Kavita vs ITO, Ward-1(3), Muzaffarnagar

The appeal in ITA No.4477/Del/2026 for AY 2009-10, arises out of the order of the Id. Jt. Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as 'Id. JCIT(A)', in short] dated 27.02.2026 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 30.08.2018 by the Assessing Officer, ITO, Ward-1(3), Muzaffarnagar (hereinafter referred to as 'Id. AO').

The only effective issue to be decided in this appeal is as to whether the Id NFAC was justified in confirming the addition made in the sum of Rs. 5,47,165 on account of cash deposits in the bank account in the facts and circumstances of the instant case.

I have heard the rival submissions and perused the materials on the record. The assessee had filed her return of income u/s 139(1) of the Act declaring total income of Rs. 1,44,000 being business income from in-house boutique and Rs. 6,120 on account of interest on Savings Bank Account. During the year under consideration, the assessee made total cash deposits in her bank account to the tune of Rs. 25,38,900. The assessee explained that the deposits were made out of cash withdrawals made from the bank account in earlier year as well as during the year in addition to receipt of Rs. 3 lakhs from sale of eucalyptus trees. The ld AO in the original scrutiny assessment proceedings gave credit for the assessee only in respect of cash withdrawals made from the bank account during the year to the tune of Rs. 16,91,735 and made an addition for the remaining cash deposit of Rs. 8,47,165 and completed the assessment u/s 143(3) of the Act dated 20.03.2015. This addition was confirmed by the ld CIT(A). The matter travelled in the first round to this Tribunal and this Tribunal remanded the matter back to the file ld AO for de novo adjudication. In the remand proceedings (i.e. second round) the ld AO further gave credit of Rs. 3 lakhs on account of cash generated from sale of trees and confirmed the remaining addition of Rs. 5,47,165/-. This addition was confirmed by the ld CIT(A) in the second round.

At the outset, the assessee had furnished the entire cash summary comprising of withdrawals and deposits for both the FYs 2007-08 and 2008-09. This is enclosed in pages 19 to 20 of the Paper Book. From the perusal of the said cash summary, it is noted that the assessee had made cash withdrawals and had closing cash balance of Rs. 6,40,000/- as on 31.03.2008. The said balance together with cash withdrawals made during the FY 2008-09 was considered as a source to meet the cash deposits made in the bank account. It is a fact that the assessee is owing 41 bigas of agricultural land and running a boutique but the cash statement enclosed in pages 19 to 20 of the Paper Book does not take care of the monthly drawings to meet house hold expenses which would in turn reduce the available cash balance in hand. Hence, an adhoc and reasonable estimate of Rs. 2 lakhs per annum is being made on that account in this order for the year under consideration, which in my considered opinion, would meet the ends of justice. Hence, as against the addition made in the sum of Rs. 5,47,165/-, a sum of Rs. 2 lakhs is being sustained and remaining Rs. 3,47,165/- is hereby deleted. Accordingly, grounds raised by the assessee are party allowed.

In the result, the appeal of the assessee is partly allowed.