ITAT Accepts Initial Evidence of Agricultural Income, Remands Matter for Verification:

ITAT Accepts Initial Evidence of Agricultural Income, Remands Matter for Verification The Tribunal set aside the addition of Rs 85,71,000 under Section 69A and remanded the matter to the AO for fresh verification after accepting that the bank deposits were prima facie supported by agricultural income evidence. Machamada Ponnappa Prakash filed the present case against the ITO, challenging the order of NFAC dated May 21, 2025.

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Background of the case

The case relates to an addition of Rs 85,71,000 made by the Income Tax Department by treating the deposits in the assessee’s bank account as unexplained money under Section 69A of the Income Tax Act. The assessee had claimed that these deposits were agricultural income earned from coffee, pepper, and arecanut cultivation. The assessee owns around 55 acres of agricultural land and has also taken about 20 acres on lease. He stated that the crops grown were sold to various buyers, and the payments were received through RTGS directly into his bank account. However, during the assessment, the assessee failed to submit enough documents, such as expense details, bills, and proof of cultivation. As a result, the AO treated the entire amount as unexplained income. Being aggrieved by the decision, the assessee approached CIT(A), which also confirmed the addition. The assessee then further approached the Tribunal. But there was a delay of eleven days in filing the appeal. The Tribunal condoned the delay, considering it minor and noting that the assessee resides in a rural area and has limited knowledge of e-proceedings. During the hearing, the assessee submitted documents, including land ownership records, copies of sale invoices, bank statements and more. The Tribunal stated that "we are satisfied that the assessee had demonstrated that he is having the source for the cash deposits made into his bank account which is nothing but an agricultural income and therefore the submissions made by the assessee could not be brushed aside in toto."

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After considering all the merits, the Tribunal held that the assessee had demonstrated a source for the bank deposits, namely, agricultural income. However, since certain expense documents were not produced before the assessing officer earlier, the Tribunal decided to send the matter back to the AO for fresh verification. The tribunal directed the AO to provide the assessee with a reasonable opportunity of hearing. As a result, the appeal was partly allowed for statistical purposes.