Cash deposits from agricultural land sale require factual

Cash deposits from agricultural land sale require factual verification and matter is remanded for de novo adjudication.

Issue

Whether the addition of cash deposits worth Rs. 10.05 lakhs as unexplained money under section 69A of the Income-tax Act, 1961 is legally sustainable when the assessee submits documentary evidence proving the funds arose from an exempt agricultural land sale by his wife, but the assessment was completed without his presence or factual verification by the Assessing Officer.

Facts

The assessee is an ex-army serviceman who retired from Government service in the Financial Year 2009-10.
He did not file a return of income for the Assessment Year 2011-12 because his sole source of income, a pension, was below the taxable limit.
The tax department received Annual Information Return (AIR) data showing cash deposits totaling Rs. 10.05 lakhs in the assessee’s ICICI Bank account.
Based on this information and his non-filing status, the Assessing Officer (AO) initiated reassessment proceedings by issuing notices under sections 148 and 142(1).
The assessee explained that the cash deposits represented the sale proceeds of agricultural land owned by his wife.
The funds were deposited into their joint bank account because his wife is illiterate and did not maintain a separate account.
The assessee further stated that the land was situated beyond 8 kilometers from municipal limits, making it non-urban agricultural land exempt from capital gains tax.
To support his claim, the assessee furnished bank statements, a copy of the registered sale deed executed by his wife, and a structured, tabulated breakdown matching the individual cash deposits with the sale timeline.
The AO did not secure the assessee’s presence, bypassed verifying these documents, and framed an ex-parte assessment under sections 143(3)/144, treating the entire Rs. 10.05 lakhs as unexplained money under section 69A.

Decision

The matter is decided in terms of a remand, and the case is restored back to the file of the Assessing Officer for fresh, de novo adjudication.
It was held that the detailed documentary evidence submitted by the retiree—including the sale deed and deposit tracking—constitutes vital material that cannot be summarily ignored.
The court observed that because these records require thorough factual verification and the initial assessment was finalized without securing the assessee’s actual presence, a fair opportunity of being heard must be provided.
Therefore, the impugned addition is set aside for the limited purpose of allowing the AO to verify the credentials of the land sale transaction afresh.

Key Takeaways

Obligation of Factual Verification: An Assessing Officer cannot mechanicaly apply section 69A or section 104 to cash deposits when an explicit, document-backed trail (like a registered sale deed) is provided; the revenue must factually verify the source before drawing adverse conclusions.
Joint Account Realities: In Indian households, it is common for sale proceeds belonging to an illiterate spouse to be deposited into a joint account managed by the other partner. The real ownership of the underlying asset must dictate the tax treatment.
Remand due to Violation of Natural Justice: Assessments framed in a rush without securing the presence of the taxpayer or providing a genuine opportunity to explain complex transactions will be restored to the lower authorities for fresh adjudication.

IN THE ITAT AGRA BENCH ‘SMC’

Rameshwar Dayal

Income-tax Officer

M. Balaganesh, Accountant Member

IT Appeal No. 85 (AGR) of 2025
[Assessment year 2011-12]

SEPTEMBER 30, 2025

Devang Gargiega, Adv. for the Appellant. Anil Kumar, Sr. DR for the Respondent.

ORDER

1. The appeal in ITA No. 85/AGR/2025 for AY 2011-12, arises out of the order of the ld. National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC, in short] dated 23.12.2022 against the order of assessment passed u/s 143(3)/144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 03.11.2018 by the Assessing Officer, ITO, Ward-3(2), Gwalior (hereinafter referred to as ‘ld. AO’).

2. At the outset, I find that there is a delay of 727 days in filing of appeal by the assessee before this Tribunal. Considering the reason adduced in the condonation petition, in the interest of substantial justice, I am inclined to condone the delay in filing of appeal before this Tribunal and admit the appeal of the assessee for adjudication.

3. The only effective issue to be decided on merits is challenging the addition of cash deposits made in ICICI Bank in the sum of Rs. 10,05,000/-.

4. I have heard the rival submissions and perused the materials available on record. The Learned AO obtained AIR information from ICICI bank wherein it was informed that a sum of Rs. 10,05,000/- stood deposited in cash in the bank account of the assessee. Since there was no return of income filed by the assessee, the Learned AO issued notice under section 148 of the Act on 20-3-2018 which was served through DAK as well as email to which, there was no response from the assessee. This was followed by a notice under section 142(1) of the Act which was also not responded to. Finally a show cause notice was issued proposing an addition of Rs. 10,05,000/- on account of cash deposits for want of explanation for source, there was no compliance. Hence the Learned AO was compelled to frame the assessment by making an addition of Rs. 10,05,000/- on account of cash deposits treating it as unexplained.

5. Before the Learned CITA, the assessee submitted that he is an exarmy serviceman and retired from Government service in financial year 2009-10. During the year under consideration, the assessee has income from pension of Rs. 45,256/- and that the same was below the maximum amount not chargeable to tax and hence there was no obligation for the assessee to file his income tax return. With regard to the source of cash deposits made in the bank account, the assessee submitted that he had received sale proceeds of agriculture land situated at village Kerki, Mukkar, Paniyala, Kotputli. It was submitted that the said agriculture land was in the name of his wife, Smt Premavati and he and his wife jointly held a bank account and the sale proceeds of land was deposited in the said joint bank account in cash. Since assessee’s wife is illiterate and there was no savings bank account maintained in her individual capacity, the sale proceeds received thereon stood deposited in the joint bank account of the assessee and his wife. The assessee also submitted that the said agriculture land is situated more than 8 kilometres from the local limits of municipality and hence would fall within the definition of capital asset and hence not chargeable to capital gains tax. The Learned CITA, however, observed that all the submissions made by the assessee were only merely self-serving statements not supported by any documentary evidences and accordingly upheld the addition made by the Learned AO.

6. The assessee before me had stated that he had furnished the complete bank statements of ICICI bank and SBI bank account for the period 1-4-2010 to 31-3-2011 together with the copy of sale deed dated 73-2011 executed by his wife wherein she had received the sale proceeds of land which was deposited in the joint bank account of assessee and his wife. The assessee also submitted the individual sources of cash deposit made in ICICI bank in a tabular form. I find that all these documentary evidences are also placed in the paper book filed before me. I find that the Learned CITA had dismissed the contentions of the assessee on the ground that no supporting evidences were filed whereas, supporting evidences were duly filed by the assessee. However a factual finding is required to be given on these documentary evidences by the Learned AO. Hence, I deem it fit and appropriate in the interest of justice and fair play, to restore this appeal to the file of Learned AO as the assessment was also framed without securing the presence of the assessee. Hence, in the interest of substantial justice, the entire appeal is restored to the file of Learned AO for denovo adjudication in accordance with law qua the issue in dispute before me. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

7. In the result, the appeal of the assessee is allowed for statistical purposes.