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Facts
The assessee introduced Rs. 6,00,000/- in his firm as capital. The Assessing Officer accepted Rs. 3,00,000/- as genuine savings and added the remaining Rs. 3,00,000/- as income from undisclosed sources. The assessee had agricultural income and other sources of income.
Held
The Tribunal held that the assessee's claim of Rs. 6,00,000/- being out of past savings is acceptable, considering his financial standing, age, and other sources of income. Therefore, the addition of Rs. 3,00,000/- is directed to be deleted.
Key Issues
Whether the addition of Rs. 3,00,000/- made by the Assessing Officer on account of alleged undisclosed income is justified, considering the assessee's other sources of income and past savings.
Sections Cited
147, 143(3), 148, 254, 144B
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA
2007-08 against impugned appellate order dated 18/09/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1068754786(1) of Commissioner of Income Tax (Appeals).
(B) In this case original assessment order dated 21/03/2014 was passed u/s 147 read with section 143(3) of the I. T. Act wherein the assessee’s total income was determined at Rs.3,96,920/- as against returned income of Rs.96,920/-. Relevant portion of the assessment order dated 21/03/2014 is reproduced as under:
“During the year under consideration, assessee has made capital introduction of Rs.7,90,266/- in the firm M/s Jai Ambe Cold Storage but no return of income for said assessment year was filed by the assessee. On this very basis, action under section 147 of the IT Act, 1961 was taken and notice under section 148 of the IT Act, 1961 was issued on 01.00.2012.
Vide questionnaire dated 23.10.2013, assessee was required to substantiate sales shown from trading of vegetables along with supporting evidences. In compliance, written reply filed stating therein that during the year under consideration sales of vegetables were made to the customers of villages for which no vouchers have been kept by him. Along with reply, assessee submitted only month wise list regarding sale of potato but he could not furnish any vouchers in this regard. Regarding business activities of the assessee, ITI of this office was directed to make spot inquiry. ITI has submitted his report after making local inquiry which Is placed on file. In his report, ITI has reported that assessee was doing business on small scale. Vide written reply dated Nil, it has been stated by the assessee that he had invested a sum of Rs.2,45,000/- out of agricultural income. In support of agricultural holdings, assessee submitted copy of khatauni which is placed on file. It is worthwhile to mention here that the assessee has never filed his return of income meaning thereby that he was enjoying income below the taxable limit. Looking to the agricultural holding and extent of business activities as also day to day household expenses & other social obligations, saving of Rs.6,00.000/- stated to have been invested in the firm is not reliance worthy. Keeping in view the business activities of the assessee and also his agricultural income, capital introduction to the extent of Rs.3,00,000/ made in the firm is considered as reasonable out of total capital Introduction at Rs.6,00,000/.”
(B.1) The assessee’s appeal against the aforesaid assessment order dated 21/03/2014 was dismissed by learned CIT(A) vide order dated 31/03/2018. The assessee filed appeal against the aforesaid order dated 31/03/2018 of learned CIT(A), in Income Tax Appellate Tribunal. Vide order dated 16/12/2020, Income Tax Appellate Tribunal set aside the case to the file of the Assessing Officer to pass assessment order afresh. In consequential assessment order dated 24/03/2022 passed afresh by the Assessing Officer u/s 147 read with section 254, read with section 144B of the Act, the Assessing Officer did not give any further relief to the assessee, and the earlier addition of Rs.3,00,000/- made in original assessment order dated 21/03/2014 was made once again. Vide impugned appellate order dated 18/09/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1068754786(1), the assessee’s appeal against the aforesaid assessment order dated 24/03/2022 was dismissed. The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 18/09/2024 of the learned CIT(A). The grounds of peal are as under:
“1. That in any view of the matter order passed u/s 147 r.w.s. 254 dated 24.03.2022 by the assessing officer is highly unjustified, illegal and his action as confirmed by CIT(A) by passing ex-parte decision is unwarranted.
That in any view of the matter proceeding u/s 147 has started as per notice dated 01.06.2012 whereas reasons were provided on 07.03.2022. In this background, the entire assessment liable to be declared illegal, invalid because the reasons were not provided while issuing the notice u/s 148 of the Act. The reasons are vague and general hence the entire action of the two lower authorities in making and maintaining the addition is uncalled for.
That in any view of the matter apart from the business income from cold storage the Appellant owns 8 bighas of agricultural land, aged about 64 years, his sons are in service, brothers also owns agricultural land. In this background addition of Rs.3 lacs made and maintained is unwarranted in the facts and circumstances of the case.
That in any view of the matter both the lower authorities were wrong and maintaining the addition of Rs. 3 lacs ignoring sources of income as well as without providing reasons hence the assessment liable to be declared illegal.
5, That in any view of the matter interest charged under different sections is highly unjustified.”
(B.2) The assessee also submitted statement of facts, which are reproduced below:
“That the Appellant is an individual and is one of the partner in the firm and styled as M/s Jai Ambey Cold Storage and is assessed to income tax for the last number of years. The appellant source of income is from firm as salary & Interest as per deed as well as the appellant's owns 8 bighas agricultural land at Lakarhara, Ghazipur. The Appellant is aged about 64 years and his sons are already settled long ago government service as well as business. In the present case a notice u/s 148 was issued on the basis of vague information. Anyhow, in compliance to said notice return was filed by declaring income of Rs.96,920/-. During the year the appellant has credited a sum of Rs.6,00,000/ - in his personal account in the books of firm out of which only credit for past savings was only allowed to the extent of Rs.3,00,000/- and remaining Rs.3,00,000/- was added as income from undisclosed sources. Thus the deposit in the firm a small some and not too heavy and when the assessing officer himself granted credit for Rs.3,00,000/- then there is no justification to disbelieve for rest some but the assessing officer disbelieve in connection with deposit of Rs.3,00,000/- only. Thus, the addition of Rs.3,00,000/- made by assessing officer and confirmed by CIT(A) by alleging income from undisclosed is unwarranted when the appellant had sufficient source of income considering his age, considering his son's enjoying income from their own sources and sons look after the family hence the addition made by assessing officer and maintained by CIT(A) by passing ex-parte decision under NFAC is not proper. Thus the addition of Rs.3,00,000/- as maintained is unwarranted. Under this circumstance the Appellant is filing appeal on the following grounds for adjudication.”
(C) At the time of hearing, the assessee was represented by none. In the absence of any representation from the assessee’s side, the learned D.R. was heard. He supported the orders passed by the Assessing Officer and the learned CIT(A). On perusal of records, it is found that the assessee credited a sum of Rs.6,00,000/- in his personal account in the books of firm M/s Jai Ambey Cold Storage. The assessee’s claim that the aforesaid amount of Rs.6,00,000/- was out of past savings, was not fully accepted by the Assessing Officer. The Assessing Officer accepted past savings to the extent of Rs.3,00,000/- as genuine and made an addition of the remaining amount of Rs.3,00,000/-. On perusal of the statement of facts (reproduced in foregoing paragraph No. (B.2), it is found that the assessee was assessed to income tax for many years. The assessee earns income from firm in which he is a partner, as salary and interest. The assessee also owns 8 Bighas agricultural land in Ghazipur. The assessee has two sons who are already settled in Government service/business. In view of the foregoing, and having due regard for assessee’s financial standing, in the specific facts and circumstances of the present case, the assessee’s claim that the aforesaid amount of Rs.6,00,000/- introduced as capital in his personal account in the books of firm M/s Jai Ambey Cold Storage, is out of past savings; is acceptable. Therefore, the Assessing Officer is directed to delete the addition of Rs.3,00,000/- originally made in the assessment order dated 21/03/2014 and again made in the aforesaid assessment order dated 24/03/2022. Accordingly, ground No. 3 & 4 of the appeal are allowed.
(D) As the aforesaid addition of Rs.3,00,000/- has already been deleted, the remaining grounds of appeal are accordingly academic in nature and need no adjudication. Therefore, I decline to adjudicate on other grounds of appeal.