Can income tax authorities tax money deposited in your bank account for someone else? ITAT rules in ₹3.69 crore case
The Agra bench of the Income Tax Appellate Tribunal (ITAT) has deleted an income tax addition of ₹3.69 crore imposed on a Firozabad-based woman whose bank accounts were used to facilitate payments between bangle traders across India and suppliers in the Uttar Pradesh town. The tribunal held that the Income Tax Department could not treat the entire amount deposited in her accounts as unexplained income without establishing that the money actually belonged to her.
In its order dated 4 November 2026, in Pooja Agarwal vs Income Tax Officer, ITA No. 309/Agr/2026, the tribunal ruled in favour of the taxpayer, setting aside the addition made under Section 69A of the Income Tax Act, 1961.
The case relates to assessment year 2018-19, when Agarwal filed her income tax return declaring a total income of ₹3.20 lakh. During scrutiny, the assessing officer (AO) found that ₹3.69 crore had been deposited into her two bank accounts, significantly higher than the turnover of ₹4.98 lakh reported in her return.
Agarwal explained that she operated a commission-based business through which she facilitated payments between bangle buyers located in different parts of the country and traders in Firozabad. Buyers deposited cash into her bank accounts, following which she withdrew the money and facilitated payments to the local suppliers.
She said she charged a commission of ₹500 for every ₹1 lakh handled and had declared commission income of ₹1.85 lakh under the presumptive taxation scheme under Section 44AD.
The assessing officer, however, rejected her explanation. The department questioned why buyers from different parts of the country would deposit cash into her accounts instead of making payments directly to traders. It also pointed out that she had not furnished complete party-wise details, including names, addresses and other information that could help verify the transactions.
The tax officer further observed that the taxpayer had not maintained adequate documentary evidence to establish the identity of the parties or the genuineness of the transactions. Consequently, the entire ₹3.69 crore was treated as unexplained money under Section 69A.
The Commissioner of Income Tax (Appeals) upheld the addition, prompting Agarwal to approach the ITAT.
The tribunal examined the bank transactions and found that the deposits were followed by substantial cash withdrawals. While the total deposits amounted to ₹3,69,92,943, cash withdrawals from the accounts stood at ₹3,73,69,422.
It also considered the assessment order for the immediately preceding assessment year, 2017-18, in which the assessing officer had acknowledged that Agarwal earned income from commission.
The tribunal observed that the tax department had not brought any evidence on record to demonstrate that Agarwal was carrying out an independent business activity capable of generating such a substantial amount of undisclosed income.
It also noted that the explanation regarding her role in facilitating transactions between bangle traders across different cities and suppliers in Firozabad could not be rejected outright, particularly in light of the transaction pattern and the department's earlier assessment.
Accordingly, the tribunal held that the deposits could not be treated as her undisclosed income under Section 69A merely on the basis of the amount involved. It deleted the addition of ₹3,69,92,943 and decided the appeal in her favour.
Section 69A allows the assessing officer to treat money, bullion, jewellery or other valuable assets as unexplained income if a taxpayer is found to be their owner but cannot satisfactorily explain their source.
However, large bank deposits do not automatically establish that the entire amount represents the account holder's taxable income. The ownership of the money, the nature of transactions and the evidence available must also be examined.
The decision does not mean that taxpayers can avoid tax on unexplained deposits simply by claiming to have handled someone else's money. Supporting evidence and the facts of each case remain important.
Kirti jha
Kirti Jha is a Senior Content Producer at Mint, where she writes on mutual funds, taxation, personal finance and macroeconomic developments. Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis. She tracked portfolio disclosures, fund manager strategies, sectoral allocation shifts and investment trends, distilling large datasets into investor-focused insights. Her work combined quantitative analysis with consumer-centric storytelling, enabling readers to better understand fund positioning, portfolio changes and long-term investment opportunities.<br><br> Kirti holds a Bachelor's degree in Economics from Indraprastha College for Women, University of Delhi, and a Master's in Finance from the Jindal School of Banking & Finance at O.P. Jindal Global University. Her academic training emphasised analytical thinking, quantitative research and financial decision-making, providing a strong foundation in understanding capital markets, financial systems and economic policy. With a combined experience in investment research and financial journalism, she is committed to producing accurate, accessible and insightful journalism that empowers readers to make well-informed financial decisions.
Get Latest real-time updates
Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
HomeMoneyPersonal FinanceCan income tax authorities tax money deposited in your bank account for someone else? ITAT rules in ₹3.69 crore case
✕
Wait for it…
Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.