MOORTHY REP. BY L/HEIR M PRABHAKARAN ,SALEM vs. ITO, WARD-1(6), SALEM

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as “CIT(A)”] dated 17.09.2025 for the Assessment Year 2021-22.

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 2 :: 2. Brief facts of the case are that the assessee filed his return of

income on 30.03.2022. The assessment was completed u/s. 143(3)

read with section 144B of the Income-tax Act, 1961 on

28.12.2022.During the course of assessment proceedings, the

Assessing Officer (AO) observed cash deposits in the bank accounts

of the assessee and called for an explanation regarding the source

of such deposits. The assessee furnished details including bank

statements, cash flow statement, and explanations regarding

utilisation of jewel loans.

However, the AO was not satisfied with the explanation and made

an addition of Rs.31,19,613/- u/s. 69A as unexplained money and

disallowance of deduction of Rs.1,00,000/- u/s. 80CCD(1B) and 80D

of the Act. The AO held that though the assessee submitted

explanations regarding cash deposits, the same were not supported

by sufficient documentary evidence. The claim that deposits were

sourced from withdrawals and jewel loans was not substantiated

with proper third-party evidence such as loan sanction letters or

confirmations. The explanation that cash was withdrawn and kept

on hand for medical purposes was not found convincing. The AO

also observed that banks do not disburse jewel loans in cash,

thereby questioning the credibility of the explanation. Accordingly,

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 3 :: the AO treated the entire cash deposits as unexplained money u/s.

69A.Further, deductions claimed u/s.s 80CCD(1B) and 80D were

disallowed due to lack of proper supporting evidence.

Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the

action of the AO and observed that the assessee’s explanation was

considered by the AO but rightly rejected as unsatisfactory. The

assessee failed to furnish credible and verifiable evidence to

establish the nexus between withdrawals and subsequent deposits.

The documents such as “jewel loan details” were not supported by

authentic bank records and were treated as self-prepared and

unverifiable. The explanation regarding cash retention for medical

purposes lacked supporting evidence. The principle of peak credit

was held to be inapplicable as the source of cash itself remained

unexplained. Accordingly, the CIT(A) confirmed the addition u/s.

69A and the disallowance of deductions, and dismissed the appeal.

The assessee is now in appeal before the Tribunal.

submitted that the assessee had duly complied with notices issued

u/s. 142(1) and furnished all relevant details including bank

statements, cash flow statement, and explanations. The assessee

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 4 :: maintained two bank accounts—one with State Bank of India and

another with a co-operative bank—used for salary, retirement

benefits, and jewel loan transactions. Cash deposits were sourced

from earlier withdrawals from bank accounts, which is evident from

the cash flow statement and bank records. The AO failed to properly

appreciate the evidences and did not establish any discrepancy in

the documents submitted. The invocation of section 69A is invalid as

the assessee had offered a plausible explanation and the

transactions were duly reflected in bank statements. It was further

submitted that the AO misunderstood the nature of jewel loans; the

loans were credited to bank accounts and later withdrawn as cash.

Without prejudice, it was argued that even if the explanation is not

fully accepted, only peak credit should be considered instead of

taxing the entire deposits. Reliance was placed on judicial

precedents includingDCIT vs. Karthik Construction Co. [ITA

No.2292/Mum/2016 dated 23.02.2018]and Smt. Teena Bethala vs.

ITO [ITA No.1383/Bang/2019]. The ld. counsel for the assessee also

referred written submissions dated 03.10.2023 (Page 5-8 of P.B.),

written submissions and declaration filed before AO on 19.12.2022

(Page 11-16 of P.B.), details of jewel loan and Form 16 filed before

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 5 :: AO (Page 19-28 of P.B.), revised computation, jewel loan

statement, state bank of India account etc(Page 31-48 of P.B.).

orders of the AO and CIT(A), contending that the assessee failed to

discharge the burden of proving the source of cash deposits with

credible evidence.Mere submission of bank statements and self-

prepared cash flow statements is insufficient. No independent

corroboration such as loan confirmations or bank certificates was

furnished. The explanation regarding cash withdrawals and

redeposits is not convincing in absence of a clear one-to-one nexus.

Therefore, the addition u/s. 69A was rightly made and sustained.

the material available on record and paper book referred.It is an

undisputed fact that the assessee had furnished bank statements,

cash flow statement, and explanations during the assessment

proceedings. The cash deposits were made in disclosed bank

accounts and the withdrawals from the same bank accounts were

also evident from records.

The core issue is whether the explanation offered by the assessee

regarding the source of cash deposits is acceptable.In this regard,

we observe that the AO has not pointed out any specific defect or

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 6 :: falsity in the bank statements furnished by the assessee. The cash

flow statement submitted by the assessee demonstrates availability

of cash from earlier withdrawals. The Revenue has not brought any

material on record to show that the cash deposits represent income

from undisclosed sources. The rejection of the explanation is largely

based on suspicion and general observations rather than concrete

evidence. It is a settled principle of law that when cash deposits are

reasonably explained with reference to withdrawals from disclosed

bank accounts, the same cannot be treated as unexplained merely

on the basis of conjectures.Further, the provisions of section 69A

can be invoked only when the assessee offers no explanationor the

explanation offered is found to be unsatisfactory based on cogent

material. In the present case, the assessee has offered a plausible

explanation supported by primary evidences. The Revenue has

failed to disprove the same with any contrary material.Even

otherwise, the authorities below have not considered the alternative

plea of peak credit, which is a recognised method to avoid double

addition in cases involving rotation of funds.Considering the totality

of facts and circumstances and paper book referred, we are of the

view that the addition of Rs.31,19,613/- u/s. 69A is unsustainable

and liable to be deleted.

ITA No 3636/Chny/2025 (AY 2021-22) Moorthy and M Prabhakaran Vs ITO W 1(6) :: 7 :: 7. With regard to disallowance u/s.s 80CCD(1B) and 80D, since the

assessee has claimed to have furnished supporting documents, and the same have not been properly verified, we deem it appropriate to

allow the claim based on available records.