ITAT Mumbai Rules Property Sale Cash Not Unexplained Income

The ITAT Mumbai has ruled that cash received from a property sale cannot be treated as unexplained income if backed by proper records. In its November 14, 2025 order, the tribunal held that a registered sale deed and matching bank deposits are sufficient proof, and such documents override automated tax alerts when determining the source of funds. However, this case involved a property sale in FY 2014-15 (AY 2015-16), when Section 269SS didn't cover property sale cash. Since FY 2015-16, stricter cash restrictions apply to property transactions.

A woman sold her property in 2014-15 for Rs 94.06 lakh and received Rs 38 lakh in cash as partial payment. She deposited Rs 13 lakh from this cash into her ICICI Bank account but didn't file an income tax return that year. The tax department got to learn about the cash deposits through their AIMS system and issued a notice under Section 148, claiming the money was unexplained income.

The Assessing Officer reopened the case under Section 148A, alleging that Rs 13 lakh deposited in the bank was unexplained cash credit as no ITR was filed under Section 139. Despite the taxpayer later filing her return along with a registered sale deed, receipts, and bank statements, the officer rejected her explanation and treated the entire Rs 94.06 lakh sale proceeds as unexplained income.

The taxpayer submitted a registered sale deed showing Rs 38.15 lakh received in cash, supported by payment receipts, bank statements, and capital gains computation. The Rs 13 lakh deposited in her bank exactly matched the cash receipts mentioned in the registered deed. The Income Tax Department produced no evidence to dispute the authenticity of these documents.

A technical glitch invalidated the taxpayer's ITR, prompting the Assessing Officer to reject all her evidence. While the CIT(A) partly accepted the capital gains calculation, the cash addition under Section 69A was upheld. ITAT Mumbai ruled that automated system issues cannot eclipse an officer's duty to assess primary documentary evidence such as registered property sale deeds.

Section 69A of the Income Tax Act applies only when a taxpayer fails to satisfactorily explain the cash deposits or provide supporting evidence. In this case, ITAT ruled that the registered sale deed confirmed the cash receipt and bank entries were an exact match, leaving the source fully explained and undisputed by the department.

ITAT Mumbai observed that the registered sale deed recorded Rs 61 lakh received during the year, including Rs 38.15 lakh in cash. This receipt corresponded exactly with deposits made into the ICICI Bank account. The correctness of these documents was neither challenged nor disproved by tax authorities. Once the primary legal document confirms cash receipt and bank statements reflect the same deposits, no further scrutiny is necessary.