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Facts
A search and seizure operation was conducted on the assessee, who derives income from business, agriculture, and other sources. During the search, incriminating documents related to investments were found, including in agricultural land and construction of a residential house. The assessee claimed that the source of these investments was agricultural income.
Held
The Tribunal held that the claim for enhanced agricultural income made during assessment proceedings u/s 153A, which was not claimed in the original return, is not admissible as it was an attempt to explain investments and reduce tax liability. The addition made by the AO regarding unexplained investment in agricultural land was upheld in ground No. 1 of ITA no. 931/JP/2024, leading to the appeal being allowed. However, in ITA no. 936/JP/2024, ground No. 2, concerning the unrecorded expenditure on construction, was partly allowed, with the AO directed to consider the correct unaccounted investment.
Key Issues
Whether the claim of enhanced agricultural income as a source of investment, not declared in the original return or during proceedings u/s 153A, is admissible. Whether the AO was justified in making additions for unexplained investments and profits from wine business.
Sections Cited
143(3), 153A, 153B(1)(b), 132(1), 132, 139, 143(2), 142, 129, 69, 69A, 69B, 115BBE, 44AD, 44AB, 133A
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA Nos. 931 to 936/JP/2024
6. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
9 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT “Decision The facts of the case are considered. There is no dispute over the amount of investment. Only dispute is with regard to source of investment. The assessee claimed that source was agriculture income. This was claimed in assessment proceedings. The claim of agriculture income was more than what is offered in the return of income. The assessee offered Rs. 40,000/- as agriculture income in the return filed u/s 139(1) of the Income Tax Act. The assessee claimed in the statement recorded during the search that correct amount of agriculture income is not shown in the return of Income. However, when return of Income was filed u/s 153A of the Act was furnished, the agriculture Income remained same at Rs. 40,000/-, The appellant was in knowledge of all the facts on the basis of which enhanced claim of agriculture Income is being made at the time of filing original return of Income u/s 139 of the Income Tax Act.
The claim of ignorance of law is not found to be acceptable as the appellant has shown the agriculture income in the retum of Income filed u/s 139 of the Income Tax Act. If the assessee was not aware about agriculture income being exempt how the agriculture income is claimed as exempt in the return of income. Further, the assessee was aware about his land holdings and other activities. Therefore, ignorance of law is not found to be there in the present case. If the assessee was not aware, no reason explained as to why only Rs. 40,000/- was shown as agriculture income. The less aware person will show the true income and not hide the facts. Hence, the agriculture income shown in the return of income seems to be correct.
It is well settled principle of law that ignorance of law is no excuse. Though in the present case, the assessee has not able to prove ignorance of law.
Showing less income from the real income does not seem to be correct as the assessee is well aware of his real profits earned. Further, the agriculture income is exempt from the tax. Hence, there is no purpose is served by not showing correct income in the return of Income filed u/s 139 of the Income Tax Act. It is important to note that the Agriculture Income was not revised by way of filing revised return. Further, the Agriculture income was not enhanced in the return filed in response to notice issued u/s 153A. In these facts, it is not admissible that the assessee came to know the fact that real income from agriculture was more than what is reported in the return of income filed only in the assessment proceedings u/s 153A of the Income Tax Act. This is only an afterthought to avoid tax liability when the assessee was found in possession of properties source of which is not found from explained sources. Hence, the claim
Agriculture income is exempt from Income Tax. Hence, the claim of exemption from income Tax needs to be made in the return of Income furnished u/s 139(1) of the Income Tax Act. In the return filed u/s 153A only the undisclosed income can be further offered. However, further exemption which were not claimed in the return filed u/s 139 cannot be claimed. In this case, the assessee has not made any new claim of exemption in the return of Income furnished u/s 153A of the Income Tax Act, however, the claim is made in the assessment proceedings pending u/s 153A of the Income Tax act. Such claim is made after a long period of time (many years) has passed. The date of filing revised return is also over for this year. In view of these facts, the claim made by the assessee about exempt agriculture income is not found to be acceptable at this stage.
In essence, the assessee wanted to increase the exempt agriculture income when the declared sources were not adequate to explain the source of investment made by him. By this way, the assessee wanted to reduce the tax liability. In effect. the Income declared in the regular return of income u/s 139 was being reduced by offering more exempt income.
In this regard it is noted that any new claim in the return filed u/s 153A of the act is not acceptable as the Search Assessments are for the benefit of the revenue rather than assessee. The returns are filed u/s 153A of the act are as a consequence of action taken under Section 132 of the Act on a assessee and thus can't be advantageous for the assessee and moreover the proceedings u/s 153A are analogous to proceedings under Section 147 of the Act to the extent that these are proceedings for the benefit of Revenue and not that of the assessee. The assessee cannot be permitted, to convert these reassessment proceedings as his appeal or revision in disguise and seek relief in respect of items earlier not claimed in the original return of income. Reliance is placed on the judgment rendered by the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag Vs ITO [2000] 161 CTR (Bom) 391 [2000] 241 1TR 865 (Bom). This decision was rendered by taking notice of the principle laid by the Hon'ble apex Court in CIT Vs Sun Engineering Works (P) Ltd. [1992] 107 CTR (SC) 209 [1992] 198 ITR 297 (SC) to the effect that in reassessment proceedings, an assessee can neither claim nor be allowed a deduction that was not claimed in the original return. As such the assessment proceedings initiated on the basis of an action under Section 132 of the Act also cannot be utilised by the assessee to seek relief not claimed earlier.
The ITAT Chennai Bench 'C' in the case of Sella Synergy (India) Ltd. v. Assistant Commissioner of Income-tax", Circle-VI, Chennai [2009] 117 ITD 264 (Chennai)/[2008] 117 TTJ 110 (Chennai) [14-09-2007] upheld the disallowance of section 10A benefit claimed in the covering letter of the return filed u/s 148 of the Income Tax Act. It is also well-settled on the anvil of Hon'ble Apex Court decision in SunEngineering Works (P) Ltd 's case (supra) that no fresh exemption/benefit can be claimed by the assessee in the course of reassessment proceedings. The ITAT held as under- x x x x
The ITAT Delhi Bench 'B' in the case of Charchit Agarwal v. Assistant Commissioner of Income-tax [2012] 20 taxmann.com 371 (Delhi)/[2011] 7 ITR(T) 35 (Delhi)[12-03-2010] held that in view of the decision of the hon'ble Supreme Court in the case of CIT v. SunEngineering WorksP. Ltd. [1992] 198 ITR 297 the assessee cannot be permitted to claim the benefit of the closing stock by changing the method of valuation in the assessment proceedings under section 153A of the Act, which were initiated to assess or reassess the undisclosed income. The relevant part of judgment is reproduced as under- x x x x
The ITAT Jodhpur Bench in the case of Suncity Alloys (P.) Ltd. v. Assistant Commissioner of Income-tax [2009] 124 TTJ 674 (Jodhpur) [19-08-2009] held that there is no merit in the ground to make a new claim of deduction or allowance during assessment/reassessment under section 153A. Head notes of the decision are as under-
"The expression assessment or reassessment used in section 153A connotes determination of total income pursuant to return required to be filed in the case of a person where a search is initiated under section 132 or requisition is made under section 132A. The expression assessment or reassessment' used in this section has to be understood in the context of section 153A alone. The word 'assessment is used in a number of provisions in a comprehensive sense and it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer and the machinery for enforcement thereof. The concept of expression' assessment' is used in the Income-tax Act at different places with different connotations.
In section 153A the expression signifies merely computation of undisclosed income that shall form part of total income' within the meaning of section 2(45) in respect of each of the assessment falling within such six assessment years that is required to be aggregated with the income already assessed in cases of completed assessments, more
12 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT so when section 132 comprehends action to search of a person in possession of undisclosed income or property. In those cases where assessments are pending at the time of initiation of action under section 132, the computation of total income has to be done in a normal manner. The computation of total income so made shall meet the requirement of section 4
Having regard to the provisions of section 139(5) and since the assessments under section 153A are in relation to undisclosed income, it is precisely for this reason that new claim of deduction or allowance cannot be made in the completed assessments
The assessment or reassessment made pursuant to notice under section 153A is not de novo assessment, therefore, there is no merit in the ground to make a new claim of deduction or allowance during assessment/reassessment under section 153A as such where admittedly the regular assessments are shown as completed assessment on the date of initiation of action under section 132."
In the above decisions, it is held that no fresh exemption can be claimed by the assessee in the assessment proceedings u/s 153A
Further, Chapter XTV-B has been replaced by new provisions of section 153A to 153C, the object of legislation is to assess undisclosed income. New claim of deduction or exemption cannot be allowed to such searched persons. If it is so allowed, then the same shall become discriminatory to the other regular assessees who have lost a right as such to claim deduction by efflux of time or by mandate of the Act. Since, the assessee neither made any such claim in the original return filed under Section 139(1) of the Act nor in regular assessment proceedings by way of filing any revised return therefore returns filed in response to notice under Section 153A of the Act are not substitute of revised return for making claim of such benefits. Having regard to the provisions of section 139(5) of the Act and the assessments under section 153A are in relation to undisclosed income, it is precisely for this reason that new claim of deduction or allowance cannot be made in the completed assessments. It is a settled principle of law that what cannot be done directly can also not be done indirectly. Reference can be made on the judgment rendered by Hon'ble Allahabad High Court in Anupam Sushil Garg v. CIT [2003] 185 CTR (All) 505 [2004] 265 ITR 474 (All). When rules of interpretation are applied it would not allow making of fresh claims as such. Principle of interpretation laid by Hon'ble apex Court in Poppatial Shah v. State of Madras 1953 AIR 274 (SC) reads as under:
"It is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase, or sentence is to be considered in the light of the general purpose and object of the Act itself. The title and 13 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT preamble, whatever their value might be as aids to the construction of a statute, undoubtedly throw light on the intent and design of the legislature and indicate the scope and purpose of the legislation itself."
It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 as under-
"It is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided."
If a assessee is allowed to claim an allowance, deduction etc. u/s 153A not claimed earlier than it would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT (A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra).
In the following decisions it was held that the search proceedings under section 153A are for the benefit of the revenue and therefore any fresh claim is not allowable u/s153A of the act -
1. Jai Steel (India), Vs Jodhpur Assistant Commissioner of Income-tax [2013] 36 taxmann.com 523 (Rajasthan)
2 Charchit Agarwal Vs Assistant Commissioner of Income-tax, Central Circle 12. New Delhi [2009] 34 SOT 348 (Delhi)
3 Suncity Alloys Pvt. Ltd. V Asstt CIT (2009) 124 TTJ 674 (Jodhpur)
The jurisdictional High Court in the case of Jai Steel (India), Vs Jodhpur Assistant Commissioner of Income-tax [2013] 36 taxmann.com 523 (Rajasthan) clearly held as under-
“30. Consequently, it is hold that it is not open for the assessee to seok deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed. only because a assessment under Section 1534 of the Act in pursuance of search or requisition is required to be made.”
Following the above discussion based on judicial principles it is held that the AO was justified in rejecting the claim of enhanced agriculture income made
14 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT by the appellant in the assessment proceedings u/s 153A which was not claimed in the return filed u/s 139(1) of the Act. It is a case where the claim of enhanced agriculture income is not even made in the return filed u/s 153A. No plausible reason explained by the assessee for not revising the claim of exempt agriculture income in the return filed after search in response to notice issued u/s 153A of the Income Tax Act. The claim of enhanced agriculture income was made in the assessment proceedings u/s 153A before the AO. Therefore, the facts of the case of the appellant are on weaker footing than the cases where the claim was made in the return filed in response to notice issued u/s 153A of the Income Tax Act. Even the claim of exemption in the return filed in response to notice issued u/s 153A of the Income Tax Act is not found to be allowable as discussed above. In view of above discussion, the claim of enhanced agriculture income in the assessment proceedings has been rightly rejected by the AO. The addition made by the AO is accordingly upheld
In view of the above legal position, the enhanced claim of exempt agriculture income during the assessment proceedings u/s 153A is not found to be admissible. The facts with regard to earning of Income which were there at the time of filing return of Income u/s 139 of the Income Tax Act remained same even when the return of Income filed in response to notice issued u/s 153A of the Act. Only because the assessee is found in possession of some investments source of which is not accounted, the fresh claim of agriculture income cannot be entertained. Therefore, the factual examination of the documents is not found to be necessary.
Therefore, the contention of the assessee that he had earned income from agriculture activities and purchased another agriculture land with the income from agriculture activity is not found to be acceptable. Therefore, decision of the AO in treating the amount of investment made by the assessee for purchase of agriculture land in FY 2011-12 i.e. Rs.5,59,890/- (2,78,050+2,81,840) as unexplained investment u/s 69 is found to be justified and upheld.
This ground of appeal is treated as dismissed.”
7. As the claim of the assessee for earning enhanced agricultural income by filling in a revised computation was not considered because the same was not supported by sufficient evidence even the claim of the before this tribunal. In support of the various grounds so raised by the assessee, ld. AR of the assessee filed a detailed written submissions for the appeal of all the years together which reads as under :
1. Assessee derives income from business, agriculture and other sources. He has filed the income tax return regularly. A search was carried out on assessee on 15.11.2017. During the course of search certain loose papers, assets etc. were found which contains details of investment in purchase of agriculture land, vehicle, construction of residential house, advance given for purchase of immovable property, cash found, loans and excess stock & over sale of Kota stone. Statement of the assessee was recorded on 15.11.2017 where in reply to Q. No.24 (PB 104) when required to explain the source of investment in house construction, he stated that same is out of the savings of agricultural income/ from business.
2. In post search proceedings assessee furnished the details of agricultural land owned by him (PB 39-68), certificate of Patwari regarding yield per bigha of crop grown (PB 69), year wise sale price of the crop & orange grown (PB 70-71), order of Deputy Director, Horticulture, Reni Bag, Kota regarding subsidy granted to the assessee on the orange plant (PB 72) and the affidavit of various customers to whom oranges were sold (PB 73-90). On this basis total agriculture income statement was filed to ADIT(Inv.), Kota (PB 91-93). On this statement of agriculture income, statement of assessee was recorded on 15.02.2018 & 16.02.2018 where assessee in reply to Q. No.11 (PB 169-171) stated that source of various investments in agriculture land is out of the agriculture income earned by him which is not fully disclosed in the return and thereby surrendered such agricultural income for tax. Further assessee in reply to Q. No.12 (PB 171-172) stated that agriculture sales slip found in search represent his agriculture income but in respect of agriculture income earned from the garden no sales slip is prepared.
In response to notice u/s 153A, assessee filed the return of income on 30.06.2018 declaring same total income and agricultural income which was filed in original returns of income. During the course of assessment proceedings AO observed that assessee has made certain investments, the source of which remains unexplained. The assessee explained that all the investments are made out of agriculture income not disclosed in the return and thus filed revised computation declaring agriculture income in each year as under:-
AY Actual Agriculture income Agriculture income (in Rs.) declared in return (in Rs.)
2012-13 3,12,998/- 40,000/- 2013-14 4,11,020/- 40,000/- 2014-15 4,48,257/ 40,000/- 2015-16 6,50,405/- 40,000/- 4. In 2016-17 8,02,086/- 58,642/- support of 2017-18 46,14,596/- 1,94,562/- agriculture 2018-19 52,73,503/- - income Total 1,25,12,865/- 4,13,204/- assessee has filed the following documents and supporting evidences:-
(i) Copy of Khasra Girdawari (ii) Statement indicating crop grown in each agriculture land. (iii) Document of subsidy received on growing of orange plants (iv) Statement indicating net agriculture income in various years (v) Certificate from Patwar Mandal certifying the per bigha crop grown (vi) Copy of letter from Shree Dev Traders & Krishi Upaj Mandi Samiti showing the selling price of oranges and crops
Assessee further explained that he could not declare the complete agricultural income in the returns filed u/s 153A for respective financial years due to lack of knowledge.
5. The AO, however, rejected the revised computation of agriculture income by holding as under:-
(i) No evidences or documents related to agricultural land such as actual yields from crops, sale of these crops, etc. were found in the search. Further assessee could not produce any reliable documentary evidence in support of source of agricultural income.
(ii) The returns filed u/s 153A of the Act was filed almost after 5 months after the date of statements made by assessee on 15.02.2018. Thus assessee was having sufficient time to consider and calculate his actual agricultural income and declare the same in return filed u/s 153A of the Act.
Accordingly AO did not allowed the claim of agriculture income and made addition on account of unexplained investment u/s 69, 69A & 69B of the Act as under:-
AY Particulars of investment Amount (Rs.) 2012-13 Investment in purchase of agricultural land 5,59,890/- 2014-15 Investment in purchase of agricultural land 2,88,820/- 2015-16 Investment in purchase of agricultural land 3,71,330/- 2016-17 Investment in purchase of motor cycle 1,25,000/- 2017-18 Investment in purchase of agricultural land 4,20,300/-
2018-19 Investment in construction of residential house, loan to Rani 74,86,599/- Stone Supplier, Advance to Radhey Shyam, purchase of car, unexplained cash, stock of polished and rough kota stone and difference in sales and opening stock Total 92,51,939/-
6. The Ld. CIT(A) called the remand report from AO (PB 19-29). The AO in the remand report (PB 28-29) accepted that assessee owns 42 bigha of agriculture land, khasra girdawari shows the various crops grown, assessee received subsidy for growing 840 orange plants, agriculture income from orange plant is shown at Rs.82,32,000/- in support of which agreement made with the parties for selling them was filed and the assessee’s wife Antara Devi received compensation of Rs.89,68,192/- on acquisition of land & 298 orange plants. However, the contention of assessee was not accepted by holding that the facts & documents proved that assessee was having huge agriculture income but the same was neither fully declared in the regular return nor in the return filed u/s 153A. Therefore even though the claim of agriculture income is verifiable from the documents filed but the same is not allowable in view of the decision of Hon’ble Supreme Court in case of Goetz India Ltd. Vs. CIT 284 ITR 323.
7. The assessee filed detailed submission before Ld. CIT(A) on the remand report of AO (PB 30-36). Reference was also made to the order of Hon’ble Settlement Commission in Salaf Group cases where the additional agriculture income not shown in the return but offered before the Hon’ble Commission was accepted. However, the Ld. CIT(A) at Para 4.6 of the order for AY 2012-13 at Pg 25-32 confirmed the addition made by AO by holding that agriculture income is exempt from tax and therefore no purpose is served by not showing correct income in the return filed by the assessee. The claim is only afterthought to avoid tax liability. Further exemption which was not claimed in the return filed cannot be claimed in assessment proceedings u/s 153A. Reliance was placed on certain decisions to hold that search proceedings u/s 153A are for the benefit of revenue and therefore fresh claim is not allowable u/s 153A of the Act. Only because assessee is found in possession of some investment, source of which is not accounted, fresh claim of agriculture income cannot be entertained and therefore the factual examination of the documents is not found necessary. Accordingly addition made by the AO is confirmed. With respect to unexplained cash of Rs.4,09,510/- found during the search in AY 2018-19, the Ld. CIT(A) accepted the assessee’s contention regarding petty cash balance of Rs.59,510/- kept at the residence and thus restricted the addition to Rs.3,50,000/-.
Submission:-
1. At the outset it is submitted that considering the documentary evidences filed, AO in the remand proceedings at Pg 10 (PB 29) has accepted that facts & documents proves that assessee was having huge agriculture income. However he has not accepted the contention of assessee by referring to the decision of Hon’ble Supreme Court in case of Goetz India Ltd. (supra). The assessee in the submission on the remand report has explained that how the decision of Goetz India Ltd. supports the case of assessee which has been accepted by Ld. CIT(A) in as much as he has not taken any adverse view with reference to the decision of Hon’ble Supreme Court in case of Goetz India Ltd.
2. It may be noted that out of the total agriculture income of Rs.1,25,12,865/- earned during AY 2012-13 to 2018-19, agriculture income of Rs.41,00,863/- was from sale of crop and agriculture income of Rs.84,12,002/- was from sale of oranges. In respect of sale of crop assessee has furnished evidence of cultivation in form of Khasra Girdawari and the yield & value of crop is determined based on the report of Patwari and Krishi Upaj Mandi Samiti. In respect of sale of oranges it may be noted that the orange plants were purchased from Deputy Director, Udhyan, Reni Bagh, Kota in FY 2013-14. For growing plants of oranges and purchase of tractors assessee received subsidy of Rs.2,73,757/- (PB 72) during FY 2013-14 to 2015-16. The orange fruits on the plants grow after 3 years of plantation and thus the orange plants planted during FY 2013-14 to 2015-16 started giving fruits in FY 2016-17 & 2017-18 which is also mentioned in the Khasra Girdawari. The orange fruits were sold to various persons during AY 2017- 18 & 2018-19 for which the affidavits of these persons is at PB 73-88. The amount received on sale of oranges is as under:-
Khasra Name of Address AY AY Total No. person 2017-18 2018-19 Badri Singh Beedmandi, Kota 217 Biram Lal 99, Narayanpura, 6,60,000 7,40,000 14,00,000 Beedmandi, Kota Guman Ward No.11, Narayanpura, Singh Beedmandi, Kota 218 13,19,000 14,63,000 27,82,000 Om Nath Ward No.8, Nathan Mandi, Suket, Kota- Madan Singh Beedmandi, Suket, Kota Nand Lal Ward No.8, Nathan Mandi, 219/273 6,60,000 7,40,000 14,00,000 Yogi Nayagaon, Aranya Khurd, Kota Prabhu Nath Nathan Mandi, Suket, Kota 24 13,90,000 15,60,000 29,50,000 Jagdish Beedmandi, Suket,
Ramganjmandi, Kota Bal Chand Ward No.8, School ke pass, Nathan Mandi, Suket, Kota Total 40,29,000 45,03,000 85,32,000
Thus the fact of agriculture income of Rs.1,25,12,865/- is verifiable from the documentary evidence on record which is also accepted by AO in the remand report and therefore the observation of Ld. CIT(A) that factual examination of the document relating to agriculture income in not found to be necessary is irrelevant.
3. Now the only issue which is left for consideration is whether in assessment proceedings u/s 153A the assessee can claim the source of investment from the agriculture income not disclosed in the return filed u/s 139/ 153A or not. It is submitted that section 153A(b) provides that in case of a search, the AO shall assess or reassess the total income of six preceding years of the date of search and for the AY relevant to the date of search. The cases relied by the Ld. CIT(A) is with reference to new claim of deduction or allowance during assessment/ reassessment u/s 153A. In the present case, assessee is not making any new claim of deduction or allowance. The claim of assessee is that it has earned agriculture income which is not fully disclosed in the return and such undisclosed agriculture income is the source of investment found in search. Therefore, the observation of Ld. CIT(A) that the exemption which was not claimed in the return cannot be considered to explain the source of investment is not as per law. Reliance in this connection is placed on the decision of Hon’ble Karnataka High Court in case of Canara Housing Development Co. Vs. DCIT (2015) 114 DTR 162 where the Hon’ble Court at Para 10 of the order held as under:-
10. Sec. 153A of the Act starts with a non-obstante clause . The fetters imposed upon the AO by the strict procedure to assume jurisdiction to reopen the assessment under ss. 147 and 148, have been removed by the non-obstante clause with which sub-s. (1) of s. 153A opens. The time-limit within which the notice under s. 148 can be issued, as provided in s. 149 has also been made inapplicable by the non-obstante clause. Sec. 151 which requires sanction to be obtained by the AO by issue of notice to reopen the assessment under s. 148 has also been excluded in a case covered by s. 153A. The time-limit prescribed for completion of an assessment or reassessment by s. 153 has also been done away with in a case covered by s. 153A. With all the stops having been pulled out, the AO under s. 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by s. 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under s. 143(1) or 143(3) of the Act, the AO is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the AO is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of s. 153A is there should be a search under s. 132. Initiation of proceedings under s. 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under s. 132, the said proceeding shall abate. If such proceedings are already concluded by the AO by initiation of proceedings under s. 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under s. 153A, however, the AO has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by s. 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under s. 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Reopened means to deal with or begin with again. It means the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or/and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order.
4. It is submitted that the agriculture income is included for the purpose of calculation of tax. Therefore, it is incorrect to presume that agriculture income do not suffer any tax in as much as because of inclusion of agriculture income for calculation of tax, the other heads of income of an assessee gets taxed at higher slab rate. An agriculture income not declared in the return or declared lower in the return than what is actually earned is also undisclosed subject to assessment u/s 153A. Such undisclosed agriculture income is not a case of making a claim for deduction and therefore the decisions relied by the Ld. CIT(A) are not applicable on the facts of the present case. At the same time such undisclosed agriculture income can be a source of investment found in search. The Hon’ble Settlement Commission in case of Saraf Mineral/Arpit Mineral/Tejmal Jain/Gautam Kumar Jain/Mohd Sahid/Mohd. Tosif/Mohd. Aslam/Mohd Aalam/Mohd. Akil Khan vide order dt. 24.02.2023 at Point No.8, Para 8.1 to 8.3, Pg 11-12 of the order observed as under:-
“8. Agricultural Income
8.1 In the SOF, it has been stated that the investments in properties were made out of agriculture Income part of which is declared in the return of income and part not declared. Accordingly, the agriculture income not disclosed in the return is estimated considering the factors mentioned in para 6.3 below and the same is offered in their respective Settlement Applications. The details of agricultural income estimated, agricultural income shown in the returns of income and the income offered in the SOF are as under: Name of Total Agricultural income Agricultural income not the Agricultural shown in return shown in return but applicant income offered in SOF estimated AY AY AY Sh. 2012-13 to 30,75,339 2012-13 to 12,82,820/- 2012-13 to 17,92,519 Tejmal 2018-19 2018-19 2018-19 Jain Sh. 2012-13 to 21,85,136 2012-13 to - 2012-13 to 21,85,136 Gautam 2017-18 2017-18 2017-18 Kumar Jain Sh. 2012-13 to 1,01,56,689 2012-13 to - 2012-13 to 1,01,56,689 Mohd. 2017-18 2017-18 2017-18 Sahid Mohd. 2012-13 to 40,56,287 2012-13 to 2,50,765 2012-13 to 38,05,522 Tosif 2017-18 2014-15 2017-18 Sh. 2012-13 to 36,27,516 2012-13 to 1,39,322 2012-13 to 34,88,194 Mohd. 2017-18 2013-14 2017-18 Aalam Sh. 2012-13 to 59,30,860 2013-14 to 4,55,612 2012-13 to 54,75,248 Mohd. 2016-17 2016-17 2016-17 Akil Khan Mohd. 2012-13 to 25,36,817 2013-14 to 3,18,086 2012-13 to 22,18,731 Shakhi 2016-17 2016-17 2016-17
8.2 The PCIT submitted that the applicants have failed to establish that the income shown above have been earned from agricultural activity. The applicants have not filed any proof of reliable documents/evidences of agricultural yields realised and sale proceeds by selling any of quantum of such agricultural products to any adatiya in the market etc. It is the stand of the applicants that they are not in a position to establish whether the investment/expenses were met out of agricultural income or kota stone business in the absence of documentary evidences. The PCIT has claimed that the agricultural income disclosed by the applicants is not a true and full disclosure and the entire scheme of earning such income is a sham and after thought. 8.3 The applicants in their replies submitted that they have estimated the agricultural income considering agricultural land holdings, Khastra/Girdwari report of Patwari, crop grown, yield of crop and average sale rate of the crop. Further, the ownership of agricultural land and the crop grown on it were supported by documentary evidences and the same was not disputed by the PCIT. No evidences were found during the search to prove that the applicants have other sources of income for making investment in immovable/movable properties. The applicants Sh. Gautam Kumar Jain and Sh. Mohd Sahid have not disclosed agricultural income in their returns for AYs 2012-13 to 2017-18 and however they have offered Rs. 21,85,136/- and Rs. 1,01,56,689/- for these AYs respectively in their settlement Applications.” Thereafter Hon’ble Settlement Commission in the absence of complete evidence accepted 50% of the income declared as agriculture income by giving following finding at Para 25.1 & 25.2 of the order:-
“25.1 In respect of individual applicants, we see that certain agricultural income has been offered to tax in their settlement applications, either for the first time or in addition to the agricultural income already offered in the regular returns of income. All the applicants have sought to explain certain part of undisclosed investments in stock, movable and immovable properties to be out of such agricultural income now offered in the settlement applications. The CIT(DR) drew our attention to the fact that the agricultural income offered is just based on average yield rates and is without any regard for the season, soil conditions, vagaries of nature etc that would affect the crop yield. It was argued that in the absence of quantitative details, estimation of agriculture income submitted by the applicants was hypothetical and deserved to be rejected as an afterthought. 25.2 We have given careful consideration to the issue at hand. It appears that the applicants have introduced agricultural income in the settlement applications in an attempt to explain the sources of undisclosed/unexplained investments unearthed during the search. We find this to be self serving story and do not find any need for these applicants to suppress agricultural income in their regular returns as agricultural income is exempt under section 10(1). We are inclined to concur with the Department that agricultural income is a make-believe story and is clearly an afterthought. At the same time, the applicants have produced evidences regarding ownership of agricultural land; however, no evidence whatsoever has been produced to prove that such agricultural land has been subjected to agricultural activity resulting in huge quantum of agricultural income as has been claimed by the applicants in their settlement applications. In the circumstances, we hold that 50% of the investments sought to be explained through agricultural income as per SOF to be out of undisclosed sources. Such unexplained investments of 50% will attract the provisions of Sec. 69 of the Act. Section 115BBE shall apply as applicable in the relevant AYs. Considering the facts and circumstances of the case, it is deemed fit that penalty u/s 271(1)(c) read with explanation 1 r.w.s 245H(1) for AYs 2012-13 to 2016- 17 and u/s 271AAC r.w.s 245H(1) for AYs 2017-18 to 2018-19 (as applicable) is leviable in these cases. The levy of penalty is considered separately in this order.” Thus the Hon’ble Settlement Commission has also, in principle, accepted that the undisclosed agriculture income can be a source for explaining the investment found in search.
After considering the agriculture income vis-à-vis the investment found in search, the source of investment is fully explained as tabulated hereunder:-
Particulars/ 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 AY (Opening) Past savings 3,00,000 53,108 4,64,128 6,23,565 9,02,640 15,79,726 57,74,022 Agriculture 3,12,998 4,11,020 4,48,257 6,50,405 8,02,086 46,14,596 52,73,503 income Investment 5,59,890 - 2,88,820 3,71,330 1,25,000 4,20,300 74,27,089 made Closing 53,108 4,64,128 6,23,565 9,02,640 15,79,726 57,74,022 36,20,436 Balance
In view of above, addition confirmed by the Ld. CIT(A) in respect of investment made be directed to be deleted.
Ground No.2 (AY 2017-18) The Ld. CIT(A) has erred on facts & in law in confirming the trading addition of Rs.9,45,887/- by applying the n.p. rate of 8% on the alleged undisclosed turnover of liquor business of Rs.1,18,23,601/- by invoking section 44AD of the Act ignoring that in the return turnover is mistakenly shown at Rs.96,84,679/- against the correct turnover of Rs.2,15,08,280/- on which income declared is Rs.7,74,775/- supported by books of accounts.
Facts:-
1. During the year assessee filed return u/s 139 declaring income from liquor business at Rs.7,74,775/- on gross turnover of Rs.96,84,679/- (only of English Wines) by opting section 44AD of the Act. In search no documents were found relating to liquor business. During the course of assessment proceedings assessee explained that the correct turnover of liquor business is Rs.2,15,08,280/- on which he has earned the profit of Rs.7,74,775/-. In support of the same, P&L A/c along with complete bills and vouchers of expenses were furnished (PB 135- 160).
2. The AO, however, held that there is difference of Rs.1,18,23,601/- in the turnover declared in the return and that declared during the assessment proceeding, books are not audited u/s 44AB of the Act and therefore the profit of Rs.7,74,775/- is not acceptable. Accordingly he computed the net profit at Rs.17,20,662/- by applying net profit rate of 8% on turnover of Rs.2,15,08,280/- and thus made addition of Rs.9,45,887/- (1,18,23,601*8%) being undisclosed profit from wine business.
3. The Ld. CIT(A) at Pg 36-37, Para 5.3 held that books of accounts of the assessee are not audited, assessee himself declared profit @ 8% u/s 44AD of the Act, AO found that actual turnover is more and therefore applied the rate of profit as per section 44AD, if the assessee wanted to show less profit he should have got his books of accounts audited and thus confirmed the addition made by AO.
Submission:-
1. It is submitted that assessee has maintained complete books of accounts, bills and vouchers in respect of the liquor business and all transactions are duly
recorded in books of accounts supported with vouchers/ bills. The profit of Rs.7,74,775/- declared by assessee was on turnover of Rs.2,15,08,280/- but in the return the turnover was wrongly mentioned at Rs.96,84,679/-. This represent turnover of only English Wine. After considering the turnover of Desi Wine of Rs.1,18,23,601/-, the total turnover is Rs.2,15,08,250/- (PB 135). The AO has accepted this turnover on the basis of Trading and P&L A/c filed by the assessee but has not considered the expenditure of Rs.2,07,33,505/- incurred by the assessee debited to profit & loss account which are wholly and exclusively for the purpose of his business and supported by bills and vouchers. Assessee had offered detailed explanation about each head of the expense with supporting vouchers and bills during the assessment proceedings. The summarised statement of head wise expense along with explanation submitted by assessee is tabulated as under:-
Particulars of Amount (Rs.) Explanation offered by assessee Paper Expenses Book Purchases 1,83,78,838 All purchases made are from RSBCL and RSGSML 136-140 who are State Government Undertaking. Ledger account was attached. Transportation 2,62,000 Paid in connection with transportation of goods 155-160 from factory/ warehouse to shop/ godown. Ledger account was furnished. Application 50,000 Fees payment made by DD no.005314 through 141 fee HDFC bank a/c. Composite fee 9,75,000 Paid to the Government as per challan. 142 Depreciation 9,855 Depreciation charged on freeze @ 15% of Rs.65,700/-. Godown rent 60,000 Paid to Devendra Surlaya. Ledger account and rent 143-144 agreement were enclosed. Interest to 1,80,000 Confirmation of accounts was furnished. 145 Mudit Goyal Bank charges 1,262 Bank charges for the period. Misc. expense 30,000 Godown Issue Fees paid to District Excise Officer, 146 Kota as per challan. Salary 4,44,000 Paid to Mohan Lal, Tanwar Singh, Narendra Singh, 147-149 Mangi Lal and Ashok Kumar. Ledger account was furnished. Shop expense 1,48,000 Expenses incurred towards tea, coffee, breakfast 150 for refreshment/ entertainment etc. and looking to the business the same is considered to be reasonable. Ledger account was enclosed. Shop rent 96,000 Rent paid to Shri Raghuraj Singh @ Rs.8,000/- per 151-153 month. Ledger account and rent agreement was furnished. Shortfall and 98,550 Paid to District Excise Officer, Kota as per challan. 154 interest Total 2,07,33,505 The lower authorities have not pointed out any discrepancies in the expenses claimed. The turnover has been accepted. Hence only for the reason that books of accounts are not audited cannot be a ground to apply n.p. rate of 8% on the total turnover to make addition of Rs.9,45,887/-. Since the books of accounts are not audited, the assessee may be liable for penalty u/s 271B of the Act but for that reason addition to income is not justified.
2. Otherwise also, section 44AD applies where the turnover of assessee does not exceed Rs.2 crore. In the present case, turnover exceeds Rs.2 crores. Hence the n.p. rate of 8% applied by the lower authorities is not justified more particularly when they have not found any defect/ discrepancy in the expenditure claimed by the assessee.
In view of above, addition confirmed by the Ld. CIT(A) be directed to be deleted.
Ground No.3 (AY 2017-18) The Ld. CIT(A) has erred on facts & in law in not allowing the set off of the alleged trading addition against the alleged unexplained investment resulting into double addition and further erred in taxing the alleged investment u/s 115BBE of the Act.
Facts & Submission:-
1. It is submitted that assessee purchased the agricultural land for Rs.4,20,300/- on 07.09.2016. The AO has made trading addition of Rs.9,45,887/- and also not accepted the agriculture income disclosed by the assessee as explained in Ground No.1 above. Even if the agriculture income is not considered, still the trading addition made is more than the investment made in agriculture land. Hence the AO be directed to allow set off of the alleged unexplained investment against the alleged trading addition made otherwise it would result into double addition.
2. The AO taxed the addition of Rs.4,20,300/- u/s 115BBE @ 60%. It is submitted that substituted section 115BBE by Taxation Laws (Second Amendment Act), 2016 received the assent of President on 15.12.2016. The section is made applicable w.e.f. 01.04.2017. Hon’ble ITAT, Jabalpur Bench in case of ACIT Vs. Sandesh Kumar Jain ITA 41/JAB/2020 order dt. 31.10.2022 at Para 4.2 of the order while interpreting the amendment made in section 115BBE which received the assent of President on 15.12.2016 held as under:-
4.2 As regards the assessee‟s second, without prejudice, argument, i.e., qua nonretrospectivity, we find considerable force therein. Section 1(2) of the Amending Act provides that save as 26 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT otherwise provided therein, it shall come into force “at once‟. The same only conveys the intent for, except where a later date is specified, the legislation to take immediate effect, i.e., as soon the assent of the Hon'ble President of India is received, by signing the same. The words “at once‟ convey an urgency, so that the same represents the earliest point of time at which the same is to take effect, i.e., 15/12/2016 itself, and which also explains the same being enacted during the course of the fiscal year, tax rates for which stand already clarified at the beginning of the year per the relevant Finance Act (FA, 2016). The said words “at once‟ would loose significance if the provisions of the Act are to, as stated by the ld. CIT(A), be read as effective 01/04/2017, implying AY 2018-19. The same, for substantive amendments, as in the instant case, represents the first day of the assessment year, i.e., AY 2017-18, which explains the assessee’s grievance of it being thus effective for fy 2016-17 or, w.e.f. 01/4/2016. Enacting it mid-year and, further, making it applicable “at once‟, becomes meaningless if the same is to take effect retrospectively, or is made effective from a later date (01/4/2017), which could in that case be by Finance Act, 2017. True, the amendment, where so read, does gives rise to a peculiar situation inasmuch as two tax rates would obtain for the current year, i.e., one from 01/04/2016 to 14/12/2016, and another from 15/12/2016 to 31/03/2017, but, then, that is no reason to read retrospectivity where the applicable date is clear and, further, there is nothing to suggest retrospectivity. Further, extraordinary and supervening circumstance of the Demonetization Scheme, 2016, brought out by the Government of India in November, 2016, explains the urgency in bringing an amendment mid-year. Further, the tax rate being in respect of incomes which are imputed with reference to a transaction/s, it is possible to administer the same, another aspect of the matter that stands considered by us. That is, a tax rate for transactions made up to 14/12/2016, and another for those thereafter. Subsequent mention of the applicability of the amended provisions of ss. 271AAB and 271AAC with reference to the date on which the Presidential assent to the Act is received, further corroborates this view, which is based on the clear language of the Amending Act, as well as the principle that a substantive amendment is to be generally prospective. We draw support from the decision in Vatika Township Pvt. Ltd. (supra), reiterating the settled law of the rule against retrospectivity. The tax rate applicable to the impugned income would, therefore, be at 30%, i.e., the rate specified in sec. 115BBE as on 30/11/2016, the date of the surrender of income per statement u/s133A (PB-1, pgs.35-44). This, it may be noted, is also consistent with our view that the income is liable to be assessed u/s. 69B (see para 4.1).
In the present case also, investment in agriculture land was made on 07.09.2016 which is prior to 15.12.2016 and therefore even if it is held that it is taxable u/s 69 of the Act, tax rate applicable u/s 115BBE would be 30% and not 60%.
Ground No.2 (AY 2018-19) The Ld. CIT(A) has further erred on facts & in law in considering the unaccounted investment in construction of residential house at Rs.9,40,000/- as against Rs.7,48,966/- claimed by the assessee.
Facts & Submission:-
During the course of search proceeding assessee in his statement u/s 132(4) dt. 17.11.2017, in reply to Q. No.36 of (PB 108) stated that the total expenditure incurred on the construction of residential house was Rs.31,00,000/- out of which Rs.15,61,000/- was recorded in the books of Dheeraj Singh Sisodiya HUF. Out of the balance amount of Rs.15,39,000/-, payment against some material & labour is still pending and therefore he admitted that Rs.9,40,000/- (31,00,000-15,61,000-5,99,000) is invested out of his current year business and other undisclosed income.
In course of assessment proceedings, assessee explained that the unpaid amount was Rs.7,90,034/- (PB 111) which was paid by cheque out of the housing loan taken from State Bank of India. Thus the correct unrecorded expenditure was worked out at Rs.7,48,966/- (31,00,000-15,61,000-7,90,034). However AO without considering the same considered the unrecorded expenditure in construction at Rs.9,40,000/- since assessee has offered this amount in his statement u/s 132(4).
3. The Ld. CIT(A) also confirmed the unrecorded expenditure in construction at Rs.9,40,000/- on the basis of statement recorded u/s 132(4).
4. It is submitted that in the statement u/s 132(4), assessee has not specified the amount of unpaid construction expenditure but only on estimation offered the unrecorded construction expenditure at Rs.9,40,000/-. In fact the unpaid amount was Rs.7,90,034/- (PB 111) which was paid by cheque out of the housing loan taken from State Bank of India. The details of unpaid expenditure of Rs.7,90,034/- is as under:-
Name of the party Bill No. Amount Paper Book Panchwati Tiles and 131,132,134 1,69,562/- 112-114 Granite Jagdish Building Material 78,75,87,79,53,55,56, 1,92,972/- 115-130 Supplier 60,63,66,100,96,94,92, 91 & 104 Jagdish S/o Onkar Lal 02/17-18 2,02,500/- 131 Onkar Lal Keshu Ram 01/2017-18 2,25,000/- 132 Total 7,90,034/- Thus the unrecorded expenditure on construction is Rs.7,48,966/- as against Rs.9,40,000/- offered during the search. Accordingly AO be directed to consider the correct unaccounted investment in construction at Rs.7,48,966/- as against Rs.9,40,000/- considered by him.”
To support the contention so raised in the written submission reliance was placed on the following evidence & records:
S. No. PARTICULARS Page No. Filed before AO/ CIT(A) 1. Copy of submission filed before Ld. CIT(A) 1-18 CIT(A) 2. Copy of remand report dt. 20.11.2023 submitted by AO 19-29 Both to CIT(A) 3. Copy of submission on remand report filed before Ld. 30-36 CIT(A) CIT(A) 4. Copy of Index of Paper Book filed before Ld. CIT(A) 37-38 CIT(A) 5. Copy of Khasara Girdawari of agricultural produce for AY 39-68 Both 12-13 to AY 18-19 6. Copy of certificate of Patwar Mandal 69 Both 7. Copy of letter of M/s Shree Dev Traders specifying rate 70 Both of crops 8. Copy of letter of Krishi upaj Mandi Samiti, Bhawanimandi 71 Both showing the average selling rate of orange fruits 9. Copy of order of Deputy Director, Horticulture, Reni Bag, 72 Both Kota 10. Copy of affidavits by customers to whom oranges were 73-90 Both sold 11. Copy of statement of assessee’s total agriculture income 91-93 Both from FY 2011-12 to FY 2017-18 12. Copy of statement of assessee dt. 15.11.2017 to 94-110 Both 17.11.2017 recorded u/s 132(4) of IT Act 13. Copy of reply furnished by assessee in respect of unpaid 111 Both expenses 14. Copy of bills of Panchwati Tiles & Granite 112-114 Both 15. Copy of bills of Jagdish Building Material Suppliers 115-130 Both 16. Copy of letter by Jagdish S/o Onkar Lal 131 Both 17. Copy of letter by Onkar Lal Keshu Ram 132 Both 18. Copy of inventory of cash found at the time of search at 133 Both assessee’s residence 19. Copy of inventory of cash seized at the time of search 134 Both 20. Copy of Trading and P&L A/c of assessee’s liquor 135 Both business 21. Copy of sales register 136 22. Copy of ledger account of purchases made between 137-140 Both 01.04.2016 to 31.03.2017 23. Copy of bank statement showing fees payment made for 141 Both Rs.50,000/- 24. Copy of challan for payment of composite fees 142 Both 25. Copy of ledger account of godown rent in assessee’s 143-144 Both books of accounts along with rent agreement 26. Copy of confirmation of accounts of Mudit Goyal 145 Both 27. Copy of challan for payment of Godown Issue Fees 146 Both 28. Copy of ledger account of salary in assessee’s books of 147-149 Both accounts 29. Copy of ledger account of shop expenses in assessee’s 150 Both books of accounts 30. Copy of ledger account of shop rent in assessee’s books 151-153 Both of accounts along with rent agreement 31. Copy of challan payment made to District Excise Officer, 154 Both Kota 32. Copy of ledger of transportation in assessee’s books of 155-160 Both accounts 33. Copy of statement of assessee dt. 15.02.2018 & 161-194 Both 16.02.2018 recorded during post search proceedings 34. Statement indicating sale bill of agricultural produce 195 Both found in search 35. Document of award received to assessee’s wife on 196-202 Both acquisition of the orange plants 36. Copy of CBDT Circular dated 11.04.1955 203-204 Both
The ld. AR of the assessee stated that the single issue which is common in this appeal is offering the additional income at the time of assessment proceeding is correct or not. The assessee explained that the investment so made in the agricultural land was of the same source of agricultural income for which all the details of holding of land, copy of Khashara Girdavari, Statement indicating crop grown in each agricultural land owned by the assessee, statement indicating net agricultural income over the years along with the certificate of Patwar Mandal certifying the per bigha crop grown and copy of letter of Upaj Mandali Samiti showing the selling price. All that evidence was ignored and unappreciated. Even at the time of recording of the statement while explaining the source of investment the assessee vide question no. 24 (APB-104) stated that the investment was out of the agricultural Income. As regards the supportive evidence to authority. The assessee vide page 39-68 filed all the copies of Khasara Girdawari of agricultural produce from AY 12-13 to 18-19. Assessee submitted all the documents post search as listed in the paper book so as to support the agricultural income. Thus, the investment so made was out of that agricultural income and evidence to the other source of income was found during the search. Even the assessee corrected the disclosure of agricultural income before the completion of assessment and also filed the related documents to support that income. When the matter carried to ld. CIT(A) in the remand report the assessee submitted all the explanation but the same was not considered by the ld. AO only on the ground that the assessee was having huge agricultural income but was not disclosed while filling the regular ITR. The assessee for the first time claimed that the investment so made was out of the agricultural income in the assessment proceeding by filling the revised computation of income. Thus, ld. AO appreciate that the assessee has placed on record all the details related to the agricultural income but the same was not considered because the same was only disclosed in the assessment proceeding. The document so filed were not disputed even the details regarding receipt of the subsidy for growing the 840-orange plant and bills for the sale of those oranges in the remand proceedings. Even the ld. CIT(A) has not commented upon the documents so placed on record but simply confirmed the addition merely on the reason that the return filed u/s. 139(1) and 153A the assessee did not disclosed the correct income. The assessee could not filed any plausible reason for not revising the claim of exempt income while filling in the return of income u/s. 153A of the Act. Thus, the findings of the lower authority are without considering the submission so filed by the assessee and purely based on surmises and conjectures.
10. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). She vehemently argued that in the search unexplained investment was found. The assessee in the return of income filed u/s. 139 and 153A declared the same agricultural income, when the explanation on the investment was called for he submitted the revised income computation claiming that the investment so made was out of the exempt agricultural income earned by the assessee. Thus, the claim of the assessee vide revised computation is just to shelter the assessee unexplained investment thus, ld. CIT(A) rightly hold that without filing the computation of income. The assessee has not filed any basis of claiming such revision and so the claim of the exempt income so claimed cannot be considered.
We have heard the rival contentions and perused the material placed on record. Vide ground no. 1 raised in the the assessee disputed the finding of the ld. CIT(A) in confirming the addition of Rs. 5,59,890/- u/s 69 of the Act on account of alleged unexplained investment in purchase of agriculture land by not accepting the explanation of assessee that the source of same was out of agriculture income of Rs. 3,12,998/- earned during the year. That claim was rejected merely on the ground that assessee has not disclosed the enhanced agriculture income in the return filed in response to notice issued u/s 153A of the Act but has disclosed the same in assessment proceedings u/s 153A which cannot be considered as admissible and the claim of the assessee the amount of Rs. 3,00,000/- which was also from saving made from the agriculture income. income from business, agriculture and other sources. He has filed the income tax return regularly. A search was conducted on assessee on 15.11.2017at the premises of the assessee. In that proceeding loose papers, proof of investment made in the assets etc. were found. That records specifically reveals that assessee made investment in purchase of agriculture land, vehicle, construction of residential house, advance given for purchase of immovable property, cash found, loans and excess stock & over sale of Kota stone.
12.1 Statement of the assessee was recorded on 15.11.2017 where in reply to Q. No.24 (PB 104) when required to explain the source of investment in house construction, he stated that same is out of the savings of agricultural income/ from business. Post search proceedings the assessee furnished the details of agricultural land owned by him (PB 39- 68), certificate of Patwari regarding yield per bigha of crop grown (PB 69), year wise sale price of the crop & orange grown (PB 70-71), order of Deputy Director, Horticulture, Reni Bag, Kota regarding subsidy granted to the assessee on the orange plant (PB 72) and the affidavit of various customers to whom oranges were sold (PB 73-90). On that basis, the total agriculture income statement was filed to ADIT(Inv.), Kota (PB 91-93), percentage of the holding of the assessee on that land for kharif and Rabi crop taken by the assessee. On this statement of agriculture income, statement of assessee was recorded on 15.02.2018 & 16.02.2018 where assessee in reply to Q. No.11 (PB 169-171) stated that source of various investments in agriculture land is out of the agriculture income earned by him which was not fully disclosed in the return and thereby surrendered such agricultural income for tax. Further assessee in reply to Q. No.12 (PB 171-172) stated that the agriculture sales slip found in search represent his agriculture income but in respect of agriculture income earned from the garden no sales slip was prepared. When the notice was issued u/s. 153A of the Act assessee filed the return of income on 30.06.2018 declaring same total income and agricultural income which was filed in original returns of income. While search assessment while explaining the source of investments made the assessee jotted down the income and filed the corrected computation of income wherein the additional agricultural income was disclosed for which the source was already explained in the post enquiry therefore, the source of investment cannot be considered as unexplained. The assessee explained that all the investments are made out of agriculture income not disclosed in the return and thus filed revised was disclosed for the all the block year as tabulated herein below:-
AY Actual Agriculture Agriculture income income (in Rs.) declared in return (in Rs.) 2012-13 3,12,998/- 40,000/- 2013-14 4,11,020/- 40,000/- 2014-15 4,48,257/ 40,000/- 2015-16 6,50,405/- 40,000/- 2016-17 8,02,086/- 58,642/- 2017-18 46,14,596/- 1,94,562/- 2018-19 52,73,503/- - Total 1,25,12,865/- 4,13,204/- 12.2 In support of the revised agricultural income so claimed the assessee supported income by filling the following documents / evidences:-
(i) Copy of Khasra Girdawari (ii) Statement indicating crop grown in each agriculture land. (iii) Document of subsidy received on growing of orange plants (iv) Statement indicating net agriculture income in various years (v) Certificate from Patwar Mandal certifying the per bigha crop grown (vi) Copy of letter from Shree Dev Traders & Krishi Upaj Mandi
Samiti showing the selling price of oranges and crops agricultural income in the returns filed u/s 153A for respective financial years due to lack of knowledge. The AO, however, rejected the revised computation of agriculture income by holding that no evidences or documents related to agricultural land such as actual yields from crops, sale of these crops, etc. were found in the search. Further assessee could not produce any reliable documentary evidence in support of source of agricultural income and the returns filed u/s 153A of the Act was filed almost after 5 months after the date of statements made by assessee on 15.02.2018. Thus assessee was having sufficient time to consider and calculate his actual agricultural income and declare the same in return filed u/s 153A of the Act which he failed to do and thereby he made the addition of the additional agricultural income claimed by the assessee which was available before the assessee for making the investment. Ultimately, ld. AO made the addition for all the years as tabulated herein below:
AY Particulars of investment Amount (Rs.) 2012-13 Investment in purchase of agricultural land 5,59,890/- 2014-15 Investment in purchase of agricultural land 2,88,820/- 2015-16 Investment in purchase of agricultural land 3,71,330/- 2016-17 Investment in purchase of motor cycle 1,25,000/- 2017-18 Investment in purchase of agricultural land 4,20,300/-
37 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT 2018-19 Investment in construction of residential house, loan 74,86,599/- to Rani Stone Supplier, Advance to Radhey Shyam, purchase of car, unexplained cash, stock of polished and rough kota stone and difference in sales and opening stock Total 92,51,939/- 12.4 When the matter carried before the ld. CIT(A) he based on the evidence so placed on record called for the remand report from the AO vide his letter dated 18.10.2023. Ld. AO in the remand report (PB 28-29) accepted that assessee owns 42 bigha of agriculture land, khasra girdawari shows the various crops grown by the assessee. In the remand proceeding the assessee filed detailed submission before Ld. CIT(A) on the remand report of AO (PB 30-36). Reference was also made to the order of Hon’ble Settlement Commission in Salaf Group cases where the additional agriculture income not shown in the return but offered before the Hon’ble Commission was accepted. However, the Ld. CIT(A) at Para 4.6 of the order for AY 2012-13 at Pg 25-32 confirmed the addition made by AO by holding that agriculture income is exempt from tax and therefore no purpose is served by not showing correct income in the return filed by the assessee. The claim is only afterthought to avoid tax liability. Further exemption which was not claimed in the return filed cannot be claimed in assessment proceedings u/s 153A. Reliance was placed on certain revenue and therefore fresh claim was not considered as allowable u/s 153A of the Act only because assessee was found in possession of some investment, source of which was not accounted, fresh claim of agriculture income being based on the factual examination of the documents was not considered. The fact that the assessee received subsidy for growing 840 orange plants was placed on record were also not disputed, from that orange plant assessee was in receipt of Rs.82,32,000/-. To support that receipt agreement made with the parties for selling them was filed and the assessee’s wife Antara Devi received compensation of Rs.89,68,192/- on acquisition of land & 298 orange plants. However, the contention of assessee was not accepted by holding that the facts & documents proved that assessee was having huge agriculture income but the same was neither fully declared in the regular return nor in the return filed u/s 153A.
Merely on that reason the claim of agriculture income even though was verifiable from the documents filed but the same was not considered as allowable merely on account of the fact that the claim of additional exempt income cannot be considered without filling the claim in the return of income and to support that contention revenue relied upon the decision of Hon’ble Supreme Court in case of Goetz India Ltd. Vs. CIT [ 284 ITR 323]. controverted nor considered as not reliable when the same were admitted and considered as additional evidence in the remand proceedings. There is not finding of the ld. AO or that of the ld. CIT(A) that claim of agricultural income is not duly supported by the evidence. All the records filed are third- party evidence and should not be disregarded. The revenue advanced the reasons for rejecting the claim of the assessee based on the decision of apex court in the case of Goetz India Ltd. (supra). The assessee in the submission on the remand report has explained that how the decision of Goetz India Ltd., supports the case of assessee which has been accepted by Ld. CIT(A) in as much as he has not taken any adverse view with reference to the decision of Hon’ble Supreme Court in case of Goetz India Ltd. Based on the facts on the case on hand it is pertinent to note that the Hon'ble Supreme Court in the case of Goetze (India) Ltd. has observed that its decision is limited to the power of the assessing authority to admit new claim made during the course of the assessment proceedings and does not impinge on the power of the Income-tax Appellate Tribunal. The courts in various judicial precedents have held that a taxpayer may raise additional claims before the appellate authorities i.e. Commissioner of Income tax (Appeals) CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] court); CIT v. Gokuldass & Co. [2002] 122 Taxman 849/253 ITR 633 (Rajasthan High Court) or Income tax Appellate Tribunal National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383 (Supreme Court); Jute Corpn. of India Ltd. v. CIT [1990] 53 Taxman 85/187 ITR 688 (Supreme Court); Pruthvi Brokers & Shareholders (P.) Ltd. (supra); Orissa Cement Ltd. v. CIT [2001] 117 Taxman 625/250 ITR 856 (Delhi High Court); Ooppootil Kurien & Co. (P.) Ltd. v. CIT [2003] 132 Taxman 530/[2004] 266 ITR 409 (Kerala High Court) and these appellate authorities have the powers to consider the claim raised by the taxpayer. From the above discussions, it may be observed that even if a taxpayer fails to make claim in the return, the same may be made by filing a revised return or during assessment/appellate proceedings.The similar view was taken by the Hon’ble Gujarat High Court in the case of Principal Commissioner of Income-tax-1 v. Babubhai Ramanbhai Patel [ 84 taxmann.com 32 (Gujarat) ] held that
Before us learned counsel for the revenue placed heavy reliance on the provisions contained in sub-section (3) of Section 139 to contend that an assessee who wishes to carry forward any loss must file a return under sub-section (3) within the time permitted and only upon which the same would be treated as return under Section 139(1) of the Act. Counsel for the revenue submitted that when no return in terms of sub-section (3) of Section 139 claiming carry forward or set off loss was filed, such claim cannot be subject matter of a revised return. Had the assessee filed such return, the possibility of revising such return on finding any error would arise.
41 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT 5. We may notice that under sub-section (1) of Section 139, every person whose income for the previous year exceeds the maximum amount not chargeable to tax, is required to file a return before the due date. Sub-section (3) of Section 139 provides that any person who has sustained a loss and claims that the loss should be carried forward would file a return of loss within the time prescribed under sub- section (1) and thereupon all the provisions of the Act shall apply as if it was a return under sub-section (1) of Section 139 of the Act. Under sub-section 4 of Section 139, a person who has not furnished a return within the time allowed under sub-section (1) may still furnish a return at any time before the end of the relevant assessment year or before the completion of the assessment whichever is earlier. Sub-section (5) of Section 139 provides that any person having furnished a return under sub-section (1) or sub-section (4) discovers any omission or a wrong statement therein, he may furnish a revised return any time before the expiry of one year from the end of relevant assessment year or before the completion of the assessment whichever is earlier.
Sub-section (5) of Section 139, therefore, gives right to an assessee who has furnished a return under sub-section (1) or sub-section (4) to revise such return on discovery of any omission or a wrong statement. Such revised return, however, can be filed before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. This is precisely what the assessee did while exercising the right to revise the return. Sub- section (5) of Section 139 does not envisage a situation whereupon revising the return if a case for loss arises which the assessee wishes to carry forward, the same would be impermissible. In terms, sub-section (5) of Section 139 allows the assessee to revise the return filed under sub- section (1) or sub-section (4) as long as the time frame provided therein is adhered to and the requirement of the revised return has arisen on discovery of any omission or a wrong statement in the return originally filed. Accepting the contention of the revenue would amount to limiting the scope of revising the return already filed by the assessee flowing from sub-section (5). No such language or intention flows from such provision. 6.1 The Allahabad High Court in case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236, in the context of the Income Tax Act, 1922 held that the assessee is given a right to file a correct and complete return if he discovers an error or omission in the return filed earlier. The assessment can be completed only on the basis of the correct and complete return. The earlier return, after a revised return has been filed, cannot form the basis of assessment although it may be used to indicate the conduct of the assessee. There is a clear distinction between a revised return and a correction of return. Once a revised return is filed, the original return must be taken to have been withdrawn and substituted by a fresh return for the purpose of assessment.
The Madras High Court in the case of CIT v. Periyar District Co-operative Milk Producers Union Ltd. [2004] 266 ITR 705/137 Taxman 364 held that once the assessee had filed a return claiming carry forward loss under sub-section (3) of 42 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT Section 139, a revised return could be filed in respect of such a return. We are conscious that we are not directly concerned with such a situation. 8. In view of the above discussion, we do not find any error in the view of the Appellate Tribunal. Tax appeal is, therefore, dismissed.
12.6 The bench also noted that out of the total agriculture income of Rs.1,25,12,865/- earned during AY 2012-13 to 2018-19, agriculture income of Rs.41,00,863/- was from sale of crop. Whereas agriculture income of Rs.84,12,002/- was from sale of oranges. In respect of sale of crop assessee has furnished evidence of cultivation in form of Khasra Girdawari and the yield & value of crop is determined based on the report of Patwari and Krishi Upaj Mandi Samiti.
12.7 In respect of sale of oranges plants were purchased from Deputy Director, Udhyan, Reni Bagh, Kota in FY 2013-14. For growing plants of oranges and purchase of tractors assessee received subsidy of Rs.2,73,757/- (PB 72) during FY 2013-14 to 2015-16. The orange fruits on the plants grow after 3 years of plantation and thus the orange plants planted during FY 2013-14 to 2015-16 started giving fruits in FY 2016-17 & 2017-18 which was also mentioned in the Khasra Girdawari. The orange fruits were sold to various persons during AY 2017-18 & 2018-19 for which the affidavits of these persons were filed [ PB 73-88. The amount received on sale of oranges for Rs. 85,32,000 as detailed here in below :-
Khasra Name of Address AY AY Total No. person 2017-18 2018-19 Badri Singh Beedmandi, Kota 217 Biram Lal 99, Narayanpura, 6,60,000 7,40,000 14,00,000 Beedmandi, Kota Guman Ward No.11, Singh Narayanpura, 218 Beedmandi, Kota 13,19,000 14,63,000 27,82,000 Om Nath Ward No.8, Nathan Mandi, Suket, Kota- Madan Beedmandi, Suket, Kota Singh 219/273 Nand Lal Ward No.8, Nathan 6,60,000 7,40,000 14,00,000 Yogi Mandi, Nayagaon, Aranya Khurd, Kota Prabhu Nathan Mandi, Suket, Nath Kota Jagdish Beedmandi, Suket, 24 Ramganjmandi, Kota 13,90,000 15,60,000 29,50,000 Bal Chand Ward No.8, School ke pass, Nathan Mandi, Suket, Kota Total 40,29,000 45,03,000 85,32,000 12.8 Thus, the fact of agriculture income of Rs.1,25,12,865/- was duly verifiable from the documentary evidence on record which was also accepted by AO in the remand report and therefore the observation of Ld. CIT(A) that factual examination of the document relating to agriculture income was not adversely commented.
12.9 Considering all these aspect as discussed herein above now the fact that whether the assessee in assessment proceedings u/s 153A the assessee can claim the source of investment from the agriculture income not disclosed in the return filed u/s 139/ 153A or not. It is submitted that reassess the total income of six preceding years of the date of search and for the AY relevant to the date of search. The cases relied by the Ld. CIT(A) is with reference to new claim of deduction or allowance during assessment/ reassessment u/s 153A. In the present case, assessee is not making any new claim of deduction or allowance. The claim of assessee is that it has earned agriculture income which was not fully disclosed in the return and such undisclosed agriculture income was available as the source of investment found in search. Therefore, the observation of Ld. CIT(A) that the exemption which was not claimed in the return cannot be considered to explain the source of investment is not as per law. We get support to this view from the decision of Hon’ble Karnataka High Court in case of Canara Housing Development Co. Vs. DCIT (2015) 114 DTR 162 where the Hon’ble Court at Para 10 of the order held as under:-
Sec. 153A of the Act starts with a non-obstante clause . The fetters imposed upon the AO by the strict procedure to assume jurisdiction to reopen the assessment under ss. 147 and 148, have been removed by the non-obstante clause with which sub-s. (1) of s. 153A opens. The time-limit within which the notice under s. 148 can be issued, as provided in s. 149 has also been made inapplicable by the non-obstante clause. Sec. 151 which requires sanction to be obtained by the AO by issue of notice to reopen the assessment under s. 148 has also been excluded in a case covered by s. 153A. The time-limit prescribed for completion of an assessment or reassessment by s. 153 has also been done away with in a case covered by s. 153A. With all the stops having been pulled out, the AO under s. 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by s. 153A, by even making 45 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under s. 143(1) or 143(3) of the Act, the AO is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the AO is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of s. 153A is there should be a search under s.
Initiation of proceedings under s. 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under s. 132, the said proceeding shall abate. If such proceedings are already concluded by the AO by initiation of proceedings under s. 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under s. 153A, however, the AO has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by s. 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under s. 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Reopened means to deal with or begin with again. It means the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or/and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order.
12.10 The bench also noted that the agriculture income is included for the purpose of calculation of tax. Therefore, it is incorrect to presume that agriculture income do not suffer any tax in as much as because of inclusion of agriculture income for calculation of tax, the other heads of income of an assessee gets taxed at higher slab rate. An agriculture income not declared in the return or declared lower in the return than what is actually earned is also undisclosed subject to assessment u/s 153A. Such undisclosed agriculture income is not a case of making a claim for deduction and therefore the decisions relied by the Ld. CIT(A) are not applicable on the facts of the present case. At the same time such undisclosed agriculture income can be a source of investment found in search. The Settlement Commission in case of Saraf Mineral/Arpit Mineral/Tejmal Jain/Gautam Kumar Jain/Mohd Sahid/Mohd. Tosif/Mohd. Aslam/Mohd Aalam/Mohd. Akil Khan vide order dt. 24.02.2023 at Point No.8, Para 8.1 to 8.3, Pg 11-12 of the order observed as under:-
“8. Agricultural Income 8.1 In the SOF, it has been stated that the investments in properties were made out of agriculture Income part of which is declared in the return of income and part not declared. Accordingly, the agriculture income not disclosed in the return is estimated considering the factors mentioned in para 6.3 below and the same is offered in their respective Settlement Applications. The details of agricultural income estimated, agricultural income shown in the returns of income and the income offered in the SOF are as under: Name of Total Agricultural income shown Agricultural income not the Agricultural in return shown in return but offered applicant income in SOF estimated AY AY AY Sh. 2012-13 to 30,75,339 2012-13 to 12,82,820/- 2012-13 to 17,92,519 Tejmal 2018-19 2018-19 2018-19 Jain Sh. 2012-13 to 21,85,136 2012-13 to - 2012-13 to 21,85,136 Gautam 2017-18 2017-18 2017-18 Kumar Jain Sh. 2012-13 to 1,01,56,689 2012-13 to - 2012-13 to 1,01,56,689 Mohd. 2017-18 2017-18 2017-18
Sahid Mohd. 2012-13 to 40,56,287 2012-13 to 2,50,765 2012-13 to 38,05,522 Tosif 2017-18 2014-15 2017-18 Sh. 2012-13 to 36,27,516 2012-13 to 1,39,322 2012-13 to 34,88,194 Mohd. 2017-18 2013-14 2017-18 Aalam Sh. 2012-13 to 59,30,860 2013-14 to 4,55,612 2012-13 to 54,75,248 Mohd. 2016-17 2016-17 2016-17 Akil Khan Mohd. 2012-13 to 25,36,817 2013-14 to 3,18,086 2012-13 to 22,18,731 Shakhi 2016-17 2016-17 2016-17
8.2 The PCIT submitted that the applicants have failed to establish that the income shown above have been earned from agricultural activity. The applicants have not filed any proof of reliable documents/evidences of agricultural yields realised and sale proceeds by selling any of quantum of such agricultural products to any adatiya in the market etc. It is the stand of the applicants that they are not in a position to establish whether the investment/expenses were met out of agricultural income or kota stone business in the absence of documentary evidences. The PCIT has claimed that the agricultural income disclosed by the applicants is not a true and full disclosure and the entire scheme of earning such income is a sham and after thought. 8.3 The applicants in their replies submitted that they have estimated the agricultural income considering agricultural land holdings, Khastra/Girdwari report of Patwari, crop grown, yield of crop and average sale rate of the crop. Further, the ownership of agricultural land and the crop grown on it were supported by documentary evidences and the same was not disputed by the PCIT. No evidences were found during the search to prove that the applicants have other sources of income for making investment in immovable/movable properties. The applicants Sh. Gautam Kumar Jain and Sh. Mohd Sahid have not disclosed agricultural income in their returns for AYs 2012-13 to 2017-18 and however they have offered Rs. 21,85,136/- and Rs. 1,01,56,689/- for these AYs respectively in their settlement Applications.” It was pointed out also that the Settlement Commission in the absence of complete evidence accepted 50% of the income declared as agriculture income by giving following finding at Para 25.1 & 25.2 of the order:-
“25.1 In respect of individual applicants, we see that certain agricultural income has been offered to tax in their settlement applications, either for the first time or in addition to the agricultural income already offered in the regular returns of income. All the applicants have sought to explain certain part of undisclosed investments in stock, movable and immovable properties to be out of such agricultural income now offered in the settlement applications. The CIT(DR) drew our attention to the fact that the agricultural income offered is just based on average yield rates and is without any regard for the season, soil conditions, vagaries of nature etc that would affect the crop yield. It was argued that in the absence of quantitative details, estimation of agriculture income submitted by the applicants was hypothetical and deserved to be rejected as an afterthought.
25.2 We have given careful consideration to the issue at hand. It appears that the applicants have introduced agricultural income in the settlement applications in an attempt to explain the sources of undisclosed/unexplained investments unearthed during the search. We find this to be self serving story and do not find any need for these applicants to suppress agricultural income in their regular returns as agricultural income is exempt under section 10(1). We are inclined to concur with the Department that agricultural income is a make-believe story and is clearly an afterthought. At the same time, the applicants have produced evidences regarding ownership of agricultural land; however, no evidence whatsoever has been produced to prove that such agricultural land has been subjected to agricultural activity resulting in huge quantum of agricultural income as has been claimed by the applicants in their settlement applications. In the circumstances, we hold that 50% of the investments sought to be explained through agricultural income as per SOF to be out of undisclosed sources. Such unexplained investments of 50% will attract the provisions of Sec. 69 of the Act. Section 115BBE shall apply as applicable in the relevant AYs. Considering the facts and circumstances of the case, it is deemed fit that penalty u/s 271(1)(c) read with explanation 1 r.w.s 245H(1) for AYs 2012-13 to 2016- 17 and u/s 271AAC r.w.s 245H(1) for AYs 2017-18 to 2018-19 (as applicable) is leviable in these cases. The levy of penalty is considered separately in this order.”
Therefore, when the revenue accepted the view of the settlement commission that the undisclosed agriculture income can be a source for explaining the investment found in search the same cannot be denied to the assessee. As submitted in the submission after considering the agriculture income vis-à-vis the investment found in search, the source of investment is fully explained as tabulated hereunder and therefore, there is no reason to sustained the addition which was fully explained as sourced from agricultural income :-
Particulars/ AY 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 (Openin g) Past savings 3,00,00 53,108 4,64,12 6,23,56 9,02,640 15,79,726 57,74,022 0 8 5 Agriculture 3,12,99 4,11,02 4,48,25 6,50,40 8,02,086 46,14,596 52,73,503 income 8 0 7 5 Investment 5,59,89 - 2,88,82 3,71,33 1,25,000 4,20,300 74,27,089 made 0 0 0 Closing 53,108 4,64,12 6,23,56 9,02,64 15,79,726 57,74,022 36,20,436 Balance 8 5 0 In the light of the discussion so recorded we do not find any reason to sustain the addition so made as per provision of section 69 of the Act in the hands of the assessee and therefore, we direct the ld. AO to delete the same.
Based on the above observation ground no. 1 raised by the assessee in stands allowed. Ground no. 2 being general in nature does not require any finding and as regards the ground no. 3 the assessee has not raised any contention before us and therefore, we do not consider it for educative in nature.
Resultantly the appeal filed by the assessee in ITA no. 931/JP/2024 stands allowed.
The bench noted that the ground of appeal raised by the assessee and facts of the case in for A.Y. 2014-15, 933/JP2024 for A.Y. 2015-16, and 934/JP/2024 for A. Y. 2016-17 are similar with that of the grounds of appeal raised by the assessee in ITA no. 931/JP/2024 for assessment year 2012-13. Therefore, it is not imperative to repeat all the facts and finding so given by us again in the appeal of the assessee in ITA 934/JP/2024 for A. Y. 2016-17 and the decision taken by us in ITA no. 931/JP/2024 for assessment year 2012-13 shall apply mutatis mutandis to that three appeal of the assessee for A.Y. 2014-15, 2015-16 & 2016-17.
Based on this observation the appeal of the assessee in ITA no.
932/JP/2024, 933/JP2024 and 934/JP/2024 stands allowed.
Now, we take up appeal of the assessee in for A.Y 2017-18. In this appeal, the assessee has raised following grounds: -
“1. The ld. CIT(A) has erred on facts & in law in confirming the addition of Rs 4,20,300/- u/s 69 of the Act on account of alleged unexplained investment in purchase of agriculture land by not accepting the explanation of assessee that the source of same is out of agriculture income of Rs 46,14,596/- earned during the year on the ground that assessee has not disclosed the enhanced agriculture come in the return filed in response to notice issued us 153A of the Act but has disclosed the same in assessment proceedings /s 153A which is not admissible.
2 The Ld. CIT(A) has erred on facts & in law in confirming the trading addition of Rs. 9,45,887-by applying the n.p. rate of 8% on the alleged undisclosed turnover of liquor business of Rs. 1,18,23,601/- by invoking section 44AD of the Act ignoring that in the return turnover is mistakenly shown at Rs.96,84,679 against the correct turnover of Rs.2,15,08,280/- on which income declared is Rs. 7,74,775/- supported by books of accounts.
3 The Ld. CIT(A) has erred on facts & in law in not allowing the set off of the alleged trading addition against the alleged unexplained investment resulting into double addition and further erred in taxing the alleged investment u/s 115BBE of the Act
4 The appellant craves to alter, amend & modify any ground of appeal
15. The bench noted that the issue raised vide ground no 1 is similar to the one raised by the assessee in ITA no. 931/JP/2024. Therefore, it is not imperative to repeat all the facts and findings given by the bench and the decision taken by us in while dealing with the ground no 1 of that appeal shall apply mutatis mutandis to the ground no. 1 raised in ITA no. 935/JP/2024. Thus, ground no. 1 raised by the assessee in this appeal stands allowed.
16. Now coming to ground no. 2 raised by the assessee, the brief facts related to this ground are that as per the ITR filed, the assessee has shown total turnover of Rs. 96,84,679/- from liquor business and shown profit u/s 44AD considering 8% NP of Rs. 7,74,775/-. During the assessment proceeding the assessee was asked to submit the details and documents in this regard and in reply assessee submitted P&L account of the wine business, as per that account assessee had shown NP of Rs. 7,74,775/- @ 3.6% of the total turnover of Rs. 2,15,08,280/-. Therefore, there was difference of RS. 1,18,23,601/- (2,15,08,280-96,84,679) in turnover as shown in ITR and as found during assessment proceeding. Since the got his books audited as per provision of section 44AB of the Act.
Therefore, net profit of Rs. 7,74,775/- offered by the assessee which come 3.6% was not acceptable to ld. AO. Considering that facts of the case, net profit was calculated @ 8% of total turnover Rs. 2,15,08,280/- which comes to Rs. 17,20,662/- and since the assessee has already offered profit of Rs. 7,74,775/- the difference of Rs. 9,45,887/- (17,20,662-7,74,775) was added to the total income of the assessee treating the difference as undisclosed profit from wine business.
Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
Ground No. 2 5.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this case, the AO noted that as per ITR filed, the assessee has shown total turnover of Rs. 96,84,679/- from liquor business and shown profit u/s 44AD considering 8% NP of Rs. 7,74,775/-. The assessee has submitted P&L account of the wine business. As per P&L Account assessee had shown NP of Rs.7,74,775/- @ 3.6% of the total turnover of Rs.2,15,08,280/-. Therefore there is difference of Rs. 1,18,23,601/- (2,15,08,280- 9684679) in turnover as shown in ITR and as found during assessment proceeding.
As the assessee has shown less turnover of Rs.1,18,23,601/- and also no audit has been done of his books of accounts as per provision of section 44AB of the IT Act. Therefore net profit of Rs. 7,74,775/- as shown by the assessee @ 3.6% is not acceptable. Considering the facts of the case, net profit is calculated @ 8% of total turnover Rs.2,15,08,280/- which comes to Rs. 17.20,662/-. As the assessee has shown net profit of Rs.7,74,775/- the difference of Rs.9,45,887/- (17,20,62-7,74,775) is added to the total income of the assessee treated as undisclosed profit from wine business. Per contra the appellant stated that the profit of Rs.7,74,775/- declared by assessee was on turnover of Rs.2,15,08,280/- but turnover was wrongly mentioned in the return at Rs.96,84,679/-, AO on the other side has accepted this turnover of the assessee amounting to Rs.2,15,08,280/- but did not considered the expenditure of Rs. 2,07,33,505/- incurred on this turnover. The said expenses are debited to profit & loss account and are incurred wholly and exclusively for the purpose of his business and supported by bills and vouchers. The facts of the case are considered. The books of accounts of the assessee are not audited. The assessee himself declared profit @8 per cent as per provisions of section 44AD of the Income Tax Act. When AO found that the actual turnover is more than declared in the return of income, then the AO applied the rate of profit as per provisions of 44AD of the Income Tax Act which is as per the provisions of Income Tax Act. If the assessee wanted to show less profit then the assessee should have got his books of accounts audited. It is not done by the assessee. In these circumstances, no fault is found in the addition made by the AO. The addition made by the AO of Rs. 9,45,887/- is therefore found to be justified and upheld. This ground of appeal is treated as dismissed.”
18. Aggrieved from the said finding of the ld. CIT(A) the assessee preferred the appeal before this tribunal on raising there ground no. 2 in this appeal. The ld. AR of the assessee in support of this ground filed the detailed written submission as consolidated submission reproduced while dealing with the appeal of the assessee in ITA no. 931/JP/2024. In addition, that written submission the ld. AR of the assessee vehemently argued that the assessee has filed all the details in support of the that profit and loss the profit at Rs. 17,20,662 then the due taxes in the form of composite fees for an amount of Rs. 9,75,000/- in any case is required to be deducted from the estimated profit if the same is reduced the profit comes to Rs. 7,45,662/- whereas against that the assessee has offered the income of that business at Rs. 7,74,775/- which is higher and no addition is warranted.
Per contra, ld. DR relied upon the finding recorded in the orders of the lower authority. She vehemently argued that the assessee has not reported the correct income, did not get the books of accounts audited and therefore, the claim of the assessee not in accordance with law.
We have heard the rival contentions and perused the material placed on record. As is evident that the assessee while filling the ITR for the year under consideration reported the turnover of Rs. 96,84,679/- from liquor business and offered the income as per provision of section 44AD of the Act, considering income at 8% of Rs. 7,74,775/- [ 96,84,679 * 8 % ].
Assessee in the assessment proceeding submitted Profit & Loss account wherein the wine business turnover of Rs. 2,15,08,280/- was reported therefore, ld. AO estimated the income @ 8 % on that turnover and added facts of the case, net profit was calculated @ 8% of total turnover Rs. 2,15,08,280/- which comes to Rs. 17,20,662/- and since the assessee has already offered profit of Rs. 7,74,775/- the difference of Rs. 9,45,887/- (17,20,662-7,74,775) was added to the total income of the assessee treating the difference as undisclosed profit from wine business. When the matter carried before the ld. CIT(A) he has confirmed the addition on the ground that the assessee has not get his books of accounts audited. The assessee himself disclosed profit @ 8 % declaring less turnover when the assessee caught with the higher turnover he cannot show less profit and thereby he justified the addition. The bench noted that arguments of the ld. AR of the assessee that though the assessee has not got his books of account audited but from the same profit and loss account filed ld. AO or that of the ld. CIT(A) did not dispute any of the claim of the assessee and therefore, the profit declared cannot be disputed. Alternatively, ld. AR argued that in any case the taxes and levy so paid are required to be reduced from the estimate of profit of Rs. 17,20,662/- and the assessee undisputedly paid a sum of Rs. 9,75,000/- as composite fees for the year 01.04.2016 to 31.03.2017 [ APB-142] as the sales is inclusive of indirect tax and the same was not disputed if the same get reduced from the estimated ] as against that profit so arrive the assessee has already offered the profit at Rs. 7,74,775/- which is better than what is to be taxed. Thus, looking to this aspect of the matter the assessee cannot be denied the credit of indirect taxes so paid by the assessee and if that is considered the income offered by the assessee is higher and therefore, we are of the considered view that no addition to that income of Rs. 7,74,775/- is required to be made in the hands of the assessee. Considering this observation ground no. 2 raised by the assessee stands allowed. Ground no. 3 being consequential does not require our finding. Ground no. 4 being general and ground no. 5 for which the assessee does not advanced any argument it becomes educative in nature.
In the results the appeal of the assessee in ITA no.935/JP/2024 stands allowed.
Now, we take up appeal of the assessee in for A.Y 2018-19. In this appeal, the assessee has raised following grounds: -
1. The Ld. CIT(A) has erred on facts & in law in confirming the addition of Rs.74,27,089/- u/s 69/69B of the Act on account of alleged unexplained investment in purchase of car (Rs.1,00,000/-) unaccounted investment in construction of residential house (Rs. 9,40,000/-), unexplained advance given to Radhey Shyam for purchase of immovable property (Rs.4,65,000/-), unexplained cash found (Rs.3,50,000/-), unexplained loans (Rs.6,27,177/-) and excess stock
57 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT & over sale of Kota stone (Rs. 49,44,912/-) by not accepting the explanation of assessee that the source of same is out of agriculture income of Rs.52,73,503/- earned during the year and out of past agricultural income on the ground that assessee has not disclosed the agriculture income in the return filed in response to notice issued us 153A of the Act but has disclosed the same in assessment proceedings u/s 153A which is not admissible. 2 The Ld. CIT(A) has further erred on facts & in law in considering the unaccounted investment in construction of residential house at Rs.9,40,000/- as against Rs.7,48,966/- claimed by the assessee. 3 The appellant craves to alter, amend & modify any ground of appeal
4. Necessary cost be awarded to the assessee.”
22. The bench noted that the issue raised vide ground no 1 is similar to the one raised by the assessee in ITA no. 931/JP/2024. Therefore, it is not imperative to repeat all the facts and findings given by the bench and the decision taken by us in while dealing with the ground no 1 of that appeal shall apply mutatis mutandis to the ground no. 1 raised in ITA no. 936/JP/2024. Thus, ground no. 1 raised by the assessee in this appeal stands allowed.
23. Now coming to the ground no. 2 raised by the assessee the brief facts related to the dispute are that the assessee was constructing a residential house at Beedmandi, Suket, Teh. Ramganjmandi, Kota. During the search & post search proceedings, he was asked about the sources of such construction expenses which were incurred for new house. During the post search proceedings, the assessee had stated that total expenses date of search. Out of the total expenditure of Rs. 31,00,000/-, an amount of Rs. 15,61,000/- had been paid from the known & declared sources of income from his HUF, which was recorded in the books of account of his HUF's. For remaining expenses, the assessee stated during the post search proceedings on 16/02/2018 by submitting the details of Rs.15,39,000/- for which he also had produced list of pending bills of construction expenses. Out of this balance amount which was still unpaid was for Rs.15,39,000/-, the assessee has offered for taxation of Rs. 9,40,000/- treating the same as investment made during the current financial year which had incurred out of books and from unaccounted/ unexplained sources. In the assessment proceeding ld. AO noted that the assessee has not included the said amount in return filed by him on 31.08.2018. During the assessment proceeding, the assessee was asked to explain the reason for the same. In response the assessee submitted a reply on 12.12.2019 on this issue where in he contended that total unpaid bills as on the date of search was Rs. 7,90,034/ in place of Rs. 5,99,000/- and offered Rs. 7,48,966/- as undisclosed income of the assessee as it was not recorded in the books of accounts. Further the assessee contended that the undisclosed income of Rs.7,48,966/- used for the submitted revised agriculture income of Rs. 52,73,503/- in place of Rs. NIL/- as declared in his return. Ld. AO considered this submission of the assessee but not found convincing as the assessee has not submitted any documentary evidences in support of expenses incurred for cultivating the crops and selling the crop yields in the mandi. In absence of all these documents the revised computation filed by the assessee was not considered/accepted. Therefore the contention of the assessee that he had earned income from agriculture activities was not found convincing.
Therefore, the amount of investment made by the assessee for the construction of house i.e. Rs.9,40,000/- as offered by the assessee during search action was added to his total income treated as unexplained investment u/s 69 and tax is charged as per provisions of section 115BBE of the IT Act.
Aggrieved from that finding of the assessing officer the assessee carried the matter before the ld. CIT(A) he confirmed the addition because the assessee disclosed that amount in the statement u/s. 132(4) of the Act but assessee has not adopted the disclosure while filing the return of income. based on the written submission that the unrecorded expenditure on construction was Rs.7,48,966/- as against Rs.9,40,000/- offered during the search. Accordingly, AO be directed to consider the correct unaccounted investment in construction at Rs.7,48,966/- as against Rs.9,40,000/- considered by him.
On the other hand, ld. DR relied upon the finding recorded in the orders of the lower authority.
We have heard the rival contentions and perused the material placed on record so far as the ground no. 2 is concerned the brief facts as emerges from the records are that during the course of search proceeding assessee in his statement u/s 132(4) dt. 17.11.2017, in reply to Q. No.36 of (PB 108) stated that the total expenditure incurred on the construction of residential house was Rs.31,00,000/- out of which Rs.15,61,000/- was recorded in the books of Dheeraj Singh Sisodiya HUF. Out of the balance amount of Rs.15,39,000/-, payment against some material & labour was pending and therefore he admitted that Rs.9,40,000/- (31,00,000- 15,61,000-5,99,000) invested out of his current year business and other explained that the unpaid amount was Rs.7,90,034/- (PB 111) which was paid by cheque out of the housing loan taken from State Bank of India.
Thus, the correct unrecorded expenditure was worked out at Rs.7,48,966/- (31,00,000-15,61,000-7,90,034). However, AO without considering the same considered the unrecorded expenditure in construction at Rs.9,40,000/- since assessee has offered this amount in his statement u/s 132(4).
When the matter carried before the ld. CIT(A) he confirmed the unrecorded expenditure in construction at Rs.9,40,000/- on the basis of statement recorded u/s 132(4).
Before us the ld. AR of the assessee argued that in the statement u/s 132(4), assessee has not specified the amount of unpaid construction expenditure but only on estimation offered the unrecorded construction expenditure at Rs.9,40,000/-. In fact, the unpaid amount was Rs.7,90,034/- (PB 111) as informed to the bank and ultimately the same was paid by cheque out of the housing loan taken from State Bank of India. The details of unpaid expenditure of Rs.7,90,034/- detailed herein below:
Name of the party Bill No. Amount Paper Book Panchwati Tiles and 131,132,134 1,69,562/- 112-114
62 to 936/JP/2024 Sh. Dheeraj Singh Sisodiya vs. DCIT Granite Jagdish Building 78,75,87,79,53,55,56, 1,92,972/- 115-130 Material Supplier 60,63,66,100,96,94,92, 91 & 104 Jagdish S/o Onkar Lal 02/17-18 2,02,500/- 131 Onkar Lal Keshu Ram 01/2017-18 2,25,000/- 132 Total 7,90,034/- Thus, the unrecorded expenditure on construction can be added at Rs.7,48,966/- as against Rs.9,40,000/- offered during the search on estimated basis. Accordingly, ld. AO is directed to add the correct unaccounted investment in construction at Rs.7,48,966/- as against Rs.9,40,000/-. In the result the ground no. 2 raised by the assessee is partly allowed.
In the result the appeal of the assessee in is partly allowed.
Order pronounced in the open court on 28/01/2025.