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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of National Faceless Appeal Centre/Ld. Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 12.11.2025 arising out of assessment order dated 25.12.2018 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2016-17. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.ITO has made addition amounting to Rs. 57,71,600/- on the grounds that the source of increase in cash (from Rs. 10,48,519/- to 68,20,119/-) is unknown but we have submitted cash books explaining all the credits in cash book are withdrawals from Bank account, along with cash book we have submitted bank statement with narration explaining from where credits are received in bank during the Assessment Year 2016-17.
2.ITO has made addition Rs. 10,48,519/- on the grounds that opening cash in hand is unexplained but we have submitted Balance Sheet for the period ended 31.03.2015 which shows Cash in hand of Rs. 10,48,519/-on 14.12.2018 in reply to notice dated 13.12.2018.
3.The order passed was further not correct as the Assessing office has not looked in to or taken in to consideration properly, the information provided, documents produced filed and placed upon records in support for opening & closing Cash in Hand.
4.That the appellate assign his right to amend, alter, change any ground of appeal or take any further ground at any time even during the course of hearing of this instant appeal.
Redrafted grounds of appeal:-
1.That on the facts and in the circumstances of the case, and in law, the Ld AO has erred in adding the opening cash balance of Rs 10,48,519 on 01.04.2015 to income on the erroneous allegations made and conclusions reached that the amount is unexplained. Addition made to income is without basis and on surmise and conjecture, and is required to be deleted.
2.That the cash balance of Rs 10,48,519 on 01.04.2015 being net of cash transactions carried out by the assessee during the period 01.04.2014 to 31.03.2015, relates to AY 2015-16 and cannot be added to income in AY 2016-17.
3.That on the facts and in the circumstances of the case, and in law, the Ld AO has erred in adding Rs. 57,71,600 to income on the erroneous allegations made and conclusions reached that increase in cash balance from Rs. 10,48,519 on 01.04.2015 to Rs. 68,20,119 on 31.03.2016 (correct figure of closing cash balance on 31.3.2016 is Rs 28,20, 119) is unexplained. Addition made to income is without basis and on surmise and conjecture, and is required to be deleted.
The only issue contested by the appellant is regarding the addition of Rs.57,71,600/- made by the ld. AO and which have been confirmed by the ld. CIT(A). The ld. Counsel for the assessee took us through the brief factual matrix of the case. Return declaring income of Rs.7,01,130/- was filed by the assessee on 19.07.2016. The case was selected for scrutiny under the limited scrutiny category so as to examine and verify the cash in hand shown in the return. The ld. AO noted that the opening cash in hand with the assessee in all its bank accounts was Rs.19,124/-The ld. AO noted, from perusal of cash book, that the cash in hand had increased from Rs.10,48,519/- to Rs.68,20,119/-, which included an amount of Rs.40 lakhs given to Shri Yogesh Satija and Shri Neetin Nagpal. The ld. AO proceeded to verify the sources of the impugned cash in hand of Rs.57,71,600/- (i.e. Rs.68,20,119 – Rs.10,48,519/-). The ld. AO has recorded following in para-4 and 5 of the order:-
“..4. As is evident from assessee had Rs. 19,124l- as opening balance in all of his banks as per the details given by the assessee. Further assessee has shown gross income of Rs. 8,86,129/- in his ITR. As per the detail filed and that available in recored, Cash in hand has increased from Rs.10,48,519/- (rounded off) (as per the cash book filed during the proceeding) to Rs. 68,20,119/- (including Rs. 40,00,000/-claimed to have been given to Yogesh Satija and Nitin Nagpal). Therefore, there is inflow of Rs. 57,71,600/- (Rs. 68,20,119/- - Rs. 10,48,519/-) source of which remain unexplained. Assessee was specifically asked vide notice dated 07/12/2018 to explain the source of increase in Cash in Hand, however assessee did not give the detail of source of increase in cash in hand. Show cause notice was issued on 13/12/2018 to explain as to why the same should not be added to the total of income. Again assessee filed only copy of the bank statement and no source of cash inflow was given except mentioning that the same has been withdrawn from the bank but the ultimate source, from which the cash has originated, has not been explained.
5.As is evident from above, assessee has shown income to the extent of Rs. 8,86, 129/- whereas the cash in hand has increased by Rs. 57,71,600/-. Therefore, income declared by the assessee for the year is not commensurate with the increase in cash in hand. In view of the above, it is concluded that the assessee has failed to explain the source of increase in Cash in Hand despite being given multiple opportunities. Therefore, increase of cash of Rs. 57,71,600/- remain unexplained and same is added to the income of the assessee. From the above discussion it is clear that, assessee has concealed particulars of his income and hence, penalty proceeding u/s 271(1)(c) of the IT Act is also initiated separately for concealing the particular of income as stated above…”
A perusal of the above alludes that the assessee did not comply with the statutory notices of the assessee and did not make any effort to satisfy the ld. AO with the sources of the cash. Incidentally the case was selected by the Revenue for scrutiny to verify the cash.
Before the ld. First Appellate Authority also, the assessee once again did not put-forth any demonstrative evidence to allude that the cash in books was sourced through genuine sources. The observations of the ld. CIT(A) on page-11 and 12 of his order are as under:-
“…6.1.4 On perusal of assessment order, I find that the appellant could not explain the source of increase in cash in hand of Rs. 57,71,600/- during the year.
Moreover, during the course of appellate proceeding also, the appellant only stated the his cash in hand was increased out of cash withdrawal from his bank account and he furnished copy of his cash book and bank account.
In this regard, it is pertinent to mention here that while the appellant provided bank statements to show that the cash was withdrawn from bank accounts, this explanation is incomplete. The AO was justified in seeking an explanation for the ultimate source of the amount credited in the bank accounts from which the withdrawals were made. Simply explaining that cash was withdrawn from a bank account is not considered a satisfactory explanation if the origin of the funds deposited in the bank remains unexplained.
In this case, the AO found the explanation unsatisfactory because the appellant did not provide the ultimate source from which the cash originated, despite having a significant increase in cash in hand that far exceeded his declared gross income. The AO was within his power to make an addition to the taxable income based on this failure to provide a complete and satisfactory explanation.
In this case, the significant increase in cash in hand compared to the declared income provides the basis for the inquiry by the AO and it was the duty of the appellant to explain the source of the same, which was not duly discharged by the appellant.
According to Income Tax Act, the burden of proof is on the appellant to provide a satisfactory explanation for any large or unexplained cash in hand.
While the appellant explained that the cash was withdrawn from a bank account, this is not considered a complete or satisfactory explanation.
The opening balance in bank accounts of the appellant was Rs.19,124/- which was ultimately withdrawn to increase cash balance, was onus of the appellant to prove the same.
The appellant's failure to explain the ultimate origin of the funds that were credited in the bank, from which the cash was later withdrawn, made the explanation unsatisfactory in the eyes of the law.
The substantial increase in cash in hand (Rs. 57,71,600) was disproportionate to the declared gross income of Rs. 8,86,129/-, further strengthening the AO's position that the amount represented unaccounted
6.1.5In favour of his contention, the appellant has relied upon various case laws, which has been mentioned in Para 5. In this regard, it is to mention that facts and circumstances of peculiar case of the appellant are completely different from those discussed in judicial pronouncements relied upon by him, therefore, the ratio laid down in those decision can't apply in peculiar case of the appellant.
In view of the above discussion, I am of the considered view that the addition of Rs. 57,71,600/- made by the AO on account of unexplained increase in cash in hand during the year is correct. Therefore, the said addition made by the AO is upheld and the ground of appeal is dismissed…”
The ld. Counsel for the assessee reiterated the argument taken before lower authorities. The appellant has filed a paper book containing extracts of bank account maintained with ICICI Bank, HDFC Bank and Kotak Mahindra Bank. The Ld. Counsel for the assessee has argued that all these details allude that the cash was from genuine sources.
The ld. DR, Shri R.K. Choudhary, vehemently argued that the assessee has not led either the ld. AO or the ld. CIT(A) with any evidence so as to indicate the genuineness of the source of cash. The assessee is merely trying to link the cash in hand with the bank statements but the same does not justifies the source of cash. No information has been given so as to suggest how and from where the impugned cash was generated.
We have heard rival submission in the light of material placed on record. It is undisputed facts on record that the case was selected for limited scrutiny by the respondent revenue to examine the justification of cash in hand in books more so in the light of lowly Return of Income. It is further an apparent fact on records, emanating from the perusal of the orders of the lower authorities that the assessee, though given sufficient opportunity to file, did not comply with the requirement to file details of sources of cash in hand appearing in its books of accounts. The assessee has before the lower authorities as well as before us filed extracts of its bank statements to justify the query of sources of cash. The assessee has however failed to understand that mere bank statements do not satisfy about the sources of a cash deposit. The only foregoing conclusion is that therefore the assessee has failed to respond to discharge the primary onus placed upon it to satisfy the queries of the respondent revenue qua sources of cash in hand appearing in assessee’s books of accounts. Under the circumstances, the assessee cannot plead any legitimate grant of relief. Accordingly, in view of the utter failure of assessee to discharge the primary onus placed upon it to satisfy the queries of the respondent revenue qua sources of cash in hand appearing in assessee’s books of accounts, we are of the considered view that the addition made by the ld. AO of Rs.57,71,600/- and its confirmation by the ld. CIT(A) is based upon correct understanding an interpretation of the facts of the case. We are therefore of the considered view that no case of any intervention to the order of the ld. CIT(A) is made out at this stage. We, therefore, confirm the order of the Ld. CIT(A) and dismiss all the grounds raised by the assessee.
In the result, the appeal filed by the assessee is dismissed.