2025 (7) TMI 1434 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - unexplained cash deposits during the period of demonetization - assessee belongs to an agriculturist family and there is no other income other than the agricultural income - HELD THAT - Cash available with the assessee as per J Form and also taking into account the fact that some agricultural produce (derived from cultivation of 21.5 acres of agricultural land) which also must have been sold outside mandi and also considering that some expenses might have been incurred by the assessee for the months April to October 2016 we take a very logical view in this case and we are of the opinion that an amount of Rs. 8 (eight) lakhs will be available to the assessee for depositing in bank a/c during demonetisation period and as such we are of the opinion that out of the total deposit Rs. 9.50 lakhs in bank on 15.11.2016 the benefit of Rs. 8 lakhs is to be allowed (as explained and as such the addition is restricted to Rs. 1.50 (One Lakh Fifty Thousand) and the assessee gets consequential relief. Appeal of the assessee is partly allowed.

Summary

ISSUES:

Whether unexplained cash deposits during the demonetization period can be added to income under section 69A read with section 115BBE of the Income Tax Act, 1961.Whether the assessee's agricultural income is sufficient to explain the source of cash deposits made during the demonetization period.Whether non-compliance with notice issued under section 250 of the Income Tax Act, 1961, due to alleged sufficient cause, affects the confirmation of additions.Whether the absence of documentary evidence supporting agricultural income and related cash deposits justifies sustaining additions.Determination of the quantum of cash deposit that can be reasonably explained from agricultural income and related transactions during the demonetization period.

RULINGS / HOLDINGS:

The addition of Rs. 9,50,000/- under section 69A read with section 115BBE was partially sustained; however, the tribunal allowed Rs. 8,00,000/- of the deposit as explained from agricultural income, restricting the addition to Rs. 1,50,000/-.The court held that the declared agricultural income of Rs. 13.20 lakhs, supported by 'J' Forms and ownership of 21.5 acres of agricultural land, was "sufficient enough to cover the deposit of Rs. 9.50 lakhs" in the bank account during demonetization.Non-compliance with the notice under section 250 was noted but the tribunal did not allow this ground to negate the addition, as the assessee failed to provide timely explanations before the first appellate authority.The absence of detailed evidence regarding agricultural activities and cash flow was a factor for sustaining part of the addition, but the tribunal recognized that some agricultural produce was sold outside the mandi and expenses were incurred, allowing partial relief.The tribunal applied a "very logical view" considering the totality of facts and circumstances, including the timing and nature of cash deposits, to allow Rs. 8 lakhs as explained from agricultural income.

RATIONALE:

The tribunal applied the provisions of section 69A read with section 115BBE of the Income Tax Act, 1961, which deal with unexplained cash credits and deem such amounts as income if not satisfactorily explained.Reference was made to the principle that unexplained cash deposits during demonetization must be scrutinized carefully to uphold the "very purpose of Demonetization."Judicial precedents from coordinate benches and the jurisdictional High Court were considered, including the observation that in absence of detailed cash flow statements or expense particulars, assumptions about redepositing cash are not probable.The tribunal recognized that agricultural income can be a legitimate source of cash deposits if supported by documentary evidence such as 'J' Forms and land ownership records (jamabandi).The tribunal balanced the strictness of section 69A additions with practical realities of agricultural cash flows, acknowledging sales outside regulated markets and normal agricultural expenses, thereby adopting a partial allowance approach.