MR. RAVINDRANATH SHETTY,MANGALURU vs. INCOME TAX OFFICER, WARD-2(4), MANGALURU

This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 20/12/2024 in DIN No. ITBA/NFAC/ S/250/2024-25/1071405031(1) for the assessment year 2014-15.

The issue raised by the assessee relates to the sources of cash deposit which was treated as unexplained money under section 69A of the Act. The assessee deposited cash of ₹69,60,000 in different bank accounts during the year. The assessee explained that the sum of ₹37,01,000 came from retirement withdrawals and the balance from agricultural income. The Assessing Officer accepted retirement withdrawals only to the extent of ₹33,16,500 and treated the balance of ₹36,43,500 as unexplained money u/s 69A of the Act. The ld. CIT(A) confirmed this addition.

Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.

The Learned Authorised Representative (AR) submitted that the assessee holds 2.27 acres of land and his family members hold 10.75 acres. On these lands crops and rubber trees were cultivated. The proceeds from such sales were deposited in the bank accounts.

As per the ld. AR the agricultural sector is largely unorganized. Farmers often do not keep detailed accounts. It is difficult to obtain confirmations from buyers, especially when sales are made in local markets. In the absence of confirmation, the AO and ld. CIT(A) wrongly assumed that non-declaration of agricultural income in earlier years meant no agricultural income existed. This is only a doubt but cannot be a conclusive ground to reject the claim. Benefit of doubt must go to the assessee, as supported by judicial precedents that emphasize substance over form in agricultural income cases.

On the other hand, the Learned Departmental Representative (DR) supported the orders of the AO and CIT(A). He submitted that the assessee did not declare any agricultural income in earlier years or in subsequent years. The claim was made only when explanation for cash deposits was sought. Notices issued by the AO to alleged purchasers . were either returned unserved or no replies were furnished. Hence, the genuineness of the claim was not proved. Retirement withdrawals were already allowed by the AO. The balance was rightly treated as unexplained. Therefore, the addition u/s 69A of the Act should be confirmed.

We have considered the rival submissions and examined the record. The AO has already allowed retirement withdrawals to the extent of ₹33,16,500. The dispute relates to the balance claimed as agricultural income. It is true that the assessee did not declare agricultural income in the return for this year, nor in earlier or later years. This creates a doubt on the claim. However, it cannot be taken as conclusive proof that no agricultural income was earned. Many small agriculturists do not declare such income regularly. The agricultural sector is disorganized, and often transactions are carried out in cash without proper bills or records.

In result, the appeal of the assessee is allowed.