ACIT vs. Trilok Chaudhary, ITA No. 820/Del/2024 (A.Y 2017-18)
In a significant ruling dated [February 2025], the Income Tax Appellate Tribunal (ITAT), Delhi Bench, dismissed the Revenue’s appeal in ITA No. 820/Del/2024 concerning Assessment Year 2017–18. The appeal challenged the CIT(A)’s deletion of two major additions:
- ₹3.04 crore added under Sections 68 and 69 for alleged unexplained cash deposits, including during the demonetization period.
- ₹6.90 lakh, claimed as exempt agricultural income, disallowed by the Assessing Officer (AO).
Background of the Case
The assessee, Trilok Chaudhary, had declared an income of ₹6.61 lakh in his return. However, during assessment, the AO made:
- An addition of ₹1.71 crore under Section 68 (unexplained credits pre-demonetization),
- ₹1.32 crore under Section 69 (unexplained deposits during demonetization), and
- ₹6.90 lakh disallowance of agricultural income, totaling ₹3.11 crore.
The basis for the additions was the AO’s conclusion that the assessee failed to explain the sources and nature of large cash deposits reflected in three bank accounts, as well as failing to substantiate his agricultural income.
CIT(A)’s Reasoning: Cash Availability Established
The Commissioner of Income Tax (Appeals) thoroughly reviewed the case and found:
- The assessee had surrendered ₹15 crore during a search and seizure operation u/s 132 in September 2013, out of which ₹2.26 crore was unexplained cash income not attributed to any specific head.
- The assessee had declared this as cash in hand, and the cash book reflected an opening balance of ₹4.59 crore as of 01/04/2016.
- The AO did not reject the cash book nor found any anomaly in the figures.
By analyzing cash withdrawals and deposits from 2013 to 2017, CIT(A) established that the assessee had sufficient cash reserves to explain the deposits in question.
Tribunal’s Observations
The ITAT upheld CIT(A)’s order, observing:
- The AO failed to contradict the cash flow statement or prove that the cash was used elsewhere.
- Cash deposits were well explained using the declared surrendered income and withdrawals across multiple bank accounts.
- Reliance was placed on jurisdictional High Court ruling in Kulwant Rai v. CIT (2007) 163 Taxman 583 (Del), which held that in the absence of contrary evidence, cash withdrawals can be presumed available for subsequent deposits.
“Even if the cash book of earlier years is ignored, the assessee was still in a position of adequate cash in hand to make the deposits.”
Agricultural Income Also Upheld
Regarding the disallowance of ₹6.90 lakh agricultural income, the ITAT noted:
- The assessee had declared agricultural income in prior years (ranging from ₹4.85 lakh to ₹5.9 lakh), which was never disputed earlier.
- The AO had no grounds for denying the claim based on marginal increase alone.
Thus, the addition was rightly deleted by CIT(A), holding the claim to be credible and consistent.
Rule 46A Allegation Dismissed
The Revenue also argued that additional evidence was accepted without allowing AO to rebut, violating Rule 46A of the Income Tax Rules.
However, the ITAT clarified:
- The CIT(A) requested documents under Rule 46A(4) during appellate proceedings, which is a recognized exception.
- There was no procedural lapse, and the AO had not objected to the cash book during assessment.
Final Verdict
The ITAT held that both the cash deposits and agricultural income were adequately explained, and the AO had failed to discredit the documentation or establish alternate use of cash.
Both grounds of appeal were dismissed.
Key Takeaways
- Surrendered income during search can be validly used to explain later cash deposits.
- Cash books not rejected by the AO hold evidentiary value.
- Consistent past reporting of agricultural income strengthens credibility.
- Rule 46A(4) empowers CIT(A) to seek additional evidence suo motu.
Result: Revenue’s Appeal Dismissed. Additions of ₹3.04 crore and ₹6.90 lakh stand deleted.