SHER SINGH,SANGRUR vs. INCOME TAX OFFICER, SANGRUR

The Registry has pointed out that there was a delay of 245 days in filing of the appeal. During the proceedings before us, the ld. Counsel for the Assessee has submitted an application for condonation of delay along with an Affidavit, which is reproduced as under:-

We have considered the reasoning given by the Assessee in the affidavit and inclined to condone the delay.

The ld. DR did not have any objection for this condonation of delay.

The brief facts are that the assessee, an individual engaged in agricultural activities and sale of milk, deposited a sum of ₹14,75,600/- in various bank accounts during the financial year 2016–17, including the demonetisation period. The Assessing Officer, noting non-compliance with statutory notices, framed the assessment ex-parte u/s 144 on 25.11.2019, treating the entire deposit as unexplained u/s 69A.

In appeal, the assessee filed additional evidence comprising affidavits, cash-flow statement, Jamabandi, and bank statements, claiming that deposits were sourced from agricultural income, milk sales, and funds of his wife, Smt. Rupinder Kaur. The Ld. CIT(A), after obtaining the remand report, admitted the evidence but held that they were not fully reliable. An estimate, relief of ₹2,50,000/- was allowed, and the balance ₹12,25,600/- was confirmed. Aggrieved, the assessee is in further appeal.

Now the assessee is in appeal before us on the ground mentioned in the appeal. 7.1 The Ld. AR reiterated that the assessee is an agriculturist possessing substantial agricultural land, jointly with his wife, and also derives income from milk and allied products. A return of income was filed declaring agricultural income of ₹7,00,000/- and milk income of ₹2,47,700/-, which clearly explains the availability of cash. It was contended that the wife of the assessee had withdrawn funds in July 2016, which were duly redeposited during the demonetization period. Her affidavit and bank statement were placed on record but were ignored by the authorities below. It was argued that the cash-flow statement prepared by the assessee merely reflects actual movements of cash and cannot be discarded as self-serving when corroborated by surrounding material. 7.2 The Ld. AR further submitted that both the AO and the CIT(A) have mechanically brushed aside the evidence. In fact, once the Ld. CIT(A) admitted additional evidence under Rule 46A, the same had to be given full weightage. Reliance was placed on decisions including Tek Ram (Dead) Through LRs v. CIT 357 ITR 133 (SC) and CIT v. Mukta Metal Works 336 ITR 555 (P&H), wherein it was held that additional evidence necessary for just adjudication must be admitted and appreciated. 7.3 Accordingly, the AR prayed that the entire addition sustained of ₹12,25,600/- deserves to be deleted as the deposits stand explained from disclosed and exempt sources.

On the other hand, the Ld. Sr. Departmental Representative supported the orders of the lower authorities. It was submitted that despite several statutory notices, the assessee failed to participate in assessment proceedings, thereby inviting ex-parte order u/s 144. 8.1 The DR emphasised that no contemporaneous evidence was produced to substantiate agricultural income, livestock details, or milk sales. The Jamabandi filed does not prove actual ownership of 70 bighas of land in the name of the assessee, and no evidence was filed in respect of agricultural land in the name of his wife. The affidavit of the wife and self-prepared cash-flow statement, without corroboration, cannot be accepted. 8.2 It was contended that the AO in his remand report categorically rejected the claim as an afterthought. The Ld. CIT(A) has already taken a liberal view in granting relief of ₹2,50,000/- for past savings. The balance addition of ₹12,25,600/- was rightly confirmed the in absence of credible evidence. It was, therefore, pleaded that the impugned order requires no interference.

We have considered rival submissions and perused the record. The core issue for adjudication is whether the cash deposits of ₹14,75,600/- made during FY 2016–17 stand explained from disclosed sources. 9.1 It is not in dispute that the assessee is an agriculturist and derives income from agricultural operations and milk business. Being a lay farmer not well-versed with tax law, he failed to appear before the AO and thus suffered an ex parte assessment u/s 144. In appellate proceedings, however, he filed affidavits, Jamabandi, bank statements, and a cash-flow statement. These evidences were relevant, and the Ld. CIT(A) also admitted them. 9.2 We find that the assessee had declared agricultural income of ₹7,00,000/- and milk income of ₹2,47,700/- in the computation forming part of return of income. The cash-flow statement filed is broadly consistent with these disclosures. Importantly, the Revenue has not brought on record any contrary material to negate the agricultural or milk income. Further, the affidavit of the assessee’s wife, evidencing the availability of cash, was also filed. These factors support the assessee’s explanation of the deposits. 9.3 At the same time, the fact remains that the assessee was a non-filer at the time of assessment, did not produce records before the AO, and has not convincingly demonstrated that the withdrawals made from his wife’s account were not utilised elsewhere. In the absence of corroborative details such as crop sale bills, livestock records, or the trend of agricultural earnings in earlier years, a complete acceptance of the claim is not possible. 9.4. Balancing both aspects, we are of the considered view that a substantial explanation of the deposits stands established. In the facts and circumstances, it would be fair to sustain the addition of only ₹2,50,000/- as unexplained, while deleting the balance of ₹10,00,000/-.