DEVENDRA KUMAR PATHAK,MAURANIPUR vs. INCOME TAX OFFICER, JHANSI

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ITA 526/AGR/2025Status: DisposedITAT Agra24 April 2026AY 2018-1911 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal observed a direct connection between cash deposits and withdrawals for medical purposes. It allowed cash deposits to the extent of cash withdrawn and sustained the addition only for the remaining unexplained amount after considering declared dairy income.

What were the facts?

The assessee's case was reopened due to cash deposits of Rs. 33,12,000/-. The assessee claimed these deposits were for his son's medical emergencies and included withdrawals and loans from relatives. The Assessing Officer added the entire amount as unexplained income.

What were the issues?

Whether the entire cash deposit of Rs. 33,12,000/- is unexplained income, or if cash withdrawals and declared dairy income can be considered as sources. The applicability of the peak credit principle was also debated.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 44AD,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA BENCH (SMC

Before: SHRI S. RIFAUR RAHMAN

For Respondent: DR (Physical hearing)
Hearing: 21.04.2026Pronounced: 24.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH (SMC), AGRA BEFORE : SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 526/Agr/2025 Assessment Year: 2018-19 Devendra Kumar Pathak Vs. Income Tax Officer 82 Katra Bazar Mauranipur, Ayakar Bhawan Civil Lines, Jhansi-284204. Jhansi. PAN : AHFPP6841G (Appellant) (Respondent) Assessee by Sh. Sanjeev Agarwal, C.A. Department by Sh. Harsh Siddharth Gautam, Sr. DR (Physical hearing) Date of hearing 21.04.2026 Date of pronouncement 24.04.2026 ORDER PER : S. RIFAUR RAHMAN, ACCOUNTANT MEMBER: The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 15.09.2025 for the Assessment Year 2018-19, wherein the assessee has raised following grounds:-

“1. The learned CIT(A) HAS ERRONEOUSLY UPHELD AN ADITION OF Rs. 33,12,000/- (Rupees thirty three lakh twelve thousand only) on account of the cash deposits. 2. On the facts and in the circumstances of the case and in law the CIT(A) erred in confirming the addition without appreciating the evidence and arguments submitted by the appellant.

ITA No.526/Agr/2025

3.

The appellant craves liberty to add, amend, alter vary and withdraw of any ground of appeal as the circumstances of the case may require at the time of hearing.”

2.

The assessee filed additional ground of appeal, after considering the same the Bench has dismissed the additional ground. We proceed to adjudicate the regular grounds of appeal.

3.

The relevant facts are, the case of the assessee was reopened based on the information available with the department i.e. sale of immovable properties, cash deposits made during the year, received contract payments and rental income received during the year. It was found that the assessee did not file his return of income for the year under consideration, therefore, notice was issued u/s 148 of the Act. After considering the submissions of the assessee, the Assessing Officer observed that the assessee is engaged in the small dairy business and property rental business during the year under consideration and has gifted immovable property to his brother in law. The assessee has furnished copy of registered gift deed to substantiate his claim. Therefore, further observed that the assessee has made cash deposit to the extent of Rs. 33,12,000/- during the year under consideration. When the assessee was asked to furnish the source of these cash deposits, in response, the assessee has submitted that the assessee had to deposit 2 | P a g e

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and withdrawal of cash from bank as his son being seriously ill and admitted various hospitals in Delhi, so cash was deposited and withdrawn to face emergency situation. After considering of cash deposits and withdrawal and also claim of the assessee that he has borrowed money from his wife, and sister-in-law for the treatment. However, the Assessing Officer observed that the assessee failed to substantiate his claim with documentary evidences. After issuing of various show cause notices, the Assessing Officer came to the conclusion that the assessee failed to substantiate the source of cash deposit with documentary evidences. Accordingly, he proceeded to make the addition of Rs. 33,12,000/- u/s 69A r.w.s. 115BBE of the Act.

4.

Aggrieved with the above order, the assessee preferred an appeal before NFAC, Delhi with the delay of 113 days and the assessee has made similar submission before the ld. CIT(Appeals). Further, assessee has submitted that he had in totality withdrawn cash, totaling Rs. 22,55,000/- from the bank in multiple small amounts. These withdrawals were made to ensure liquidity during the medical emergency concerning the assessee,s son, the same was as also mentioned in previous communications. The assessee later deposited the same amount, Rs. 22,55,000/-(in multiple small denominations), into the bank when he

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believed the immediate need for cash had passed. However, due to the worsening of his son's condition, the appellant had to make further withdrawals as required for medical expenses.

The remaining differential cash deposit of Rs. 10,57,000/-(33,12,000-less 22,55,000/-), which has been deposited into the bank, is explained in detail below:-

Particulars Amount Opening balance of Cash-in-hand as on 01.04.17 2,02,300.00 The appellant had received agricultural income, and 3,25,300.00 the same is deposited in bank. The appellant had also received Dairy income, and the 2,23,700.00/- same is also deposited in bank. The appellant had also received cash from his wife, out 1,90,000.00/- of his accumulated past savings The appellant had also received cash from his Bhabhi 1,50,000.00/- (i.e. Sister-in-law), out of his accumulated past savings Cash deposited in bank 10,57,000.00/- Closing balance of cash-in-hand 34,300.00/-

In addition to the above explanations, it is further submitted that one of his relative, Mrs. Krishna Devi Pathak had, directly deposited Rs. 21,95,000 at the hospital counter during the medical emergency. Later, when I offered to return the amount, they refused, stating that the amount 4 | P a g e

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was given as a gift out of love and affection. To substantiate this fact, Mrs. Krishna Devi Pathak is providing an affidavit affirming that she had gifted the amount voluntarily. Since she is covered under the definition of "relative" under Section 56 of the Income Tax Act 1961, such a gift is not taxable in my hands.

The Hon'ble Supreme Court in Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) laid down the principle that when an affidavit is submitted as evidence and its contents are neither disproven nor challenged by cross-examination or contrary evidence, the facts stated therein must be accepted as true. Hence it must be treated as valid proof, and no adverse inference should be drawn.

5.

After considering the detailed of submission of the assessee, Ld. CIT(Appeals) dismissed the grounds raised by the assessee on technical ground and with regard to cash deposit of Rs. 33,12,000/- dismissed the appeal of the assessee by observing as under:-

“9.2 As per provisions under section 69A read with section 115BBE, unexplained money can be taxed if the assessee fails to satisfactorily explain the source, which is the case here. The Income Tax Act places the burden of justifying cash transactions on the assessee. Lack of corroborating documentary evidence or credible third-party confirmations makes addition under section 69A legally sustainable. The appellant was given reasonable opportunities (multiple notices) to explain, but responses were insufficient or repetitive which justifying ex-parte inference and addition. And while doing so the AO followed due process by issuing show-cause notices, providing time 5 | P a g e

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and opportunity for a reply, and making the final addition only after considering all submitted details.Reliance in this regard is placed in case of CIT v. P.K. Noorjahan [(1999) 237 ITR 570 (SC)], it was clarified that AO has the power to make addition under section 69 where explanation is unsatisfactory or non- existent. 9.3 Mere filing affidavits or vague statements without bank trails, third-party confirmation, or credible records do not discharge the assessee's burden as held in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC). Section 69A clearly states that where any money is found credited in the books and the assessee either fails to offer an explanation or the AO finds the explanation unsatisfactory, such amount shall be deemed to be income. At the stage of appeal proceedings also the appellant only filed basic details as mentioned above without and supporting documentary evidence which substantiates appellant's contention. 9.4 Further during the appellate proceedings, the appellant submitted that the Ld. AO has incorrectly treated the entire cash deposit of Rs.33,12,000/- as unexplained income u/s 69A, without considering the principle of Peak credit. In this regard, it is well established that Peak Credit Principle is not mandatory and cannot be applied automatically. It is discretionary and is applied only when evidence of rotation of funds is available. It was held in case of CIT Vs Vijay Agricultural Ind 294 ITR 610(All) that no peak to be applied. Further in case of Bhaiyalal Shyam Behari v. CIT [2005] 276 ITR 38 decided on January 19, 2005, it was has held that the principle of peak credit is not applicable in case where the deposits remained unexplained under section 68 of the Act. In the absence of concrete bank trails or supporting books, entire deposits can be treated as unexplained. The AO reasonably assessed unexplained deposits, hence ground raised by the appellant is hereby dismissed.” 6. Aggrieved with the above order, the assessee is in appeal before us.

7.

At the time of haring, Ld. AR of the assessee brought to our notice relevant facts on record and also brought to our notice at page 1 to 16 of the paper book the bank statement in particular. He brought to our notice at page 3 of the paper book wherein the assessee has made cash

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deposit of Rs. 6, lakh Rs. 9,75,000/- and Rs. 75,000/- and also cancellation of RTGS made by the assessee of Rs. 10,75,000/- and further, brought to our notice cash withdrawn by the assessee on 26.10.2017 to 15.11.2017. He submitted that these withdrawals clearly shows that the withdrawn for emergency and the same cash was redeposited. Further he brought to our notice the assessee has taken RTGS for Rs. 10,75,000/- on 27.09.2017 and the same was cancelled on 07.11.2017 the following cancellation of RTGS the assessee has withdrawn cash subsequently to the extent of same amount. He submitted that the AO overlooked this fact on record and proceeded to make the total cash deposit overlooking the cash withdrawals. He submitted that the Assessing Officer should have considered only net amount of Rs. 10,00,000/- which the assessee has made the deposit during the year. This amount of Rs. 10,00,000/- was also deposited by the assessee out of business income from dairy business and also loan from his sister in law, he prayed that the addition made by the AO is unjustified deserves to be deleted.

8.

On the other hand, Ld. DR relied on the detailed findings of lower authorities.

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9.

Considered the rival submissions and the material placed on record. I observed that Ld. CIT(Appeals) has sustained the addition on the basis that the assessee has not established the sources of cash deposit even though the Assessing Officer has given several opportunities. Therefore, the Assessing Officer had to take and follow due process of time. Ld. CIT(Appeals) has also rejected the prayer to certain peak credit in this case Ld. CIT(Appeals) also relied on decision of Noorjahan (1991 237 ITR 570) (SC) to justify addition u/s 69 where the explanation offered is un-satisfactory or non-existent.

Ld. CIT(Appeals) further rejected the affidavits and vague statement by relying on decision of sumati Dayal 214 ITR 881 (SC) . Based on the above findings sustained the addition. After considering the submissions of Ld. AR and material available on record, I observed that the assessee had deposited the cash as well withdrawn the cash due to his son’s medical purpose. After careful consideration we noticed that the assessee had withdrawn cash on various dates as under:-

Date Amount (Rs.) 28.06.2017 1,40,000/- 15.09.2017 1,10,000/- 03.10.2017 1,80,000/-

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29.10.2017 1,00,000/- 09.11.2017 2,00,000/- 10.11.2017 2,00,000/- 14.11.2017 2,00,000/- 15.11.2017 2,25,000/- 20.11.2017 1,50,000/- 01.02.2018 55,000/- Total 15,60,000/-

Date Amount (Rs.) 03.05.2017 1,50,000 17.05.2017 1,48,000 19.06.2017 1,40,000 27.07.2017 50,000 07.09.2017 6,00,000 27.09.2017 9,75,000 27.09.2017 75,000 08.12.2017 2,00,000 26.02.2018 1,99,000 27.02.2018 1,50,000 23.03.2018 5,00,000 Total 31,87,000

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(We have considered only to extent of the deposit and withdrawal above Rs. 50,000/-) From the above, we noticed that the assessee was desperate to keep liquid cash in hand for his son’s medical purpose. There is direct connection with the cash deposit and withdrawal therefore, we are inclined to allow to the cash deposit to the extent of cash withdrawn by the assessee.

Therefore, the difference between cash deposit and withdrawn is Rs. 16,27,000/-. We noticed that the assessee had declared the income from dairy products u/s 44AD of the Act to the extent of Rs. 10,69,000/-. In my view, there is source of cash deposit out of income decleared u/s 44AD of the Act. Therefore, I am inclined to sustain the addition to the extent of Rs. 5,58,000/- (Rs./ 16,27,000 less Rs. 10,69,000). Therefore the grounds raised by the assessee is partly allowed.

10.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 24.04.2026. Sd/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER Dated: 24.04.2026 *Santosh, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra 10 | P a g e

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