ITAT Remands Cash Deposit Addition to CIT(A) to Consider Additional Evidence Regarding Agricultural Source

ITAT Remands Cash Deposit Addition to CIT(A) to Consider Additional Evidence Regarding Agricultural Source

Issue

Whether the addition of Rs. 7.02 Lakhs (sustained by the CIT(A) out of an original Rs. 10.02 Lakhs addition) on account of unexplained cash deposits should be confirmed, or if the matter requires fresh adjudication to consider additional evidence produced by the assessee claiming the source to be agricultural income.

Facts

• Assessment: The Assessing Officer (AO) completed the assessment under Section 144 (Best Judgment Assessment) for AY 2017-18 on 24-11-2019.

• The Addition: The AO made an addition of Rs. 10.02 Lakhs on account of unexplained cash deposits.

• First Appeal: The Commissioner (Appeals) [CIT(A)] granted partial relief of Rs. 3 Lakhs but sustained the addition of the remaining Rs. 7.02 Lakhs.

• Assessee’s Plea: Before the Tribunal, the assessee’s Authorized Representative (AR) sought the admission of additional evidence. The AR argued that the assessee is an agriculturist and is now in a position to substantiate the remaining cash deposits with the new documents.

• Revenue’s Stand: The Senior Departmental Representative (Sr. DR) opposed any interference with the CIT(A)’s order.

Decision

• The ITAT Chandigarh Bench allowed the appeal for statistical purposes.

• Natural Justice: The Tribunal prioritized the principles of natural justice. Since the original assessment was a Best Judgment assessment (implying the assessee may not have fully participated or produced records earlier), the Tribunal was inclined to give the assessee a chance to prove the source.

• Additional Evidence Admitted: The Tribunal accepted the prayer to admit the additional evidence regarding the agricultural source of funds.

• Remand: The appeal was restored back to the file of the Ld. CIT(A) for de novo (fresh) adjudication regarding the sustained addition of Rs. 7.02 Lakhs.

• Direction: The assessee was directed to plead and prove its case forthwith before the appellate authority.

Key Takeaways

• • Rule 46A Application: Tribunals often exercise discretion to admit additional evidence (documents not shown to the AO) if it is essential to determine the real tax liability, especially when the assessee is an individual/agriculturist facing a best judgment assessment.

• Agricultural Income Defense: Cash deposits can often be explained by agricultural receipts. However, this requires proof such as land ownership records (Jamanbandi), Mandi receipts (J-Forms), and a cash flow statement showing the availability of funds.

• Statistical Allowance: The appeal is technically “allowed,” but the final liability will be determined by the CIT(A) in the second round of proceedings.