Deposited over ₹50 lakh cash in bank account, no ITR filed: Here’s why ITAT ruled in taxpayer’s favour

A huge amount of cash deposited in a bank account can attract scrutiny from the Income Tax Department, particularly when the taxpayer has not filed an income tax return (ITR) to explain the source of income.

But a recent Income Tax Appellate Tribunal (ITAT) Delhi ruling shows that a large cash deposit cannot automatically be treated as taxable income if the taxpayer can establish that the money actually belonged to someone else.

According to a report by The Economic Times, a Rohtak-based property dealer, Rathee, faced a tax demand after depositing ₹54 lakh in cash into his bank account. The Income Tax Department treated the amount as unexplained income after he failed to file his ITR and did not respond to multiple notices.

However, the ITAT Delhi deleted the ₹54 lakh addition after examining documents showing that Rathee was merely acting as an intermediary in property transactions.

Why did the tax department add ₹54 lakh to his income?

According to the Economic Times report, the case relates to financial year 2011-12 (assessment year 2012-13). The Income Tax Department received information about Rathee’s cash deposits through AIR/CBI.

A verification letter was sent to him on 13 February 2019, but he did not respond. He subsequently received a notice under Section 148 on 28 March 2019, followed by notices under Section 142(1) with questionnaires on 3 May, 2 July and 29 July 2019.

Rathee did not respond to these notices either. The Assessing Officer (AO) consequently treated the ₹54 lakh cash deposit as unexplained income and added it to his taxable income through an order dated 16 December 2019.

Rathee challenged the order before the Commissioner of Income Tax (Appeals), but his appeal was dismissed in March 2026. He then approached the ITAT Delhi.

What was Rathee’s explanation?

As reported by The Economic Times, chartered accountant Naveen Kumar Goyal, who represented Rathee before the tribunal, said, “He is a property dealer who works as an intermediary for Mr Singh and his family members.”

According to the explanation, prospective property buyers gave cash to Rathee. He deposited that money into his bank account and subsequently transferred it to the sellers to facilitate registration of property sale deeds.

To establish this, Rathee submitted bank statements, three affidavits from sellers, eight sale deeds executed by Singh and his family, and seven affidavits from buyers confirming that they had handed over the cash to Rathee for transferring it to the sellers.

Why did the ITAT delete the tax addition?

After examining the evidence, the ITAT accepted that Rathee was acting as a conduit rather than earning the ₹54 lakh himself, as per the report.

The tribunal observed that the cash received from buyers was deposited into Rathee’s account and subsequently transferred to the property sellers, with the transactions supported by affidavits and sale deeds.

Therefore, it set aside the AO’s order and the subsequent CIT(A) order and deleted the ₹54 lakh addition.

Advocate Shourya Garg of Garg & Garg Tax Associates told ET Wealth Online, “Since the money was shown to be a pass-through and not Rathee’s own unexplained income, the addition of ₹54 lakh could not be sustained.”

What taxpayers need to know?

Cash deposits of ₹50 lakh in one or more current accounts by a person during a financial year are reportable by banks under the Statement of Financial Transactions (SFT). For accounts other than current accounts and time deposits, the reporting threshold is ₹10 lakh or more in aggregate during a financial year.

This means the Income Tax Department directly receives this information, and the taxpayer may need to explain the source of the deposits.

Mint has not been able to independently verify the authenticity of the report.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.