Maradi Jagadeesha Vs ITO (ITAT Bangalore)
Cleaning Farmland, Facing a Tax Addition: Farmers’ Confirmations Secure Relief
Cash deposits explained through service receipts
The Bangalore ITAT deleted an addition of ₹3,22,000 under section 69A, holding that the assessee had furnished adequate documentary evidence explaining the nature and source of cash deposited in his bank accounts. The evidence included confirmation letters from farmers, their names and complete addresses, Aadhaar cards and proof of ownership of agricultural land.
The assessee’s explanation was that he earned money by cleaning and developing agricultural land for cultivation. These were receipts for services rendered to farmers. The Tribunal accepted that the documents established both the nature of the receipts and the persons from whom they had been received.
The decision highlights the importance of examining supporting evidence in its entirety before treating a bank deposit as unexplained money under section 69A.
Reassessment and the disputed deposits
The assessee had not previously filed a return of income. Following information concerning financial transactions with Karnataka Gramin Bank, reassessment proceedings were initiated through a notice under section 148 dated 25 March 2024.
In response, the assessee filed his return on 7 May 2024, declaring total income of ₹2,40,320. During the proceedings, the Assessing Officer obtained information from the bank under section 133(6) and examined cash deposits in accounts maintained with Karnataka Gramin Bank and State Bank of India.
The disputed addition concerned ₹3,00,000 deposited on 23 July 2019 and ₹22,000 deposited on 6 June 2019. The assessee referred to accumulated savings and income earned from cleaning and developing agricultural land as the sources of the deposits.
To substantiate the service receipts, he furnished confirmations recording payments of ₹77,100, ₹60,900, ₹59,850 and ₹1,33,700. He also contended that the receipts had already been offered to tax and could not be separately added again merely because the money had been deposited in a bank.
Assessing Officer and CIT(A) reject the explanation
The Assessing Officer concluded that the assessee had failed to establish the source of the two deposits. Accordingly, ₹3,22,000 was treated as unexplained money under section 69A, increasing the assessed income from ₹2,40,320 to ₹5,62,320.
The CIT(A) sustained the addition. The appellate authority observed that ownership of the bank accounts was established through the banks’ know-your-customer records, but considered the explanation regarding the source of the deposits insufficient.
The dispute therefore centred on whether the documents furnished by the assessee adequately explained the deposits. Ownership of the accounts was not the contested issue.
An 81-day delay condoned
Before examining the addition, the Tribunal considered an 81-day delay in filing the appeal.
The assessee explained that his land had been compulsorily acquired by the Karnataka Industrial Areas Development Board on behalf of a private company. He had no prior income-tax assessment and depended on a local village accountant to handle the proceedings.
After receiving the CIT(A)’s order, he requested the accountant to arrange further appellate assistance. Acting on the accountant’s instructions, he paid the Tribunal appeal fee on 17 September 2025 and believed that the appeal was being pursued.
Only after receiving a recovery call from the Department in December 2025 did he discover that no appeal had been filed. He then contacted the present authorised representative through a family acquaintance and filed the appeal.
Despite the Revenue’s opposition, the Tribunal found that the delay was bona fide, supported by sufficient cause and unconnected with any mala fide conduct. It therefore condoned the delay and admitted the appeal.
Documents establish the source: Addition deleted
On merits, the assessee emphasised that he had furnished more than Aadhaar cards. The record also contained complete addresses, evidence of land ownership and confirmation letters specifying payments for cleaning the land.
The Revenue maintained that identity, creditworthiness and genuineness had not been established.
The Tribunal, however, found that the evidence adequately established the nature of the receipts as the assessee’s income and the persons who had paid him. On those facts, there was no basis to sustain the addition.
It directed the Assessing Officer to delete the entire ₹3,22,000 addition. The jurisdictional ground challenging the reopening was not pressed and was dismissed. Consequently, the appeal was formally partly allowed, although the disputed addition was deleted in full.
Author’s comments
The distinction between income from providing services to farmers and agricultural income deserves attention. The Tribunal accepted the explanation that the money represented payment for cleaning and developing agricultural land. It did not hold that such service receipts were exempt agricultural income.
The ruling also demonstrates why evidence must be considered collectively. Aadhaar cards, land ownership documents and confirmations describing the work and payments, read together, provided a factual explanation for the receipts.
At the same time, the decision does not mean that every cash deposit stands explained merely because income is declared in a return. Here, relief rested on the supporting documents establishing the receipt’s nature and the payer’s identity.
Where service receipts are supported by credible confirmations and relevant documents, treating the corresponding deposits as unexplained money requires a proper examination of that evidence.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal by the assessee is directed against the appellate order dated 20 August 2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2020–21. By that order, the NFAC dismissed the assessee’s appeal against the reassessment order dated 24 December 2024, passed by the Assessment Unit under section 147 read with section 144B of the Income-tax Act, 1961 (the Act). Aggrieved, the assessee is in appeal before us. The sole issue is the addition of ₹3,22,000 made by the learned Assessing Officer and confirmed by the learned CIT(A).
2. The Assessee has raised the following grounds of appeal:
1. The impugned assessment order 147 r.w.s 144B dated, 24-12-2014 is passed in haste violating the principles of natural justice and opposed to the facts of the case. Hence, the same is void ab initio.
2. The notice u/s 148 dated, 25-03-2024 issued by the Jurisdictional Assessing Officer – ITO Ward 1 & TPS, Hosptet, is bad in law and invalid, since the same is not in accordance with Section 151 of the Act and the Notification No. 18/2022 dated, 29-03-2022.
3. The learned CIT(A) erred in confirming the addition of Rs. 3,22,000/- u/s 69A of the Act by misreading the submissions of the assessee, since the cash deposits were made out service income from farmers for cleaning & development of agricultural lands, and not agricultural income.
4. The learned AO erred in treating cash deposits of Rs. 3,22,000/- as unexplained money u/s 69A of the Act.
5. The Appellant craves leave to add or delete or modify or revise any ground at the time of hearing before the Hon’ble Tribunal.
For these and other grounds that may be urged at the time of hearing, it is prayed that the Hon’ble Tribunal may be pleased to allow the appeal in the interest of equity and justice.
3. The Registry noted that the appeal was filed 81 days late. The assessee submitted that the appellate order was received on 20 August 2025, while the appeal was filed on 20 January 2026. The assessee is a land loser whose land was compulsorily acquired by the Karnataka Industrial Areas Development Board on behalf of M/s BMM Ispat Private Limited. Having no stable source of income and no prior income-tax assessment, he secured employment only after the acquisition and remains unfamiliar with income-tax proceedings. He relied on a local accountant in his village to handle his tax matters. After receiving the order of the learned CIT(A), he asked the accountant to assist with further remedies. The accountant explained that an appeal had to be filed before the Tribunal at Bengaluru, stated that he could not handle it himself, and undertook to identify a suitable tax consultant. On the accountant’s instructions, the assessee paid the appeal fee on 17 September 2025 and bona fide believed that the necessary steps were being taken. In December 2025, however, he received a call from the Income Tax Department’s demand recovery cell seeking payment of the outstanding demand and stating that his appeal had been dismissed. On inquiry, the accountant admitted that, despite his efforts, he had not found a suitable consultant and no appeal had been filed. The assessee then promptly contacted the present authorised representative in Bengaluru through a family acquaintance and filed the appeal. It was therefore submitted that the delay was unintentional, arose from sufficient cause, and was nominal; accordingly, condonation was requested.
4. The learned authorised representative, Shri Shivaprasad Reddy, reiterated these facts and sought condonation of the delay.
5. The learned Standing Counsel, Shri Ganesh R. Ghale, strongly opposed both the condonation of the 81-day delay and the admission of the appeal. He submitted that the assessee had not shown sufficient cause for the delay and that the appeal should therefore not be admitted.
6. We have carefully considered the rival contentions and examined the condonation petition and supporting affidavit filed by the assessee. The delay was not attributable to any mala fide conduct on his part. He had entrusted the matter to the accountant, who failed to take the necessary steps, resulting in the late filing of the appeal. As the delay of 81 days is nominal, bona fide, and supported by sufficient cause, it is condoned and the assessee’s appeal is admitted.
7. Briefly, the assessee, who had not previously filed a return of income, was identified as having undertaken certain financial transactions with Karnataka Gramin Bank. Reassessment proceedings were therefore initiated, and a notice under section 148 of the Income-tax Act was issued on 25 March 2024. The assessee filed his return on 7 May 2024, declaring total income of ₹2,40,320. Proceedings were then conducted under section 142(1) of the Act. On 10 September 2024, the Assessing Officer issued a notice under section 133(6) to Karnataka Gramin Bank and obtained the relevant information. The inquiry was confined to cash deposits totalling ₹3,22,000 in the assessee’s bank accounts: ₹500 and ₹3,00,000 deposited on 22 and 23 July 2019, respectively, in Karnataka Gramin Bank account no. 4051, which the assessee attributed to earlier savings, and ₹22,000 deposited on 6 June 2019 in State Bank of India account no. 972. The assessee explained that the funds represented income from cleaning and developing agricultural land. In support, he submitted letters from the landowners, copies of their Aadhaar cards, and certificates dated 19 November 2024. The parties confirmed payments of ₹77,100, ₹60,900, ₹59,850, and ₹1,33,700 for cleaning and developing land for cultivation. The assessee contended that these receipts had already been offered to tax in his return and could not be added again.
8. The learned Assessing Officer held that the assessee had failed to establish the source of the cash deposits of ₹22,000 on 6 June 2019 and ₹3,00,000 on 23 July 2019. Accordingly, the aggregate amount was treated as unexplained money and added to the assessee’s income. The reassessment order dated 24 December 2024 therefore assessed total income at ₹5,62,320, compared with the returned income of ₹2,40,320, after adding ₹3,22,000 as unexplained money under section 69A of the Act.
9. Aggrieved, the assessee appealed to the learned CIT(A), who dismissed the appeal by order dated 20 August 2025. The learned CIT(A) found that the assessee had deposited ₹3,22,000 in accounts maintained with Karnataka Gramin Bank and State Bank of India and that his ownership of those accounts was established through the banks’ know-your-customer records. As the assessee had not provided an acceptable and cogent explanation for the source of the deposits, the learned CIT(A) upheld the addition made by the Assessing Officer and dismissed the appeal.
10. Ground no. 2, which challenges jurisdiction, was not pressed and is therefore dismissed.
11. On grounds nos. 3 and 4, the assessee submitted that he had duly explained the nature and source of the cash deposits as accumulated savings, principally from service income earned during financial year 2018–19. He contended that such savings represented income earned earlier and retained over time. Although confirmations had been produced, the Assessing Officer did not accept them. The assessee maintained that he had earned income from cleaning and developing agricultural land, as confirmed by the respective parties through letters placed on record. The Assessing Officer rejected this evidence on the ground that the farmers’ Aadhaar cards alone did not establish identity, creditworthiness, and genuineness. The learned authorised representative argued that, because the amount had been offered as the assessee’s income, the requirements applicable under section 68 of the Income-tax Act did not arise. He further submitted that the assessee had furnished the parties’ names and complete addresses, Aadhaar cards, proof of land ownership, and confirmation letters specifying the amounts paid. Accordingly, the cash deposits of ₹3,20,000 were supported by documentary evidence and could not be added separately to the assessee’s income.
12. The learned Standing Counsel, Shri Ganesh R. Ghale, strongly supported the orders of the lower authorities. He submitted that the assessee had failed to establish the identity and creditworthiness of the persons concerned or the genuineness of the source of the ₹3,22,000 deposited in the bank accounts. He therefore contended that the addition was justified and that the impugned orders should be upheld.
13. We have carefully considered the rival submissions and examined the orders of the lower authorities. The sole issue is the addition of ₹3,22,000 deposited by the assessee in his bank accounts. To explain the deposits, the assessee furnished the names and complete addresses of the payers, copies of their Aadhaar cards, proof of their ownership of the agricultural land, and confirmation letters stating that they had paid him for cleaning the land. On these facts, there is no basis for sustaining the addition, as the assessee has produced adequate evidence establishing both the nature of the receipts as his income and the persons from whom they were received. Accordingly, grounds nos. 3 and 4 are allowed, and the Assessing Officer is directed to delete the addition of ₹3,22,000.
14. In the result, the assessee’s appeal is partly allowed.
Order pronounced in the open court on 30th September, 2026.
