2023 (12) TMI 397 - AT - Income Tax

Agricultural income cannot be treated as unexplained cash credit under Section 68 r.w.s. 115BBE

The ITAT Rajkot held that agricultural income cannot be treated as unexplained cash credit under Section 68 r.w.s. 115BBE. The assessee showed gross total ... Treatment of bank credits as unexplained cash credit under section 68 - agricultural income - bank passbook not books of account - deeming operation of section 68 - application of section 115BBE - reliance on precedents excluding bank credits from section 68Treatment of bank credits as unexplained cash credit under section 68 - agricultural income - bank passbook not books of account - Whether part of the agricultural income disallowed by the AO as unexplained cash credit under section 68 is sustainable. - HELD THAT: - The Tribunal reviewed the Assessing Officer's action of treating 50% of the declared agricultural income as unexplained cash credit and invoking section 68 r.w.s. 115BBE after noting bank deposit entries and alleged absence of supporting operational vouchers. Relying on coordinate decisions and high court authority, the Tribunal held that a credit reflected only in the bank passbook does not constitute a credit in the assessee's books of account for the purposes of section 68. Since the AO's addition was premised on bank credits and the assessee's agricultural activities for the year and earlier years were not disbelieved in entirety, invocation of section 68 was legally incorrect. The Tribunal therefore found the addition unsustainable and deleted it. [Paras 7, 8, 9]Addition treating part of agricultural income as unexplained cash credit under section 68 deleted; appeal allowed.Final Conclusion: The Tribunal held that the addition made by treating part of the declared agricultural income as unexplained cash credit under section 68 was legally unsustainable because bank passbook entries do not equate to credits in the assessee's books; the addition was deleted and the appeal was allowed. Issues involved:The judgment deals with the issue of addition of agricultural income as unexplained cash credit under section 68 of the Income Tax Act, 1961.Issue 1 - Addition of Agricultural Income:The appellant contested the addition of Rs. 14,32,782 as unexplained cash credit under section 68 of the Income Tax Act. The Assessing Officer had treated 50% of the agricultural income as unaccounted, leading to the addition. The appellant argued that the agricultural income was earned legitimately through cultivation on his own land and leased land, supported by agreements with landowners. The appellant highlighted the lack of additional evidence like bills and vouchers as the reason for the AO's disbelief. The ITAT upheld the addition, stating that 50% of the agricultural income was considered genuine, while the remaining amount was treated as unaccounted income. The ITAT found the AO's actions reasonable, emphasizing the importance of producing all relevant details and evidence during assessment.Issue 2 - Legal Grounds for Appeal:The appellant raised several grounds of appeal, challenging the decision of the Commissioner of Income Tax (Appeals) to uphold the addition of agricultural income as unexplained cash credit under section 68 of the Income Tax Act. The appellant argued that the decision was arbitrary, legally unsound, and unjust. The appellant also sought to introduce additional grounds during the appeal hearing.Judicial Analysis and Decision:Upon thorough consideration of the submissions, evidence, and relevant case laws, the ITAT found that the Assessing Officer's application of section 68 to the agricultural income was legally incorrect. The ITAT noted that bank passbook entries could not be treated as unexplained cash credits under section 68, as the bank account was not part of the assessee's books of accounts. Citing precedents from various High Courts, the ITAT concluded that the additions made by the Lower Authorities were unwarranted. The ITAT ruled in favor of the appellant, allowing the appeal and directing the deletion of the addition to the agricultural income.Conclusion:The ITAT ruled in favor of the appellant, holding that the addition of agricultural income as unexplained cash credit under section 68 was legally unfounded. The ITAT emphasized the importance of considering bank passbook entries and maintaining proper books of accounts in such cases. The appeal was allowed, and the addition was ordered to be deleted.