2023 (11) TMI 978 - AT - Income Tax

Unexplained money taxable u/s. 69 - unexplained cash deposits in specified bank notes during demonetization period - extent of land held by the assessee and deriving income from agricultural operations during demonetization period - HELD THAT - When the assessee is having sufficient land holding and also proved carrying out agricultural operations, then in our considered view the AO ought to have accepted the explanation of the assessee regarding source of income for cash deposits during demonetization period, more particularly when the Assessing Officer has accepted partial explanation of the assessee and allowed relief to the extent of Rs. 2,50,000/- towards cash deposits during demonetization period. Just because, the assessee did not file his return of income for earlier assessment years, the available source in the form of agricultural income cannot be disputed . The filing of return in earlier years is hardly depending upon the taxable income of the assessee for those assessment years. In case the assessee does not have any taxable income, he need not to file income tax returns for those assessment years, even if he had earned agricultural income. Therefore, rejection of explanation furnished by the assessee, by the AO on the basis of non-filing of income tax return for earlier period is not acceptable. Coming back to the evidences filed by the assessee in support of claim for source for cash deposits. Although, the assessee claims to have filed details of land holding, cash receipts for sale of agricultural products, but could not file complete details to explain cash deposits of Rs. 11,54,500/-. Since, neither the AO nor the assessee could prove their case with relevant evidences and reasons, we are of the considered view that the only option left with us is to settle the dispute between the assessee and the Assessing Officer, by estimating source for cash deposits during demonetization period. We, therefore considering the extent of land held by the assessee and other evidences filed during the course of assessment proceedings, we are of the considered view that, credit for agricultural income to the extent of Rs. 6,54,500/- needs to be given to the assessee. Thus, we direct the Assessing Officer to allow credit for source to the extent of Rs. 6,54,500/- out of agricultural income earned by the assessee for the impugned assessment year and balance amount of Rs. 5,00,000/- to be treated as unexplained money taxable u/s. 69 of the Act. Assessee gets partial relief .

Summary

Issues Involved:
The judgment involves issues related to the addition of cash deposits in the bank account during the demonetization period, the applicability of Section 68 of the Income-tax Act, 1961, and the determination of tax liability under Section 115BBE of the Act.

Issue 1: Addition of Cash Deposits
The appellant, a Chartered Accountant, declared income from various sources including agricultural activities. The Assessing Officer (AO) noted significant cash deposits during demonetization and questioned the source. The appellant provided evidence of agricultural income from nursery activities but was not satisfied with the explanation. The AO made additions under Section 69 of the Act, which was upheld by the Commissioner of Income Tax (Appeals) (CIT(A)). The appellant contended that the AO erred in disregarding the agricultural operations and land holdings, and the non-filing of previous returns should not lead to adverse inferences. The Tribunal observed that the AO did not dispute the appellant's land holdings or agricultural activities. Considering the evidence presented, the Tribunal directed the AO to credit Rs. 6,54,500 as agricultural income, with the balance treated as unexplained money taxable under Section 69.

Issue 2: Applicability of Section 68 and Section 115BBE
The appellant argued against the application of Section 68 and Section 115BBE to the case, stating that the provisions were not applicable. The Tribunal noted the appellant's claim of receiving cash from agricultural product sales and the AO's partial acceptance of the explanation. While the appellant could not provide complete details for all cash deposits, the Tribunal estimated a credit of Rs. 6,54,500 as agricultural income. The balance of Rs. 5,00,000 was treated as unexplained money taxable under Section 69. The Tribunal partially allowed the appeal, providing relief to the appellant on the cash deposit issue.

Separate Judgment:
The judgment was delivered by the Appellate Tribunal ITAT Chennai, with Shri Manjunatha G presiding as the Hon'ble Accountant Member. The appeal was directed against the order of the Commissioner of Income-tax (Appeals) pertaining to the assessment year 2017-18. The Tribunal considered the evidence presented by the appellant regarding agricultural income and land holdings, ultimately granting partial relief by crediting a portion of the cash deposits to agricultural income and upholding the tax liability on the remaining unexplained amount. The decision was pronounced in Chennai on 11th August 2023.