ITAT Delhi Deletes Addition on Cash Deposits; Accepts Sale of Agricultural Land as Explained Source

Headnote

The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the appeal of the assessee by deleting an addition of ₹13,00,000 made under Section 69A of the Income-tax Act, 1961 on account of unexplained cash deposits. The Tribunal held that the assessee had satisfactorily explained the source of deposits as sale proceeds of rural agricultural land, supported by registered sale deeds and agreements. Since income from such rural agricultural land is exempt under Section 10(1), the cash deposits could not be treated as unexplained money.

Background

Information from the ITBA revealed that the assessee had deposited cash exceeding ₹10 lakhs during FY 2014-15. Consequently, the Assessing Officer initiated reassessment proceedings under Section 147 of the Income-tax Act, noting that no return of income had been filed for AY 2015-16. In response, the assessee explained that the deposits represented sale proceeds from agricultural land situated at Village Rehadva, Bijnor, along with a cash gift received from his father. However, the AO observed that there was no proper correlation between the dates of the cash deposits and the sale deeds and accordingly treated a sum of ₹13,00,000 as unexplained money under Section 69A, assessing the total income at ₹14,65,000. On appeal, the CIT(A) upheld the addition on the ground that the assessee failed to satisfactorily justify the source of the deposits. Aggrieved, the assessee carried the matter in appeal before the ITAT.

Court’s Opinion

1. The assessee demonstrated through agreement to sell and registered sale deed that the deposits originated from sale of rural agricultural land, where cash transactions are customary. Deposits were made between the dates of agreement (25.04.2014) and sale deed (25.11.2014), showing clear linkage.
2. Agricultural land situated in a rural area does not qualify as a "capital asset" under Section 2(14); thus, its sale proceeds constitute agricultural income exempt under Section 10(1). Once the assessee discharged the burden of explaining the source, the onus shifted back to the Revenue, which failed to disprove the claim. The addition under Section 69A was unsustainable. The ITAT deleted the addition of ₹13,00,000, set aside orders of AO and CIT(A), and allowed the assessee’s appeal.

Provision Concerned

1. Section 69A, Income-tax Act, 1961 – Unexplained money.
2. Section 147, Income-tax Act, 1961 – Income escaping assessment.
3. Section 2(14), Income-tax Act, 1961 – Definition of capital asset (excludes rural agricultural land).
4. Section 10(1), Income-tax Act, 1961 – Exemption of agricultural income.

Case: Jitendra Singh v. ACIT/JCIT (Appeals), ITA No. 3316/Del/2025, AY 2015-16

Bench: Delhi (SMC) Bench, ITAT

Date of Decision: 3 October 2025