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Facts
The assessee, an agriculturist and commission agent, deposited Rs.12,72,000/- cash in bank accounts during the demonetization period (AY 2017-18). The AO made an addition of Rs.12,72,000/- u/s 69A as unexplained cash, which the CIT(A) partially relieved by allowing Rs.4,50,000/-, sustaining an addition of Rs.8,22,000/-. The assessee claimed the sources of deposits were agricultural income, prior cash withdrawals, and income from his second-hand car dealing business.
Held
The Tribunal found that the assessee's claims regarding agricultural income and prior cash withdrawals were partly substantiated by documentary evidence. Considering probable receipts from agricultural crops, 50% of the unspent cash withdrawal from the earlier year, and cash in hand from the second-hand car business, the Tribunal allowed a further benefit of Rs.6,00,000/-. Consequently, the addition was restricted to Rs.2,22,000/-.
Key Issues
Whether cash deposits made during the demonetization period were adequately explained by agricultural income, prior cash withdrawals, and income from second-hand car business, and to what extent the addition under Section 69A of the Income Tax Act, 1961, was justified.
Sections Cited
Section 250 of the Income Tax Act, 1961, Section 143(3) of the Income Tax Act, 1961, Section 69A of the Income Tax Act, 1961, Section 44AD of the Income Tax Act, 1961, Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. UDAYAN DASGUPTA & SH. BRAJESH KUMAR SINGH
This appeal is filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi, passed u/s 250 of the Income Tax Act, 1961 dated 26.06.2024 which has arisen from the order of the AO, dated 18.11.2019 passed u/s 143(3) of the I. T. Act, 1961.
2. The grounds of appeal taken by the assessee in Form No. 36 are as follows:
“1. The ld. CIT(A), NFAC has erred on facts and law in confirming the addition of Rs.8,22,000/- as against of Rs.12,72,000/- made by the AO, vide appellate order u/s 250 of the Act dated 26.06.2024 on account of alleged unexplained cash deposits in bank during the period of demonetization.
2. That the ld. CIT(A), NFAC has confirmed the addition of Rs.8,22,000/- as against of Rs.12,72,000/- made by the AO on account of alleged unexplained cash deposits during the period of demonetization vide appellate order u/s 250 of the Act dated 26.06.2024 without appreciating the explanation as well as evidence filed during the course of assessment and appellate proceedings .
3. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”
Brief facts emerging from records are that the assessee is an agriculturist and has filed return declaring total income of Rs.2,80,340/- (and agricultural income of Rs.2,30,000/-). The case was selected for scrutiny through CASS for investigating into the source of cash deposit of Rs.12,72,000/- in three separate Bank A/c nos. xxxxxx00069, xxxxxx000103 and xxxxxx000167 maintained with Bank of India by the assessee, during the demonetization period. In response to notices issued, the assessee has explained the source of the said cash deposits to have come from his business of commission agent from sale and purchase of 2nd hand motor vehicles and also from cultivation of agricultural lands owned by him measuring 12 acres located from Bank of India amounting to Rs.12 lakhs against agricultural lands. In support of agricultural activity he produced copies of his bank account, J-forms and jamabandi and has submitted that he had withdrawn cash from his savings bank account on various dates, which has been redeposited. However, the explanations was not found to be satisfactory by the Assessing Officer and ultimately the assessment has been completed on a total income of Rs.15,52,340/- (with an addition of Rs.12,72,000/- being unexplained cash deposit u/s 69A of the Act).
4. The matter was carried in appeal before the ld. first appellate authority and the ld. CIT(A), NFAC has admitted fresh evidences furnished by the assessee and has obtained remand report from the concerned AO and after considering the response of the assessee, has allowed part relief of an amount of Rs.4,50,000/- and sustaining the balance addition of Rs.8,22,000/- by observing as follows:
“8.0 I have perused the assessment order, remand report, appeal documents and submissions of the assessee. The assessee in his submissions contended that the source of cash deposits was earlier cash withdrawals, cash receipts of agricultural income & from the business of purchase/sale of used cars. The assessee further submitted that the AO did not consider the submissions of the assessee and wrongly made the addition of Rs. 12,72,000/- treating it as unexplained money u/s 69A of the Act.
The contention of the assessee is considered and my findings are as under:
1. To begin with, the assessee did not submit the details/bifurcation of the cash deposited from various sources. The assessee plainly submitted that the source of the cash deposits of Rs. 12,72,000/- were from cash withdrawals, cash receipts of agricultural income & from the business of purchase/sale of used cars. The assessee was required to furnish the bifurcation of source of the deposits but failed to do so.
2. As regards earlier cash withdrawals, the details of these withdrawals are as follow:
Sr. No. Date Bank Name Amount 1. 24.04.2025 Bank of India 4,00,000/- 2. 08.08.2015 Bank of India 1,00,000/- 3. 17.08.2015 Bank of India 3,90,000/- Total 8,90,000/-
The cash withdrawals are more than one year prior to the cash deposited during demonetization. The assessee is engaged in agriculture and significant part of these transactions are carried out in cash. Therefore, it cannot be said that the cash withdrawn was not utilized in business and instead re-deposited in his bank account during the period of demonetization. Therefore, the contention of the assessee that the deposits were from earlier withdrawals is not accepted.
The assessee submitted that he is engaged in business of second-hand car dealings and in support of his contention, produced copy of affidavit from the President of Second hand car bazaar Union, Malaut. The assessee submitted that he earned brokerage from this business and declared income of Rs. 2,80,340/- on presumptive basis i.e. 8% of the gross receipts of Rs. 35,04,250/-. However, the assessee did not furnish the details of vehicle sold, name & address details of buyers and sellers, business receipts etc. The AO disputed the contention because the relevant details like cash receipts and the expenditure bills were not produced. True, if the contention of the assessee were accepted, then the deerned profit u/s 44AD would be 8% of the total receipts and under such circumstances, there was not even a need to maintain the books of account. However, the onus of proving the very existence of business to the satisfaction of AO rested solely with assessee. To avail the benefit of the presumptive tax, it is imperative on the part of the assessee to establish that he was eligible to declare profit u/s 44AD. Therefore, the contention of the assessee that the cash deposits were out from cash receipts of business of second hand cars is not accepted.
The next source of cash deposits was stated from agricultural income and in support of the contention assessee produced the declaration from the village Sarpanch that the assessee along with his brother's wife owns 12 acres of agricultural land in village Virk Khera, Tehsil Malout. Further, the assessee also produced a statement showing total receipt of Rs.6,62,785/- from a commission agent on account of crops sold during F.Y. 2016-17, However, the statement does not clearly specify the extent of receipts in cash during the relevant assessment year.
Considering the facts discussed above, cash deposits to the extent of Rs. 2,00,000/- is treated as receipts from agricultural income and a sum of Rs. 2,50,000/- is treated as cash available with assessee on account of savings. In effect, Rs 4,50,000 is treated as cash available with assessee for deposit during demonetization. The addition to the extent of Rs. 4,50,000/- is therefore deleted and the balance addition of Rs 8,22,000 is confirmed. The grounds of appeal are partly allowed.”
5. Now, the assessee is in appeal before the Tribunal on the grounds contained in the memorandum of appeal and in course of hearing, the assessee has filed a short paper book containing documentary evidences (filed before the lower authorities) in order to prove the existence of agricultural land holdings and the agricultural income of the assessee, which includes supporting documents like jamabandi, khasra girdawari of the land and J-forms as evidence of sale of agricultural produce.
Brar (president of the used car bazaar union, Malout, which certified that the assessee is a second hand car dealer), to justify his income from business of sale and purchase of second hand cars. He further submitted that the source of cash deposit during demo period has come from cash withdrawals from bank account made earlier by the assessee at regular intervals and also out of agricultural income earned by the assessee and income from dealing with used cars as a dealer.
He further pointed out that an amount of Rs.8,90,000/- has been withdrawn by the assessee from the bank on the following dates in the immediately preceding year,
Date Amount of Withdrawal 24.04.2015 4,00,000/- 08.08.2015 1,00,000/- 17.08.2015 3,90,000/- Total 8,90,000/- and argued that the ld. CIT(A) was not justified in allowing cash benefit of Rs.2,50,000/- only, without bringing on record any materials to disprove the existence of Rs.8,90,000/- as stated above. He further submitted that no evidence has been unearthed by the AO or the ld. CIT(A) to prove actual utilization of the above cash withdrawn in the immediately preceeding year, hence, the benefit of the balance Rs.6,40,000/- should have been allowed to the assessee. On this issue, the ld. AR of the assessee has placed reliance on the following judgments of the Hon’ble Courts:
“Shiv Charan Dass vs. CIT as reported in 126 ITR 263 (P& H HC) In this regard, it has been held by the Hon'ble jurisdictional High Court that the onus is on the Department to show that the explanation of the assessee should not be accepted. Further, it is trite that nobody can be asked to prove a negative, as was sought to be done by the AO.”
He further placed reliance on the following judgments of various Tribunals on almost similar issue:
“1. Smt. Sandeep Kaur w/o Sh. Sukhpal Singh v. ITO in ITA No. 157/Asr/2022
2. Gandhi Ram v. PCIT in dated 04.08.2022
3. Ravinder Singh Negi v. DCIT in & 812/Chd/2014 Chd. Bench
ITO v. Chandan Nijjer in dated 08.08.2016 (Asr Bench)
ITO v. Mrs. Deepali Sehgal in dated 05.09.2014 (Delhi Bench)
CIT v. Kulwant Rai as reported in 291 ITR 36 (Delhi HC).”
He further submitted that the assessee owns 12 acres (twelve) of agricultural land along with his brother’s wife Smt. Sandeep Kaur, and the family is engaged in self-cultivation which is supported by the jamabandi and khasra girdawari of the land which is already furnished. He also refers to the self-declaration given by Smt. income after expenses from the cultivation of wheat and paddy for the financial year 2016-17 amounted to Rs.80,000/- (eighty thousand) per acre (approximately). He further submitted referring (to pg. no. 22 of the paper book) which is a certificate issued by M/s Harkewal Singh Basant Singh Commission Agents regarding sale of crop which is given as supporting evidence of carrying out agricultural activities of the assessee and its sale proceeds.
Thereafter, with reference to a (declaration) certificate issued by the president of the Malout Car Bazar Union he stated that the assesee is working as a dealer in second hand cars in the car bazar during the financial year 2016-17 and he further certifies that the dealings are in cash where cash is received by the dealer and the cash is also paid by the purchaser. He further submitted that this business activity of the assessee is already disclosed by him in his normal income tax return, the transaction in second hand car bazaar dealing in used cars, the customers and the sellers both are mainly transacting in cash through the agents and as such the money that is deposited by the assessee in his bank account are also partly funded by his dealings in the second hand car market. It is further submitted that these being a legible business, the assessee has already disclosed this business in his return under the presumptive scheme of taxation and has declared of profit percentage of 8% of total gross receipt on the same. He further points out that the net profit disclosed in under the presumptive taxation, the gross receipts (by applying the profit rate of 8%), the gross turnover will be around 35 lakhs approximately which is more than sufficient to cover the cash that is deposited in the bank account. As such, he submits considering the entire facts and the existence of receipts from agricultural crops, the entire cash deposits stands fully explained, and the addition sustained by the ld. CIT(A) amounting to Rs. 8.22 lacs is not at all justified and the said addition may please be deleted.
The ld. DR relies on the order of the ld. CIT(A) and submits that the benefit of Rs.2,80,340/- (as derived from dealing in second hand cars) has already been allowed to the assessee and the assessee is a commission agent who earns a certain percentage on the entire transaction value of the vehicles sold and his benefits are only restricted to the percentage of commission. As such, he prays that the order of the ld. CIT(A) is very much justified and the same should be upheld.
The ld. D/R further referred to the decision of the jurisdictional High Court in the case of Smt. Kavita Chandra v. CIT(A), Panchkula in of 2016 dated 07.03.2017 to argue that in the instant case, cash withdrawn from bank in the month of April, 2015 and in the month of August, 2015 could not be accepted to have been re-deposited after a gap of so many months which is not probable in absence of deposited after a gap of 16 (sixteen) months. Referring to the jurisdictional High Court judgment he submitted that under identical circumstances, the Hon’ble jurisdictional High Court has held that in absence of any detailed expenses being filed by the assessee, the cash flow statement has no relevance and the entire withdrawal cannot be said to have been redeposited.
We have heard the rival submissions and considered the materials on record and we find that the withdrawal of cash from Bank A/c No. xxxxxx00036 from Bank of India, Malout amounting to Rs.8,90,000/- during the financial year 2015-16 are evidenced by the bank statement. There is no material on record to rebut the claim of the assessee that at least a part of the said amount was available with him for the purpose of deposit in bank account on 28.11.2016.
We further find that the existence of agricultural lands are proved with documentary evidences and the fact that the agricultural activity and cultivation of crops takes place on such land are also proved by the existence of khasra girdawari and jamabandi and also supported by certificates issued by the commission agent in the books of Harkewal Singh Basant Singh which is placed in (PB pg. 22 to 23) regarding sale of crops evidencing the agricultural activity of the assessee. Further, it is also evident from the record that the assessee is also engaged in the activity as take note of the certificate issued by the Sarpanch placed in paper book no. 20-25 that income from cultivation of crops will give an approximate earning of Rs.80,000/- per acre per annum (the assessee having 12 acres of agricultural land, which works out to Rs.9.6 lakhs per annum).
As such, considering the probable receipts on account of sale of agricultural crops, for a period of seven months, plus availability of at least of (fifty) 50% of the cash withdrawal in the earlier year (being the unspent amount) and availability of cash in hand as agent in the second hand car market, we are of the opinion that the assessee should be allowed a further benefit of 6 lakh (six) cash, available with the assessee on the date of deposit in bank. As such, we restrict the addition to Rs.2,22,000/- and the assesse gets consequential relief.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 21.07.2025 Sd/- Sd/- (Brajesh Kumar Singh) (Udayan Dasgupta) Accountant Member Judicial Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: