Suleekere Kallegowda Rajashekar Vs ITO (ITAT Bangalore)
₹20.33 Lakh Deposited in Retired Principal’s Account: Were Hostel Fees His Unexplained Money?
A bank account may stand in an individual’s name, but that fact alone does not answer whose money was deposited in it. This was the central issue before the Bangalore Bench of the ITAT in Suleekere Kallegowda Rajashekar v. ITO, ITA No. 2405/Bang/2025, order dated 22 September 2026, relating to AY 2017–18.
The assessee, a retired principal, had deposited ₹20,33,799 in cash across two Bank of India accounts. He explained that the deposits represented fees collected from students of a ladies’ hostel associated with Sri Vidya Peetha (R) Education Society. According to him, the hostel was maintained on a no-profit basis, its expenses were paid from the same bank account, and the modest surplus of ₹2,251 had already been offered to tax. The Assessing Officer rejected the explanation and added the entire cash deposit under section 69A.
Why the entire deposit was added
The assessee filed his return declaring income of ₹5,72,000 from salary, house property and other sources. His case was selected for limited scrutiny to verify cash deposits. The Assessing Officer found deposits of ₹19,23,449 through more than 50 entries in one account and ₹1,10,350 through four entries in another.
The assessee stated that he was handling hostel fee collections and that the amounts, although deposited in his personal account, related to the hostel maintained for the society’s students. He furnished bank statements and a list of hostel fee collections. The Assessing Officer, however, found that original fee receipts and an income and expenditure statement had not been produced to substantiate the cash receipts and their application towards hostel expenses. He therefore treated the full ₹20,33,799 as unexplained money.
Before the CIT(A), the assessee reiterated that he was in charge of the ladies’ hostel and collected only the amounts needed for its maintenance. He claimed that receipts had been issued in the society’s name and that the collections were deposited in his account for convenience. The CIT(A) remained unconvinced that the source had been established and dismissed the appeal.
A 666-day delay explained by age and illness
There was a substantial preliminary hurdle before the Tribunal could examine the addition. The CIT(A)’s order was dated 19 October 2023, while the appeal before the ITAT was filed on 27 October 2025, resulting in a delay of 666 days.
The assessee explained that he was an 89-year-old senior citizen suffering from several age-related medical conditions, including spinal problems, signs of osteoporosis and impaired mobility. These difficulties affected his ability to attend to financial matters and coordinate with his professional representative. He furnished a medical certificate and stated that, after becoming aware of recovery proceedings, he obtained assistance and filed the appeal.
The Tribunal accepted that his age, health and mobility difficulties constituted sufficient cause. It also noted that filing the appeal despite those circumstances indicated an intention to pursue the matter. The delay was condoned, allowing the dispute to be heard on its merits.
What the Tribunal directed the Assessing Officer to verify
On the addition itself, the Tribunal did not make a final finding that the deposits belonged to the society or that only ₹2,251 was taxable. It found that the assessee’s explanation required verification against the underlying records.
The Assessing Officer was directed to examine whether the assessee ran the ladies’ hostel on behalf of, or in connection with, Sri Vidya Peetha (R) Education Society. The Tribunal gave a clear consequence for one possible finding: if the receipts were issued by the society and the amounts were recorded in its books of account, the addition in the assessee’s hands must be deleted.
If the receipts were not issued in the society’s name, or the collections were not recorded in its books, the inquiry would not end there. The assessee must then be given an opportunity to explain how the total hostel receipts produced a surplus of only ₹2,251, including the expenses incurred in running the hostel. The Assessing Officer must verify the facts and decide the matter afresh in accordance with law.
The appeal was accordingly allowed for statistical purposes. The addition of ₹20,33,799 was sent back for examination; it was not finally deleted by the Tribunal.
Author’s comment
The order illustrates the difficulty created when institutional collections pass through a personal bank account. The bank entries establish that cash was received, but they do not, by themselves, establish whether the full amount was the account holder’s income. Equally, describing the deposits as hostel fees or pointing to a small surplus does not dispense with the need to prove the collections and expenditure.
The decisive evidence on remand will be the fee receipts, student-wise collection details, the society’s books, confirmation of the hostel arrangement, and a reconciliation of receipts with hostel expenses and bank transactions. If the society’s records establish that the money was collected on its behalf, the Tribunal has directed deletion in the assessee’s hands. Otherwise, the assessee still has an opportunity to substantiate the actual surplus. The case is therefore a reminder that section 69A additions must follow verification of the explanation offered, while an assessee who handles another entity’s funds must preserve records that clearly show their source and use.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal is filed by Suleekere Kallegowda Rajashekar (the assessee/appellant) for assessment year 2017-18 against the order dated 19 October 2023 passed by the National Faceless Appeal Centre, Delhi (the learned CIT(A)), whereby the assessee’s appeal against the assessment order dated 7 November 2019 passed under section 143(3) by the Income Tax Officer, Ward 1, Tiptur, was dismissed.
2. The Assessee has raised the following grounds of appeal:
1. The Learned Appellant Authority has erred both in law and in Facts in passing the impugned order in the manner and haste in which it was passed and hence the order of the Learned Appellant Authority needs to be cancelled in to-to.
2. The Learned Appellant Authority has erred both in law and in Facts in omitting to follow the relevant requirements prescribed under the Income Tax Act, 1961 and rules thereon.
3. The Learned Appellant Authority has erred both in law and in facts in making additions contrary to the law and rules thereunder.
4. The Learned Appellant Authority has erred in law and in facts, by failing to address and adjudicate each of the grounds raised in the appeal.
5. The Learned Appellant Authority has erred in upholding the assessment order, which is perverse, arbitrary, and contrary to the principles of natural justice. The Assessee was not granted adequate opportunity to be heard, and relevant submissions and judicial precedents were ignored.
6. The Learned Appellant Authority has failed to appreciate that the Assessee, an 90-year- old senior citizen, managed a ladies hostel on a no- profit basis for students of Sri Vidhya Petha (R) Education Society. The hostel maintenance fees deposited in the Assessee s bank account were for administrative convenience and did not constitute taxable income.
7. The Learned Appellant Authority has erred in treating the entire hostel maintenance fee deposits as taxable income, disregarding the real income theory and the doctrine of mutuality. The nominal surplus of Rs. 2,251/- was duly offered for taxation, and the transactions were fiduciary in nature, not generating personal income for the Assessee.
8. The Learned Appellant Authority has erred in upholding the invocation of Section 69A of the Income- tax Act, 1961, despite the Assessee having satisfactorily explained the source of deposits. The burden of proof was on the AO, who failed to disprove the Assessees explanation, rendering the addition unsustainable.
9. That, without prejudice to the above, the Learned Appellant Authority failed to consider the concept of Peak Credit in determining the unexplained cash deposits. Even assuming, without admitting, that the cash deposits were unexplained, only the peak credit (i.e., the maximum outstanding balance at any point in time) should have been considered for addition to avoid taxing the same funds multiple times. The repeated deposits and withdrawals indicate rotation of the same funds, and taxing gross deposits results in double taxation, which is impermissible under law.
2. At the outset, the Registry noted that the appeal is barred by limitation by 666 days. As per Form No. 36, the appellate order is dated 19 October 2023 and was stated to have been received by the assessee on the same date. However, the appeal was filed on 27 October 2025, resulting in a delay of 666 days.
3. The assessee filed an application seeking condonation of delay, stating that he is an 89 -year-old senior citizen suffering from multiple age- related ailments, including cervical and lumbar spondylitis, signs of osteoporosis of the bones, and generalized de generative changes. It was submitted that his impaired mobility made it extremely difficult for him to attend to official and financial matters in time, and that these medical conditions substantially affected his ability to coordinate with his professional representative. A medical certificate was furnished in support of the application. Considering his age and fragile health, the assessee prayed that the delay of 666 days in filing the appeal be condoned. It was also submitted that an addition of ₹ 20,33, 799 had been made in his case and that, upon becoming aware of the recovery proceedings, he received assistance and filed the present appeal.
4. The learned authorised representative reiterated these facts and submitted that the delay deserved to be condoned. Reliance was placed on judicial precedents, the assessee’s health condition, and his immobility in support of the request for condonation.
5. The learned departmental representative submitted that no sufficient cause had been shown for the delay in filing the appeal.
6. We have carefully considered the rival contentions and the reasons given by the assessee for the delay. The assessee is an 89-year- old senior citizen suffering from several medical issues and impaired mobility. Despite these circumstances, his filing of th e appeal demonstrates his intent to comply with the law. We are therefore satisfied that sufficient cause existed for the delay and that the assessee acted bona fide. Accordingly, the delay in filing the appeal is condoned, and the appeal is admitted for adjudication on merits.
7. On the facts of the case, we note that the assessee filed his return of income on 20 November 2017 declaring total income of ₹ 5,72,000 from salary, house property, and other sources. The case was selected for limited scrutiny to verify cash deposits made during the year, and notice under section 143(2) was issued on 9 August 2018. The learned Assessing Officer noted that the assessee, a retired school headmaster, had deposits of ₹ 19,23,449 were made in one account through more than 50 entries, and ₹ 1,10,350 was deposited in the second account through four entries. The assessee explained that the deposits represented hostel fee collections from students and cash withdrawals from the bank. The learned Assessing Officer called upon the assessee to furnish documentary evidence, including the list of hostel fee collections from students. The assessee submitted bank statements and the list of hostel fee collections, and further stated that the fee collections belonged to Sri Vidya Peetha (R) Education Society, but were mistakenly deposited in his personal bank account, from which related expenses were also incurred. The learned Assessing Officer rejected the explanation and added ₹ 20,33,799 to the assessee’s income under section 69A of the Act, holding that the assessee had not produced original hostel fee receipts or other documentary evidence for the cash receipts, nor any income and expenditure statement to support the cash deposits. Accordingly, the assessment order was passed under section 143(3) of the Act on 7 November 2019.
8. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A), reiterating the same facts. He submitted that, during the relevant financial year, he was about 83 years old, a retired principal of a PU College, and was in charge of a ladies’ hostel for students of Sri Vidya Peetha (R) Education Society. The hostel was run on a non- profit basis, and only the actual monthly expenditure was collected from the students for its maintenance. The amounts so collected were deposited i n the assessee’s bank account and spent towards hostel maintenance, leaving only a meagre surplus of ₹ 2,251, which was offered to tax. The assessee further submitted that, during the assessment proceedings, he had explained that the cash deposits represented hostel fees collected from students and supported by receipts issued in the name of Sri Vidya Peetha (R) Education Society, as the hostel was maintained for students of that society. The learned CIT(A), however, held that the explanation regarding host el fee collections from students of Sri Vidya Peetha (R) Education Society remained unsubstantiated even at the appellate stage and, accordingly, dismissed the assessee’s appeal.
9. Aggrieved, the learned authorised representative reiterated the same facts and submitted was contended that, on scrutiny of the bank account, the corresponding expenses incurred from that account would be evident, and that the remaining balance was only ₹ 2,251, which had already been offered to tax. It was further submitted that the assessee, a retired headmaster, was running a ladies’ hostel for students of Sri Vidya Peetha (R) Education Society on a no- profit basis. Therefore, the addition made by the learned Assessing Officer was not sustainable.
10. The learned senior departmental representative supported the orders of the lower authorities.
11. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee is about 90 years old, a retired college principal, and was stated to be maintaining a ladies’ hostel. The cash deposited in his bank account w as explained as hostel fees received from students of Sri Vidya Peetha (R) Education Society. The assessee further submitted that expenses relating to the hostel were also incurred from the same account and that the net surplus was only ₹ 2,251, which had been offered to tax. It was also contended that the hostel was run for the benefit of girl students of the said education society on a no-profit-no- loss basis. The assessee stated that he had furnished details of hostel fees and the names of students from whom the fees were received, and submitted that verification of the bank account would show the nature of the related expenditure. He also submitted that confirmation from Sri Vidya Peetha (R) Education Society could be obtained to verify these facts. In our view, the matter requires verification. We therefore restore the issue to the file of the learned Assessing Officer with a direction to examine whether the ladies’ hostel activity was carried on by the assessee on behalf of, or in connection with, Sri Vidya Peetha (R) Education Society. If the receipts were issued by the said society and the amounts are found recorded in its books of account, the addition in the hands of the assessee shall be deleted. If the receipts were not issued in the name of the society or the amounts are not recorded in its books, the assessee shall be given an opportunity to explain how, from the total receipts, only a surplus of ₹ 2,251 arose from running the hostel. The learned Assessing Officer shall verify these facts and decigrounds of appeal raised by the assessee are restored to the file of the learned Assessing Officer.
12. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 22nd September, 2026.
