Answer

1. F

   Facts

   Banks report large cash deposits to the department, and the officer wants to know where the cash came from. A good reply links each deposit to a known source, such as business sales, withdrawals made earlier or sale of an asset. Unexplained amounts can later be taxed as income.

2. P

   Provisions and law

   • Sec 133(6) (now Sec 252(1)(a))The officer can call for information useful for or relevant to any enquiry or proceeding
   • Sec 69 (now Sec 103)Unexplained investments can be taxed as income if the source is not explained
   • Sec 68 (now Sec 102)Unexplained cash credits in books can be taxed as income
3. A

   Analysis

   The officer will match deposits with your return: if you run a shop and reported sales of ₹40 lakh, deposits of ₹12 lakh fit easily, but a salaried person with no cash income must show a source. Show earlier withdrawals from the same or another account, cash gifts from relatives with a gift letter, or cash from a property sale with the deed. If the source cannot be shown, Sec 69 or 68 type additions can follow at a high rate. Keep the explanation consistent with what you showed in your return.

4. C

   Conclusion

   1. 1List each cash deposit with date and amount.
   2. 2Match each to a source with documents.
   3. 3Write a reply giving the source for every deposit.
   4. 4Attach bank statements and supporting proof.

Inventing a source that the records cannot support is far riskier than accepting a small unexplained amount with your CA's advice.

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.