KASHINATH PANDA,BHADRAK vs. ITO BHADRA, BHADRAK

Shri Mohit Sheth, Mohit Sheth,ld AR appeared for the assessee. Shri the assessee. Shri S.C.Mohanty, ld Sr DR represented on behalf of the revenue. represented on behalf of the revenue.

It was submitted by ld AR that the assessee is in the business of It was submitted by ld AR that the assessee is in the business of It was submitted by ld AR that the assessee is in the business of dairy farm and and agricultural activity. It was the submission that from the It was the submission that from the business of Dairy farming, the assessee had shown Rs.1,30,402/ business of Dairy farming, the assessee had shown Rs.1,30,402/ business of Dairy farming, the assessee had shown Rs.1,30,402/- and the assessee had also assessee had also disclosed agricultural income of Rs.8,50,0000/ disclosed agricultural income of Rs.8,50,0000/-. During the year under consideration, the as the year under consideration, the assessee had deposited Rs.20,00,000/ sessee had deposited Rs.20,00,000/- in P a g e 1 | 6 the form of part Specified Bank Notes (SBN) and part regular notes in his bank account. The return filed by the assessee for the relevant assessment year came to be processed and the assessment came to be completed, wherein, the Assessing Officer made an addition of Rs.20,00,000/- as undisclosed income of the assessee and also treated the agricultural income disclosed by the assessee at Rs.8,50,000/- as undisclosed income of the assessee. It was the further submission that the assessee has no other source of income other than dairy farming and agricultural income. It was the submission that other incomes were in the form of interest on KVP and from fixed deposits. It was the submission that on appeal, the ld CIT(A) had granted the assessee the benefit of agricultural income to an extent of Rs.5,00,000/- and had confirmed the addition of Rs.3,50,000/- out of agricultural income. It was the further submission that in respect of deposit of Rs.20,00,000/-, the ld CIT(A) had re-worked the cash flow of the assessee, wherein, the assessee had shown a total cash flow of Rs.24,84,698/- , the ld CIT(A) had reworked the same to Rs.5,52,533/-. It was the submission that this was not permissible insofar as the ld CIT(A) in para 6.7 of his order has reworked the opening cash balance as Rs.1,00,000/- as against Rs. 4,13,698/-. Ld AR has placed before me the copy of the balance sheet of the assessee for the year ending 31.3.2016, which categorically showed cash balance as on 31.3.2016 at Rs. 4,13,968/-. It was the submission that the return for the assessment year 2016-17 had P a g e 2 | 6 also been filed and same had also been accepted. It was the further submission that in para 6.7 of the order, the ld CIT(A) has accepted cash in hand at Rs.4 lakhs as against the cash withdrawal just before demonetization of Rs.9,40,000/-. It was the submission that before demonetization, the assessee had withdrawn an amount of Rs.9,40,000/- and the same were in large denominations, which had become SBN. It was the further submission that the ld CIT(A) has also reworked the average sale of dairy products and agricultural products. It was the submission that the average sale of the same is not permissible insofar as the sales are done according to the availability of the products. It was the submission that the addition as made by the AO and as confirmed by the ld CIT(A) is liable to be deleted.

In reply, ld Sr DR vehemently supported the order of the AO and ld CIT(A). It was the submission that the ld CIT(A) has given adequate relief to the assessee and no further relief was called for. It was the further submission that there was no evidence of the opening cash balance and cash withdrawal before demonitisation was more than 20 days. It was the submission that no evidence in regard to sale of the agricultural produce or dairy produce was produced.

I have considered the rival submissions. A perusal of the facts of the present case clearly shows that out of Rs.8,50,000/- as agricultural income as claimed by the assessee, ld CIT(A) has allowed Rs.5 lakhs. There is no P a g e 3 | 6 justification given by the ld CIT(A) for allowing the amount of Rs.5 lakhs itself. In fact, the assessee is having only agricultural income and income from dairy produce. There is no other source of income, nor the assessee is partner in partnership firm. The assessee has also not shown any investment during the year in his balance sheet. The assessee admittedly does not gain any specific benefit by showing higher agricultural income. In fact, the assessee, herein, actually suffers from on account of disclosure of higher agricultural income insofar as the agricultural income gets added to the regular income for the purpose of computing of the tax and this would only lead to higher burden of the taxable income. The Assessing Officer has also not given any justification in disallowing Rs.8,50,000/- claimed by the assessee as agricultural income. This being so, in the interest of justice, I am of the considered view that the agricultural income as disclosed by the assessee is liable to be accepted and I do so. Consequently, the agricultural income accepted by the ld CIT(A) to the extent of Rs.5 lakhs is enhanced to Rs.8,50,000/- and consequently, the disallowance made by the AO in respect of agricultural income stands deleted.

In regard to addition of Rs.20 lakhs, it is noticed that the Assessing Officer has separately made addition of Rs.20 lakhs and Rs.8,50,000/-, both are under the head “unexplained income”, which is not permissible. Obviously, Rs.8,50,000/- would be available to the assessee for depositing in the bank account and consequently, the addition of Rs.8,50,000/- should

P a g e 4 | 6 have been normally telescoped to the income of Rs.20 lakhs. In fact, I have already held that agricultural income of the assessee is accepted as Rs.8,50,000/-, therefore, same is admittedly available for deposit in the bank. Similarly, the assessee has filed return for the assessment year 2016- 17 and this has also been recognized by the AO in his assessment order. The balance sheet filed with the return of income for the assessment year 2016-17 clearly shows cash in hand of Rs.4,13,968/-. Consequently, the reworking done by the ld CIT(A) of an amount of Rs.4,13,968/- being opening balance of Rs.1 lakh would stand reversed. Thus, the total cash available with the assessee would be Rs.8,50,000/- plus Rs.4,13,698/-. Now coming to cash withdrawal of Rs.9,40,000/-, it is a known fact that before demonetization when large cash were withdrawn from the bank, same was large denominations. Admittedly, demonetization took place in regard to high value currency. Consequently, Rs.9,40,000/- would be available for redepositing in the bank. In these circumstances, the reworking of cash flow as done by the ld CIT(A) in respect of cash withdrawal of Rs.9,40,000/- worked out to Rs.4 lakhs stands reversed. Coming to the cash available with the assessee of Rs.8,50,000/- representing the agricultural income, Rs.4,13,968/- being the opening cash balance and Rs.9,40,000/- being cash withdrawn before demonetization, totaling of the same would be more than Rs.20 lakhs more so nearly Rs.22

In the result, appeal of the assessee stands allowed.