MADHAVA REDDY TALASANI,MAHBUBNAGAR vs. ITO, WARD-1, MAHBUBNAGAR

The brief facts of the case are that the assessee is an individual who had not filed any return of income for Assessment Year 2016-17. Based on information available with the Learned Assessing Officer (“Ld. AO”), it came to his notice that during the year under consideration the assessee had deposited cash in his bank accounts. Accordingly, after passing an order under section 148A(d) of the Income-tax Act, 1961 (“the Act”) dated 31.03.2023, the case of the assessee was reopened under section 147 of the Act, and notice under section 148 dated 31.03.2023 was issued. In response to the notice issued under section 148 of the Act, the assessee filed his return of income on 13.06.2023 declaring total income of ₹13,060/-. During the reassessment proceedings, the Ld. AO noticed that the assessee had deposited cash of ₹14,24,000/- in his Andhra Bank account and ₹7,29,000/- in his Canara Bank account during the relevant previous year. The assessee was called upon to explain the source of the said cash deposits. Not being satisfied with the explanation furnished by the assessee, the Ld. AO treated the entire cash deposits of ₹14,24,000/- and ₹7,29,000/- as unexplained investments under section 69 of the Act and completed the assessment under section 147 read with section 144B of the Act vide order dated 08.01.2024, assessing the total income of the assessee at ₹21,66,060/-. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) granted relief of ₹4,00,000/- out of the addition of ₹14,24,000/- and sustained the balance addition of ₹10,24,000/- relating to cash deposits in Andhra Bank. The Ld. CIT(A) also sustained

With regard to the second issue relating to the addition of ₹7,29,000/- towards deposit of cash in the Canara Bank account, the Ld. AR submitted that the cash deposits represented repayments of loans earlier advanced by the assessee to three persons. Inviting our attention to para no. 3 at page no. 4 of the assessment order, he submitted that the Ld. AO rejected the explanation on the ground that the assessee had failed to furnish PAN, bank statements and income-tax particulars of the concerned persons and had also failed to furnish details of loans advanced. The Ld. AR submitted that the observation of the Ld. AO regarding non- furnishing of PAN details is factually incorrect. In this regard, he invited our attention to page no.165 of the paper book where PAN details of all the three persons are placed on record and submitted that the same were also submitted before the Ld. AO. He submitted that despite availability of PAN details, no enquiry was conducted by the Ld. AO from the concerned persons. The Ld. AR further submitted that the assessee has now filed affidavits from all the three persons affirming that they had received loans from the assessee and repaid the same during the year under consideration. Along with the affidavits, the assessee has also filed a petition seeking admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 (“the Rules”). It was submitted that the affidavits go to the root of the matter and are necessary for proper adjudication of the issue. Accordingly, it was prayed that the additional evidence be admitted and the issue be restored to the file of the Ld. AO for fresh adjudication.

Per contra, with regard to the addition of ₹10,24,000/- sustained on account of cash deposits in Andhra Bank account, the Learned Departmental Representative (“Ld. DR”) submitted that the assessee merely claimed that the deposits represented past savings from agricultural activities but failed to furnish any working or documentary evidence showing accumulation of such savings over the years. He submitted that although the assessee furnished evidence regarding ownership of agricultural land and certain purchase invoices for seeds and pesticides, no evidence was produced regarding actual cultivation, agricultural produce generated, sale of agricultural produce or the accumulation of savings. Therefore, according to the Ld. DR, the assessee failed to substantiate his claim and the addition sustained by the Ld. CIT(A) deserves to be upheld. 9. With regard to the addition of ₹7,29,000/- relating to cash deposits in Canara Bank account, the Ld. DR submitted that except for filing certain details, the assessee had not furnished sufficient evidence before the lower authorities to establish the identity and creditworthiness of the persons concerned and the genuineness of the transactions. Accordingly, the addition was rightly sustained. However, in the alternative, the Ld. DR fairly submitted that since the PAN details furnished by the assessee before the Ld. AO do not appear to have been examined and the affidavits now filed by the assessee require verification, he would have no objection if the issue is restored to the file of the Ld. AO for proper examination and fresh adjudication.

We have heard the rival submissions and perused the material available on record. The first issue of the assessee relates to the addition of ₹10,24,000/- sustained on account of cash deposits in Andhra Bank account. We find from the material available on record that the assessee has placed on record a certificate issued by the concerned Tahsildar evidencing ownership of agricultural land. The assessee has also filed purchase invoices relating to seeds, fertilizers and pesticides. In our considered view, once such evidences are available on record, the engagement of the assessee in agricultural activities cannot be entirely denied. At the same time, we find merit in the contention of the Revenue that the assessee has not produced sufficient evidence demonstrating accumulation of past savings from agricultural income. Mere ownership of agricultural land and purchase of agricultural inputs do not automatically establish that the cash deposits under consideration represented accumulated savings from agricultural operations carried on in earlier years. Considering the totality of facts and circumstances of the case, we are of the view that the matter requires fresh examination at the level of the Ld. AO. Accordingly, the issue relating to the addition of ₹10,24,000/- is set aside to the file of the Ld. AO with liberty to the assessee to substantiate the claim of accumulation of past savings by producing adequate evidence, including details of agricultural income earned in earlier years, expenditure incurred, savings accumulated year-wise and such other supporting material as may be available. 11. The second issue of the assessee relates to the addition of ₹7,29,000/- sustained on account of cash deposits in Canara Bank account. We find that it is an undisputed fact

In the result, the appeal of the assessee is allowed for statistical purposes.