Cash deposits during demonetisation accepted as explained; addition under s. 69A deleted based on agricultural income, crop loan

The ITAT Amritsar allowed the assessee's appeal and deleted the addition made as unexplained money under s. 69A in respect of cash deposits during the demonetization period. The Tribunal found, on facts, that substantive agricultural activities were carried on by the assessee, generating agricultural income, and that the assessee had earlier withdrawn Rs. 30 lakhs in cash from a sanctioned crop loan. Even assuming part of the withdrawal was used for agricultural expenses, the Tribunal held that the remaining unutilized cash, together with agricultural income up to November 2016, satisfactorily explained the Rs. 26.73 lakhs deposited.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the cash deposit of Rs. 26,73,000 made during the demonetization period in the assessee's agricultural credit account constituted "unexplained money" liable to addition under Section 69A of the Income-tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition under Section 69A in respect of cash deposit of Rs. 26,73,000 during demonetization

(a) Legal framework (as noticed and applied by the Tribunal)

2.1 The Tribunal proceeded on the basis that under Section 69A, the onus initially lies on the assessee to offer a satisfactory explanation regarding the nature and source of money found to be in his possession, and that once a plausible and supported explanation is furnished, the Revenue must bring adverse material to rebut such explanation before treating the sum as "unexplained money".

(b) Interpretation and reasoning

2.2 The Tribunal noted that the assessee was an agriculturist with seven acres of self-owned agricultural land and additional agricultural land taken on lease (17 acres from one lessor and 11.63 acres from another), and that the assessee's only claimed source of income was agricultural activities.

2.3 The Tribunal recorded that the assessee held an agricultural credit/crop loan account with a bank, that a working limit of Rs. 30 lakhs had been sanctioned on hypothecation of crops, and that on 26.04.2016 the assessee withdrew Rs. 30 lakhs in cash from this account; thereafter on 10.11.2016 he deposited Rs. 26,73,000 in cash in the same bank account during the demonetization period.

2.4 The Tribunal took into account documentary evidences produced and certified as filed before the lower authorities and the bank, namely: (i) crop loan sanction and hypothecation agreement showing land details and crop financing; (ii) agreements/records evidencing leasehold agricultural land; (iii) copies of J-Forms evidencing sale of agricultural produce; and (iv) copies of fard jamabandi evidencing landholding and agricultural use.

2.5 On appreciation of these documents, the Tribunal concluded that agricultural activities were "indeed carried out" by the assessee and that he "also derives income from agriculture", and further that the cash withdrawal of Rs. 30 lakhs formed part of the sanctioned crop loan facility.

2.6 The Departmental Representative contended that the cash of Rs. 30 lakhs withdrawn in April 2016 must have been utilized for agricultural expenses and therefore could not be available in full for redeposit in November 2016, but did not dispute or question the evidences of landholding, lease arrangements, jamabandi, J-Forms and agricultural operations produced by the assessee.

2.7 The Tribunal reasoned that, even if it were assumed that a part of the Rs. 30 lakhs withdrawn in April 2016 was utilized towards agricultural expenditure, the income from agricultural activities generated up to November 2016 would also be available as cash with the assessee. On a combined consideration of (i) the unutilized portion of the April 2016 withdrawal and (ii) the agricultural income earned during the relevant period, the Tribunal held that the explanation for the deposit of Rs. 26,73,000 was reasonable and consistent with the proved factual matrix.

2.8 The Tribunal emphasized that the assessee did not maintain books of account and that in such a case, where existence of substantial landholdings and actual agricultural operations stood proved "beyond doubt", a "reasonable and logical view" ought to be taken as to the availability of agricultural income and earlier withdrawals to explain the cash deposit, particularly in the absence of any material brought by the Revenue to show diversion or different utilization of the withdrawn cash.

(c) Conclusions

2.9 The Tribunal held that the source of the cash deposit of Rs. 26,73,000 in the assessee's bank account during the demonetization period was satisfactorily explained as having arisen partly from the cash withdrawn (Rs. 30 lakhs) from the same bank account on 26.04.2016 and partly from agricultural income earned during April to November 2016.

2.10 The Tribunal found that the Revenue had not discharged the onus of disproving or rebutting the assessee's explanation, nor had it produced any material to show that the cash withdrawn had been spent elsewhere or that agricultural income as claimed was not available.

2.11 Consequently, the addition of Rs. 26,73,000 made under Section 69A as unexplained money was deleted, and the assessee's appeal was allowed.

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