ITAT Raipur Strikes Down Section 69A Addition: Cash Deposits in Joint Bank Account Cannot Be Taxed in Wife's Assessment When Husband Declares Ownership and Provides Source Evidence

Introduction

The Income Tax Appellate Tribunal, Raipur Bench, delivered a significant ruling in the matter of Trupti Shukla vs ITO for Assessment Year 2017-18, addressing a fundamental question of tax jurisprudence: can cash deposits in a jointly held bank account be assessed as unexplained money in the hands of one joint holder when the other joint holder has categorically accepted ownership and furnished supporting evidence? The Tribunal ruled decisively in favor of the assessee, striking down an addition of Rs. 52.24 lakh made under Section 69A read with Section 115BBE of the Income Tax Act, 1961.

The case highlights critical principles governing the taxation of joint accounts, the evidentiary value of uncontroverted declarations, and the limitations on the application of deeming provisions contained in fiscal statutes.

Factual Matrix of the Case

Background of the Assessee

The appellant in this matter was employed as a school teacher and supplemented her salary with modest tuition income. She did not engage in any substantial commercial venture or business operation. During the Financial Year 2016-17, cash aggregating approximately Rs. 52.24 lakh was deposited across various banking accounts, primarily in joint accounts maintained with her spouse.

Nature of Cash Deposits

Of the total deposits:

  • Rs. 32.89 lakh represented non-demonetization period deposits
  • Rs. 19.35 lakh were deposits made during the demonetization period

These accounts were held jointly in the names of the assessee and her husband, who himself was an independent taxpayer with separate assessment records.

Assessee's Explanation and Documentation

Throughout the assessment proceedings, the assessee maintained a consistent position that the cash deposits were made by her spouse from his own resources. She submitted comprehensive documentation including:

  1. A written declaration executed by her husband accepting full ownership of the deposited funds
  2. Copies of her husband's income tax returns for relevant assessment years
  3. Bank account statements demonstrating his financial transactions
  4. Letters explaining that the source comprised business receipts and accumulated savings from previous years

The assessee contended that the joint account arrangement was purely for convenience in managing household finances, a common practice among married couples.

Assessment Proceedings Timeline

Original Assessment under Section 143(3) dated 16.12.2019:
The case was initially selected for limited scrutiny on the ground of "cash deposits during the year." The Assessing Officer noted total cash deposits of Rs. 52.24 lakh but added only Rs. 19.35 lakh under Section 69A, restricting the addition to demonetization period deposits. The balance amount of Rs. 32.89 lakh (non-demonetization deposits) was not examined.

Revisionary Order under Section 263 dated 16.03.2023:
The Principal Commissioner of Income Tax exercised revisionary jurisdiction under Section 263 of the Act, holding that the original assessment order was erroneous and prejudicial to Revenue interest. The PCIT observed that despite the limited scrutiny notice covering cash deposits during the year, the AO had failed to examine the full amount of Rs. 52.24 lakh. The assessment was consequently set aside for fresh consideration.

Re-assessment under Section 143(3) read with Section 263 dated 24.03.2023:
Pursuant to the directions under Section 263, the Assessing Officer passed a fresh order adding the entire amount of Rs. 52.24 lakh as unexplained money under Section 69A of the Act. During these proceedings, the assessee furnished a declaration from her husband stating that he had deposited Rs. 19.45 lakh in their joint account during the demonetization window, and that all deposits were made from cash received in the ordinary course of his business activities and from past savings.

The AO examined the income tax returns filed by the husband for Assessment Years 2016-17, 2017-18, and 2018-19, and concluded that the returned income did not correlate with the quantum of deposits made. On this basis, the entire addition of Rs. 52.24 lakh was confirmed in the hands of the assessee-wife.

First Appellate Order under Section 250 dated 28.05.2025:
Aggrieved by the reassessment order, the assessee preferred an appeal before the National Faceless Appeal Centre (NFAC). Before this authority, the assessee reiterated that the account was jointly held, that the funds belonged to both account holders, and that the source of deposits had been adequately explained through her husband's business income and savings.

The CIT(Appeals)/NFAC summarily dismissed the appeal and fully sustained the addition of Rs. 52.24 lakh under Section 69A read with Section 115BBE of the Act.

Grounds of Appeal Before ITAT

The assessee filed appeal before the Income Tax Appellate Tribunal, Raipur, raising the following substantive grounds:

  1. That the CIT(Appeals) erred in sustaining the addition of Rs. 55,24,000 made by the Assessing Officer
  2. That the CIT(Appeals) was not justified in confirming the application of Section 69A on cash deposits of Rs. 55,24,000 and charging the same at higher rate under Section 115BBE of the Act
  3. That the appellant reserved the right to add, alter or omit any grounds in the interest of justice

The central question for determination was:

Whether cash deposited in a joint bank account during the demonetization year, which has been categorically owned and explained by the husband (a separate assessee), can be assessed as unexplained money under Section 69A in the hands of the wife, merely because she is a joint account holder and spouse?

Joint Account Does Not Establish Presumption of Ownership