Bhikhu Rajshi Karavadara Vs ITO (ITAT Rajkot)
Agricultural Cash Deposits: ITAT Restricts Addition to 10%, Directs Normal Tax Instead of Section 115BBE
The controversy
The Rajkot Tribunal restricted an aggregate addition of ₹11,65,540 to ₹1,16,554, granting substantial relief to an agriculturist whose cash deposits had been treated as unexplained money.
The Tribunal found that the Assessing Officer had rejected the assessee’s agricultural-income explanation without conducting an enquiry or explaining why the supporting evidence was unacceptable. However, since some documents were considered self-serving, the Tribunal declined to grant complete relief and sustained an ad hoc addition of 10%, taxable at normal rates rather than under Section 115BBE.
Significantly, the Tribunal expressly stated that its adjudication should not be treated as a precedent for preceding or succeeding assessment years.
Cash deposits triggered reassessment
The assessee was an individual engaged in agricultural activities. Information available with the Department showed cash deposits of ₹18,34,000 in his State Bank of India account during FY 2011-12.
The Assessing Officer initiated reassessment proceedings. In response, the assessee furnished his return, computation of income and evidence relating to agricultural income. The return disclosed agricultural income of ₹1,64,050 and bank interest of ₹15,537.
The assessee explained the bank transactions with reference to agricultural activities and cash withdrawals and redeposits. He also relied on evidence concerning his agricultural landholding.
The Assessing Officer rejected the explanation, observing that the agricultural income disclosed did not explain the cash deposits. Nevertheless, he recognised that there were regular cash withdrawals and subsequent redeposits.
Instead of adding the entire deposits of ₹18,34,000, the Assessing Officer calculated a peak credit of ₹11,50,000 as on 7 September 2011, taking the opening cash balance as nil and accounting for withdrawals and redeposits.
This amount was assessed as unexplained money under Section 69A. A further ₹15,540 was added as bank interest, resulting in an aggregate addition of ₹11,65,540.
The CIT(A) confirmed the assessment.
Delay of 430 days condoned
The appeal before the Tribunal was delayed by 430 days.
The assessee filed an affidavit and a condonation petition explaining that the delay arose from a mistake on the part of his advocate. He pleaded that he should not suffer for that lapse.
The Revenue opposed condonation and sought dismissal of the appeal as time-barred. After examining the affidavit, the Tribunal found mitigating circumstances sufficient to exercise its discretion in favour of the assessee and condoned the delay.
Agricultural evidence could not be brushed aside
On merits, the assessee argued that his status as an agriculturist was accepted and that he had furnished evidence supporting both his agricultural activities and landholding.
The Tribunal noted that the assessee had produced his return, computation and agricultural-income evidence. It also recorded that the Assessing Officer had acknowledged regular cash withdrawals for agricultural purposes and deposits out of agricultural income.
Despite this material, the Assessing Officer had not carried out an enquiry before rejecting the explanation.
The Tribunal emphasised that the assessment order did not explain why the evidence was unacceptable. The documents had simply been brushed aside. Evidence supporting an assessee’s claim, it held, cannot be rejected merely on surmises.
Some evidence was self-serving: Complete relief refused
The Tribunal nevertheless found that some documents and evidence were self-serving and could not be fully relied upon.
It therefore considered that the assessee deserved relief, but that deleting the entire addition would be inappropriate. Referring to the smallness of the amount and the inconsistencies in the documents, the Tribunal adopted an ad hoc estimate to protect the Revenue’s interest.
It applied what it described as a 10% net profit rate to the aggregate amount of ₹11,65,540, arriving at ₹1,16,554.
The Assessing Officer was directed to restrict the addition to that amount and apply the normal income-tax rate, expressly excluding Section 115BBE.
The appeal was accordingly partly allowed. The Tribunal clarified that this adjudication was made considering the particular circumstances and was not to operate as a precedent for other assessment years.
Author’s comments
The useful principle emerging from the order is that agricultural-income evidence requires examination, not summary rejection. An Assessing Officer who disputes the explanation should identify its deficiencies and make appropriate enquiries.
However, the 10% estimation is expressly fact-specific. The order does not establish a general rule that unexplained bank deposits of an agriculturist should be taxed only to the extent of 10%. Agricultural status alone also does not explain every deposit; the source and availability of cash remain relevant.
The reasoning contains a point requiring care: the Tribunal applied 10% to an aggregate that included both the peak-credit addition and bank interest, without separately analysing the interest component. Although the order records that interest of ₹15,537 had already been disclosed, it does not expressly examine whether the Assessing Officer’s addition of ₹15,540 duplicated that disclosure.
Finally, the direction excluding Section 115BBE should be confined to the estimated addition sustained in this case. It is not a broader ruling that Section 115BBE can never apply to unexplained money held by an agriculturist.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2012-13, is directed against the order under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 16.04.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 06.12.2019.
2. When the matter was called for hearing, the learned Counsel for the assessee at the outset submitted that appeal has been filed by the assessee belatedly by 430 days. The assessee has moved a petition for condonation of delay, requesting the Bench to condone the delay, in filing appeal. The learned Counsel therefore, adverted my attention to the affidavit filed in this regard citing reasons for condonation of delay and urged for a benign view and sought condonation of delay 430 days. Learned Counsel for the assessee submitted that because of the mistake of the advocate of the assessee, the delay of 430 days has resulted for which the assessee should not be penalized. However, Ld. DR for the revenue, opposed the prayer of the assessee, for condonation of delay and stated that appeal may be dismissed on account of the delay. I have heard, both the parties on this preliminary issue. A perusal of the affidavit gives me an impression of existence of mitigating circumstances to enable me to exercise my discretion in favour of the assessee. Accordingly, the delay is condoned.
3. Solitary grievance of the assessee in this appeal is that learned CIT(A) erred, in confirming the addition of Rs.11,50,000/-( peak credit) and Rs. 15,540/- ( interest from Bank) totalling to Rs. 11,65,540/-, mainly on account of peak credit of cash deposited in the bank account out of agricultural income.
4. Succinctly, the factual panorama of the case is that assessee before me is an Individual and agriculturalist. In this case, as per ITS data available on record, it is noticed that the assessee has made cash deposit of Rs. 18,34,000/- in State Bank of India “during F.Y. 2011-12. The re-opening proceedings was initiated and notice u/s148 of the I.T. Act was issued on 27.03.2019 after following all procedure laid down in the Income-tax Act, which was duly served to the assessee on 18.03.2019. Thereafter reminder letter was issued on 31.05.2019 in which the assessee was directed to make compliance of notice u/s 148 of the I.T. Act and submit the copy of return of income, (ROI) with computation of income after e-filing the return of income duly verified by assessee.
5. In response to the various notices of the assessing officer, the assessee has furnished written reply on dispatch on 10.06.2019 and furnish acknowledgment of return of income filed on 05.06.2019 with computation of income by showing interest income of Rs. 15,537/- and agricultural income of Rs. 1,64,050/- and evidence pertaining to agricultural income.
6. However, the assessing officer rejected the above reply of the assessee and observed that the assessee has bank account in State Bank of India and made cash deposit of Rs. 18,34,000/- during the year and there was regular withdrawal of cash during the year and further no any description mentioned in the bank account. The assessee has shown agricultural income of Rs. 1,64,050/- in return of income. Thus, cash deposit does not belongs to agricultural income. In the light of above facts and circumstances peak credit of the cash deposit i.e. Rs. 11,50,000/-,as on 07.09.2011 (by considering opening cash balance at zero and the assessee has made redeposit after withdrawal ). Therefore, cash deposits made by the assessee to the extent of Rs. 11,50,000/- was treated by the assessing officer, as asssessee’s unexplained money under section 69A of the I.T. Act. Moreover, the assessee has earned interest from bank during the F.Y. 2011-12, by amounting to Rs. 15,540/-, hence, an addition of Rs. 15,540/- was made as interest income under the head income from other sources. Therefore, assessing officer made total addition to the tune of Rs.11,65,540/- ( Rs. 11,50,000+ Rs. 15,540).
7. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
8. 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. Learned Counsel for the assessee submitted that assessing officer himself admitted that assessee is an agriculturalist and had shown agricultural income, in his income tax return. The assessing officer also admitted that assessee has been regularly doing withdrawal of cash from the bank account for agricultural purposes and also depositing the cash in the bank account, out of agricultural income. Therefore, it is not disputed that the assessee is not an agriculturalist. The assessee has submitted necessary evidence, showing agricultural income and evidence relating to land holding, therefore addition sustained by the learned CIT(A) should be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.
9. I have considered submissions of both the parties and noted that assessee under consideration is an agriculturalist. During the assessment proceedings, the assessee submitted before the assessing officer, return of income, computation of total income showing interest income of Rs. 15,537/- and agricultural income of Rs.1,64,050/- and evidence pertaining to agricultural income. The assessing officer also admitted that assessee has regularly been doing withdrawal of cash from the bank account for agricultural purposes and also depositing the cash in the bank account, out of agricultural income. It was revealed from the assessment order, and the submissions of the assessee before the assessing officer that the assessing officer did not carry out any enquiry before rejecting the submission of the assessee. The assessing officer does not mention why he is not accepting these evidences. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. However, I also find that some of the documents and evidences are self- servicing, documents and evidences on which reliance cannot be placed, therefore, to protect the interest of the revenue, and considering the smallness of the amount an ad-hoc, estimated addition should be made in the hands of the assessee. Therefore, I find some merit in the contention of the ld. Counsel for the assessee. 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% of Rs. 11,65,540/- which comes to Rs. 1,16,554/- , is adopted, 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. 1,16,554/-, by applying the normal rate of income tax ( not under section 115BBE of the Act). This adjudication has been done, considering the smallness of the amount, therefore, it is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
10. In the result, appeal filed by the assessee, is partly allowed.
Order is pronounced in the open Court Today on 12/10/2026.
