THUCANAICKENPALAYAM MARANNAN MANOHARAN,ERODE vs. ITO, WARD-2(4), ERODE

The assessee has challenged the addition of unexplained investment of Rs.18,84,065/- made by the AO u/s.69, being the increase in capital of the appellant in his partnership firm. 4. The facts in brief are that the assessee is an individual filed his return of income for the A.Y.2016-17 by declaring an income of Rs.4,99,020/-. The return of income was picked up for limited scrutiny to examine the increase in his capital in the partnership firm M/s. Rathna & Co. to the tune of Rs.56,69,974/-. During the assessment proceedings, the assessee submitted that the source for the increase in the capital was the agricultural income of Rs.19,50,148/- and proceeds from sale of turmeric stock of Rs.13,86,890/-. On verification of the ITR filed by the assessee for this year, the AO found that the net agricultural income shown for this year was Rs.14,52,973/- only and that the value of turmeric stock was not disclosed in the ITR. In response, the assessee submitted that the sale of turmeric stock was omitted to be disclosed in the ITR and filed a revised agricultural income statement, which has been extracted at Page of the order of assessment.

The assessee had also filed the ledger of his capital account in all his partnership firms and proprietorship for the year. However, the AO did not accept the assessee’s explanation for the following reasons;

Challenging these additions, the assessee filed the an before the ld.CIT(A). The assessee submitted before the ld.CIT(A) that the very same explanation and also filed the ledgers of his capital account in the following firms and proprietorships; a. Rathna & Co., b. TM Manoharan (Weigh Bridge), c. Manoj Agency.

The assessee highlighted all the agricultural income credited to his capital (which included both sale of turmeric and sugarcane) and also the withdrawals to meet the agricultural expenses. He further submitted the abstract of his agricultural income and expenses for this year, which the Ld.AR has placed in the Paper-book filed before us at Pgs.41 & 42. Furthermore, the assessee also submitted the sales bills issued for the sale of turmeric before the ld.CIT(A) to evidence the same.

The ld.CIT(A) has dismissed the appeal and upheld the additions by stating that the claim of sale of turmeric stock and omission of agricultural expense of Rs.54,006/- were afterthoughts, not backed by evidence. 10. Aggrieved by the order of the ld.CIT(A), the present appeal has been preferred before us. In relation to the addition to the extent of Rs.13,86,890/-, the Ld. AR submitted before us that though the proceeds from the sale of turmeric were omitted to be included in the ITR filed for this year, the same were duly recorded by the assessee in the ledgers in the capital account in the firms and proprietorships. To evidence the same, he took us through the ledgers of the assessee’s capital account in the firms and proprietorships, highlighting the agricultural income credited on various dates and withdrawals for meeting the agricultural expenses. He also showed us the sales bills issued for the sale of turmeric, which were admittedly filed before the ld.CIT(A). 11. The ld.AR further submitted that the ld.CIT(A) had erred in appreciating these evidence and had merely confirmed the additions. He thus prayed for the addition to be deleted as the assessee had duly proved the income from the sale of turmeric stock. In relation to the remaining portion of the addition of Rs.4,97,175/-, the Ld. AR submitted that the same was incorrect as the AO had compared the net agricultural income declared in the ITR of Rs.14,52,973/- with the gross agricultural income credited in M/s.Rathna & Co. of Rs.19,50,148/-. Нe submitted that the AO ought to have seen that the actual gross agricultural income during the year, including the sale of turmeric was higher, at Rs.35,61,038/-, and even the gross agricultural income deficiently declared in the ITR was higher, at Rs.21,74,148/-. He thus prayed for the addition to be deleted in full. 12. The Ld. DR on the other hand relied on the orders of the sub-ordinate authorities to state that the assessee's claim of income from sale of turmeric stock is an afterthought and that the same cannot be accepted. She further submitted that though the assessee had produced the sale bills, no proof

Further, mere omission of sale of turmeric in the ITR cannot preclude the assessee from furnishing evidence for the same to explain the increase in the capital. Having furnished the sale bills before the ld.CIT(A), the ld.CIT(A) ought to have verified the same and we do not countenance his action in failing to refer to the evidence in his order and upholding the addition by stating that the explanation was mere afterthought. It is pertinent to note that immediately succeeding year (i.e.) the A.Y.2017-18, the assessee’s net agricultural income of Rs.35,25,244/- was scrutinized and accepted by the AO vide his order of assessment u/s.143(3) of the Act for the A.Y.2017-18 dated 27.12.2019. 16. In the present facts and circumstances of the case, since the evidence such as the sales bills were not available with the AO, we remit this portion of the addition of Rs.13,86,890/- alone to the AO for verification along with ledger accounts furnished by the ld.AR. The AO shall examine the sales bills and any other evidence that the assessee may rely on and file in support of his claim. The AO shall also be at liberty to call for relevant details after providing sufficient opportunity. 17. In the result, the appeal filed by the assessee is partly allowed

अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. धवभागीय प्रधतधनधि/DR 5. गार्ा फाईल/GF