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Facts
The assessee reported cash on hand of ₹22,48,834/- as of March 31, 2016. The Assessing Officer (AO) added this amount to the assessee's income as unexplained money, disbelieving the assessee's explanation that it was withdrawn from her bank account from the sale of property and invested in fixed deposits. The CIT(A) confirmed the AO's action.
Held
The Tribunal held that the assessee had discharged her initial burden of proving the nature and source of the cash by showing it was withdrawn from her bank account. The AO failed to disprove that the withdrawn amount was not spent, invested, or deployed elsewhere. Therefore, the onus shifted to the AO, which was not discharged.
Key Issues
Whether the addition of cash on hand as unexplained money under Section 69A of the Income Tax Act, 1961, is justified when the assessee has provided evidence of withdrawal from her bank account?
Sections Cited
69, 69A, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 09.09.2025 for the Assessment Year (hereinafter referred to as "AY”) 2016-17.
The main grievance of the assessee is against the action of the Ld.CIT(A) confirming the addition of ₹22,48,834/- u/s.69 of the Income Tax Act, 1961 (hereinafter referred to as "the Act”).
The brief facts of the case are that the assessee filed return of income (RoI) on 01.02.2017 declaring total income at ₹10,78,323/-.
Later, the case was selected for limited scrutiny through CASS for the reason “high cash on hand shown in balance-sheet as compared to preceding year and RoI filed after 07.11.2016, whether the cash in hand shown in the RoI is correct”. In this regard, the AO noted that the assessee had shown cash on hand as on 31.03.2016 at ₹22,48,834/- in her balance-sheet as on 31.03.2016. Hence, the AO asked the assessee to prove the nature and source of the cash on hand as on 31.03.2016; and the AO is note to have passed an order u/s.144 of the Act on 10.12.2018 making an addition of ₹22,48,834/-, which addition was assailed in the first round by the assessee before this Tribunal; and the Tribunal is noted to have set aside the matter back to the file of the AO vide order dated 17.10.2023 [in for fresh assessment. Pursuant to it, the AO is noted to have issued various statutory notices directing the assessee to prove the nature and source of cash on hand of ₹22,48,834/- as on 31.03.2016. The assessee is noted to have submitted that she was a partner in a partnership firm M/s. Sri Balaji Cotton Mills and that firm had sold an immovable property and by virtue of it, the assessee received her share of ₹1,04,00,000/- which was received in her bank account on 08.08.2014, which she invested in fixed
Date of cash Amount in withdrawal Rs. 08.04.2015 10,000 25.05.2015 8,50,000 27.05.2015 15,00,000 27.05.2015 15,00,000 24.08.2015 2,00,000 14.09.2015 2,00,000 18.09.2015 1,00,000 Total 43,60,000/-
During the relevant FY, the assessee had withdrawn an amount of Rs 43,50,000/- out of the bank accounts by redemption of the aforesaid fixed deposits and utilized the same to various purpose and had a closing cash balance of ₹22,48,834/-. The AO noted that the assessee had withdrawn out of ₹43,50,000/-, an amount of ₹30 lakhs was withdrawn as on 27.05.2015 and ₹8.50 lakhs on 25.05.2015 and balance ought to be around ₹22,48,834/-. However, the AO disbelieved the assesssee’s assertion that she kept ₹22,48,834/- in her hands for more than six (6) months, which is suspicious and against human probabilities. Therefore, the AO disbelieved the assessee’s claim of the nature & source of ₹22,48,834/- and made an addition of the same as unexplained money u/s.69A of the Act.
Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to confirm the same.
Aggrieved, the assessee is in appeal before this Tribunal.
We have heard both the parties and perused the material available on record, we note that, appellant-assessee had filed her ROI for A.Y. 2016-17 declaring Rs 10,78,323/-, wherein assessee has admitted in the ROI that she had cash on hand at Rs.22.48 lacs, which RoI was selected for scrutiny and the assessment was completed u/s 144 of the Act, by adding cash on hand as on 31.03.2016 as unexplained money u/s.69A of Act vide order of AO dated 10.12.2018 which was set aside back to the Income Tax Authorities/AO for fresh adjudication.
Accordingly, during the second round of assessment proceedings, the AO is noted to have asked the assessee to prove the nature & source of Rs 22.48 lacs as on 31.03.2016, file reconciliation and substantiation of cash on hand as on 31.03.2016. The assessee is noted to have explained that she received ₹1,04,00,000/- in her bank account on 08.08.2014 [share from sale from sale of immovable property] which she invested in fixed deposit in AY 2015-16. During the relevant AY 2016-17 (FY 2015- 16), the assessee is noted to have shown with the aid of bank statement that she has withdrawn an amount of ₹43,60,000/- by redemption of the aforesaid fixed deposits and utilized the same to various purpose and had a closing cash balance of ₹22,48,834/- which was shown as closing cash in hand as on 31.03.2016. However the AO is noted to have disbelieved (AY 2016-17) Nadarajan Kalyani the explanation of assessee and noted that other than her contention that she withdrew more than Rs 43 lacs, for the purpose of investments in properties and thereby contended such cash as available as withdrawn for the purpose of investment having not spent/invested etc., and thereby claimed the cash on hand as admitted as explainable. However, according to authorities below, the assessee didn’t substantiate such contentions with explainable cash withdrawals as accounted in assessee’s cash book / statement of affairs with consequent spending and non-spending of the same for the purposes for which it is withdrawn with any explainable proofs, the entire cash on hand as admitted in the ROI was treated as unexplained money u/s.69A of the Act. On appeal, the Ld CIT(A) is noted to have confirmed the action of AO, against which assessee is before us.
The dispute is regarding the nature & source of Rs 22.48 lacs as on 31.03.2016, which assessee has shown as closing cash on hand in her RoI for AY 2016-17. The assessee is noted to have shown with the support of bank statement that she has withdrawn an amount of ₹43,60,000/- [by redemption of the fixed deposit of ₹1,04,00,000/- in earlier year] which was utilized for various purpose and she had a closing cash balance of ₹22,48,834/- which was shown as closing cash on hand as on 31.03.2016. Details of withdrawals from assessee’s bank account are as under:
Date of cash withdrawal Amount in Rs. 08.04.2015 10,000 25.05.2015 8,50,000 27.05.2015 15,00,000 27.05.2015 15,00,000 24.08.2015 2,00,000 14.09.2015 2,00,000 18.09.2015 1,00,000 Total 43,60,000/-
The AO is noted to have disbelieved the claim of the assessee to have closing cash balance as on 31.03.2016 to the tune of ₹22,48,834/- mainly on the ground that out of ₹43,60,000/-, the assessee had withdrawn the amount of ₹38.50 lakhs in the month of May, 2015, so, it was improbable that she would keep Rs 22 lacs with her which is quiet unlikely. According to the AO, it is improbable that the assessee would hold substantial cash in her hand for more than six (6) months when the cash if invested in fixed deposits would have yielded interest income.
Further the AO noted that assessee has stated to withdrew cash, for the purpose of investment, having not spent/invested was the source of Rs 22 lacs, which means assessee was indulging in cash transaction for investment in immovable property attracting penal consequences.
Therefore, considering the facts, the AO is noted to have disbelieved the assessee’s claim that the nature and source of the closing cash on hand as on 31.03.2016 was from the withdrawal made in the year under consideration. The Ld.CIT(A) has concurred with the view of the AO. We don’t countenance the action of the lower authorities for the reason that (AY 2016-17) Nadarajan Kalyani when asked by the AO to prove the nature and source of ₹22,48,834/-, [which the assessee has admitted in her RoI as well as in her balance- sheet as closing balance in her hand as on 31.03.2016] the assessee is noted to have brought to the notice of the lower authorities that she had withdrawn cash of ₹43,60,000/- in the relevant year, and the cash- balance as on 31.03.2016 was out of the withdrawals only. The fact that assessee has withdrawn ₹43,60,000/- from her bank account has not been disputed by the AO/Ld.CIT(A). Merely because, the assessee had withdrawn substantial sum of ₹38.50 lakhs in the month of May, 2015 and had kept with her more than ₹22 lakhs as on 31.03.2016 can’t be a ground to disbelieve the assertion made by the assessee that the source of the impugned cash is her withdrawal from the bank account. The assessee is noted to have discharged her burden to prove the nature and source of cash deposits. In such a scenario, unless the AO is able to show that the withdrawn amount by the assessee has spent, invested or otherwise deployed elsewhere, the assessee can’t be asked to prove the negative i.e. she has not spent ₹22 lakhs in her hand. Since the assessee has discharged her burden to prove the nature and source of cash of ₹22,48,834/-, the onus shifted to the shoulder of the AO to disprove it. which unfortunately the AO has not discharged. Therefore, merely because, the assessee was holding the cash for a period of more than six (6) months in her hand wouldn’t be reason in the given facts of the case
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 04th day of March, 2026, in Chennai.