An addition for cash deposits is invalid when the assessee provides a complete documentary trail explaining the source, which the revenue fails to rebut.

By | October 17, 2025
0 Comment

An addition for cash deposits is invalid when the assessee provides a complete documentary trail explaining the source, which the revenue fails to rebut.

Issue

Can an addition be sustained under Section 69A for cash deposits when the assessee provides substantial documentary evidence to prove that the funds were temporarily deposited by a third party for a specific purpose, and the revenue fails to counter this evidence?

Facts

  • The case of a taxi driver was reopened for assessment based on information that cash totaling ₹13.01 lakhs had been deposited into his savings bank account.
  • The assessee explained that the deposits were made by a travel consultant, ‘SL’, to demonstrate a sufficient bank balance for his son and daughter-in-law’s visa applications.
  • The travel consultant, however, stated to the Assessing Officer (AO) that the cash was brought by the assessee.
  • Relying on the consultant’s statement, the AO treated the deposits as unexplained money under Section 69A and added the amount to the assessee’s income.
  • The assessee provided a strong documentary trail to support his claim, including:
    • Pay-in slips with the travel agent’s PAN attached.
    • Bank statements showing the account was a joint account held by the assessee’s wife, the assessee, and the travel agent.
    • An account closure letter, proving the account was opened for the limited purpose of visa processing and was closed shortly after.

Decision

  • The High Court deleted the addition made by the Assessing Officer.
  • It held that the assessee had successfully provided a complete and cogent documentary trail that established a clear nexus between the travel agent and the impugned cash deposits.
  • The court found that the revenue had failed to bring any contrary evidence on record to prove that the cash represented the assessee’s own unaccounted money. The consultant’s uncorroborated statement was not sufficient to override the documentary proof.

Key Takeaways

  • Documentary Evidence Trumps Oral Statements: Strong, verifiable documentary evidence that tells a consistent story is more powerful than a third-party oral statement, especially when the statement is self-serving or uncorroborated.
  • Onus of Proof Shifts: While the initial burden to explain a cash deposit is on the assessee, once they provide a plausible explanation supported by a complete documentary trail, the onus shifts to the revenue to disprove it with concrete evidence.
  • Context Matters: Evidence that provides context to a transaction (like an account closure letter proving a temporary purpose) can be crucial in establishing the genuineness of the assessee’s explanation.
  • Complete Trail is Key: The success of the assessee’s case hinged on their ability to connect all the dots—the joint account, the agent’s PAN on deposit slips, and the temporary nature of the account—creating a complete and believable narrative.
IN THE ITAT AHMEDABAD BENCH ‘SMC’
Dilipsinh Ranjitsinh Chauhan
v.
Income-tax Officer
Siddhartha Nautiyal, Judicial Member
and MAKARAND V. MAHADEOKAR, Accountant Member
IT Appeal No.1542 (Ahd) of 2025
[Assessment year 2010-11]
SEPTEMBER  29, 2025
Srendra Modiani, AR for the Applicant. Arvind Kumbhare, Sr. DR for the Respondent.
ORDER
Makarand V. Mahadeokar, Accountant Member.- This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals), Addl./JCIT (A)-4, Mumbai [hereinafter referred to as “the CIT(A)”], dated 26.06.2025, arising out of the order passed by the Assessing Officer, Income-tax Officer, Ward-1(3)(1), Vadodara [hereinafter referred to as “the AO”], under section 143(3) read with section 147 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] dated 01.12.2017, for the assessment year 2010-11.
2. Facts of the Case
2.1 The brief background of the case is that the assessee, an individual engaged in the business of operating a single taxi, filed his return of income for the assessment year under consideration on 29.07.2010 declaring total income of Rs.1,30,000/-. The return was processed. Subsequently, based on the Annual Information Return (AIR) information, it came to the notice of the Department that cash aggregating to Rs. 13,01,500/- had been deposited in the savings bank account of the assessee during the relevant previous year. The AO, being of the prima facie view that income chargeable to tax had escaped assessment, recorded reasons and issued notice under section 148 of the Act on 14.03.2017.
2.2 In response, the assessee contended that the said deposits were not his income but represented an arrangement with one Shri Siraj Lakdawala, a Visa Consultant associated with M/s. Vibrant International, who had deposited funds in a joint bank account opened in the names of the assessee, his family members and the said consultant, to demonstrate sufficient balance for the purpose of obtaining student visa and dependent visa for the assessee’s son and daughter-in-law for studies in the United Kingdom. It was explained that the amount of Rs. 13,01,000/- was deposited by the consultant himself, subsequently withdrawn, and also that interest of Rs.1,95,000/- was allegedly paid by the assessee for the short-term use of these funds.
2.3 The AO, however, did not accept the explanation. For verification, summons under section 131 of the Act were issued to Shri Siraj Lakdawala, who appeared, and his statement was recorded on oath on 25.07.2017. In the said statement, Shri Lakdawala confirmed that he was engaged in arranging student visas and immigration formalities but categorically denied having advanced any loan or cash to the assessee. On the contrary, he affirmed that the cash deposits aggregating to Rs. 13,01,000/- were brought in by the assessee and his wife, which were deposited into the said joint bank account in his presence. In cross-examination conducted at the request of the assessee, Shri Lakdawala reiterated his stand and maintained that the deposits belonged to the assessee. The AO noted that the assessee failed to produce any corroborative evidence such as agreements, confirmations, or repayment proof to establish that the funds belonged to the consultant.
2.4 The AO, therefore, concluded that the cash deposits of Rs.13,01,000/- represented unexplained money of the assessee and treated the same as income under section 69A of the Act. The total income of the assessee was accordingly assessed at Rs.14,31,000/-as against the returned income of Rs.1,30,000/-. The AO also initiated penalty proceedings under section 271(1)(c) for concealment of income.
2.5 The assessee carried the matter in appeal before the CIT(A). It was contended before the CIT(A) that the reopening itself was invalid, as there was no tangible material available with the AO to form a belief that income had escaped assessment, and that mere AIR information could not constitute valid “reason to believe”. It was further submitted that the addition of Rs.13,01,000/- was wholly unjustified, inasmuch as documentary evidence in the form of bank account statements, pay-in slips, and PAN details of the consultant had been furnished to demonstrate that the deposits were made by the consultant himself for visa documentation purposes. The assessee also contended that the money was subsequently withdrawn and never used by him, thereby negating any inference of income.
2.6 The CIT(A) was not impressed with the submissions of the assessee. He noted that the reopening was based on specific and credible AIR information of large cash deposits and that at the stage of initiation of proceedings under section 147, what is required is “reason to believe” and not conclusive proof, placing reliance on the judgment of the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). He further observed that the assessee had failed to substantiate the claim of loan/temporary arrangement with any cogent documentary evidence. On the contrary, the statement of Shri Lakdawala recorded on oath clearly denied having advanced any funds to the assessee and attributed the deposits to the assessee himself. The CIT(A) held that mere assertion or self-serving statements could not displace the statutory presumption under section 69A in the absence of corroboration. He also placed reliance on Smt. Amiya Bala Paul v. CIT  511/262 ITR 407 (SC) and a recent decision of ITAT Rajkot Bench in Kantilal Lallubhai Shah v. ITO 230, wherein similar addition of cash deposits was upheld. Consequently, the CIT(A) confirmed the addition of Rs. 13,01,000/- made by the AO and dismissed the appeal.
2.7 Aggrieved by the order of CIT(A), the assessee is in further appeal before us raising following grounds of appeal:
1. That the learned Assessing Officer erred in law and on facts in initiating proceedings under section 148 and completing the assessment under section 147 of the Income-tax Act, 1961, and the learned Commissioner of Income-tax (Appeals) further erred in upholding such reassessment. The appellant submits that there was no tangible material or valid reason to believe that income had escaped assessment and that the conditions precedent in my case for invoking jurisdiction under section 147 were not satisfied. The reassessment is therefore bad in law and liable to be quashed.
2. The learned Assessing Officer erred in law and on facts in making an addition of Rs.13,01,000/- as income from undisclosed sources under section 69 of the Income Tax Act, 1961, being cash deposits in the bank account, and the learned Commissioner of Income-tax (Appeals) erred in confirming the same. The appellant submits that the addition is unjustified, arbitrary, and without proper appreciation of the facts and evidence on record. The addition may kindly be deleted.
3. Your appellant craves leave to add to, alter, amend or delete any of the grounds of appeal.
3. During the course of hearing, the learned Authorised Representative (AR) reiterated the detailed submissions filed in writing. It was submitted that the reopening of assessment under section 147 is without jurisdiction, as there was no tangible material to form a valid “reason to believe” that income chargeable to tax had escaped assessment. The sole basis of reopening was the AIR information relating to cash deposits, which by itself could not constitute sufficient reason. It was urged that “reason to suspect” cannot be equated with “reason to believe”.
3.1 On the merits, it was submitted that the addition of Rs.13,01,000/- under section 69 is wholly unsustainable. The learned AR contended that the assessee had not made any investment. The deposits were made and withdrawn by the travel agent, Shri Siraj Lakdawala, for the limited purpose of visa documentation. To substantiate this, the assessee furnished documentary trail including pay-in slips signed by the travel agent, copy of his PAN card, and bank records confirming the depositor’s signature. Copies of account opening forms, withdrawal vouchers, and related correspondence were also placed on record. It was emphasised that the account was not the assessee’s regular account but was opened jointly with the travel agent solely for temporary visa requirements. It was submitted that the entire sequence of transactions namely, deposit of cash by the travel agent in November-December 2009, withdrawal in May 2010, and closure of account in June 2010, clearly established that the funds never belonged to the assessee. The denial of ownership by the travel agent when examined, it was argued, was not sufficient to dislodge the objective documentary evidences showing his involvement.
3.2 The learned Authorised Representative further relied upon the judgment of the Hon’ble Supreme Court in CIT v. P.K. Noorjahan 382/237 ITR 570 (SC), for the proposition that rejection of explanation does not automatically justify addition under section 69/69A, as the provision is enabling and discretionary. Particular reliance was placed on the order of the Co-ordinate Bench in Ashwani Kumar v. ITO [IT Appeal No. 81(Asr.) of 2018, dated 24-12-2021]. In that case also, the assessee had opened and operated a bank account under the control of a travel agent for the purpose of obtaining a visa, wherein substantial cash deposits were made and withdrawn by the agent. The Assessing Officer made addition of unexplained cash deposits, and the CIT(A) upheld the same by rejecting the assessee’s affidavit and explanation. The Co-ordinate Bench, however, observed that such matters must be considered in the totality of facts, including the financial capacity of the assessee and the prevalent practices followed in connection with visa applications. It was held that the explanation supported by circumstantial evidence cannot be brushed aside merely on the ground that the travel agent did not admit ownership.
4. On the other hand, the learned Departmental Representative (DR) placed strong reliance on the orders of the lower authorities.
5. We have heard the rival submissions and perused the material placed on record. The facts are largely undisputed. The assessee, engaged in the business of running a taxi, filed his return of income declaring Rs.1,30,000/-. The reassessment was initiated on the basis of AIR information showing cash deposits of Rs. 13,01,000/- in a savings bank account. The Assessing Officer treated the said deposits as unexplained income under section 69A, and the CIT(A) confirmed the same.
5.1 At the outset, we note that though a ground relating to validity of reopening was raised in the appeal, during the course of hearing the learned Authorised Representative did not advance any specific arguments on this issue. The learned CIT(A) has, in his appellate order, dealt with the aspect of reopening in detail. In the absence of any specific submissions before us challenging the findings of the first appellate authority on this issue, we are not adjudicating upon Ground No. 1 relating to validity of reassessment.
5.2 Coming to the merits of the addition, the assessee’s consistent case has been that the impugned deposits did not represent his income but were arranged and deposited by a travel agent, Shri Siraj Lakdawala, for the limited purpose of demonstrating funds for visa processing of the assessee’s son and daughter-in-law. In support of this explanation, the assessee has placed on record cogent corroborative material, which includes:
i. Copies of pay-in slips evidencing the cash deposits, to which the PAN copy of Shri Siraj Lakdawala was attached.
ii. Bank statement showing that the account was a joint account, opened on 03.11.2009, in which the assessee’s wife was the first holder, the assessee was the second holder, and the travel agent was the third holder.
iii. The fact that immediately after the issuance of the visa, an amount of Rs. 13,07,341/- was withdrawn from the said account, through a cheque signed jointly by the assessee’s wife and Shri Siraj Lakdawala, thereby showing that the operation of the account and control over withdrawals was with the travel agent.
iv. Copy of the account closure letter dated 18.06.2010, also signed by Shri Siraj Lakdawala, evidencing that the account itself was opened for the limited purpose of visa processing and was closed once the objective was achieved.
5.3 The above evidences clearly establish the nexus of the travel agent with the impugned deposits and withdrawals and significantly dilute the Revenue’s case that the cash belonged to the assessee. It is not in dispute that the assessee had declared a small income of Rs.1,30,000/- only and had no demonstrated financial capacity to deposit Rs.13,01,000/-.
5.4 We find merit in the submission of the assessee that the denial by the travel agent, when examined on oath, cannot override the objective evidences emanating from contemporaneous bank documents which bear his signatures and PAN details.
5.5 In this context, reliance placed by the assessee on the decision of the Co-ordinate Bench in Ashwani Kumar (Supra) is apposite. In that case also, substantial cash deposits were made in the assessee’s bank account under the control of a travel agent for visa purposes. The Co-ordinate Bench held that such explanation, though unusual, cannot be brushed aside merely because the travel agent does not come forward to admit ownership. The Co-ordinate Bench emphasised that the totality of facts, the financial capacity of the assessee, and the prevailing practices in visa matters must be considered, and that the assessee’s explanation supported by circumstantial evidence should not be summarily rejected.
5.6 Applying the ratio of the aforesaid decision, the learned Authorised Representative submitted that the facts of the present case are on a stronger footing. Unlike in Ashwani Kumar where only an affidavit was filed, here the assessee has produced a complete documentary trail from the bank showing the depositor’s signature, PAN card of the travel agent, and transaction vouchers evidencing his direct role in the deposits and withdrawals. The Revenue has not brought any contrary material to show that the impugned cash deposits represented the assessee’s own unaccounted money. In such circumstances, the addition made by the AO and sustained by the CIT(A) cannot be upheld.
5.7 Accordingly, we delete the addition of Rs.13,01,000/- made under section 69A of the Act. The assessee thus succeeds on merits.
6. In the result, Ground No. 1 relating to reopening is not adjudicated, and Ground No. 2 is allowed. The appeal of the assessee is accordingly allowed on merits.