Jaipur ITAT deletes ₹10.90 lakh Section 69A addition on cash credit-card payments, ruling that direct matching of every withdrawal with payment is not mandatory.
Introduction
Making a substantial payment towards credit-card dues in cash can attract scrutiny from the Income Tax Department, particularly when the taxpayer is unable to satisfactorily explain the source of such cash. However, the mere fact that a taxpayer cannot establish a direct, transaction-by-transaction connection between every bank withdrawal and every subsequent cash payment does not automatically mean that the payment represents unexplained money.
In a significant ruling, the Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has provided relief to a taxpayer who made cash payments of ₹10,90,100 towards credit-card dues. The Tribunal held that where sufficient cash withdrawals are reflected in the taxpayer’s bank account and there is no evidence that such cash was utilised elsewhere, a strict one-to-one correlation between individual withdrawals and credit-card payments is not necessarily required.
The ruling in Sharwan Kumar Prajapat v. ITO, Ward Bundi, ITA No. 1535/JPR/2025, decided on 21 July 2026, provides useful guidance on the treatment of cash payments under Section 69A of the Income Tax Act, 1961.
Background of the Case
The taxpayer had filed his return of income for Assessment Year 2023-24, declaring total income of approximately ₹4.95 lakh. During assessment proceedings, the Income Tax Department noticed substantial cash payments made towards credit-card purchases.
The taxpayer explained that the cash used for making the payments had been withdrawn from his bank account. He furnished his bank statement to demonstrate the availability of cash.
During the relevant year, the taxpayer had made cash withdrawals of approximately ₹28.02 lakh from his bank account. Against this background, he contended that the cash payments of ₹10.90 lakh towards credit-card dues were funded from the cash available with him.
However, the Assessing Officer was not satisfied with the explanation. The officer took the view that the taxpayer had not established a proper correlation between particular cash withdrawals and particular credit-card payments.
Consequently, ₹10,90,100 was treated as unexplained money under Section 69A of the Income Tax Act.
The addition was subsequently upheld by the first appellate authority, prompting the taxpayer to approach the Jaipur ITAT.
Why Did the Tax Department Question the Cash Payments?
The central issue was not simply whether the taxpayer had withdrawn cash from his bank account. The tax authorities wanted the taxpayer to demonstrate how those withdrawals were actually utilised.
The taxpayer had argued that the cash withdrawals provided sufficient availability of funds for making the credit-card payments. However, the authorities expected a date-wise reconciliation establishing a direct connection between individual withdrawals and individual credit-card payments.
The appellate authority also questioned the taxpayer’s claim that the funds originated from his contractual business income declared under the presumptive taxation provisions of Section 44AD.
The taxpayer therefore faced an addition under Section 69A, which deals with unexplained money, bullion, jewellery or other valuable articles found to be owned by a taxpayer when the taxpayer fails to satisfactorily explain their nature and source.
ITAT Examines the Bank Withdrawals
The Jaipur ITAT took a different view of the matter.
After examining the bank statement, the Tribunal noted that the taxpayer had made frequent cash withdrawals and that the withdrawals were sufficient to cover the credit-card payments under consideration.
Importantly, the Revenue had not established that the cash withdrawn by the taxpayer had actually been spent for some other purpose.
The Tribunal therefore rejected the approach of insisting upon a strict one-to-one correlation between every cash withdrawal and every credit-card payment.
According to the Tribunal, where sufficient cash withdrawals are available and there is no material showing that such cash was utilised elsewhere, it is reasonable to accept that the taxpayer could have retained the cash and subsequently used it for settling credit-card dues.
Direct Correlation Between Every Withdrawal and Payment Not Mandatory
One of the most important aspects of the ruling is the Tribunal’s observation that a direct correlation between each individual bank withdrawal and each individual cash payment is not indispensable.
The Revenue authorities had all the relevant information before them, including the bank statement showing the cash withdrawals and the details of the credit-card payments.
If the department believed that the taxpayer’s explanation was incorrect, it was required to identify a specific anomaly or demonstrate that the withdrawn cash had been utilised elsewhere.
A general allegation that the withdrawals were not directly correlated with the payments was not considered sufficient.
The ITAT accordingly held that the taxpayer had adequately explained the source of the ₹10.90 lakh cash payments.
Significance of Section 44AD
Another important issue concerned the taxpayer’s business income.
The taxpayer had declared income from contractual business under the presumptive taxation provisions of Section 44AD. The return reflecting such income had been accepted by the Revenue.
The Tribunal observed that after accepting the taxpayer’s returned business income under Section 44AD, the appellate authority could not simultaneously reject the taxpayer’s explanation that the cash available in his bank account originated from that business.
The Tribunal found the rejection of this explanation unjustified in the circumstances of the case.
ITAT Also Addresses Double Taxation
The taxpayer had also argued that taxing the credit-card payments separately would effectively result in double taxation because the underlying business income had already been offered to tax.
The Tribunal found merit in this contention after accepting the taxpayer’s explanation regarding the source of the cash.
If the bank credits represented business receipts and the income from that business had already been subjected to tax, taxing the subsequent utilisation of those funds again as unexplained money would effectively result in taxing the same funds twice.
Accordingly, the Tribunal held that the addition could not be sustained.
Final Decision of the Jaipur ITAT
The Jaipur Bench of the ITAT deleted the entire addition of ₹10,90,100 made under Section 69A.
The Tribunal concluded that the taxpayer had sufficiently explained the source of the cash used for making the credit-card payments through the cash withdrawals reflected in his bank account.
The appeal was therefore allowed in favour of the taxpayer.
Key Takeaways for Taxpayers
This ruling provides several practical lessons for individuals making substantial cash payments:
1. Maintain complete bank records
Bank statements showing substantial cash withdrawals can be important evidence when explaining the source of later cash expenditure.
2. Cash availability matters
A taxpayer should be able to demonstrate that sufficient legitimate cash was available during the relevant period.
3. One-to-one matching is not always necessary
The ruling indicates that every cash payment does not necessarily have to be linked to one specific bank withdrawal if the overall availability of cash is satisfactorily established.
4. Preserve evidence of the source
Taxpayers should maintain supporting records relating to business receipts, income-tax returns, cash books, invoices, agreements and other relevant documents wherever applicable.
5. The Department must identify a specific discrepancy
A mere suspicion that cash withdrawals were not used for the stated purpose may not be enough. Where the taxpayer provides credible evidence, the Revenue should identify a specific inconsistency or demonstrate that the funds were utilised elsewhere.
Conclusion
The Jaipur ITAT ruling in Sharwan Kumar Prajapat v. ITO provides an important clarification on cash payments towards credit-card dues and unexplained money under Section 69A.
The decision does not establish that large cash credit-card payments are automatically immune from tax scrutiny. Rather, it emphasises that the source of money has to be examined on the basis of the overall facts and available evidence.
Where a taxpayer can demonstrate sufficient legitimate cash withdrawals, and the Revenue cannot establish that the money was diverted or utilised elsewhere, the absence of a perfect transaction-by-transaction correlation should not, by itself, result in an addition under Section 69A.
For taxpayers and tax professionals, the ruling reinforces the importance of maintaining bank statements, income-tax returns, business records and evidence demonstrating availability of cash. At the same time, it highlights that tax authorities should base additions on concrete discrepancies rather than assumptions or generalised suspicion.
The decision is therefore particularly relevant in cases involving large cash payments, credit-card expenditure, bank withdrawals, Section 69A additions and presumptive business income under Section 44AD.