Income-tax authorities cannot discredit demonetisation cash deposits, agricultural-land exemption, or explained bank credits on mere suspicion

5-Second Takeaway

The Tribunal deleted the additions: cash deposits during demonetisation were explained from cash in hand reflected in the assessee’s cash books, agricultural-land sale profit was exempt because the land lay beyond the relevant territorial limit, and explained bank credits could not be treated as business income. It held that presumptive-return filing under section 44AD did not justify rejecting cash-book support merely because earlier returns did not separately reflect cash balances.

The assessee challenged additions made on three separate counts. The first related to cash deposited during demonetisation, which the department treated as unexplained income under section 69A. The assessee said the deposits came from cash in hand shown in its cash books, supported by earlier-year financial records.

The Tribunal accepted that explanation. It noted that the assessee had filed returns on a presumptive basis under section 44AD, and that the law, for the years in question, did not require the return to carry the kind of detailed disclosure on which the tax authorities sought to discredit the cash balance. The addition was therefore held to rest on suspicion rather than evidence.

On the land transaction, the Tribunal found that the agricultural land sold by the assessee lay beyond 8 km from the outer limit of Greater Noida. It relied on the Tehsildar’s certificate and the departmental verification, and held that the land was not a capital asset within section 2(14), so the gain was exempt under section 10.

The Tribunal also rejected an estimated business-income addition based on bank credits. It accepted the assessee’s explanation that the credits represented sale consideration and repayment of loans or advances, and held that a flat estimate could not be made without supporting material or corresponding expenditure. The additions were deleted.