Facts of the Case

The assessee’s assessment for multiple years was reopened under Sections 147/148. During reassessment, the assessee declared minimal taxable income but claimed substantial agricultural income as exempt.

Significant cash deposits were found in the assessee’s bank accounts. The assessee explained that deposits arose from sale proceeds of property, agricultural income from leased land, loans, and receipts from partners. However, documentary evidence supporting these claims was inadequate.

The Assessing Officer made additions treating certain deposits as unexplained income. On appeal, the CIT(A) partly deleted additions but confirmed rejection of agricultural income claims and further enhanced income by treating additional cash deposits as unexplained.

 Issues Involved

  1. Whether the assessee successfully proved that the income claimed was agricultural income exempt under the Act.
  2. Whether large cash deposits in bank accounts were satisfactorily explained.
  3. Whether enhancement by CIT(A) treating deposits as unexplained income was justified.
  4. Whether delay in filing appeals should be condoned considering the assessee’s circumstances.

 Petitioner’s (Assessee’s) Arguments

  • Agricultural operations were conducted on leased land since 1999.
  • Crops such as aromatic grasses, herbs, vegetables, and grains were cultivated and sold.
  • Income from sale of these produce constituted agricultural income exempt from tax.
  • Cash deposits represented accumulated agricultural savings and funds received from partners for real estate activities.
  • Lease agreement and profit-and-loss accounts of agricultural activity were produced.
  • Due to advanced age, illness, and financial hardship, complete evidence could not be gathered.
  • Delay in filing appeal occurred because the assessee was a bedridden super senior citizen lacking funds to pay appeal fees.

 Respondent’s (Revenue’s) Arguments

  • The assessee owned no agricultural land; reliance was placed on an unregistered lease deed.
  • No documentary evidence of agricultural operations was produced, such as:
    • Purchase of seeds or fertilizers
    • Labour expenses
    • Sale bills
    • Details of buyers
    • Evidence of cultivation activities
  • Claims regarding agricultural income and sources of deposits were inconsistent across proceedings.
  • Cash deposits remained unexplained and were rightly taxable as income from undisclosed sources.

Court Order / Findings (ITAT)

  • Assessee’s advanced age (around 90 years)
  • Paralysis and bedridden condition
  • Financial hardship
  • Dependence on children
  • COVID-19 pandemic circumstances

 Important Clarification

  • Agricultural income exemption is not automatic; strict proof is required.
  • Essential elements include:
    • Ownership or lawful possession of land
    • Actual agricultural operations
    • Human effort on land
    • Evidence of produce and sales
    • Nexus between land and income
  • Cash transactions without documentary backing are viewed with suspicion.
  • Inconsistent explanations weaken the credibility of the assessee’s case.
  • Delay in filing appeals may be condoned where sufficient cause exists, especially in cases of extreme hardship.

Link to download the order   https://itat.gov.in/public/files/upload/1678865768-Satya%20prakash%20gupta%20pdf.pdf

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