VASUDHEVAN MURALIDHARAN,ERODE vs. ITO, WARD-1(1), ERODE

Brief facts of the case are as follows: The assessee is an individual engaged in the business of manufacturing bakery products. For the assessment year 2018-19, the return of income was filed on 28.03.2019 declaring total income of Rs.4,97,480/-. The assessment was selected for scrutiny and notice u/s.143(2) of the Act was issued. During the course of assessment proceedings, the assessee was directed to explain the source of capital introduced amounting to Rs.3,85,68,143/- during the relevant assessment year. In response, the assessee submitted that assessee had sold two agricultural lands and two vacant sites for a sum of Rs.3,80,32,960/-. However, the source of introduction of capital was disbelieved by the AO and assessment was completed u/s.143(3) r.w.s.144B of the Act vide order dated 26.04.2021 wherein, he made an addition of Rs.3,79,33,429/- as unexplained cash credit u/s.68 of the Act. The AO also applied :- 3 -: special rate of taxation u/s.115BBE of the Act. The relevant finding of the AO reads as follows:- “5 Notice U/s. 142(1) on various dates were issued to the assessee to produce information in respect of introduction of capital during the year. The assessee filed relevant requisite documents through the ITBA portal. The assessee furnished copy of sale deed, and 2 registered agreements in vernacular language. The same are perused.

Aggrieved by the assessment order, assessee filed appeal before the First Appellate Authority (FAA). The FAA confirmed the order of the AO and dismissed the appeal of the assessee.

Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The assessee has filed a petition under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 for admission of additional evidence. The additional evidence that is sought to be admitted is copy of patta, chitta and adangal extracts to establish that lands sold are agricultural lands which are not liable for capital gains taxation. The Ld.AR’s limited prayer was to set aside the matter to the AO. The Ld.AR submitted before the Tribunal that the AO in the impugned assessment order had stated that assessee had filed copy of illegible certificate from the Village Administrative Officer in vernacular language for claiming the lands sold are agricultural :- 5 -: lands. Therefore, additional evidence now produced goes to controvert the finding of the AO and the FAA. The Ld.AR also pointed out the mistakes in the order of FAA.

The Ld.DR supported the order of the AO.

We have heard rival submissions and perused the material on record. The solitary issue involved in this appeal is regarding the addition of Rs.3,79,33,429/- as unexplained cash credit u/s.68 of the Act, being the amount credited in the capital account of the assessee which was sustained by the FAA. The written submissions filed by the assessee before the FAA is extracted at page 4 & 5 of the impugned order of the FAA. In the above written submission, assessee had tried to explain the source of credits in the capital account. From the last para at page 5 of the FAA order, we find that the FAA has given a finding related to section 11(1) of the Act, which is not related to the case of the assessee. Further, from para 3.1 at page 3 of the appellate order, the FAA has adjudicated the grounds raised by the assessee with regard to section 10(23C)(iiiad) of the Act, which is contrary to the facts of the present case. Therefore, the finding of the FAA in dismissing the appeal of the assessee shows :- 6 -: complete non-application of mind. The assessee’s claim is the source of credit in the capital account to the extent of Rs.3,79,33,429/- are out of sale consideration received from sale of two agricultural lands and two vacant plots. The assessee had claimed that the sale consideration of vacant lands are reinvested and claimed deduction u/s.54F of the Act to the extent of Rs.68,50,000/-. The assessee has filed a petition under Rule 29 of the Income Tax Appellate Rules, 1963 for admission of additional evidence. The additional evidence is with regard to documents to show that the lands sold are agricultural lands and are not liable for capital gains. The AO had disbelieved the claim of the assessee that the lands sold are agricultural lands by stating assessee had only filed illegible certificate from the Village Administrative Office and that to in vernacular language. Therefore, the additional evidences now produced before the Tribunal are absolutely necessary for adjudication of the issue in hand. Therefore, the additional evidence is taken on record. Since the additional evidences are taken on record, we deem it appropriate to restore the matter to the files of the AO. The AO is directed to afford a reasonable opportunity of hearing to the assessee before a decision is taken. The assessee is directed to :- 7 -: cooperate with the Revenue and shall not seek unnecessary adjournment. It is ordered accordingly.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Coimbatore 4. ͪवभागीय ĤǓतǓनͬध/DR

गाड[ फाईल/GF.