Cash Deposits Linked to Wife’s Agricultural Land Sale Beyond 8 Km of Municipality, Assessee Claims Not Taxable: ITAT Orders De Novo Adjudication [Read Order]

The Income Tax Appellate Tribunal (ITAT), Agra Bench, remanded the matter of cash deposit addition of Rs. 10.05L linked to sale of agricultural land of wife of Ex - Army man for fresh adjudication, where he claims that the land is beyond 8 km of municipality and cannot be subject to capital gain tax.

An income tax appeal was filed by Rameshwar Dayal, an ex-Army serviceman, against an order of the National Faceless Appeal Centre (NFAC), Delhi, which had upheld the Assessing Officer’s (AO) addition of cash deposits in his ICICI Bank account.

The AO had received information through the Annual Information Return (AIR) system that cash deposits of ₹10.05 lakh had been made in the assessee’s bank account during AY 2011-12. Since no return of income had been filed and statutory notices under Sections 148 and 142(1) of the Income-tax Act, 1961, went unanswered, the AO treated the deposits as unexplained and completed the assessment under Section 144.

In appeal, the assessee explained that he had retired in FY 2009–10 and received a pension of ₹45,256 during the relevant year, which was below the taxable threshold. He argued that the deposits originated from the sale proceeds of agricultural land situated at village Kerki, Mukkar, Paniyala, Kotputli, owned by his wife, Smt. Premavati.

As his wife was illiterate and did not maintain an individual bank account, the proceeds were deposited in their joint account. Importantly, it was claimed that the land was located more than 8 kilometres away from the local municipality, and therefore did not qualify as a “capital asset” under the Act, rendering the transaction non-taxable under the capital gains provisions.

While the NFAC dismissed these explanations as mere self-serving statements unsupported by documentary evidence, the assessee placed on record before the Tribunal bank statements from ICICI and SBI for the relevant period, along with the registered sale deed dated 7 March 2011 evidencing his wife’s land sale. He also provided a detailed tabulation tracing the sources of the cash deposits.

The bench of M. Balaganesh ( Accountant member) observed that the NFAC had overlooked the evidence furnished and wrongly held that no supporting documents were filed.

As considering that the assessment was framed ex parte and factual verification of the sale deed and bank records was essential, the bench held that the interests of justice would be served by remanding the matter.

The ITAT accordingly restored the issue to the AO for de novo adjudication, directing a fresh determination after examining the evidence and securing the assessee’s participation. Accordingly, the appeal was allowed for statistical purposes.

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