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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SHAMIM YAHYA & SHRI RAM LAL NEGI
PER SHAMIM YAHYA, A.M.
Aforesaid appeal at the instance of the Revenue is against the
impugned order dated 17th June 2014, passed by the learned
Commissioner (Appeals)–I, Nagpur, relevant to the assessment year
2009–10.
The grounds raised by the Revenue are reproduced below:–
“1. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in admitting the additional evidence in contravention of the provisions of Rule 46A(b) & 46A(c) of the l.T.Rules in as much as the assessee has failed to establish with evidence that he was prevented by sufficient cause in not producing the evidence which was called upon by the AO and which was relevant to the grounds of appeal raised before the CIT (A);
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On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the additions/ disallowances made in the best judgment order without appreciating the fact that the assessment was completed ex-parte by the AO for non- compliance of the statutory notices on the part of the assessee;
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the additions of Rs. 22,53,200/- as investment in land without appreciating the fact that genuineness of cash receipt to the extent of Rs. 20 lacs for the alleged sale of land was not proved by the assessee before CIT (A) and the assessee had produced the evidence which was not subjected to the test of genuineness;
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in accepting genuineness of the loan of Rs. 3 lacs from Mr. Pramod Bhoyar in as much as the assessee had neither established the genuineness of the loan nor any confirmation from the creditor was filed;
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition in respect of introduction of capital of Rs. 16,50,000/- without appreciating the fact that the account with Jansewa Urban Co-operative Bank was neither disclosed account nor the genuineness of the credits in this account were explained by the assessee before the CIT (A) and also that sources of contribution of Rs. 3 lacs from Chandak Cut Piece Stores were neither proved by the assessee nor any confirmation was filed;
On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition as income from other sources of Rs. 1,48,944/- without appreciating the fact that the assessee had not furnished any evidence in support of expenses;
On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting 20% disallowance of the business expenses in absence of evidence as regards the genuineness of the business expenses:
On the facts and circumstances of the case and in law, the Ld. CIT(A) was not justified in concluding from the words used by the AO in this remand report "The Contents thereof and however found to correct" that the AO had verified there additional documentary evidence filed by the assessee and found it correct. When the AO had not made any such verification.”
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Brief facts are that the assessee is an individual running a
proprietary concern in the name and style of “Chandak Fire Works
Industries” engaged in manufacturing and trading of fireworks.
Assessment was framed under section 144 of the Income Tax Act,
1961 (for short “the Act”) on the ground that the assessee has not
given necessary details. In the assessment order, the addition for
investment in agricultural property of ` 22,53,200, was made as
unexplained income of the assessee on the ground that the assessee
did not submit the source of investment. Further, the Assessing Officer
noted that the assessee has taken unsecured loan of ` 38,13,277 and
given details only for ` 23,98,000, hence, the Assessing Officer added
` 14,15,277 as an unexplained income. Further, the Assessing Officer
disallowed 20% of the expenditure on ad–hoc basis. The Assessing
Officer also made addition of ` 16,50,000 on account of unexplained
addition in proprietor’s Capital Account. Lastly, the Assessing Officer
also added ` 1,48,994, for lack details of agricultural income. The
assessee being aggrieved by the order of the Assessing Officer filed
appeal before the first appellate authority.
The assessee, before the learned CIT(A), submitted various
details. The learned CIT(A) also obtained remand report wherein the
Assessing Officer reiterated the earlier Assessing Officer’s order,
however, in the concluding remark, the Assessing Officer stated that
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the Hon’ble CIT(A) may kindly decide about the admission of fresh
evidence and the contents thereof are, however, found to be correct.
The findings of the learned CIT(A) are reproduced below:–
“6.0 Ground No.2: In Ground No.2, the appellant has objected to the addition of Rs.54,67,421/- made under four different heads as under: Investment in land : Rs. 22,53,200/- i) Unsecured loans : Rs. 14,15,277/- Capital : Rs. 16,50,000/- ii) iii) Agricultural income : Rs. 1,48,944/- Total Rs. 54,67,421/-
6.1 Addition on account of investment in land of Rs.22,53,200/-
: The AC in the course of assessment proceedings noticed that the assessee had purchased an immovable property, being agricultural land bearing No.83/2, R.G. 1.04 hectares situated at Nagpur Rural, Dist. Nagpur for Rs.21,00,000/- on 12.06.2008 from Shri Manohar Kisan Thakre, on which stamp duty of Rs. 1,18,000/- and registration charges of Rs.35,200/- were paid by the assessee. The AO asked the assessee to explain the source of investment in land to the tune of Rs.22,53,200/-. The AC has recorded finding in the assessment order that since no explanation has been filed, therefore, the entire investment in land is treated as unexplained.
6.2 The AR of the appellant filed a written submission dated 08.10.2013 enclosed with the evidences in support of his submissions. The AR in para 6 of his submission appearing on page no.4 to 6 of the Paper Book has explained the source of investment in purchase of land. The AR has submitted that the assessee is owning an agricultural land admeasuring 2.3 hectares at Mouza Sonegaon. The AR further submitted that the assessee entered into an agreement to sale with one Mr.Dinesh Maheshwari and others for sale of two acres of land on 01.04.2008 for a total consideration of Rs.40 lakhs, out of which Rs.20 lakhs received as advance. In support of his claim, a copy of agreement of sale has been filed on record. The AR of the assessee has explained the investment in land as under:
6) Investments in purchase of Agricultural Land
i. That during the year on 12.06.2008 the assessee has purchased Agricultural ad-measuring 1.04 Hectres at Mouza Wakeshwar from
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Manohar Thakre and Ravi Walde, the details of investments made are as under - Payments to sellers Date Amount Mode Cash 01.04.2008 5,00,000.00 Cash 11.04.2008 5,00,000.00 Cash 01.05.2008 5,00,000.00 Cash 01.06.2008 4,00,000.00 12.06.2008 2,00,000.00 Cheque ` 21,00,000.00 Stamp Duty 12.06.2008 ` 1,18,00.00 Registration Charges, etc. 12.06.2008 ` 35,200.00 Grand Total ` 22,53,200.00
ii. The assessee is owning agricultural land ad–measuring 2.34 hectares (approx 5.78 acres) at Mouza Sonegaon.
iii. He entered in to an agreement of sale with Dinesh Maheshwari and other for sale of 2 acres of land for the consideration of ` 40,00,000 on 01.04.2008, from the above land and received sum of ` 20,00,000 as advance in cash on 01.04.2008. The details are as under:–
i. Dinesh Maheshwari Rs. 5,00,000.00 ii. Rajendra Maheshwari Rs. 8,00,000.00 iii. Smt. Savitri Maheshwari Rs. 3,00,000.00 iv. Brijmohan Maheshwari Rs. 4,00,000.00 Rs.20,00,000.00
iv. The source of investments are from following sources –
(1) Advance Received on agreement Rs. 20,00,000.00 of sale as above (2) Payment made to on of the sellers by two cheques dt. 12.06.2008 Rs. 2,00,000.00 to Ravi Walde (3) Cash withdrawals from O.D. A/c with Jansewa Urban Co.op. Bank Rs.1,25,000.00 on 11.06.2008 (4) Payment of Registration fee sub– registrar, by cheque from Jan– Rs. 29,580.00 Sewa Urban Co–op. Bank on 12.06.2008 Rs.23,54,580.00
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v. The investments of Rs.22,53,200 as per para (i) above, are from the above sources.
vi. That in the context it is submitted with great respect and humility that the following withdrawals / payments which are by cheque / cash cannot be disputed.
I) Cash on 12.06.2008 Rs. 1,25,000.00 II) Cheque from Bank to sub– Rs. 29,580.00 registrar 12.06.2008 III) Cheque to sellor Ravi Walde Rs. 1,00,000.00 – en–cashed on 12.06.2008 IV) Cheque to sellor Ravi Walde Rs. 1,00,000.00 – en–cashed on 12.06.2008 Rs. 4,54,580.00
vii. The Advance received amounting to ` 20,00,000 as per para (iii) above returned to them on the following mentioned dates since assessee could not get the necessary sanction from NIT & Town Planning Department.
Date Amount Mode By Demand Draft 08.06.2011 5,00,000.00 By Demand Draft 06.09.2011 3,00,000.00 By Demand Draft 14.01.2012 3,00,000.00 By A/c payee cheque 18.06.2012 3,75,000.00 By A/c payee cheque 18.06.2012 2,25,000.00 By A/c payee cheque 24.07.2012 3,00,000.00 20,00,000.00
viii. The genuineness of the advances received could not be verified at the time of assessment for want of proof confirmations. All the persons from whom the advances received are land lords having substantial land. Their confirmations and agreement are also enclosed.
ix. In this connection it is submitted with great humility the advances refunded on 08.06.2011 and 06,09.2011 amounting Rs. 5,00,0001- and Rs. 3,00,0001- i.e are before the date 30. 12.2011 on which the order u/s. 144 of I. T. Act has been passed.
In the circumstances it is requested to delete the additions made."
6.3 The submissions made by the AR of the appellant were remanded to the AG for necessary verification. The AG submitted
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his remand report dated 17.10.2013. The AG in his remand report has reiterated the same facts mentioned in the assessment order. However, at the end of his report, the AG has recorded the following finding:
"The Hon'ble CIT(A) -I, Nagpur, may kindly decide about admission of fresh evidence. The contents thereof and however found to correct."
7.0 On careful examination of the facts, it is seen that the AR of the appellant has demonstrated the sources of funds applied for purchase of land by the appellant. The AR has also filed the necessary supporting evidences in the form of sale agreement with four parties from whom advance of Rs. 20 lakhs, as stated above, was received, which has been utilised by the appellant towards purchase of land. These documents were forwarded to the AO calling for his remand report and the AO after examination has concluded that the contents of the documents and evidences filed by the AR of the appellant are factually found correct, the AO however has refrained to give any comments as regards to the admissibility or otherwise of the additional evidences filed by the AR. Since the evidences filed by the AR are pivotal in determining the grounds of appeal, coupled with the fact that assessment has been completed ex–parte u/s 144 of the Act by the A.O., the additional evidences filed by the AR cannot be discarded, hence the same are considered while deciding the issues in hand and also that non-cognizance of such evidences would cause gross injustice to the appellant. Therefore, the additional evidences filed by the AR having direct correlation with the grounds of appeal, are accepted. Thus, keeping in view of the finding of the AO in his remand report and the evidences furnished by the AR of the appellant, it is seen that the sources of the investment in purchase of land are satisfactorily explained by the appellant. Therefore, I do not find any justification in making any addition on this account and accordingly, the addition made by the AO is directed to be deleted.
8.0 Unsecured loans Rs.14,15,277/-:
The AO in the assessment proceedings noticed that the assessee had taken unsecured loans of Rs.38,13,277/-. The AO has stated that the assessee could provide the details of unsecured loans to the tune of Rs.23,98,000/- only and no explanation, according to the AO, was offered in respect of remaining loan amount of Rs.14,15,277/-. The AO, therefore, has treated the same as unexplained income in the hands of the assessee in the ex-parte order passed u/s 144 of the Act.
8.1 The AR of the appellant has filed the submission as under: "4) Addition of Unsecured Loans
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The learned A.O. has made addition of Rs. 14,15,277/- on i. this count. ii. The unsecured loans as at 31.03.2008 and 31.03.2009 are as under - i. 31.03.2008 Rs. 38,38,277.00 ii.31.03.2009 Rs. 38,13,277.00 iii.That no such addition was made in the year ending on 31. 03.2008. iv. The comparative details of addition made as under:–
Name Balance on Balance on Remarks 31.3.2008 31.3.2009 Bhoyar 8,75,000 8,75,000 Opening Developers Balance as on 01.04.2008 G.K. Traders 61,459 61,459 Opening Balance as on 01.04.2008 H.G. Gupta 40,000 40,000 Opening Balance as on 01.04.2008 Maheshwari 57,818 57,818 Opening Jarda Stores Balance as on 01.04.2008 Pramod Bhoyar – 3,00,000 New loan by A/c P. Ch. On 20.02.2009 Rajesh Sharma 20,000 20,000 Opening Balance as on 01.04.2008 Gayatri 19,000 19,000 Opening Chandak Balance as on 01.04.2008 Manju Chandak 18,000 18,000 Opening Balance as on 01.04.2008 Mahesh 24,000 24,000 Opening Chandak Balance as on 01.04.2008 11,15,277 14,15,277
v. That from the above chart it is well apparent that except loan vide entry no.5 in the name of Pramod Bhoyar, all other are old loans and accepted as genuine in past. Shri Pramod Bhoyar is assessed to income tax, confirmation is enclosed.
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vi. That if on verification the above is found to be correct, the A.O. may be directed to delete the addition made.
8.2 On careful examination of the facts, it is seen that the contention of the AR of the appellant that all loans, except the amount of Rs.3,00,000/- appearing at sr.no.5 in the name of Pramod Bhoyar are old loans appears to be correct. In respect of the loan amount of Rs. 3,00,000/-, which is taken during the relevant financial year, it is found that the amount has been received by account-payee cheque, which is verifiable from the bank account of the appellant. Since the AO has added this amount without verification for want of details submitted by the assessee, the addition made by the AO does not sustain. Even in respect of old brought–forward loans, no proper investigation has been done by the AO during the assessment proceedings and the addition has been made in a routine and casual manner. The details furnished by the appellant during the appellate proceedings were provided to the AG for verification. However, it clearly transpires from the finding given by the AG in his remand report dated 17.10.2013, vide para B on page no.1, that no worthwhile investigation has been made in respect of the veracity of unsecured loans. The AG, however, at the end of his report has recorded the following finding:
"The Hon 'ble CIT (A) -I, Nagpur, may kindly decide about admission of fresh evidence. The contents thereof and however found to correct."
8.3 Thus, after having considered the material facts available on record, I do not find any merits in the addition made by the AG and the same is directed to be deleted.
9.0 Capital Rs.1650,000/-:
The AG has discussed this issue in para 10 of the assessment order. The AG found that the assessee has made an addition of Rs.16,50,000/- in the capital account of N/s Chandak Fireworks Industries, Nagpur. The AG has stated that introduction of capital has not been explained, hence treated as unexplained income in the hands of the assessee in the order passed ex-parte u/s 144 of the Act.
The AR of the appellant has filed submission as under:– “5) Credits in Capital Amount `.16,50,000 (I) The details are as under:–
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Date Amount Particulars Withdrawals from O.D. A/c with 30.06.2008 5,00,000 Jansewa Urban Co.op Bank Personal Loan a/c Withdrawals from O.D. A/c with 06.08.2008 1,00,000 Jansewa Urban Co.op Bank Personal Loan a/c Withdrawals from O.D. A/c with 21.08.2008 2,00,000 Jansewa Urban Co.op Bank Personal Loan a/c Withdrawals from O.D. A/c with 24.01.2009 5,00,000 Jansewa Urban Co.op Bank Personal Loan a/c Withdrawals from O.D. A/c with 12.02.2009 5,00,000 Jansewa Urban Co.op Bank Personal Loan a/c Transfer from Chandak Cut–piece 26.03.2009 3,00,000 stores 16,50,000
(II) The copy of bank account and copy of Account from Chandak cut piece stores are enclosed.
(III) That since all the credits are duly verifiable and from known sources the learned A.O. may be directed to delete the addition."
9.2 It is seen from the above explanation filed by the AR of the appellant that the appellant has explained the source of capital introduced in the proprietary concern by way of withdrawals from the overdraft account of Jansewa Urban Co-operative Bank and transfer from Chandak Cut-piece Stores. The AR has also filed the supporting documents in the form of copy of bank account and account of Chandak Cut-piece Stores. The AO in his remand report has certified the contents as true, therefore the addition is directed to be deleted in the absence of any evidence contrary to the records.
10.0 Agricultural income Rs.1,48,944/-:
The AO has discussed this issue in para 11 of the assessment order. The AO has recorded a finding that since the assessee has failed to offer any explanation as regards to the agricultural income, therefore the exemption claimed by the assessee is withdrawn and treated as income from other sources. 10.1 The AR of the appellant has filed submission as under: "Agricultural Income
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i. The assessee has shown Agricultural income at Rs. 148,944/- the details of which are as under - Particulars Amount (i)Soyabin sold to Gyneshwar Motiram Gajbhiye Rs. 70,535.00 on 16.12.2008 payment received by cheque.
Soyabin sold to Gyneshwar Motiram Gajbhiye Rs. 1,13,049.00 (ii) on 24.12.2008 payment received by cheque. (iii) Thar sold to Gyneshwar Motiram Gajbhiye on Rs. 34,223.00 21.01.2009 payment received by cheque. (iv) Soyabin sold to Gyneshwar Motiram Gajbhiye Rs. 30,433.00 on 26.02.2009 payment received by cheque Total Rs. 2,80,420.00 (v) Less: Expenses Rs.99,296.00 Net Rs. 1,48,944.00
The assessee owns Agricultural Land ad-measuring about 15 ii. acres at Sonegaon which is irrigated. Looking to the area of the land the income shown is reasonable. The same may please be accepted. The photo-stat copies of sale bills are enclosed.
iii. In the circumstances it is requested to delete the addition made on this count."
10.3 It is seen from the submission filed by the AR of the appellant that the appellant has given the details of sale of agricultural products to various parties and the sale consideration for the same has been received by cheque from the buyers. The appellant has also apportioned the expenses amounting to Rs. 99,296/- against the gross receipts of Rs.2,80,420/- to arrive at the net agricultural income of Rs.1,48,944/-. It is not disputed that the appellant owns an agricultural land admeasuring 15 acres at Sonegaon, which is fertile and irrigated land. The AO had made the additions for want of details in the assessment order, however the same were made available to the AO during the remand proceedings, the contents of which has been conceded to be correct by the AO in his remand report dated 17.10.2013. In the light of these material facts, the addition made by the AO cannot be sustained, keeping in view of the decision of the Hon’ble ITAT, Nagpur Bench, Nagpur, in the case of M/s. Linkhouse Industries Ltd., Nagpur for A.Y. 2010–11, wherein the yield per acre of Rs. 30,463 has been held to be reasonable in respect of a fertile and irrigated land on which crops are grown. In view thereof, the agricultural income declared by the appellant is quite reasonable, hence the addition made by the AO is directed to be deleted. 11.0 Ground No.3 : In this ground, the appellant has object to the disallowance of business expenses to the tune of Rs.1,27,299/-, which represents 20% of the total business expenditure.
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11.1 The AO has discussed this issue in para 9 of the assessment order. The AO in the course of assessment proceedings called for the details of books of account and bills and vouchers for expenses, which the appellant failed to furnish. Therefore, the AO in his order passed ex-parte u/s 144 of the Act disallowed 20% of the expenses on ad-hoc basis for want of production of books of account and bills and vouchers.
11.2 The AR of the appellant in this regard, has filed the following submission:
"Ad-hoc Disallowance out of Expenses
i. That during the year under reference the assessee has claimed expenditure of Rs. 6,36,495/- (including depreciation Rs. 6,59,320/-). The learned A.O. has observed that the expenditure claimed are excess, therefore he disallowed sum of Rs. 1,27,2991-, being 20% of Rs.6,36,495/-.
All the expenditure claimed as deduction are bonafide ii. business expenditure. The comparative chart of expenses claimed in the year ending on 31.03.2008 and 31.03.2009 is enclosed.
The comparative figures of sales and expenses is as under:– iii.
Year Ending 31.3.2009 Particulars 31.3.2008 60,96,162 Sales 52,32,814 6,36,495 Expenditure 5,09,011 4,67,072 Net Profit 3,74,934 7.66% 7.16%
iv. That in the past no disallowance out of expenses debited to profit and loss account was made.
V. In the circumstances it is requested to delete the disallowance made."
11.3 It is seen from the details submitted by the AR that the expenditure claimed by the appellant in the year under consideration represents 7.66%, as against 7.16% in the immediately preceding financial year. The slight increase in the expenditure seems to be quite reasonable to the corresponding increase in the turnover of the assessee to Rs.60.96 lakhs, as against Rs.52.32 lakhs in the immediately preceding financial year. The AO has made the disallowance on ad-hoc and estimated basis @ 20% for want of production of books of account and bills and
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vouchers. The AO has not examined the books of account and bills & vouchers even during the remand proceedings and refrained to give any finding on submissions of the AR. Therefore, the addition made by the AO is without any basis, hence directed to be deleted.”
Against the above order, the Revenue is in appeal before the
Tribunal.
We have heard the rival contentions and perused the material
available on record. The Revenue, in its submissions, stated that the
Assessing Officer and the learned CIT(A) have not properly verified the
matter, hence, the order passed by the Assessing Officer should be
confirmed. Upon careful consideration, we find that the Revenue has
made a very strange submission. We note that the assessee has
submitted all the necessary details before the learned CIT(A). The
learned CIT(A) has remanded the same to the Assessing Officer. The
Assessing Officer in his concluding remark has held that the contents
of the additional evidences were found correct. Based on this and after
evaluating in detail the additional documentary evidence submitted by
the assessee, the learned CIT(A) has granted necessary relief. In such
a scenario, we fail to understand as to what is the grievance of the
Revenue for which it is being requested that the matter be again
remanded. When the additional documentary evidences on the basis of
which the learned CIT(A) had granted relief and the contents thereof
are found to be correct by the Assessing Officer who had duly verified
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these additional documentary evidences filed by the assessee, then in
that case, there remains nothing to be adjudicated any more. In the
backdrop of the aforesaid discussion and in view of the detailed order
passed by the learned CIT(A), in our considered opinion, there is no
infirmity in the order of the learned CIT(A). Consequently, the order of
the learned CIT(A) is hereby upheld by dismissing the grounds raised
by the Revenue.
In the result, Revenue’s appeal is dismissed.
Order pronounced in the open Court on 09.05.2018
Sd/- Sd/- RAM LAL NEGI SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER
NAGPUR, DATED: 09.05.2018
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Sr. P.S./P.S.) ITAT, Nagpur