BHAWNA PURI,MANDI V. INCOME TAX OFFICER WARD, MANDI, MANDI

ITA 978/CHANDI/2025

AI Insights

The case involves Bhawna Puri, who appealed against the order of the CIT(A)/NFAC, Delhi, which upheld the addition of Rs.36,16,472 to her income for the assessment year 2017-18 under section 68 of the Income-tax Act, 1961. This addition was made due to unexplained cash deposits in her bank accounts during the demonetization period. The Assessing Officer had accepted part of her explanations regarding the sources of these deposits but treated a significant portion as unexplained. The CIT(A) concurred with the Assessing Officer's findings. The Tribunal, after examining the submissions and evidence, partly allowed the appeal, reducing the unexplained amount to Rs.10,00,000.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779740 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 02-08-2025
• Other Referred Cases: CIT v. P. Mohanakala (291 ITR 278)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: VISHAL MOHAN
• Keywords: Unexplained cash credit; Income from undisclosed sources; Onus to prove; Gift; Source of fund
• Section: 68

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 978/Chd/ 2025 िनधाŊरण वषŊ / Assessment Year : 2017-18 Bhawna Puri 184/8, Darmayana Mohlla, Mandi Himachal Pradesh, 175001 बनाम The ITO Ward Mandi-175027, Himachal Pradesh ˕ायी लेखा सं./PAN NO: AQCPP2146G अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Vishal Mohan, Sr. Advocate with Shri Parveen Sharma, Advocate (Virtual) राजˢ की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT सुनवाई की तारीख/Date of Hearing : 13/10/2025 उदघोषणा की तारीख/Date of Pronouncement : 15/10/2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal by the assessee is directed against the order of the Ld. CIT(A)/NFAC, Delhi dated 03.07.2025 for A.Y. 2017–18, upholding the addition of Rs.36,16,472/- made under section 68 of the Income-tax Act, 1961 on account of cash deposits during the demonetization period. 2. In the present appeal Assessee has raised the following grounds: 1. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified in not considering / appreciating the submission put forth by the assessee/ appellant. 2. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified in confirming the addition of Rs.33,39,000/- made on account of cash deposits in the bank account of the assessee by treating the said income from undisclosed sources. The addition so made by the Ld. Assessing Officer is not sustainable in the eyes of law. 3. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified upholding the assessment of agricultural receipt of Rs.2,77,472/- as income from undisclosed sources. 4. That the order of the Ld. Commissioner of Income Tax Appeals and Ld. Assessing Officer are bad in law. Printed from counselvise.com 2 3. Briefly, the facts of the case are that the assessee, an individual, filed her return declaring income of Rs.5,21,950/- and agricultural income of Rs.5,50,000/-. The case was selected for scrutiny under CASS on account of substantial cash deposits of Rs.47.89 lakh during the demonetization period. 3.1 In the course of assessment proceedings, the assessee explained that the deposits represented accumulated savings, gifts from her mother and mother-in-law, income from tuitions and event management, and agricultural receipts from her share in a family orchard. The Assessing Officer examined the material and accepted Rs.11,73,028/- as explained, comprising Rs.4,00,000/- gifts, Rs.2,72,528/- agricultural income, and Rs.5,00,000/- as household and tuition receipts, but treated the balance Rs.36,16,472/- as unexplained and added the same u/s 68 of the Act taxed u/s 115BBE. 4. Against the order of the AO the assessee went in appeal before the Ld CIT(A). The CIT(A) concurred with the findings of the AO and dismissed the appeal vide paras 5.1.1 to 5.1.6 of her order dated 03.07.2025 which read as under: 5.1.1 I have carefully considered the facts and circumstances of the case, GOA, SOF, the submissions of the appellant, and the findings recorded by the Assessing Officer. The appellant has challenged the addition of Rs. 36,16,472/- made u/s 68 of the Income-tax Act, 1961, on the ground that the AO was not justified in treating a portion of the cash deposited during the demonetization period as unexplained cash credit. The total cash deposits made by the appellant in three different bank accounts during the demonetization window, i.e., from November 9, 2016, to December 30, 2016, amounted to Rs. 47.89 lakh. Out of this, the Assessing Officer, after examining the explanation offered by the appellant and evaluating the available documentary evidence, accepted a total amount of Rs. 11,73,028/- as explained. The balance amount of Rs. 36,16,472/- was treated as unexplained and added to the total income of the appellant u/s 68, which deals with unexplained credits. 5.1.2 The appellant contended that the entire cash deposit was explainable and sourced from accumulated savings, gifts from family members, agricultural income, tuition fees, and earnings from event- related activities over several years. However, these assertions remained vague and were unsupported by verifiable evidence. For Printed from counselvise.com 3 instance, in respect of the cash gifts of Rs. 2,00,000/- each allegedly received from the appellant’s mother and mother-in-law, the appellant submitted affidavits in the course of assessment proceedings. The Assessing Officer also accepted agricultural income of Rs. 2.72 lakh based on the orchard lease agreement and available bills. Beyond this, the appellant’s explanation fell short of evidentiary standards. 5.1.3 The most significant claim made by the appellant pertained to agricultural income of Rs. 24.50 lakh over seven years from leasing an orchard. However, the orchard lease agreement clearly showed that the property was co-owned by six individuals, making the appellant’s share only one-sixth of the total lease amount. Despite this, the appellant attempted to claim the entire sum, which was not only factually incorrect but also misleading. The AO correctly restricted the allowable income to the appellant’s proportionate share for the relevant assessment year. Furthermore, no records were presented to support the actual receipt of such income over the claimed period. Even assuming the income had accrued, the absence of any evidence to show cash accumulation and retention over seven years, without depositing in banks, rendered the claim highly improbable. The assertion that large amounts of cash were saved and kept at home over several years due to customary rural practices or for emergency purposes lacks credibility, especially in the case of an educated individual who maintained multiple active bank accounts. It is highly improbable that a financially literate person, with access to formal banking infrastructure, would consistently choose to accumulate substantial cash holdings rather than use secure, interest- bearing accounts. What makes the claim even more questionable is the fact that the entire cash deposits were made in demonetized currency notes of Rs. 500 and Rs. 1,000 denominations. This casts serious doubt on the genuineness of the explanation, because if the cash had truly been accumulated gradually over a span of years—as claimed through gifts, part-time earnings, and household savings—one would reasonably expect it to comprise a mix of denominations and to include some amount in smaller or newer notes. The uniformity of the denomination suggests that the cash was not accumulated over time, but rather acquired or pooled together shortly before the demonetization period. This directly contradicts the narrative of long- term savings and instead aligns with the inference that the source of funds is unexplained u/s 68 of the Act. 5.1.4 The appellant also contended that substantial savings had been accumulated over 10 to 11 years from tuition work, event management, part-time jobs, and support from relatives. However, no documentary proof such as tuition fee receipts, event income bills, personal ledgers, or statements of income and expenditure were submitted to support this claim. More importantly, no corresponding cash flow statements, bank entries, or declarations in earlier income tax returns were produced to substantiate the existence or accumulation of such savings. It is a well-established principle under Printed from counselvise.com 4 section 68 that the burden of proof lies on the appellant to provide a satisfactory explanation about the nature and source of any sum credited or deposited. In the absence of reliable evidences, this burden remains undischarged. General statements regarding holding cash for emergencies or vague references to rural customs do not constitute valid or acceptable explanations under the law, particularly in the case of an individual who is financially literate, familiar with the banking system, and actively maintains multiple bank accounts. In the absence of contemporaneous records, corroborative documents, or consistent financial conduct supporting such claims, these assertions remain self-serving and fail to discharge the burden of proof mandated u/s 68 of the Income Tax Act. 5.1.5 The appellant’s reference to public statements made by Government authorities during demonetization, assuring that deposits of legitimate income would not be questioned, does not alter the legal position. The AO is duty-bound to examine any deposit in accordance with the law, and section 68 clearly mandates that unexplained credits or cash deposits must be satisfactorily explained. Judicial precedents, including the decision of the Hon’ble Supreme Court in CIT v. P. Mohanakala (291 ITR 278), strengthen the requirement that explanations must be credible and supported by evidence. In the present case, the appellant’s explanation fails on both counts: it lacks credibility and is not backed by corroborative documentation. The AO has exercised due diligence, provided opportunities to the assessee to explain the deposits, and allowed partial relief wherever minimal documentary evidence was available. Therefore, the allegation of arbitrary or high-handed action does not hold merit. 5.1.6 In view of the above, it is evident that the appellant has not discharged the burden of proving the source and nature of the cash deposits amounting to Rs. 36,16,472/- during the demonetization period. The explanation offered by the appellant is not supported by proper document, and the long-term retention of cash remains implausible in the given context. The Assessing Officer has rightly invoked section 68 and made the addition to income, applying the applicable provisions of section 115BBE, which deals with taxation of unexplained income at a special rate. This action is in conformity with law and supported by the factual matrix of the case. Even during the course of appellate proceedings, the documents submitted by the appellant fail to establish the genuineness of the transactions or substantiate the nature and source of the cash deposits. The appellant’s failure to produce credible and corroborative material evidence, her reliance on vague and general statements, and the unjustified attempt to claim full ownership over income derived from a jointly held asset collectively fall short of satisfying the statutory requirements under Section 68 of the Income Tax Act. The evidentiary material placed on record does not meet the requirements of Section 68 of the Income Tax Act, which mandates a clear, credible, and verifiable explanation regarding the source of deposits. Mere affidavits or general narrations unsupported by contemporaneous evidence cannot discharge the statutory burden, and thus, the explanation Printed from counselvise.com 5 offered by the appellant fails the legal test under Section 68. Hence, the addition of Rs. 36,16,472/- is upheld as valid and legally sustainable. The ground raised by the appellant contesting this addition is found to be devoid of merit and is accordingly dismissed. 5. Now the assessee is in appeal before us. 6. During the course of hearing the Ld. AR reiterated that the assessee and her siblings jointly owned an apple orchard leased to one Shri Sawaran Singh for seven years (2010–2016) and that the lease proceeds were received in cash and retained by her for several years. It was contended that the cash so held represented genuine agricultural receipts belonging to the family, which were later deposited in her bank account during demonetization. It was argued that the authorities below failed to appreciate that there was no prohibition in law against keeping cash, and the explanation was supported by an agreement and affidavits of family members. 7. Per contra, the Ld. DR relied upon the detailed findings of the Assessing Officer recorded in paras 2 to 3 of the assessment order (pages 8–10) and the reasoning of the CIT(A) in paras 5.1.1 to 5.1.6 of the appellate order. The DR emphasized that the AO had meticulously examined the assessee’s explanation and found that: (i) the assessee was only one of six co-owners of the orchard, hence entitled to only one-sixth of the lease income; (ii) there was no evidence of actual receipt of the full lease amount or its retention in cash for five to six years; and (iii) the cash deposits consisted entirely of demonetised notes, belying the claim of long-term accumulation. 7.1 The Ld. DR submitted that the CIT(A) had rightly observed that the explanation lacked credibility, that it was highly improbable for a financially literate assessee to hold large sums in cash for several years without banking, and that the burden under section 68 remained unfulfilled. The addition, therefore, was argued to be fully justified. Printed from counselvise.com 6 8. We have carefully considered the rival submissions and examined the material placed on record. The relevant facts are not in dispute. The assessee and her siblings jointly owned an apple orchard leased for seven years, and the assessee claimed that her mother had retained the lease receipts in cash for several years, which were later deposited during demonetization. 8.1 The authorities below have disbelieved this explanation on the ground that there was no evidence of actual receipt or retention of such cash. The Assessing Officer has already allowed credit for gifts and current year’s agricultural receipts, and partly accepted income from other sources. The balance has been treated as unexplained. 8.2 It is highly improbable that the agriculture receipts accumulated over more than seven years would have been retained in cash without any utilisation towards household expenditure, orchard maintenance, labour wages, or other incidental expenses. The assertion that the entire amount remained intact with the assessee for several years defies normal human probability. No affidavit or corroborative evidence has been filed from Shri Swaran Singh, to whom the orchard was stated to have been leased. Further, the assessee has not furnished details of per-acre income or documentary proof that the orchard yielded receipts aggregating to Rs.35,00,000/- over the past seven years after accounting for expenses, or that such amount was in fact paid by Shri Swaran Singh. No mandi receipts, sale bills, or confirmation letters evidencing the sale of produce were placed before the Assessing Officer. 8.3 Moreover, the orchard being jointly owned, the entire sale proceeds cannot be regarded as belonging exclusively to the assessee. Her claim that the whole sum of Rs.36,16,472/- represented her individual receipts is factually untenable, as her ownership extended only to a one-sixth share. No evidence has been adduced to establish that her siblings lacked bank accounts or that they authorised her to deposit the collective proceeds into her account. Consequently, even if lease income was actually received, the assessee could not have had the entire consideration. Printed from counselvise.com 7 8.4 Considering the totality of the circumstances, we find that while the assessee’s explanation carries some plausibility given the family’s agricultural background and continued orchard operations, the evidentiary support remains inadequate. The Assessing Officer has already taken cognisance of certain genuine elements of income. In the interest of justice, we deem it appropriate to sustain an addition of Rs.10,00,000/- to account for the possible unexplained portion of the cash deposits, and direct deletion of the balance addition. Accordingly, the addition u/s 68 is restricted to Rs.10,00,000/-, and the remaining Rs.26,16,472/- is deleted. 9. The appeal of the assessee is partly allowed in the above terms. Order pronounced in the open Court on 15/10/2025 Sd/- Sd/- क ृणवȶ सहाय लिलत क ुमार (KRINWANT SAHAY) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "