ITAT Agra Deletes Rs. 12.66 Lakh Section 69A Addition: Unverified Lender Affidavits Cannot Sustain Cash Deposit Addition Against Agriculturist
Background and Context
The Income Tax Appellate Tribunal, Agra Bench, recently adjudicated an appeal filed by Rajpal Singh against the order of the National Faceless Appeal Centre (NFAC) in appeal No. CIT(Appeal)-2, Agra/10013/2019-20, passed under Section 250 of the Income Tax Act, 1961, for Assessment Year 2011-12. The core dispute revolved around whether cash deposits of Rs. 12,66,000/- could be treated as unexplained money under Section 69A of the Act, given that the assessee — an aged, semi-literate agriculturist — had furnished a detailed source-wise explanation supported by documentary evidence including land records, bank passbooks, a chronological cash flow statement, and notarised affidavits from seven identified lenders.
The Tribunal's ultimate decision to delete the entire Rs. 12,66,000/- addition rests on two distinct pillars: acceptance of the opening cash balance and agricultural income on facts and circumstances, and a finding that the Assessing Officer failed to conduct any verification of lender affidavits during remand proceedings despite having ample opportunity to do so.
How the Case Originated: Reopening Under Section 148
The assessment for AY 2011-12 was reopened by way of a notice under Section 148 of the Income Tax Act, 1961, dated 31.03.2018. The trigger was Annual Information Return (AIR) data reflecting cash deposits aggregating Rs. 46,51,000/- in the assessee's savings bank account during Financial Year 2010-11.
Since the assessee did not participate in the reassessment proceedings — reportedly owing to his age, illiteracy, and unawareness of the notices — the Assessing Officer completed the assessment ex parte under Section 144 read with Section 147 of the Act. The AO added:
- Rs. 46,51,000/- as unexplained cash deposits
- Rs. 15,190/- as interest earned on those deposits
This resulted in a total addition of Rs. 46,66,190/- treated as undisclosed income.
First Appeal: CIT(A) Grants Partial Relief of Rs. 33,85,000/-
When the assessee approached the CIT(A) in the first round of appeal, he placed extensive documentary evidence on record for the first time. The documents included:
- A registered sale deed dated 23.09.2010 evidencing the sale of agricultural land for a consideration of Rs. 25,00,000/- received in cash
- Indian Overseas Bank passbook reflecting a Kisan Credit Card (KCC) loan credit of Rs. 1,35,000/- on 06.07.2010 with cash withdrawal on the same date
- State Bank of India passbook corroborating earlier cash withdrawals subsequently redeposited
- A date-wise chronological cash flow statement
- Notarised affidavits from seven lenders identifying themselves and describing their income sources
The CIT(A) forwarded these documents to the Assessing Officer for remand proceedings. After examining the remand reports dated 27.10.2023 and 24.06.2024, the CIT(A) accepted the source of Rs. 33,85,000/- out of the total deposits, comprising:
| Source | Amount Accepted |
|---|---|
| Cash sale consideration from agricultural land sale deed dated 23.09.2010 | Rs. 25,00,000/- |
| Redeposit of earlier SBI cash withdrawals | Rs. 7,50,000/- |
| Kisan Credit Card (KCC) loan from Indian Overseas Bank | Rs. 1,35,000/- |
| Total Accepted | Rs. 33,85,000/- |
However, the CIT(A) by order dated 11.03.2026 sustained the balance Rs. 12,66,000/- under Section 69A, holding that the assessee had not satisfactorily explained the source of the remaining deposits.
What the CIT(A) Rejected and Why
The CIT(A)'s order contained the following specific findings regarding the three sources claimed for the remaining Rs. 12,66,000/-:
Opening Cash Balance of Rs. 2,25,000/-
The CIT(A) reproduced its finding as follows:
"7.6.3 The appellant has further claimed that it has an opening cash balance of Rs. 2,25,000/- and has derived agricultural income of Rs. 3,40,000/- during the year. The appellant has however not furnished any documentary evidences in support of both the above claims made during appellate proceedings. Even during remand proceedings, the appellant has not furnished any evidence of having opening cash balance and documentary proof of deriving agricultural income... Therefore, the claims made by the appellant of having opening cash balance of Rs. 2,25,000/- and having derived agricultural income of Rs. 3,40,000/- are found to be untenable."