GANIGARA REKHA VENUGOPAL,DEVANAHALLI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6(3)(1), BANGALORE

The AO however rejected the contention of the assessee that she had transferred Rs.21,75,000/- from the lease advance already taxed in the Assessment Year 2011-12 for the reason that the return for Assessment Year 2012-13 was filed on 29.12.2012 declaring Rs.21,75,000/- as agricultural income from Manepalli lands which was well before the date of completion of the proceedings for Assessment Year 2011-12 i.e. 7.3.2014. According to the AO, it was only an afterthought of the assessee to explain the bogus income declared under the head 'Agricultural Income' by bringing in the above explanation, which cannot be accepted for the reason that when assessee claims to have agricultural income in the returns filed and later brings in explanation to have transferred the taxed income of earlier years only goes to prove that the assessee had not earned agricultural income during the year. According to the AO, the assessee has taken contradictory stand with its claim in the reply viz-a-vis ITR filed for Assessment Years 2011-12 and 2012-13 and has introduced income from unaccounted sources in the guise of agricultural income. The AO therefore made addition of Rs.21,75.000/- being income from undisclosed sources as income of the assessee. The CIT(A) confirmed the order of the AO, hence the present appeal by the assessee before the Tribunal.

There is a delay of 75 days in filing this appeal by the assessee. The assessee has explained the reasons for the delay in filing the appeal on the ground that the hard copy of the order of the CIT(A) dated 08.06.2022 was not received by the assessee. According to the assessee, the erstwhile Counsel did not inform the assessee about the order passed on 08.06.2022 by the CIT(A) nor the assessee received any SMS communication on the registered mobile. While filing the return for Assessment Year 2022-23 in the month of September, 2022, the assessee come to know about the order of the CIT(A). Thereafter, the assessee contacted the present Counsel and filed the appeal before the ITAT.

Though the learned DR opposed the prayer for condonation of delay, I am of the view that the reasons given in the affidavit for condonation of delay are acceptable and would constitute reasonable cause for the delay in filing the appeal and also keeping in mind the ratio laid down in the following decisions, I am of the view that the delay in filing the appeal deserves to be condoned and the same is accordingly condoned based on the ratio laid down in the following decisions that procedural defects should not stand in the way of Assessee getting substantial justice in the matter of payment of taxes.  Collector, Land Acquisition vs. MST.Katiji and Others (1987) 167 ITR 471  Concord of India Insurance Co. Ltd., Vs Smt. Nirmala Devi and Others 118 ITR 507,  Hon'ble Supreme Court decision in the case of Ram Nath Sao Vs. Godardhan Sao, reported in [2002] 3 SCC page 195.

In so far as the merits of the appeal of the assessee is concerned, it is seen that in Assessment Year 2011-12, the assessee had shown lease advance in respect of Manepalli lands of Rs.43,50,000/-. In the order of the assessment passed for Assessment Year 2011-12 dated 07.03.2014, the AO brought to tax the entire sum of Rs.43,50,000/- as unexplained entry in the books of accounts under section 68 of the Act and brought to tax the sum of Rs.43,50,000/-. Therefore, it is clear that this sum of Rs.43,50,000/- was not agricultural income declared by the assessee but was an entry appearing in the balance sheet which was treated as unexplained income and added under section 68 of the Act. In Assessment Year 2012-13, the assessee had shown a sum of Rs.21,75,000/- as agricultural income and the advance received in respect of lease of lands does not appear in the balance sheet as on 31.3.2012. It is thus clear that what was shown as advance in the balance sheet in Assessment Year 2011-12 as on 31.3.2011 a part of it was shown as agricultural income by the assessee in Assessment Year 2012-13. Therefore, the contention of the assessee that the sum of Rs.21,75,000/- declared as agricultural income was on the opening balance of 31.03.2011 of leased lands received in respect of Manepalli lands is correct. Therefore, the contention of the assessee that the same income which was taxed in Assessment Year 2011-12 against sought to be taxed in Assessment Year 2012-13 is factually found to be correct. The plea of the learned counsel for the Assessee rest on the theory of Telescoping. If income is available to an Assessee, then that income can be explained as a source for an item of investment or expenditure that the Assessee is unable to explain, provided the income was available to the Assessee when the investment or expenditure is made/incurred. The idea is ultimately tax is levied either only on the income or only on its application. The theory operates on the basic presumption that when there are undisclosed income and also certain undisclosed investments, then it could be reasonably presumed that the undisclosed investments have been sourced out of the undisclosed income, so that only the income may be taxed or only the investment may be taxed and not both, in the hands of the assessee under the provisions of the Act. When an income is taxed / addition is made to taxable income in an earlier year, the assessee may claim that the income arising in subsequent year / subsequent period is sourced out of the income taxed earlier. CIT v. Jawanmal Gemaji Gandhi (1985) 151 ITR 353 (Bom). The AO and the CIT(A) have proceeded on the presumption that the assessee is claiming credit on the agricultural income of Rs.21,75,000/- declared in Assessment Year 2011-12 is factually incorrect. The credit is claimed only for the advance shown in the balance sheet that was treated as unexplained credit under section 68 of the Act of Rs.43,50,000/-. I, therefore, accept the prayer of the assessee and delete the addition in question.

In the result, appeal of the assessee is allowed.