JITENDRA SHANTILAL MUTHA (HUF),PUNE vs. INCOME TAX OFFICER (ITO) WARD 5(4), PUNE

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Additional/Joint Commissioner of Income Tax (Appeals), Mysore [Ld. Addl./JCIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2017-18 on 28.08.2025.

Delay

Submission of Ld. AR:

ITA No.1153/PUN/2026

“I. INTRODUCTION AND BRIEF FACTS

1.1 The Appellant is a Hindu Undivided Family (HUF) assessed to income tax at Pune. The present appeal arises from the order passed by the learned Commissioner of Income Tax (Appeals) (hereinafter 'CIT(A)'], who, while deciding the appeal against the assessment order under Section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act'], confirmed the addition of Rs. 75,000/- (Rupees Seventy-Five Thousand only) made by the Assessing Officer (hereinafter 'AO'] under Section 69A read with Section 115BBE of the Act in respect of cash deposits found in the bank account of the Appellant.

1.2 The brief facts leading to the present appeal are as under:

(a) The Appellant is a HUF carrying on its affairs in the ordinary course. During the Assessment Year 2017-18, the AO, in the course of scrutiny assessment under Section 143(3) of the Act, noticed certain cash deposits in the bank account of the Appellant.

(b) The AO, without bringing any independent or corroborative material on record, proceeded on mere presumptions and surmises that the said cash deposits represented unexplained money. The AO failed to establish any nexus between the cash deposits and any undisclosed source of income.

(c) The Appellant, in the course of assessment proceedings, duly explained that the cash deposits of Rs. 75,000/- were made out of opening cash balance available with the HUF and from cash withdrawals made from the bank account. The Appellant thus traced the complete source of the deposits to the Appellant's own funds.

(d) Despite the clear and cogent explanation furnished, the AO invoked Section 69A of the Act and made an addition of Rs. 75,000/-, applying the special tax rate under Section 115BBE.

(e) The Appellant preferred an appeal before the learned CIT(A). The CIT(A), vide the impugned order, upheld the addition without properly considering the submissions made by the Appellant, holding that the Appellant had not furnished concrete documentary evidence regarding the source of cash deposits.

1.3 Aggrieved by the impugned order of the CIT(A), the Appellant has filed the present appeal before this Hon'ble Tribunal on the grounds set out in the Memorandum of Appeal.

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II. ISSUES ARISING FOR CONSIDERATION

2.1 The following issues arise for consideration and adjudication before this Hon'ble Tribunal:

Issue No. 1: Whether the assessment order under Section 143(3) is sustainable in law when the same is founded on mere presumptions and surmises, without any cogent material on record establishing that the cash deposits represent income from undisclosed sources?

Issue No. 2: Whether the CIT(A) erred in failing to adjudicate the specific ground challenging the legal validity of the assessment order?

Issue No. 3: Whether the addition of Rs. 75,000/- under Section 69A of the Act can be sustained when the Appellant has duly explained the source of cash deposits as being from opening cash balance and cash withdrawals from the bank account?

Issue No. 4: Whether Section 115BBE can be applied in the absence of a valid and sustainable addition under Section 69A of the Act?

III. LEGAL INTERPRETATION

3.1 Section 69A - Unexplained Money:

Section 69A of the Act provides that where, in any financial year, an assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or other valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income, and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not, in the opinion of the AO, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of such financial year.

3.2 The following conditions are, therefore, necessary before Section 69A can be invoked:

(a) The assessee must be found to be the owner of money not recorded in the books of account.

(b) The assessee must have failed to offer any explanation regarding the nature and source thereof, OR the explanation offered must be found unsatisfactory.

(c) The satisfaction must be that of the AO arrived at after due application of mind not a mechanical or presumptive conclusion.

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3.3 Section 115BBE - Special Rate of Tax:

Section 115BBE prescribes a special tax rate of 60% on income referred to in Sections 68, 69, 69A, 69B, 69C or 69D. It is therefore consequential and triggered only upon a valid addition being made under the substantive provision. If the addition under Section 69A is not sustainable, Section 115BBE cannot be applied.

3.4 Burden of Proof:

It is well settled that the initial burden of proving that a sum represents unexplained income lies on the Revenue. The Assessing Officer cannot, without independent material, reject an explanation that is plausible and consistent with the facts on record. The burden shifts to the assessee only after the Revenue has discharged its primary burden.

IV. SUBMISSIONS ON EACH GROUND OF APPEAL

GROUND NO. 2: Validity of Assessment Order

4.1 The Appellant respectfully submits that the assessment order passed by the AO under Section 143(3) is bad in law, being premised entirely on presumptions and surmises. The AO's case was built on an alleged 'absence of correlation' between cash withdrawals from the bank and subsequent cash deposits without bringing any independent, cogent, or corroborative material on record to establish that the deposits represented income from any undisclosed source.

4.2 An assessment based on surmises and conjectures, devoid of any tangible material, is not sustainable in law. The Hon'ble Supreme Court and various High Courts have consistently held that additions cannot be made on the basis of suspicion alone.

4.3 It is respectfully submitted that the CIT(A) failed to adjudicate this specific ground at all, which itself constitutes a legal error. The first appellate authority is duty-bound to address each ground of appeal. Non-adjudication of a ground is a jurisdictional infirmity warranting remand or adjudication by this Hon'ble Tribunal. Reliance is placed on the well-settled principle that an appellate order that fails to deal with a ground raised before it is ex facie deficient.

GROUND NOS. 3 & 4: Unwarranted Addition under Section 69A –Source Satisfactorily Explained

4.4 The Appellant submits that the addition of Rs. 75,000/- under Section 69A is wholly unwarranted for the following reasons:

ITA No.1153/PUN/2026

A. The Source Was Duly Explained

4.4.1 The Appellant categorically explained before the AO and the CIT(A) that the cash deposits were made from: (i) the opening cash balance available with the HUF; and (ii) cash withdrawals made from the bank accounts of the HUF. The source of the deposited cash, therefore, traces back to the Appellant's own recorded funds not to any undisclosed or Unaccounted source.

4.4.2 When cash is deposited into a bank account after being withdrawn from the same or another bank account, it represents a mere re-deposit of the assessee's own money. Such transactions, by their very nature, cannot constitute 'unexplained money' within the meaning of Section 69A. There is no accretion to income.

B. No Corroborative Material Brought by the AO

4.4.3 The AO did not bring any corroborative evidence whatsoever on record to establish that the cash deposits were from any undisclosed source. There was no detection of: any unexplained investment; any unaccounted receipt; any third-party statement; or any document suggesting that the HUF had income beyond what was declared. The entire addition rests on the AO's bald assertion.

4.4.4 It is trite law that Section 69A places the burden on the Revenue, at the first instance, to establish through positive material that the money found in the assessee's possession is unrecorded and unexplained. Mere noticing of cash deposits in a bank account – without more – does not discharge this burden.

C. The CIT(A) Applied an Impermissible Standard of Proof

4.4.5 The CIT(A), in confirming the addition, held that the Appellant did not produce 'concrete documentary evidence' of the source of cash deposits. The Appellant respectfully submits that this reasoning is legally flawed. The Act does not require an assessee to produce formal documentary evidence for every cash transaction involving the assessee's tracing deposits to withdrawals own funds. The explanation offered is a plausible and consistent explanation that and opening balance ought to have been accepted. Demanding documentary proof for what is, in essence, a movement of the assessee's own funds, is to impose an impractical and legally unsupported burden.

4.4.6 It is further submitted that Section 69A requires the AO to find the explanation 'unsatisfactory.' A finding of dissatisfaction must be based on reasons, not on a mechanical rejection of uncontroverted

ITA No.1153/PUN/2026

facts. The AO and the CIT(A) have not identified any specific infirmity in the explanation offered by the Appellant, nor have they pointed to any material that is inconsistent with the Appellant's explanation.

GROUND NO. 4 (Second): Addition Is Unwarranted as Source Is the Appellant's Own Money

4.5 The Appellant reiterates and adopts the submissions at paragraphs 4.4.1 to 4.4.6 above. When the cash deposited in the bank account is the assessee's own money the sourced from prior withdrawals and opening balance element of 'unexplained' money is completely absent. The foundational condition for invoking Section 69A is not satisfied. The addition of Rs. 75,000/- and the consequential application of Section 115BBE are, therefore, unwarranted and deserving to be deleted.

V. LEGAL SUBMISSIONS

5.1 Re-deposits of Own Withdrawn Cash - Cannot Attract Section 69A:

It is elementary that when an assessee withdraws cash from his bank account and subsequently re-deposits it, there is no 'new' money entering the picture. The quantum of the HUF's assets does not change by the act of withdrawal and re-deposit. The Revenue's theory, if accepted, would mean that every individual who carries cash and later deposits it is guilty of holding 'unexplained money', an absurd result that the legislature could not have intended.

5.2 Mechanical Application of Section 69A - Impermissible:

Section 69A vests a discretion in the AO ('may be deemed'). This discretion must be exercised judiciously, after examining the totality of the material. A mechanical or formulaic invocation of Section 69A, without proper analysis of the explanation offered, renders the order unsustainable. The AO's order in the instant case suffers from this very infirmity.

5.3 Non-Adjudication by CIT(A) Constitutes Jurisdictional Error:

The CIT(A) is the 'first appellate court' under the Act and is duty-bound to deal with every ground raised by the appellant. The failure to adjudicate the specific ground challenging the legality of the assessment order is a jurisdictional error. This Tribunal, in exercise of its plenary appellate powers under Section 254 of the Act, is fully competent to adjudicate such grounds and, if required, to render a finding on the legality of the assessment order.

ITA No.1153/PUN/2026

5.4 Section 115BBE Consequential - Must Fall: The application of Section 115BBE is entirely parasitic on a valid and sustainable addition under Section 69A. If the addition under Section 69A is deleted, Section 115BBE has no independent operation and must necessarily fall along with the principal addition. In view of the foregoing facts, submissions, and judicial precedents, the Appellant most respectfully prays that this Hon'ble Tribunal may be pleased to: (a) Allow the present appeal; (b) Hold that the assessment order under Section 143(3) of the Act is legally flawed, being based on presumptions and surmises without any cogent material; (c) Delete the addition of Rs. 75,000/- (Rupees Seventy-Five Thousand only) made under Section 69A of the Act, as the source of the cash deposits has been satisfactorily explained by the Appellant as being out of opening cash balance and cash withdrawals from the bank; (d) Consequentially, delete the application of the special tax rate under Section 115BBE of the Act; (e) Pass such other and further order(s) as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the case.”

Submission of Ld.DR :

Findings and Analysis :

ITA No.1153/PUN/2026 the order. Assessee filed its replies. During the Assessment Proceedings the AO noted that the Assessee has deposited Rs.10,19,000/- in Cash during demonetization. The AO asked the Assessee to explain the same. After considering reply filed by the Assessee, the AO made addition of Rs.75000/- u/s 69A of the Act. The Relevant Paragraph of the Assessment Order is scanned as under :

5.1 Aggrieved by the Assessment Order the Assessee filed Appeal before the CIT(A) who confirmed the addition. Aggrieved

ITA No.1153/PUN/2026 by the Order u/s 250 of the Act, the Assessee filed Appeal before this ITAT.

5.2 In this case to explain the source of cash deposits the Assessee submitted that it has withdrawn cash in FY 2014-15 and 2015-16, which was deposited.

5.3 The AO analyzed the currencies which were withdrawn and the currencies which were deposited, and then came to the conclusion that Assessee could not explain the source of 75 notes of Rs.1000/-. The assessee claimed that it had converted the withdrawn currency. No evidence has been brought on record by the Assessee to prove the contention that Assessee had converted the currency. These facts are in the exclusive knowledge of the assessee and hence onus was on assessee to produce the evidence in support of its claim. The assessee had not filed any evidence.

5.4 The Assessee had relied on certain decisions which are factually distinguishable, hence not applicable in the case of the assessee.

5.5 The Addition made by the AO is not on the basis of any presumptions or surmises. The AO after analyzing the submission realized that assessee had not offered any submission for 75 notes of Rs.1000/-. Even before us no specific evidence has been filed by the assessee. We have already mentioned that the facts were in exclusive knowledge of the assessee hence the onus was assessee to prove the same by documentary evidence. Assessee failed to prove the same.

ITA No.1153/PUN/2026

Order pronounced in the open Court on 31st August, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 31-08-2026 Ravi Kumar Digitally signed by Ravi Kumar Date: 2026.08.31 15:06:12 Ravi Kumar +05'30' आदेशकीप्रतितितिअग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘SMC’ Bench, Pune 5. ग र्डफ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकरअपीलीयअदिकरण, पुणे / ITAT, Pune