2025 (4) TMI 283 - AT - Income Tax

Unexplained money u/s 69A - AO has not accepted the explanation of the assessee with regard to the claim of agricultural income and cash received on sale of Gold - HELD THAT - Assessee is deriving income from agricultural operations and the question is only what is the extent of agricultural income earned by the assessee for the AY 2015-16 and 2016-17. Since the assessee could not file relevant evidence including the extent of land holdings in our considered view going by the agricultural income declared for the AY 2017-18 a reasonable amount of the agricultural income needs to be considered for the purpose of source for cash deposit. Therefore out of total agricultural income claimed by the assessee for Rs. 9 lakhs we direct the AO to accept the explanation of the assessee for source to the extent of Rs. 4, 50, 000/-. In respect of errors in computation of opening cash in hand as on 1/4/2016 although the assessee has filed relevant evidences including bank account statement in our considered view the entire cash withdrawals cannot be considered as savings with the assessee. Therefore out of differential cash withdrawal of Rs. 7, 62, 500/- claimed by the assessee we direct the AO to allow source for the cash deposit to the extent of Rs. 3, 50, 000/- only. To sum up the assessee gets further relief of Rs. 4, 50, 000/- out of agricultural income of the AYs 2015-16 and 2016-17 and further relief of Rs. 3, 50, 000/- out of cash withdrawal of AY 2015-16 and in total the assessee gets relief of Rs. 8 lakhs. Therefore we direct the AO to allow further relief of Rs. 8 lakhs out of the additions sustained by the CIT(A) for Rs. 17, 06, 950/-. In other words out of the addition sustained by the CIT(A) the assessee gets relief of Rs. 8 lakhs and the balance addition of Rs. 9, 06, 950/- is sustained.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the additions made by the Assessing Officer (AO) regarding unexplained cash deposits during the demonetization period were justified.
• Whether the claim of agricultural income for Assessment Years (AY) 2015-16 and 2016-17, which was not accepted by the AO, should be considered valid.
• Whether the cash deposits claimed to be from the sale of Gold and cash withdrawals were adequately substantiated by the assessee.
• Whether the discrepancies in the computation of cash withdrawals and opening cash balance as stated by the AO were accurate.

ISSUE-WISE DETAILED ANALYSIS

1. Justification of Additions for Unexplained Cash Deposits

The legal framework involves Section 69A of the Income Tax Act, 1961, which deals with unexplained money. The AO initially accepted part of the explanation provided by the assessee for cash deposits, attributing them to gifts and opening cash balances. However, the AO did not accept the explanation for the remaining cash deposits, citing a lack of evidence for agricultural income and sales of Gold.

The Tribunal noted that the AO had accepted the assessee's explanation for Rs. 50,92,750/- but had treated Rs. 24,69,450/- as unexplained. The CIT(A) provided partial relief by accepting Rs. 7,62,500/- as explained, leaving Rs. 17,06,950/- as unexplained.

2. Validity of Agricultural Income Claims

The assessee claimed agricultural income of Rs. 9 lakhs for AYs 2015-16 and 2016-17, supported by Income Tax Returns (ITRs). The AO and CIT(A) did not accept this claim due to insufficient evidence, such as lack of documentation on land holdings.

The Tribunal recognized that the assessee derived income from agricultural operations, as evidenced by the accepted agricultural income for AY 2017-18. The Tribunal directed the AO to accept Rs. 4,50,000/- as a reasonable estimate of agricultural income for the previous years, based on the pattern of income for AY 2017-18.

3. Substantiation of Cash Deposits from Sale of Gold and Cash Withdrawals

The assessee claimed additional cash deposits from the sale of Gold and cash withdrawals. The AO did not accept the sale of Gold due to a lack of evidence. Regarding cash withdrawals, the assessee argued that there was a discrepancy in the AO's computation, claiming Rs. 15,91,200/- in withdrawals versus the AO's figure of Rs. 8,86,000/-.

The Tribunal considered the evidence provided, including bank statements, and determined that not all cash withdrawals could be treated as savings. It directed the AO to accept Rs. 3,50,000/- as explained from cash withdrawals, acknowledging the discrepancy but limiting the acceptance to a reasonable amount.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include:

• The Tribunal recognized the need for evidence to substantiate claims of income, yet it also acknowledged the practical difficulties in proving agricultural income without comprehensive documentation. It established that a reasonable estimation based on patterns in subsequent years could be applied.
• The Tribunal directed the AO to allow further relief of Rs. 8 lakhs, reducing the unexplained cash deposits to Rs. 9,06,950/-. This relief was based on a combination of agricultural income estimation and partial acceptance of cash withdrawals.
• Key legal reasoning included: "In our considered view, going by the agricultural income declared for the AY 2017-18, a reasonable amount of the agricultural income needs to be considered for the purpose of source for cash deposit."

The Tribunal's final determination was to partly allow the appeal, granting the assessee relief of Rs. 8 lakhs from the additions sustained by the CIT(A), thereby reducing the unexplained cash deposits to Rs. 9,06,950/-. This decision reflects a balanced approach, considering both the need for evidence and the practical realities of documenting certain types of income.