Shop owner deposits Rs 2.47 crore cash in bank account, gets income tax notice
When Mr Rakesh Kumar from Rohini, Delhi, who owns a thriving retail business of pharmaceuticals and medicines, deposited Rs 2.47 crore cash in his own bank accounts, he had no idea that it would trigger a tax notice for unexplained cash from the income tax department. Kumar deposited the cash in his three savings bank accounts at Oriental Bank of Commerce.
Kumar tried his best to make the Income Tax Department understand that the cash deposits were from sales at his pharmaceutical shop, and were duly accounted for in his books. He also submitted the audited balance sheet, VAT (value-added tax) returns, and sample sales invoices.
However, the Income Tax Assessing Officer (AO) rejected Kumar’s explanation, observing that the expenses shown in the profit and loss account were not reflected as corresponding bank debits and that salary and bonus had allegedly not been paid regularly. The Commissioner of Appeals (CIT A) confirmed the AO’s action and rejected Kumar’s explanation; thus, Kumar filed an appeal before the Income Tax Appellate Tribunal (ITAT) Delhi.
After a long legal fight, Kumar finally won the case in the ITAT Delhi on July 7, 2026. Chartered Accountant Naman Singla had represented him before the ITAT Delhi. Case no.: 2746/Del/2026.
How did Kumar win the case?
Chartered Accountant Ashish Niraj, Partner, A S N & Company, said to ET Wealth Online that at the time of scrutiny of demonetisation period cash transactions , income tax officials were watching each cash transaction with suspicious view and onus was on taxpayer to establish its genuity.
Niraj says that in Kumar’s casehe had furnished complete bank statements, VAT returns and complete financials with required supporting documents. However, all of these evidence were not rejected by AO and CIT (A) so ITAT Delhi accepted the books of accounts and evidences submitted by Kumar.
Niraj says that the ITAT Delhi tax tribunal was satisfied with documents furnished by Kumar and believed that he is able to prove cash withdrawals, personal savings and personals savings of family members deposited, hence appeal was allowed.Niraj says: “This judgement gives learning that even if you have done cash transactions in crores, if supporting documents are properly kept, negative assessment can be challenged and won.”
ITAT Delhi discussion
Income Tax Dept could not counter the evidence
The ITAT Delhi tax tribunal observed that Kumar has submitted his financial statement, balance sheet, profit & loss account statement, bank statements, and VAT returns, as well as his sample bills, to prove that the cash sales are out of the stock and this is the same cash deposited by him in his bank account.
The ITAT Delhi observed that neither the AO nor the CIT (A) could find any defect in the evidence and documents submitted by Kumar, and neither of the authorities has rejected his books of accounts under Section 145.
Thus, the ITAT Delhi ruled that the cash deposited by Kumar is directly co-relatable to the cash sales made during the demonetisation period, as he is engaged in the retail business of pharmaceuticals and medicines.
Cash withdrawal also stands explained
The ITAT Delhi observed that the cash withdrawals made from Kumar’s bank account stood as explained, as these withdrawals were made from his family savings, and Kumar proved them via his account statement also.
The ITAT Delhi observed that the family members had savings of Rs 72 lakh and Kumar himself had saved Rs 2.46 lakh, and these facts are proved via Kumar’s statement as well as documents submitted by his family members. For example: Kumar’s brother’s wife had saved Rs 15 lakh, and that is reflected in her submitted ITR copy.
| Relationship | Cash gift |
| Kumar’s brother’s wife | Rs 15 lakh |
| Kumar’s wife | Rs 16 lakh |
| Kumar’s brother | Rs 14 lakh |
| Kumar’s son | Rs 13 lakh |
| Kumar’s daughter | Rs 14 lakh |
Source: ITAT Delhi submissions
ITAT Delhi observed that the CIT (A) simply brushed aside and rejected Kumar’s explanation without any cogent reason.
ITAT Delhi order
The ITAT Delhi said that Kumar has proved the cash withdrawals, his personal savings, and the personal savings of his family members with the help of the bank account statements. The ITAT Delhi also said that the AO, in his remand report, has not negated any of these documents, and evidence is unaccounted for. Even CIT (A) could not negate the evidence filed by Kumar.
The ITAT Delhi ruled: “We noted that the explanation submitted by the assessee (Kumar) along with evidence regarding the availability of cash is enough to prove the assessee’s claim, and we find no infirmity in the same.” Thus, Kumar won the case.
