2022 (7) TMI 378 - AT - Income Tax

Unexplained cash deposit - whether the assessee had sufficient sources to prove cash-deposits made in the bank accounts or not? - HELD THAT - On perusal of various evidences placed by Ld. AR, we find that the assessee has received so much of recognition, awards and certificates from the Government or Governmental authorities in appreciation of agricultural activities done by him. We also observe that the assessee has submitted Bills/Vouchers and also submitted he had made sale of crops directly to ultimate consumers for which the evidences could not be maintained. We find much weightage in the submission of assessee. This submission of assessee finds direct support from Smt. Annakkalanjiam Mathivanan 2019 (3) TMI 259 - ITAT CHENNAI - Therefore, the assessee's submission deserves credence and acceptance. Secondly, we also observe that the assessee has made a total cash-withdrawals from his bank accounts during the year from time to time and therefore moneys were available with the assessee for making cash-deposits. On perusal of the bank-statements placed in the paper-book, we observe that the cash-withdrawals and cash-deposits have been made on various dates during the year and the pattern is such that re-deposits out of cash-withdrawals is possible. Thirdly, we also find that the assessee is having agriculture as sole source of income and there is no other source of income brought on record by Ld. AO. Since agricultural income is fully exempt, the assessee does not have any taxable income and therefore the addition u/s. cannot be made - Appeal of assessee allowed.

Summary

Issues Involved:
1. Addition to the income of the assessee on account of unexplained cash deposit.
2. Treatment of agricultural income as unexplained cash deposit.

Detailed Analysis:

Issue 1: Addition to the income of the assessee on account of unexplained cash deposit

The appeal pertains to the order dated 25.11.2021 by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre, which upheld the assessment order dated 17.12.2019 by the Income Tax Officer, Harda. The assessment was conducted under section 144 of the Income-tax Act, 1961 for the Assessment Year 2017-18. The primary issue was the addition of Rs. 9,42,063/- to the income of the assessee due to unexplained cash deposits.

The assessee, an agriculturist, deposited Rs. 15,06,678/- during the demonetization period and Rs. 33,91,841/- throughout the year in various bank accounts. The assessee claimed these deposits were from agricultural income, supported by bills, vouchers, and other documents. However, the Assessing Officer (AO) found that the evidence only supported Rs. 24,49,778/- of the deposits, leaving Rs. 9,42,063/- unexplained, and thus added this amount to the total income under section 69A.

During the faceless appellate proceeding, the Commissioner of Income-Tax (Appeals) issued notices to the assessee, who did not respond, leading to the confirmation of the AO's addition.

Before the Tribunal, the Authorized Representative (AR) argued that the assessee was a full-time agriculturist with limited knowledge of tax laws and no legal counsel. The AR highlighted the assessee's agricultural credentials and provided additional evidence, including certificates and media recognition, to substantiate the agricultural income claim. The AR also argued that part of the deposits came from cash withdrawals from the same bank accounts, which were re-deposited.

Issue 2: Treatment of agricultural income as unexplained cash deposit

The AR emphasized that the agricultural sector in India is unorganized, making it difficult to maintain complete documentation for all sales, especially those made directly to consumers. The AR cited the ITAT Chennai's decision in Smt. Annakkalanjiam Mathivanan, which acknowledged the challenges in producing bills for all agricultural sales.

The AR argued that the assessee had provided substantial evidence for Rs. 24,49,148/- of the deposits and that the remaining Rs. 9,42,063/- should be considered explained due to the nature of agricultural operations and the re-deposit of cash withdrawals. The AR also cited the ITAT Indore's decision in ITO Vs. Smt. Shahnaj Bano, which held that no addition could be made if the only source of income was agricultural, as agricultural income is non-taxable.

Tribunal's Findings:

The Tribunal considered the submissions and evidence, noting the assessee's recognition and awards in agriculture. It found the explanation for the unaccounted cash deposits plausible, given the unorganized nature of the agricultural sector and the re-deposit of cash withdrawals. The Tribunal observed that the AO had not identified any other source of income for the assessee and that agricultural income is non-taxable.

Conclusion:

The Tribunal concluded that the addition of Rs. 9,42,063/- under section 69A was not sustainable and deleted the addition, allowing the assessee's appeal. The order was pronounced on 28.06.2022.