The dispute began when Madegonda Nagarathna, a BESCOM employee living in Bengaluru, deposited ₹25 lakh at Corporation Bank's Nrupathunga Road branch on June 29, 2016. According to reports from Mint, the income tax assessing officer from Koramangala became suspicious after finding that Nagarathna had sold a property just weeks before making the deposit. The officer concluded that the money must have come from the property sale in cash, leading to the reopening of her tax file.
During assessment proceedings, Nagarathna explained that the deposit came from savings accumulated through earlier withdrawals of ₹13.17 lakh and ₹11.95 lakh from her and her husband's bank accounts over the preceding two years. As reported by Mint, the income tax officer treated the amount as unexplained money under Section 69 of the Income-tax Act and added it back to her total income. The Commissioner of Appeals also upheld this addition, prompting Nagarathna to challenge the decision before the ITAT Bangalore, where the case remained pending for several years.
During the ITAT Bangalore hearing, Nagarathna's legal representative Sheetal Borkar argued that bank and loan statements showed the accumulated withdrawals, citing a Karnataka High Court judgment in Smt. P Padmavathi vs ITO case. According to Mint, Ganesh R Ghale, standing counsel for the income tax department, argued that there was no clear proof that the withdrawn cash was still available when the deposit was made. The tribunal ruled in Nagarathna's favour on August 17, 2026, noting that cash deposit sources can be traced back to identifiable withdrawals from disclosed bank accounts even with time gaps between withdrawals and deposits.
The ITAT's decision resulted in the deletion of the ₹25 lakh addition made under Section 69 of the Income-tax Act, allowing Nagarathna's appeal. As reported by Mint, the tribunal emphasized that the source of cash deposits cannot be rejected solely because of time gaps between withdrawals and subsequent deposits, provided the withdrawal source can be clearly traced. The ruling establishes precedent for cases involving large cash deposits from accumulated savings, particularly where bank statements demonstrate consistent withdrawal patterns over time.
