Disallowance of Rs.6.78 Lakh Cash Deposits as Unexplained Investment: ITAT Allows Claim Based on Agricultural, Transportation, and Family Income [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed an appeal against the disallowance of Rs.6.78 lakh cash deposits under section 69 of Income Tax Act,1961 as unexplained investment, based on agricultural, transportation, and family income.

Salvantsingh Swarupsingh Pallu, appellant-assessee, was engaged mainly in agriculture and a transportation business, and also earned some interest income. He had not filed his income tax return for the year under consideration.

Based on information regarding cash deposits in his State Bank of India and HDFC Bank accounts, proceedings under section 147 were initiated, and a notice under section 148 was issued on 29.03.2019. He filed his return on 13.11.2019, declaring total income of Rs.1,18,860/- and agricultural income of Rs.1,60,020/-.

During assessment, the Assessing Officer(AO) observed cash deposits of Rs.18,77,600/-. After accepting part of the agricultural income, deposits of Rs.6,78,400/- remained unexplained, which were added under section 69 as unexplained investment.

The assessee appealed to the Commissioner of Income Tax (Appeals)[CIT(A)], who, citing non-compliance and lack of evidence, confirmed the addition. Dissatisfied, the assessee filed an appeal before the tribunal.

The assessee counsel stated that the assessee was a farmer engaged in agriculture. He explained that the cash deposits came from the assessee’s agricultural and transportation income, his wife’s dairy income, his son’s savings, opening cash balances, and loan repayments from earlier years.

The assessee had submitted land documents, cash book, bank statements, family confirmations, and a certificate from the village sarpanch confirming agricultural activities. The AO accepted agricultural income of Rs.5,00,000/- but disallowed Rs.6,78,400/- due to insufficient evidence, especially regarding cash balances and loan repayments.

The Departmental Representative supported the orders of the lower authorities.

The two member bench comprising Dr.B.R.R Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) heard the parties and reviewed the records. It noted that the lower authorities had accepted part of the assessee’s claims and allowed Rs.5,00,000/- based on evidence showing that the deposits came from the assessee’s agricultural and transportation income, his wife’s dairy income, and his son’s savings.

The assessee had also provided opening cash balances and loan repayments from earlier years, supported by land documents, cash book, bank statements, and family confirmations. Considering all this, the tribunal found no reason to disallow Rs.6,78,400/- for lack of evidence.

Accordingly the appeal was allowed.

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