ITAT Agra Deletes Demonetization Cash Addition After Accepting Past Withdrawals

Mithilesh Gupta Vs ITO (ITAT Agra)

The ITAT Agra allowed the assessee’s appeal against an addition of ₹11 lakh under Section 69A of the Income-tax Act, 1961, concerning cash deposits during the demonetization period. The assessee, a 64-year-old woman receiving family pension and income from stitching/alteration work, had deposited ₹11 lakh in her Madhya Pradesh Gramin Bank account and ₹2.50 lakh in an SBI account. The Assessing Officer accepted ₹2.50 lakh as accumulated savings but added ₹11 lakh as unexplained money. The CIT(A) upheld the addition.

Before the Tribunal, the assessee submitted that the deposits represented accumulated savings from earlier bank withdrawals, pension, stitching income and amounts received following her husband’s death. She relied on cash-flow statements, bank statements, ITRs and passbooks, and contended that her household expenses were substantially borne by her son and daughter-in-law.

The CIT(A) had particularly relied on the fact that ₹7 lakh was deposited on 15.11.2016 and ₹5 lakh was transferred by NEFT on 16.11.2016, while ₹4 lakh was deposited on 30.11.2016 and ₹2 lakh transferred by NEFT on the same day. The CIT(A) considered these transactions inconsistent with the assessee’s claim of accumulated savings.

The Tribunal, however, noted that the Assessing Officer did not make any enquiry regarding the destination of the NEFT transfers. In the absence of such enquiry, the Tribunal observed that the ₹7 lakh cash deposit could not have been treated as the assessee’s money. Regarding the remaining ₹4 lakh, the Tribunal accepted the assessee’s claim that it represented past withdrawals, taking into account her status.

The Tribunal therefore did not uphold the CIT(A)’s findings and deleted the entire ₹11 lakh addition under Section 69A. Grounds 1 and 2 were allowed and the assessee’s appeal was allowed. The order was pronounced on 23.07.2026.

Cases Discussed

• Vimal Chatur v. ITO, Ward-2(2), Udaipur (ITAT Jodhpur), (JODH-TRIB.) 2024 ITL 1398; I.T.A. No. 351/Jodh/2023
• Preeti Bhardwaj v. ITO (ITAT Delhi, 2024)
• Jaya Aggarwal v. ITO (Delhi HC, 2018)
• CIT v. P. K. Noorjahan (Supreme Court), [1999] 237 ITR 570 (SC)

FULL TEXT OF THE ORDER OF ITAT AGRA

This appeal is directed against the impugned order dated 27.03.2026 passed in appeal No CIT(A), Gwalior/10355/2019-20 by the Id. ADDL/JCIT (A)-2 MUMBAI [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18, wherein Id CIT(A) has dismissed assessee’s appeal.

2. Brief facts of the case: The assessee filed her return of income on 05.08.2017 declaring total income of Rs. 3,30,940/- which was selected for complete scrutiny. The AO had information that the assessee had deposited of Rs. 11,00,000/- in her bank account with Madhya Pradesh Gramin Bank, Porsa, Morena and Rs. 2,50,000/- in her bank account in SBI, Imli Chouk Porsa, Morena totaling Rs. 13,50000/-. The AO asked the assessee to explain the source of the cash deposit.

2.1 The assessee vide her submission dated 27.07.2019 submitted that during the year the assessee received monthly pension from government, interest on saving bank and generated income from stitching/ alteration of ladies’ blouse etc. from home. She also submitted that she was a pension holder and so the frequencies of transactions are only withdrawal. The assessee also submitted that the said cash deposited were the amount earlier transferred from her husband. However, the AO noted that the assessee never substantiated the reason as to why the total cash of Rs. 13,50,000/-was held by her. The AO after considering the details submitted by the assessee accepted the assessee contention to the extent of Rs. 2,50,000/- on account of accumulated savings over the years out of stitching / alteration work. Further, the AO noted that out of the total cash deposited amounting to Rs. 7,00,000/- and Rs. 4,00,000/- in cash in her bank account on 15.11.2016 and 30.11.2016 Rs.5,00,000/- and Rs. 2,00,000/- were transferred by debiting her bank account by NEFT on 16.11.2016 and 30.11.2016 respectively. In absence of any further explanation furnished by the assessee, the AO added the sum of Rs. 11,00,000/- to the total income of the assessee u/s 69 of the Act.

3. Aggrieved with the said order the assessee filed an appeal before the Ld. CIT A, who dismissed the appeal of the assessee. The relevant extracts of the order of the Id CIT (A) are reproduced as under:

“5.2 Ground No. 2 & 5: Addition of Rs.11,00,000/- under Section 69A as Unexplained Money

5.2.1 The crux of the assessee’s case is that the cash deposits of Rs.11,00,000/-made in the MPGB account during the demonetization period were sourced from accumulated cash in hand, built up over several years from prior bank withdrawals. The assessee has presented a year-wise cash flow summary from FY 2009-10 to 08.11.2016, claiming a cumulative cash balance of Rs.10,99,445/- as on the date of demonetization.

5.2.2 I have carefully examined this claim and the supporting cash flow summaries placed on record. The assessee’s entire case rests on the proposition that she withdrew cash from her bank accounts over a period of approximately seven years (from FY 2009-10 to 08.11.2016) and held the entire accumulated sum in cash at home until the announcement of demonetization, at which point she deposited the same in her bank accounts.

5.2.3 This explanation is neither plausible nor acceptable for the following reasons:

(a) Implausibility of holding large cash over an extended period: The assessee claims to have accumulated cash of approximately Rs. 10,99,445/- over a period of nearly seven years (2009-10 to November 2016). No prudent person, much less a pensioner with limited income, would withdraw large sums from bank accounts and hoard them in cash form at home for such an extended period of six to seven years. The very foundation of the assessee’s case that she withdrew cash in 2009-10, 2010-11, 2011-12, and subsequent years, and continued to hold the same without spending, without investing, and without re­depositing until November 2016-defies all logic and common sense. A reasonable person, particularly a senior citizen concerned about safety and financial security, would not keep lakhs of rupees in cash at home for years on end when the same was already in a safe banking channel.

(b) Cherry-picking of withdrawals: A detailed analysis of the cash flow summary submitted by the assessee reveals a fundamental flaw in her methodology. The assessee has selectively presented only withdrawals from her bank accounts while conveniently ignoring the purpose for which such withdrawals were made and the corresponding expenditures incurred from such cash. The cash flow summary presented by the assessee proceeds on the assumption that every single rupee withdrawn from the bank over a seven-year period was simply held in cash at home and never spent on any household expenditure, medical expenses, daily necessities, or any other purpose whatsoever. This assumption is patently absurd and wholly unrealistic.

(c) Specific analysis of the SBI Cash Flow: According to the assessee’s own SBI cash flow summary, in FY 2010-11, deposits of Rs.23,05,000/- were made and withdrawals of Rs.22,66,464/- were made, leaving a supposed “cash balance” of Rs.1,66,536/-. In FY 2011-12, deposits of Rs. 15,78,000/- were made and withdrawals of Rs.7,39,790/- were recorded, leading to a claimed cash balance of Rs. 10,04,746/-. The assessee would have this authority believe that she withdrew Rs.22,66,464/- in FY 2010-11 and Rs.7,39,790/- in FY 2011-12 from her bank account and, after making deposits back into the same account, simply retained the net balance as cash at home for the next five to six years. This is nothing but a mathematical exercise in cherry-picking withdrawals and ignoring the real-world purpose for which such funds were withdrawn.

(d) No evidence of purpose of withdrawals or living expenses: The assessee has not furnished any explanation or evidence as to how she met her household and daily living expenses during this period of seven years if the entire withdrawal amount was being accumulated as cash at home. The assessee is a pensioner who received a monthly pension. If the pension was sufficient to meet her daily expenses, then there was no need to withdraw large sums from bank accounts. And if she was withdrawing for daily expenses, then the withdrawn amounts could not have been simultaneously accumulated as cash in hand.

(e) The lump sum receipt of Rs.9,35,382/- on 09.01.2010: The assessee has highlighted that she received a lump sum of Rs.9,35,382/- following the death of her husband on 09.01.2010. However, the bank statement itself shows that this amount was received by transfer into her SBI account, and subsequently Rs.1,00,000/- was withdrawn on 13.01.2010 and the remaining balance in the account was utilized in subsequent transactions. The assessee has not demonstrated that this specific sum was withdrawn in its entirety and held as cash. Moreover, even assuming for the sake of argument that part of this amount was withdrawn, holding the same in cash for over six years until November 2016 is not the behaviour of a prudent person.

(f) Pattern of immediate NEFT transfers after cash deposits: A crucial fact that severely undermines the assessee’s credibility is the pattern of transactions in the MPGB account during the demonetization period. On 15.11.2016, Rs.7,00,000/- was deposited in cash, and on the very next day, 16.11.2016, Rs.5,00,000/- was transferred by NEFT. Again, on 30.11.2016, Rs.4,00,000/-was deposited in cash and on the same day, Rs.2,00,000/- was transferred by NEFT. This pattern of immediate transfers following cash deposits strongly suggests that the cash deposits were not from genuine accumulated savings but were part of an arrangement to convert unaccounted cash into the banking system through the assessee’s bank account during the demonetization window. If the assessee was indeed depositing her own long-held savings, there would have been no urgency or need to immediately transfer the same by NEFT to other accounts. This pattern is a clear badge of accommodation entries.

(g) MPGB account was largely dormant: The assessee’s cash flow summary for the MPGB account itself shows that from FY 2010-11 to 08.11.2016-a period of nearly six years-there were virtually no transactions in this account except a minor transaction in FY 2012-13 (deposit of Rs.1,00,000/- and withdrawal of Rs.1,12,000/-). The account was effectively dormant. The sudden deposit of Rs. 11,00,000/- in such a dormant account during the demonetization period, followed by immediate NEFT transfers, is highly suspicious and inconsistent with the claim of depositing accumulated household savings.

(h) Failure to furnish critical documents: Despite repeated notices, the assessee failed to furnish: (i) computation of income for AY 2017-18, (ii) copies of ITRs for AY 2014-15 to 2016-17 along with computation of income, (iii) evidence to substantiate her stitching/alteration business, (iv) pay-in-slips for the cash deposits, (v) details of cash withdrawals for the period 01.04.2014 to 31.03.2018, and (vi) comparative details of deposits across different periods. The failure to furnish these critical documents, when specifically and repeatedly asked for, further strengthens the inference that the assessee had no satisfactory explanation for the source of the impugned cash deposits.

(i) Claim of stitching/alteration income by a 64-year-old: The assessee has claimed to earn income of Rs.1,65,820/- from stitching and alteration work done from home. As rightly observed by the AO, this claim from a 64-year-old lady is difficult to accept at face value, particularly in the absence of any corroborative evidence such as receipts, customer details, or any other documentation. Furthermore, even if this income is accepted at face value, it is far too meagre to explain the accumulation of Rs. 11,00,000/- in cash.

Moreover, the assessee filed ITR-1 (Sahaj) for AY 2017-18 despite having declared income from what she herself described as stitching/alteration work amounting to Rs.1,65,820/-. ITR-1 is applicable only for individuals having income from Salary/Pension, One House Property, and Other Sources. If the assessee was engaged in a business or profession (even home-based), the correct form to be used was ITR-4 (for presumptive income) or ITR-3. The use of ITR-1 despite having business income indicates a lack of transparent disclosure. The assessee’s argument that such income was appropriately classified under “Income from Other Sources” does not hold merit as the nature of the activity (stitching/alteration on a regular basis for consideration) constitutes business or profession under Section 2(13)/2(36) of the Act, regardless of the scale of operations.

(j) Inconsistency in stated source of deposits: During the original assessment proceedings, the assessee stated that the cash deposits were the amount earlier transferred from her husband. However, in the appellate proceedings, the assessee has shifted her stance to claim that the deposits were from accumulated bank withdrawals over seven years. This shift in explanation undermines the credibility of the assessee’s case. If the source was genuinely from past withdrawals, this should have been the explanation offered at the first instance.

(k) The concept of “cash balance held” as presented is misleading: The assessee’s cash flow summary computes “Cash Balance Held” as the arithmetic difference between cumulative deposits and withdrawals in the bank account. This is fundamentally flawed because it treats every net withdrawal as cash retained at home, without accounting for any expenditure whatsoever-no household expenses, no food, no clothing, no medical bills, no transportation, no utilities, nothing. For a period spanning seven financial years, this is a mathematical impossibility. The assessee is essentially asking this authority to believe that she survived for seven years without spending any of the withdrawn cash, which is absurd on its face.

5.2.4 The assessee has placed reliance on several judicial pronouncements. I have considered each of them and find them distinguishable from the facts of the present case:

(a) Om Parkash Nahar v. ITO (ITAT Delhi): In this case, the ITAT accepted the assessee’s explanation because the pattern of withdrawals was consistent and the assessee demonstrated a genuine habit of keeping cash due to old age and health concerns. In the present case, however, the withdrawal pattern is spread over seven years with no cogent explanation as to why cash was not spent on living expenses, and the immediate NEFT transfers post-deposit suggest the deposits were not from genuine savings.

(b) Preeti Bhardwaj v. ITO (ITAT Delhi, 2024): The ratio that a mere time gap between withdrawals and deposits cannot be a valid ground for treating deposits as unexplained income is well-taken, but the same applies where there is no other adverse circumstance. In the present case, the time gap is not of a few months but of several years, and there are multiple adverse circumstances including the pattern of immediate NEFT transfers, dormancy of the MPGB account, failure to explain the purpose of withdrawals, and non-submission of critical documents.

(c) CIT v. P. K. Noorjahan [1999] 237 ITR 570 (SC): The Hon’ble Supreme Court held that once the assessee provides an explanation, the burden shifts to the Revenue to disprove it. However, this presupposes that the explanation offered by the assessee is reasonable and credible. In the present case, the explanation that cash was withdrawn from FY 2009-10 onwards and held at home for up to seven years without any expenditure is neither reasonable nor credible. The explanation offered is, on the face of it, not “satisfactory” within the meaning of Section 69A. The Revenue is not required to disprove an inherently implausible explanation.

(d) Jaya Aggarwal v. ITO (Delhi HC, 2018): In that case, the Delhi High Court held that funds withdrawn for a specific purpose but remaining unused and subsequently redeposited could not be treated as unexplained. The factual matrix there was entirely different-the funds were withdrawn for a specific identifiable purpose and redeposited within a reasonable time frame. In the present case, no specific purpose for the withdrawals has been identified, the time gap between withdrawals and deposits spans several years, and the pattern of immediate NEFT transfers strongly suggests accommodation entries.

5.2.5 In light of the above analysis, I am of the considered view that the assessee has failed to satisfactorily explain the nature and source of cash deposits amounting to Rs.11,00,000/- made during the demonetization period. The explanation offered that the entire amount represented accumulated withdrawals held in cash at home over a period of seven years-is not only implausible but is contradicted by the pattern of transactions observed in the bank statements. The assessee has merely cherry-picked withdrawals from bank statements spread over seven years to construct a post-facto narrative to justify the deposits, without accounting for the obvious expenditure of those withdrawn funds on daily living, household, medical and other expenses over that period. The cash flow summary presented is nothing more than a theoretical arithmetic exercise that bears no connection to reality.

5.2.6 I, therefore, uphold the action of the Assessing Officer in treating the cash deposits of Rs.11,00,000/- as unexplained money under Section 69A of the Act and adding the same to the total income of the assessee. The provisions of Section 69A are squarely applicable as the assessee has been found to be the owner of money (cash deposits) for which no satisfactory explanation regarding the nature and source has been offered. These grounds are accordingly DISMISSED”.

4. Aggrieved with the said order, the assessee has filed an appeal before us on the following grounds of appeal

“Grounds of appeal Ground No 1-Addition u/s 69A for unexplained cash deposits

The Learned Assessing Officer (AO) has erred in confirming the addition under Section 69A of the Income-tax Act, 1961, without properly appreciating that the cash deposits were duly explained and supported by evidences on record.

As per Section 69A of the Act, any money found to be owned by the assessee may be treated as unexplained income only where the assessee fails to offer a satisfactory explanation regarding its nature and source. In the present case, the addition of f11,00,000/- is unjustified as the assessee had duly explained the nature and source of the cash deposits made during the demonetization period. The deposits were out of past savings, earlier withdrawals from bank accounts, and amounts received on account of the demise of her husband. The availability of sufficient cash in hand is duly supported by cash flow statements, bank statements, ITR Copy and passbooks.

The assessee had demonstrated, through year-wise details, that cash was withdrawn from the bank and retained, thereby establishing availability of cash for subsequent deposits. However, the Learned AO and the Hon’ble CIT(A) have failed to properly appreciate these evidences and have rejected the explanation on presumptive and general grounds.

Further, the Hon’ble CIT(A) has erred in observing that the cash flow is not realistic on the ground that the assessee has withdrawn cash, redeposited part of it, and retained the balance without incurring personal expenditure, which is not a normal human conduct. In this regard, it is respectfully submitted that such an observation is not correct and based on general assumptions. The assessee is a 64-year-old lady residing with her son and daughter-in-law, who bear her day-to-day and household expenses. Accordingly, the assessee is not required to incur any significant personal expenditure, and it is entirely reasonable for her to retain cash over a period of time. Further, the assessee also earns a small income from household stitching work.

Merely because the pattern of withdrawals, deposits, and cash retention does not align with the perception of normal behaviour, the same cannot be a ground to disregard duly substantiated evidences. The explanation furnished by the assessee is reasonable, consistent, and supported by documentary records.

In view of the above, the addition made under Section 69A is unjustified, arbitrary, and liable to be deleted. It is therefore humbly prayed that the same be deleted.

Ground No 2-Principal of Natural Justice

The Hon’ble CIT(A) has erred in law and on facts in not considering the responses, explanations, and evidences submitted by the appellant regarding the source of cash deposits, including past savings, earlier withdrawals, and amounts received on account of the death of her husband. Such non-consideration is in violation of the settled Principles of Natural Justice, which are integral to ensuring a fair and unbiased assessment as enshrined under Article 14 of the Constitution of India. In view of the above, the addition made under section 69A is liable to be held as unjustified and unsustainable in law.

Ground No 3- General Ground

The appellant craves leave to add or amend or modify the grounds of appeal”.

5. At the time of hearing the Ld. AR filed a written submission and relied upon the same. The relevant extracts of the said submission are reproduced as under:

“Grounds of the Case before the Hon’ble ITAT

The Appellant, is a 64 year old individual, earns income from the pension of her deceased husband, a government employee, and from stitching/alteration work at home. She filed her Income Tax Return for the Assessment Year (A. Y.) 2017-18, declaring a total income of Rs.3,30,940/-vide Acknowledgment No. 156917780050817 dated 05.08.2017.

The Appellant deposited a sum of Rs.11,00,000/- in her account maintained with Madhya Pradesh Gramin Bank, Porsa, bearing A/c No. 2002691010000002, and a further sum of Rs.2,50,000/- in her account maintained with State Bank of India, Imli Chowk, Porsa, bearing A/c No. 53033118626, during the demonetization period, which were duly accounted for and explained by placing evidences on record.

Although, the Learned Assessing Officer (AO) has erred in confirming the addition of Rs. 11,00,000/- under Section 69A of the Income-tax Act, 1961, without properly appreciating the fact, that cash deposits were duly explained and supported by evidences on record.

The provisions of Section 69A of the Income-tax Act, 1961, can be invoked only when the assessee is found to be the owner of money, bullion, jewellery, or other valuable assets and fails to satisfactorily explain their nature and source. Where the assessee provides a reasonable and satisfactory explanation regarding the source of such money, no addition can be made under Section 69A.

In the present case, the addition of Rs.11,00,000/- is unjustified as the assessee had duly explained the nature and source of the cash deposits made during the demonetization period. The deposits were out of past savings, earlier withdrawals from bank accounts, and amounts received on account of the demise of her husband. The availability of sufficient cash in hand is duly supported by cash flow statements, bank statements (Annexure 1), ITR Copy and passbooks.

The assessee had demonstrated, through year-wise details, that cash was withdrawn from the bank and retained, thereby establishing availability of cash for subsequent deposits. However, the Learned AO and the Hon’ble CIT(A) have failed to properly appreciate these evidences and have rejected the explanation on presumptive and general grounds.

The Assessee hereby attached the details of Cash Deposited and Cash Withdrawal as per Cash Statements year wise are given in detailed below as per SBI A/c No. 53033118626.Also the same has been attached as (Annexure 2) for your kind Reference

Details of Cash Deposited and Cash Withdrawal as per Cash Statements year wise are given in Detailed below as per Madhya Pradesh Gramin Bank A/c No. 2002691010000002

It is clearly evident from the above tables, that the assessee had a total cash balance of Rs. 10,99,445/- as on 08.11.2016 (Rs. 8,91,445 in SBI and Rs. 2,08,000 in MPGB) which had been accumulated from past withdrawals, thereby substantiating the subsequent deposits made during November 2016.

The assessee is an old taxpayer who has been regularly filing her Income Tax Returns for several years consistently, disclosing her income under the heads “Salary/Pension” (being the recipient of family pension consequent to the demise of her husband) and “Income from Other Sources” (arising from stitching/alteration works).

Accordingly, the assessee had accumulated sufficient savings from her past year’s income, resulting in an adequate cash balance available for deposit on the said date.

The Assessee had duly filed her returns of income for the relevant assessment years, declaring a Gross Total Income of Rs.2,48,384/- for A.Y. 2015-16, comprising pension income of Rs.1,53,264/- and income from other sources of Rs.95,120/-. Similarly, for A.Y. 2016-17, the Assessee declared a Gross Total Income of Rs.2,70,176/-, consisting of pension income of Rs.1,57,716/- and income from other sources of Rs. 1 ,12,460/-.

The relevant details are furnished below, and copies of the respective Income Tax Returns are also enclosed as Annexure 3 and Annexure 4 respectively for your kind reference and record.

Accordingly, even after meeting her personal expenses, the Assessee remained in possession of sufficient cash savings accumulated over the years.

The finding of the Assessing Officer that only a sum of Rs.2,50,000 could be considered as accumulated savings over the years is erroneous and not acceptable to the assessee.

The assessee has regularly disclosed her income in Income Tax Returns. The income so disclosed in the ITR’s amounted to Rs.2,48,384/- for F.Y. 2014-15, Rs.2,70,176/- for F.Y. 2015-16, and Rs.3,30,940/- for F.Y. 2016­17. These figures clearly demonstrate that the assessee had been consistently receiving income from stitching and alteration work and pension on behalf of her deceased husband over the years.

Further, the major household expenses of the assessee were borne by her son and daughter-in-law. As a result, the assessee was required to incur only limited personal expenses from her own earnings and was able to save a substantial portion of the income received. Therefore, the accumulated savings available with the assessee were significantly higher than the amount of Rs. 2,50,000/- deemed by the Assessing Officer.

Accordingly, the action of the Assessing Officer in restricting the assessee’s accumulated savings from stitching and alteration work to Rs.2,50,000/- is unjustified and contrary to the facts on record. The assessee has been engaged in such activity for several years and has accumulated her earnings as savings over time. The income earned from this activity has consistently been disclosed in her Income Tax Returns. Therefore, doubting or disregarding the accumulation of the assessee’s hard-earned savings built up over several years is neither reasonable nor justified.

Therefore, the addition made by the AO is arbitrary and contrary to the facts on record, and liable to be rejected.

The table below shows the cash balance available with the assessee on the date of deposit i.e. 08-Nov-2016.

In the present case, the assessee has furnished a satisfactory explanation regarding the nature and source of the amounts deposited in her bank account. The deposits were made out of past savings, earlier withdrawals from bank accounts, and amounts received consequent to the demise of her husband. Accordingly, the sources explained by the assessee deserve to be accepted as the legitimate source of the deposits made in the bank accounts.

Reliance is placed on the judgment of the Hon’ble ITAT Mumbai Bench “SMC”

The Bakhtawar Nariman Dalal v. Income-tax Officer

The Tribunal held that the addition under Section 69A towards cash deposits was not justified, considering the assessee’s small-scale business, advanced age, and absence of requirement to maintain books of account. The explanation of past savings was accepted as reasonable based on surrounding circumstances and human probabilities.

The facts of the present case are squarely covered by the judgment of The Bakhtawar Nariman Dalal v. Income-tax Officer, wherein the Hon’ble Tribunal accepted the explanation of cash deposits based on past savings and surrounding circumstances. Similarly, in the present case, the assessee had duly explained the source of cash deposits as being out of past savings, earlier bank withdrawals, and amounts received after the demise of her husband, which are duly supported by documentary evidences. Therefore, the addition made under Section 69A is unsustainable in law and liable to be deleted. (attached as Annexure 5 for your kind reference)

Further, the Hon’ble CIT(A) has erred in observing that the cash flow is not realistic on the ground that the assessee has withdrawn cash, re­deposited part of it, and retained the balance without incurring personal expenditure, which is not a normal human conduct. In this regard, it is respectfully submitted that such an observation is not correct and based on general assumptions.

The assessee is a 64-year-old lady who lives with her son and daughter-in-law. Since her day-to-day and household expenses are taken care of by them, she does not have to spend much on her personal needs. Therefore, it is natural for her to save and keep cash with her over the years.

The assessee also earns a small income from household stitching work, which has been disclosed in her Income Tax Returns under the head “Income from Other Sources.” During A.Y. 2016-17, such income amounting to Rs. 2,51,540 was accepted by the Assessing Officer. The assessee has been earning similar income for many years and, after meeting her personal and household expenses, the remaining amount was gradually saved and accumulated over the years.

Merely because the pattern of withdrawals, deposits, and cash retention does not align with the perception of normal behaviour, the same cannot be a ground to overlook duly proved evidence. The explanation furnished by the assessee is reasonable, consistent, and supported by documentary records.

The following judgement further supports the contentions and submissions made by the assessee in the present case.

ITAT Jodhpur
Vimal Chatur v. ITO, Ward-2(2), Udaipur
Citation: (JODH-TRIB.) 2024 ITL 1398; I.T.A. No. 351/Jodh/2023
Court:

The assessee, a senior citizen and retired Government employee, explained the cash deposits of Rs. 18,29,500/- made during the demonetization period as arising from past savings of himself and his wife. In support, he furnished cash flow statements, details of withdrawals and deposits, family settlement records, and an affidavit of his wife stating that the jointly held bank accounts contained cash deposited by her. However, the AO accepted only Rs. 2,20,000/- as explained and treated the balance amount of Rs. 16,09,500/- as unexplained under Section 69A, despite no contrary evidence being brought on record by the Revenue.

The Hon’ble ITAT Jodhpur, vide order dated 26-04-2024 for A.Y. 2017-18, held that an addition cannot be sustained merely on suspicion without any Valid evidence on record. Since the assessee had duly explained and substantiated the genuineness and source of the transactions, and no adverse evidence was brought by the Revenue, the addition was deleted and the assessee’s appeal was allowed. (attached as Annexure 6 for your kind reference)

A perusal of the judgment of the Hon’ble ITAT Jodhpur clearly shows that, in the absence of any contrary or adverse evidence brought on record by the Revenue, the documentary evidences furnished by the assessee cannot be ignored or rejected merely on suspicion or presumptions.

Therefore, following the principles laid down by the Hon’ble ITAT Jodhpur in the aforesaid judgment, the assessee’s properly supported explanation cannot be rejected on mere suspicion or assumptions. In the absence of any adverse evidence on record, the addition is not justified and deserves to be deleted”.

6. On the other hand, the Sr. DR supported the orders of the authorities below.

7. We have heard both the parties and perused the material on record. The Appellant, is a 64 years old lady, earning income from the pension of her deceased husband, a government employee, who had expired on 09.01.2010. She filed her Income Tax Return for the Assessment Year (A.Y.) 2017-18, declaring a total income of Rs.3,30,940/- on 05.08.2017 showing income from pension and from stitching/alteration work at home. Thus, in this case the known source of income of the assessee is the family pension and her claim of income from stitching/alteration work at home. The assessee submits that source of the above cash deposits is out of the accumulated savings of her past withdrawals from the bank made out of the above income. In this regard, the AO noted that out of the total cash deposited amounting to Rs. 7,00,000/- and Rs. 4,00,000/- in cash in her bank account on 15.11.2016 and 30.11.2016, Rs.5,00,000/- and Rs. 2,00,000/- were transferred by debiting her bank account by NEFT on 16.11.2016 and 30.11.2016 respectively. However, the AO did not make any enquiry regarding the destination of the said NEFT transfers. Taking note of these transfers the Ld. CIT (A) in para no. 5.2.3(f) as reproduced above, observed that this pattern of immediate transfers following cash deposits strongly suggests that the cash deposits were not from genuine accumulated savings but were part of an arrangement to convert unaccounted cash into the banking system through the assessee’s bank account during the demonetization window. The Ld. CIT (A) further observed that if the assessee was indeed depositing her own long-held savings, there would have been no urgency or need to immediately transfer the same by NEFT to other accounts and this pattern was a clear badge of accommodation entries. Thus, in this case, in absence any enquiry about the destination of transfer of Rs. 7,00,000/- by way of NEFT and in view of the above observation of the Ld. CIT (A), it appears that the cash deposits to the extent of Rs. 7,00,000/- was not the money of the assessee and the said addition could not have been made in the hands of the assessee. Regarding the balance amount of Rs. 4,00,000/-taking a considerate view of the status of the assessee her claim that it was deposited out of her past withdrawals is accepted. Therefore, we do not uphold the findings of the Ld. CIT(A) and delete the addition of Rs. 11,00,000/- made by the AO. Ground no. 1 and 2 of the appeal are allowed.

8. In the result, the appeal of the assessee is allowed.

Order pronounced in the Open Court on- 23.07.2026