Lol, source of income are you serious? You know they just excuses right? That info has nothing to do with them and is for you the taxman and your government to know. You don't have to explain to an exchange where your funding is coming from because paying tax is done by you not the exchange. Only the government would need to know such things.
Much better to use DEX I have never seen any reason to use CEX and don't understand the appeal when it goes against everything crypto.
This happens. As a matter of fact, it happened to me once, although not with Bittrex but with a local wallet.
Excuses or not, you have no choice especially if you have a significant amount of funds on the line. You can do nothing else but comply. Of course, you're right. Bittrex has nothing to do with whatever sources your funds are coming from. You owe Bittrex no explanation whatsoever. But this is not Bittrex acting on its own. This is Bittrex just complying with the law.
You are correct. Only governments would demand this from your, and it is actually the government that asking for it, only through Bittrex.