Property Deal Gone Wrong: Rs 40 Lakh Cash Deposit Lands Ambernath Woman in Tax Trouble

A cancelled property deal, cash advances from a developer, and a bank account that the taxman misread — this is the story of how Pooja Vinod Wadhwani, a resident of Ambernath on Mumbai’s outskirts, spent years fighting a Rs 40 lakh tax addition before the Income Tax Appellate Tribunal (ITAT) in Mumbai finally cleared her name entirely in April 2026.

The case, decided by a bench of Smt. Beena Pillai (Judicial Member) and Shri Girish Agrawal (Accountant Member) on April 15, 2026, is a textbook illustration of how large cash transactions — even entirely legitimate ones — can spiral into prolonged tax litigation when documentation is incomplete and third parties don’t cooperate with the taxman.

The Transaction That Caught the Taxman’s Eye

Pooja had not filed an income tax return for the financial year 2009-10 (Assessment Year 2010-11), believing her income was below the taxable threshold. She had no salary, no business income to speak of, and reported interest income of a mere Rs 14,429 when eventually asked to file.

But the Income Tax Department’s data systems told a different story. A review of her individual transaction statement flagged two significant financial events during that year — a cash deposit of Rs 40.09 lakhs into a Bank of Maharashtra account, and the purchase of a flat at Dev Shrishti, Kurla Camp Road, Ulhasnagar for Rs 12.65 lakhs, paid by cheque. Together, these transactions amounted to over Rs 52 lakhs — a striking sum for someone claiming negligible income.

The Assessing Officer (AO) at Income Tax Ward 2(3), Kalyan issued a notice under Section 148 of the Income Tax Act in March 2017, invoking Section 147 to reopen the case on the ground that income had escaped assessment. Pooja was required to file a return and explain these transactions.

The Explanation: A Property Deal That Never Closed

Pooja’s explanation was straightforward. She had entered into a sale agreement with a developer, M/s Samruddhi Developers, for the sale of her ancestral house property — a plot identified as BK 1894-U No. 204, Shade No. 68. The developer had paid her a token advance of Rs 40 lakhs in cash, in two tranches: Rs 20 lakhs in June 2009 and another Rs 20 lakhs in December 2009. She deposited this cash into her Bank of Maharashtra account.

However, the sale ultimately did not go through. The deal fell apart and was cancelled. Since the advance had been received in cash, she returned it to the developer in cash — withdrawing the money from her bank account, as reflected in her passbook. She produced copies of the sale agreement and her bank passbook to support her account.

As for the flat purchase in Ulhasnagar, she explained that it was funded through three cheques totalling Rs 12.65 lakhs — a separate transaction entirely, with its own paper trail.

Why the Tax Officer Wasn’t Convinced

The Assessing Officer found the explanation plausible on its face but unverifiable. The critical problem was the developer. The AO issued a notice under Section 133(6) of the Income Tax Act to M/s Samruddhi Developers, asking them to confirm the transaction — but the developer simply did not respond.

With no third-party confirmation of the cash advance, the AO took the view that Pooja had failed to explain the source of the cash deposits with adequate documentary evidence. He invoked Section 68 of the Income Tax Act — which deals with unexplained cash credits — and added the entire Rs 40.09 lakhs to her income for the year. Interestingly, he did not pursue the flat purchase separately, treating that as explained by the cheque trail.

The addition of Rs 40.09 lakhs as unexplained income meant a substantial tax demand on a woman who had reported virtually no income that year.

The First Appeal: Half Relief, Half Frustration

Pooja challenged the addition before the Commissioner of Income Tax (Appeals), or CIT(A), operating through the National Faceless Appeal Centre (NFAC) in Delhi. She reiterated her explanation about the developer and the cancelled deal.

The CIT(A) was sympathetic but non-committal. In what can only be described as a compromise ruling, he observed that “there may be certain element of truth in the conditions of the assessee and the same cannot be totally ignored.” Rather than either accepting or rejecting her explanation fully, he split the addition down the middle — accepting 50% of the deposits as explained and confirming the remaining 50% as unexplained cash credit. This left Pooja with an addition of approximately Rs 20.04 lakhs still standing against her.

Neither side was fully satisfied. However, the Income Tax Department chose not to appeal the 50% relief granted by CIT(A) to the ITAT — which meant that portion was settled in Pooja’s favour. Pooja, on the other hand, appealed the remaining Rs 20.04 lakh addition to the ITAT.

A Complication: The 108-Day Delay

Before the ITAT could even hear the case on merits, there was a procedural hurdle. Pooja had filed appeals for two assessment years — 2010-11 and 2014-15 — and the CIT(A) had passed orders on both within a day of each other in December 2024. Pooja mistakenly believed both orders were the same, forwarded only one to her tax consultant, and the appeal for AY 2010-11 was consequently not filed within the prescribed time limit. The delay was 108 days.

She filed a petition for condonation of delay along with an affidavit explaining the genuine mix-up. The ITAT accepted this explanation, found the delay to be bona fide and unintentional, condoned it, and admitted the appeal for hearing.

What the ITAT Found: Two Critical Errors

When the ITAT examined the record in detail, it found that the remaining Rs 20.04 lakh addition suffered from two distinct and fatal flaws.

Error One — A Daughter’s Account Wrongly Attributed to the Mother

The total cash deposits of Rs 40.09 lakhs that the AO had added to Pooja’s income were not all in Pooja’s account. The ITAT found that the deposits were spread across two Bank of Maharashtra accounts — Rs 32.01 lakhs in Account No. 20116731464 held in Pooja’s own name, and Rs 8.99 lakhs in Account No. 20116743538 held in the name of Miss Pragathi Wadhwani — Pooja’s daughter.

This was a straightforward error. Deposits in a daughter’s bank account cannot be added as unexplained income in the mother’s hands. The ITAT deleted the Rs 8.99 lakh addition on this ground alone. When the department’s representative was confronted with this fact, he had nothing to say in response.

Error Two — Withdrawals Explained the Re-Deposits

After removing the daughter’s deposits and accounting for the 50% relief already given by CIT(A), the disputed amount that remained was Rs 12.01 lakhs. This was the sum the ITAT now had to decide on.

Pooja’s counsel pointed the tribunal to her bank passbook, which showed a clear pattern. Between July 2009 and March 2010, Pooja had made withdrawals from her account totalling Rs 15.20 lakhs. The cash deposits of Rs 12.60 lakhs that the taxman found suspicious were made on March 30 and 31, 2010 — after those withdrawals. In other words, the deposits were simply money she had previously withdrawn, sitting with her in cash, and then re-deposited.

The ITAT laid down a clear and important principle: once there are deposits in a bank account with corresponding prior withdrawals, the entire deposit cannot automatically be treated as unexplained income. The burden shifts to the Revenue — it must specifically demonstrate that the withdrawals were used for some other purpose and were therefore not available to the assessee for re-deposit. The department failed to discharge this burden. The Rs 12.01 lakh addition was accordingly deleted.

The Final Scoreboard

The appeal was allowed in full. Pooja walked away with a clean slate for Assessment Year 2010-11, more than 15 years after the original transactions took place.

The Broader Lesson

This case carries important lessons for anyone dealing in cash — particularly in property transactions. A legitimate deal, a cancelled agreement, and a developer who simply didn’t respond to a tax notice were enough to trigger over a decade of litigation for an ordinary woman from Ambernath.

The ITAT’s ruling reinforces two key principles of tax law. First, family members’ bank accounts must not be clubbed together without clear legal basis. Second, cash re-deposits backed by prior withdrawals from the same account cannot be treated as fresh unexplained income unless the department can prove the withdrawals were deployed elsewhere.

For taxpayers, the case underscores the importance of ensuring that all parties to a property transaction — especially developers receiving or returning cash — respond to tax notices when called upon, since a developer’s silence can turn a straightforward explanation into years of appellate proceedings.

Also Read: ITAT Mumbai Clears Real Estate Developer of Fraud Allegations, Allows ₹1.79 Crore Tax Deduction