Case Law Details
Dineshbhai Nagjibhai Viradiya Vs ITO (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, heard an appeal filed by the assessee for Assessment Year 2017-18 against the order passed by the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), which had confirmed an addition of Rs. 6,80,000 under Section 69A of the Income Tax Act relating to cash deposits made during the demonetization period.
The assessee also challenged the rejection of agricultural income, the estimation of opening cash balance, and the appellate authority’s treatment of documentary evidence.
The appeal before the Tribunal was delayed by 47 days. The assessee sought condonation of delay on the ground of severe illness. After hearing both parties and examining the affidavit filed in support of the application, the Tribunal held that sufficient cause had been shown and condoned the delay in the interest of justice.
The assessee had filed his return of income declaring total income of Rs. 2,93,380 and exempt agricultural income of Rs. 2,96,050. During the relevant year, the assessee earned salary income from M/s Bhakti Construction and agricultural income from farming activities. The case was selected for scrutiny assessment under CASS, and notices under Sections 143(2) and 142(1) of the Income Tax Act were issued during the assessment proceedings.
The Assessing Officer observed that the assessee maintained bank accounts with Rajkot District Co-operative Bank and had deposited cash totaling Rs. 11,50,000 during the demonetization period. According to the Assessing Officer, the cash deposits were not commensurate with the assessee’s return profile. A show-cause notice was issued asking the assessee to explain why the deposits should not be treated as unexplained money under Section 69A of the Act.
In response, the assessee submitted that he was not maintaining books of account but explained the source of cash deposits through a cash flow statement. The assessee stated that the deposits were made out of opening cash in hand of Rs. 7,50,000 as on 01.04.2016, agricultural receipts of Rs. 4,50,000, salary income of Rs. 1,40,000, and bank withdrawals of Rs. 2,30,000. After reducing agricultural expenses of Rs. 1,53,950, the assessee claimed to have cash in hand of Rs. 14,16,050 as on 08.11.2016.
The Assessing Officer rejected the explanation relating to the opening cash balance of Rs. 7,50,000 and agricultural income. The officer accepted only Rs. 1,00,000 as opening cash in hand and considered salary income and bank withdrawals totaling Rs. 3,70,000. Accordingly, the Assessing Officer treated Rs. 6,80,000 out of the total cash deposits of Rs. 11,50,000 as unexplained money under Section 69A of the Act.
The Commissioner (Appeals) upheld the addition made by the Assessing Officer, following which the assessee approached the Tribunal. Before the Tribunal, the assessee argued that all relevant evidence had been submitted, including books of account, cash flow statements, bank statements, proof of opening cash balance, agricultural income records, land holding documents, and evidence relating to agricultural expenses and cash deposits. The assessee contended that despite furnishing substantial documentary evidence, the authorities below made the addition without proper consideration of the material placed on record.
The Departmental Representative supported the findings of the Assessing Officer.
After examining the records and submissions, the Tribunal noted that the assessee had produced copies of land records such as 7/12 extracts to establish ownership of 28 bighas of agricultural land. The Tribunal observed that the assessee had submitted documentary evidence relating to agricultural activities, cash flow statements, bank statements, opening cash balance, salary income, past savings, and cash withdrawals. The Tribunal held that these documents had not been properly considered by the Assessing Officer.
The Tribunal further observed that the Assessing Officer had brushed aside the evidence without examining or verifying the documents and without pointing out specific defects. However, the Tribunal also noted that some of the documents produced by the assessee were self-serving in nature and that there remained a possibility of revenue leakage.
Considering the overall facts and evidence, the Tribunal held that the entire addition should not be sustained and that partial relief should be granted to the assessee. The Tribunal concluded that the ends of justice would be met by adopting a net profit rate of 10% on the disputed amount of Rs. 6,80,000, resulting in an addition of Rs. 68,000. The Tribunal directed that the addition should be taxed at the normal rate and not under Section 115BBE of the Act. It was also clarified that the decision would not operate as a precedent for any preceding or succeeding assessment year.
Accordingly, the appeal of the assessee was partly allowed.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [‘Ld. CIT(A)’], dated 25.09.2025, which in turn arises out of an assessment order passed by the Assessing Officer (AO) u/s. 143(3) of the Act, on 05.12.2019.
2. The assessee has raised the following grounds of appeal:
“1. The order passed by the Ld. Addl./JCIT(A), Faridabad (hereinafter referred to as ld. CIT(A), u/s 250 of the Income-tax Act, 1961 is bad in law, erroneous on facts, contrary to evidence on record, based on surmises and conjectures, and therefore liable to be quashed
2. The Ld. CIT(A) erred in confirming the addition of Rs. 6,80,000/-, u/s 69A on account of cash deposits made during the demonetization period, without appreciating that the appellant had fully explained the source of cash by way of opening cash balance, agricultural income, salary income and bank withdrawals.
3. The Ld. CIT(A) erred in law as well as on facts sustaining the addition mechanically, without dislodging the cash-flow statement and explanations supported by contemporaneous evidence, thereby rendering the order perverse and unsustainable.
4. The Ld. CIT(A) erred in law and on facts in rejecting the agricultural income of Rs.2,96,050/- (net) declared by the appellant, despite the fact that the appellant’s ownership and possession of agricultural land stood conclusively proved by statutory revenue records (Form 5, 7, 8A & 12), the crops grown and irrigation facilities were duly recorded in government records, agricultural income was regularly declared in earlier years, and the assessing officer himself accepted the agricultural income for rate purposes in the computation annexed to the assessment order.
5. The Ld. CIT(A) erred in holding that absence of sale bills is fatal to the claim of agricultural income, ignoring the ground realities of agricultural trade, settled judicial precedents and the fact that there is no statutory obligation on an agriculturist to maintain sale bills.
6. The Ld. CIT(A) erred in law as well as on facts in confirming arbitrary, unrealistic and contrary to human probabilities estimation of Ld. assessing officer about opening cash of Rs. 1.00 Lakh instead of Rs. 7.50 Lakh,
7. The Ld. CIT(A) erred in law in not adjudicating the detailed written submissions supported by documentary evidence filed by the appellant, and in passing a nonspeaking and cryptic order, thereby violating the principles of natural justice.
8. Without prejudice to the above, the addition sustained is highly excessive, unreasonable and not in accordance with the preponderance of probabilities and deserves to be deleted or substantially reduced.
3. The appeal filed by the assessee for Assessment Year 2017-18, is barred by limitation by 47 days. The assessee has moved a petition requesting the Bench to condone the delay. Learned Counsel for the assessee submitted that assessee was feeling severe illness, therefore, such delay has resulted which may be condoned, in the interest of justice. On the other hand, learned DR for the revenue opposed the prayer of the assessee, to condone the delay and stated that delay should not be condoned.
4. I have heard, both the parties on this preliminary issue. I note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, I am of the considered opinion that in the interest of justice, the delay deserves to be condoned. I, accordingly, condone the delay.
5. Succinctly, the factual panorama of the case is that the return of income for the Assessment Year 2017-18, was e-filed by the assessee on 29/03/2018 with returned income at Rs.2,93,380/- and claiming exempt agricultural income of Rs.2,96,050/-. The assessee, during the year under consideration has earned Salary income from M/s Bhakti Construction and Agricultural Income from his agricultural activity. The assessee’s case was selected for scrutiny in CASS for e-assessment proceedings and a statutory notice u/s 143(2) of the I.T. Act, 1961 was issued on 14/08/2018, which was duly served upon the assessee within time limit. Thereafter, during the course of e-assessment proceedings, further notice u/s. 142(1) along with questionnaire were issued on 02/02/2019, 01/08/2019 which were duly served upon assessee. The assessing officer also gave a final opportunity to assessee and issued Show Cause Notice dated 16/10/2019 which was duly served upon assessee. The relevant portion of Show Cause Notice is mentioned as under:
“Kindly refer to the above and assessment proceeding in your case for A.Y. 2017-18.
2. During the course of assessment proceeding, detailed questionnaire vide notice u/s 142(1) of the Act dated 01.08.2019 was issued in your case, however you have failed to provide the details by schedule date. Subsequently in your case, reminder in form of notice u/s 142(1) of the Act was issued dated 19.9.2019 by which you were once again requested to submit details asked vide questionnaire dated 01.08.2019, however again nothing was submitted by schedule date. It is observed that you are not willing to participate in assessment proceeding and the assessment in the case is to be finalized on the basis of details available on record, however following the principle of nature justice, one more opportunity is being provided in the form of this notice to submit details.
3. As per details available on record, it is seen that you were maintaining bank accounts with Rajkot District Co-operative Bank having account nos. 114002213584 and account no. 614123076789 (the account has been shown by you in your return of income) wherein you have made cash deposit during demonetization period in SBN of Rs.5,50,000/- and Rs.6,00,000/- respectively. The deposit so made is not in commensuration with your return profile and accordingly, to verify the same detailed questionnaire was issued, however you have failed to provide details. In this regard, you are requested to explain why not in absence of any information and explanation in respect of source of cash deposit made of Rs.11,50,000/- in the above-mentioned bank accounts, during demonetization period, should be brought to tax net as unexplained money within the meaning of section 69A of the Act.
4. You are therefore, requested to offer your explanation via e-filing portal by 30.10.2019 at 11.30 AM along with relevant documents and explanation as called for. Please note if the information is not received as per schedule, assessment shall be finalized ex-parte u/s 144 of the Act on the basis of the material available on records and merits of the case. Please note that, under no circumstances further adjournment application will be entertained and in case of non-compliance of these notices, assessment will be finalized ex parte.
6. In response to the above said Show Cause Notice, the assessee complied with the Show Cause Notice and filed reply before the assessing officer, on dated 29/11/2019. The gist of reply submitted by the assessee was produced by the assessing officer, in the assessment order. The assessee has submitted that he is not maintaining books of accounts, however given reply that he has claimed vide his above mentioned cash flow statement that the Cash deposit in SDN during demonetization period of Rs.11,50,000/- in its bank account number 114002213584 and 614123076789 was made out of opening cash on hand on 01/04/2016 of Rs.7,50,000/- and income generated during the year from agricultural receipts of Rs.4,50,000/- and Salary of Rs.1,40,000/- and cash withdrawal from Bank of Rs.2,30,000/-, aggregating to Rs.15,70,000/-, which is reduced by agricultural expenses incurred of Rs.1,53,950/-, on pro rata basis, resulting in cash in hand with assessee on 08/11/2016 was of Rs.14,16,050/-.
7. However, the assessing officer, rejected the contention of the assessee and observed that to the extent of Rs.3,70,000/- (Rs.2,30,000+ Rs.1,40,000), which is made from cash withdrawal of Rs.2,30,000/- and salary earned of Rs.1,40,000/-, prior to the period of demonetization and considering the financial statement of the person, it will be appropriate to give credit of opening cash on hand at Rs.1,00,000/-. Therefore, the reply submitted by the assessee regarding opening cash of Rs.7,50,000/- and income earned / withdrawals made during the year of Rs.8,20,000/- was not accepted by the assessing officer. The amount accepted was Rs.1,00,000/-, as opening cash on hand and benefit of income earned/withdrawal made during the year except agricultural income was of Rs.3,70,000/-, and total of both comes to Rs. 4,70,000/- (Rs.1,00,000+ Rs.3,70,000). Thus, total availability of fund before the assessee prior to demonization was of Rs.4,70,000/-. Accordingly, the assessing officer provided the benefit of having cash of Rs.4,70,000/- in cash prior to demonetization and over and above the amount deposited during demonetization period of Rs.6,80,000/- (Rs.11,50,000-Rs.4,70,000) was treated as unaccounted money of the assessee within the meaning of section 69A of the Act.
8. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer, therefore, the assessee is in further appeal before this Tribunal.
9. Shri Samir Bhuptani, Learned Counsel for the assessee, argued that the assessee has submitted all possible evidences in support of his claim before the assessing officer such as, books of account, cash flow statement, details of the cash deposited in the bank account, the proof relating to opening cash in hand on 01.04.2016. The assessee also submitted the evidence relating to income earned from agricultural activity and cash deposited in the bank Account. The assessee also submitted the land holding proof and agricultural income and expenses. Therefore, Ld. Counsel contended that during the assessment proceedings, despite submission of plethora of documents and evidences, the assessing officer made the addition. Therefore, the Ld. Counsel contended that addition made by the assessing officer may be deleted.
10. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
11. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. I note that during the assessment proceedings, the assessee, produced the copy of 7/12, as an evidence for holding the agricultural land. The assessee, stated that 28 bighas of land is available with the assessee which is sufficient to earn the agricultural income, as shown by the assessee. I also note that during the assessment proceedings, the assessee submitted written submission along with documentary evidences. The assessee submitted the cash flow statement, bank statement and the clarification regarding source of cash deposit from agricultural activity during the financial years 2015-16 and 2016-17. The assessee also submitted the documents pertaining to land holding and I note that the assessee is owner of 28 bighas of agricultural land and such land is utilized for growing the commercial crops.
The assessee also submitted the books of accounts, cash flow statement, details of the cash deposited in the bank account, the proof relating to opening cash in hand on 01.04.2016, cash withdrawn from the bank, salary income, and past savings. These evidences have not been considered by the assessing officer, in a right perspective. Therefore, I find that the assessing officer did not accept these documents and evidence and simply brushed aside the documents and evidence, hence, I note that the assessing officer ought to have considered these documents and evidences and ought to have examined these documents and evidences and then after verifying the same, the assessing officer must have highlighted the defects in documents and evidences, however, the assessing officer has failed to do so. However, I also find that some of the documents and evidences furnished by the assessee before the lower authorities are self-serving documents and evidence, therefore, there is a possibility of leakage of revenue. Hence, I find that the entire addition should not be deleted, however, a part relief should be given to the assessee, considering the so much documents and evidences, so submitted by the assessee, during the assessment stage. Hence, I find that while the case of the assessee merits some relief, at the same time entire relief cannot be permitted to the assessee. In my view the ends of justice would be met, if a net profit rate of 10% on Rs.6,80,000/- is adopted, which comes to Rs.68,000/-, since the same would take care of the inconsistencies, in the various documents and evidences submitted before the lower authorities. Therefore, in order to plug the leakage of revenue, I direct the assessing officer to make addition of Rs.68,000/-, by applying the normal rate of income tax (not under section 115BBE of the Act). It is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
12. In the result, the appeal filed by the assessee is partly allowed in the above terms.
Order was pronounced in the open Court on 05/05/2026.
Author Bio
