ITAT Delhi: Cash Deposits in Trust Account Not Taxable in Individual’s Hands Without Proof of Ownership

April 30, 2026 : The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that cash deposits made in the bank account of a separate legal entity cannot be taxed in the hands of an individual merely because he is an authorised signatory, unless there is clear evidence of beneficial ownership or undisclosed income. The Tribunal dismissed the Revenue’s appeal and upheld the deletion of an addition of ₹4.94 crore made under Section 68 of the Income Tax Act.

The ruling came in Assistant Commissioner of Income Tax v. Deepak Gupta (ITA No. 5276/Del/2025) for Assessment Year 2017–18, decided by a Bench comprising Judicial Member Raj Kumar Chauhan and Accountant Member Brajesh Kumar Singh.

The assessee had filed his return declaring an income of ₹6.50 lakh. His case was selected for scrutiny after a Suspicious Transaction Report flagged substantial cash deposits during the demonetisation period. The Assessing Officer observed that ₹4.94 crore had been deposited in a bank account linked to the assessee’s PAN and treated the amount as unexplained cash credits under Section 68.

During the proceedings, it emerged that the bank account was in the name of M/s KCC Institute of Technology and Management. The assessee maintained that the account belonged to Deepak Gupta Education Trust, a separately assessed entity, and that he operated it only as an authorised signatory in his capacity as trustee. He supported this claim with documentary evidence, including an affidavit confirming that the account did not belong to him personally, as reflected in the Tribunal record.

The Assessing Officer rejected this explanation, relying on the fact that the assessee’s PAN was linked to the account and that he exercised operational control. The entire amount was therefore added to his income as unexplained cash credits.

On appeal, the Commissioner of Income Tax (Appeals) deleted the addition, holding that the account did not belong to the assessee and that there was no material to establish that the deposits represented his undisclosed income. It was also noted that the deposits were reflected in the books of the Trust and had been examined in its assessment, raising concerns of double taxation.

The Tribunal agreed with these findings and held that mere association with a bank account, including being an authorised signatory or having operational control, does not establish ownership of the funds. It emphasised that for an addition under Section 68 to be sustained, the Revenue must bring on record cogent evidence demonstrating that the deposits constitute the undisclosed income of the assessee.

Observing that the bank account belonged to the Trust and that no corroborative evidence had been produced to link the deposits to the assessee personally, the Tribunal found the addition unsustainable. It also noted that the same deposits had already been considered in the Trust’s assessment, reinforcing the conclusion that taxing them again in the hands of the individual would be improper.

The Tribunal clarified that its decision was confined to the case of the individual assessee and would not affect the merits of any addition in the hands of the Trust. With these observations, the Revenue’s appeal was dismissed and the deletion of the ₹4.94 crore addition was upheld.