Assessee's explanation for Rs 7.20 lacs cash deposits accepted - agricultural income and business withdrawals validated

ITAT Chandigarh allowed the assessee's appeal regarding undisclosed cash deposits totaling Rs 7.20 lacs in bank account. The tribunal accepted the assessee's explanation that Rs 4 lacs originated from agricultural income from 38 bighas of apple orchards jointly owned with mother, supported by land records and production evidence. Remaining Rs 3.20 lacs was from earlier withdrawals for contracting work with HP Forest Corporation in remote areas, where cash was kept for business exigencies and later redeposited. Despite two-month time gap between withdrawal and deposit, the tribunal found the explanation reasonable considering business nature and regular banking transactions.

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Issues Involved:
1. Non-acceptance of agricultural income amounting to Rs. 4,50,000/-.
2. Addition of Rs. 7,20,000/- made on account of cash deposits.

Summary:

Issue 1: Non-acceptance of Agricultural Income

The assessee declared an agricultural income of Rs. 4,50,000/- in the ITR filed for the Assessment Year 2012-13. The Ld. CIT(A) upheld the A.O.'s decision of not accepting this income due to lack of proof of sale of agricultural produce. The assessee argued that the land holding records and agriculture produce records, which show apple production, were ignored by the authorities. The Tribunal accepted the explanation of the assessee, considering the land holding and apple production, and the fact that all transactions were routed through the assessee's bank account. Therefore, the source of the cash deposit of Rs. 4,00,000/- out of agricultural produce was accepted.

Issue 2: Addition of Rs. 7,20,000/- on Account of Cash Deposits

The assessee explained that the cash deposits were made out of earlier cash withdrawals, which were necessary due to the nature of his work as a contractor for HP Forest Corporation in remote areas. The Ld. CIT(A) upheld the A.O.'s decision to add Rs. 7,20,000/- as unexplained cash deposits, citing a considerable time gap between withdrawals and deposits. The Tribunal found the explanation of the assessee reasonable, considering the business exigency of keeping cash in hand and the regular deposits and withdrawals from the same bank account. The Tribunal set aside the addition of Rs. 7,20,000/- made by the A.O. and confirmed by the Ld. CIT(A).

Conclusion:

The Tribunal allowed the appeal of the assessee, setting aside the impugned orders dated 19/12/2017 and 07/11/2022. The addition of Rs. 7,20,000/- was deleted, and the agricultural income of Rs. 4,50,000/- was accepted.

Order Pronounced in the Open Court on 06/12/2023.

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