Agricultural income evidence defeats unexplained cash deposit addition, and the linked penalty falls with the deletion of the addition.

Cash deposits and bank credits supported by agricultural land records, sale invoices, produce invoices and prior agricultural income evidence could not be sustained as unexplained money under Section 69A of the Income-tax Act, 1961, because the documentary material established a plausible agricultural source and the lower authorities had not properly appreciated the cash flow evidence. The addition was therefore deleted. As the penalty under Section 271AAC(1) depended entirely on the sustained addition, it also failed once the quantum addition was set aside, and the penalty was deleted.

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Issues: (i) Whether the cash deposits and bank credits were rightly treated as unexplained money under Section 69A of the Income-tax Act, 1961. (ii) Whether the penalty levied under Section 271AAC(1) of the Income-tax Act, 1961 could survive once the addition was not sustained.

Issue (i): Whether the cash deposits and bank credits were rightly treated as unexplained money under Section 69A of the Income-tax Act, 1961.

Analysis: The assessee established that the deposits were linked to agricultural activity over substantial agricultural land, with supporting material such as sale invoices, produce invoices, land records, and prior agricultural income evidence. The Tribunal found that the authorities below considered only certain loan-related transfers and did not properly appreciate the agricultural cash flow and the documentary support for the source of deposits.

Conclusion: The addition treating the deposits as unexplained money was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether the penalty levied under Section 271AAC(1) of the Income-tax Act, 1961 could survive once the addition was not sustained.

Analysis: The penalty was dependent upon the sustenance of the underlying addition. Since the addition under Section 69A of the Income-tax Act, 1961 was deleted, the basis for the penalty disappeared.

Conclusion: The penalty did not survive and was deleted in favour of the assessee.

Final Conclusion: The assessee succeeded on both the quantum addition and the consequential penalty, and both appeals were allowed.

Ratio Decidendi: Where the source of bank deposits is supported by evidence of agricultural income and related records, the deposits cannot be sustained as unexplained money, and any penalty based solely on such addition falls with the deletion of the addition.

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