RAKESH KUMAR AGARWAL,MANCHERIAL V. INCOME TAX OFFICER, WARD-1 , MANCHERIAL

ITA 1442/HYD/2025

AI Insights

The case revolves around an appeal by Rakesh Kumar Agarwal against the order of the Additional Commissioner of Income Tax (Appeals) - Thane, which upheld the addition of Rs. 7,12,000 to the assessee's income for the assessment year 2017-18 under Section 69A of the Income-tax Act, 1961. The addition was initially made by the Assessing Officer, who questioned the source of cash deposits made by the assessee in his bank accounts. The assessee argued that these deposits were from his salary and previous cash in hand, supported by a cash flow statement. However, both the Assessing Officer and the CIT(A) found the explanations insufficient, leading to the appeal before the Tribunal. The Tribunal, after reviewing the submissions and evidence, concluded that the assessee had sufficiently explained the source of the deposits, leading to the decision in favor of the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 831170 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 09-09-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Salary income; Source of fund

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “SMC” Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.1442/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2017-18) Rakesh Kumar Agarwal, R/o.Manchierial. Telangana. PAN : AMBPA3459L Vs. The Income Tax Officer, Ward – 1, Mancherial. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Hari Agarwal, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Ms. P. Sumitha, Sr. A.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 13.01.2026 घोर्णध की तधरीख/ Date of Pronouncement : 21.01.2026 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Addl/Commissioner of Income Tax (Appeals) – Thane Printed from counselvise.com 2 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal (for short “Ld. CIT(A)”) dated 15.07.2025, pertaining to the assessment year 2017-18. 2. The brief facts of the case are that, the assessee, who is an individual filed his return of income for assessment year 2017-18 on 06.03.2018 admitting income of Rs. 2,97,830/-. The case was selected for limited scrutiny and during the course of assessment proceedings, the A.O. noticed that, the assessee has made cash deposit into bank accounts maintained with ICICI Bank and State Bank of India amounting to Rs. 7,12,000/-. The A.O. called upon the assessee to furnish source for cash deposit. In response, the assessee submitted that, he is an income-tax assessee, filing return of income for past 10 years and deriving income from salary and income from other sources, and out of his salary income and previous cash in hand, he has made cash deposits of Rs. 7,12,000/-. The assessee has also furnished relevant cash flow statement explaining the availability of cash in hand. The A.O., after considering the relevant submissions of the assessee and also taking note of explanation furnished by the assessee, observed that, on perusal of ledger account of the salary, it is seen that, the salary is credited on the last day of the month, whereas Printed from counselvise.com 3 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal the cash deposits into bank accounts as shown at para 2 are not matching with the dates of salary credits in cash. The cash deposits in books of account are made on random dates and therefore the source for cash deposit out of salary income is not accepted. The A.O. had also rejected the cash flow statement filed by the assessee explaining the availability of cash on 01.04.2016 and held that, the assessee also failed to substantiate the cash deposit with any known source of income. Therefore, the A.O. rejected the explanation of the assessee and made addition of Rs. 7,12,000/- under Section 69A of the Income-tax Act, 1961 as unexplained money. 3. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has filed submissions and explained that, the cash deposited into bank accounts were explained along with the ITR filed for earlier years, where the assessee was having sufficient cash in hand of Rs. 10,31,207/-, out of which the assessee has made cash deposits of Rs. 5,32,000/- into State Bank of India and further deposited Rs. 1,80,000/- into ICICI Bank account. The Ld. CIT(A), after considering the relevant submissions of the assessee and Printed from counselvise.com 4 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal also taking note of the reasons given by the A.O., observed that, the assessee merely submitted explanation without furnishing any supportive documents in support of the cash flow statement filed by the assessee to explain the source for cash deposits. Since the explanation offered by the assessee and the details filed in support thereof were not found acceptable, it was held that, the assessee has failed to explain the source of cash deposits. Hence, the addition of Rs. 7,12,000/- made by the A.O. has been upheld. 4. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 5. The learned counsel for the assessee, Shri Hari Agarwal, C.A. submitted that, the Ld. CIT(A) erred in sustaining the addition made towards cash deposit of Rs. 7,12,000/- under Section 69A of the Act, even though the assessee has explained the source of cash deposit out of opening cash balance on 01.04.2016 of Rs. 6,71,207/- and further cash received during the year towards salary income and interest income. If the total cash availability of Rs. 10,31,207/- is considered, the assessee has explained the source of cash deposit of Rs. 7,12,000/-. The A.O., without Printed from counselvise.com 5 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal appreciating the relevant facts, simply rejected the explanation of the assessee only on the ground that, there is a mismatch between the salary income credited in the books of account and the date of deposit of cash into the bank account, without appreciating the fact that, although the salary income has been credited at the end of each month, the assessee has made cash deposits into the bank account in the subsequent months upon receipt of salary, and therefore the observations of the A.O. lack merit and cannot be accepted. Therefore, he submitted that, the addition made by the A.O. should be deleted. 6. The learned Senior A.R. for the Revenue, Ms. P. Sumitha, on the other hand, referring to the income declared by the assessee and the opening cash balance available as on 01.04.2016, submitted that, the opening cash balance shown as on 01.04.2016 is not commensurate with the income declared by the assessee, going by the ITRs filed for the earlier financial year and the current financial year. The A.O., after considering the relevant facts, has rightly held that, the assessee has failed to explain the source for cash deposit and thus, made addition under Section Printed from counselvise.com 6 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal 69A of the Act. Therefore, she submitted that, the addition made by the A.O. should be upheld. 7. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the amount of cash deposit into bank account. The assessee has made cash deposit of Rs. 5,32,000/- in State Bank of India and Rs. 1,80,000/- in ICICI Bank. The assessee has explained the source for cash deposit by filing a cash flow statement and statement of affairs as on 31.03.2016. As per the cash flow statement filed by the assessee, he was having the opening cash balance of Rs. 6,71,207/- on 01.04.2016. Going by the evidence filed by the assessee, it is clear that, the assessee has regularly filed his return of income for more than 10 years and out of his known sources of income, he has shown cash in hand of Rs. 6,71,207/-. If we consider the capital balance of the assessee and other investments, the assessee does not have any substantial investment, either in movable or immovable property, except small investments in life insurance premium and miscellaneous advances. Therefore, in our considered view, the cash balance as on 01.04.2016 is backed by Printed from counselvise.com 7 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal relevant evidences, including income declared by the assessee for the earlier assessment years, and therefore, the A.O. ought not to have rejected the explanation of the assessee with regard to the opening cash balance of Rs. 6,71,207/-. 8. In so far as the cash received for the year under consideration, the assessee claims to have received salary income of Rs. 2,40,000/- and interest income of Rs. 1,20,000/-. The assessee has furnished the relevant ledger accounts of salary income. The A.O. has accepted that, the assessee derives salary income of Rs. 2,40,000/-, however, rejected the explanation with regard to the source only on the ground that, there is a mismatch between the date of receipt of salary and the date of deposit of cash into the bank account. 9. We have gone through the relevant ledger account along with the cash deposits into the bank account and we find that, the assessee received salary income at the end of each month and made cash deposits in the subsequent month. Therefore, going by the income earned by the assessee and the date of receipt, in our considered view, the assessee can easily explain the cash deposits Printed from counselvise.com 8 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal in the subsequent month out of the salary received from the previous month. Therefore, the observation of the A.O. in this regard is also devoid of merit and cannot be accepted. If we consider the total cash balance available with the assessee, including the opening cash balance as on 01.04.2016 of Rs. 6,71,207/-, and the income for the financial year 2016-17, the assessee was having a total cash balance of Rs. 10,31,207/-, out of which he has made cash deposits of Rs. 7,12,000/- into the bank accounts on various dates. From the above, it is very clear that, the assessee has explained the source for cash deposits with known sources of income by filing relevant details. The A.O., without appreciating the relevant facts, has simply made addition towards cash deposits under Section 69A of the Act. The Ld. CIT(A), without considering the relevant facts, simply sustained the addition made by the A.O. Therefore, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition made towards cash deposits of Rs. 7,12,000/- under Section 69A of the Act. Printed from counselvise.com 9 ITA No.1442/Hyd/2025 Rakesh Kumar Agarwal 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 21st January, 2026. Sd/- श्री विजय पाल राि (VIJAY PAL RAO) उपाध्यक्ष /VICE PRESIDENT Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 21.01.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Rakesh Kumar Agarwal, 10-196, Chinnoor Road, Mancherial, Telangana – 504208. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward – 1, Mancherial. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Printed from counselvise.com "