Case Law Details
Jigar Patel Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has dismissed an appeal filed by Jigar Patel, upholding an addition of Rs. 49,55,101/- made by the Income Tax Officer (ITO) as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The ruling, delivered on June 26, 2025, pertains to the Assessment Year 2018-19 and affirms the decision of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC), Delhi.
The case centered on a significant discrepancy in agricultural income declared by the assessee, Jigar Patel, for the fiscal year 2017-18, which corresponded to Assessment Year 2018-19. Mr. Patel had e-filed his return of income on July 31, 2018, declaring a total income of Rs. 5,48,790/- and an agricultural income of Rs. 75,54,376/-. His case subsequently came under scrutiny through the Computer Assisted Scrutiny Selection (CASS) system, specifically flagged under the “Agricultural Income” criteria.
During the assessment proceedings, the Assessing Officer (AO) issued several statutory notices to Mr. Patel, requesting detailed information and documentation concerning his agricultural activities. In response, Mr. Patel’s representative, Shri Shailesh C Parikh & Co. CAs, submitted a reply. However, the AO, after a thorough examination of the submitted information and the prevailing circumstances, concluded that the declared agricultural income was questionable.
A key factor in the AO’s assessment was the widespread natural calamity that had affected Gujarat during the year under consideration – the 2017 floods. Given the significant damage to crops across the state, the AO found it implausible that Mr. Patel’s agricultural income would have seen such a substantial increase. The AO ultimately determined that only Rs. 25,99,275/- of the declared agricultural income could be genuinely attributed to agricultural sources. The remaining amount of Rs. 49,55,101/- (calculated as Rs. 75,54,376/- less Rs. 25,99,275/-) was consequently treated as income from unexplained sources, disguised as agricultural income, and added back to Mr. Patel’s taxable income under Section 68 of the Act. The assessment was completed under Section 143(3) read with Sections 143(3A) and 143(3B) on March 18, 2021.
Aggrieved by the AO’s order, Mr. Patel lodged an appeal with the CIT(A)/NFAC. Before the appellate authority, Mr. Patel contended that the addition of Rs. 49,55,101/- was erroneous both in law and on facts, and that the CIT(A) had failed to properly appreciate the submissions, explanations, and information provided during the assessment proceedings. He also challenged the validity of the CIT(A)’s order itself.
The CIT(A)/NFAC, after reviewing the factual matrix of the case, sided with the AO’s findings. The appellate authority noted that Mr. Patel’s declared net agricultural income of Rs. 75,54,376/- represented a three-fold jump compared to his agricultural income in the preceding financial year (2016-17), which stood at Rs. 25,99,275/-. While acknowledging that Mr. Patel owned 91 Vighas of agricultural land and was not subject to the Gujarat Agricultural Land Ceiling Act 1960, the CIT(A) highlighted several inconsistencies in his claims.
Crucially, the CIT(A) observed that Mr. Patel had failed to provide specific details of the crops grown before the AO, instead seeking adjournments. Although he later submitted computerized ledger extracts of “CASH Agricultural income,” these records presented a peculiar pattern: they indicated almost daily sales of the same types of produce – specifically, vegetables like bitter gourd, bottle gourd, brinjal, lemon, and chilly – throughout the year, and often in similar quantities.
Mr. Patel attempted to explain the significant increase in agricultural income by attributing it to a reduction in agricultural expenses. He claimed that expenses had decreased from 76.6% in the Financial Year 2016-17 to 43.94% in the relevant previous year, citing cost-cutting measures and accumulated experience. However, these submissions did not convince the AO, nor the CIT(A).
The CIT(A) found “great force” in the AO’s argument that a three-fold hike in net agricultural income in a year marked by a natural calamity like the Gujarat floods was “unbelievable and unsupported by documents.” It was noted that Mr. Patel failed to submit any proof in this regard during either the assessment or the appellate proceedings. Even the photographs of vegetables submitted during the assessment were deemed insufficient to rebut the AO’s findings, leaving the ground of appeal unsubstantiated. Consequently, the CIT(A) found no reason to overturn the AO’s “well-reasoned and speaking order,” sustaining the estimation of agricultural income at Rs. 25,99,275/- and confirming the addition of the balance Rs. 49,55,101/- as unexplained income under Section 68 of the Act.
Upon review of the case records and the merits of the arguments presented, the ITAT concurred with the observations of the CIT(A). The Tribunal stated that Mr. Patel’s explanation regarding the three-fold increase in agricultural income and the drastic reduction in expenses from 76% to 43% could not be considered “reasonable, logical and acceptable.” The ITAT explicitly stated its agreement with the CIT(A)’s decision to confirm the addition based on the merits of the case.
It is noteworthy that the ITAT’s order, as provided, does not explicitly refer to or rely upon any specific judicial precedents from higher courts or other tribunals. The decision appears to be based primarily on the factual assessment of the evidence presented by the assessee against the backdrop of the prevailing circumstances (the Gujarat floods) and the application of Section 68 of the Income Tax Act. The Tribunal’s ruling underscores the importance of taxpayers providing comprehensive and verifiable documentation to substantiate claims, particularly when significant deviations from previous financial patterns or external factors like natural calamities are involved.
In conclusion, the appeal filed by Jigar Patel was dismissed, affirming the tax authorities’ stance on the unexplained cash credit. The order was pronounced in the open Court on June 26, 2025.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against the appellate order dated 04.03.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2018-19.
2. The assessee has raised the following ground of appeal:
1.The Learned CIT(A) erred in law and on facts in confirming addition of Rs.49,55,101/- made by the learned ITO (Assessment Unit) as unexplained cash credit u/s.68 of the Act. The Addition confirmed by the learned CIT(A) NFAC deserves to be deleted. The same be deleted now.
2. The Learned CIT(A) has erred in properly appreciating the facts, various submissions, explanations and information submitted by the appellant during the assessment proceedings which ought to have been considered in proper perspective before passing the impugned order.
3. The order passed by the Learned CIT(A) NFAC is invalid and bad in law. It be so held now.
4. The appellant crave to add, amend, alter, delete, change or modify any or all grounds of appeal before or at the time of hearing.
3. The brief facts of the case are that assessee e-filed his return of income on 31.07.2018 for the AY 2018-19 declaring total income at Rs.5,48,790/- and agriculture income of Rs.75,54,376/-. The case was selected for scrutiny under CASS under selection criteria “Agricultural Income”. In response to several statutory notices issued to the assessee to furnish details about the agricultural activities, the assessee’s representative Shri Shailesh C Parikh & Co. CAs submitted reply. The AO on examination of the entire case, came to the conclusion that for the year under consideration which witnessed widespread calamity i.e. Gujarat 2017 floods, the agricultural income cannot be more and the reply given by the assessee was nothing but a concocted story. The AO completed the assessment u/s.143(3) r.w.s 143(3A) & 143(3B) of the Act dated 18.03.2021, considering Rs.25,99,275/- as the agriculture income was held as income from the unexplained sources shown as agricultural income and Rs.49,55,101/- (i.e. Rs.75,54,376 – Rs.25,99,275) was treated as unexplained cash credit u/s.68 of the Act.
4. Aggrieved assessee filed an appeal before the Ld.CIT(A), who dismissed the appeal of the assessee by observing as under:
“…Having considered the factual matrix of the case, I find that during the year under consideration, the assessee had shown net agricultural income of Rs.75,54,376/- which was a three fold jump from the previous year’s agricultural income. It has been observed by the AO that the assessee has got 91 Vighas of agricultural land. Gujarat Agricultural Land ceiling Act 1960 does not apply to him. But before the AO, the assessee did not give details of crops grown and sought adjournments. However, he filed a computerized ledger extracts of CASH Agricultural income which gave an impression that throughout the year, the assessee grew same types of produce – vegetables of bitter gourd, bottle gourd, brinjal, lemon, tomato chilly. The said ledger shows sale of agricultural produce almost on a daily basis and of almost same degree. The AO required the assessee to explain the reasons as to how the net agricultural income of the previous year 2017-18 has grown three times to Rs.75,54,376/- from the corresponding figure of the preceding fiscal of Rs.25,99,275/- and other details. The assessee submitted that the rise in agricultural income was due to reduction in agricultural expenses from 76.6% in the FY 2016-17 to 43.94% in the relevant previous year. He attributed this reduction to cutting down cost, experiences gathered etc. the submissions of the assessee did not find favour with the AO. The AO found that during the year under consideration, the state of Gujarat witnessed heavy floods causing damage to crops. I find great force in the argument of the AO that three times hike in net agricultural income in a year and that too, in the year of natural calamity was unbelievable and unsupported by documents. No proof in this regard was submitted by the assessee during the assessment or appellate proceedings. The photos of vegetables submitted during the assessment proceedings do not rebutted the findings of the AO and this ground of appeal remain unsubstantiated. In the circumstances, I do not have any reason but to sustain the well reasoned and speaking order of the AO estimating the agricultural income of the assessee at Rs.25,99,275/- and holding the balance income of Rs.49,55,101/- (Rs.75,54,376 – Rs.25,99,275) as income from the unexplained sources shown as agricultural income and added u/s.68 of the Act…”
5. On going through the record before us and after examining the matter on merits, we hold that the explanation of the assessee that there has been hike in agricultural income by three times in the current year and expenses have gone down from 76% to 43% cannot be held to be reasonable, logical and acceptable. We are in agreement with the Ld. CIT(A)’s observation in confirming the addition on merits of the case.
6. In the result, the appeal of the assessee is dismissed.
The order is pronounced in the open Court on 26.06.2025
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