ITAT Jaipur Deletes ₹31.40 Lakh Section 69A Addition on Explained Cash Trail

Sunil Kumar Garg Vs ITO (ITAT Jaipur)

Cash Withdrawn From Bank & Immediately Deposited in Post Office Cannot Be Branded Unexplained Merely Because AO Finds the Transaction “Unreasonable”: ITAT Jaipur Deletes Addition u/s 69A

Cash Deposit of ₹31.40 Lakh Treated as Unexplained

The assessee had deposited an aggregate amount of ₹31,40,000 in cash in a post-office savings account jointly held with his wife. During assessment proceedings, he explained that the deposits represented amounts received from his father & mother, maturity proceeds of term deposits and a small amount of past savings.

The assessee produced copies of the bank accounts of his parents evidencing the gifts, his own bank account showing receipt of the amounts and subsequent cash withdrawals, and the post-office account showing the corresponding cash deposits.

The mother had gifted different amounts to the assessee, including ₹4.90 lakh through a bearer cheque, ₹76,000 through an account-payee cheque and ₹3.75 lakh through another bearer cheque. Similarly, the father had transferred various amounts aggregating to a substantial sum through account-payee cheques and bank transfers.

Apart from these amounts, the proceeds of four term deposits aggregating to ₹9,03,452 were credited to the assessee’s bank account. Out of the maturity proceeds, ₹4.50 lakh was withdrawn in cash and deposited in the post-office account. The assessee also explained utilisation of past cash savings of ₹30,000.

Thus, according to the assessee, every material part of the cash deposit had an identifiable source supported by contemporaneous bank records.

AO Finds Cash Movement “Unreasonable”

The AO rejected the explanation principally on the ground that it was unreasonable for the assessee to withdraw money from one account in cash and thereafter deposit it into another account when the funds could have been transferred by cheque or through another banking mode.

The AO also observed that the accounts of the assessee’s family members contained certain cash credits and, therefore, the cash deposited in the assessee’s account could not automatically be presumed to have originated from the withdrawals appearing in their accounts.

On this reasoning, the entire cash deposit of ₹31.40 lakh was treated as unexplained money u/s 69A and subjected to the special rate of tax prescribed u/s 115BBE.

The NFAC sustained the addition. The CIT(A) recorded that the assessee had not made submissions on merits during the appellate proceedings despite being provided opportunities and had failed to furnish any material warranting interference with the assessment order.

Documentary Trail Was Never Disproved

Before the Tribunal, the assessee furnished a detailed chart explaining the source, date of receipt, mode of receipt, cash withdrawal and corresponding deposit in the post-office account. Copies of the relevant bank accounts and the post-office account were also placed in the paper book.

The Tribunal found that the assessee had demonstrated the entire movement of funds. The bank accounts of the parents established that the gifts had been made, while the assessee’s bank account established receipt of those gifts. The same account further showed withdrawal of the amounts in cash, and the post-office savings account evidenced their deposit shortly thereafter.

Significantly, the Revenue did not identify any falsity or discrepancy in this documentary trail. It did not dispute the gifts received through banking channels, the withdrawals made by the assessee or the subsequent deposits in the post-office account.

The Revenue’s objection was confined substantially to the supposed imprudence of withdrawing money in cash instead of directly transferring it to the post-office account.

Unusual Conduct Is Not Automatically Untrue Conduct

The Tribunal held that the explanation could not be rejected merely because the AO considered the manner of dealing with the money unreasonable. The alleged unreasonableness was not so perverse or improbable as to displace the documentary evidence furnished by the assessee.

The assessee had established that the cash withdrawn from his bank account was deposited in the post-office savings account immediately thereafter. The Revenue had neither disputed the proximity between the withdrawal & deposit nor demonstrated that the withdrawn cash had been utilised for some other purpose.

Once the assessee establishes the source and the connecting trail through reliable documents, the burden shifts to the Revenue to point out a specific defect or bring contrary material on record. A mere observation that the assessee could have adopted a more convenient banking method cannot substitute evidence.

Accordingly, the Tribunal set aside the order of the CIT(A) and deleted the entire addition of ₹31,40,000 made u/s 69A. Consequently, the application of the penal rate prescribed u/s 115BBE also ceased to survive.

Author’s Comments

This decision reinforces an important distinction between an explanation that is unusual and one that is unproved. Tax authorities may legitimately examine why an assessee withdrew money in cash and redeposited it elsewhere. However, once the assessee provides a credible, date-wise and document-supported cash trail, the addition cannot rest merely on the AO’s perception of how a prudent person should have conducted the transaction.

The principle is particularly relevant in cases involving rural areas, post-office accounts and family transactions, where cash dealings may continue despite the availability of digital or cheque-based alternatives. The Income-tax Act does not authorise an addition simply because the assessee chose a less convenient mode of transferring his own explained funds.

At the same time, the protection available from this decision depends upon maintaining a clear proximity between withdrawal & redeposit, documentary evidence of the original source and absence of any material suggesting intervening utilisation. A bare plea that an old cash withdrawal remained available for several months may stand on a different footing.

The ruling therefore conveys a crisp legal principle: when the source and movement of money stand proved through an undisputed documentary trail, suspicion about the manner of the transaction cannot convert explained money into unexplained money u/s 69A.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, JAIPUR

The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre, Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 13.10.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. The grounds raised read as under:

1. That on the facts and in law the learned CIT(A) erred in sustaining the additions of Rs. 31,40,000/-made by the A.O. u/s. 69A r.w.s. 115 BBE of the I.T. Act in the relevant assessment order, which sustaining of the additions of Rs. 31,40,000/- by the learned CIT(A) are most arbitrary, unjust and untenable in fact and in law and in the alternative highly excessive w.r.t facts and circumstances of the case.

2. That the learned CIT(A) erred in sustaining the invoking of provisions of section 69A r.w.s. 11588E of the I.T. Act by the AO whereby he, the learned AO, levied tax @ 60% plus 25% S.C., etc. on the additions made by the A.O., which sustaining by the learned CIT(A) of invoking of provisions of section 69A r.w.s. 115BBE of the I.T. Act by the AO and levying tax @ 60% plus 25% 5.C., etc. on the additions of Rs. 31,40,000/- made by him is most arbitrary, unjust and untenable in fact and in law.

3. That the learned CIT(A) ought to have appreciated that the learned AO failed to discharge the burden of proof which squarely lay upon him for not treating the cash deposited by the assessee in his bank accounts during the period 01.04.2021 to 31.03.2022 at Rs. 31,40,000/- as explained and consequentially treating the cash deposited at Rs. 31,40,000/- in the bank accounts during the relevant previous year as unexplained money as per provisions of section 69A and adding the same in the total income of the assessee.

4. That the Id. CIT (A) grossly erred in not complying with the specific provisions of section 250 (4) of the IT Act, which clearly cast a duty on the Id. CIT (A) that before disposing of an appeal he will make such further inquiry as he thinks fit, but in this case before deciding the appeal the Id. CIT(A) neither himself made any inquiry nor he directed the AO to make further inquiry nor he even called assessment record of the assessee from the AO for his inspection/perusal/consideration.

5. That the Id. CIT (A) failed to take into consideration the details of sources of generation of cash in hand like filing by him with the AO copy of post office statements of his parents and wife Vandana which clearly confirmed cash withdrawals made by all these three near relatives and giving such cash to the assessee which he simultaneously deposited in his bank account.

6. That the appellant craves leave to add, alter, amend and/or substitute one or more grounds of appeal as and when necessary.

3. The solitary issue in the present appeal relates to the addition made to the income of the assessee on account of cash found deposited in the bank account of the assessee amounting to Rs.31,40,000/- the source of which allegedly remained unexplained.

4. The facts on record are that the assessee was noted to have deposited cash amounting to Rs.31,40,000/- in one or more account (other than current account and time deposits). The assessee’s explanation of the source of cash deposit is reproduced at page 15 of the assessment order wherein the source is explained in a tabular form as under:-

SUNIL KUMAR GARG

5. Referring to the same, ld. Counsel for the assessee contended that the assessee had explained the amount of Rs.31,40,000/- was deposited in the post office account of the assessee and the source of the same had been explained as amount received by the assessee from his father and mother, which was subsequently withdrawn in cash and deposited in the post office account of the assessee. As evidence:

• Copy of bank account of the assessee’s mother and father were filed reflecting the payment of amounts to the assessee by way of banking entries through cheque.
• Copy of bank account of the assessee in Baroda Rajasthan Kshetriya Gramin Bank reflecting credit of the amounts received from his mother and father, subsequently withdrawn in cash of the amount so deposited.
• Copy of the post-office saving bank account in the name of the assessee wherein the cash withdrawn from the bank account of the assessee was shown as deposited.

6. The explanation of the assessee and the evidences filed to the Authorities below have been submitted in writing by the assessee before me in his written submissions. The contents of which are reproduced hereunder:-

1. The only issue in this case is that the assessee who is resident of village and post Behnera, Bharatpur deposited total cash of Rs. 31,40,000/- in piece meal with post office at village and post Behnera, Bharatpur, Rajasthan.

2. The source of such cash deposit is explained by a chart in tabular form inter-alia giving details of immediate source of cash received for deposit in Post Office; Amount; Total Cash in hand for deposit in Post Office on the date of deposit of cash in Post Office; source of fund; date of receipt of such fund; nature of receipt; amount; source of funds in the hand of donor/fund giver, date of utilization; cash utilized where; nature of utilization; amount of cash utilized.

3. In support of these details the appellant filed with the A.O. following supporting documents:-

i. Copy of bank account no. 43860100007703 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera in the name of appellant’s mother Mrs. Ram Maya Devi W/o Madan Lal Garg confirming gift of Rs. 4,90,000/- by way of bearer cheque no. 511013 dated 13/05/2021 in the name of her son appellant Sunil Kumar Garg who withdrew cash amount of Rs. 4,90,000/- from the bank by way of this bearer cheque. This cash amount of Rs. 4,90,000/- plus Rs. 30,000/- assessee’s own cash saving, totaling to Rs. 5,20,000/- was immediately deposited in the post office account in the joint name of appellant Sunil Kumar and his wife Vandana Garg on 13/05/2021.

ii. Copy of another bank account no. 44740100004283 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera in the name of appellant’s mother Mrs. Ram Maya Devi W/o Madan Lal Garg confirming two gifts, one of Rs. 76,000/-by way of account payee cheque of Rs. 76,000/- bearing cheque No. 36919 dated 12/04/2021 and the other of Rs. 3,75,000/- by way of bearer cheque dated 14/06/2021 in the name of her son appellant Sunil Kumar Garg who withdrew cash amount of Rs. 3,75,000/- from the bank by way of this bearer cheque. This cash gift received from his mother of Rs. 3,75,000/- was immediately deposited in the post office account in the joint name of appellant Sunil Kumar and his wife Vandana Garg on 14/06/2021 itself.

iii. Copy of bank account no. 44740100003169 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera in the name of appellant’s father Madan Lal Garg confirming gifts of Rs. 4,58,000/-; Rs. 2,65,000/-, Rs. 9,60,000; Rs. 10,10,000/-; Rs. 1,45,000/- by way of account payee cheques/bank transfers dated 12/04/2021; 14/07/2021; 11/10/2021; 19/02/2022 and 03/03/2022 respectively.

iv. Copy of bank account no. 44740100004248 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera in the name of appellant Sunil Kumar Garg confirming deposits of above mentioned cheques/bank transfers of Rs. 4,58,000/-; Rs. 76,000; Rs. 2,65,000/-, Rs. 9,60,000; Rs. 10,10,000/-; Rs. 1,45,000/-by way of account payee cheques/bank transfer dated 12/04/2021; 12/04/2021; 14/07/2021; 11/10/2021; 19/02/2022 and 03/03/2022 respectively.

v. Besides in the bank account of appellant Sunil Kumar closure proceeds of four term deposits totaling to Rs. 9,03,452/- were also credited on 10/05/2021 and out of these proceeds a cash of Rs. 4,50,000/- was withdrawn and the same was deposited in post office.

vi. In addition to that the past cash saving of Rs. 30,000 was also utilized in depositing the above amount of Rs. 31,40,000/- in the Post Office as per chart enclosed herewith.

vii. For the purpose of depositing cash of Rs. 31,40,000/- in the post office account in joint name of appellant Sunil Kumar Garg and his wife Vandana Garg, assessee withdrew cash amounts of Rs. 90,000; Rs. 4,60,000/-; Rs. 4,50,000/-; Rs. 2,65,000/-; Rs. 3,20,000/-; Rs. 5,00,000/-; Rs. 10,000/- and Rs. 1,50,000/- on 15/04/2021; 15/04/2021; 10/05/2021; 14/07/2021; 14/10/2021; 21/02/2022; 21/02/2022 and 03/03/2022 respectively. All these entries are reflected in assessee’s bank account no. 44740100004248 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera

viii. Copy of Post Office saving bank account no. 010001471068 in the joint name of Sunil Kumar and Vandana with post office at village and post Behnera, Bharatpur showing total cash deposit of Rs. 31,40,000/-(Rs. 5,50,000/- plus Rs. 4,50,000 plus Rs. 5,20,000 plus Rs. 3,75,000/- plus 2,65,000/- plus 3,20,000/- plus Rs. 5,10,000/-plus Rs. 1,50,000/-) is enclosed herewith.

4. From the perusal of above mentioned details and the enclosed chart in the tabular form the hon’ble bench will very kindly find that the appellant has fully filed all the supporting documents explaining the source of total cash deposits of Rs. 31,40,000/- in the post office at village and post Behnera, Bharatpur in joint name of Sunil Kumar & Vandana and there is no unexplained income of the appellant at all.

In view of above it is respectfully submitted that provisions of section 69A of the IT Act r.w.s. 115BBE are not applicable in this case.

7. Ld. Counsel for the assessee further filed a chart in tabular and extended form showing all fund in the hands of the assessee as well as in the hands of donor or fund giver as under:-

8. Copy of the bank accounts of the assessee’s mother and father, his own bank account in which the gifts received from father and mother were deposited and also copy of the post office savings bank account where cash of Rs.31,40,000/- was deposited after withdrawing from his Gramin Bank Account were filed before me at paper book page No.7 to 31.

9. Ld. Counsel for the assessee contended that having so explained the source of cash deposited in his post office savings bank account, the explanation was rejected by the AO and the Ld. CIT(A) only for the reason that it appeared unreasonable to withdraw cash from one account and deposit the same in the account of another person when the amounts could be transferred through cheques or any other mode. He drew my attention to the findings of the Ld. AO in this regard at page 16 of his order as under:-

……

In support of cash deposit to the tune of Rs. 31,40,000/-, the assessee has submitted only copies of post office statements of his father, mother and Smt. Vandana in which some cash withdrawal is appearing. However, it is observed from the post office statements of above persons that the accounts of these persons also credited with the cash. Hence, it cannot be presumed that the cash deposited in assessee’s bank account is out of the cash withdrawal from the post office account of the above person. Further, it is appears to be unreasonable to withdraw cash from one account to deposit the same in the account of another persons when the fund can be transferred through cheques or any other mode.

……

10. He drew my attention to the findings of the Ld. CIT(A) at para 5.1.2 of his order as under:-

……

5.1.2 With respect to cash deposits of Rs. 31,40,000/-, no submission on merits has been made by the appellant during the appeal proceedings despite having provided with ample opportunities. The appellant has failed to explain the source of the credits/cash deposits in his bank account. Based on material available on record and gathered during the assessment proceedings the AO has passed the assessment order considering all facts and circumstances of the case. No details, documents or explanations have been provided by the appellant to come to any conclusion other than those arrived at by the AO in the assessment order. During the appellate proceedings, the appellant was given opportunities to put forth and explain his case, but the appellant did not submit any response despite service of notice(s). Considering the facts and circumstances as stated and discussed in the preceding paragraphs, no interference with the assessment order of the AO is called for. The appellate proceedings cannot be allowed to be held back because of non-compliance of notices. The onus of pursuing with the appeal is the responsibility of the appellant. The appellant has failed to substantiate his own ground of appeal and the transactions. Therefore, no infirmity has been found in the action of the AO in adding the unexplained cash deposits of Rs. 31,40,000/-. Consequently, ground of appeal 1 is hereby dismissed.

……..

11. He pleaded that in light of voluminous evidences filed by the assessee for the source of cash deposited, the explanation could not have been rejected for the reason that it was unreasonable to believe that the explanation, particularly when no infirmity was found by the authorities below in the explanation furnished by the assessee.

12. Ld. DR however, relied on the findings of the AO and the Ld. CIT(A).

13. Having heard the contentions of both the parties, I find merit in the contention of the Ld. Counsel for the assessee that the source of cash deposited in the bank account of the assessee to the tune of Rs.31,40,000/- had been duly explained as sourced from gifts received from his father and mother. The assessee has supported his explanation with the necessary evidences showing the entry of gifts given by his parents through banking channels by submitting their bank accounts and also bank account of the assessee showing receipt of said gifts. He has also demonstrated the withdrawal of amount of gifts received in cash from his bank account and the subsequent deposit of the same in his post office savings bank account immediately thereafter.

14. The facts pointed out by the Ld. Counsel for the assessee explaining the entire trail of money received by the assessee from his parents to one of his bank accounts from which he withdrew cash and deposited in his post office savings bank account has not been disputed by the Revenue. They have rejected the explanation only on account of unreasonableness, contending that cheques could have been directly deposited in the post office savings bank account of the assessee etc.

15. Having not disputed the facts pointed out by the assessee before me, explaining the entire trail of cash deposited in the post office savings bank account, I do not find any merit in the order of the Authorities below rejecting assessee’s explanation on the mere ground of unreasonableness that too when the unreasonableness in the explanation is not perverse enough to unsettle the facts pointed out by the Ld. Counsel for the assessee to the Authorities Below. The assessee has demonstrated the cash withdrawn from his bank account to have been deposited immediately thereafter in his post office savings bank account. The Revenue does not dispute this fact. It is also not the case of the Revenue that the cash withdrawn by the assessee from his bank account has been utilized elsewhere.

16. In the light of the same, I see no reason for rejecting the assessee’s explanation of the source of cash deposited in his bank account. The order of theLd.CIT(A) treating the cash deposited in his bank account as unexplained therefore is set aside. The addition made to the income of the assessee of Rs.31,40,000/- is deleted.

17. In effect, the appeal of the assessee is allowed.

Order pronounced in the Open Court on 15.09.2026