2025 (6) TMI 790 - AT - Income Tax

Cash deposits of Rs. 17.38 lakhs partly explained as agricultural income under section 69A, considering total land holdings and crop loans.

ITAT Ahmedabad partly allowed assessee's appeal regarding cash deposits of Rs. 17,38,500 in bank accounts treated as unexplained money under section 69A ... Addition towards cash deposits in various bank accounts - unexplained money u/s 69A rws 115BBE - HELD THAT:- CIT(A) has given allowance and consideration to the explanation of the assessee of the cash being found in his bank account from his agricultural activities only to the extent of land owned by him 1.64 vigha. He has completely ignored the factum of the remaining land of 3.5 vigha owned by the assessee along with his family members. He has also completely ignored the factum of crop loan taken by the assessee in his name and jointly with other family members for carrying out agricultural activities, as also the factum of having taken the same in his preceding years and repaid the same also. Further, the findings of the CIT(A) that an allowance on agricultural land per vigha may be allowed to the assessee, we find is without any basis at all. Therefore, no merit in the order passed by CIT(A) giving allowance of only Rs. 3,28,000/- of the cash deposited in the bank account, out of Rs. 17,38,500/-, as attributed to agricultural income earned by the assessee. On the contrary, considering the evidences/explanation of the assessee duly substantiated with evidences, by way of crop loan taken during the year as also the land holding of the assessee himself along with his family members, assessee is entitled to greater allowance in this regard. Accordingly in the interest of justice and considering the entire facts and circumstances of the case, hold that agricultural income to the tune of approximately 14 lakhs be attributed to the cash deposited in the bank account and the remaining addition accordingly is directed to be confirmed. Appeal of the assessee is partly allowed. The core legal question considered in this appeal is whether the cash deposits amounting to Rs. 17,38,500/- in the assessee's bank accounts can be treated as unexplained income under section 69A read with section 115BBE of the Income Tax Act, 1961, or whether the assessee's explanation that the cash originated from agricultural income is acceptable and substantiated enough to exclude the entire or part of the amount from addition.The sole issue revolves around the applicability and sufficiency of evidence supporting the source of cash deposits as agricultural income, and the consequent correctness of the addition made by the Assessing Officer (AO) and upheld, albeit partly reduced, by the Commissioner of Income Tax (Appeals) [CIT(A)].The relevant legal framework involves section 69A of the Income Tax Act, which deals with unexplained cash credits, and section 115BBE, which prescribes a special rate of tax on unexplained income or cash credits. The burden lies on the assessee to satisfactorily explain the source of cash deposits to avoid additions under these provisions. Precedents emphasize the need for credible, consistent, and corroborated evidence to establish the genuineness of claimed agricultural income, including land ownership, crop cultivation details, sale of produce, and financial transactions related to agricultural activities.In the present case, the AO made a full addition of Rs. 17,38,500/- on the ground that the assessee failed to satisfactorily explain the source of cash deposits. The CIT(A) partially allowed the appeal by reducing the addition to Rs. 14,10,500/-, attributing Rs. 3,28,000/- to agricultural income based on the assessee's ownership of 1.64 vigha of agricultural land and crop loans taken. The CIT(A) rejected the explanation for the balance amount primarily due to the following reasons: absence of details regarding crops cultivated and revenue records; lack of acceptable evidence for cultivation on jointly owned land (3.5 vigha) without agreements or confirmations from family members; failure to produce details of sale of agricultural produce or confirmation from buyers; absence of cash flow statements and cash on hand as of the previous year-end; inconsistency in cash deposit patterns compared to earlier years; and unexplained preference for cash receipts despite availability of banking facilities locally.The Court examined these findings and the evidence submitted by the assessee, including ownership records of agricultural land totaling 5.15 vigha (1.64 vigha individually and 3.5 vigha jointly with family), sanction and repayment details of crop loans amounting to Rs. 3,66,000/- and Rs. 12,10,000/-, and the historical pattern of loan repayment from agricultural income. The Court noted that the CIT(A) had only allowed agricultural income corresponding to the land held solely in the assessee's name, ignoring the jointly owned land and the crop loans taken jointly with family members, which were supported by documentary evidence.The Court found the CIT(A)'s allowance of Rs. 2,00,000/- per vigha as agricultural income to be arbitrary and unsupported by any basis. The Court emphasized that the explanation and evidence furnished by the assessee regarding agricultural income were more substantial than acknowledged by the CIT(A). The Court held that the entire landholding of 5.15 vigha and the associated crop loans should be taken into consideration in determining the agricultural income, thereby entitling the assessee to a higher allowance of approximately Rs. 14,00,000/- against the cash deposits.In applying the law to the facts, the Court balanced the statutory presumption under section 69A against the evidentiary material submitted by the assessee. The Court underscored that while the burden of proof lies on the assessee to explain the source of cash deposits, the explanation must be evaluated holistically, including land ownership (both individual and joint), loan records, and repayment history. The absence of certain documents like crop details and buyer confirmations, though noted, did not outweigh the substantial evidence of agricultural activity and related financial transactions. The Court also implicitly considered the principle that agricultural income is exempt from tax under the Act and thus relevant in explaining cash deposits.The Court rejected the CIT(A)'s reasoning that the jointly owned land could not be considered without formal agreements or confirmation letters from family members, holding that such rigid requirements were not mandated by law and that joint ownership and family arrangements are common in agricultural contexts. The Court also dismissed the CIT(A)'s observations on cash deposit patterns and banking facility availability as insufficient to discredit the agricultural income explanation when supported by credible evidence.Accordingly, the Court concluded that the addition of Rs. 14,10,500/- upheld by the CIT(A) was excessive and that the assessee was entitled to attribute a larger portion of the cash deposits, approximately Rs. 14,00,000/-, to agricultural income. The remaining unexplained amount was confirmed as income liable to tax under the relevant provisions.Significant holdings include the Court's statement that the CIT(A)'s allowance of agricultural income at Rs. 2,00,000/- per vigha was 'without any basis at all,' and the observation that 'considering the evidences/explanation of the assessee duly substantiated with evidences, by way of crop loan taken during the year as also the land holding of the assessee himself along with his family members,' the assessee is entitled to a greater allowance. The Court thereby established the principle that joint ownership and associated financial transactions must be duly considered in assessing agricultural income for explaining cash deposits, and that arbitrary restrictions or demands for formal agreements are not warranted.In conclusion, the Court partly allowed the appeal, directing that agricultural income to the tune of approximately Rs. 14,00,000/- be attributed to the cash deposits, reducing the addition correspondingly, while confirming the balance amount as unexplained income under sections 69A and 115BBE of the Income Tax Act.