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Facts
During an election surveillance, cash of Rs. 49 lakhs was found in possession of the assessee. The assessee claimed it was business funds, but failed to provide evidence. A search was conducted, and cash and sales bill books were seized. The assessee's return declared Rs. 25,58,660/-. The assessment was completed at Rs. 55,58,660/-.
Held
The Tribunal upheld the addition of Rs. 10,84,977/- under Section 69A as unexplained money. The claims for agricultural income and cash gifts were not substantiated with credible evidence and were deemed afterthoughts. The penalty grounds were dismissed as premature.
Key Issues
Whether the additions made by the Assessing Officer and sustained by the CIT(A) on account of alleged unexplained agricultural income and cash gifts are justified, and whether the penalty proceedings initiated are valid.
Sections Cited
69A, 271AAC(1), 270A, 131(1A), 132, 143(2), 143(3), 153A, 10(1), 56(2)(x), 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRIS.R.RAGHUNATHA
आदेश / O R D E R
PER MANU KUMAR GIRI, Judicial Member:
This captioned Appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Chennai-19, [CIT(A)] dated 29.04.2025 for Assessment Year 2020-21.
The assessee has raised the following grounds of appeal:
1. The learned CIT(A) has grossly erred in upholding the addition of Rs 10,84,977/- u/s. 69A of the Act as unexplained money, without properly appreciating the evidence, documents, and explanations placed on record by the Appellant.
2. The learned CIT(A) has failed to appreciate that the cash seized to the extent of Rs.6,90,000/-was duly explained from agricultural income, supported by sale bills, land ownership records, and other corroborative documents, and rejection of such evidence is arbitrary, baseless, and against the principles of natural justice.
ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 2 ::
The learned CIT(A) has erred in law and on facts in dismissing the explanation regarding cash gifts of Rs.3,85,000/- received from Appellant's father and uncle, despite submission of valid notarized gift deeds, and without affording sufficient opportunity to substantiate the creditworthiness and genuineness of the donors.
The learned CIT(A) has erred in placing unwarranted reliance on presumptions, conjectures, and surmises in disregarding the agricultural income and gifts, contrary to settled judicial precedents that no addition can be made merely based on assumptions.
The learned CIT(A) has erred in confirming the initiation of penalty proceedings u/s.271AAC(1) and section 270A of the Act, which are premature, unwarranted, and unsustainable in law as no valid addition survives after considering the genuine explanation of the Appellant.
The learned authorities below have violated the principles of natural justice by not affording reasonable and sufficient opportunity of being heard before making adverse additions, thereby rendering the assessment order and appellate order invalid and liable to be quashed. The Appellant craves leave to add, alter, amend, or withdraw any ground of appeal at the time of hearing.
Brief facts of the case: In the course of election-related surveillance, information was received from the Assistant Returning Officer, Salem Parliamentary Constituency, and the Revenue Divisional Officer, Salem, that the appellant had been found in possession of Rs.49 lakhs by the Flying Squad Officer. Consequently, summons u/s. 131(1A) of the Act were issued to the appellant on 18.05.2019, and his statement was recorded. In the said statement, the appellant asserted that the sum of Rs.49 lakhs represented business funds intended for the purchase of goods from Tirupati. However, he failed to furnish any documentary evidence in support of this explanation. Accordingly, a search u/s. 132 of the Act was carried out in the appellant’s case on 18.05.2019, during which Rs.49 lakhs in cash and certain sales bill books were seized. The appellant filed the return of income for the relevant assessment year on 31.03.2021, declaring a total income of Rs.25,58,660/-. Thereafter, assessment proceedings were initiated by issuance of notice ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 3 ::
u/s. 143(2) of the Act dated 29.06.2021. The assessment was subsequently completed u/s. 143(3) read with Section 153A of the Act on 25.09.2021, determining the total assessed income at Rs.55,58,660/-. Aggrieved by the said assessment order, the appellant has preferred appeal before the CIT(A) who passed following order: 6. Decision: 6.1. Ground no. 1 & 2: 6.1.1. These grounds raised by the appellant are against the addition of Rs.49,00,000/- as unexplained money u/s 69A of the Act. With regard to the source of seized cash of Rs.49,00,000/-, the appellant had submitted during the assessment proceedings that he had admitted Rs. 19,00,000/- as unexplained money in the return of income for the year under consideration, Rs.6,25,000/- was from agricultural income, Rs.3,85,000/- was received as cash gift from the relatives and the balance cash was his business income. The explanation furnished by the appellant was not accepted by the AO because the appellant had not declared any agricultural income and gift from his relatives during the time of search. Further, the AO noted that with regard to the receipt of gifts of Rs.3,85,000/-, the appellant had furnished an affidavit claiming that the said gift was received from his father on two occasions but failed to substantiate the capacity of the donor to give such gifts and genuineness of the transaction. The AO also noted that the appellant had not furnished any bank account statement of his father to demonstrate cash withdrawals, which was claimed as gift.
6.1.2.With regard to the claim of agricultural income of Rs.6,25,000/-, the appellant had submitted sale bills of agricultural produce during the course of assessment proceedings. The AO had noted that as per the revenue records submitted by the appellant, all the items sold were not grown by the appellant. The AO also noted that the said agricultural land is in the name of four persons including the appellant. The AO further noted that the said documents did not clearly show the extent of land holding and extent of land in which crops were cultivated. For these reasons, the AO rejected the claim of the appellant with regard to agricultural income. For the balance amount, the appellant had not offered any valid explanation to the satisfaction of the AO. Thus, the AO treated the entire seized cash of Rs.49,00,000/- as unexplained money u/s 69A of the Act. 6.1.3. During the course of appeal proceedings, the appellant had submitted almost the same details furnished before the AO with regard ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 4 :: to the source of cash seized during the course of search. The sources of the cash for consideration in this appeal are discussed as under: i) Agricultural income: During the appeal proceedings, the appellant has stated that he had submitted sale bills and invoices of agricultural produce, substantiating the sales of agricultural produce and landholding records were also submitted confirming the appellant's ownership and cultivation rights over the land. The appellant has further stated that the AO has made few assumptions like these sale bills are total sales bills for all 4 owners of the land, genuineness of said bills, books of accounts for agriculture etc. The appellant has contended that it is for the Revenue to prove the allegations. Firstly, it is noted that on the day of the search, the appellant claimed that the said cash was out of business income and the appellant had not mentioned any agricultural income in the statement recorded during the course of search. Secondly, on perusal of the details furnished by the appellant, it is noticed from the 'KhasraGirdawari' issued by the Patwari, Tehsil Sayala (Jalore) that 2.34 acres of land is co-owned by the appellant along with three others. Thus, the appellant's share in the said land is only 0.58 acres Further, it is seen that the appellant has furnished following invoices for sale of agricultural produce: Sr.No. Date Amount (in Rs.)
1 03-04-2019 1,07,877 2 09-04-2019 1,27,500 3 18-04-2019 74,620 4 25-04-2019 1,37,760 5 03-05-2019 1,38,470 6 09-05-2019 1,13,750
Total 6,99,977 Thus, the appellant's share out of the alleged agricultural income works out to Rs.1,74,994/- only. Further, it is noted that it is nowhere mentioned in these bills that the amount was received in cash. Furthermore, it is also noted that all the sales were made through 'Shree Nimboharnath Mahadev Krishi Upaj Mandi Samiti, Jalore' and 'Shree Kanhad Dev Sonagra Krishi Upaj Mandi Samiti, Jalore' Meaning thereby all these sales were made through these two Agricultural Produce Market Committees which are located in Jalore District, ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 5 ::
Rajasthan, whereas the cash was seized from the appellant near Salem, Tamilnadu. Even if it is assumed that the agricultural produce sales were made in cash, the appellant has not explained how the cash was transferred from Rajasthan to Tamilnadu. It is also observed that receipt of Rs.6,99,977/- against the crops grown in 0.58 acres is not at all feasible for the conditions prevailed in the state of Rajasthan. Thus, it can be concluded that the claim of the appellant regarding the agricultural income is merely an afterthought and the same is not acceptable. ii) Cash Gift: With regard to the cash gift, the appellant has submitted during the appeal proceedings that the AO considered notarized copies of Bakshishnama (Gift deeds) as affidavit and assumed that both the donors are not capable to give gift to the appellant without any document or details on record nor he asked the appellant for the same. The appellant has further stated that the AO also presumed that both gifts were made by the father of appellant only on two occasions without pursuing copies of gift deeds. The appellant has claimed that both the donors are farmers & gifts are made in cash out of their cash savings from their agricultural income. The appellant also submitted the copies of gift deeds from his father and uncle, along with copy of ITR Acknowledgment & computation for FY 2019-20. On perusal of the gift deed submitted by the appellant, it noted that the gift deed was made by his father & his uncle on 25.04.2019 & 29.04.2019 respectively. However, during the course of search on 18.05.2019, there is no whisper about any such gift deeds by the appellant in the statement recorded during the course of search. Thus, it can be only stated that it is an afterthought of the appellant. If it is presumed to be genuine, the appellant could have very well stated on the day of search about the cash received from his father and his uncle as gift from them. Further, it is also noted that the source for his father & his uncle to gift is from agricultural activities, which could not be verified. Hence, the claim of the appellant that Rs.3,85,000/- was received as gift from his father and uncle is the source of cash seized in the course of search is not acceptable. iii) Business receipts: The appellant had explained that the remaining balance of Rs 19,15,023/- is out of his business receipts In this regard, the appellant had furnished the copy of GST return filed for the quarter April-June. On perusal of the GST return filed, it is noted that the total turnover for the quarter was Rs.34,91,556/- Further, it is also noted that the search was initiated in the case of the appellant on 18.05.2019 and certain sale books were also seized in the course of search proceedings. This undoubtedly proves that the appellant was carrying out business. Furthermore, it is also noted that the appellant had duly filed his GST ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 6 :: return subsequent to the date of search for the quarter ending April to June. Hence, the claim of the appellant that he had received cash receipts from the sale/debtors is a source of Rs. 19,15,023/- seems to be acceptable. Therefore, the amount of Rs. 19,15,023/- is considered to be from explained sources of the appellant. 6.1.4. To summarize the above, apart from Rs. 19,00,000/- already offered by the appellant in the return of income as unexplained cash, only amount of Rs. 10,84,977/- is considered as unexplained cash seized from the appellant. Accordingly, the AO is directed to delete the balance amount Rs. 19,15,023/- and these grounds of appeal are partly allowed.
4. Before us, the ld.AR has filed paper book as under: INDEX Sr.No. Annexu Particulars Page re No. 1 Written Submission on behalf of Appellant 45 to 58 2 J Copies of the agricultural produce sale bills 59 to 64 3 K Copy of patta issued by state revenue authorities 65 4 L Copy of Impound order dated 18.05.2019 by 66 to DDIT(Inv.), Erode 69 5 M Copy of corrigendum dated 28.05.2019 by ADIT(Inv.) 70 6 N Copy of sworn statement recorded on 18.05.2019 by 71 to ADIT, Salem in presence of the DDIT (Inv.), Erode 77 7 O Copies of land revenue records corroborating ownership 78 to of agricultural land owned by father of appellant 90 8 P Copies of land revenue records owned by uncle of 91 to appellant corroborating ownership of agricultural land 92 9 Q Copies of gift deeds, ITR-V & Computation of Income 93 to tax father & uncle of Appellant 100 10 R Copy of ITR-V & Computation of Income of appellant for 101 to the AY under consideration 104 11 S Copy of medical records of appellant 105 to 112 12 T Copies of full citations for quoted judgments 113 to 139
We note that appeal paper from page Nos.1 to 44 contains Form No.36, grounds of appeal
, Form 35 and orders of the authorities below.
6. On the basis of paper book filed, the ld.AR tried to convince the bench that the impugned order has been passed in due haste without considering the above material evidence which is enumerated in the ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 7 :: paper book. The ld.AR submitted that the assessee is a semi-educated individual originally from Sayla, Rajasthan, engaged in FMCG distributorship under the trade name M/s. Ugam Agency and also carrying on agricultural activities.He furthermore submitted that the assessee deals primarily with small retailers in rural and semi-urban areas, whose transactions are predominantly cash-based owing to their illiteracy and lack of banking access.Considering the nature and volume of small cash transactions, the assessee has opted for presumptive taxation u/s. 44AD of the Income-tax Act, 1961 (“the Act”), which does not mandate maintenance of regular books of account.Therefore, adverse inference merely for non-maintenance of books is contrary to the scheme of presumptive taxation.
He further submitted that the cash of Rs.49,00,000 was seized on 18.05.2019. The source of the said cash has been explained as under: Particulars Amount (Rs.)
Unexplained income (voluntarily offered) 19,00,000 Agricultural receipts 6,90,000 Gifts from relatives 3,85,000 Balance – Business cash on hand 19,25,000 Total 49,00,000 He further argued that the assessee has already offered Rs.19,00,000 as unexplained income in the return filed on 31.03.2021 and paid due taxes (subject to adjustment against seized cash). Therefore, further addition beyond this amount amounts to double taxation and unjust enrichment.
ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 8 ::
Agricultural Income – Rs.6,90,000 u/s. 69A The AO rejected the agricultural income on the following grounds:
• Land is jointly held by four persons • No books maintained • Crop details not fully established The ld.AR for the assessee has produced: o Sale bills of agricultural produce, o Patta, Chitta and Adangal issued by State Revenue Authorities. He submitted that the existence of agricultural land is not disputed. Joint ownership does not negate receipt of income. At most, the AO could have determined proportionate share, but outright rejection is arbitrary.There is no statutory requirement to maintain books for agricultural operations.Agricultural income is exempt u/s. 10(1) of the Act. Once landholding and crop sale are evidenced, the burden shifts to the department.Without conducting independent enquiry (such as summoning co-owners, verifying mandi records, or revenue authorities), rejection is purely on suspicion.Thus, addition u/s. 69A is unjustified and liable to be deleted.
9. Gifts – Rs.3,85,000 u/s. 69A The gifts were received fromFather – Rs.1,95,000; Uncle – Rs.1,90,000. The assessee furnished notarized Gift Deeds (Bakshishnama). The ld.AR submitted that the identity of donors is established (close blood relatives).Relationships are undisputed.Gifts from relatives are not taxable u/s. 56(2)(x).In rural families, transactions are predominantly in cash.The AO did not issue summons u/s. 131 nor conduct enquiry to disprove the gift.It is settled law that once identity ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 9 :: and relationship are established, minor deficiencies cannot justify addition u/s. 69A without disproving genuineness through investigation.Therefore, he submitted that addition of Rs.3,85,000 is liable to be deleted.
Business Cash – Rs.19,25,000 The AO rejected business cash balance alleging lack of valid explanation.The ld.AR submitted that the assessee is covered under presumptive taxation (Section 44AD) and maintenance of detailed cash book is not mandatory.GST CMP-08 returns and approximate cash flow statement were furnished.Cash receipts of Rs.26,25,000/- from sales during 01.04.2019 to 18.05.2019 are consistent with the scale of business.Operating expenses of Rs.3,95,000/- were deducted to arrive at available balance.The ld.AR submitted that the AO has not disputed turnover declared under GST nor conducted any third-party verification from customers.Under presumptive scheme, once turnover is accepted, cash generation from business cannot be doubted without rejecting declared turnover.Therefore, he submitted that treating Rs.19,25,000 as unexplained u/s. 69A is arbitrary.
Liquidity Hardship and Adjustment of Seized Cash The ld.AR submitted that the assessee filed return declaring Rs.19,00,000 as unexplained income.Tax liability of Rs.19,79,120 was computed.
We have heard the rival submissions, perused the orders of the lower authorities and examined the material placed in the paper book.The limited dispute before us is with regard to confirmation of addition of Rs.10,84,977/- u/s. 69A of the Income-tax Act, 1961 (“the Act”), sustained by the ld.CIT(A).It is an admitted position that cash of Rs.49,00,000/- was seized on 18.05.2019. Out of the said amount ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 10 ::
Rs.19,00,000/- was voluntarily offered by the assessee as unexplained income in the return of income. Rs.19,15,023/- has been accepted by the ld.CIT(A) as explained out of business receipts. The balance Rs.10,84,977/- (Rs.6,99,977/- agricultural receipts and Rs.3,85,000/- gifts) stands confirmed as unexplained.Thus, the scope of adjudication before us is confined to Rs.10,84,977/-. I. Agricultural Income – Rs.6,99,977/- The assessee claimed that the amount represents sale proceeds of agricultural produce. The ld. CIT(A), after examining the land records (KhasraGirdawari), found that the total land admeasuring 2.34 acres was jointly owned by four persons.The assessee’s share works out to 0.58 acres.Sale invoices aggregating to Rs.6,99,977/- were issued through Agricultural Produce Market Committees at Jalore, Rajasthan.There is no evidence that the entire sale proceeds belonged exclusively to the assessee.There is no material to establish that such sale proceeds were received in cash and physically transported from Rajasthan to Tamil Nadu.The quantum of receipts shown against 0.58 acres was found to be disproportionate and unsupported by evidence.Before us, though copies of sale bills and revenue records were filed, no material has been brought on record to rebut the factual findings of the ld. CIT(A), particularly that the land was jointly held and the assessee’s share was only 0.58 acres and that the sale proceeds were routed through Mandi Committees in Rajasthan. No evidence was produced regarding receipt of sale consideration in cash and its movement to Tamil Nadu.U/s. 69A, where the assessee is found to be the owner of money and offers an explanation which is not satisfactory in the opinion of the Assessing Officer, the amount may be deemed to be income. The explanation must be supported by credible and cogent ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 11 :: evidence.In the present case, except for producing sale invoices and general land records, the assessee has failed to establish exclusive entitlement to the entire sale proceeds and actual receipt of the amounts in cash. We find that no nexus between the alleged agricultural receipts and the cash seized in Tamil Nadu.The finding of the ld. CIT(A) that only proportionate share could at best be considered, and that the balance claim is not substantiated, is based on appreciation of evidence and has not been controverted by any clinching material.Accordingly, we find no infirmity in the order of the ld. CIT(A) in sustaining addition to the extent relatable to agricultural receipts forming part of Rs.10,84,977/-. II. Gifts – Rs.3,85,000/- The assessee claimed receipt of cash gifts from his father (Rs.1,95,000/-) and uncle (Rs.1,90,000/-) and filed notarized gift deeds along with copies of their returns of income.The ld. CIT(A) observed that during the search proceedings and statement recorded on 18.05.2019, there was no mention of any such gifts.The explanation surfaced only subsequently during assessment.The source of funds in the hands of the donors, allegedly from agricultural income, was not verifiable.No independent evidence was produced to establish the creditworthiness of the donors and genuineness of the cash transactions.It is well settled that in cases involving cash credits or unexplained money, the assessee is required to establish: 1. Identity of the creditor/donor, 2. Creditworthiness, 3. Genuineness of the transaction. Though identity and relationship are not in dispute, the crucial aspects of creditworthiness and genuineness of cash transactions remain unsubstantiated. Mere filing of notarized gift deeds, without ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 12 :: demonstrable evidence of availability of cash with the donors and actual transfer thereof, is insufficient.Further, the absence of any contemporaneous disclosure of such gifts at the time of search is a relevant surrounding circumstance.In the absence of satisfactory evidence establishing the capacity of the donors and the genuineness of the cash gifts, the explanation cannot be said to be satisfactory within the meaning of Section 69A.Therefore, we find no reason to interfere with the order of the ld. CIT(A) in confirming addition relatable to gifts forming part of Rs.10,84,977/-. III. Business Receipts – Rs.19,15,023/- The ld. CIT(A) has accepted the explanation of the assessee to the extent of Rs.19,15,023/- as being out of business receipts, based on GST returns and seized sale bills. The Revenue has not challenged this finding before us.Accordingly, the said finding has attained finality. IV. Voluntary Disclosure – Rs.19,00,000/- The assessee has already offered Rs.19,00,000/- as unexplained income in the return of income. The same stands assessed and is not in dispute before us. V. Penalty Grounds The grounds relating to initiation of penalty u/s.s 271AAC(1) and 270A are premature at this stage, as initiation of penalty proceedings does not give rise to an independent cause of action unless penalty is levied. The same are therefore dismissed as infructuous.
In view of the foregoing discussion, the addition sustained by the ld. CIT(A) amounting to Rs.10,84,977/- u/s. 69A is upheld.Grounds raised by the assessee on merits are dismissed.Grounds relating to penalty initiation are dismissed as premature.
ITA 1861 Chny 2025 (AY 2020-21) & SA 69 Chny 2025 Mahendra Kumar Jagtaji Vs DCIT C C :: 13 :: 14. STAY No.69/Chny/2025: Since we have disposed of the appeal itself hence stay application is dismissed as infructuous. 15. In the result, the appeal filed by the assessee is dismissed. Stay application is dismissed as infructuous.
Order pronounced on the 23rd day of February, 2026, in Chennai.
Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) �या�यक सद)य/JUDICIAL MEMBER लेखा सद)य/ACCOUNTANT MEMBER चे�नई/Chennai, *दनांक/Dated: 23rd February, 2026. SNDP, Sr. PS आदेश क ��त,ल-प अ.े-षत/Copy to:
अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF