Paid a large credit-card bill in cash? ITAT ruling explains when the tax department can question the source of money

A Jaipur ITAT ruling offers relief to taxpayers making large cash payments from bank withdrawals. The tribunal said every credit-card payment need not be matched to a specific withdrawal if the taxpayer can establish the source and availability of the cash.

A taxpayer who paid ₹10.90 lakh towards credit-card dues in cash faced income-tax scrutiny after the department questioned the source of the money. In Shrawan Kumar Prajapat vs ITO (ITA No. 1535/JPR/2025), the Jaipur bench of the Income Tax Appellate Tribunal (ITAT) examined whether the taxpayer had to prove that each cash withdrawal from his bank account directly funded a particular credit-card payment.

The tribunal ruled in favour of the taxpayer, holding that a one-to-one match between every bank withdrawal and credit-card payment was not necessary when the taxpayer could demonstrate sufficient cash withdrawals and there was no evidence that the money had been spent elsewhere. The ruling offers an important lesson for taxpayers who make large cash payments from money withdrawn from their bank accounts.

Why the ₹10.90 lakh credit-card payments were questioned

The taxpayer had made cash payments of about ₹10.90 lakh towards his credit-card dues. During assessment, the assessing officer treated the amount as unexplained money under Section 69A of the Income-tax Act.

The taxpayer explained that the cash used for the payments had come from withdrawals from his bank account. He also pointed to his business income and availability of cash to explain the payments.

The tax authorities, however, were not satisfied with the explanation. The issue was whether the taxpayer could establish that the specific cash withdrawn from his bank account was the same cash subsequently used to pay his credit-card bills.