SHRI RAMESH CHHANABHAI KACCHADIYA (PATEL),,JAMNAGAR vs. THE INCOME TAX OFFICER, WARD-1(3),, JAMNAGAR

First we take up ITA No.518/RJT/2012.

Sole grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.81,55,000/- with the aid of section 68 of the Income Tax Act, 1961.

Brief facts of the case are that the assessee has filed his return of income on 29.12.2006 declaring total income at Rs.3,75,933/-. The assessee at the relevant time was running a proprietorship concern in the name and style of “Kachhadiya Metal Industries”, Jamnagar where he was engaged in the business of manufacturing brass parts and components. The assessment order was passed under section 143(3) on 22.12.2008 wherein an addition of Rs.81.55 lakhs was made by the AO with help of section 68 of the Income Tax Act. Dissatisfied with the addition, assessee carried the matter in appeal before the ld.CIT(A) who vide order dated 24.3.2009 allowed the appeal partly and deleted the addition to the extent of Rs.38,45,000/-. The balance i.e. Rs.43.10 lakhs was confirmed. Dissatisfied with the order, the assessee as well as Revenue came in appeal before the Tribunal, and the Tribunal has set aside the order of the CIT(A) and remitted the issue for fresh examination at the level of the AO. In the set aside proceedings, the ld.AO again made addition, and appeal to the CIT(A) did not bring any relief to the assessee.

It emerges out from the record that the assessee took loan of Rs.81.55 lakhs from his maternal grandfather viz. late Shri Kanjibhai Becharbhai Bhanderi (“Naana”) . The assessee has brought on record the following facts relating to this loan:

We have duly considered rival contentions and gone through the record carefully. Section 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year.

A perusal of the record would indicate that Shri Kanjibhai was “Naana” of the assessee. His identity is not in dispute. The assessee has proved the identity. The loan was taken through banking channel. Hence, the genuineness of the transaction was also not in dispute. Only dispute is whether Shri Kanjibhai was having source of income for advancing of such loan or not. In order to prove this factor, the assessee has produced details of land holding, crop cultivation thereon etc. The Revenue authorities have disbelieved earning of income at the end of said Shri Kanjibhai on the ground that the assessee failed to produce the details of expenditure incurred, sales bills of agriculture produce etc. To our mind it is such factor which will never be available with the agriculturist. The AO ought to have appreciated that Shri Kanjibhai in the first round confirmed the advancement of loan to the assessee, and he was having 130 acres of land. He is man of means. Hence, his credit worthiness cannot be doubted simply for the reason that agriculture produce ought to have been substantiated. This can be inquired into his case. How the assessee should produce sale bills of agriculture produce, purchase bill of fertilizers etc. These factors are not relevant circumstances while examining the case of the assessee. Apart from the above, the assessee has

Now we take up ITA 519/Ahd/2012.

Grievance of the assessee in this appeal is that the ld.CIT(A) has erred in confirming the addition of Rs.32,21,000/- which was added by the AO with aid of section 68 of the Income Tax Act, 1961.

Brief facts of the case are that the AO got information from AIR wing exhibiting that assessee has deposited Rs.32,21,000/- in the saving bank account maintained with Punjab National Bank. He directed the assessee to explain the source of such deposits. In response to query, it was contended by the assessee that he was an agriculturist. The amount was deposited out of sale of agriculture produce. The assessee has produced details of land holding. However, the ld.AO was not satisfied with the explanation of the assessee and treated such deposits as unexplained investment in the bank, and made addition of Rs.32,21,000/-. Dissatisfied with the assessment order, assessee carried the matter in appeal before the ld.CIT(A). He pleaded that the ld.AO erred in reopening of the assessment order and also erred in making addition of Rs.32,21,000/-. The ld.CIT(A) rejected this contention of the assessee and confirmed the addition.

Before us, in ground no.1 and 2, the assessee has pleaded that reopening of the assessment is bad in the eyes of law.

As far as addition on merit is concerned, section 68 contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year.

In order to demonstrate the source of such deposits, the assessee was required to show as to how he has earned the agriculture income. A perusal of the details submitted by the assessee would indicate that he was only possessing 10 bighas of land. It is quite impossible to earn an income of Rs.32.21 lakhs out of such small land holding. Apart from this explanation, there is no explanation at the end of the assessee. Therefore, considering the

ITA No.520/Ahd/2012.

Grievance of the assessee in this appeal is similar to the ground raised in ITA No.519/RJT/2012, wherein the assessee aggrieved by the action Revenue authorities in confirming the addition of Rs.34,55,000/- being deposits made in the bank which remained unexplained.

Similarly, assessee has also agitated over reopening of the assessment under section 147 of the Act as reflected in ground no.1 and 2 of the appeal.

In this case the assessee has not filed regular return of income. The AO got information from the AIR wing an amount of Rs.34,55,000/- has been deposited in the saving bank account of the assessee with Punjab National Bank. To the query of the AO, the assessee submitted that he was an agriculturist and earning agriculture income, which was not liable to be taxed. He filed details of agricultural and in form no.7/12. On verification, the AO noticed that the assessee owning only small size of agriculture land; there was no details of crop production, and other related expenses etc. Therefore, the AO disbelieved source of the deposit of Rs.34,55,00/- and reopened the assessment under section 147 as the said deposit amount was escaped assessment. There is no explanation at the end of the assessee as to how reopening of the assessment is bad in law, because there is nothing before the AO. The assessee has not filed regular return of income. There is no

Coming to the merit of the case, on a query by the AO as to the source of deposit of Rs.34,55,000/- in the saving bank account with the bank, assessee has submitted that he was possessing 70 bighas of land and the deposit was made out cash sales of agriculture produce cultivated on the said land. He has also produced revenue records to this effect. The AO has not satisfied with the explanation of the assessee. He made addition of Rs.34,55,000/-. Aggrieved assessee, went in appeal before the ld.CIT(A) who though confirmed the addition made by the AO has recorded a finding that the assessee was holding land approx. 70 bighas in two villages viz. Siddhsar and Jimarana, but the AO has noticed only the land situated in Siddhsar for making the impugned addition. Dissatisfied with order of the ld.CIT(A), assessee now before the Tribunal.

Before us, the ld.cousnel for the assessee reiterated submissions as were made before the Revenue authorities. He also took us through page no.30 to 100 of the paper book which contained copies of form no.7/12 showing cultivation of crop i.e. groundnut, sales and purchase bills of agriculture produces etc. to demonstrate that the assessee is a man of means so as to make such deposits in the banks. The ld.DR on the other hand relied upon the orders of the Revenue authorities.

We have considered rival submissions and gone through the record carefully. We find that addition has been made by the Revenue authorities on the ground that the assessee has no proven source of income. In order to prove this, the assessee has produced copies of documents showing ownership of the

In the result, ITA No.518 and 520/RJT/2012 are allowed, and ITA No.519/RJT/2012 is partly allowed.