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Facts
The assessee, a housewife, deposited Rs. 10,05,000 in her bank account. The Assessing Officer (AO) treated this as unexplained money under section 69A of the Income Tax Act. The Commissioner of Income Tax (Appeals) confirmed the addition.
Held
The Tribunal held that the assessee had provided sufficient explanation and documentation for the cash deposits, including cash withdrawals for construction and tuition fees. The Tribunal found the assessee's explanation plausible and accepted it.
Key Issues
Whether the cash deposits made by the assessee in her bank account are unexplained money and thus exigible to tax under section 69A of the Income Tax Act.
Sections Cited
69A, 115BBE, 144
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Income Tax Appellate Tribunal, MUMBAI “H(SMC
Before: SHRI VIKRAM SINGH YADAV & SHRI SANDEEP SINGH KARHAIL
Assessment Year : 2017-18 Manisha Kamalkar Sadavarte, Income Tax Officer, 4B, Room No. 24, Ward-28(2)(2), Shree Pranav CHS, vs. Tower-6, Sector-10, Koparkhairne, Vashi Railway Station, Navi Mumbai-400709. Commercial Complex, PAN : DUHPS2971A Vashi, Navi Mumbai-400703. (Appellant) (Respondent) For Assessee : Shri Ketan Vajani For Revenue : Shri Pravin Salunkhe, Sr.DR Date of Hearing : 08-12-2025 Date of Pronouncement : 01-01-2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 26-03-2025, pertaining to Assessment Year (AY) 2017-18, wherein the assessee has taken the following grounds of appeal:
“1.On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals)-NFAC, hereinafter referred to as the "CIT (A)", has erred in confirming the addition of Rs. 10,05,000/- made in the case of the appellant on account of cash deposited in bank account under the provisions of section 69A of the Act.
2. The CIT (A) has erred in not appreciating the fact that the source of the cash deposited in bank account has been duly explained with required documentary evidences and further that the source also included cash withdrawn from the bank account prior to such deposits. The CIT (A) has erred in deciding the appeal of the appellant without considering the totality of facts and circumstances.
Your appellant respectfully submits that the source of the amount of cash deposited in bank account is duly established and the same is also supported by documentary evidences. In view of this, the appellant submits that no addition can be made u/s. 69A of the Act for the above assessment year.
4. The appellant, therefore, prays that the impugned addition may please be deleted or any other relief as deemed fit on the facts of the case may please be allowed to the appellant.”
Briefly stated, facts of the case are that assessment in this case was completed u/s. 144 of the Income Tax Act, 1961 („the Act‟), vide order dt. 29-10-2019 wherein the AO has brought to tax a sum of Rs. 10,05,000/- as unexplained money u/s. 69A r.w.s. 115BBE of the Act in respect of cash deposits and unexplained credits in the bank account maintained by the assessee.
3. The assessee thereafter carried the matter in appeal before the Ld.CIT(A). The assessee also moved an application for admission of the additional evidences and the reasons for non-furnishing the evidences before the AO. The Ld.CIT(A) thereafter called for the remand report from the AO and after taking into consideration the rejoinder submitted by the assessee, has passed the impugned order, wherein he has confirmed the order of the AO and the addition of Rs. 10,05,000/- u/s. 69A of the Act has been confirmed and against the said order, the assessee is in appeal before us.
During the course of hearing, the Ld.AR submitted that the assessee is a house wife and provides tuitions to the students from home and she had been receiving tuition fees during the previous financial year 2015-16 as well as impugned financial year 2016-17. Further, the assessee has also received management consultancy fees from EMS-Himal Hydro JV. It was submitted that assessee‟s gross total income was below the maximum amount not chargeable to tax, hence, no return of income was filed by the assessee in respect of tuition income as well as from the management consultancy fee. However, in respect of management consultancy fee, the TDS has been deducted by the company, which is duly reflected in Form- 26AS.
It was further submitted that though the assessee could not produce necessary explanation and documentation during the assessment proceedings, however, during the appellate proceedings, the assessee submitted necessary explanation and documentation in support of the cash so deposited in her bank account.
It was submitted that the details of cash-in hand, date-wise cash withdrawals during the financial year 2015-16 as well as 2016-17, details of the tuition fees received during the financial years 2015-16 and 2016-17 were submitted along with copy of the bank statements of two bank accounts maintained by the assessee with ICICI Bank and HDFC Bank for both the financial years. It was submitted that during the financial year 2015-16, the assessee had opening cash balance as on 01-04-2015 of Rs. 2,26,500/- on account of saving of the previous years and after adding Rs. 1,89,000/- on account of net tuition fee received in cash and Rs. 2,81,000/- on account of cash withdrawals during the year, had a closing cash balance of Rs. 6,96,500/- as on 31-03-2016. Further, during the financial year 2016-17, the assessee has earned net tuition income in cash amounting to Rs. 1,54,000/- and Rs. 1,52,000/- has been withdrawn in cash from 01-04-2016 to 08-11-2016 and, therefore, the assessee was having cash balance of Rs. 10,02,500/- as on 08-11-2016 and out of the said cash balance, the assessee has deposited Rs. 10 lakhs on 10-11-2016.
It was submitted that the assessee was withdrawing cash in small tranches for the purpose of making payments to the laborers and vendors for construction of residential house at Nanded, which is native place of the assessee. It was submitted that since the assessee‟s village is located at a remote location and payments are to be made to the laborers and vendors for purchase of construction materials at village, the amounts was withdrawn periodically so that she can made a lumpsum payment altogether when required. It was submitted that a dispute had arose with the local villagers regarding land on which construction was to be made, due to which, the construction work got delayed and the withdrawals which were made earlier were kept with the assessee. It was submitted that the dispute got finally settled and construction began after first year i.e., April, 2017 and thereafter, the assessee started making payments and has also withdrawn further cash as evident from the bank statement. It was accordingly submitted that the cash deposited was out of the withdrawals made earlier mainly for the purpose of construction of the house at her native village and given that the construction got delayed and the demonetization happened in between, the assessee had no option, but to deposit the cash into her bank account. It was submitted that it is a settled position that where cash deposited is out of earlier cash withdrawals, the said cash deposits cannot be treated as un-explained money u/s. 69A of the Act. It was submitted that the AO in the remand proceedings has stated that the assessee has not submitted any documentary evidences which shows that the cash was required for payment to laborers and to vendors for purchase of construction materials in subsequent year and the explanation of the assessee was rejected. It was submitted that the assessee has submitted before the Ld.CIT(A) the cash memos/invoices/delivery challans and the detailed list of expenditure totaling to Rs 6,94,313/-, which has been incurred for construction of house at Nanded and the Ld.CIT(A) has not recorded any adverse findings regarding these documentation and in spite of that, has confirmed the addition made by the AO.
Regarding tuition fees, it was submitted that the assessee has earned tuition fee of Rs. 2,24,500/- in financial year 2015-16 and Rs. 1,64,500/- in financial year 2016-17 and such tuition fees has been received from the parents/students for conducting tuition classes at the assessee‟s residence and the assessee used to maintain a register containing necessary details in terms of name of the student, standard in which the student was studying and the month-wise fee, which has been collected by the assessee, which has been submitted before the Ld.CIT(A). It was submitted that the assessee being a house-wife, during the spare time only, she was conducting tuition classes and given that, she had maintained a register of students‟ tuition fee received from the respective students and there were no formal receipt or invoices, which have been raised by and kept by the assessee. It was submitted that the said documentation in form of register was duly submitted before the Ld.CIT(A) and no adverse findings has been recorded by the Ld.CIT(A) and inspite of that, he has confirmed the order so passed by the AO.
The Ld.AR also placed reliance on the following decisions: i. Jaya Aggarwal vs. ITO [2018] 92 taxmann.com 108 (Delhi); Rajesh Mangla vs. DCIT [2024] 162 taxmann.com 324 (Delhi-Trib.); ii. iii. Sudhirbhai Pravinkant Thaker vs. ITO [2017] 88 taxmann.com 382 (Ahmedabad – Trib.)
It was accordingly submitted that necessary relief be provided to the assessee by deleting the addition so made by the AO and confirmed by the Ld.CIT(A).
The Ld. Sr.DR has been heard, who has relied on the orders passed by the AO as well as that of the Ld.CIT(A). It was submitted that the assessee did not file any explanation regarding the nature and source of cash deposits during the assessment proceedings and the AO, therefore, has passed the best judgment assessment, wherein he has taken into consideration the information received from HDFC bank in terms of bank statement along with KYC details of the assessee, and in absence of the necessary explanation, the addition has been made in respect of cash deposit as well as credits in the bank account maintained by the assessee. It was further submitted that during the appellate proceedings, the assessee furnished certain additional evidences and the AO has carried out necessary verification and the explanation of the assessee has not been found acceptable.
Further, reliance was placed on the findings of the Ld.CIT(A), which are contained at para 9 of the impugned order, which reads as under:
“9.0 I have perused the assessment order, appeal documents, submissions, remand report and rejoinder of the assessee. The assessee during the course of appeallate proceedings submitted that the AO erred in treating the cash deposits of the assessee as unexplained money u/s 69A of the Act. The assessee submitted the bifurcation of source of cash deposits of Rs. 10,02,500/-i.e. she was having opening cash balance as on 01.04.2016 of Rs. 6,96,500/-, she had received tution fees in cash of Rs. 1,64,500/- during relevant financial year upto demonetization period and further she did cash withdrawals of Rs. 1,52,000/- from her bank account upto demonetization period. I have considered the contention of the assessee, the assessee submitted that she had opening cash balance of Rs. 6,96,500/- as on 01.04.2016. The bifurcation of this opening cash balance was Rs. 2,26,500/- from past years savings of tution fees i.e, before F.Y. 2015-16, Rs. 2,24,500/- from tution fees for F.Y. 2015-16 and Rs. 2,81,000/- from her bank withdrawals for F.Y. 2015-16. The assessee further submitted she had received tution fees of Rs. 1,64,500/- in cash during F.Y. 2016-17 upto demontization period and further Rs. 1,52,000/- were withdrawals from the bank during F.Y. 2016-17 upto demonetization period. The contention of the assessee is found not tenable the assessee submitted that the source of cash deposits to the tune of Rs. 6,15,500/- was from tution fees received by her in cash over a stretch of years upto the demonetization period. Usually it is human tendency to keep the cash in bank account and the assessee also did not file any closing cash in hand in her previous year ITR i.e. for F.Y. 2015-16 relevant to A.Y. 2016-17. Further the assessee submitted that she did cash withdrawals of Rs. 1,64,500/- during F.Y. 2016-17 upto demonetization period and Rs. 2,81,000/- during F.Y. 2015-16, the contention of the assessee is not acceptable since whenever withdrawals are made from the bank there is specific purpose to meet certain expenses further the assessee did not produce any sufficient reason why the withdrawals were kept outside the bank account for such extent of time. In the light of the above facts, it is crystallized that the assessee's claim is unjustified and found not tenable. I found that there is no infirmity in the decision of the AO in his assessment order as well as in the remand report. Accordingly, the addition made by the AO to the tune of Rs. 10,05,000/- u/s 69A is hereby upheld and grounds of appeal filed by the assessee are dismissed.”
We have heard the rival contentions and perused the material available on record. The issue under consideration relates to nature and source of cash deposits in the bank account maintained by the assessee. During the appellate proceedings, the assessee has tendered her explanation and has stated that the source of cash deposits is out of earlier cash withdrawals from her bank account as well as tuition fee receipts from the students and thus sufficient cash in hand prior to date of deposit. The assessee has also submitted the documentation in terms of date-wise withdrawals and the bank statements evidencing such withdrawals and the purpose of such withdrawals (and subsequent utilization) and tuition fee register maintained by her. We find that Ld. CIT(A) has not accepted the explanation and documentation so submitted merely for the reason that the assessee has not sufficiently explained why she has made cash withdrawals and kept such withdrawals and other tuition receipts with her and not deposited in the bank account for a long period of time. Except for that, no adverse finding has been recorded in terms of factum and quantum of actual cash withdrawals and receipt of tuition fees and related documentation placed on record. In this regard, we find that the assessee did explain the reasons as to why she has withdrawn cash from time to time from her bank account and kept with her, which, apparently, has not been considered and appreciated by the Ld.CIT(A). As we have noted earlier, the assessee has explained that she has withdrawn cash in small tranches for the purpose of construction of the house at her native village and given that the construction got delayed and the demonetization happened in-between, she had no option, but to deposit the cash into her bank account. Subsequently, the cash so withdrawn has been actually utilized for the purposes of construction and necessary evidences have also been placed on record which corroborates the assessee‟s explanation regarding cash withdrawal for the purposes of construction. We find the explanation so tendered by the assessee as a plausible explanation and see no reason but to accept the same in the facts and circumstances of the present case. As held by the Hon‟ble Delhi High Court in case of Jaya Aggarwal (supra) wherein also there was long time period between the date of withdrawal and subsequent deposit, persons can behave differently even when placed in similar situation and due regard and latitude to human conduct and behavior has to be given and accepted when we consider validity and truthfulness of an explanation. In light of the same, the addition so made and sustained by the Ld.CIT(A) is hereby deleted and the AO is directly to give necessary relief to the assessee.
In the result, the appeal of the assessee is allowed.