The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) ruled an agriculturist could not be held liable for the non-response of a third party to a tax notice. The tribunal confirmed that the cash deposit during the demonetization period was agricultural income supported by sale bills and land records.
Dushyant M. Pandya, an agriculturist, explained that the cash deposited in his bank account was derived from the sale of agricultural produce. The AO disbelieved the explanation citing that New Surrod Ginning and Pressing Factory, the party to whom the agricultural produce was sold, failed to respond to a notice issued under Section 133 ( 6 ) of the Act.
The AO treated the cash as unexplained and added Rs. 10,00,000 to Mr. Pandya’s income. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s addition in an ex-parte order after Mr. Pandya failed to appear due to limited opportunities provided during the COVID-19 period.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The assessee approached the ITAT, arguing that he had sufficiently proven the source of the cash deposit. The assessee provided evidence of consistent agricultural income, including Rs. 9.5 lakhs in the 2015-16 assessment year, Rs. 10.0 lakhs in 2016-17, and Rs. 8.5 lakhs in 2018-19.
The assessee also submitted bills for the sale of agricultural produce and 7/12 records showing ownership of agricultural land and cultivation of cotton crops. The revenue’s counsel countered that the assessee’s claim remained unverified due to the non-response of the third party.
The bench led by Accountant Member Annapurna Gupta held that the AO and CIT(A) had erred in treating the cash as unexplained income. The tribunal observed that the assessee had consistently reported agricultural income and submitted adequate documentation which the authorities ignored.
The tribunal observed that the rejection of the claim based on the third party’s non-response was unjust and that the assessee could not be penalized for the actions of another party. The tribunal directed the deletion of the Rs. 10,00,000 addition citing the assessee sufficiently proven that the cash deposit originated from the sale of agricultural produce. The appeal was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
