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When Mr Mehta from Shivaji Park, Mumbai, Maharashtra filed his income tax return (ITR), showing an income of Rs 6.3 lakh after paying off his credit card bill of Rs 27.65 lakh, which included a cash payment of Rs 13.95 lakh, the Income Tax Department issued him a notice for unexplained cash.
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To explain this cash, Mehta filed a court affidavit saying that his family members out of their love and affection towards him, gave him Rs 15.5 lakh cash, of which he used Rs 13.95 lakh to pay the credit card bill:
- Wife: Rs 3 lakh
- Father: Rs 8 lakh
- Mother: Rs 4.5 lakh
The Income Tax officer however, was not satisfied with this explanation and asked Mehta to give verifiable evidence to substantiate his claim and also told him that an affidavit is not a conclusive proof of source of funds as the onus is on him to prove that his parents actually earned this much money.
The assessing officer ultimately did not accept the explanation given by him and the cash payment of Rs 13,95,020 was treated as unexplained money under Section 69A. Unhappy with the additions in the assessment order, Mehta filed an appeal before the Commissioner of Income Tax (Appeals) or CIT(A), where he made a similar submission.
The CIT(A) after hearing his arguments and reviewing the evidence, upheld the action of the assessing officer and took the view that Mehta’s explanation regarding getting cash from his family members is difficult to believe as none of the three family members have filed any ITR and there is no proof that any of them owned any business.
Further aggrieved, Mehta appealed to the Income Tax Appellate Tribunal (ITAT) Mumbai. Advocate Kinjal Bhuta represented him in ITAT Mumbai.
Regarding the Rs 3 lakh cash which he claims his wife gave, the tax officer alleged that this cash has come from his own account. However, when ITAT Mumbai analysed her bank statement, they saw that the wife had rendered professional services and for this, many entities had paid her. Thus her explanation for this cash was found to be explained and accordingly deleted.
Ultimately, ITAT Mumbai gave him partial relief by deleting Rs 4 lakh, Rs 2.25 lakh and Rs 3 lakh as unexplained cash, but treated Rs 4.7 lakh as unexplained cash.
Mihir Tanna, associate director, S.K Patodia LLP, said to ET Wealth Online: “Whether it’s a loan or gift or investment in an unlisted company, source of money and creditworthiness of the payer is important. Explanation about entries in bank statements around payment transactions – shows source of money and income shown in ITR along with financials (if prepared) shows creditworthiness/capacity to pay said amount.”
ITAT Mumbai order and discussion
Before ITAT Mumbai, Advocate Kinjal Bhuta representing Mehta argued that the nature of source of the cash is not unexplained as he had told the tax officer right from the beginning that the cash was given to him by his father, mother and wife.
Ms. Bhuta told ITAT Mumbai that Mehta’s father was in the agarbatti business and his mother earned money by giving tuitions and also sold homemade eatable items and his wife was in the consultancy business.
To substantiate the cash receipt from father, Mehta had furnished an affidavit, ITR and bank statement. Similarly, for his mother, he furnished affidavit confirmation ITR and bank statement. A similar document from his wife was also furnished.
Bhuta told ITAT Mumbai that Mehta’s father was earlier in the transport business but due to heavy business loss, he had discontinued the business.
Judicial Member Pawan Singh heard this case in ITAT Mumbai on January 21, 2026 and passed this judgement on April 6, 2026.
ITAT Mumbai said that they have gone through the documentary evidence filed by Mehta, namely the affidavits, the copy of confirmation of gift, income tax return with profit and loss account of mother, father and wife and bank statement of all the three family members of the assessee.
On looking at his father’s ITR, ITAT Mumbai found that in AY 2023-24, he had shown Rs 4.83 lakh income but in the affidavit, he showed that he provided Rs 8 lakh cash to his son (Mehta). On further analysis of his income pattern during F.Y. 2021-22 and 2022-23, ITAT Mumbai saw that it was Rs 2.94 lakh and Rs 4.83 lakh.
Similarly, for his mother, her affidavit stated that she earned Rs 2.47 lakh in FY 2020-21 and Rs 3.18 lakh in FY 2022-23 from sale of small edible items to home makers and women in the community.
His wife’s affidavit showed that she earned Rs 5.18 lakh in FY 2021-22 and Rs 4.55 lakh in FY 2022-23 from commissions and professional income.
ITAT Mumbai further analysed his wife’s bank statement and saw that there is regular inflow of money from various other entities. Moreover, in her ITR, she showed professional income under Section 44ADA. Thus her Rs 3 lakh cash gift explanation was accepted by ITAT Mumbai.
Regarding his mother, ITAT Mumbai said that she showed Rs 4.5 lakh as cash gift to her son (Mehta) and her bank statement also showed that she is regularly getting some credit in her bank account by way of UPI credit.
Thus ITAT Mumbai said that his mother’s bank account shows regular credit and some credit from Mehta and there is nothing unusual about it. Therefore, the entire cash gift cannot be treated as unexplained. ITAT Mumbai accepted 50% of the gift as reasonable and treated the other 50% as unexplained.
About his father’s Rs 8 lakh cash gift, ITAT Mumbai said that he maintains a separate bank account in Dadar and the bank statement shows regular debit and credit entries. ITAT Mumbai said that it can be safely concluded that his father is also engaged in some systematic business activities. Thus, a 50% cash gift from father is also acceptable.
Order: In the result, out of total addition, Rs 4,00,000 + Rs 2,25,000 and Rs 3,00,000 are deleted and the remaining of Rs 4,70,000 is confirmed. Thus, the ground of appeal raised by the assessee is partly allowed. In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 06/04/2026
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