MOHMMADHAROON BABUBHAI SHAIKH,AHMEDABAD vs. ITO WARD-1(1)(2), AHMEDABAD, AHMEDABAD

2.3 It is settled law that a litigant does not stand to benefit by lodging an appeal late. Refusing to condone delay can result in a meritorious matter being thrown out. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, there is no mala fide intention, no dilatory conduct, and no material prejudice shown to the Revenue due to this delay. In the interest of advancing justice, we are satisfied that sufficient cause has been shown to condone the delay. Accordingly, the delay of 373 days in filing the appeal is hereby condoned, and the appeal is admitted for hearing on merits.

3.2 In response to queries raised by the AO, the assessee submitted that he had an opening cash balance of Rs.10,98,289/- as on 01.04.2016, which, along with seasonal agricultural sales of paddy harvested during monsoon (August–September), formed the source of the impugned cash deposits. The assessee submitted a copy of his balance sheet for F.Y. 2015– 16 and also furnished his HDFC Bank account statement. It was further contended that the family of four persons managed on monthly withdrawals of Rs.17,000/-, and cash was deposited in tranches to avoid the risk of carrying large sums at once.

3.3 The Assessing Officer, however, rejected the explanation furnished by the assessee, holding that the balance sheet produced was not part of the ITR for A.Y. 2016–17 and no cash book or bank statements for F.Y. 2015– 16 were produced to substantiate the availability of such large cash on hand. The AO also noted that during F.Y. 2015–16, the assessee had deposited Rs.33,66,000/- in his bank accounts and hence, the availability of cash on hand as on 31.03.2016 appeared improbable. Further, the AO noted that the assessee had regular banking habits, maintaining at least three bank accounts with frequent withdrawals ranging from Rs.5,000/- to Rs.1,00,000/-, and was unlikely to hoard cash. The claim of agricultural sales during September–October 2016 was also disputed on the basis of local agronomic data indicating paddy harvesting in Gujarat typically occurs during late October to November. The assessee’s own sales chart for F.Ys. 2014–15 and 2015–16 revealed major sales during November– December, thereby negating the asserted September–October sales. The AO also noted that the assessee paid credit card dues of Rs.10,30,100/- during the year, for which no source was explained, thereby weakening the claim of availability of cash for deposits. Concluding that the source of Rs.12,05,500/- deposited during the demonetisation period remained unexplained, the AO invoked section 68 and taxed the amount at special rate under section 115BBE. Penalty proceedings under section 271AAC were separately initiated.

3.4 The assessee preferred an appeal before the CIT(A), NFAC. The appellate proceedings were conducted by issuance of notices dated 28.01.2021, 13.09.2023, and 29.09.2023 under section 250. However, the assessee failed to respond or file any written submissions. The CIT(A) proceeded ex parte on merits, noting that the appellant had not sought adjournment nor explained non-compliance. Placing reliance on the judicial precedents, the CIT(A) held that a litigant must pursue their appeal diligently. Finding no cause to interfere, the CIT(A) confirmed the addition made by the AO and dismissed the appeal in limine.

4.1 During the course of hearing, the learned Authorised Representative (AR) of the assessee reiterated the factual background and submitted that the assessee is engaged in agricultural activity and has been consistently depositing cash into his bank accounts post-harvest season, particularly during the months of November and December every year, which corresponds to the sale cycle of agricultural produce such as paddy and wheat. Drawing the attention of the Bench to page no. 98 of the paper book, the AR referred to the assessee’s written submission dated 14.12.2019 placed before the AO, enclosing year-wise data of cash deposits made in the months of November and December for three years. It was submitted that the assessee deposited Rs.14,55,000/- in A.Y. 2015–16, Rs.22,00,000/- in A.Y. 2016–17, and Rs.12,05,500/- in A.Y. 2017–18. This pattern, it was argued, evidences a consistent trend of post-harvest liquidity inflow and is a routine feature of the assessee’s agricultural operations. The AR submitted that the demonetisation period (08.11.2016 to 31.12.2016) overlapped with the assessee’s customary period of depositing cash from agricultural sales, and the deposit of Rs.12,05,500/- during this period was, in fact, lower than the cash deposits made in the preceding two assessment years during the same time frame. The AR argued that far from being abnormal, the demonetisation year deposit was the lowest among the three, and thus no adverse inference should be drawn.

4.2 In support of the source of funds, the assessee submitted copies of land records (gram utara 7/12 and 8A) evidencing ownership of approximately 43,043 sq. meters of agricultural land forming part of total cultivable area of 1,29,129 sq. meters. These documents were again filed before the AO along with the covering letter dated 02.12.2019 and are placed in the paper book. The land was used for cultivation of paddy and wheat, and sale proceeds from the same were the source of the impugned deposits. As per the agricultural income chart placed on page 99 of the paper book, the assessee disclosed: i. Agricultural income for A.Y. 2015–16: Rs. 25,11,604/- ii. Agricultural income for A.Y. 2016–17: Rs. 25,87,016/- iii. Agricultural income for A.Y. 2017–18: Rs. 25,02,569/- 4.3 The AR also drew attention to page 88 of the paper book, which contains a confirmation from Arman Traders, the entity to whom agricultural produce (paddy and wheat) was sold. The said confirmation corroborates the quantum and timing of sales, as well as the name and address of the buyer. The AR submitted that the sale consideration was received in cash, which is customary in agricultural transactions and duly supported by receipts issued by the local market committee. On the aspect of irrigation and infrastructure, it was explained that the land was given for cultivation to a relative under a contract farming arrangement. The relative possessed borewell facilities, and the land was situated near the riverbank of the Narmada, ensuring availability of irrigation water. The farmers/labourers bore all irrigation-related expenses. These facts were elaborated in the annexures to the reply dated 14.12.2019 and are found in pages 99 to 100 of the paper book. Further, the AR submitted cash flow summaries and monthly cash balance charts for F.Y. 2014–15 and 2015– 16 (refer pp. 101–103 of the paper book), evidencing the accumulation of cash on hand through agriculture receipts and minimal household withdrawals. Closing cash on hand as on 31.03.2016 was Rs.10,98,289/-, which was carried forward and explained as the source of cash in hand during the beginning of the demonetisation period.

4.4 The AR emphasised that the AO failed to appreciate this well- documented and consistent background, and that the CIT(A) dismissed the appeal without examining any of the above material. The assessee’s conduct, it was argued, was transparent, consistent with past practice, and fully documented. The addition under section 68 was made purely on conjecture, without rebutting the material submitted.

6.1 During the course of hearing, the AR drew our attention to the detailed written submissions filed before the AO, including copies of Form 7/12 and 8A (land records) placed at pages 109–111 of the paper book, which establish that the assessee and his family members owned substantial agricultural land in village Chorli, Taluka Dholka, District Ahmedabad. These land parcels, admeasuring approx. 43,043 sq. metres in assessee’s share, were shown to be irrigated and continuously cultivated with crops like wheat and paddy during the preceding years. The assessee also placed reliance on receipts from the Agricultural Market Committee, sale confirmations from Arman Traders, and comparative cash deposit patterns during November–December for A.Ys. 2015–16 to 2017–18 (page 98 of paper book), to demonstrate the continuity of activity and the regularity of deposits. On careful perusal, we find that the assessee’s explanation is supported by contemporaneous documentary evidence submitted before AO. The revenue records issued by the competent authority clearly show agricultural landholding in the name of the assessee and family members with recorded crop cultivation. Further, the sale receipts from Arman Traders were supported by confirmation, and there is nothing on record to disbelieve the genuineness of the same. No contrary evidence has been brought on record by the AO to rebut these documents or to allege that the agricultural activity was non-existent or manipulated. The pattern of cash deposits across earlier and later years further substantiates that the cash deposit during the demonetisation period was not an isolated or anomalous occurrence.

6.2 It is well settled that in order to make an addition under section 68, the AO must discharge the initial burden of demonstrating that the explanation offered by the assessee is unsatisfactory. Once the assessee places primary evidence substantiating the source—here, land records, sale confirmations, and cash flow statements—the onus shifts on the Revenue to rebut the same with cogent material. Mere disbelief or suspicion, howsoever strong, cannot substitute evidence. In the present case, we find that the AO and the CIT(A) have failed to address the documentary submissions filed by the assessee and have proceeded to sustain the addition on presumptive reasoning, which is not sustainable in law.

6.3 We also note that the assessee had declared agricultural income of Rs.25,02,569/- in the return for A.Y. 2017–18, and the department has not made any independent disallowance of the same under the head “agriculture.” The bank deposits are reasonably explained with reference to this disclosed source, and the AO’s action in treating the same as unexplained cash credit under section 68, in our view, lacks legal and factual foundation.

6.4 In light of the above discussion, we are of the considered view that the addition of Rs.12,05,500/- sustained by the CIT(A) under section 68 is unsustainable and liable to be deleted. The assessee has satisfactorily discharged the burden cast upon him by placing reliable and corroborative material on record.

Order pronounced in the Court on 12th August, 2025 at Ahmedabad.