Muninarasaiah Ramesh Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes ₹58.20 Lakh Demonetisation Addition—Agricultural Income Accumulated Over Earlier Years Can Explain Cash Deposits; AO Cannot Reject Explanation on Mere Assumptions
The Bangalore ITAT deleted an addition of ₹58.20 lakh under Section 69A read with Section 115BBE, holding that the assessee had satisfactorily demonstrated that the cash deposited during the demonetisation period represented agricultural income accumulated over earlier years.
The assessee, a farmer, had deposited an aggregate ₹80.82 lakh in three bank accounts during the relevant period. He had declared agricultural income of ₹22.62 lakh for AY 2017-18. The AO accepted agricultural income to that extent but treated the balance ₹58.20 lakh as unexplained money under Section 69A, principally because the assessee had not produced sufficient bills and vouchers to substantiate accumulation of agricultural income.
The CIT(A) confirmed the addition, observing that it was not reasonable to believe that the assessee would keep ₹80.82 lakh in cash at his house for constructing a house on agricultural land.
Before the ITAT, the assessee demonstrated agricultural income earned over four financial years aggregating ₹84.36 lakh—₹22.40 lakh in FY 2013-14, ₹19.74 lakh in FY 2014-15, ₹19.60 lakh in FY 2015-16 and ₹22.62 lakh in FY 2016-17. Significantly, the agricultural income of ₹19.74 lakh for AY 2015-16 had itself been accepted by the AO in scrutiny assessment, while ₹22.62 lakh for the year under appeal was also accepted as agricultural income.
The assessee also produced RTC records, crop certificates, details of crops cultivated, bank statements for FYs 2013-14 to 2016-17 and a detailed cash-flow statement explaining the availability and accumulation of cash. His case was that the agricultural income had been retained in cash with the intention of constructing a farmhouse.
The Tribunal held that the assessee had clearly demonstrated the source and availability of cash prior to demonetisation. Once agricultural income over the preceding years was established and supporting evidence was furnished, the explanation could not be rejected merely because the authorities considered it unusual that such a large amount of cash had been retained at home.
The ITAT strongly noted that both the AO and CIT(A) had rejected the explanation “merely based on assumption & surmises” without bringing any adverse material on record. It therefore directed the AO to delete the entire addition of ₹58.20 lakh under Section 69A and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 17/07/2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1078616649(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2017-18.
