Explained cash deposits and rural agricultural land evidence defeated additions under section 68 and capital gains treatment.

Cash deposits during demonetisation were held to be explained where supported by prior withdrawals, cash flow statements and books of account, with no adverse material from the Revenue; the section 68 addition was deleted. Land sold was accepted as rural agricultural land outside the definition of capital asset because documentary evidence, including the Tehsildar's certificate and distance material, showed it lay beyond municipal limits; the capital gains addition was deleted. Declared agricultural income was also accepted as genuine because no enquiry or contrary evidence discredited it, so that addition too was deleted.

---

---

Issues: (i) whether cash deposits made during the demonetisation period could be treated as unexplained income under section 68; (ii) whether the land sold was a rural agricultural land outside the ambit of capital asset under section 2(14); (iii) whether the addition made by treating the declared agricultural income as non-genuine was sustainable.

Issue (i): Whether cash deposits made during the demonetisation period could be treated as unexplained income under section 68.

Analysis: The assessee had withdrawn cash before the demonetisation window and supported the deposits with cash flow particulars and books of account. The appellate authority found no serious defect in the books and no material to discredit the explanation that the cash on hand was redeposited within the permitted period after demonetisation. The Tribunal accepted that the deposits were backed by available cash and that the Revenue had not shown any contrary material.

Conclusion: The addition under section 68 was rightly deleted and is not sustainable.

Issue (ii): Whether the land sold was a rural agricultural land outside the ambit of capital asset under section 2(14).

Analysis: The assessee produced documentary evidence including the Tehsildar's certificate, map-based distance material and additional evidence under Rule 46A to show that the land was beyond the prescribed municipal limits. The Assessing Officer did not file any remand report to rebut the evidence. The Tribunal accepted the finding that the distance placed the land outside the definition of capital asset and noted that similar group cases had already been decided in favour of the assessee on identical facts.

Conclusion: The addition towards long-term capital gain was rightly deleted and is not sustainable.

Issue (iii): Whether the addition made by treating the declared agricultural income as non-genuine was sustainable.

Analysis: The assessee's declaration of agricultural income was not disproved by any adverse material or enquiry, and the appellate authority recorded that the assessee had declared net agricultural income. The Tribunal found no basis to interfere with that factual finding.

Conclusion: The addition on account of agricultural income was rightly deleted and is not sustainable.

Final Conclusion: The Revenue's challenge failed on all counts, and the relief granted by the first appellate authority was affirmed in full.

Ratio Decidendi: Where cash deposits are supported by contemporaneous cash withdrawals and an un-rebutted cash flow, and where documentary evidence establishes that land sold is rural agricultural land beyond municipal limits, additions under section 68 and as capital gains cannot be sustained in the absence of contrary material.

---