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Facts
The assessee deposited Rs. 8,00,000 in cash during the demonetization period. The Assessing Officer (AO) accepted Rs. 3,00,000 as savings and added Rs. 5,00,000 to the total income as unexplained cash credit under section 69A. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the assessee failed to substantiate the source of the cash deposit of Rs. 5,00,000. The explanation regarding income from stitching, embroidery, and pressing was considered a story to explain the cash and was not accepted. The cash withdrawal from bank accounts was also found to be made by third parties and not for the assessee's use.
Key Issues
Whether the addition of Rs. 5,00,000 as unexplained cash credit is justified on account of cash deposits made during the demonetization period.
Sections Cited
253, 143(3), 69A, 246A, 115BBE, 234A, 234B, 234C, 271AAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
assessee is aggrieved by the order bearing number ITBA/ APL/S/250/2025-26/1076590488 (1)dated 30th May 2025 passed
Sudha Luhadia ITANo.546/Ind/2025 by the Ld. CIT(appeal) under section 250 of the act which is impugned order. hereinafter referred to as the The Relevant assessment year is 2017-18 and the corresponding previous year period is from 1.4. 2016 to 31.3.2017.
Factual Matrix 2.1 That as and by way of an assessment order made under section 143(3) of the act, the total income of the assessee was computed and assessed at Rs.12,09,000/-. The income as per the return of income was at Rs. 7,09,000/-. The addition of Rs.
5,00,000/- was made under section 69A [Para 3 of assessment order] of the Act. That the aforesaid assessment order bears number: - ITBA/AST/S/143(3)/ 2019-20/1021453232(1) and that the same is dated 01.12.2019 which is hereinafter referred to as the “impugned assessment order”.
2.2 That the core reason for making addition in the “impugned assessment order” at para 3 is below: -
“3. All of the assesse's reply have been seen and perused on portal. Perusal of record reveals that the ITR for F.Y. 2016-17 was also filed after the demonetization period on 28.01.2017 at the income of Rs. 755760/- in which income is declared from rental income and income from business of stitching, embroidery and pressing at Rs. 4,50,000/- on presumptive basis.
Sudha Luhadia ITANo.546/Ind/2025
Perusal of ITR and computation for A.Y. 2015-16 filed on 31.12.2015 before demonetization reveals that no such income was offered by the assessee in that A.Y. from business of Stitching, Embroidery and pressing work. Bills of stitching machine and Steam iron produced by the AR reveals that they were ranging from 2010 to 2014 i.e. before A.Y. 2015-16. However, no income was offered from the so-called business in the ITR of A.Y. 2015-16. It is shown only in the ITR's filed after demonetization this so-called business of stitching, embroidery and pressing. This fact clearly establishes that the story of so-called business and accumulation of money in a span of time is only made to explain the money of Rs. 8,00,000/- deposited during the demonetization period. It is just an afterthought frame to hide the truth behind the glass cover but deficiencies in the picture are so vital that the picture is seen crystal clear even behind the glass. Thus, the assessee has failed to substantiate the income from stitching, embroidery shown by her. The aforesaid income has been offered in the ITR filed post demonetization period. The assessee has shown names of various persons from whom stitching charges is received. Even if for a moment it is believed that the assessee was doing stitching work, there is no probability that she would receive Rs. 500/- and Rs. 1000/- notes for miscellaneous stitching work. Therefore, stitching income is nothing but a ploy to explain the cash deposited during demonetization period. Accordingly, the explanation given by the assessee is not accepted. However, looking to the assessee's age of around 50years and cash balance shown in the ITR of AY 2016-17, it could not be denied to have some accumulation of the savings during 20-25 years of married life hence, accumulation of money around Rs. 300000/- is accepted and Rs. 500000/- out of Rs. 8,00,000/- deposited during demonetization period, are added back to the total income of the assessee u/s 69A of the IT Act as unexplained cash credits in her account. Since the addition is made u/s 69A the taxes chargeable at the rates prescribed u/s 115 BBE of the IT Act 1961. In this case, addition has been made u/s 69 A of the IT Act 1961, hence, penalty proceedings u/s 271AAC is also initiated on this issue. The assessee's income after considering all the facts and circumstances of the case, as available on the record, is determined as here under:- Income as per ITR Rs. 7,09,000/- Addition u/s 69A as per para 3 Rs. 5,00,000/- Total Income Rs. 12,09,000/- Assessed u/s 143(3) accordingly. Demand Notice and Challan issued. Interest u/s 234A, 234B, 2340 of the IT Act are Charged as appropriate. Tax Charged at the rate prescribed u/s 115BBE of the IT Act, 1961. Tax and interest are payable as per ITNS 150, which is a part of this order. Penalty proceedings Notice u/s 271AAC issued.”
Sudha Luhadia ITANo.546/Ind/2025 2.3 That the Assessee being aggrieved by the aforesaid “impugned assessment order” prefers the first appeal under section 246A of the act before the Learned CIT(A) who by the impugned order has dismissed the first appeal of the assessee on the grounds and reasons stated therein. The core grounds and reasons for the dismissal of the first appeal were as under:-
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Sudha Luhadia ITANo.546/Ind/2025 2.4 The assessee being aggrieved by the impugned order has preferred the instant second appeal before this Tribunal and has raised the following grounds of appeal in the form number 36 against the impugned order which are as under:-
“1.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 5,00,000/-made to the total income of the appellant on account of cash deposited in the bank account during the demonetization period by treating it as unexplained money under section 69A r.w.s. 115BBE of the Income-Tax Act, 1961 without properly appreciating the facts of the case and submissions filed by the appellant even when source of cash deposit was duly explained during the course of assessment proceedings and appellate proceedings itself. 2.That on the facts and in the circumstances of the case and in law, the Ld Assessing Officer erred in computing the amount of tax liability by invoking the amended provisions of section 115BBE of Income-Tax Act, 1961 even in respect of cash deposited in the bank accounts prior to 15-12-2016 i.e. prior to the date of obtaining assent from the President of India and henceforth, applicability of the amended provisions of section 115BBE of the Income- Tax Act, 1961 in respect of this addition was grossly unjustifiable and wholly unwarranted. 3.The appellant reserves the right to add, alter and modify the grounds of appeal as taken by her.”
3. Record of hearing 3.1 The hearing in the matter took place before this Tribunal on 19.1.2026 when the Ld. AR for the assessee and on behalf of the assessee appeared before this Tribunal and interalia contended that the impugned order is bad in law, illegal and not proper. It therefore deserves to be set aside. The Ld. AR for the assessee has placed on Sudha Luhadia ITANo.546/Ind/2025 the record of this Tribunal a paper book containing pages 1 to 176 and a synopsis of three pages. At the outside it was contended that the assessee had deposited cash of Rs. 8 lakh in her bank account with Canara bank on 11.11.2016. The case of the assessee was selected in scrutiny on the issue of cash deposits during the demonetization period. That the Ld. Assessing Officer while passing the “impugned assessment order” doubted the source of cash as explained by the Assessee but allowed the accumulation of cash to the tune of Rs. 3 lakh and balance amount of Rs.500000 was added to the total income of the assessee. Our attention was invited to page 5 of the paper book which was a copy of ITR for assessment year 2016 – 17 filed on 28.01.2017. Our attention was next invited to page 6 and 8 of paper book containing computation of income, computation of tax and the capital account of the assessee for assessment year 2016- 17. Basis page 6 of the paper book our attention was brought that the assessee is having income from house property. Basis page 7 it was submitted that income from stitching was Rs.203550, income from embroidery was Rs.1,55,500/- and income from pressing was Rs.90950, the aggregates of which comes to Rs. 4,50,000/- (credit not given). It
Sudha Luhadia ITANo.546/Ind/2025 was submitted that the ROI was filed late. In respect of income from rent is concerned, it was submitted that same are realised by cheques. The Assessee is a regular income tax filer. It was submitted that return of income for assessment year 2016 – 17 [page 5 of PB] was filed on 28.1.2017 which was late (after demonetization and after depositing of money). The case was selected by CASS under the scrutiny on the issue of cash deposits during demonetization period. It was submitted that the ROI for assessment year 2015-16, [page 9 of paper book] was filed on 31.12.2015. Basis page number 7 of paper book [computation of tax] it was submitted that for assessment year 2016 – 17 the assessee had paid taxes of Rs.93,860 (interest too is paid). If the income from stitching, embroidery and pressing are excluded then the assessee is below taxable limit. Our attention was invited to paper book page 31 to 34 - bills for stitching, steam ironing[purchases] which were doubted. Our attention was then invited to paper book pages 35 to 46 which are copies of few sales bills/job charges issued by the assessee to customers. With regards to the impugned order of ld. CIT(A) it was submitted that due weightage is not given for withdrawal of cash amount. Our
Sudha Luhadia ITANo.546/Ind/2025 attention was invited to the internal page 19 of the impugned order with regard to the amount of Rs.4,70,480/-. The Ld. AR submitted that Mr. Santosh, Mr. Manohar and Mr. Purjeet whose names are appearing in the bank account are the persons who had actually withdrawn the money from the bank rest of two entities are of self [Assessee]. It was submitted that in normal banking transactions against the cheques of withdrawal the person who actually goes to the bank his/her name is recorded, if the cheques are not crossed account payee cheques (page 19 of impugned order). It was finally submitted that Ld. CIT(A) has misunderstood the cash flow statement and has made mistake in reading the same. Cash flow statement was to be given the due benefit. The Ld. AR finally submitted that he relies upon synopsis which is reproduced by us as below:-
Sudha Luhadia ITANo.546/Ind/2025
Sudha Luhadia ITANo.546/Ind/2025
Sudha Luhadia ITANo.546/Ind/2025 3.2 Per Contra the Ld. DR appearing for and on behalf of the revenue contended that bills page 31 onwards 32 of paper book relied upon raised doubt while adjudging the income for the assessment. The Ld. DR then placed reliance on the orders passed by the lower authorities below. In the rejoinder, the Ld. AR submitted that assessee has paid high tax as demonstrated. The Assessee is a lady and a senior citizen. Small amount is involved in making addition. Rely upon Madras High court decision as per the synopsis filed. The hearing was then closed.
Sudha Luhadia ITANo.546/Ind/2025 4 Observations findings and conclusions
4.1 We have to decide the legality, validity and proprietary of the “Impugned order” basis records of the case & the rival submissions canvassed before us.
4.2 We have carefully perused the records of the case and have heard the submissions.
4.3 We basis records of the case and after hearing and upon examining the rival contentions of the Ld. AR and Ld. DR canvased before us, are of the considered opinion that the ROI was at Rs.7,09,000/- filed on 05.08.2017. The assessee had deposited Rs.8 lakhs during the demonetization period from 09.11.2016 to 30.12.2016. The explanation for sources of cash deposit was “accumulation of cash” with the assessee since 2014 till 08.11.2016 when the demonetization was declared. The closing balance as on 31.3.2015 was at Rs.3,54,777/- and after that assessee has earned/has income from the stitching, embroidery and pressing the cash accumulation was to the tune of Rs.8,68,377/- till 08.11.2016 out of which Rs.8 lakh were deposited in the Canara Bank account number 03251023131 on 11.11.2016
Sudha Luhadia ITANo.546/Ind/2025 few bills, vouchers, few list of customers etc. in support are placed on record. The Ld. AO held following as adversial:-
ITR for assessment year 2016 – 17 filed after the demonetization on 28.1.2017 2. Sources of income are from rental income and income from the business of stitching embroidery and pressing. 3. Perusal of ITR for assessment year 2015-2016 before the demonetization reveals that no income was offered by the assessing from stitching, embroidery and pressing. 4. Bills for stitching machine and steam iron ranges from 2010 to 2014 which period is before assessment year 2015-16. 5. The story of business of stitching embroidery and pressing after the demonetization is coined story. It is shown in the ITR for A.Y. 2016 – 17 for the first time. 6. The above fact at (4) and (5) above is a created story to explain the sources of Rs. 8,00,000/-. It is just an after thought framed to hide the truth behind the glass cover but deficiency's in the picture are vital that the picture is seen crystal clear even behind the glass. 7. Receipt of rupees 500 and rupees 1000 notes for miscellaneous stitching work is improbable exercise. Stitching income is a ploy to explain the cash deposited during demonetization period. 8. The learned AO in the ultimate analysis looking to the fact that age of the assessee is 50 years, the accumulation of savings during 20-25 years of married life and cash balance showing in assessment year 2016-17 accepted Rs.3 lakh of the amount as accumulation against Rs. 800000/- cash deposited. Added Rs.5 lakh under section 69A as unexplained cash. 4.4 In our considered opinion the above finding cannot be said to be adversial as the entire facts and circumstances of the case is taken into consideration, the evidence produced is analysed, factum of income from stitching, embroidery and pressing in assessment
Sudha Luhadia ITANo.546/Ind/2025 year 2017-18 is a few activity uncravelled which in our opinion can be said to be sham, “make believe” and “subterfuge” [ both ROI AY 2016-17 & 2017-18 belated]. The observations of the AO is well merited. The impugned assessment order is fair and equitable. The fair benefit of Rs.3 lakh out of Rs.8 lakh is given and balance Rs.5 lakh added on reasonable just and fair basis. The impugned assessment order therefore cannot be termed as arbitrary, capacacious and bad in law.
4.5 The assessee has not been able to offer any plausible explanation worth a credence even before the Ld. CIT(A) for balance amount of Rs.500000. The documentary evidence of few bills for stitching machine and steam iron[purchases] are of 2010 to 14 and (how it holds valid for assessment year 2017 2018 in absence of any income for the assessment year 2015 – 16) from activities as stated by the assessee is correctly appreciated. What is required in law is not the evidence of purchases of earlier years of machines but the income made from the deployment of those machines in the years 2015- 16, or preceding years that is 11-12, 12-13, 13-14, 14-15 (the relevant years of acquisition of Sudha Luhadia ITANo.546/Ind/2025 machines) which matters, which is not the case hearin. Mere act of purchases without their being corresponding sales/job work is no justification for source of cash of the remaining Rs.5 lakh (Pages 31 to 34 of paper book) (Ipsofacto examination of page 31 to 34 of paper book).
4.6 The ld. CIT(A) in the impugned order after carefully examining the cash flow statement which we have already reproduced at para 2.3(supra) has inferred correctly which too is also reproduced by us in para 2.3(supra) (tables of cash flow from 1.4.2014 to 31.3. 17 plus table summarized).
4.7 We hold that basis Para 7.7 of the Impugned Order Which too is reproduced by us in Para 2.3, we are in the agreement with the view of ld ClT(A). The withdrawal of Rs 1,61, 880 by Mr. Santosh Kumar on 16/10/2014 of Rs 100000 by Mr. Manohar on 31.12.2014 & Rs. 100000/-by Mr. Purjeet on 01/1/2015 cannot be said to be withdrawals of Assessee as claimed by the Ld. AR.
Whenever the Assessee herself wanted to do so [withdrawals ] she has done it Say on 21/10/2014 of Rs 44,300/- and on 18/12/2024 of RS. 64,300/. Hence the theory canvassed that Sudha Luhadia ITANo.546/Ind/2025 these persons actually went to the bank and withdrew the money by bearer Cheque is a ploy deployed lo explain source of Cash Deposit of Remaining Rs.5 lakh. The Contention of Ld.AR is Rejected. [Generally bank in withdrawal of Rs.50,000 by bearer Cheque takes PAN Nos.too] We therefore, upheld the Reasoning Canvassed by Ld.CIT (A) in para 7,7 & find No Infirmities. The ld AR has failed to demolish the reasoning of ld CIT(A) with any Convincing Arguments. No Details of Mr. Santosh kumar, Mr.
Mahohar & Mr. Purjeet have been Placed on Record to justify the Say of the Assessee.
4.8 With Regard to the finding of order Id ClT(A) in the Impugned order under title "2 Income from Embroidery, Stitching & Pressing in FY 15-16 (AY16-17) FY 16-17 (AY 17-18)" Internal Page 21 of the Impugned order Which too we have already Reproduced at para 2.3 supra we find, no infirmities in it. The Ld AR has failed to demolish the said finding basis any Cogent- material and evidence. The Circumstances have been held against the assessee. The reasoning is logical, plausible. It is not demonstrated before us that same is illogical and not plausible. It is irrational too is not demonstrated by Sudha Luhadia ITANo.546/Ind/2025 Ld AR of the Assessee. Similarly we find no infirmities with the findings of Learned CIT(A) given Under Caption “3 Incomplete flow statement” Internal Page 22 of Learned CIT(A) order which too is already reproduced by us in Para 2.3 supra. At both the stages the Assessee ought to have given full & complete Picture of his Accounts, books, Computation, flow Chart, goods on which Job work was done etc. but nothing is Presented. At least Prima facie the Names, Address, identity, PAN No of Persons who had gone to withdraw the Cash Money & their Affidavits could have been given.
Further their Relationship with Assesses/Capacity Could have been explained. Similarly regular customers of assessee with Names, identity, address and volume of business which they did with assessee could have been explained. Unfortunately nothing is even explained before two lower authorities. In brief, once the income is earned from business full and complete details of customers must be given so that tax authorities could verify those details by the due process of law, similar is the situation with regard to bank withdrawals (supra).
Sudha Luhadia ITANo.546/Ind/2025 4.9 The Ld. AR has made a vain attempt to draw nexus between the amount of withdrawn of Rs. 4,70,000/- (Supra) with Rs. 5 lakh or 8 lakh as earlier withdrawals of assessee but has failed to justify earlier withdrawal of Rs. 4,70,000/- of assessee herself. Except two remaining 3 have been found to be of third parties. Source of cash deposit of Rs. 5 Lakh or 8 Lakh have not been proved by any tangible material record. Except bald statements / explanation no credible evidence has been placed on record to justify sources despite full and complete opportunities to the assessee at both the lower stages of adjudication and adjudgement. The Ld. AO has been realistic and so also Ld. CIT (A) by giving benefit of Rs. 3 lakh on account of she being, a lady and a married woman for 20-25 years beyond this indulgence what else the assessee expects ? The expectations of assessee for complete relief even for the balance amount of 5 lakh is farfetched and does not meet ends of justice too as income must be computed on real time basis and which both lower authorities have rightly done so.
The arguments of embroidery, stitching and pressing have no place in law [without proofs] with due respect to the contention of Ld. AR in this matter. The onus is on the assessee to prove that Sudha Luhadia ITANo.546/Ind/2025 cash deposited during demonetization came from business’s, cash- in hand, sales or regular business operations with proper supportings.
4.10 The bare assertions are insufficient the assessee must provide detailed cash flow statement, sales invoices and stock registers to prove that the cash generated was from the specific business activity.
4.11 The assessee has not been successfully able to establish cash deposit by combination of opening cash balance, daily sales/ job receipts and bank withdrawals. Hence undisclosed income is proved.
4.12 The assessee has not able to establish sudden spike in cash sales by any tangible material worth credence. How much material came, from whom it has come, how much job work was done of embroidery, stitching and ironing are not spelt out. There is no primary evidence, no reconciliation on record if any hence the explanation is rightly rejected by CIT (A).
4.13 In the presmises drawn by us we uphold the “Impugned order” of Learned CIT(A) and we dismiss the appeal.
Sudha Luhadia ITANo.546/Ind/2025
Order 5.1 In the result, the impugned order is upheld.
5.2 The appeal of the assessee is dismissed. pronounced in open court on 06.02.2026.
Sd/- Sd/- (BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER