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Facts
The assessee deposited ₹11,00,000/- in cash, explaining it as proceeds from a property sale. The Assessing Officer rejected this, citing a ten-month gap between sale and deposit and a belief that the funds were used for construction. The CIT(A) upheld the addition.
Held
The Tribunal held that the assessee's explanation for the cash deposit from property sale proceeds was reasonable and satisfactory. The AO did not provide evidence to disprove this, and suspicion cannot substitute for evidence, thus the addition under section 69A was not justified.
Key Issues
Whether the cash deposit made by the assessee from property sale proceeds, despite a time gap, can be treated as unexplained income under Section 69A of the Act.
Sections Cited
69A
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Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order of the NFAC, Delhi vide order dated 27/05/2025 in DIN No.ITBA/NFAC/S/250/2025- 26/1076487590(1) for the assessment year 2016-17.
The assessee has filed an appeal against the order of the learned CIT(A). The dispute is regarding the addition of ₹11,00,000/- under section 69A of the Act.
The Assessing Officer noted that the assessee had deposited ₹11,00,000/- in cash on 25 January 2016. The assessee explained that the source was out of the sale proceeds of a property sold on 17 April 2015. As per the assessee, the cash component against the sale of property was for ₹13,30,000/- only. The AO rejected the explanation. He observed that there was a gap of nearly ten months between the sale and the deposit. According to him, no prudent person would keep such a large cash amount at home for such a long time. He also believed that the sale consideration must have been used for construction of a house. On this basis, the AO treated the deposit as unexplained cash under section 69A of the Act and added it to the assessee’s income.
The learned CIT(A) confirmed the order of the AO. He reiterated that the assessee had failed to establish a direct link between the cash deposit and the property sale. He also agreed with the AO that the long delay in deposit created doubt about the explanation. Accordingly, he upheld the addition of ₹11,00,000/-.
Being aggrieved, by the order of learned CIT-A, the assessee is in appeal before us.
Before us, the learned Authorised Representative submitted that the cash deposit was fully explained. The cash component against the property sold was for ₹13,30,000/- only. The deposit of ₹11,00,000/- came from the same source. The fact of sale and receipt of consideration is not in dispute. The ld. AR argued that there is no law which prohibits an assessee from keeping cash at home for some time .
Page 3 of 4 before depositing it. He submitted that the explanation was reasonable and should have been accepted.
On the other hand, the learned Departmental Representative supported the orders of the lower authorities. He argued that the long delay in depositing cash made the claim unreliable. Similarly, the utilisation of cash in the house constructed by the assessee can also not be ruled out. The assessee has not submitted any cash flow statement justifying the availability of cash. He contended that the AO was correct in holding the amount as unexplained under section 69A of the Act.
We have considered the rival submissions and examined the material placed on record. The cash component against the sale of property on 17 April 2015 for ₹13,30,000/- is admitted. The assessee deposited ₹11,00,000/- on 25 January 2016. The explanation offered is that the deposit was made from the sale proceeds.
8.1 In our view, the explanation is reasonable and satisfactory. The AO has not brought any material evidence to prove that the assessee had used the sale proceeds elsewhere. The finding that the money must have been used for house construction is only an assumption. No proof of such utilisation has been produced. It is well settled that suspicion or presumption cannot be a substitute for evidence. Additions under section 69A of the Act require clear evidence of unexplained money.
8.2 The delay of ten months in depositing the cash does not by itself render the explanation false. Many people, depending on their personal .
Page 4 of 4 circumstances, keep cash with them for some months before banking it. There is no prohibition in law against keeping cash in hand. The mere fact of delay cannot be treated as a ground to make an addition.
8.3 The assessee has explained the source of the cash deposit. The source is identifiable and verifiable. The department has not disproved this explanation with any evidence. We therefore hold that the addition under section 69A of the Act was not justified. The explanation of the assessee should be accepted. We delete the addition of ₹11,00,000/- made by the AO and sustained by the CIT(A). Hence, the ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in court on 3rd day of November, 2025