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Facts
The assessee, a farmer, was assessed under Section 147 read with Section 144 of the Income Tax Act, 1961, with his total income assessed at Rs. 24,91,000. The CIT(A) partly allowed the appeal, sustaining additions of Rs. 12,00,700. The assessee appealed this order.
Held
The Tribunal noted that the assessee provided substantial documentary evidence, including land records, girdawari reports, and financial statements, to support his claim of agricultural income. It was also acknowledged that cash transactions are common among farmers due to limited financial literacy. The Tribunal concluded that the cash deposits were accumulated savings from agricultural income, which is exempt under Section 10(1) of the Income Tax Act.
Key Issues
Whether the addition of Rs. 12,00,700 was justified in light of the assessee's claim of agricultural income and the evidence provided.
Sections Cited
147, 144, 10(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 1033/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 10-05-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2013-14 raising therein following grounds of appeal. ‘’1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in opening the case u/s 147 of the Income Tax Act, 1961. The action of the ld. CIT(A) and AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said assessment order.
SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar 2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO of adding the amount of Rs.12,00,700/-.The action of the ld. CIT(A) and AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions.
2.1 At the outset of the hearing, the Bench noted that there is delay of 28 days for which the assessee has filed an application for condonation of delay mainly praying therein as under:- ‘’I am senior citizen and not much aware about the online process of Income tax website account. I was under the impression that 60 days will be counted from the receipt of physical order. Also, I came to know regarding the order only when I receive the same physically. Due to this lack of awareness, I got late to file the appeal before ITAT. Accordingly, there is delay of 28 days in filing the appeal. The delay is non-deliberate. The delay is not on account of reasonable cause and therefore a humble prayer is being made for condonation of delay.
To this effect, the assessee has filed an affidavit deposing the above facts. 2.2 On the other hand, the ld. DR objected to such delay but submitted that the Court may decide the issue as deem fit and proper in the case. 2.3 The Bench has heard both the parties and perused the materials available. The Bench considered the submissions of the assessee – senior citizen and found that there is a merit in his submission. Hence, the delay is condoned.
SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar 3.1 The brief facts of the case are that assessee is a farmer and assessment under section 147 read with section 144 was completed, thereby assessing total income of the assessee at Rs.24,91,000/- 3.2 Assessee preferred appeal before the ld. CIT(A) but the appeal of the assessee was partly allowed, thereby sustaining additions of Rs.12,00,700/-. 3.3 Aggrieved by the order of ld CIT(A), the assessee has now preferred appeal before me on the grounds mentioned hereinabove 4.1 Ground No. 1 raised by the appellant has not been pressed and in this regard necessary endorsement has already been made on the court file. Therefore considering the request and submissions of the assessee ground number one raised stands dismissed as not pressed. 5.1 Ground No. 2 raised by the appellant relates to challenging the order of ld. CIT(A) in confirming the action of AO in adding the amount of Rs.12,00,700/- 5.2 In this regard, Ld AR appearing on behalf of assessee reiterated the same arguments as raised by him before the revenue authorities and also relied upon his written submissions. It was submitted by ld. AR that assessee was a farmer and had agriculture income in the current as well as past years but AO has rejected the claim of the assessee because of the reason that assessee could not submit sales bills of agricultural produce whereas on the contrary, it was submitted that assessee had already placed on record its documents which are annexed in the paper book in SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar the shape of bank statement, death certificate, Gramapanchayath certificate, Jama Bandi KCC statement, land details, Rajasthan Gramin bank statement and RBI circular. It was further submitted that assessee was involved in the agricultural activities along with his father for the last many years, and even after the death of his father assessee continued to cultivate the lands and it was also submitted that the pre-dominant occupation of the assessee during the year under consideration was agricultural and their activities were exclusively centered around cultivating agricultural produce. However, due to assessee’s limited knowledge of compliance /requirements under the Income Tax Act, he was unaware of the need to maintain proper documentation related to the sale of his agricultural produce. It was further submitted that because of lack of awareness the same resulted in an absence of formal documentation for the transaction conducted during the relevant financial year. It was also submitted that the common practice among farmers including the appellant is predominantly to operate in cash rather than through banks, many farmers including the appellant prefer to hold on to cash rather than deposit it into a bank account due to factors such as lack of financial literacy, trust in banking institutions etc. 5.3 The ld. DR appearing on behalf of the revenue relied upon the orders passed by the revenue authorities. It was submitted that since assessee could not SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar substantiate his agricultural income by way of documentary evidences therefore, additions were rightly upheld by ld. CIT(A). 5.4 I have heard the counsels for both the parties and also perused the material placed on record , judgements cited before me and also the orders passed by the revenue authorityies. From the records, I noticed that assessee is a farmer and engaged in agricultural activities including cultivation of agricultural produce during the year under consideration. The return of income for the year under consideration was initially not filed as according to the assessee he was not having any taxable income. Therefore, after initiating the reopening proceedings, the assessment under section 147, read with section 144 was completed, thereby assessing the total income of the assessee at Rs.24,91,000/-. On appeal, ld. CIT(A) partly allowed the appeal and restricted the addition to Rs.12,00700/-. In order to substantiate its argument and its claim that assessee is a farmer in this regard, assessee has placed on record copy girdawari report along with Jama Bandi’s and land details apart from this assessee has also relied upon a detailed table containing cropwise production details for financial year 2011 to 2012 and financial year 2012 to 2013 and the same is reproduced below:
The assessee has also placed on record the details of receipt and payment account for the period ending 31 March 2012, and the same is reproduced below After analysing the above statements, it is evident that the amount standing as on 1.4. 2012 represents carry forward cash in hand from the preceding financial years. This amount is directly associated with the assessee as no deposits were made into the bank during the previous year. From the documents placed on record, it cannot be ignored that it is undisputed fact that assessee is a farmer and involved in agricultural activities and he is also holding a good chunk of land and thus I can safely conclude that during the relevant financial year, the assessee was engaged in farming activities and wholly and exclusively involved in the cultivation of agricultural produce and the pre-dominant occupation of the assessee during the hearing consideration was agriculture and their activities were exclusively centered around cultivating agricultural produce. The assessee has also placed on record a confirmation from the Office of gram Panchayat Tigaon Alwar, wherein the average production of various crops per Bigha has been depicted at Paper Book page 4. Therefore, this information from the office of gram Panchayat, coupled with Khasara Girdhari‘s, Jama Bandi etc. is available at PB page 5 to 14 and it , reflects that the entire land is registered in the name of assessee whereupon cultivation activities are being undertaken. In my view, these documents not only authenticate the stand of the assessee but also substantiate the agricultural activities being conducted by the assessee on the specified lands. It is also an admitted fact SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar that the entire land is either in the name of assessee or his father or his wife. It cannot be lost sight of the fact that it is a common practice among farmers in India who predominantly operate in cash rather than through banks and said fact is substantiated by the dates of opening of appellant bank and KCC account . In this case the assessee’s SBI savings Bank account was opened on 4.12. 2012, along with the KCC account. I can notice that the preference for cash transactions is often attributed to a combination of limited financial literacy and traditional working practises prevalent in the agricultural community and the farmers reliance on cash reflects the norms within the farming sector where historical practices and practical considerations contribute to this cash-based approach over banking transaction. From the facts, I further noticed that assessee was issued Kisan credit card from State bank of India with account number 32691047568 and it opened on 4 December 2012. This account has been specifically designed for farmers to cover costs and related expenses based on estimated crop expenses. The assessee has placed on record the KCC statement in the paper book and the guidelines issued by RBI on May 11, 2012 which is placed on record at PB Page 22 to 31. These documents clearly indicates under point number three of next to the RBI notification under heading Objectives that Kisan credit card scheme aims at providing adequate and timely credit support from the banking system under a single window to the farmers for their cultivation and other needs and in the instant SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar case the assessee was engaged in farming activities during the relevant financial year. Hence the assessee was able to avail such KCC scheme facility. Therefore it is no conclusively proved on record that assessee was involved into agricultural activities and is a farmer and therefore the documentation related to cultivation activities and the banks disbursement of funds to the farmers through the KCC further supports the stand of the assessee. Therefore in my view, it is not justified to deny the claim of the assessee that assessee was not engaged in agricultural activities merely because sales documents were not in his possession. Under the above circumstances, one can understand that formal codes of agricultural sales or banking transactions may not have been maintained meticulously. However, the absence of such records in my view should not undermine the legitimate source of income when it is backed by credible and direct circumstantial evidences. As it is a common practice that many farmers prefer to hold on cash rather than deposit it into a bank account due to factors such as lack of financial literacy, trust in banking institutions, or the desire to have liquid cash readily available for agricultural operations or unforeseen circumstances, therefore, in my view accumulating cash over a period of time is a reasonable and acceptable practice in ruler areas, particularly for individuals engaged in seasonal or cyclical occupations like farming’s from the above circumstances, as discussed by me above the deposits made by the appellant are therefore a reflection of this accumulated SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar agricultural savings which have been held in cash over several years. Moreover, I am also of the view that in the absence of any adverse material or evidence demonstrating that the cash deposits originated from a taxable source and after evaluating the entire facts and circumstances of the present case, I am of the considered view that the explanation put forth before me by the assessee coupled with documentary evidence is placed on record. I can safely conclude that these deposits were accumulated savings from agricultural income of the assessee, in my considered view the agricultural income which is explicitly exempt under section 10 (1) of the Income Tax Act retains its exempt status, even if the income received over the years and deposit in cash at a later stage. Therefore, unless the tax authorities can provide credible evidence showing that the funds in question are from a taxable source, the assessee’s explanation should be accepted. It is a common practice, particularly in rural and agricultural commodities to conduct transactions in cash and as long as the source is well explained and supported by reasonable evidence it may not be rejected. Therefore, considering the totality of facts and circumstances, as discussed by me above, the assessee has successfully proved on record that he is a farmer and engaged in agricultural activities and the source of cash deposits is agricultural income earned over the years and thus successful in proving that the cash deposits in the bank is having proper and well SHRI CHAGAN YADAV VS ITO, WARD 1(1), Alwar explained source. Therefore additions made by the AO and upheld by ld. CIT(A) stands deleted. Hence, this ground raised by the appellant stands allowed. 6.0 Consequently, the appeal filed by the assessee is allowed, partly with no orders as to cost . Order pronounced in the open court on 30 /09/2024.