Balakrishnamurthy Ramachandrababu Vs DCIT (ITAT Bangalore Bench)
APMC Bills Harvest Relief u/s 69A: Agricultural Sale Proceeds Cannot Be Uprooted Merely Because RTC Does Not Mention the Crop
Summary: The assessee, an individual deriving income from salary & other sources, filed his return of income for AY 2022-23. His case was selected for scrutiny to verify, inter alia, large cash deposits in his bank account & certain reported transactions relating to purchase/sale of immovable property.
During assessment proceedings, the assessee denied having undertaken any property transaction during the relevant year. On verification of the records, the AO accepted the explanation & did not make any addition on that issue.
Agricultural Produce Sold Through APMC
The assessee explained that he owned 4 acres & 4 guntas of ancestral agricultural land, where he cultivated vegetables & fruits. The agricultural produce was sold through the APMC Yard, Doddaballapura, and the sale proceeds received in cash were deposited in his bank account.
In support of the explanation, the assessee furnished:
- RTC & pahani records relating to the agricultural lands;
- monthly summaries of agricultural sales;
- sale bills issued through the APMC Yard; &
- copies of the relevant bank statements.
The assessee further explained that, since agricultural income was exempt from tax, he was under a bona fide but mistaken belief that such income need not be disclosed in the return.
AO Finds No Crop in the RTC & Plants Addition u/s 69A
The AO rejected the explanation principally because the RTC records did not specify the crops cultivated on the land. He also observed that the assessee had not produced bills for purchase of seeds, pesticides or other cultivation expenses.
The AO further relied upon the fact that the assessee had not disclosed agricultural income either in the earlier years or in the subsequent year. On these grounds, the entire cash deposits were treated as unexplained money u/s 69A.
The CIT(A) endorsed the addition, holding that the assessee’s explanation was not supported by credible evidence.
State Government Records Cannot Be Selectively Disbelieved
Before the ITAT, the assessee contended that the APMC sale bills were authentic records generated through a market committee established & regulated by the State Government. The genuineness of those sale bills had never been doubted by the AO.
It was submitted that non-mentioning of the particular crop in the RTC was attributable to the manner in which the revenue authorities maintained the land records. An omission by the State authorities could not be converted into evidence that no agricultural activity was carried on.
The assessee also pointed out the practical reality that agricultural operations, particularly those undertaken by a small farmer, largely function in the unorganised sector. Expecting the farmer to maintain pucca vouchers for every purchase of seeds, pesticides & other agricultural inputs was unrealistic.
No Enquiry, No Contrary Material—Only Suspicion
The ITAT noticed that the assessee’s ownership of agricultural land was not in dispute. The RTC & pahani records established ownership and possession, while the APMC sale bills demonstrated the actual sale of agricultural commodities.
The Tribunal observed that an RTC is maintained by the State authorities. Merely because the crop cultivated was not mentioned in that record, it could not automatically be concluded that the assessee had not cultivated any agricultural produce.
More importantly, the AO had not undertaken any independent verification. The Tribunal observed that the AO could have obtained a report from the Verification Unit or made enquiries from the APMC or other available sources to ascertain whether the assessee had carried on agricultural activities. No such exercise was undertaken.
The Department also failed to bring any material contradicting the APMC bills or establishing that the sale proceeds recorded therein were fictitious. In the absence of such an enquiry or contrary evidence, the assessee’s documentary evidence could not be brushed aside merely on suspicion.
Small Farmers Cannot Be Expected to Maintain Corporate-Style Records
Rejecting the AO’s objection regarding non-production of bills for seeds & pesticides, the ITAT held that persons engaged in small-scale agricultural activities cannot ordinarily be expected to maintain pucca records of every agricultural expense in the manner contemplated by the AO.
The assessee had submitted positive evidence showing ownership of agricultural land & sale of agricultural produce through a government-regulated market. Such evidence could not be rejected only because supporting expenditure vouchers were unavailable.
The earlier or subsequent non-disclosure of agricultural income was also held insufficient to discredit the claim. The assessee had explained that the omission arose from his ignorance that exempt agricultural income was required to be reported in the return. Non-reporting may be an omission, but it does not transform genuine agricultural receipts into unexplained money.
Conclusion
The ITAT held that the assessee had satisfactorily established the source of the cash deposits through the RTC records, pahani records, APMC sale bills & corresponding banking transactions. Since the AO neither disproved those documents nor conducted any meaningful enquiry, the agricultural sale proceeds could not be assessed as unexplained money u/s 69A.
Accordingly, the ITAT deleted the entire addition u/s 69A & allowed the assessee’s appeal.
Legal Principle
Where an assessee establishes ownership of agricultural land & produces authentic APMC sale bills evidencing sale of agricultural produce, the resulting cash deposits cannot be branded as unexplained money merely because the RTC does not mention the crop, cultivation-expense vouchers are unavailable, or agricultural income was not disclosed in the return. Evidence cannot be rejected on suspicion without enquiry or contrary material.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE BENCH
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 05/09/2025 in respect of the A.Y. 2022-23.
2. The brief facts of the case are that the assessee is an individual and earned income from salary and from other sources and filed his return of income on 25/07/2022. The case of the assessee was selected for verifying the large cash deposits into his bank account and also purchased / sold property during the year. Notice u/s. 143(2) and 142(1) were issued. The assessee filed his reply on 08/11/2023. Show cause notices were also issued and hearing was also provided through VC. Insofar as the transaction of purchase / sale of property, the assessee denied the said transactions and the AO after verifying the records, had accepted that the assessee had not effected any purchase / sale of properties during the relevant year.
3. Insofar as the cash deposits made with the State Bank of India, the assessee filed a detailed reply explaining that he is owning an agricultural land of 4 acres and 04 guntas of ancestral lands and cultivated vegetables and fruits and sold the said commodities through the APMC Yard, Doddaballapura and the sale proceeds received in cash were deposited into the SBI Bank account and also filed the copies of the land records and the APMC Yard sale bills and the copies of the bank statement and pleaded that the said cash deposits are nothing but the agricultural income received by the assessee during the relevant year. The assessee also submitted that since the agricultural income was an exempted one, bonafidely believed that the income is not taxable and also need not be shown in the return of income, had not included the said income in their return of income. The AO considered the documents furnished by the assessee and not accepted the RTC records since it does not contain the name of the commodity cultivated. The AO had also observed that the assessee had not shown any expenses towards the purchase of seeds and other expenses incurred towards cultivating the said vegetables and fruits and therefore, not accepted the explanation offered by the assessee and treated the said cash deposits as unexplained money and made an addition u/s. 69A of the Act. The AO had also observed that the assessee had not reported any such agricultural income in the previous years as well as in the subsequent year and therefore disbelieved the explanation offered by the assessee and made the assessment.
4. The assessee challenged the said order before the Ld.CIT(A) and explained the facts in detail and also furnished the various documents in support of his case that the cash deposits are only from the agricultural activities. The assessee also explained that the sale bills are the authenticated records issued by the wing of the State Government and therefore, on that basis, the plea of the assessee has to be accepted even though the RTC records does not reflect the correct fact. The Ld.CIT(A) had considered the plea raised by the assessee and dismissed the appeal on the ground that the explanation offered by the assessee is not substantiated by credible evidence.
5. As against the said order, the present appeal has been filed by the assessee before this Tribunal.
6. At the time of hearing, the Ld.AR submitted that the assessee was under the wrong notion that the agricultural incomes need not be reported since the same are exempt from the levy of tax. The Ld.AR further submitted that the assessee was growing vegetables and fruits and sold the items in the APMC market of Doddaballapur for which the relevant sale bills and the summary statement of all sale bills were available and also produced before the authorities but the authorities had not accepted the said records without any contra evidence available with them and therefore submitted that the order is liable to be set aside. The Ld.AR also submitted that all the records including the RTC and pahani copies of agricultural lands owned / cultivated were made available to the authorities and therefore, the non-mentioning of the details by the state authorities in the RTC records would not be a reason to disallow the agricultural income. The Ld.AR further submitted that the agricultural activities are done in the unorganized sector and therefore, the keeping of the books of accounts as well as the receipts for the expenses incurred would be a difficult task and submitted that when the government controlled APMC record shows that the assessee had sold the agricultural commodities, the same could not be rejected without any evidences available with the Department. The Ld.AR further submitted that the authorities had not doubted about the genuineness of the sale bills submitted by the assessee and in such circumstances, the explanation has to be accepted and the benefit should be granted to the assessee. The Ld.AR filed a written submissions and also a paper book enclosing the various documents including the APMC sale bills, RTC records etc. and prayed to allow the appeal.
7. The Ld.DR submitted that the RTC document furnished by the assessee does not contain the details of the cultivation made by the assessee and the assessee had also not reported the agricultural income in his return of income and therefore, the genuineness of the submissions could not be relied on and prayed to confirm the orders of the authorities below. The Ld.DR further submitted that the assessee had not shown any such agricultural income in the earlier years and also in the subsequent year and therefore, the explanation offered all of a sudden could not be a believable one and therefore prayed to dismiss the appeal.
8. We have heard the arguments of both sides and perused the materials available on record.
9. We have considered the submissions made by the assessee along with the documents submitted by him. There is no dispute with regard to the owning of the agricultural lands by the assessee. The only allegation made by the authorities are that the assessee had not reported the said agricultural income while filing his return of income and also the documents are not clear about the cultivation made by the assessee and therefore, they are doubting about the income and made the addition u/s. 69A of the Act. We have also considered the documents furnished by the assessee, i.e. the RTC and pahani copies of agricultural lands owned / cultivated by the assessee, monthly summary of sale bills, sale bills of agricultural produce sold in APMC market. These documents would exhibit that the assessee is the owner of the lands. In the RTC, the allegation of the AO is that the type of crop was not mentioned. It is a document maintained by the State authorities and the non-maintenance of the same would not lead to a conclusion that the assessee had not cultivated any agricultural crops. This fact was also not verified by the authorities through the various sources available to them. Moreover, the APMC is a market committee established by the State Government for the sale of agricultural produce by the farmers. It is coming under the control of the Department of Agricultural Marketing of the State Government. The assessee sold his produce through the said market committee for which the market committee had issued sale bills which were produced by the assessee before the authorities. In such circumstances, we cannot simply deny the claim of the assessee when one authority of State Government has issued sale bills to the assessee to show that the assessee had sold the agricultural commodities in the APMC Yard and received cash which was later on deposited into his bank account. If the AO had conducted any further enquiry about the genuineness of the claim made by the assessee, we could have accepted the allegation made by the AO.
10. The other allegations for disbelieving the explanation offered by the assessee are that the assessee has not maintained the purchase bills of seeds and pesticides and not reported the agricultural income in the earlier years as well as the subsequent year. We do not think that in the agricultural sector that too small time agricultural activities, the assessee would maintain the pucca records as stated by the AO. Insofar as the non-reporting of the agricultural income during the earlier years, the assessee had explained that he has not reported the said income out of ignorance and therefore, we do not think that the same could be a reason for rejecting the explanation offered by the assessee. In the present case, the assessee had filed various records to show that he is doing the agricultural activities but the AO had simply not accepted the said explanation without having any other materials. In fact, the AO could have got report from the verification unit and find out whether any agricultural activities are carried out by the assessee or not. But no such exercise was done by the authorities. Therefore, we are in agreement with the submissions made by the assessee and also by relying on the various documents furnished by the assessee including the APMC sale bills issued to the assessee, we concluded that the assessee had agricultural income and therefore, the same could not treated as unexplained money u/s. 69A of the Act.
11. We have also considered the orders of the Coordinate Benches of this Tribunal cited by the assessee and on the basis of the principles laid down by the Tribunals, we also delete the addition made u/s. 69A of the Act.
12. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 28th August, 2026.
