Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: Shri Pramod Kumar]
By way of this appeal, the assessee appellant has challenged correctness of order dated 22nd January 2015 passed by the CIT(A) in the matter of assessment under Section 144 r.w.s. 147 of the Income-tax Act, 1961, for the assessment year 2006-07.
Grievances raised by the appellant are as follows:-
“1. The Learned Commissioner of Income Tax (Appeals) erred in upholding the addition made by the Learned Assessing Officer of Rs. 18,26,730/- as unexplained cash credit.
The Learned Commissioner of Income Tax (Appeals) ought to have appreciated the facts and circumstances of the case and deleted the addition made by Learned Assessing Officer as it involved (i) income from agricultural produces which cannot be denied when all the members in the family are agriculturists and hold land with them (ii) gift from relative who had income from agriculture and (iii) loans received from relatives and friends who were produced before the Learned Assessing Officer and the amounts lent by each one was well within their means of earnings.”
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 2 of 7
Learned counsel begins with a preliminary objection with respect to mechanical approval to the reopening of assessment, as granted by the Commissioner on the same day, as the date on which reopening proposal was sent, by simply observing “Yes, I am satisfied”. He urges me to consider this legal plea first, and relies upon Hon’ble Bombay High Court’s judgment in the case of German Remedies Ltd Vs. DCIT [(2006) 287 ITR 494 (Bom)] which is claimed to cover the issue in favour of the assessee.
Having heard the parties and having perused the material on record, I am not inclined to uphold the objections of the assessee on merits. The mere fact that the approval was granted by the CIT on the same day does not necessarily mean that the approval is granted in a mechanical manner without application of mind. Learned CIT has observed that “Yes, I am satisfied”. As regards the judicial precedent in the case of German Remedies (supra), learned CIT had merely observed “Yes” and the approval was granted immediately on the same day and at the same moment, in the presence of the Assessing Officer. I see no help to the assessee, by this judicial precedent in the present case. I, therefore, reject this objection.
To adjudicate on the ground of appeal, on merits, only a few material facts need to be taken note of. The annual information report filed by the bank showed that the assessee had made cash deposits of Rs.21,53,730/- in his bank account. Accordingly, the case was reopened and the assessee was confronted with the said information. There was no compliance with the assessee. Under these circumstances, adjusting cash deposit to the extent of Rs.1,32,000/- out of withdraws on 05.12.2005, the Assessing Officer brought to tax Rs.18,27,061/- as unexplained cash credits. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A), in a very elaborate and well reasoned order, reiterated the stand of the Assessing Officer and justified the same as follows:-
“5.4 I have considered the facts of the case, assessment order, submission made by the appellant, remand report and rejoinder filed by the appellant. After carefully considering the written submission, remand report and rejoinder as is reproduced in the paras above, the issues in hand are discussed and decided in the following paragraphs:
The AO's contention in the remand report can be summarized as under:
> Numerous opportunity was granted to the appellant both during the assessment proceedings and also during the remand proceedings. But, no details were produced before him.
> In response to the summons issued u/s 131 of the Act to Shri Vinaykumar Kantilal Choksi, nobody attended the office of the AO nor filed any details. As such the transactions of the agricultural sale of the assesses have been not verified from the books of account of Shri Vinaykumar Kantilal Chokshi.
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 3 of 7
> Also no details called for like copy of PAN, details of business activity and source of income during the FY 2004-05 to 2007-08.; Copy of return of income and statement of total income for A.Y. 2005-06 to 2007-08 and Copy of all bank statements for A.Y. 2006-07. Appellant did not submit the Income & Expenditure statement of agricultural income.
> The assessee has shown the sales amount in the cash flow statement without any expenses debited towards the agricultural produce.
> Agriculture land is jointly held with his brother but assessee has not given any share from agricultural income to his brother on sale of the agricultural produce.
> As against the prevalent practice that auction is held in the APMC market and the higher bidder wins the auction, in the case of the appellant all the agricultural produce is sold to only ,, one firm i.e. Vinaykumar kantilal Choksi.
> The sale bills are fabricated and were made later on to eyewash the department
> That Shri Vinaykumkar Kantilal Choksi is the employer of the assessee, who works as an accountant
> Shri Vinaykumar K. Choksi who had purchased the agricultural produce and issued bills failed to produce his bill books, counterfoil of the bills and books of accounts The assessee since working as an accountant could easily obtain false and fabricated bills.
> It is mandatory in the case of gift that proper gift deed should be made on stamp paper and sign of the donor and the donee and the witnesses should be obtained. In the present case no such deed is there nor is it as per law.
> Further the assessee has received gift in cash and not a single paisa has been received in cheque or through banking channel.
> The donor has stated in the statement recorded u/s 131 of the Act stated that he has no agricultural land of his own but works with his mother and father. The sale bills of agricultural produce are all in the name of his mother. Therefore, no proof showing that such huge amount of Rs.4,00,000/- was available with the son of the assessee to give it to his father as gift. Therefore, capacity of Shri Jayesh Shivrambhai Patel son of the assessee has not been established that he has given the gift to his father and genuineness of source of gift.
> Most of the labourers working in the APMC Market Unjha and having no bank account. All depositors are not filing their return of income and also having no PAN.
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 4 of 7
> All the loans have been taken and repaid through cash only.
The contention of the appellant can be summarized as under:
> Jayesh S. Patel had appeared before the AO in response to the summons and in his statement was recorded he had confirmed the transactions.
> It is not mandatory to execute a gift deed and especially when both the parties are closely related as father and son.
> No contrary material brought on record by the AO.
> appellant had discharged burden by producing evidence such as confirmation letter, Identity proof etc. and AO has made no attempt to disprove the same. No adverse inference should have been drawn by the AO.
After carefully considering all the facts as above, so far as agricultural income is concerned, no evidences whatsoever have been produced by the appellant either during the assessment proceedings or remand proceedings before the AO. Neither has such details been produced before the undersigned during the appellate proceedings, Moreover, it is perused that appellant's family members are agriculturists and has landholding of not more than 20 bighas in which the total agricultural income is shown of Rs.14,87,543/- in his individual capacity and from the same agricultural land, appellant's wife has claimed to have given gift to his son to the tune of Rs.4,50,000/-. Thus, total agricultural income comes to Rs.19,37,543/- from 20 bigha land. Apart from the findings given by the AO that appellant is not assessed to tax, not filed return of income disclosing the agricultural income in earlier years or subsequent years. Even this fact is accepted by the appellant and has shown his inability to submit the details of agricultural expenditure made by him to earn the agricultural income by any material evidences which is required to be spent upto 40%; in the case of the appellant, such expenditure can be worked out to Rs.7,75,016/-; as has been held by the jurisdictional Ahmedabad ITAT in many cases. Such evidences has not been produced by the appellant in respect of agricultural income as well as expenditure for earning such agricultural income. The contention of the AO is that sale of agricultural produce receipts from Vinaykumar Kantilal Choksi appears to be fabricated as contended by the AO as appellant is providing his services to Vinaykumar Kantilal Choksi as an accountant. It is also a fact that every time the agricultural produce is sold to Vinaykumar Kantilal Choksi, from whom he has obtained agricultural sale bills in phases, throughout the financial year 2005-06. It is against the practice in APMC market when agriculturist sell their commodities to highest bidder of their goods. This argument of the AO is not rebutted by the appellant during the appellate proceedings. This view of the AO is well supported by the remand 'import that Shri Vinaykumar Kantilal Choksi was
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 5 of 7
summoned u/s 131 to ascertain the genuineness of the bills which were obtained by the appellant. Shri Vinaykumar Kantilal Choksi chose not to attend before the AO. No counterfoil of bills or books of accounts or other evidences were filed before the AO by Vinaykumar Kantilal Choksi. The AO had very categorically asked Shri Vinaykumar Kantilal Choksi to produce before-him copy of PAN, details of business activities, sources of income for FY 2004-05 to 2007-08, Copy of return of income and statement of total income for AY 2005-06 to 2007-08 and copy of all bank statements for AY 2006-07. AS reported by the AO in his remand report Shri Vinaykumar Kantilal Choksi neither attended before him nor any submission has been made till the finalization of remand report. The only conclusion that can be drawn in this regard is that the so called agricultural bills obtained by the appellant are bogus and as such no agricultural produce was cultivated in the small piece of land is claimed totaling to Rs. 19,37,543/- during the year under appeal. It is also to be noted that appellant is working in a small firm viz. Vinaykumar Kantilal Choksi as an accountant and he is well aware of the legal seriousness of the proceedings before the AO and even he has not advised his employer to attend before the AO. Therefore, the contention made by the appellant cannot be accepted and is hereby confirmed.
With regard to the claim of Gift received by the appellant from his son of Rs.4,00,000/-, as is discussed in above paragraphs, this is unaccounted cash of the appellant which is stated to be gift of Rs.4,40,000/- from Shri Jayesh Patel who has claimed in the statement recorded that he has given this gift which is earned from agricultural income. As is discussed herein above paragraphs, there is less than 20 bigha of land and donor is claiming it to, be gift. Apart from the findings given by the AO that appellant is not assessed to tax, not filed return of income disclosing the agricultural income in earlier years or subsequent years. Even this fact is accepted by the appellant and has shown his inability to submit the details of agricultural expenditure made by him to earn the agricultural income by any material evidences which is required to be spent upto 40%; in the case of the appellant, such expenditure can be worked out to Rs.7,75,016/-; as has been held by the jurisdictional Ahmedabad ITAT in many cases. Such evidences has not been produced by the appellant in respect of agricultural income as well as expenditure for earning such agricultural income. The contention of the AO is that sale of agricultural produce receipts from Vinaykumar Kantilal Choksi appears to be fabricated as contended by the AO as appellant is providing his services to Vinaykumar Kantilal Choksi as an accountant. It is also a fact that every time the agricultural produce is sold to Vinaykumar Kantilal Choksi, from whom he has obtained agricultural sale bills in phases, throughout the financial year 2005-06. It is against the practice in APMC market when agriculturist sell their commodities to highest bidder of their goods. This argument of the AO is not rebutted by the appellant during the appellate proceedings. The contention of the AO is nothing but a colourful technique adopted by the appellant as Jayesh Patel is not having any agricultural land in his name. The addition on this ground made is therefore confirmed.
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 6 of 7
Further, with regard to the deposits oj Rs.1,53,100/- claimed to be received by the appellant from friends and relatives, the AO has recorded statements of all the persons and he has very specifically asked the deposits the following details:
1) Copy of PAN Card. 2) Details of business activity and source of income during the FY 2004-05 to 2007-08. 3) Copy of return of income and statement of total income for A.Y. 2005-06 to 2007-08 4) Copy of trading A/c, P&L a/c, balance sheet and capital account for AY 2006-07 5) Copy of all bank statements for A.Y. 2006-07
AO has stated that all the deposits attended before the AO but did not furnish any details which were required and called for and they attended only to testify the deposits as genuine. But, it is found that deposits were given in cash and all below Rs.20,000/- to nullify the provisions of section 40A(3) of Income-tax. Further, the AO has reported that these persons are working as labourers in APMC and it is beyond their capacity to pay such deposits who is employed as an accountant in the firm Vinaykumar Kantilal Choksi. Thus, in view of the above findings, appellant has failed to substantiate with evidences the source of introduction of cash in the bank account by way of claiming agricultural income, gifts and borrowings from friends and relatives . It is very important to mention here that appellant has not submitted before me any new evidences other than what was produced before the AO, which has been verified by him before arriving at the conclusion as has been reported in the remand report.
In view of the above, the action of the AO in making addition of Rs.18,26,730/- is held justified and is hereby confirmed. The relevant ground of appeal is rejected.”
The assessee is not satisfied and is in further appeal before me.
I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
I find that there are no arguments before me to dislodge the findings of the CIT(A). All that the assessee has submitted is that the lenders have categorically confirmed the fact of giving loans, and, for that reason, these credits should be held to be genuine. As regards the alleged gift of Rs.4,00,000 and accumulated past savings which are alleged to be Rs.14,87,543, learned counsel has mainly placed reliance on the contentions before the authorities below and reiterated the same. None of these submissions, however, make much sense. As regards the alleged gift of Rs.4,00,000/- and alleged borrowings of Rs.1,53,100/- from friends and relatives, I see no reasons to deviate from the well reasoned findings of the CIT(A) which have remained uncontroverted. I approve the same. However, as regards the claim of Rs.14,87,543/- as accumulated savings and agricultural
SMC-ITA No. 860/Ahd/2015 Shivram Ramchanddas Patel Vs. ITO AY : 2006-07 Page 7 of 7
income, I am of the view that since the assessee was having some agricultural income, an amount of Rs.5,00,000/- can at best be treated as explained. To this extent, I uphold the plea of the assessee.
In view of the above discussions, I uphold the addition to the extent of Rs.13,26,730/- and delete the addition to the extent of Rs.5,00,000/-.
In the result, the appeal is partly allowed in the terms indicated above. Order pronounced in the open Court on this 15th day of October, 2018.
Sd/-
Pramod Kumar (Accountant Member) Ahmedabad, the 15th day of October, 2018 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order