If crores of rupees pass through your bank account, does the taxman get to treat all of it as your income? Not automatically, according to a recent ruling by the Income Tax Appellate Tribunal.
The tribunal's Agra bench has struck down a tax addition of Rs 3.69 crore made against Pooja Agarwal, a resident of Firozabad in Uttar Pradesh. Her bank accounts had been used to move payments between bangle buyers in different parts of India and suppliers in the town. The tax department, the tribunal said, could not count the full amount as her unexplained income without first proving the money was actually hers, according to a report.
The case goes back to assessment year 2018-19. Agarwal had declared a total income of Rs 3.20 lakh and a turnover of Rs 4.98 lakh in her return. During scrutiny, however, the assessing officer found that Rs 3.69 crore had been deposited across her two bank accounts, Mint reported.
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Agarwal said she ran a commission-based business. Buyers from other cities deposited cash into her accounts, and she withdrew it to pay traders in Firozabad. For this, she charged Rs 500 on every Rs 1 lakh, and had shown commission income of Rs 1.85 lakh under the presumptive taxation scheme of Section 44AD.
The tax officer did not accept this. He questioned why buyers across the country would route cash through her instead of paying the traders directly, and pointed out that she had not given complete details of the parties, such as names and addresses. With no proper documents to verify who the parties were or whether the deals were genuine, the entire Rs 3.69 crore was added to her income as unexplained money under Section 69A. The Commissioner of Income Tax (Appeals) agreed, after which Agarwal went to the tribunal.
Why The Tribunal Disagreed
The bank statements told a different story. Deposits totalled Rs 3,69,92,943, while cash withdrawals from the same accounts were even higher, at Rs 3,73,69,422. The tribunal also noted that in the previous year's assessment, for 2017-18, the tax officer himself had accepted that she earned commission income.
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The department, it said, had offered no proof that Agarwal ran any separate business capable of generating such large undisclosed earnings. Given the pattern of transactions and the earlier assessment, her explanation could not simply be dismissed. The size of the deposits alone was not enough to treat them as her income.
In its order dated November 4, in Pooja Agarwal vs Income Tax Officer (ITA No. 309/Agr/2026), the tribunal deleted the full addition and ruled in her favour.
What It Means For Taxpayers
Section 69A of the Income Tax Act, 1961 lets tax officers treat money, bullion, jewellery or other valuables as unexplained income if the taxpayer owns them but cannot explain where they came from.
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The ruling makes clear that big deposits do not, by themselves, prove the money belongs to the account holder. Who owns the money, how the transactions work and what evidence exists all have to be looked at.
It is not a loophole, though. Simply claiming the money belonged to someone else will not be enough. Proper evidence, and the facts of each case, still decide the outcome.
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