SHRI. MUNIYAPPA MUNIRAJU ,BENGALURU vs. INCOME TAX OFFICER, WARD - 4(3)(4), BANGALORE

Cash Deposits of Rs.43,39,000/- treated as unexplained and invocation of provisions of Section 69A of the Act: 3.1. The learned CIT(A) has erred in not admitting the fact that the entire cash deposits are the results of business income earned by the Appellant and the same has been offered under the provisions of Section 44AD of the Act. Without considering the said facts, the learned CIT(A) dismissed the Appeal. That being so, the appeal proceedings be treated as void and bad in law. 3.2. Without prejudice to the foregoing, the learned CIT(A) has erred in not providing any findings or operative part as to why the amount of cash deposits be added to income and the provisions of Section 69A and 115BBE be invoked. Accordingly, the said addition of Rs.43,39,000/- be deleted and impugned order be quashed.

In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A) to the extent prejudicial to the appellant be quashed, or in the alternative, the above grounds including the relief prayed for be allowed. The appellant prays accordingly.” 2. Brief facts of the case are as under: 2.1 The assessee is carrying on the business of civil works contract and filed return of income for the assessment year 2017- 18 on 31.03.2018. 2.2 The assessee declared his business income u/s. 44AD of the IT Act, 1961 on presumptive basis at 8% on the amount received and deposited the receipts to two bank accounts maintained in Canara Bank and State Bank of India. The assessee has not maintained any books of account. 2.3 The Ld.AO accepted this return of income and income offered u/s. 44AD on the turnover declared by assessee. 2.4 The case was selected for scrutiny by CASS for the reason “Large Cash Deposits” in the year. Accordingly, notice u/s. 143(2) was issued on 12.09.2018. 2.5 In response the assessee submitted the computation of income and the bank account statements. The assessee in his reply has stated that he is an agriculturist and during his free time undertakes contract work on piece work basis in his village limits and the cash deposit to the bank account is made out of contract works received and the agricultural proceeds. 2.6 The Ld.AO after considering the submissions of the assessee observed that the assessee failed to provide any details such as the nature and type of contract work undertaken by him. The Assessee has neither submitted any documentary evidence for Page 4 of the contract work undertaken by him nor has submitted any details to prove the veracity of his submissions. The Assessee has not provided any confirmation or any documents/contract agreements from his clients to prove that he has undertaken and performed the contract work. The Assessee has also not submitted the statement of affairs of his business to support the income earned. Hence, the Assessee's submission that he has received cash from contract receipts is not acceptable. 2.7 The Ld.AO thus issued the SCN dated 14.11.2019 calling upon the assessee as to why the cash deposited and the income from the sale of immovable property should not be brought to tax. 2.8 The Ld.AO observed that assessee deposited cash to the extent of Rs.45,39,000/- in his bank accounts of Canara Bank and State Bank of India during the F.Y. 2016-17. An amount of Rs.37,00,000/- has been deposited to his Canara Bank account No.0437101020756 and Rs.8,39,000/- in his State Bank of India account No.64002611149 during the F.Y.2016- 17. He thus held that the source of cash remains unexplained. The Ld.AO gave benefit of the basic exemption towards non pursuit of enquiry in respect of the source of cash deposited to the extent of Rs.2 lakhs, the balance sum of Rs.43,39,000/- was treated as unexplained income and brought to tax u/s.69A r.w.s 115BBE of the Act. 2.9 The Ld.AO further noticed that the Assessee, in the Computation of income for the A.Y.2017-18 claimed NIL income from Long Term Capital Gains on sale of agricultural land. The Assessee was asked to submit the documents Page 5 of Agricultural land. The Assessee has submitted the copies of the sale deeds of the land owned by him. The same has been perused. On verification of the sale deeds, it is noticed that the Assessee has purchased land bearing Survey No.111, situated at Mylasandra Village, Begur Hobli, Bangalore South Taluk, on 17.06.1992 and has sold the immovable property by way of registered sale agreement dt.22.04.2016 for a sale consideration of Rs.1,05,00,000/- where the payments received are reflected in the bank statements of the Assessee. The Assessee has provided a copy of the notarized unregistered Agreement dated 23.02.2017 for purchase of the new asset which cannot be relied upon as a piece of evidence. The Assessee in his reply dt.07.12.2019 has accepted that the land is not registered and the required documents are not furnished and as the land is under litigation the same is not registered and possession not taken by the Assessee. The Assessee in the statement of income submitted for the A.Y.2017-18 has declared sale of agricultural land and claimed exemption u/s.54 of Rs.1,35,00.000/- and declared NIL income under the head "Long Term Capital Gain". On verification of the submissions, it is noticed that the Assessee has neither purchased or constructed any new asset within the time allowed as per the Income Tax Act nor has provided any documents to prove the exemption claimed u/s.54 of the Income Tax Act. 1961. 2.10 The Ld.AO was of the opinion that the exemption claimed by the Assessee on the sale of the immovable asset does not fit under sections 54B or 54F of the Income Tax Act, 1961 as Page 6 of Income Tax Act and also failed to submit proper supporting evidences for investment. From the preceding paragraphs it is clear that the Assessee has received a net consideration of Rs.1.05,00,000/-on the sale of land during the year 2016-17. Hence. the total consideration received of Rs.1,05,00,000/- is brought to tax under the head "Income from Long Term Capital Gain”. 2.11 Aggrieved by the order of the Ld.AO, the assessee filed appeal before the Ld.CIT(A). 2.12 The Ld.CIT(A) observed and held as under: “7.5 In the light of above facts and discussion and the legal precedents submitted by the appellant in his written submission, I have come to the conclusion that there are two main issues for determination:- a. Whether the sale of land could have been investigated by the AO under the limited scope of scrutiny? b. Whether the LTCG on the sale of such land was entitled to exemption u/s 54 B or 54 F as claimed by the appellant. 7.6 On the first issue; the AO has started his enquiry from trying to find the source of the cash deposits in the appellant's bank accounts and he has limited enquiry to the same. The deposits in the bank accounts of the appellant included deposits of sale proceeds of the land which are claimed to have been reinvested transaction within the 2 year window provided. 7.7 Thus AO has rightly held that the exemption u/s 54 B or 54 F was not eligible as the new asset has not been purchased within the time period allowed as per IT Act and also failed to submit the required evidences regarding the same. The AO has also allowed indexed cost of acquisition accordingly. Thus, the two addition made by the AO are affirmed as being within the purview of the IT Act and the grounds of appeal are accordingly dismissed.” 2.13 Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

Ground no. 3: 5.1 The next issue in appeal is regarding cash deposited during the financial year relevant to Assessment Year under consideration of Rs.41,19,500/- u/s.

The Ld.AO disallowed Rs.41,19,500/- as per the rates applicable u/s. 115BBE of Income from business deposited as cash allegedly made prior to the demonetisation period. Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A). 5.2 Before the Ld.CIT(A), assessee failed to furnish necessary evidence in support of the claim that the sum of Rs.41,19,500/- represents sale proceeds of business and therefore this addition so made was upheld. Aggrieved by the order of Ld.CIT(A), assessee is in appeal before this Tribunal. 5.3 The Ld.DR on the contrary, submitted that the cash has been deposited during the period when demonetisation was declared and therefore necessary verification has to be carried out in accordance with the circulars issued by the CBDT. We have perused the submissions advanced by both sides in the light of records placed before us.