ITAT Sets Aside Section 69A Unexplained Money Addition on Gifts Received from Parents, Accepts Cash Withdrawal and Gift Trail:

The Income Tax Appellate Tribunal (ITAT), Jaipur, has set aside a Section 69A Unexplained Money addition of Rs 31.40 lakh after noting that the source of cash deposits was supported by bank records reflecting gifts received from the assessee's parents, cash withdrawals, and thereafter immediate deposits into a post office savings account.

In the present case, the Assessing Officer (AO) had noted that during the Assessment Year 2022-23, the assessee had made cash deposits amounting to Rs 31.40 lakh in one or more accounts (other than current account and time deposits); however, he failed to explain the source of the same. Consequently, the AO treated the entire cash deposit as unexplained and made an addition of the same to the assessee's income under Section 69A r.w.s. 115 BBE of the Income Tax Act.

The assessee, being aggrieved by the AO's decision, challenged the same before the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income Tax (Appeals) [CIT(A)]. However, the impugned order was sustained vide an order dated October 13, 2025, passed under Section 250 of the Income Tax Act, 1961, on the assessee's failure to explain the source of credit.

However, the assessee explained that the cash deposit of Rs 31.40 lakh was made into his post office account, and the same was received from his father and mother, which was subsequently withdrawn in cash and deposited in a post office account, opened jointly with his wife, Vandana Garg. The assessee explained the deposits in question were primarily sourced from gifts received from his parents.

He further explained that the proceeds were generated from the closure of four term deposits totalling about Rs 9.03 lakh, out of which Rs 4.50 lakh was withdrawn in cash and was deposited in a post office account. Furthermore, the past cash savings of Rs 30,000 were used to make a deposit of Rs 31.40 lakh in the post office as per the chart enclosed herewith.

The assessee explained that "for the purpose of depositing cash of Rs. 31,40,000/- in the post office account in joint name of appellant Sunil Kumar Garg and his wife Vandana Garg, assessee withdrew cash amounts of Rs. 90,000; Rs. 4,60,000/-; Rs. 4,50,000/-; Rs. 2,65,000/-; Rs. 3,20,000/-; Rs. 5,00,000/-; Rs. 10,000/- and Rs. 1,50,000/- on 15/04/2021; 15/04/2021; 10/05/2021; 14/07/2021; 14/10/2021; 21/02/2022; 21/02/2022 and 03/03/2022 respectively. All these entries are reflected in assessee's bank account no. 44740100004248 with Baroda Rajasthan Kshetriya Gramin Bank, Bharatpur, Village and Post Behnera."

It was further explained that "copy of Post Office saving bank account no. 010001471068 in the joint name of Sunil Kumar and Vandana with post office at village and post Behnera, Bharatpur showing total cash deposit of Rs. 31,40,000/-(Rs. 5,50,000/- plus Rs. 4,50,000 plus Rs. 5,20,000 plus Rs. 3,75,000/- plus 2,65,000/- plus 3,20,000/- plus Rs. 5,10,000/-plus Rs. 1,50,000/-) is enclosed herewith."

The assessee subsequently approached the Income Tax Appellate Tribunal (ITAT), Jaipur. The tribunal observed that the assessee had produced evidence showing the complete trail of the funds received from his parents, the subsequent cash withdrawals and the deposits into the post office account. The Revenue had not disputed these transactions or established that the withdrawn cash was used elsewhere.

The Jaipur Bench held that the explanation could not be rejected merely because the method of withdrawing cash and depositing it in another account appeared unreasonable. Since the assessee had demonstrated the source and movement of the cash through supporting documents, the Tribunal found no basis for treating the amount as unexplained.

Accordingly, the ITAT set aside the CIT(A)’s order and deleted the addition of Rs. 31.40 lakh. The appeal filed by Sunil Kumar Garg was allowed.