The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has granted substantial relief to an assessee by restricting an addition made towards unexplained cash deposits from ₹1.16 crore to a lump sum of ₹5 lakh.

The bench of Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) held that the cash deposits were intrinsically linked to an established agricultural land transaction and observed that the assessee’s socio-economic background and accumulated cash holdings could not be ignored while determining the addition. 

The appeal arose from reassessment proceedings for the Assessment Year (AY) 2011-12. The Assessing Officer (AO) had treated cash deposits amounting to ₹1,16,03,750 as unexplained under Section 68 of the Income Tax Act, 1961, after accepting only ₹81 lakh as explained cash received from registered sale deeds relating to agricultural land. The remaining amount was added to the assessee’s taxable income. 

Buy Now: INCOME TAX E-COMPILATION – JUNE 2026

According to the Income Tax Department, the assessee had deposited a total of ₹1,97,03,750 in cash in her Axis Bank savings account. During reassessment proceedings initiated pursuant to an order under Section 263, the assessee explained that the deposits originated from the sale of agricultural lands belonging to the joint family. She also claimed that additional amounts were received from the sale of agricultural produce, cattle, agricultural equipment, trees, gold and silver ornaments, and gifts from relatives. However, documentary evidence supporting these additional sources was not produced, leading the AO to reject the explanation except to the extent of ₹81 lakh reflected in the registered sale deeds. 

Before the Tribunal, the assessee consistently maintained that the entire cash deposits represented the cash component received in connection with the sale of agricultural land executed on 19 May 2010.

It was argued that the family had entered into agreements for sale of agricultural land for an aggregate consideration of ₹2.37 crore, out of which ₹37.70 lakh had been received at the time of the agreement and ₹1.97 crore was received in cash at the time of execution of the sale deed. The assessee submitted copies of the sale agreements and contended that the entire cash deposited in the bank represented sale consideration from agricultural land, which was exempt from taxation. 

The Revenue, however, maintained that only the consideration disclosed in the registered sale deeds could be accepted. Since the alleged higher consideration mentioned in the unregistered agreements was unsupported by confirmations from purchasers or other corroborative evidence, the balance amount could not be accepted as explained. 

The Bench observed that throughout the proceedings, the assessee had consistently maintained that the disputed cash deposits represented the cash component of the agricultural land transaction.

The Tribunal noted that there was no dispute regarding the genuineness of the land transaction itself. It further relied upon the decision of the Third Member Bench in Mrs. Malini Ramnath Rele v. ITO (1994) 49 ITD 43 (Bom.), wherein it had been held that once the underlying property transaction stood established, a reasonable inference could be drawn that the disputed cash represented the undeclared “on-money” component of that transaction. 

The Bench also observed that while the assessee had not fully substantiated every aspect of the claim to the satisfaction of the lower authorities, no credit had been given for her accumulated cash-in-hand, savings, or her overall socio-economic status.

Considering the totality of the facts and circumstances, the Tribunal held that making the entire addition of ₹1.16 crore was not justified.

The ITAT concluded that a lump sum addition of only ₹5 lakh would adequately meet the ends of justice. Accordingly, it deleted ₹1.11 crore out of the total addition, while specifically directing that the order should not be treated as a precedent for other cases. Necessary consequential computation was directed to be carried out in accordance with law. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Bogus Sales Through Accommodation Entries: ITAT Caps Income Addition at 1% GP Estimation