Mumbai entrepreneur paid ₹10 lakh in cash towards credit card bills, gets tax demand; here’s why she still won
A Mumbai-based woman entrepreneur who faced a tax addition of over ₹20 lakh, partly over cash payments towards her credit card bills, has won relief from the Income Tax Appellate Tribunal (ITAT).
The tax department had questioned cash deposits and expenditures linked to her business and treated the amounts as unexplained. This case concerns Rina Radha Madhab Jena, who runs a manpower consultancy and recruitment business.
Jena filed her return for AY 2023-24, in which she reported a total income of ₹11.78 lakh under the presumptive taxation scheme. Her declared turnover for that specific financial year was ₹52.01 lakh, of which she made a 6% profit. The businesswoman also earned income from rent and interest.
Why was Jena’s case subject to scrutiny?
The assessee’s business income tax return (ITR) was subsequently selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS), citing “large cash payments made for credit card purchases” as the reason.
During assessment, the assessing officer (AO) examined her cash deposits of ₹10.24 lakh and ₹10.15 lakh paid towards credit card bills. Jena told the tax department that ₹3.11 lakh of the deposits represented receipts from her own business, while the remaining ₹7.13 lakh came from a joint overdraft account held with her husband, who was the primary account holder.
She also submitted her credit card statements, explaining that the bills were paid using cash received from clients as part of her business activities.
However, the income tax officer was not convinced by her explanation. He consequently added ₹10.24 lakh to her taxable income under Section 69A of the Income-tax Act, labeling it as unexplained money. He also added ₹10.15 lakh under Section 69C as unexplained expenditure.
These additions took Jena’s total assessed income to ₹32.17, which was more than double of what she reported initially in her return. The CIT(A) confirmed both additions. Aggrieved by the decision, Jena approached ITAT Mumbai.
What did ITAT Mumbai say in its ruling?
In the order dated September 4, 2026, the Mumbai tribunal held that once business income is declared under the presumptive taxation scheme, the department cannot make separate additions merely because the taxpayer did not produce individual bills or vouchers for business-related cash transactions.
The ITAT also noted that the assessee had consistently offered her business income under the presumptive scheme and that the turnover was not disputed. The judgement was also based on previous cases of similar nature.
Referring to the business cash deposit, the tribunal held that “taxing the same amount independently under section 69A, without material demonstrating that it represents income from a source outside the disclosed business, would not be justified”. Additionally, the tribunal accepted that the amount that came from a joint overdraft account was indeed deposited by the husband and did not belong to the businesswoman.
On the credit card cash payments for credit card bills, the tribunal held that “a separate addition of the underlying business expenditure merely on the ground that individual supporting vouchers were not produced would run contrary to the scheme of presumptive taxation, in the absence of material demonstrating that the expenditure was incurred from an independent unexplained source”.
The tribunal deleted both additions and allowed the appeal, giving major relief to Jena in this case.
“The reliance placed by the Ld. AR on the judgment of the Hon’ble Punjab & Haryana High Court in Surinder Pal Anand, (supra) is relevant. The Hon’ble High Court observed, in the context of section 44AD, that where presumptive income is the basis for determining taxable business…the assessee is not required to explain each individual cash deposit unless the particular deposit has no nexus with the gross receipts,” the judgement read.
