Mumbai ITAT Deletes Section 69A Cash Redeposit Addition Based on Mere Suspicion

Sushila Nana Savekar Vs ITO (ITAT Mumbai)

Mumbai ITAT Deletes Section 69A Addition on Cash Redeposits; Revenue Cannot Reject Explained Bank Withdrawals on Mere Suspicion

The Mumbai ITAT deleted the addition of ₹17.63 lakh made under section 69A, holding that cash redeposited into the assessee’s bank accounts could not be treated as unexplained when the source of the cash was established through earlier withdrawals from disclosed bank accounts. The assessee, a 74-year-old retired municipal employee, demonstrated that she had withdrawn ₹42.16 lakh from nine bank accounts during the year, out of which ₹24 lakh was earmarked for her daughter’s marriage and the balance was redeposited. The Tribunal observed that ₹4.47 lakh represented same-day withdrawal and redeposit (contra entries), while the remaining deposits were also covered by explained cash withdrawals. It held that although the assessee could not fully substantiate the proposed utilization of ₹24 lakh towards marriage expenses, that by itself did not negate the explained source of the withdrawn cash. Since the Revenue failed to establish that the withdrawn cash had been utilized elsewhere or that the deposits represented income from an undisclosed source, the addition was based merely on surmise regarding the retention of cash. Relying on the Karnataka High Court’s decision in S.R. Venkataraman and the Bengaluru Tribunal’s ruling in Sampathraj Rakesh Kumar, the Tribunal held that the Department cannot dictate how long an assessee may retain withdrawn cash. Accordingly, it directed deletion of the addition under section 69A.

Cases Discussed

• Sampathraj Rakesh Kumar vs ITO (ITAT Bengaluru), ITA No.1451/Bang/2018 dated 03.10.2018
• R. Venkataraman vs. CIT, Karnataka-1 (Karnataka High Court), (1981) 127 ITR 807 (Karnataka)

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2015-16, date of order 19.12.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity the ‘Ld. AO’) order passed under section 147 r.w.s. 144B of the Act date of order 15.03.2024.

2. The brief facts of the case are that the assessee is 74 year old resident widow senior citizen and retired as municipal employee from Municipal Corporation of Greater Mumbai. The assessee filed the return by declaring total income Rs.3,75,220/-. The Ld. AO had received the information from Risk Management Strategy (RMS) that the assessee has deposited cash in different dates in the bank account of the assessee. Accordingly, the case was selected for scrutiny and after due verification the amount of Rs.17,63,500/- was added back with the total income of the assessee u/sec. 69A of the Act as unexplained money deposited in the bank account. The aggrieved assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A) the assessee submitted all the details of cash withdrawal and deposit in different bank accounts. The assessee had multiple bank accounts and had withdrawn amount of Rs.42,16,300/-. Out of that the assessee incurred expenses for the daughter’s marriage amount to Rs.24,00,000/-and rest of the amount was deposited in the bank account. The Ld. CIT(A) rejected the assessee’s argument and confirmed the additions. Being aggrieved assessee filed an appeal before us.

3. The Ld. AR argued and filed a paper book comprising pages 1 to 146 which has been placed on record. The Ld. AR contended that the assessee has an opening cash balance on 01.04.2014 amount of Rs.1,01,500/- the cash was duly withdrawn and amount of Rs.42,16,300/- in alleged financial year. But after the expenses incurred related to daughter’s marriage amount of Rs.24,00,000/- the balance amount of Rs.17,63,500/- was deposited in the bank account. The Ld. AR contended that the out of 17,63,500/- the contra entries of same day deposit was amount of Rs.4,47,000/- and the rest of the amount was made within the five months difference after due withdrawal the amount. A chart in tabular format is duly submitted which is reproduced as below:

4. The Ld. AR further contended that the bank wise withdrawal and deposit with detail analysis was duly submitted before the revenue authorities. The Ld. AR argued that the affidavit on support of cash redeposit, opening balance of fix deposits, bank transactions, bank statements and month wise cash balance, source of fund, details of daughter’s marriage expenses and marriage certificate of daughter are duly annexed in APB page 68 to 116. The assessee explained the source of funds and the fund was duly accumulated from liquidation of fix deposits, sale proceeds, sale of shop etc. The details are duly submitted in APB page 114. So, the details of source of fund and application of fund is reproduced as below:

5. The Ld. AR further argued and respectfully relied on the order of Coordinate Bench of ITAT Bengaluru in the case of Sampathraj Rakesh Kumar vs ITO ITA No.1451/Bang/2018 dated 03.10.2018 where the identical issue was adjudicated. The observations of the Coordinate Bench is reproduced as below:

“12. Thus, the total cash withdrawn from the bank account by the assessee was Rs.20,91,500+ 17,71,800 which was withdrawn by his self- cheque. There was also a deposit of Rs.9 lakhs in the bank account in March, 2013. After excluding the cash deposit, net cash available with assessee from the withdrawals was a sum of Rs.29,63,000. The availability of cash as a source of deposit in the bank account was disbelieved by the AO for the only reason that it was highly improbable for a person to keep withdrawals in the bank account for a period of two years. In this regard, we find that the Hon’ble Karnataka High Court in the case of S.R. Venkataraman vs. CIT, Karnataka-1 (1981) 127 ITR 807 (Karnataka) had taken a view that withdrawals of cash in the past as a source of deposit at a later point of time in the bank account cannot be disbelieved merely on the surmise that it was improbable for an assessee to keep cash withdrawn for two years. The Hon’ble High Court held that revenue authorities were not competent to dictate as to what the assessee should do with the money withdrawn from the bank. The court held that as long as the source is explained and established and if money is withdrawn from SB account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. The Court also held that money might have been utilised in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee. The aforesaid decision of the Hon’ble Karnataka High Court in the facts and circumstances of the present case supports the plea of the assessee. I accordingly hold that the revenue authorities were not justified in rejecting the explanation of assessee with regard to source of deposit of cash in the bank account. The consequent addition made is directed to be deleted and the appeal of the assessee is allowed.

13. In the result, the assessee’s appeal is allowed.”

6. The Ld. DR argued and contended that the assessee had deposited cash aggregating to Rs.17,63,500/- in various bank accounts during the year under consideration. It was further submitted that, out of the total cash withdrawals, the assessee claimed to have incurred expenditure of Rs.24,00,000/- towards her daughter’s marriage. However, the assessee failed to substantiate the said claim with any cogent documentary evidence. The Ld. DR pointed out that the marriage of the assessee’s daughter was solemnized only on 04.01.2016, i.e., in the succeeding financial year, whereas the cash deposits under consideration pertain to the relevant financial year. Therefore, according to the Ld. DR, there exists a clear mismatch between the alleged utilization of cash and the timing of the deposits. The Ld. DR further submitted that, in the absence of supporting evidence to establish the utilization of Rs.24,00,000/- towards marriage-related expenses, the explanation furnished by the assessee remained unsubstantiated. Accordingly, it was contended that the Ld. CIT(A) was justified in confirming the addition of Rs.17,63,500/- under section 69A of the Act. In support of the aforesaid contention, the Ld. DR invited our attention to paragraph 5.2 of the impugned appellate order, which is reproduced hereunder:

“Grounds of appeal Nos. 2 & 3

5.2 In these grounds of appeal, the appellant challenge the action of AO for making addition of Rs. 17,63,500/- u/s 69A of the Act.

I have carefully considered the assessment order, grounds of appeal, submissions of the appellant and the material placed on record.

5.2.1 The core issue for adjudication is whether the cash deposits aggregating to Rs. 17,63,500/-have been satisfactorily explained by the appellant. It is undisputed that the appellant deposited cash in multiple tranches and across multiple bank accounts during the year.

5.2.2 The appellant’s primary explanation is that the cash deposits represent re-deposit of cash withdrawn earlier for marriage-related purposes. However, on examination of records, it is noted that the marriage of the appellant’s daughter was solemnized on 04.01.2016, whereas the cash deposits in question pertain to the financial year 2014-15. Thus, there is a clear mismatch between the timing of alleged utilization and redeposit of cash.

5.2.3 Further, despite being specifically asked by the AO, the appellant failed to furnish any corroborative third-party evidence such as bills, vouchers or expenditure details to substantiate the claim of utilization of cash towards marriage expenses. The cash summaries and fund flow statements relied upon by the appellant are self-prepared documents and do not, by themselves, establish the nexus between cash withdrawals and subsequent re-deposits.

5.2.4 The pattern of frequent cash deposits in different bank accounts, sometimes on the same day or within short intervals, also weakens the appellant’s contention that the re-deposits were merely unutilized cash lying on hand. In the absence of cogent and credible evidence to demonstrate that the cash deposited was the same cash withdrawn earlier and remained unutilized, the explanation offered cannot be said to be satisfactory within the meaning of section 69A of the Act.

5.2.5 The contention of the appellant that section 69A is not applicable as she does not maintain books of account is also devoid of merit. Section 69A applies where the assessee is found to be the owner of unexplained money and the explanation offered is not satisfactory. Maintenance of books of account is not a pre-condition for invoking section 69A.

5.2.6 In view of the above facts and circumstances, I find no infirmity in the action of the AO in treating the cash deposits of Rs. 17,63,500/- as unexplained money u/s 69A of the Act. The addition is therefore confirmed.

The grounds of appeal nos. 2 & 3 of the appellant are dismissed.”

7. We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that the assessee had withdrawn an aggregate cash amount of Rs.42,16,300/- from various bank accounts during the relevant period. The source of such withdrawals has never been disputed by the revenue. The documentary evidence placed on record demonstrates that the withdrawals were sourced from disclosed bank accounts, liquidation of fixed deposits, sale proceeds, and other explained sources. Thus, the availability of cash with the assessee stands duly established. The Revenue’s objection is primarily based on the assessee’s inability to fully substantiate the claim that a sum of Rs.24,00,000/- was earmarked and utilized for her daughter’s marriage, which was solemnized on 04.01.2016. However, merely because the assessee could not furnish complete supporting evidence for the proposed utilization of a part of the withdrawn cash, the explained source of the cash withdrawals themselves cannot be disregarded. Significantly, out of the total cash deposits of Rs.17,63,500/-, an amount of Rs.4,47,000/- represents contra entries involving withdrawal and redeposit on the same day, while the balance amount of Rs.13,16,500/- stands covered by the cash withdrawn from the disclosed bank accounts. The revenue has not brought any material on record to establish that the cash withdrawn was utilized elsewhere or that the cash deposits represented income from any undisclosed source. The addition has been sustained merely on the basis of suspicion regarding the retention of cash for a period of time. Such an approach is contrary to the settled legal position. The Coordinate Bench, in the case of Sampathraj Rakesh Kumar (supra) relying upon the judgment of the Hon’ble Karnataka High Court in S.R. Venkataraman (supra), has held that once the source of cash is explained through earlier withdrawals, the revenue cannot reject the explanation merely on the ground that it is improbable for an assessee to retain cash for a considerable period.

Considering the entirety of the facts and circumstances of the case, we find that the source of the cash deposits stands satisfactorily explained and the revenue has failed to establish any nexus between the impugned deposits and undisclosed income. Accordingly, we set aside the impugned order of the Ld. CIT(A) and direct the Ld. AO to delete the addition of Rs.17,63,500/- made under section 69A of the Act. The grounds raised by the assessee are allowed.

8. In the result, the appeal of the assessee bearing ITA No.473/Mum/2026 is allowed.

Order pronounced in the open court on 23^rd day of June 2026.