Addition under s.69 deleted as agricultural cash deposits proved to belong to daughter via unchallenged affidavits

ITAT Chandigarh-AT allowed the assessee's appeal and deleted the addition u/s 69 for alleged unexplained cash deposits. It held that the assessee's ownership of agricultural land and the conduct of agricultural operations were undisputed, and the cash deposits in the joint bank account were credibly explained as agricultural proceeds belonging to the assessee's daughter, supported by uncontroverted affidavits. ITAT ruled that, absent any cross-examination or contrary evidence, such affidavits carry evidentiary weight and cannot be rejected on mere suspicion or for want of mandi receipts. Since the deposits were shown to belong to another identifiable person, the statutory preconditions for invoking s.69 were not satisfied.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether cash deposits of Rs. 12,00,000/- in a joint bank account could be treated as unexplained investment under section 69 in the hands of the assessee.

1.2 Whether the assessee's explanation that the deposits represented agricultural receipts belonging to her daughter, supported by uncontroverted affidavits, was sufficient to discharge the onus and exclude the application of section 69.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Addition under section 69 on account of cash deposits in a joint bank account; effect of agricultural income explanation and uncontroverted affidavits

Legal framework (as discussed)

2.1 The Tribunal proceeded on the legal requirements of section 69 of the Income-tax Act, 1961, namely that the provision is a deeming fiction applicable where an "investment" is found to be that of the assessee and the assessee offers no satisfactory explanation about its nature and source.

2.2 The Tribunal relied upon the principle laid down by the Supreme Court in CIT v. Daulat Ram Rawatmull that ownership of money cannot be presumed on suspicion or conjecture and that the burden is on the Revenue to establish that the money belongs to the assessee before applying the deeming provision.

2.3 The Tribunal also reiterated the settled principle that "suspicion, however strong, cannot take the place of proof" and recognised that an uncontroverted affidavit carries evidentiary value and cannot be brushed aside without cross-examination or contrary material.

Interpretation and reasoning

2.4 The Tribunal noted as undisputed that the assessee owned agricultural land, supported by registered ownership documents and revenue records (jamabandi/fard), and that both the Assessing Officer and the first appellate authority had accepted such ownership.

2.5 The controversy was confined to the nature and ownership of cash deposits of Rs. 12,00,000/- in a joint bank account held by the assessee and her daughter, and whether these deposits constituted unexplained investment of the assessee.

2.6 The assessee's consistent explanation was that the deposits belonged to her daughter, who managed and cultivated the agricultural land, and that the cash represented agricultural receipts arising through a third party (Sh. Gurjit Singh) who cultivated the land on a hire-purchase basis and paid Rs. 12,00,000/- in cash from sale proceeds.

2.7 The Tribunal particularly examined the affidavits of (i) the daughter, affirming that she alone operated the bank account and that the deposits were her own funds from agricultural activities, and (ii) Sh. Gurjit Singh, affirming that he had taken the land on hire-purchase, cultivated it, and paid Rs. 12,00,000/- in cash to the daughter out of crop sale proceeds.

2.8 It was emphasised that these affidavits were never rebutted or discredited by the Department-no cross-examination was conducted and no contrary evidence was brought on record. The Tribunal held that, in such circumstances, the affidavits possess evidentiary value and cannot be rejected merely on surmise.

2.9 The Tribunal observed that the first appellate authority, despite accepting ownership of agricultural land and even recognising the plausibility of agricultural operations by granting estimated relief of Rs. 1,00,000/-, had rejected the assessee's fuller explanation mainly due to non-production of mandi receipts, sale bills, or formal lease documentation.

2.10 The Tribunal held that once ownership of agricultural land and the possibility of agricultural operations were accepted, the explanation could not be discarded solely for want of mandi receipts, particularly in the context of small-village, cash-based agricultural transactions where formal documentation is often absent.

2.11 On the scope of section 69, the Tribunal reasoned that the deeming fiction applies only if the investment is shown to belong to the assessee and its source is unexplained. In the present case, the assessee had positively identified the source and owner of the deposits as another identifiable person (the daughter, receiving funds from Sh. Gurjit Singh), and this explanation was not disproved by the Revenue.

2.12 Applying the ratio of Daulat Ram Rawatmull, the Tribunal held that the Revenue could not presume that the money belonged to the assessee merely on suspicion arising from the fact that the bank account was joint, when the assessee's explanation and supporting affidavits remained unrebutted.

2.13 The Tribunal therefore concluded that the foundational requirement for invoking section 69-establishing that the deposits constituted unexplained investment of the assessee-was not satisfied. The addition was found to rest on presumptions and not on positive, cogent material linking the assessee to the cash as her own unexplained investment.

Conclusions

2.14 The Tribunal held that, in view of the uncontroverted affidavits, accepted ownership of agricultural land, plausibility of agricultural operations, and lack of any contrary evidence, the Department failed to discharge its burden of proving that the deposits represented unexplained investments of the assessee.

2.15 It was held that mere non-production of mandi receipts or formal sale/lease documents could not, in the facts, outweigh the evidentiary value of unrebutted affidavits and the accepted factual substratum.

2.16 The Tribunal concluded that the conditions for application of section 69 were not met and that the addition sustained by the first appellate authority was based on suspicion rather than proof.

2.17 The order of the first appellate authority sustaining the addition of Rs. 11,00,000/- under section 69 was set aside, and the Assessing Officer was directed to delete the entire addition. The appeal of the assessee was allowed.

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