₹20.45 lakh cash deposits, ₹12.64 lakh capital gains from property sale questioned by Income Tax Department; here’s why woman wins relief at ITAT Hyderabad

A woman from Telangana faced an income-tax dispute over Rs 20.45 lakh in cash deposits and Rs 12.64 lakh from a property sale. The ITAT Hyderabad partly ruled in her favour on September 9, 2026, by cancelling most of the income tax notices sent to her but asked the income tax officer to check out one remaining issue.

Here’s why the ITAT granted her relief on most of the disputed amount while keeping one part of the case open.

Why did the tax officer add Rs 20.45 lakh in cash deposits and Rs 12.64 lakh in capital gains?

The case relates to assessment year 2020-21, for which she had not filed an income-tax return (ITR).

Based on information available with the Income Tax Department, the Assessing Officer initiated reassessment proceedings and later noticed cash deposits of Rs 20.45 lakh and time deposits of Rs 34 lakh.

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According to CA (Dr.) Suresh Surana, on verification, the AO accepted the source of one fixed deposit of Rs. 17 lakh because it had come from another bank account of the assessee.

However, since the taxpayer could not satisfactorily explain the cash deposits during assessment, the AO treated the entire Rs 20.45 lakh as unexplained money under Section 69A. The AO also treated Rs 12.64 lakh, representing sale proceeds of an immovable property, as long-term capital gain in the assessee’s hands.

“The AO accordingly determined the Assessee’s total income at Rs 33.09 lakh by an assessment order dated December 30 2024,” says Bhupendra L. Kenia, Advocate, D. M. Harish & Co.

The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the Assessee’s appeal, following which she approached the Income Tax Appellate Tribunal (ITAT), Hyderabad Bench.

Why did ITAT delete the Rs 12.64 lakh capital-gains addition?

Before the ITAT, the taxpayer explained that the property whose sale proceeds of Rs 12.64 lakh had been taxed did not actually belong to her.

The property measuring 316 square yards belonged to her two daughters, who had acquired their respective portions through registered gift deeds. The assessee and other family members had merely joined the sale deed as confirming or facilitating parties to avoid future disputes and to give the purchaser a clear title, Surana pointed out.

After examining the registered documents, the ITAT found no evidence that Ammula owned any part of the property.

The Tribunal held that merely signing or joining a sale deed as a confirming party does not make a person the owner of the property or make the resulting capital gain taxable in that person’s hands.

Accordingly, the ITAT directed the AO to delete the entire addition of Rs 12.64 lakh made as long-term capital gain.

How did the woman explain Rs 16.95 lakh in cash deposits?

The tribunal then examined the separate addition of Rs 20.45 lakh relating to cash deposits in Ammula’s bank account.

She explained that Rs 16.95 lakh represented sale proceeds arising from family property transactions. She produced an agreement to sell, a receipt and a registered sale deed to support the source of the cash.

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According to Surana, the ITAT also noted that Rs. 11 lakh was deposited on the very date of execution of one of the registered sale deeds and another Rs 5.95 lakh was deposited a few days earlier.

The Tribunal considered this timing, along with the supporting documents, sufficient to establish a reasonable link between the property transactions and the cash deposits.

She also explained that she deposited the money in her account because she was the eldest family member and the funds were to be distributed among the legal heirs.

The ITAT accepted this explanation and directed deletion of the Rs 16.95 lakh addition.

Out of the remaining deposits, the assessee claimed that Rs 1.40 lakh came from accumulated family savings. She pointed out that her husband was a retired government employee drawing a pension of Rs 37,000 per month and had retirement savings, explains Surana.

Considering the family’s financial background, the ITAT accepted the explanation to the extent of Rs 1 lakh and directed deletion of that amount.

Why was the Rs 1.90 lakh chit-fund claim sent back for verification?

The taxpayer attributed the remaining Rs 1.90 lakh to money received from a chit fund after adjusting an instalment amount.

According to Surana, she produced a photocopy of the chit book, but the Tribunal found that the available evidence was not sufficient to finally accept or reject the claim.

Instead of confirming the addition, the ITAT sent this issue back to the AO for fresh verification and directed that the assessee should be allowed to produce additional supporting evidence.

How much tax relief did the woman get?

The assessee received substantial relief. The ITAT deleted the Rs. 12.64 lakh capital-gains addition, deleted Rs 16.95 lakh of cash deposits supported by property-sale documents, allowed relief of Rs 1 lakh out of the amount claimed from accumulated savings, and sent the Rs 1.90 lakh chit-fund claim back to the AO for verification. The appeal was therefore partly allowed.

What can taxpayers learn from this ITAT ruling?

The key takeaway is that taxpayers should maintain proper, contemporaneous documentary evidence to establish the source of cash deposits in their bank accounts and the ownership of any property sold. Cash transactions, in particular, may be difficult to explain several years later if supporting records have not been preserved, explains Kenia.

In the case of property transactions, taxpayers should retain registered sale deeds, gift deeds and other title documents establishing ownership, together with agreements to sell, receipts acknowledging consideration, and records showing the receipt and subsequent deposit of the sale proceeds.

According to Kenia, in cases where money is deposited in one family member’s bank account on behalf of other family members, the circumstances and intended distribution of the funds should be properly documented.

For cash deposits claimed to represent accumulated savings, relevant records of income, pension, retirement benefits and household finances may help substantiate the explanation.

Similarly, where the source is a chit transaction, the taxpayer should maintain the chit agreement or membership records, payment receipts, the account or passbook recording instalments, and proof of the amount received on maturity or lifting of the chit.

Taxpayers should therefore minimise avoidable cash transactions and ensure that all significant receipts, deposits and property transactions are properly documented. Maintaining clear records can help establish the source of funds and ownership rights and reduce the risk of additions being made during assessment proceedings.