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ITR

Explaining large cash deposits in a 142(1) reply

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Unexplained cash credits or deposits can be treated as income and taxed at a special high rate with penalty. You need to show where the cash came from with documents, such as business receipts, withdrawals earlier, gifts from relatives or sale of an asset.

Provisions

Sec 142(1) (now Sec 268(1)); Sec 68 (now Sec 102); Sec 69 (now Sec 103)

Analysis

Build a cash flow: opening cash, withdrawals, receipts and deposits by date. For example, ₹6 lakh may come from a withdrawal two months earlier, ₹5 lakh from shop sales shown in ITR-4, and ₹4 lakh from a gift by your father with his bank withdrawal and a gift deed. Each part needs a document. Vague answers like 'savings at home' without proof are often rejected.

Close

  1. List every cash deposit above ₹50,000 with dates
  2. Match each to a source: withdrawal, sales, gift, loan or asset sale
  3. Collect proof: bank statements, sales records, gift deed, donor's bank entry
  4. Give a cash flow table in the reply with the proofs attached

Do not create back dated documents; they make the case worse and can attract prosecution.

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Connect nowPay and start: Inquiry before assessment, Sec 142(1) (now 268(1)), ₹4,999

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

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