Shivashankrappa Sahukar Vs ITO (ITAT Bangalore)
Fifty-Four Acres of Farmland, but Where Is the Crop Income? ITAT Sends Cash Deposits Back for Verification
The deposits and the agricultural explanation
The Assessing Officer (AO) received information about substantial transactions in the bank accounts of Shivashankrappa Sahukar for assessment year 2015–16. Reassessment proceedings followed, and the AO ultimately treated ₹50,99,684 of bank credits as unexplained, rejecting the explanation that the money came from agricultural income, earlier bank withdrawals and accumulated savings.
Sahukar said that he owned 54 acres of irrigated ancestral agricultural land in the villages of Arshinagi and Hemnal. He produced land records and stated that buyers collected produce from his farm and paid cash there. The AO sought supporting details of the crops, cultivation expenditure, production and sales. Finding the evidence insufficient, he made the addition. The CIT(A) upheld it.
Before the Bangalore ITAT, the assessee attacked both the validity of the reopening and the addition on merits. He succeeded in obtaining another opportunity to prove the source of the deposits, but his challenges to the reassessment itself failed.
A digital signature after midnight
One objection concerned the Section 148 notice. It was dated 30 March 2022 but digitally signed at 12:33 a.m. on 31 March 2022. The assessee argued that this made the notice invalid.
The Tribunal examined the notice and found that it had been signed by the officer identified on it. It clearly stated the officer’s name, designation and station. The difference between the date appearing on the notice and the early-hours digital signature did not, on these facts, establish invalidity. The Tribunal therefore rejected this ground.
Does the final addition decide the ₹50 lakh threshold?
The assessee also relied on the ₹50 lakh threshold in Section 149. He argued that although the AO had finally added ₹50,99,684, his disclosed agricultural income should be reduced from that amount. On that basis, he put the unexplained balance at ₹40,25,829, below ₹50 lakh, and said the reopening could not survive.
The Tribunal held that the threshold for issuing the Section 148 notice had to be tested when the notice was issued, using the information then available to the AO. Evidence produced later might reduce or even eliminate the eventual addition, but that later result did not retrospectively invalidate a notice based on information indicating escaped income above the statutory threshold at the relevant time.
This is the critical distinction in the order: the basis for reopening and the amount ultimately assessable are examined at different stages. The Tribunal dismissed the assessee’s jurisdictional grounds. It also rejected the argument that the AO had exceeded the scope of a limited scrutiny, holding that the limited-versus-complete scrutiny distinction invoked by the assessee did not govern this reassessment in the manner suggested.
Land ownership is only the beginning of proof
On the merits, the Tribunal accepted that Sahukar’s ownership of 54 acres of fully irrigated agricultural land was undisputed. But ownership alone could not prove the amount of agricultural income or establish that particular bank deposits represented proceeds from crops sold.
The land records produced before the AO did not give the necessary cultivation details. The Tribunal said the assessee needed to substantiate what crops were grown, the quantities produced and sold, where and how the sales occurred, who purchased the produce, and what cultivation expenses were incurred. His assertions about farm-gate cash sales and agricultural activity could not replace evidence capable of being checked.
The assessee had also referred to earlier withdrawals from bank accounts that allegedly remained available as cash when the disputed deposits were made. That explanation required its own factual examination. Withdrawal of cash at one point did not automatically establish that the same cash was still held and later redeposited. The Tribunal said availability could be considered to the extent supported by evidence, including evidence concerning similar agricultural income in the earlier years.
A remand with a 90-day requirement
Rather than finally accepting or rejecting the agricultural explanation, the Tribunal sent the determination of agricultural income and the related unexplained deposits back to the AO. Sahukar was directed to furnish supporting evidence within 90 days of receiving the Tribunal’s order. The AO must examine that material and decide the issue afresh.
The relief is therefore an opportunity to prove the source, not deletion of the ₹50,99,684 addition. The Tribunal expressly stated that, if the assessee failed to substantiate the agricultural income, the AO could restore the addition to the extent of the unsubstantiated deposits. The appeal was partly allowed for statistical purposes.
Author’s comment
This decision is useful for both sides of a bank-deposit dispute. For the Department, it confirms that an established landholding does not quantify crop income. For the taxpayer, it keeps open the possibility of explaining deposits through proved agricultural receipts and available cash from earlier withdrawals.
The practical work lies in building a year-wise cash trail: land and crop records, evidence of inputs and harvesting, sale details, purchaser information where available, bank withdrawals and a reconciliation to each deposit. The 90-day period runs from receipt of the order, making prompt collection of those records essential in this remand. The ₹50 lakh reopening argument cannot be rescued merely by obtaining a lower assessed addition later; the source of the deposits must now be proved on the merits.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by SHIVASHANKRAPPA SAHUKAR (the assessee/appellant) concerns the order dated 21 December 2025 of the National Faceless Appeal Centre (NFAC), Delhi, for assessment year 2015–16. The NFAC dismissed the assessee’s appeal against the reassessment order passed under section 147 read with section 144B of the Income-tax Act, 1961 (the Act).
2. The Assessee has raised the following grounds of appeal:
1. On facts and circumstances of the Appellants case, the impugned order of the lower authorities are opposed to law, equity, weight of evidence and probabilities.
2. On facts and circumstances of the Appellants case, the learned assessing officer erred in assuming jurisdiction for making assessment under section 147 r.w.s. 144 of IT Act 1961.
The assessment order framed under section 147 r.w.s. 144 r.w.s. 144B of the Act is not in accordance with law and is consequently liable to be quashed and the proceedings are void ab initio as the notice was issued on 30.03.2022 as per online Pan based account at income tax portal which was digitally signed on 31.03.2022.
3. On facts and circumstances of the Appellants case, the learned assessing officer ought to have recorded reasons to believe for escapement of income after verification of correctness of online information from the source of information about the alleged deposits into bank accounts with State bank of India, HDFC bank and State bank of India, the entire course of action exhibits reasons to believe have been recorded mechanically, in routine manner without verification of information and data available over the NMS module of insight portal and specific information flagged as per risk management strategy and also without application of mind as required by the applicable provisions of the Income Tax Act, as the cash deposited into saving account with State bank of India, HDFC bank and State bank of India never exhibits SO much cash deposits of Rs.76,79,400/-, reasons to believe are heart beat and pulse of the case to be re-opened
4. On facts and circumstances of the Appellants case, the learned assessing officer erred in assuming jurisdiction, without complying to the mandatory requirements of provisions of section 149 of the Act, as the appellant’s undisclosed income was below Rs.50,00,000/- specified in the section.
The learned assessing officer has accepted, considered and adopted agriculture income of Rs. 10,73,855/- at serial number 15 of page No.2 of computation sheet, for aggregation of income with assessed income of Rs.51,00,090/- at serial number 14 of page No.2 of computation sheet and also allowed rebate on agriculture income but did not consider nor accept for quantifying unexplained money at Rs.50,99,684/- under section 69A of the Act.
On consideration and acceptance of agriculture income of Rs.1073855/-, unexplained money was about Rs.40,25,829 (5099684-1073855) which was below the mandatory requirement of Rs.50,00,000/-.
5. On facts and circumstances of the Appellants case, the learned assessing officer has assumed jurisdiction for limited scrutiny and assessment of alleged cash deposits into saving accounts whereas conducted complete scrutiny and assessment of total deposits into saving accounts, is beyond the scope of limited scrutiny, without obtaining prior approval of prescribed authority more so the assessment order passed on 18.03.2023 does not speaks of obtainance of approval of prescribed authority for conversion of limited scrutiny into complete scrutiny.
6. On facts and circumstances of the Appellants case, the learned assessing officer is not justified in passing the assessment order in gross violation of principles of natural justice in as much as the learned assessing officer did concluded the assessment proceedings without considering cash drawn from the bank and held on hand during the period FY:2012-13 to 2014-15 vis-à-vis statement of bank accounts for FY:2012-13 to 2014-15.
The actions of the assessing officer are against the principles of natural justice and equity
The assessing officer ought to have telescoped cash drawings vis a vis cash deposits vis-à-vis agriculture income from and into the bank account during the period FY 2012-13 to 2014-15, is against the provisions of income tax Act 1961.
7. On facts and circumstances of the Appellants case, The learned assessing officer has also failed to appreciate that there were no unexplained money not recorded in the books of accounts, identified or unearthed by the assessing officer which could have been treated as unexplained money for there were none and hence the addition is unsustainable in law on the facts and circumstances of the case, which is also against the provisions of section 69A.
Conditions for invoking:
a) assesee is found to be the owner of any bullion, jewellery or valuable article and
b) such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income and.
c) the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article or.
d) the explanation offered by him is not in the opinion of the (Assessing) officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article.
8. On facts and circumstances of the Appellants case, the assessment order passed is against the provisions of sec.144 of IT Act 1961 as assessing officer did not taken into account all the relevant materials which are available with the assessing officer physically and online portal and also submitted by the appellant in response to the notices. The assessing officer ought to have, collected or gathered any material evidences viz statements of accounts stated in the notices issued and also assessment order from the State bank of India and HDFC Bank before making best judgement assessment, there was no assessment of material evidences nor collection of evidences for evaluation and scrutiny resulted in complete failure of assessment procedure and scheme.
Section 144: (i) If any person
(a) Fails to make the return required (under sub section(1) of section 139) and has not made a return or a revised return under sub section (4) or sub section (5) of that section, or
(b) Fails to comply with all the terms of a notice issued under sub section (1) of section 142 (or fails to comply with a direction issued under sub section (2A) of that section) or
(c) Having made a return, fails to comply with all the terms of a notice issued under sub section (2) of section 143,
The (assessing) officer, after taking into account all relevant material which the (Assessing) officer gathered shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of this judgement and determine the sum payable by the assessee on the basis of such assessment:
Provided that such opportunity shall be given by the assessing officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgement:
9. On facts and circumstances of the Appellants case, the assessing officer ought not to have fully relied upon AIR information only received through ITBA, multi year NMS flagged in accordance with risk management strategy endorsed at para No.1 of page No.1, and at para No.3.1 of page No.2 and 3 of assessment order, as such information cannot assume the character of conclusive and substantive material evidence to make assessment though AIR information is a peace of evidence more so in view of the fact the cash deposited into saving account with State bank of India, HDFC bank and State bank of India never exhibits so much cash deposits of Rs.76,79,400/-.
10. On facts and circumstances of the Appellants case, The learned assessing officer ought to have quantified, estimated and assessed agriculture income from the agriculture lands more so the assessing officer has drawn conclusion at para No.3.8 of page No.12 of assessment order that the appellant is having 54 acres of agriculture land at village Arshinagi and Hemnal which have been irrigated through canal, borewell, rain in view of direct material evidence viz record of right(pahani patraka) about existence and ownership of agriculture land in india filed during the course of assessment proceedings.
The learned assessing officer endorsement is, at para No.1 of page No.13 of assessment order, is against rule 7 of Income Tax Rules which does not prescribe physical and open market for sale of agriculture produce. The place where agriculture produce is bought and sold is immaterial, the place of delivery of goods may be decided by the purchaser and seller by mutual consent, there may not be an actual market. Where there is no open market, an estimate of the market price will have to be made on a hypothetical basis.
11. On facts and circumstances of the Appellants case, the learned assessing officer ought to have considered agriculture income of Rs.10,78,350/-returned in the return of income, as source for sourcing cash deposits into saving account more so in view of the learned authority has adopted agriculture income of Rs.10,78,350/- returned in the return of income for determination of tax and interest.
12. On facts and circumstances of the Appellants case, the learned assessing officer erred in making the assessment purely on the basis of presumption, surmise and conjecture which is wholly impermissible in law and contrary to evidence on record and also biased to the fact and submissions
13. On facts and circumstances of the Appellants case, the learned assessing officer is not justified in levying interest u/s 234A, u/s 234B and u/s 234C of the Act on the facts and circumstances of the case and further the quantum, period and rate are not discernible from the assessment order.
14. The appellant craves leave to add, alter, delete, amend or substitute any or all of the above grounds urged above as may be necessary at the time of hearing.
3. The facts show that the Assessing Officer had information regarding financial transactions of ₹7,679,400 undertaken by the assessee with the State Bank of India and that the assessee had not filed a return of income for the relevant year. Accordingly, a notice under section 148 of the Act was issued on 30 March 2022, but the assessee did not respond. The Assessing Officer noted that the assessee had deposited ₹7,079,400 into State Bank of India account No. 5405, including a cash deposit of ₹6 lakh. Proceedings under section 147 were initiated after following the prescribed procedure under section 148A, and notice under section 148 was issued on 30 March 2022 requiring the assessee to file a return of income; however, no compliance was made. A further notice under section 142(1), dated 5 October 2022, sought specified details, but the assessee again failed to comply. In response to a subsequent reminder, the assessee furnished statements for State Bank of India account No. 5405 and HDFC Bank account No. 115. Notice under section 143(2) was then issued on 7 December 2022 after the assessee filed the income-tax return. During the assessment proceedings, the assessee explained that the cash deposits were sourced from agricultural income, withdrawals from bank accounts during financial years 2012–13 to 2014–15, and accumulated savings from such agricultural income and withdrawals. The assessee further stated that purchasers bought agricultural produce at the farm and paid the consideration in cash on the spot. The assessee claimed to own 54 acres of fully irrigated agricultural land in the villages of Arshinagi and Hemnal and furnished a copy of the Pahani Patraka. However, that document did not contain crop-cultivation details. The Assessing Officer therefore required evidence of land use, cultivation costs, purchases of seeds and fertilisers, labour and machinery expenses, cash-book entries, transactions in agricultural produce, agricultural sale receipts and expenses, and proof of sales in the open market or through retail shops. The assessee did not provide these details. Although the assessee maintained that only one HDFC Bank account and one State Bank of India account were held, the Assessing Officer identified three bank accounts through notices issued under section 133(6) of the Act. The total credits, including cash deposits, in these accounts were ₹5,099,684. As the assessee failed to substantiate the agricultural income, the Assessing Officer added this amount to the assessee’s total income and assessed the total income at ₹5,099,684 by an order dated 18 March 2023 passed under section 147 read with section 144B of the Income-tax Act.
4. Aggrieved by the assessment order, the assessee appealed to the learned CIT(A), challenging the validity of the reassessment proceedings and the assumption of jurisdiction under section 147 of the Income-tax Act. The CIT(A) observed that the reassessment had been initiated on the basis of information concerning substantial cash deposits exceeding ₹50 lakh in the assessee’s bank account and, therefore, found no infirmity in the reopening. As regards the addition of the cash deposits as unexplained money under section 69C of the Act, the CIT(A) dismissed the ground because the assessee had produced no further evidence of agricultural income. The CIT(A) also rejected the assessee’s request to telescope cash withdrawals against cash deposits, holding that the assessee had failed to establish a direct nexus between them. On the claim of agricultural income, the CIT(A) noted that, despite owning agricultural land, the assessee had not furnished reliable and verifiable evidence of crop-wise details, yield, sale proceeds, mode of sale, purchasers’ identities, or contemporaneous records of agricultural receipts that would permit quantification of such income for excluding the cash deposits. The CIT(A) held that land records establish ownership but do not, by themselves, prove the income generated from the land, and that agricultural income cannot be accepted solely on the basis of landholding. Accordingly, this ground and all other grounds of appeal were dismissed by order dated 21 December 2025. The assessee is therefore in appeal before us.
5. Shri Raj Kumar Hunchal, Chartered Accountant and authorised representative, submitted a 71-page paper book, of which 41 pages comprised written submissions. He referred to his written submission
6. Shri Pradeep S., learned Senior Departmental Representative and Additional Commissioner of Income Tax, strongly supported the orders of the lower authorities.
7. Grounds Nos. 1–4 challenge the validity of the notice issued under section 148 of the Income-tax Act. The learned authorised representative submitted that, although the notice was dated 30 March 2022, it was digitally signed on 31 March 2022 and was therefore invalid. The notice for assessment year 2015–16, dated 30 March 2022, identifies the Assessing Officer as Mr Rajkumar k Thakur Singh Rathore, Ward 1 and TPS Gulbarga. It was digitally signed by the same officer in Bangalore on 31 March 2022 at 12:33 a.m. We therefore find that the notice was duly signed and clearly stated the Assessing Officer’s name, designation, and station. Accordingly, there is no basis for holding that the notice dated 30 March 2022 and digitally signed on 31 March 2022 was invalid. The judicial precedents relied upon by the learned authorised representative are also inapplicable.
8. The second issue raised by the learned authorised representative concerns the validity of the reassessment. The Assessing Officer reopened the assessment based on information that the assessee had deposited ₹7,079,400 in State Bank of India account No. 5405, along with further bank deposits of ₹6 lakh. The learned authorised representative submitted that, in the return filed under section 148 of the Income-tax Act on 3 December 2022, the assessee disclosed gross agricultural income of ₹4,022,355 and claimed expenditure of ₹348,500, resulting in net agricultural income of ₹1,073,855 exempt under section 10 of the Act. As the Assessing Officer ultimately added ₹5,099,684, the representative contended that, after reducing the disclosed agricultural income of ₹1,073,855, the alleged unexplained income was only ₹4,025,829. Since this amount was below the statutory threshold of ₹50 lakh, he argued that the reassessment was invalid and should be quashed, relying on several judicial precedents. However, a careful reading of section 149 shows that the ₹50 lakh threshold must be examined at the time the notice under section 148 is issued. A reassessment may validly be initiated where the information then available indicates escaped income of ₹50 lakh or more, even if the assessee later produces satisfactory evidence during the reassessment proceedings and no addition, or a lower addition, is ultimately made. Such a subsequent outcome does not invalidate the reopening. Accordingly same is dismissed.
9. All other grounds concerning the reopening of the assessment were pressed. Accordingly, Grounds Nos. 1–4 are dismissed.
10. In Ground No. 5, the assessee contends that the Assessing Officer initiated proceedings for the limited purpose of examining alleged cash deposits in savings accounts but conducted a complete scrutiny of all deposits, thereby exceeding the permissible scope of assessment. We have carefully considered the assessee’s written submissions. These are reassessment proceedings, to which the distinction between limited and complete scrutiny, applicable to original assessments, does not apply. The assessee has also produced no evidence that the reassessment was initiated for a restricted purpose. In any event, the law permits the Assessing Officer to make other additions during reassessment, which reopens the entire assessment. Accordingly, Ground No. 5 is dismissed.
11. Ground No. 6 alleges a violation of the principles of natural justice. No supporting evidence was produced before us or with the written submissions. The assessee nevertheless contended that the Assessing Officer added the cash deposits to total income without considering earlier bank withdrawals that remained available as cash on hand. Ground No. 7 raises the related contention that those withdrawals were the source of the cash deposited in the savings account. The assessee also disputes the treatment of the claimed agricultural income as unexplained income. According to the assessee, the agricultural land was inherited from his forefathers, irrigated by canal, borewell, and rainwater, and cultivated throughout the year with crops including cotton, oilseeds, fruits, and vegetables because water was perennially available. The assessee further claimed to operate a dairy on the farmland and maintain 30 buffaloes, 15 cows, sheep, and goats. On this basis, the assessee estimated income of ₹520,800 from one part of the land and ₹356,250 from 15 acres, and claimed net agricultural income of ₹1,078,350. The assessee therefore submitted that the addition made by the Assessing Officer was without merit. Grounds Nos. 8–12 are argumentative and reiterate the same claim regarding agricultural income.
12. We have considered the assessee’s claim that the disputed amount represented agricultural income and should not have been included in total income. Before the Assessing Officer, however, the assessee produced no evidence other than proof of landholding. As the Assessing Officer and the learned CIT(A) correctly observed, ownership of agricultural land alone does not establish agricultural income. Before us, the assessee furnished only a cash-flow statement, bank statements, and records showing ownership and possession of the land. Although the assessee’s ownership of 54 acres of fully irrigated ancestral agricultural land is undisputed, that fact does not establish either the source of the bank deposits or the agricultural income reported in the return filed in response to the notice under section 148 of the Act. The assessee must substantiate the crops cultivated, quantities produced and sold, mode and place of sale, purchasers, and cultivation expenses. As these details were not furnished before the lower authorities, we grant the assessee a further opportunity to produce them before the Assessing Officer and establish that the deposits arose from agricultural income. Unsupported assertions are insufficient to prove the source of the deposits. The availability of cash from earlier withdrawals may also be considered to the extent supported by evidence, including evidence of similar agricultural income in those years. We therefore remit the determination of agricultural income and the related unexplained cash deposits to the Assessing Officer for fresh consideration. The assessee shall furnish supporting evidence within 90 days of receiving this order, and the Assessing Officer shall examine it and decide the issue afresh. If the assessee fails to substantiate the agricultural income, the Assessing Officer shall restore the addition to the extent of the unsubstantiated deposits. Accordingly, Grounds Nos. 6–14 are allowed to the extent stated above.
13. Accordingly, the assessee’s appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 29th September, 2026.
