Fruit seller deposited cash, got tax notice, won case

A landowner in Bangalore, Mr Ramachandrababu, successfully won a tax case after being served an unexplained cash credit notice by the Income Tax Department. Mr Ramachandrababu cultivated vegetables and fruits on his 4 acre 4 guntas land, selling them to the APMC Yard in Doddaballapura for substantial cash earnings. He deposited this cash into his State Bank of India account, but the Income Tax Department suspected discrepancies between his income and the income tax return he filed.

Mr Ramachandrababu challenged the tax notice at the ITAT Bangalore, claiming that agricultural income is not taxable and therefore not required to be reported in the income tax return. His legal counsel, Chartered Accountant Nagaraja K.H., presented credible documentary evidence, including land records, APMC sale bills, and bank statements, to support his claim.

The ITAT Bangalore acknowledged the practicalities of small-scale agricultural activities and noted that inconsistencies in land records or failure to report agricultural income in prior years did not undermine his explanation.

The tax assessor, however, observed that the records did not specify the crops grown or the expenses incurred in cultivation. The Commissioner of Appeals CIT(A) dismissed the appeal, citing lack of credible evidence from the landowner. Despite this, Mr Ramachandrabu's team persevered and successfully won the case on August 28, 2026.

The ITAT Bangalore held that the cash deposits could not be treated as unexplained money under Section 69A of the Income-tax Act, 1961, as the landowner had provided sufficient evidence of his agricultural income.