Yeslur Gangadharappa Vasanth Kumar Vs ITO (ITAT Bangalore)
Cash Deposits Explained in Part, Relief Granted in Part: Section 115BBE Cannot Travel Backwards
The dispute: ₹15.56 lakh deposited in a bank account
The Bangalore ITAT partly allowed an assessee’s appeal against an addition of ₹15,56,000 towards unexplained cash deposits, accepting the explanation for ₹11,65,500 and restoring the remaining amount to the Assessing Officer for verification. The Tribunal also categorically directed that section 115BBE could not be invoked for AY 2011-12, since the provision was not applicable to that assessment year.
The decision illustrates the importance of establishing a clear connection between cash deposits and their sources. While a supported explanation can secure relief, references to accumulated savings, jewellery sales or borrowings require evidence. Equally, the year in which an assessment is completed cannot justify applying a provision that was not in force for the relevant assessment year.
How the addition arose
AIR information indicated that the assessee had earned salary income of ₹13,50,041 but had not filed his return for AY 2011-12. Following reopening proceedings and a notice under section 142(1), he filed a return declaring total income of ₹11,11,342.
Information from HDFC Bank also disclosed cash deposits of ₹15,56,600. The Assessing Officer issued notices seeking bank statements and supporting evidence. As the assessee did not respond to those notices, the officer made an addition of ₹15,56,000, treating the deposits as unexplained income.
Before the first appellate authority, the assessee explained that he had withdrawn ₹15,71,000 during FY 2009-10 and ₹3,00,000 during FY 2010-11, and subsequently redeposited the money for purchasing property. He also referred to proceeds from the sale of his wife’s gold jewellery and loans from friends and relatives.
Earlier withdrawals did not automatically explain later deposits
The CIT(A) rejected the explanation because the assessee had not furnished a satisfactory cash-flow statement, opening cash balance or date-wise reconciliation demonstrating that the money withdrawn earlier remained available for redeposit.
The explanation regarding borrowing was also unsupported. There was no adequate evidence establishing the lenders’ identities, financial capacity or the genuineness and sources of the transactions. Consequently, the entire addition was sustained.
The difficulty was therefore evidentiary. Merely showing that cash had been withdrawn at some earlier point did not, on the material then available, establish that the same cash funded the disputed deposits.
Tribunal accepts ₹11.65 lakh as explained
Before the Tribunal, the assessee’s representative furnished a 50-page paper book, including a cash-flow statement. She relied on earlier withdrawals and a property sale deed to explain the deposits. She acknowledged that details concerning the alleged jewellery sale were unavailable.
After examining the material, the Tribunal accepted ₹8,65,500 from the sale of property and ₹3,00,000 withdrawn from the bank, aggregating to ₹11,65,500, as explained sources of the deposits.
A distinction in the order deserves attention. The representative’s submissions referred to a sale deed recording cash consideration of ₹10,20,000, whereas the Tribunal’s operative finding accepted ₹8,65,500 as the property-sale component. Accordingly, the relief granted must be understood by reference to the operative finding: ₹11,65,500 stood accepted as explained.
Balance remanded, with a 90-day requirement
The remaining ₹3,90,500 was restored to the Assessing Officer for fresh verification.
Although the cash-flow statement showed an opening cash balance of ₹15,57,500, the Tribunal found that the assessee had not satisfactorily established its source. His annual salary of approximately ₹10 lakh to ₹15 lakh did not, by itself, substantiate the disputed balance.
The assessee was directed to furnish, within 90 days of receiving the order, the names and addresses of lenders, dates and amounts of cash loans, and supporting evidence concerning any sale of his wife’s jewellery.
If the Assessing Officer was satisfied with the evidence, the corresponding addition was to be deleted. Thus, the balance was remanded for verification; it was not finally deleted. The burden of substantiating those sources remained with the assessee.
Section 115BBE: No retrospective application
The Tribunal separately allowed the ground concerning section 115BBE. The assessee argued that the provision had been introduced by the Finance Act, 2012 with effect from 1 April 2013, and therefore did not apply to AY 2011-12.
The Tribunal agreed and directed the Assessing Officer not to invoke section 115BBE for the year under consideration. This direction is relevant even if any part of the remanded addition ultimately survives verification.
Author’s comments
The practical lesson is that a cash-flow statement must be supported by evidence connecting the opening balance, receipts, withdrawals and deposits. Salary income may explain the capacity to save, but a substantial cash balance still requires a credible factual foundation.
The decision should also be read within its limits. The assessee argued that section 69A could not apply because he maintained no books, but the Tribunal did not expressly uphold that proposition. The actual relief rested on acceptance of identified sources, verification of the remaining deposits and the inapplicability of section 115BBE.
Documented sources secured substantial relief; unsupported explanations received another opportunity, subject to proof.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal arises from the order dated 21.01.2026 passed by the Commissioner of Income Tax (Appeals), Addl./JCIT(A), Jodhpur, for AY 2011-12, dismissing the assessee’s appeal against the assessment order dated 27.12.2018 passed under section 143(3) read with section 147 of the Income Tax Act, 1961 (“the Act”) by the ITO, Ward-5(3)(5), Bangalore (“the AO”).
2. The Assessee has raised the following grounds of appeal:
1. Order of CIT(A) erroneous
The order passed by the learned Commissioner of Income Tax (Appeals) under section 250 of the Income-tax Act, 1961 is contrary to law, facts, and circumstances of the case and therefore liable to be set aside.
2. Addition of ₹15,56,000 unjustified
The learned CIT(A) erred in confirming the addition of ₹15,56,000/- made by the Assessing Officer treating the cash deposits in the bank account as unexplained investment under section 69of the Act.
3. Failure to appreciate explanation of the assessee
The learned CIT(A) failed to appreciate that the Appellant had clearly explained that the deposits were made out of: sale proceeds of wife’s gold jewellery, borrowings from friends and relatives, and earlier withdrawals from savings and salary income.
4. No proper opportunity of hearing
The learned CIT(A) erred in passing the order without properly appreciating the submissions and explanations filed by the Appellant and without granting effective opportunity to substantiate the source of the deposits.
5. Ignoring surrounding circumstances
The learned CIT(A) failed to consider the surrounding circumstances and the fact that the Appellant is a salaried employee and the deposits were made for the purpose of purchase of a residential site.
6. Burden of proof wrongly applied
The learned CIT(A) erred in holding that the Appellant failed to discharge the burden of proof without properly examining the explanation and evidences available on record.
7. Addition based on presumption
The authorities below erred in confirming the addition merely on presumptions and conjectures without bringing any material evidence to establish that the deposits represent unexplained income of the Appellant.
8. Taxation under section 115BBE
The learned CIT(A) erred in upholding the taxation of the addition under section 115BBE without properly establishing that the provisions of section 69 were applicable.
9. Right to add/alter grounds
The Appellant craves leave to add, alter, amend or delete any of the above grounds at the time of hearing.
3. AIR information showed that the assessee earned salary income of Rs. 13,50,041/- but did not file a return for AY 2011-12. After receiving no response to a notice under section 148, the AO issued a notice under section 142(1) on 16.07.2018. The assessee then filed an ITR declaring total income of Rs. 11,11,342/-. AIR information from HDFC Bank also showed cash deposits of Rs. 15,56,600/-. Despite notices dated 17.11.2018, 14.12.2018, and 24.12.2018 seeking bank statements and supporting evidence, the assessee did not respond. The AO therefore treated Rs. 15,56,000/- as unexplained income and added it to the assessee’s total income.
4. On appeal, the assessee stated that he had withdrawn Rs. 15,71,000/- in FY 2009-10 and Rs. 3,00,000/- in FY 2010-11, then redeposited the funds to purchase property. He also claimed that proceeds from his wife’s gold jewelry and loans from friends and relatives explained the Rs. 15,56,000/- deposited in his HDFC Bank account.
5. The CIT(A) rejected the claim that the Rs. 15,56,000/- deposited in AY 2011-12 came from earlier withdrawals or savings, finding it implausible and unsupported by a cash-flow statement, books, opening cash balance, or a date-wise reconciliation showing the funds remained available. The claim that the money was withdrawn for a property purchase but later redeposited was also inconsistent. The alternative claim of loans from friends and relatives failed because the assessee provided no evidence of the lenders’ identities, creditworthiness, capacity, or the genuineness and sources of the transactions. The CIT(A) therefore upheld the AO’s addition of Rs. 15,56,000/- as unexplained income.
6. The appeal was filed eight days late. The assessee sought condonation for the delay and submitted an affidavit in support. After hearing both parties, we find that the brief delay was unintentional and supported by sufficient cause. We therefore condone the delay and admit the appeal.
7. The learned advocate, Ms. Pratibha, filed a 50-page paper book containing, among other documents, the assessee’s cash-flow statement. She submitted that the sole issue was the addition of cash deposits of Rs. 15,56,000/-. Referring to the chart at page 29, she contended that the deposits represented earlier cash withdrawals and did not constitute unaccounted income. She further relied on the land sale deed at page 31, dated 6 May 2010, under which the assessee received cash consideration of Rs. 10,20,000/-, corresponding with a bank deposit made on the same date. She acknowledged that no details were available regarding the alleged jewelry sale. She also argued that section 115BBE, introduced by the Finance Act, 2012 with effect from 1 April 2013, did not apply to AY 2011-12. Finally, she contended that section 69A applies only where books of account are maintained; as the assessee maintained none, the addition should be deleted.
8. The learned Standing Counsel for the Revenue, Shri Ganesh R. Ghale, supported the orders of the lower authorities. He submitted that the assessee had deposited cash of ₹15,56,600 in his HDFC Bank account but failed to explain its source. The Assessing Officer therefore made the addition. He further submitted that the assessee could not substantiate the source even before the learned CIT(A); accordingly, the CIT(A)’s order confirming the addition contains no infirmity.
9. We have carefully considered the rival submissions and reviewed the orders of the lower authorities. The sole issue is the cash deposit of ₹15,56,000 in the assessee’s HDFC Bank account. In the cash-flow statement, the assessee identified ₹8,65,500 received from the sale of property and ₹3,00,000 withdrawn from his bank account, aggregating to ₹11,65,500, as sources of the deposit. He also submitted that, as a salaried employee earning approximately ₹10,00,000 to ₹15,00,000 annually, he had sufficient savings to explain the balance. Before the Assessing Officer, he additionally claimed that the funds came from the sale of his wife’s jewelry and loans from friends and relatives. We accept the source of the deposit to the extent of ₹11,65,500. However, the assessee produced no evidence, such as sale invoices or lender details, to substantiate the balance claimed to have arisen from the sale of jewelry or loans from friends and relatives. Although the cash-flow statement shows opening cash on hand of ₹15,57,500, the assessee has not established a satisfactory source for such a substantial balance. We therefore restore the issue concerning the balance deposit, over and above ₹11,65,500, to the Assessing Officer for verification. Within 90 days of receiving this order, the assessee shall provide the names and addresses of the lenders, the dates and amounts of any cash loans, and supporting evidence for any sale of his wife’s jewelry. If the Assessing Officer is satisfied that the balance arose from those sources, the corresponding addition shall be deleted. The burden of substantiating the claim remains on the assessee. The Assessing Officer shall verify the evidence and decide the issue relating to the balance amount afresh. Accordingly, ground no. 2 is partly allowed.
10. Ground no. 1 is general. Ground no. 3 was not argued, ground no. 4 was not pressed, and ground nos. 5 to 7 were not argued; they are therefore dismissed.
11. Ground no. 8 concerns taxation under section 115BBE of the Act. As that provision was neither in force nor applicable for AY 2011-12, the Assessing Officer is directed not to invoke it for the year under consideration. Ground no. 8 is accordingly allowed to that extent.
12. In the result, the assessee’s appeal is partly allowed as indicated above.
Order pronounced in the open court on 30th September, 2026.
