The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of Rs. 31.40 lakh made against a taxpayer for cash deposits in a post office savings account.
The bench of Annapurna Gupta (Accountant Member) has observed that the taxpayer had produced bank records tracing the money from gifts received from his parents through to the cash withdrawals and subsequent deposits. The tax authorities could not reject that evidence merely because they considered the choice to transfer the money in cash unreasonable.
The Assessing Officer noticed cash deposits totalling ₹31.40 lakh in an account held by assessee and treated the amount as unexplained money under Section 69A of the Income Tax Act, 1961, read with Section 115BBE. The National Faceless Appeal Centre upheld the addition in an order dated October 13, 2025, following which the assessee approached the Tribunal.
The assessee’s case was that the deposits were made in a post office savings account held jointly with his wife. He said the money largely came from gifts made by his parents. According to the records placed before the Tribunal, amounts received through banking channels were credited to his account with Baroda Rajasthan Kshetriya Gramin Bank, withdrawn in cash and then deposited in the post office account.
His submissions also referred to cash received through bearer cheques from his mother, proceeds credited on closure of four term deposits, and ₹30,000 of past cash savings. He produced his parents’ bank statements, his own bank statement and the post office account statement to support the sequence of transactions.
The Assessing Officer questioned why money would be withdrawn from one account and deposited in another in cash when it could have been transferred by cheque or another banking method. The first appellate authority sustained the addition, recording that assessee had not made a submission on the merits during the appeal proceedings despite being given opportunities.
The assessee argued that the documents already furnished showed the source and movement of the funds. The Revenue relied on the findings of the Assessing Officer and the appellate authority.
The Tribunal found that the bank records supported the receipt of gifts from assessee’s parents, the withdrawal of money from his bank account and its deposit in the post office savings account soon afterwards. It noted that the Revenue had not disputed this trail or shown that the withdrawn cash had been used elsewhere.
In those circumstances, the Tribunal held that the explanation could not be rejected solely because the authorities thought a direct transfer would have been more reasonable. It set aside the appellate order, deleted the ₹31.40 lakh addition and allowed the appeal.
The decision turns on the documented trail in this case: the Tribunal accepted the explanation because the relevant receipts, withdrawals and deposits were supported by records and the Revenue had not identified a contrary use of the cash.
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