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Facts
The assessee's return of income for AY 2017-18 was assessed at Rs. 47,10,240/-, which included additions of Rs. 10,00,000/- for disbelieved agricultural income and Rs. 22,00,000/- for cash deposits in specified bank notes during demonetisation. The assessee claimed the cash deposits were from an earlier cash balance, but failed to provide sufficient explanation.
Held
The Tribunal held that while the assessee failed to provide evidence for agricultural income, the AO should have estimated it based on local inquiries rather than totally disbelieving it. Regarding cash deposits, the AO and CIT(A) should have provided an opportunity for the assessee to submit evidence.
Key Issues
Whether the AO was justified in disbelieving the entire agricultural income and adding the cash deposits without providing sufficient opportunity for the assessee to provide evidence.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
Assessment Year: 2017-18 Karuvoth Pariyai .......... Appellant M/s. Kannankandy Sales Corporation Indira Gandhi Road, Kozhikode [PAN: AFJPP8835J] vs. The Income Tax Officer, Ward-1(3), Kozhikode ......... Respondent Assessee by: Shri Raghunathan, Advocate Revenue by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 27.10.2025 Date of Pronouncement: 30.10.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 23.07.2025 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is an individual. The return of income for AY 2017-18 was filed on 02.03.2018 declaring total income of Rs. 12,85,160/-. Against the said return of income, the assessment was completed by the ITO, Ward-1(3), Kozhikode (hereinafter called "the AO") vide order dated 18.11.2019 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 47,10,240/-. While doing so, the AO made Karuvoth Pariyai addition of Rs. 10,00,000/- disbelieving the agricultural income claimed to be exempt and also made addition of Rs. 22,00,000/- being the cash deposits made in specified bank notes (SBN) during demonetisation period, rejecting the explanation of the appellant that the said cash deposits were made out of the earlier cash withdrawals from the bank account, as the assessee failed to explain the reasons for the earlier cash withdrawals.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submits before us that the appellant owns agricultural land and in earlier assessment years, in the scrutiny assessment, the AO had accepted the agricultural income of Rs. 10,00,000/- and, therefore, in the absence of any change of circumstances, the AO ought not have disbelieved the agricultural income. With regard to the addition made on account of cash deposits in SBN, it is submitted that the cash deposits were made out of the opening cash balance of Rs. 35,00,000/- as on 01.04,.2016 and the AO ought not have rejected the explanation without valid reasons.
On the other hand, the learned Sr. DR submits that the appellant had failed to substantiate deriving agricultural income and
I heard the rival contentions and perused the material available on record. The first ground of appeal relates to the addition on account of disbelieving agricultural income of Rs. 10,00,000/-. Admittedly, the appellant had failed to file the details as called for by the AO. However, the fact that the appellant owns agricultural land was not disputed by the assessing authority. Even though, the appellant had failed adduce evidence, the AO is bound to estimate the income based on the local enquiries made by him. He cannot totally disbelieve the entire agricultural income. Therefore, in the interest of justice I remand the matter back to the file of the AO to estimate the income based on local enquiries to be conducted by him.
8. Similarly, with regard to the addition on account of cash deposits in SBN during demonetisation period, the AO as well as the CIT(A) ought to have given opportunity to the appellant to adduce evidence in support of the explanation for the source of cash deposits. Therefore, this issue also remanded back to the file of the AO for de novo adjudication in accordance with law after affording reasonable opportunity of hearing to the appellant.
Order pronounced in the open court on 30th October, 2025.