Section 69 Addition Deleted – Cash Availability Human Probabilities Accepted: ITAT Bangalore

Siddegowda Channa Basavaiah Vs ITO (ITAT Bangalore)

Section 69 Addition Deleted – Cash Availability Human Probabilities Accepted- ITAT Bangalore

The Bangalore ITAT deleted the addition of ₹4.81 lakh made under Section 69, holding that the assessee had reasonably explained the source of cash deposits based on surrounding circumstances and human probabilities.

The AO had treated excess cash deposits as unexplained due to:

• Lack of one-to-one correlation between withdrawals and deposits,
• Time gap between withdrawals and redeposit,
• Absence of documentary proof for cash received from relatives.

However, the Tribunal held:

• Strict one-to-one nexus is not required; once overall cash availability is demonstrated, explanation cannot be rejected on technical grounds.
• Bank withdrawals (₹2.90 lakh + ₹1.14 lakh) were undisputed and sufficient to establish availability of cash.
• Contributions of ₹1.5 lakh each from father and father-in-law (agriculturists) were plausible, especially in a cash-based rural economy.
• RTC records support agricultural background, and lack of banking trail cannot be fatal.

The ITAT emphasized:

• In Indian family context, financial support for house purchase is normal, even in cash.
• Preponderance of probabilities is sufficient-proof beyond doubt is not required.
• Suspicion cannot replace evidence.

Further, the Tribunal also considered the assessee’s medical condition, explaining inability to furnish full documentation during assessment.

Accordingly, the assessee was held to have discharged the burden under Section 69, and the addition was deleted in full.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

The present appeal filed, at the instance of the assessee, is directed against the order passed under section 250 of the Income Tax 1961 dated 14-08-2025 pertaining to A.Y. 2017-18 at National Faceless Appeal Centre-NFAC, Delhi.

2. The effective issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 4.81 Lakh by treating the cash deposit as unexplained money under section 69 of the Act.

3. The facts in brief are that the assessee is an individual who sold a vacant land property for a consideration of Rs. 13.44 lakh. The assessee out of such sale consideration received a sum of Rs. 5.89 lakh in cash as recorded in sale deed. Subsequently, the assessee deposited cash amounting to Rs. 10.7 lakh which was utilised for making payment for the purchase of a residential house for a consideration of Rs. 57.8 Lakh. Regarding the source of excess cash deposit of Rs. 4.81 lakh (Rs. 10.7 lakh – 5.89 lakh), the assessee explained that same was out of personal saving of cash for emergency use and loan from friends and relative. However, the assessee sought time for furnishing supporting documents as he was ill and going for cancer diagnosis.

3.1 The AO acknowledges the assessee being ill but considering the fact that the assessment was getting time bared, the AO completed the assessment by treating the excess cash deposit of Rs. 4.81 Lakh as unexplained money u/s 69 of the Act and added to total income of the assessee.

4. The aggrieved assessee preferred an appeal before the learned CIT(A).

5. The assessee before the learned CIT(A) submitted that the during the year under consideration and in the last quarter of previous financial year (2015-16), he has withdrawn cash totalling to Rs. 2,90,500/- and 1,14,000/-. In addition, he received a sum of Rs. 1.5 lakh each from his father and father in-law. Both are into agricultural activity as evident from RTC records furnished along with the details. However, the learned CIT(A) dismissed the assessee’s explanation and confirmed the addition made by the AO by observing as under:

7.1 Grounds 1, 2, and 3 – These grounds challenge the addition of Rs.4,81,000/- as unexplained receipt. The core contention is that the cash deposits were sourced from earlier withdrawals and from relatives. On examination of the withdrawal pattern, it is evident that the withdrawals of Rs.1,14,000/- during January–March 2016 were in small amounts and spread out over several dates. There is a significant time gap between such withdrawals and the deposits, with no direct one-to-one correlation. Given the regularity of household expenses, it is implausible that the entire withdrawn sum remained intact until redeposit. The claim of Rs.3,00,000/- from relatives is unsupported by any evidence of actual transfer, such as bank statements or affidavits; RTC records merely establish landholding, not cash availability or actual payment. This pattern and lack of corroboration justify the AO’s conclusion under section 69.

7.2 Ground 4 – The grievance that evidence was ignored is unfounded. The AO has discussed the material and found it inadequate to explain the deposits satisfactorily. Mere filing of documents does not ipso facto establish their veracity; the onus under section 69 remains on the assessee, which has not been discharged.

7.3 Ground 5 – The appellant’s reliance on section 68 being wrongly applied is also misplaced. The AO’s reference to unexplained receipts can be read in the context of section 69, which applies where investments or deposits are not recorded in the books and the explanation offered is not satisfactory. The statutory conditions stand met.

7.4 The failure to produce conclusive documentary evidence of cash availability, the inconsistent withdrawal-deposit nexus, and the unsubstantiated claim of relative contributions lead to the inevitable inference that the deposits are unexplained. Judicial precedents uphold the principle that uncorroborated explanations can be rejected, and additions sustained.

7.5 In view of the above, all grounds of appeal are rejected.

8. Conclusion and Order

In aggregate, the appellant has not been able to substantiate the source of the cash deposits of Rs.4,81,000/- with credible, contemporaneous, and verifiable evidence. The pattern of withdrawals, the gaps between withdrawals and deposits, the absence of direct proof of relative contributions, relatives source and the inherent improbability in the explanation offered, all cumulatively support the AO’s addition under section 69. Accordingly, the appeal is dismissed and the addition sustained.

6. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

7. The learned AR before us submitted that the addition was made without properly appreciating the facts and surrounding circumstances. It was contended that the assessee had sufficient cash availability from earlier withdrawals and support from close family members. The withdrawals from bank accounts were duly evidenced and cannot be rejected merely due to time gap. It was further submitted that contributions from father and father-in-law, who are agriculturists, are reasonable and supported by RTC records. The learned AR emphasized that strict one-to-one correlation is not required and the explanation based on human probabilities should be accepted.

8. Per contra, the learned DR before us submitted that the assessee failed to substantiate the source of cash deposits with credible and verifiable evidence. It was argued that there is no direct nexus between withdrawals and deposits, and the time gap weakens the explanation. The claim of receiving cash from relatives is not supported by any documentary proof such as confirmations or bank statements. Mere RTC records do not establish availability of cash. Therefore, the assessee failed to discharge the onus under section 69 of the Act. Accordingly, the learned DR supported the orders of the AO and CIT(A) and prayed for sustaining the addition.

9. We have heard the rival contentions of both the parties and perused the materials available on record. The issue for our consideration is whether the cash deposits of Rs. 4,81,000/- can be treated as unexplained money u/s 69 of the Act. On perusal of the facts, we note that the assessee has explained the source of cash deposits as arising from (i) withdrawals from bank account during the relevant period and immediately preceding period, and (ii) receipt of cash from his father and father-in-law. The details of withdrawals aggregating to Rs. 2,90,500/- and Rs. 1,14,000/- have been brought on record and are not in dispute. The lower authorities have rejected the same mainly on the ground that there is no one-to-one correlation between withdrawals and deposits and there is a time gap. In our considered view, such an approach of the lower authorities is too technical and not in accordance with the settled position of law. It is not necessary that the assessee should establish a direct one-to-one nexus between each withdrawal and each deposit. Once the availability of cash is reasonably demonstrated, the explanation cannot be rejected merely on the basis of timing differences, especially in the case of an individual where cash is normally kept for household and contingency purposes.

9.1 Further, the assessee has also explained that a sum of Rs. 1,50,000/- each was received from his father and father-in-law. It is an undisputed fact that both of them are engaged in agricultural activities, and this fact stands substantiated by RTC records placed on record. In the Indian context, agricultural income is largely cash based and it is a matter of common knowledge that persons engaged in agriculture generally deal in cash. Therefore, availability of cash of Rs. 1.5 lakh each with close family members like father and father-in-law cannot be doubted merely because no banking trail is produced.

9.2 The Ld. CIT(A) has rejected the said explanation by observing that RTC records only establish landholding and not cash availability. While this observation may be correct in a strict sense, however, it ignores the surrounding circumstances and ground realities. Ownership of agricultural land coupled with engagement in agricultural activity reasonably supports the capacity to generate cash. In absence of any contrary material brought on record by the Revenue, such explanation cannot be brushed aside.

9.3 We also note that the impugned cash deposits were utilised towards acquisition of a residential house property. In Indian family settings, it is a normal and well accepted practice that parents and close relatives extend financial support, particularly when a family member is purchasing a house. Such support is often informal and in cash, especially in rural and semi-urban areas. Therefore, contribution of Rs. 1.5 lakh each by the assessee’s father and father-in-law towards purchase of a residential house is a plausible and natural human conduct and cannot be disregarded merely for want of formal documentation.

9.4 We further note that the assessee had also explained that he was undergoing serious medical condition at the relevant time, which has not been disputed by the AO. This also explains the inability of the assessee to furnish elaborate documentation during assessment proceedings. The explanation of the assessee, when seen in totality, appears to be reasonable and plausible.

9.5 The addition made by the AO and sustained by the Ld. CIT(A) is primarily based on suspicion and absence of evidence. However, it is settled law that suspicion, howsoever strong, cannot take the place of proof. At the same time, the assessee is only required to establish his case on the basis of preponderance of probabilities and not beyond doubt.

9.6 Considering the totality of facts, the availability of cash from withdrawals, the explanation of receipt from close relatives engaged in agriculture activity, and the surrounding circumstances, we are of the considered view that the assessee has substantially discharged the onus cast upon him u/s 69 of the Act. Accordingly, the addition of Rs. 4,81,000/- made by the AO and confirmed by the Ld. CIT(A) is not sustainable and the same is hereby deleted. Hence, the grounds raised by the assessee are allowed.

9.7 As we have allowed the substantive ground raised by the assessee and deleted the addition made, we are not inclined adjudicate the other grounds which are either general grounds or consequential in nature. Accordingly, the same are hereby dismissed as infructuous.

10. In the result, the appeal of the assessee is hereby partly allowed.

Order pronounced in court on 15^th day of April, 2026