CHINNAMUNIYAPPA VENKATESH,HOSUR V. ITO, WARD-1, HOSUR

ITA 2917/CHNY/2024

AI Insights

The case revolves around the appeal by Shri Chinnamuniyappa Venkatesh against the order of the Addl/Joint Commissioner of Income Tax (Appeals)-1, Surat, which confirmed the addition of Rs.5,86,000 to the assessee's income for the Assessment Year 2017-2018. The addition was initially made by the Assessing Officer, who treated the cash deposit of Rs.5,86,000, made during the demonetization period, as unexplained money under Section 69A of the Income Tax Act. The Tribunal, referencing similar cases and the specific circumstances of the assessee's agricultural activities, overturned the lower authorities' decisions, accepting the assessee's explanation that the deposits were from legitimate agricultural income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314113 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P. VIJAIDEEPAN
• Assessee Lawyers: C. SATHISH
• Keywords: Set aside; Principle of natural justice; Procedural lapse
• Section: 143(3); 68; 69; 234B

Judgement Text

" आयकर अपीलीय अिधकरण,‘ए’\u000eा यपीठ, चे\u0013ई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘A’ BENCH, CHENNAI \u0015ी मनु क ुमा र िग\u001bर ,\u000eा ियक सद एवं \u0015ी जगदीश, लेखा सद क े सम% BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.2917/Chny/2024 (िनधा\u0005रणवष\u0005 / Assessment Year: 2017-18) Shri Chinnamuniyappa Venkatesh, 1-93, Koladasapuram, Berigai Post, Hosur-635 105. Vs Income Tax Officer, Ward-1, Hosur. PAN: AOGPV-9858-K (अपीलाथ\u000f/Appellant) (\u0010\u0011यथ\u000f/Respondent) अपीलाथ\u000fक\u0014ओरसे/ Appellant by : Mr. C. Sathish, CA \u0010\u0011यथ\u000fक\u0014ओरसे/Respondent by : Mr. P.Vijaideepan, JCIT सुनवाईक\bतारीख/Date of hearing : 11.02.2025 घोषणाक\bतारीख /Date of Pronouncement : 08 .05.2025 आदेश आदेश आदेश आदेश / O R D E R PER MANU KUMAR GIRI, JM: The captioned appeal filed by the assessee is directed against the order of the Addl/Joint Commissioner of Income Tax (Appeals)- 1, Surat [CIT(A)] dated 19.09.2024 for Assessment Year 2017-2018. 2. The grounds raised by the assessee read as under: - “1. Ground 1: The learned CIT(A) and AO erred in law and on facts by passing an order that is arbitrary, erroneous, and based on surmises and conjectures, disregarding the appellant's submissions and evidence. 2. Ground 2: The learned AO issued show-cause notices under Sections 68 and 69 but passed the final order under Section 69A, violating principles of natural justice. The learned CIT(A) further erred in justifying this procedural lapse by invoking Section 292B of the Act. 3. Ground 3: The learned CIT(A) and AO erred in sustaining the addition of ₹5,86,000, which represents exempt agricultural income, despite the appellant presenting adequate evidence. The appellant's sole source of income is agriculture, and no contrary evidence was brought on record by the AO. 2 ITA No. 2917/Chny/2024 4. Ground 4: The learned CIT(A) and AO erred in taxing transactions involving specified bank notes (SBNs) during the demonetization period, despite the absence of any prohibition or charging provision under the Income-tax Act. 5. Ground 5: The learned CIT(A) and AO erred in levying interest under Section 234B on cash deposits that are fully explained and exempt as agricultural income.” 3. Brief facts are as under: The assessee filed his return of income on 23-11-2017 admitting \"Nil\" income from business and agricultural income of Rs.5,87,205/- from horticulture carried on agricultural lands taken on lease. The assessee is engaged in the cultivation of cut flowers and selling them in local markets and outside Tamilnadu in places like Delhi through agent. The case was taken up for scrutiny by issue of notice u/s 143(2) dt 09.08.2018 and the Assessing Officer has completed the assessment u/s.143(3) on 28.12.2019. The AO while completing the assessment added back a sum of Rs.5,86,000/- being deposit of SBNs at Indian Bank Delhi by the agent Mr. Shyam kumar to the tune of Rs.5,86,000/- on 24.11.2016 from out of sale proceeds of cut flower sent to the agent. The assessee had to accept the SBNs from the agent out of exigency of the trade and was also under the impression that payment for sale of agricultural and horticultural products were allowed to be received in SBNs. The AO having accepted the fact of agricultural activity of the assessee, treated the cash deposit as unexplained money u/s 69A and added the same as income of the assessee from other sources. The AO did not appreciate the fact that the only activity of the assessee is carrying on horticulture and no other activity of taxable nature. The 3 ITA No. 2917/Chny/2024 Assessing Officer by invoking the provisions of sec. 115BBE of the Act determined the taxable income at Rs.5,86,000/- as unexplained money u/s.69A of the Act. 4. Aggrieved, the assessee challenged the order of assessment before the CIT(A). However, the CIT(A) confirmed the order of Assessing Officer. 5. Before us, the learned counsel for the assessee referred to page nos. 83, 86 to 89 and 95 of the paper book, which is copy of statement of bank statements showing cash deposits entries in support of his claim during the year 01.02.2015 to 30.04.2015, wherein assessee has made cash deposits. The learned counsel for the assessee relied upon the decisions of the ITAT., Dehradun in the case of Sh.Chaudhary Mange Ram Panwar Vs ITO in ITA No.36/DDN/2022 dated 23.06.2023 and co-ordinate Bench of this Tribunal in the case of Smt. Annalakshmi Mathivanan Vs.ACIT in ITA No.2451/Chny/2018, and submitted that under identical circumstances of this case, the Tribunal deleted the additions made by the Revenue. 6. Per contra, the learned DR relied upon the findings of the CIT(A), which reads as under:- “5.1 I have carefully gone through the grounds of appeal raised by the appellant, Order passed by the AO u/s. 143(3) and documentary evidence submitted by the appellant and in adherence to the principles of natural justice, I hereunder adjudicate the appeal on the basis of material available on record. 5.2 The appellant engaged in cultivation of flowers and selling it in local market and to other cities of India as well. On perusal of the Bank Statement submitted by the appellant having account number 6218681047 maintained with Indian Bank, for demonetisation period and of previous year, it is noticed that amount has been transferred to account of the appellant through 4 ITA No. 2917/Chny/2024 cheque and cash deposited. The Assessing Officer has considered amount of Rs.5,86,000/- deposited in cash from lndirapuram on 24.11.2016 as unexplained income of the appellant. 5.3 In this regard, it is worthwhile to mention here that from the midnight of 08.11.2016 vide Notification in S.O.No.3407(E) dt.08.11.2016 issued by the Central Government the legal tender status of Specified Bank Notes hereafter, SBNs w.e.f 09.11.2016 were withdrawn but permitted the deposit of such SBNs held by a person into his bank account, the SBNs deposited in bank during demonetization period by the assessee represents the SBNs held by him as on 08.11.2016. it is therefore, had the depositor i.e, Mr. Shyam Kumar would have deposited the sum into his own account and thereafter transferred the same to the account of the appellant, it would have made no wrong inference drawn. In this case the appellant transcended the order of the Government and transacted in the demonetised currency which was not permissible. 5.4 Further, the appellant has raised the ground that the AO had issued SCN for making addition u/s. 68, however, the while finalising the assessment order addition was made under 69A of the I. T. Act. In this regard, it worth to mention that section 2928 of the Act which is as under: \"No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of the Act\". Thus, in the event of any mistake, defect or omission in the notice or other proceedings, if the same is in conformity with or according to the intent and purpose of the Act, the notice cannot be termed as invalid. To put it in other words, the notice should be in conformity with and in accordance with the intent and purpose of this Act. 5.5 The purpose behind the introduction of section 2928 is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The object and purpose of this Section is to ensure that procedural irregularities do not vitiate 5 ITA No. 2917/Chny/2024 assessments. Notice/summons may be defective or there may be omissions but this would not make the notice/summon a nullity. Accordingly, the ground raised by the appellant is hereby disallowed. The other ground of appeal raised by the appellant including interest levied u/s. 2348 is of consequential in nature hence not adjudicated. 6. In view of the above, I find that the AO has correctly added the sum considering the amount deposited of Rs. 5,86,000/- from lndiraparam as unexplained income of the appellant. I therefore, uphold the addition made by the AO of Rs. 5,86,000/-, consequently appeal of the appellant is disallowed.” 7. We have heard rival submissions and perused materials placed on record, including paper book and case laws relied upon the learned counsel for the assessee. We find that on identical facts, the Dehradun Bench of this Tribunal in ITA No.36/DDN/2022 dated 23.06.2023 held as under:- “Sale of Poplar Trees 6. The assessee claimed that he had sold 727 Poplar trees to Sh. Prakash for Rs.6 lakhs for which photocopy of the receipt was filed before the learned Assessing Officer. The learned Assessing Officer asked the assessee to produce Sh. Prakash in person for examination, which was not complied with by the assessee. The assessee also furnished copy of Lekhpal Report before learned Assessing Officer to substantiate the sale of Poplar trees. Since, the assessee could not substantiate the receipt in cash of Rs. 6 lakhs from Sh. Prakash out of the sale of Poplar trees, the lower authorities had disbelieved the said cash source available with the Assessing Officer. In this regard, we hold that that there is no dispute with regard to the fact that assessee owns 106 bighas of agricultural land cultivating sugar, wheat and other agricultural products. It is not in dispute that the assessee has furnished the Lekhpal report. The contention of the assessee is that he has received a sum of Rs. 6 lakhs on 20.10.2016 in cash from Sh. Prakash towards sale proceeds of 727 Poplar trees. It is not in dispute that the assessee has furnished a photocopy of the receipt from Sh. Prakash. We find that the assessee has also furnished affidavit duly notarized before the learned CIT(A) affirming the fact that the Poplar trees were disposed of during the year by him. This affidavit is enclosed in page 7 of the paper-book. The 6 ITA No. 2917/Chny/2024 photocopy of the receipt given by Sh. Prakash is enclosed in page 9 of the paperbook. We further find that the assessee has also written a letter dated 10.10.2017 to the Tahsildar intimating the fact that he has cut the Poplar trees in 2016, and received Rs. 6 lakhs and also requested the Tahsildar to depute a person for inspection of the land where the Poplar trees were originally situated and were cut. Pursuant to this request, learned Tahsildar has also furnished his report on 16.10.2017. All these facts collectively prove that the sale of Poplar trees had indeed been made by the assessee for Rs. 6 lakhs. It is pertinent to note that the sale consideration of Rs.6 lakhs received by the assessee in cash is not disputed. What is disputed is whether the assessee had sold Poplar trees or not. The aforesaid facts clearly prove that the assessee had indeed sold poplar trees. Merely because the assessee is not able to produce Sh. Prakash (buyer of the Popular trees), transaction carried out by the assessee cannot be disputed or suspected. It is a fact that the assessee has declared 9,50,000/- as agricultural income in the return of income and these are also reflected in the affidavit furnished by him before the learned CIT(A). Hence, the cash source disclosed by the assessee for the sum of Rs. 6 lakhs towards sale of poplar trees is to be accepted as the source available for explaining the cash deposit. Sale proceeds of Crop sold in October 2016 7. The assessee explained that he had received sale proceeds of Rs.3.5 lakhs on sale of agricultural crops in October 2016. As stated earlier, it is not in dispute that the assessee is owning 106 bighas of agricultural land and cultivating sugar cane, wheat and other agricultural produces. It is also not in dispute that the assessee owns tractor and other agricultural implements for usage in his agriculture operations. As against the agricultural income declared by the assessee for a sum of Rs.9,50,000/-, learned CIT(A) restricted the same to Rs. 2 lakhs, based on agricultural income declared in immediately preceding year at Rs.1,52,800/-. In our considered opinion, on a conservative basis, even if this sum of Rs.2 lakhs is taken together with the aforesaid two receipts of Rs.6,50,000/- on sale of car and Rs.6 lakhs on sale of Poplar trees, this would explain the entire cash deposits made by the assessee, which is the subject matter of dispute. Old Personal Savings: 8. The assessee claimed old personal savings of Rs.1,17,500/- as a cash source available for explaining the cash deposit, which was accepted by learned CIT(A) to the extent of Rs.1 lakh. Even, this is taken together with the aforesaid three receipts of Rs.6,50,000/-; 6,00,000/-; and Rs.2,00,000/-, it would explain the entire cash deposits by the assessee during the demonetization 7 ITA No. 2917/Chny/2024 period. Hence, on merits, the entire cash deposits stands proved with proper source. 9. It is also crucial to note that preponderance of probability theory would go in favour of the assessee in the instant case. The predominant income available with the assessee is only the agricultural income. No other source of income is brought on record by learned Assessing Officer and it is not in dispute that the assessee is not engaged in any business or profession. The source of income in any manner whatsoever could only emanate from agricultural income. Hence, the overall explanation given by the assessee for explaining the cash deposits as emanating out of the sale of car and agricultural receipts need to be accepted. There is no other source available with the assessee which would have enabled him to earn income. 10. In view of the aforesaid observations, we direct the learned Assessing Officer to delete the addition made in respect of cash deposits made during the demonetization period in demonetized currency. Accordingly, grounds raised by the assessee are allowed. 11. In the result, the appeal of the assesse is allowed.” 8. We also find that the co-ordinate Bench of this Tribunal on similar facts and circumstances of this case in ITA No.2451/Chny/2018 dated 22.01.2019 has decided the issue in favour of the assessee by holding as under:- “4. We have considered the rival submissions on either side and perused the relevant material available on record. The issue arises for consideration is addition of Rs.8,00,000/- out of Rs.20,00,000/- disclosed by the assessee as agricultural income. The Assessing Officer found that the assessee could not produce any bills and vouchers for sale of agricultural produce. The assessee also could not produce any receipts for expenditure incurred. From the order of the Assessing Officer it appears that the assessee has filed certificate from the Village Administrative Officer. The CIT(Appeals), however, found that the assessee could not establish that he was carrying out agricultural operation on the land. The fact remains that the adangal extract available before the lower authorities and before this Tribunal establishes that the assessee was cultivating paddy, coconut, teak, etc. on the subject land. Therefore, the 8 ITA No. 2917/Chny/2024 CIT(Appeals) is not justified in saying that the assessee could not establish the fact of cultivation. The fact of cultivation is established by the assessee. Both the authorities below dispute the sale of agricultural produce. Since the assessee could not produce bills and vouchers for sale of agricultural produce and expenses, the claim of the assessee was disbelieved. 5. The Assessing Officer as well as the CIT(Appeals) have to appreciate the fact that the agricultural products in this country are traded in unorganized sector. The workforce in the agricultural sector is unorganized. When the agricultural products are traded in unorganized sector in the country, expecting the assessee to produce bills for sale of agricultural produce is something which cannot be produced by the assessee. Moreover, when the assessee engages labourers in carrying out agricultural operation and incur expenditure, producing vouchers is something uncalled for. What is to be seen is that whether the assessee has cultivated the land as claimed. When the assessee claims that the land was cultivated with certain crops and when the Assessing Officer has taken up the assessment for examination after three or four years from the relevant financial year, no material evidence will be available on the land to show that the assessee has cultivated as claimed. The only evidence available is the record maintained by the State Government in its Revenue Department. As per the Revenue Board's standing orders of Government of Tamil Nadu, the Village Administrative Officer in his official duty has to go round the village and take stock of the cultivation made at the relevant field and it has to be recorded in Village Account No.2. The Village Account No.2 is otherwise known as adangal. Therefore, the only official document maintained in the course of administration is the adangal extract maintained by the Village Administrative Officer. Beyond this, the assessee cannot produce any evidence for establishing the cultivation. 6. Moreover, for yield, there cannot be any other evidence other than estimation. A coconut tree may yield 100-120 nuts in a year. Now the Agriculture Department and Agriculture University invented hybrid coconut varieties which give 150-200 nuts in a year. Therefore, estimation of yield in agriculture is something difficult and which needs to be appreciated by the authorities who are performing judicial function. When agricultural produce including coconuts is traded in unorganized market like Uzhavar Sandhai and other local market, expecting the assessee to produce bills and vouchers is nothing but asking the assessee to perform an impossible task. Therefore, this Tribunal finds no reason to disallow any claim of the assessee. Had the Assessing Officer found that the assessee has no land or he has not cultivated as claimed, the 9 ITA No. 2917/Chny/2024 matter might have stood in a different foot. In this case, the Assessing Officer accepted the fact that the assessee has cultivated the land. The only reason for disallowance is that the assessee could not produce bills and vouchers for sale of agricultural produce and receipts for expenses. Apart from that, the assessee has established by producing copy of adangal extract that the land in question was subject to cultivation. In those circumstances, this Tribunal is of the considered opinion that there is no reason to disallow any part of claim. Therefore, this Tribunal is unable to uphold the order of the lower authority. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to delete the addition of Rs.8,00,000/-. 7. In the result, the appeal filed by the assessee is allowed.” 9. Before us, the assessee has shown copy of lease agreement dated 08.06.2025 with patta, chitta, invoices, adangal etc. to substantiate his genuine horticultural activity. The revenue has not controverted the fact that inspector from revenue has conducted on- site visits and confirmed the horticultural activity in the cultivation of rose flowers. In this case, we find that assessee had been used to deposit cash in the bank accounts which are nothing but agricultural income. In all probability, we are of the considered view that the source for the cash deposits is from the horticultural activity in the cultivation of rose flowers. In this case, the preponderance of probability theory would go in favour of the assessee in the instant case. The predominant income available with the assessee is only the agricultural income. No other source of income is brought on record by learned Assessing Officer. The source of income in any manner, whatsoever could only arise from agricultural income. Therefore, we accept the explanation of the assessee in respect of cash deposits during demonetization period in demonetized currency on 24.11.2016 and direct the AO to delete the additions of Rs.5,86,000/-. Accordingly, grounds on merits raised by the assessee are allowed. 10 ITA No. 2917/Chny/2024 10. In result, the appeal of the assessee is allowed. Order pronounced in the open court on 8th May, 2025 Sd/- Sd/- ( जगदीश ) ( मनु क ुमार िग\u001bर ) ( Jagadish ) ( Manu Kumar Giri) लेखासद\u0007य लेखासद\u0007य लेखासद\u0007य लेखासद\u0007य / Accountant Member \u000eाियकसद / Judicial Member चे\u0019ई/Chennai, \u001bदनांक/Date: 08.05.2025 DS आदेश क\u0007 \bितिलिप अ\u000eेिषत/Copy to: 1. Appellant 2. Respondent 3.आयकर आयु\u0013/CIT Chennai/Salem 4. िवभागीय \bितिनिध/DR 5. गाड फाईल/GF. "