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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-12, Hyderabad vide Appeal No.10248/2017-18 dated 10.01.2018 for the Assessment Year (A.Y.) 2014-15.
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Ground No.1 and 5 are general in nature which does not require specific adjudication.
Ground No.2 is related to the addition of Rs.16,80,000 towards income from Pisiculture. During the assessment proceedings, the Assessing Officer (AO) found that the assessee has taken 124 acres of agricultural land on lease and cultivated the fish ponds. The AO found that the assessee had offered the income from fish ponds at Rs.7,500/- per acre taking 70% of water spread area for cultivation leaving 30% of the area for bunds. The AO found that the assessee had declared to the bank that he has developed the fish ponds in the 90% of the water spread area, leaving 10% of the land for bunds and taken the bank loan of Rs.1.00 crore for developing the fish ponds. Since the assessee himself had accepted that the water spread area is 90% of the fish pond, the AO did not accept the submission of the assessee and the guidelines of the CBDT to consider 70% of water spread area for estimation of income. The assessing officer heavily placed reliance on the assessee’s letter for water spread area of 90% and estimated the income @Rs.15,000/- per acre on 90% of water spread area. For estimation of income @ Rs.15,000/- per acre, the AO has
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taken comparable cases where income was admitted at Rs.20,000/- per acre in the vicinity of the cultivation undertaken by the assessee.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO and dismissed the appeal of the assessee.
Against the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the AO estimated the water spread area at 90% which is unreasonable. As per the Board circular, water spread area is to be considered at 70%, but not 90%. The Ld.AR further submitted that the assessee has furnished the letter to the bank stating that the water spread area was 90% for the purpose of bank loan and there was no truth in the contents of the letter submitted to the bank. Therefore, requested to ignore letter submitted to the bank for the purpose of bank loan and requested to take 70% of the water spread area for the purpose of estimation of income. The Ld.AR relied on the decision of this Tribunal in the case of M/s Krishna Fisheries, Vijayawada in I.T.A No.s 325 to 330/Viz/2015 dated 26/07/2017.
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Similarly, the Ld.AR argued that the estimation of income @ Rs.15,000/- per acre is also unreasonable and not in accordance with the judicial precedents. The Ld.AR further argued that ITAT in the case of Krishna Fisheries, Vijayawada, cited (supra) held that estimation of income @ Rs.13,300/- per acre is reasonable, therefore, requested to estimate the income at Rs.13,300/- instead of Rs.15,000/- per acre. Accordingly the Ld.AR requested to set aside the orders of the lower authorities and pass appropriate orders.
On the other hand, the Ld.DR supported the orders of the lower authorities.
We have heard both the parties and perused the material placed on record. In the instant case, the AO estimated the income on 90% of the water spread area instead of 70% as per the guidelines issued by CBDT in Instruction No.5160 dated 19.10.1993. The AO relied on the submissions made by the assessee before bank authorities for the purpose of obtaining bank loan. No physical inspection was made by the AO or by the Income Tax authorities to find out the actual water spread area of the fish tanks and embankments. In the instant case, the assessee has taken 124 acres of land
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on lease for Pisciculture. The CBDT after considering the facts of the case held that 70% of the water spread area is reasonable. Therefore, we hold that for the purpose of estimation of income, considering 70% of the water spread area of 124 acres is reasonable and in consonance with the instructions issued by the CBDT. Except the letter given by the assessee to the bank, there was no other evidence brought on record by the AO by making physical inspection or any other evidence from the revenue authorities. This view is also supported by the order of this Tribunal in Krishna Fisheries supra. Therefore, we consider 70% of water spread area is reasonable.
The next issue in this ground is estimation of income. The AO estimated the income at Rs.15,000/- per acre which was confirmed by the Ld.CIT(A). The assessee relied on the decision of Krishna Fisheries, Vijayawada cited (supra) and requested for scaling down the estimation to Rs.13,300/- per acre. The assessment year involved in the case of Krishna Fisheries relied upon by the Ld.AR is related to the A.Y.2006-07 to 2011-12, whereas in the instant case, the assessment year involved is 2014-15. In the case relied upon by the Ld.AR, the Ld.CIT(A) estimated the income at
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Rs.13,300/- per acre, which was confirmed by the Ld.CIT(A) and upheld by the ITAT. In the case of the assessee, the AO estimated the income at Rs.15,000/- per acre which was confirmed by the Ld.CIT(A). The AO has also brought on record, the comparable cases, wherein, the income admitted was Rs.20,000/- per acre. Neither before the AO, nor before the CIT(A), the assessee has made out a case that the income was lesser than Rs.15,000/- per acre. During the appeal hearing also, the Ld.AR did not made out a case of income lesser than Rs.15,000/- per acre. Estimation of income depends on facts of each case and the area of cultivation. This Tribunal in the case of Shri Mudunuri Sridevi and Shri Mudunuri Subba Raju in I.T.A. No.421-423/Viz/2018 and I.T.A. No.573-575/Viz/2018 dated 13.02.2019 considered the issue on similar facts and upheld the estimation of income @15000/- per acre. While upholding the estimation of income at Rs.15,000/- per acre, this Tribunal also considered the decision of Krishna Fisheries relied upon by the assessee. Therefore, we hold that the decision relied upon by the assessee is distinguishable on facts and cannot be applied in the assessee’s case. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee. Hence, we direct the AO to estimate the income at Rs.15,000/- per acre on 70% of the water spread
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area. The assessee’s appeal on this ground is allowed partly.
Ground No.3 is related to the addition of Rs.14,17,500/- towards unexplained cash deposits in the bank. During the assessment proceedings, the AO found that the assessee had made cash deposits in HDFC Bank A/c 16411930001280 for an amount of Rs.4,67,500/- on 04.04.2013 and Rs.9,50,000/- on 06.05.2013 aggregating to a sum of Rs.14,17,500/-. The assessee also admitted agricultural income of Rs.2,00,000/- in the return of income. Before the AO, the assessee explained that the assessee has taken gold loan of Rs.14,17,500/- and spent for agricultural purposes and from the sale proceeds of the agricultural produce, the cash deposits were made to repay the loan. According to the assessee, the source of Rs.14,17,500/- paid in to the bank account was relating to the sale proceeds of the agricultural produce. Not being convinced with the explanation of the assessee, the AO made the addition of Rs.14,17,500 as unexplained and added back to the income.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO and dismissed the appeal of the assessee. The order of the Ld.CIT(A) is
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extracted which is made available in para No.8.3 which reads as under : “8.3. I have carefully considered the submissions of the appellant as well as theorder of the Assessing Officer. On verification of the bank account statement of the assessee with HDFC bank, the Assessing Officer noted that the assessee had deposited an amount of Rs.4,67,500/- on 04-04- 2O13, and Rs.9,50,000/- on 06.05.2013, which were utilized for repayments of gold loans obtained during the earlier year. Further, on verification of books of accounts, it was seen that the said transactions were not recorded in the books of accounts. After duly giving show cause to the assessee and discussing the reply filed, the Assessing Officer proceeded to add the said amount of Rs 14,17,500/- as the assessee's unexplained income. During the course of appellate proceedings, it is the contention of the appellant's AR that the receipt of gold loan was not recorded in the books for the reason that this loan was utilized for agricultural purposes and not for any business purposes. It is further argued that the repayment Rs. 14,17,500/- has been done out of the agricultural income of the appellant, This argument however does not carry any weight. The net agricultural income admitted by the appellant is Rs.2,00,000/- only, and no documentary evidence has been submitted, either during assessment or during appellate proceedings, to prove that the gross receipts from the agricultural activity were more than Rs.14,17,000/- and that the net income resulting from the said activity was only Rs.2,00,000/-. In fact, as pointed out by the Assessing Officer, the agricultural activity is itself in doubt, when no evidence thereof has been furnished. Moreover, as rightly observed by the Assessing Officer, when the assessee had prepared a balance sheet as on 31-03-2014, and mentioned agricultural land therein under assets, it is not understandable as to why the liability towards gold loan already taken for agricultural purposes, was not, reflected therein The cash deposits made in the bank account, totaling to Rs.14,17,500/- which have been used for repayment of the gold loan, therefore remain unexplained. The addition made by the Assessing Officer on this issue is therefore confirmed and all grounds related thereto are DISMISSED.”
During the appeal hearing, the Ld.AR argued that the assessee owns 10 acres of agricultural land (Five acres in his own name and five acres in the name of his wife) and the assessee had taken the gold loan for agricultural operations and utilized the said gold loan for carrying on
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agricultural activities. The sale proceeds of the agricultural produce weighing about 1000 bags of paddy was used for the purpose of making the deposit in the bank account. Therefore, argued that the AO has not considered the gross receipts from the agricultural activities and requested to consider the same, as explained and delete the addition. The Ld.AR further argued that the assessee had taken gold loan which was not brought in the books of accounts and the source is available for the assessee to make the deposit in the bank account. Accordingly, the Ld.AR submitted that both ways, the assessee is entitled for relief and requested to delete the addition.
On the other hand, the Ld.DR supported the orders of the lower authorities.
We have heard both the parties and perused the material placed on record. The assessee argued that the assessee owns agricultural land of 5 acres in his own name and 5 acres in the name of his wife totaling to 10 acres which was used by him for the purpose of cultivating the paddy. The assessee has taken the gold loan of Rs.14,17,500/- for carrying agricultural opearations and the gold loan was utilized for the said purpose. The sale proceeds of the crops grown in the paddy field were said to have been
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deposited in the Bank account for repayment of the Bank loan, therefore, argued that the source stands explained, hence no addition is required to be made. In this connection, as per the bank account, the assessee has paid a sum of Rs.4,67,500/- on 04.04.2013 and Rs.9,50,000/ on 06.05.2013. The assessee has stated that the assessee had taken gold loan to meet the agricultural operations and incurred the said amount of Rs.14,17,500/- for agricultural operations. The assessee has not produced any bills and vouchers with regard to the agricultural operations and the expenditure incurred. The assessee also did not give break-up of expenses incurred for cultivating the 10 acres of agricultural land. The assessee neither furnished the break-up of expenses nor produced the bills and vouchers. The assessee also did not furnish the date of taking the gold loan. As per the bank account copy placed before us, the account was opened on 01.12.2012 by the time the entire agricultural operations of Rabi crop would be completed except the tilling activities. Therefore, the explanation of the assessee that the gold loan was utilized for the purpose of agricultural operations was also not supported by any evidence. In any case, for cultivation of 10 acres of agricultural land, the expenditure of Rs.14.17 lakhs is exorbitant and unbelievable. The assessee submitted that he had
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sold the agricultural produce and the deposits were made out of sale of paddy. The assessee neither furnished the names of rice millers nor furnished the details of amounts received from various rice millers towards sale of paddy. There is no evidence with regard to production of 50 bags per acre per crop. The assessee also did not produce any adangal to support the cultivation of agricultural land. In the instant case, the assessee neither furnished any evidence to support the realization of sale proceeds at Rs.14.17 lakhs nor explained the source of deposit of Rs.14.17 lakhs. Therefore, we hold that the AO has rightly made the addition and the Ld.CIT(A) upheld the same. Hence, we do not find any reason to interfere with the order of the Ld.CIT(A).
13.1. The next argument of the assessee with regard to the source of Rs.14.17 lakhs is gold loan taken by the assessee which was available as a source for cash deposits. The assessee has taken the loan as stated during the appeal hearing on 01.12.2012, date of opening the bank account. The assessee has not furnished the actual date of taking the gold loan. The assessee also did not furnish the purpose of application of gold loan. The assessee being a business man, having fish ponds and liquor business,
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operating regular bank accounts and it is unbelievable to accept the contentions that cash was available intact. Therefore, it is beyond doubt that the assessee has applied the bank loan for the purpose which was not explained and the same cannot be taken as a source for deposits made in the bank account. Accordingly, on this count also, the assessee fails. Therefore, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee on this ground.
Ground No.4 is related to the addition of Rs.10,38,064/- made by the AO towards unexplained cash deficit. During the appeal hearing, the AO found that there was cash deficit as per the books of accounts and the AO further observed that the assessee does not deposit the daily sales in the bank account. The assessee explained that there was sufficient cash balance out of agricultural operations and AO did not convince with the explanation offered by the assessee and made the addition of Rs.10,38,604/- on account of cash deficit.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee. However, before the Ld.CIT(A), the assessee brought arithmetical mistake
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in working out of the cash deficit to the notice of the Ld.CIT(A) to the extent of Rs.4,97,873/- and the Ld.CIT(A) directed the AO to examine the issue and make the correct amount of addition.
Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal.
We have heard both the parties and perused the material placed on record. In the instant case, the AO estimated the income from pisciculture as well as from sale of liquor after rejecting the books of accounts. The AO also made the unaccounted cash deposit as per books of accounts. Once, the AO rejects the books of accounts and estimate the income, the AO is not permitted to revisit the same books of accounts and bring the cash deficit as income in the hands of the assessee unless there are unexplained investments. Therefore, we set aside the orders of the lower authorities and delete the addition made by the AO. The appeal of the assessee on this ground is allowed.
In the result, appeal of the assessee is partly allowed
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Order pronounced in the open court on 22nd March, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 22.03.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee- Kalli Narayana Appa Rao, Bavi Street, Pulla Bhimadole Mandalam, West Godavari Dist. 2. रधजस्व/ The Revenue – Income Tax Officer, Ward-2, Eluru 3. The Pr.Commissioner of Income Tax, Rajamahendravaram 4. Commissioner of Income-Tax (Appeals)-12, Hyderabad 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम /DR, ITAT, Visakhapatnam 6.गार्डफ़ाईि / Guard file आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam