Cash Receipt In Agricultural Land Sale Not 'Unexplained' Where Duly Explained: ITAT New Delhi

The New Delhi Income Tax Appellate Tribunal (ITAT) on 17 April, held that cash receipts arising from a duly evidenced agricultural land sale could not be treated as unexplained cash credit under Section 68 where the identity of the payer, genuineness of the transaction, and supporting documentation were established.

A Bench comprising Judicial Member Vimal Kumar and Accountant Member S Rifaur Rahman allowed the appeal filed by Angad Developers Pvt Ltd against the order of the Commissioner of Income Tax (Appeals) for assessment year 2016-17 and deleted the addition of Rs. 75 lakh. It held:

“The tribunal held that once the taxpayer had established the identity of the payer, genuineness of the transaction and supporting documentation, the addition could not be sustained merely because the buyer did not independently respond to departmental notices.”

Angad Developers had filed its return declaring a loss of Rs. 1.05 lakh. During scrutiny assessment under Section 143(3), the Assessing Officer (AO) noted a sharp increase in cash-in-hand from Rs. 7.25 lakh in the previous year to Rs. 80.85 lakh, and called for an explanation.

It submitted that it had entered into an agreement to sell agricultural land to Versatile Commotrade for Rs. 10.37 crore. It was also stated that the buyer had made payments, including cash components, which were recorded through cash receipts issued by the company and reflected in its books of account.

The record further showed that the receipt of Rs. 75,00,000 in cash was disclosed in civil proceedings before the Delhi High Court, where the buyer had instituted a suit seeking recovery of Rs. 2 crore allegedly paid as advance under the transaction. The buyer itself acknowledged the payments in those proceedings.

The AO treated the Rs. 75 lakh cash receipt as unexplained income under Section 68 of the Income Tax Act, 1961, and made an addition. The CIT(A) upheld the addition.

Before the Tribunal, the taxpayer relied on the sale agreement, cash book entries, audited financial statements, cash receipts, and pleadings in the civil suit to substantiate the transaction.

The Tribunal observed that the documentary record, including admissions in civil litigation, supported the genuineness of the transaction and established the identity of the payer. It held that mere non-response by the buyer to departmental notices could not justify an addition when primary evidence was on record.

Accordingly, the ITAT deleted the addition of Rs. 75 lakh and allowed the appeal.