2025 (9) TMI 1251 - AT - Income Tax

Appeal allowed; Rs.2,35,000 addition deleted after cash books and SBN receipts accepted; soybean sale income on family land upheld

Machindra Baburao Suke Versus Income Tax Officer, Ward-5 (3), Pune

ITAT PUNE - AT allowed the appeal, deleting the Rs.2,35,000 addition after finding the assessee had sufficient cash-in-hand as shown by cash books and SBN ... Unexplained money/unexplained credit - AO made addition alleging that the source of cash deposit on 03.12.2016 in SBNs is not explained because the assessee did not have sufficient cash in hand. HELD THAT:- Before us assessee filed the details of cash book along with SBN details during November and December 2016 and after going through the same I find that the assessee had sufficient cash in hand to explain source of deposit of Rs. 2,35,000/-. Therefore, the impugned addition of Rs. 2,35,000/- is hereby deleted. Receipt of the alleged cash from its outstanding debtors during the demonetization period - Sundry Debtors are part and parcel of the regular business activity carried out by the assessee and AO has disputed receipt of such sum from the outstanding debtors merely referring to the demonetization period but no finding is made against the assessee by making the necessary verification of the debtors list filed before ld. AO. Find merit in the contention of ld. Counsel for the assessee. Assessee received the same from the outstanding debtors in SBNs during the demonetization period which were against the sales made for Petroleum products. Since the genuineness of the same is not in dispute,fail to find any justification in the addition made by ld. AO. Agricultural income - Assessee is engaged in Agricultural business and runs business on portion of Agricultural land. It has also been submitted that during June 2016 that assessee was carrying out farming of Soyabean in the Agricultural land owned by his family. Normally Soyabean crops grown 4 to 4 ½ months and sale is made directly to the local customers/transfers. After the crop is grown 4 to 4 ½ months ends in the months of October/November, 2016 and assessee has to make the sale of the Agricultural produce in the SBNs else the crop could have spoiled. Considering the submissions of the assessee and also considering the amount of income earned from Agricultural sources and the fact that ld. AO has not placed any tangible evidence on record to prove that the said receipts were not from Agricultural sources inspite of the fact that assessee has filed 7/12 extract showing the ownership of the Agricultural land by his father and sale of Soyabean produce, fail to find any consistency in the finding of ld.CIT(A) affirming the addition. Appeal filed by the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether delay of 214 days in filing the appeal before the Tribunal is liable to be condoned under the principle of 'reasonable cause'. 2. Whether addition of Rs. 2,35,000 as 'unexplained money' under section 69/69A read with section 115BBE is sustainable where cash book and SBN (Specified Bank Notes) entries for November-December 2016 are produced to show sufficiency of cash in hand. 3. Whether addition of Rs. 16,96,240 as unexplained cash credit under section 68 read with section 115BBE is sustainable where the assessee produced particulars of sundry debtors, audited accounts and the receipts were in SBNs during demonetisation and related to regular sales of business (petroleum products). 4. Whether addition of Rs. 1,65,900 as unexplained cash credit under section 68 read with section 115BBE is sustainable where the assessee declares agricultural income and produces 7/12 extract and explains that cash deposits relate to sale of agricultural produce (soyabean) harvested and sold during the demonetisation period. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay (214 days) Legal framework: Principles governing condonation of delay require demonstration of 'reasonable cause' preventing compliance with statutory limitation; judicial discretion guided by precedents emphasising justice and absence of wilful default. Precedent Treatment: The Tribunal relied upon authoritative Supreme Court principles on condonation of delay (as applied in earlier apex rulings) to evaluate 'reasonable cause'. Interpretation and reasoning: The Tribunal examined the application explaining causes of delay, heard both sides and applied established criteria - whether the cause is bona fide and reasonable and whether prejudice or gain would result from condonation. The Tribunal noted no gain to the appellant by delay and found the reasons satisfactory. Ratio vs. Obiter: Ratio - condonation granted because the facts constituted 'reasonable cause' and no prejudice or improper advantage resulted. This is a binding application of established principles to facts; not obiter. Conclusion: Delay of 214 days is condoned; appeal admitted for adjudication. Issue 2 - Addition of Rs. 2,35,000 as unexplained money (s.69/69A read with s.115BBE) Legal framework: Section 69/69A deals with unexplained cash/money where source is not satisfactorily explained; where unexplained and attributable to undisclosed income special tax provisions like section 115BBE may apply. Onus on assessee to explain source; assessment must rest on record and verification. Precedent Treatment: The Tribunal applied standard evidentiary approach - if books and contemporaneous records (cash book, bank/SBN entries) satisfactorily explain the source, addition cannot be sustained. No new precedent overruled or laid down. Interpretation and reasoning: AO disallowed on finding insufficient cash in hand. The assessee produced detailed cash book pages and SBN deposit particulars for the relevant period. On scrutiny, the Tribunal found records establish sufficient cash in hand to account for the SBN deposit of Rs. 2,35,000 on 03.12.2016. The AO made the addition without reconciling available cash records; therefore the addition lacked justification. Ratio vs. Obiter: Ratio - where contemporaneous cash records and SBN deposit particulars demonstrate sufficiency of cash, an addition under section 69/69A cannot be sustained. This is a factual-ratio for application in similar fact-situations. No obiter. Conclusion: Addition of Rs. 2,35,000 deleted. Issue 3 - Addition of Rs. 16,96,240 as unexplained cash credit (s.68 read with s.115BBE) Legal framework: Section 68 addresses unexplained cash credits - where assessee must satisfactorily explain nature and source of entries shown as credit in books. For business receipts from debtors, production of debtor ledger, invoices, accounts and consistency with trading operations are relevant; mere timing (receipt during demonetisation) is not, by itself, a ground for rejection if genuineness is not controverted. Precedent Treatment: The Tribunal followed the principle that AO must undertake verification of parties and evidence beyond temporal coincidence; unverified suspicion based solely on demonetisation timing is insufficient to treat genuine business receipts as unexplained credits. Interpretation and reasoning: AO treated receipts from sundry debtors during demonetisation as unexplained without conducting any verification of the debtor list submitted. Assessee produced list of debtors, audited balance sheet and P&L, and the receipts corresponded to regular business (petroleum sales). The Tribunal found genuineness of transactions not disputed and noted absence of tangible adverse material from AO; in those circumstances treating sundry-debtor receipts as unexplained solely because they were received in SBNs was unjustified. Ratio vs. Obiter: Ratio - unexplained credit under section 68 cannot be sustained where receipts are in relation to regular business, supported by books, audited accounts and debtor particulars, and where AO fails to perform verification or produce contradictory evidence. This forms a factual-legal ratio applicable where genuineness is not controverted. Conclusion: Addition of Rs. 16,96,240 deleted; Commissioner (Appeals) finding reversed on this point. Issue 4 - Addition of Rs. 1,65,900 as unexplained cash credit purportedly from agricultural income (s.68 read with s.115BBE) Legal framework: Agricultural income exemption and explanation of cash deposits require proof of nexus between deposit and agricultural receipts. Documentary evidence such as 7/12 extract, contemporaneous sale realization, explanation of crop cycle and manner of sale are relevant to establish source. AO bears burden to show receipts are not from declared agricultural source where supporting documents are filed. Precedent Treatment: The Tribunal applied established approach that cash deposits claimed to be agricultural receipts must be rejected only if AO adduces tangible contrary evidence; mere suspicion or formality is insufficient. Interpretation and reasoning: Assessee filed 7/12 extract showing family ownership of agricultural land and submitted explanation that soyabean crop (4-4½ months cycle) matured and had to be sold in Oct/Nov 2016, resulting in cash receipts in SBNs on 02.12.2016 to avoid spoilage. The AO did not produce tangible evidence disproving agricultural origin. Taking into account the declared agricultural income figure and supporting documents, the Tribunal found the addition unsupported by material evidence and inconsistent with the AO/CIT(A) findings. Ratio vs. Obiter: Ratio - where assessee produces contemporaneous documentary evidence (e.g., 7/12 extract), a plausible crop cycle explanation and declared agricultural income, an addition under section 68 alleging agricultural receipts to be unexplained cannot be sustained unless AO adduces positive contrary material. This is a factual-legal ratio. Conclusion: Addition of Rs. 1,65,900 deleted. Composite Conclusion The Tribunal held that all three impugned additions (Rs. 2,35,000; Rs. 16,96,240; Rs. 1,65,900) were unjustified on the material on record and deleted the total addition of Rs. 20,97,140. Remaining grounds were declared academic/infructuous. Appeal allowed.