ITAT Bangalore on Section 69A: Cash Deposits Accepted as Explained When Backed by Farmers’ Confirmations

1. Background of the Dispute

The decision in Maradi Jagadeesha Vs ITO (ITAT Bangalore) concerns an addition of ₹3,22,000 under Section 69A of the Income Tax Act 1961. The central controversy was whether certain cash deposits in the assessee’s bank accounts could be regarded as “unexplained money”, or whether they stood properly explained as consideration received for services rendered to farmers.

The assessee was engaged in the activity of cleaning and preparing agricultural lands owned by various farmers to make them suitable for cultivation. Cash received for these services was deposited into bank accounts maintained with Karnataka Gramin Bank and State Bank of India.

The Assessing Officer treated ₹3,22,000 of such deposits as unexplained under Section 69A, and this view was upheld by the CIT(A). On further appeal, the Bangalore Bench of the ITAT reversed the addition after evaluating the documentary support produced by the assessee, including:

  • Confirmation letters from the concerned farmers
  • Full names and postal addresses of payers
  • Copies of Aadhaar cards
  • Evidence of agricultural land ownership

The Tribunal concluded that, when read together, these documents sufficiently clarified both the nature and the source of the money deposited.

2. Reassessment Proceedings and Cash Deposits Under Scrutiny

2.1 Initiation of Reassessment

The assessee had not filed any return of income prior to the relevant reassessment. On the basis of information about financial dealings routed through Karnataka Gramin Bank, the Assessing Officer reopened the case by issuing a notice under Section 148 on 25 March 2024.

In response, the assessee furnished a return of income on 7 May 2024, declaring taxable income of ₹2,40,320 for Assessment Year 2020-21. Thereafter, the case proceeded under the faceless regime, with notices and information gathering under Section 142(1) and Section 133(6).

2.2 Bank Deposits Examined

Based on the information obtained from Karnataka Gramin Bank and State Bank of India under Section 133(6), the Assessing Officer focused on cash deposits totalling ₹3,22,000 during the relevant financial year. These comprised:

  • A deposit of ₹3,00,000 on 23 July 2019 in account no. 4051 with Karnataka Gramin Bank
  • A deposit of ₹22,000 on 6 June 2019 in account no. 972 with State Bank of India

There was also a nominal deposit of ₹500 on **22 July 2019in the Karnataka Gramin Bank account, but the disputed addition revolved around the aggregate figure of₹3,22,000`.

The assessee explained that the cash represented:

  • Receipts from services of cleaning and developing agricultural land
  • Accumulated savings from such activities

To substantiate this claim, he produced confirmations evidencing receipts of:

  • ₹77,100
  • ₹60,900
  • ₹59,850
  • ₹1,33,700

These confirmations were accompanied by Aadhaar cards and land-related documents of the farmers. The assessee also maintained that this service income had already been offered to tax in the return, and therefore, the same amount could not once again be brought to tax merely because it was deposited in cash.

3. Findings of the Assessing Officer and CIT(A)

3.1 Treatment by the Assessing Officer

The Assessing Officer concluded that the assessee had not satisfactorily proved the source of the deposits of ₹22,000 (06 June 2019) and ₹3,00,000 (23 July 2019). He declined to accept the explanations and documents furnished, holding that:

  • The assessee did not establish the source of the cash
  • The evidence produced was not adequate to link the deposits to declared income

Consequently, the Assessing Officer invoked Section 69A and treated ₹3,22,000 as unexplained money, thereby enhancing the total income from the returned ₹2,40,320 to ₹5,62,320.

3.2 Order of the CIT(A) / NFAC

On appeal, the CIT(A) (through NFAC, Delhi) confirmed the addition by order dated 20 August 2025. While accepting that:

  • The bank accounts indeed belonged to the assessee (based on KYC records),

the appellate authority took the view that:

  • The assessee failed to demonstrate a credible source for the cash deposits;
  • The material furnished did not sufficiently discharge the onus cast upon him under Section 69A.