ITAT Partly Deletes Addition of ₹10 Lakh on Cash Deposits from Agricultural Income u/s 69A [Read Order]

The bench of the Income Tax Appellate Tribunal (ITAT), Chandigarh has deleted ₹10,00,000 out of the total addition made under Section 69A of the Income Tax Act, 1961 thereby partly allowing the appeal of the assessee upon discharge of satisfactorily explanation of the cash deposits as being sourced from agricultural and milk income.

The appeal was filed by Sher Singh, a resident of Village Balian, Sangrur, engaged in agricultural activities and milk sales, against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [CIT(A)], Delhi, dated 24 January 2025, for the Assessment Year (A.Y.) 2017-18.

The case originated when the Assessing Officer (AO), Income Tax Officer, Sangrur, observed cash deposits of ₹14,75,600 made in various bank accounts of the assessee during the financial year 2016-17, which included the demonetisation period.

Due to non-compliance with statutory notices, the AO completed the assessment ex parte under Section 144 of the Income Tax Act, 1961, treating the entire amount as unexplained money under Section 69A.

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The assessee produced additional evidence, including affidavits, a cash-flow statement, Jamabandi records, and bank statements, contending that the deposits represented agricultural income, milk sales, and funds belonging to his wife.

The CIT(A), after obtaining the remand report, admitted the evidence but found them only partly granting relief of ₹2,50,000 and confirming an addition of ₹12,25,600 as unexplained cash deposits. Aggrieved by the partial relief, the assessee approached the ITAT.

The assessee represented by Gaurav Soni, argued that the assessee along with his wife, owned substantial agricultural land and derived income from agricultural operations and milk production. The assessee had filed a return of income declaring ₹7,00,000 as agricultural income and ₹2,47,700 as milk income, which adequately explained the source of the cash deposits.

It was submitted that the assessee’s wife had withdrawn cash in July 2016, which was redeposited during the demonetisation period.Further, it was argued that via an affidavit and bank statements supporting the claim were not considered by the lower authorities.

It was contended that once the CIT(A) admitted the additional evidence under Rule 46A of the Income Tax Rules, 1962, it was incumbent upon the appellate authority to evaluate the same in totality.

The Revenue represented by Dr. Ranjit Kaur submitted that the assessee had failed to comply with multiple statutory notices and did not participate in the assessment proceedings, thereby inviting an ex-parte assessment under Section 144.

It was contended that the assessee had not produced credible or contemporaneous evidence to substantiate the agricultural income, ownership of livestock, or milk sales. Furthermore, the Jamabandi records filed did not conclusively establish ownership of 70 bighas of agricultural land in the assessee’s name, and no supporting evidence was furnished for land in his wife’s name.

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It was argued that the affidavit of the wife and the cash-flow statement, being self-prepared, lacked independent corroboration. The AO’s remand report had also rejected the claims as afterthoughts.

It was further submitted that the CIT(A) had already taken a lenient view by granting relief of ₹2,50,000 towards past savings and that the balance addition of ₹12,25,600 was justified in the absence of credible evidence.

The Bench comprising Judicial Member, Laliet Kumar and Accountant Member, Manoj Kumar Aggarwal observed that the assessee was an agriculturist deriving income from agriculture and milk production. Although the assessment had been completed ex-parte, the assessee had subsequently filed relevant documents, including affidavits, and cash-flow details, which were pertinent to the adjudication.

The Tribunal noted that the assessee’s declared agricultural income of ₹7,00,000 and milk income of ₹2,47,700 were broadly consistent with the explanation furnished for the deposits. Additionally, the Revenue failed to bring forth any material evidence to contradict these claims.

However, the Tribunal held that the assessee did not produce full corroborative details such as crop sale bills, livestock records, or historical data on agricultural earnings, which could have completely established the genuineness of the sources claimed.

Therefore, the Bench held that while a major part of the deposits was satisfactorily explained, some portion remained unsubstantiated.

Accordingly, the Tribunal restricted the addition to ₹2,50,000 as unexplained money and deleted the balance addition of ₹10,00,000.

Thus, the appeal of the assessee was thus partly allowed.

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