Fruit seller deposited large amount of cash in bank, got income tax notice of unexplained income; won case in ITAT Bangalore for this reason

A landowner in Bangalore owned 4 acres of land where he grew vegetables and fruits, selling them for cash to APMC. After depositing the cash in his bank account, he received an unexplained cash tax notice from the income tax department. However, he successfully won his case at the ITAT Bangalore.

Mr Ramachandrababu, hailing from Dodballapura, Bangalore Rural, recently won an unexplained cash credit case under Section 69 at the ITAT. He managed to prove that he grew vegetables and fruits in his 4 acre 4 guntas land and sold them to APMC for significant amounts of cash.

Mr Ramachandrababu was sent the Income Tax Notice on suspicions surrounding his activities, as he had deposited ‘large amounts of cash” in his State Bank of India (SBI) account and also sold and purchased a property, while his income tax return (ITR) did not seem to match these activities.


Mr Ramachandrababu explained that he owned 4 acre 4 guntas of agricultural land in Bangalore and cultivated vegetables and fruits, selling them at the APMC Yard in Doddaballapura. The cash he received from these sales was deposited into his SBI bank account.

To support his claims, Mr Ramachandrababu submitted copies of the land records and the APMC Yard sale bills and the copies of the bank statement, arguing that the cash deposits were simply his agricultural income.

Additionally, Ramachandrababu explained that he genuinely believed that since agricultural income is not taxable, it doesn’t have to be included in the ITR.

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However, the Income Tax Assessing Officer (AO) observed that the RTC records did not mention which commodity Ramachandrababu grew on his land that fetched him so much cash in the market.

Another odd thing the AO noticed was that Ramachandrababu didn’t report for buying seeds and other necessary expenses needed for cultivating vegetables and fruits, yet somehow managed to cultivate them.

The AO also noted that Ramachandrababu had not reported any agricultural income in the previous years and the following year, leading him to doubt Ramachandrababu’s explanation and concluded that the large amount of cash deposited was unexplained cash credit under Section 69.

The Commissioner of Appeals CIT(A) considered Ramachandrababu’s plea but dismissed the appeal on the ground that the explanation offered by him lacked credible evidence. Feeling aggrieved, he appealed to the Income Tax Appellate Tribunal (ITAT) Bangalore. Chartered Accountant Nagaraja K.H. represented him before ITAT Bangalore. On August 28, 2026 he won the case in ITAT Bangalore.

Why did the landowner win the case?

Akhil Chandna, Partner, Global People Solutions Leader, Grant Thornton Bharat, said to ET Wealth Online that the landowner succeeded as he was able to substantiate the source of the cash deposits as agricultural income through credible documentary evidence, including agricultural land records, APMC sale bills and supporting bank records.

The ITAT Bangalore noted that the Income Tax Department neither brought any contrary evidence on record nor conducted independent verification to disprove the taxpayer’s explanation. ITAT Bangalore also acknowledged the practical realities of small-scale agricultural activities and observed that absence of detailed records for agricultural inputs, deficiencies in Karnataka State-maintained land records or non-reporting of agricultural income in earlier years could not, by themselves, negate an otherwise substantiated claim.

Chandna says: "Accordingly, since the landowner could establish a credible nexus between the agricultural activities, cash sale proceeds and subsequent bank deposits, the ITAT Bangalore held that such deposits could not be treated as unexplained money under Section 69A of the Income-tax Act, 1961."

Do we need to show agricultural income in ITR?

While agricultural income is generally exempt from tax, appropriate disclosure in the ITR is still relevant where required by the applicable return form.

According to Chandna, the prescribed ITR forms contain specific fields/schedules for reporting exempt income, including agricultural income. Such disclosure also assumes importance where agricultural income is considered for partial integration in determining the applicable tax rate on non-agricultural income.

In the present case, the landowner had not reported the agricultural income in the ITR, believing that exempt income was not required to be disclosed. The ITAT Bangalore accepted that this was due to ignorance and held that non-reporting, by itself, was not sufficient to reject the landowner’s explanation when the agricultural activity and source of cash deposits were otherwise supported by documentary evidence.

Chandna says: "Therefore, while the non-disclosure was a compliance lapse, it was not fatal to the landowner’s case. As a matter of good tax compliance, agricultural income should be appropriately and consistently disclosed in the ITR wherever required by the applicable form."

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Is income from urban agricultural land tax free or only rural?

The income tax exemption for agricultural income is not restricted to agricultural land situated in rural areas. Under the Income-tax Act, 2025, income qualifying as “agricultural income” and satisfying the prescribed conditions is generally exempt, irrespective of whether the agricultural land is situated in an urban or rural area.

Accordingly, Chandna says that income derived from genuine agricultural operations on land situated in India may qualify for exemption even where the land is located in an urban area. The urban–rural distinction becomes particularly relevant for other tax purposes, including the treatment of the land itself as a capital asset and the taxability of gains arising on its transfer, rather than for determining the exemption of income generated from genuine agricultural operations.

Chandna says: "It is also relevant that while agricultural income may itself be exempt, it can be considered under the partial integration mechanism for determining the applicable tax rate on non-agricultural income, where the prescribed conditions are satisfied."

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ITAT Bangalore discussion

ITAT Bangalore said that the only allegation made by the authorities was that Ramachandrababu had not reported the said agricultural income while filing his income tax return (ITR), and that the documents didn’t clearly show what Ramachandrababu had cultivated, which led them to question the income and apply an addition under Section 69A for unexplained money.

ITAT Bangalore reviewed the evidence namely the RTC and pahani copies of agricultural lands owned / cultivated by Ramachandrababu, along with the monthly summary of sale bills and the sale bills of the agricultural produce sold in the APMC market.

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These documents confirmed that Ramachandrababu was the owner of the lands. In the RTC, the AO had alleged that the type of crop cultivated was not mentioned.

The ITAT Bangalore said that RTC is a document maintained by the Karnataka State authorities and the non-maintenance of the same would not mean that Ramachandrababu had not cultivated any agricultural crops. This fact was also not verified by the authorities though various sources were available to them.

Moreover, the APMC is a market committee established by the state government for the sale of agricultural produce by the farmers. It is under the control of the Department of Agricultural Marketing of the Karnataka state government.

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Ramachandrababu sold his produce through the market committee, which issued the sale bills that he produced before the authorities.

Given the scenario, the ITAT Bangalore said they could not simply deny Ramachandrababu’s claim when a state government entity had issued him the sale bills to show that he had sold the agricultural commodities in the APMC Yard and received cash which was later on deposited into his bank account.

The ITAT Bangalore observed that if the AO had conducted any further enquiry about the genuineness of Ramachandrababu’s claim, they could have accepted the allegations made by the AO.

The other reasons given by the AO for not believing Ramachandrababu’s explanation were that he had not maintained the purchase bills of seeds and pesticides and not reported the agricultural income in the earlier years as well as the following year.

The ITAT Bangalore said that they do not think that in the agricultural sector for small time agricultural activities, Ramachandrababu would maintain the pucca records as stated by the AO.

Insofar as the non-reporting of the agricultural income during the earlier years is concerned, the ITAT Bangalore observed that Ramachandrababu had explained that he had not reported that income out of ignorance and therefore the ITAT did not think that it could be a reason for rejecting Ramachandrababu’s explanation.

In the present case, Ramachandrababu had filed various records to show that he was involved in agricultural activities but the AO had simply not accepted his explanation without having any other materials.

In fact, the ITAT Bangalore said that the AO could have got a report from the verification unit and found out whether any agricultural activities were carried out by the assessee or not. But no such exercise was undertaken by the authorities.

Therefore, ITAT Bangalore accepted Ramachandrababu’s submissions and also the various documents furnished by him including the APMC sale bills.

Accordingly, the ITAT Bangalore concluded that Ramachandrababu had agricultural income and it could not be treated as unexplained money under Section 69A. Thus, Ramachandrababu won the case at the ITAT Bangalore.