Uncontroverted affidavits and land ownership prove agricultural source of cash deposits; Section 69 addition deleted
Issue
Whether cash deposits in a joint bank account can be treated as unexplained investments under Section 69 of the Income-tax Act, 1961, when the assessee claims they represent agricultural income belonging to the joint holder (daughter), supported by affidavits but lacking formal mandi receipts or sale bills.
Facts
Reopening of Assessment: The assessee filed her return for AY 2013-14 declaring an income of Rs. 7,12,110/-. The case was reopened under Section 147 due to cash deposits aggregating to Rs. 13,85,349/- in her savings bank account.
Joint Account Defense: The assessee submitted that the account was held jointly with her daughter. She claimed the deposits were agricultural income belonging to her daughter, derived from land owned by the assessee but cultivated by the daughter/tenant.
AO’s Rejection: The Assessing Officer (AO) noted that while land ownership was proved, no documentary evidence (mandi receipts, sale bills, crop details) was provided to prove actual cultivation or sale of produce. The AO treated Rs. 12,00,000/- as unexplained investment under Section 69.
CIT(A)’s Partial Relief: The CIT(A) accepted the ownership of the land and the possibility of some agricultural activity. He estimated agricultural income at Rs. 1,00,000/- and sustained the addition of Rs. 11,00,000/-.
Affidavits Filed: The assessee provided affidavits from:
Her daughter (confirming she operated the account and the money was hers).
Sh. Gurjeet Singh (confirming he leased the land and paid Rs. 12,00,000/- in cash to the daughter from crop sales).
Decision
Ownership Undisputed: The Tribunal noted that both the AO and CIT(A) had accepted the assessee’s ownership of the agricultural land in Village Ramdass, Punjab.
Uncontroverted Evidence: The affidavits filed by the daughter and the tenant (Sh. Gurjeet Singh) were neither cross-examined by the Department nor rebutted with contrary evidence. The Tribunal held that an uncontroverted affidavit has strong evidentiary value and cannot be disregarded based on mere surmise.
Village Reality Recognized: The Tribunal observed that in small villages, agricultural produce is often sold in cash without formal documentation. The lack of mandi receipts is not fatal when the fundamental facts of land ownership and cultivation are not challenged.
Section 69 Inapplicable: Section 69 applies only when the source is “unexplained.” Since the assessee identified the source (the tenant paying the daughter), the condition for invoking Section 69 was not met. The Tribunal relied on the Supreme Court judgment in CIT v. Daulat Ram Rawatmull.
Suspicion is not Proof: The addition was based on suspicion rather than positive material. Consequently, the ITAT set aside the CIT(A)’s order and deleted the entire addition of Rs. 11,00,000/-.
Key Takeaways
Evidentiary Value of Affidavits: If an assessee files an affidavit explaining a transaction, the Assessing Officer must cross-examine the deponent to challenge it. If the affidavit remains uncontroverted, it stands as valid proof.
Mandi Receipts Not Mandatory: For agricultural income verification, especially in rural contexts, the absence of formal mandi receipts or sale bills is not a conclusive ground for addition if land ownership and cultivation are otherwise established.
Joint Account Liability: When an explanation is provided that funds in a joint account belong to the other holder (supported by evidence), the primary holder cannot be automatically taxed for those deposits under Section 69.
Source :- 1764314720-VWat4A-1-TO