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Facts
The assessee is aggrieved by an order of the CIT(A) which partly allowed their appeal against an assessment order. The assessment order was passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961, for AY 2012-13, making additions for unexplained investment and treating agriculture income as income from other sources.
Held
The Tribunal held that the CIT(A) was justified in accepting the claim regarding cash withdrawals to the extent of Rs. 36,51,816/-. However, the Tribunal found that the CIT(A) should not have rejected the claim for agriculture income solely based on the sale of onions, and the remaining sum of Rs. 5,48,550/- should have been considered as agricultural income.
Key Issues
Whether the additions made by the Assessing Officer for unexplained investment and for treating agriculture income as income from other sources, as partly confirmed by the CIT(A), were justified. The dispute also concerns the admissibility of additional evidence and the assessee's failure to provide certain documentation.
Sections Cited
147, 143(3), 69, 234A, 234B, 234C, 271(1)(c), 148, 142(1), 46A
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ORDER \ PER: Narinder Kumar, Judicial Member, Assessee-appellant is feeling aggrieved by order dated 24.09.2024, passed by Learned CIT(A), NFAC, Delhi u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), whereby appeal filed by the assessee against assessment order dated 20.12.2019, has been partly allowed.
Sh. Prem Chand Gupta vs. ITO Assessment order dated 20.12.2019 pertains to the assessment year 2012-13. The order was passed u/s 143(3) r.w.s. 147 of the Act. Thereby the Assessing Officer computed total income of the assessee as under:-
In Rs. Addition u/s 69 as unexplained investment 47,77,300 Agriculture income assessee as income from other 5,48,550 sources Total income 53,25,850 Rounded off to 53,25,850 This order is passed under section 143(3)/147of the Income-tax Act, 1961 at an income of Rs.53,25,850/- and agriculture income of Rs. 1,75,000/-.Interest w/s 234A, 234B and 234C of the I.T. Act are charged. Tax is calculated. Credit for pre-paid taxes, if any, is given after due verification. Demand Notice and challan are issued. Penalty proceedings for concealment of income u/s 271(1) (c) is initiated separately.”
As noticed above, in the operative part of the assessment order, the Assessing Officer observed that the assessment was being framed as regards income of Rs. 53,25,850/- and agriculture income of Rs. 1,75,000/- . In addition thereto, interest u/s 234A, 234B and 234C of the Act was also ordered to be charged. Tax was accordingly calculated. At the same time, penalty proceedings u/s 271(1)(c) of the Act, were also sought to be initiated separately on account of concealment of income.
Sh. Prem Chand Gupta vs. ITO 3. Ground No. 1 raised by the appellant before Ld. CIT(A) was that the assessment order was illegal. Learned CIT(A) rejected said grounds for the reasons recorded in the impugned order. It may be mentioned here that in the course of arguments before us, Learned AR for the appellant has not raised said ground or challenged the findings recorded by Learned CIT(A). Ist Addition By way of Ground No. 2 raised there, the assessee challenged addition of Rs. 47,77,300/- i.e. u/s 69 of the Act as regards unexplained investment. Having considered the material made available in the appeal, Learned CIT(A) was of the view that source of cash deposits to the tune of Rs. 36,51,816/- i.e. out of earlier cash withdrawals from bank, was acceptable. However, as regards amount to the tune of Rs. 20,77,800/- said to have been received by the assessee from other agriculturists, as loans and advances, Learned CIT(A) held that said claim of the assessee was unacceptable due to the reason that the assessee had failed to prove Sh. Prem Chand Gupta vs. ITO creditworthiness of lending parties by producing supporting evidence during remand proceedings. Ultimately, as regards said addition, Learned CIT(A) deleted part thereof i.e. to the extent of Rs. 36,58,816/- and confirmed framing of addition to the tune of Rs. 11,25,484/-. IInd Addition So far as ground No. 3 raised to challenge the second addition of Rs. 5,48,550/-, i.e. income claimed by the assessee from agriculture, but assessed by the Assessing Officer as income from other sources, Learned CIT(A) rejected the same for the reasons recorded therein and upholding the reasons recorded by the Assessing Officer.
In view of the part relief granted to the assessee, as regards first mentioned addition, the appeal was only partly allowed by Learned CIT(A),and the second addition was confirmed. That is how, the assessee is before this Appellate Tribunal.
Arguments heard. File perused.
Ist Addition Non filing of ITR by the assessee initially Sh. Prem Chand Gupta vs. ITO 6. As is available from the assessment order, and also not disputed by the assessee, initially no return of income was filed by him for the assessment year 2012-13. Department is said to have been received information that the assessee had entered into transactions with banking company for Rs. 47,77,300/-, but he had not filed return of income. That is how, approval was received from Ld. PCIT, Alwar vide letter dated 28.03.2019 and it led to issuance of notice u/s 148 of the Act to the assessee. It was followed by other notice u/s 142(1) of the Act, on 02.07.2019 to the assessee. Since, the assessee did not put in appearance on the given date, another notice u/s 142(1) of the Act was issued. It was thereupon on 23.07.2019, Learned AR for the assessee appeared and filed return of income for the assessment year under consideration, declaring income of Rs. 2,298/-. In addition thereto, agriculture income of Rs. 7,23,550/-was also declared. All this is not being disputed on behalf of the appellant.
Since above said amount of Rs. 47,77,300/- was not explained by the assessee, case was reopened u/s 147 of the Act, as noticed above.
Sh. Prem Chand Gupta vs. ITO As per claim of the department, during financial year 2011-12, the assessee had deposited the above said amount of Rs. 47,77,300/- in his bank account maintained with IDBI Bank, Alwar. In order to explain said deposit, in the course of assessment proceedings, the assessee claimed himself to be an agriculturist, even in the year under consideration. He also claimed not to have engaged in business activity during the said year. He further claimed to have not availed of any loan facility from anyone during the said year, but at the same time, pleaded that during the year, out of a sum of Rs. 21,37,100/-, he had received Rs. 16.32 lacs from various agriculturists. As regards, the above said claim and plea put forth by the assesse, the Assessing Officer called upon the assessee to produce documents as regards source of said cash deposits. Thereupon, the assessee filed books of accounts and certain affidavits. This factual position is not being disputed before us on behalf of the appellant. However, on behalf of the appellant, it has been submitted that the Assessing Officer and Ld. CIT(A) should have taken into consideration said affidavits of the agriculturists.
Sh. Prem Chand Gupta vs. ITO 8. In paragraph No. 6 of the assessment order, the Assessing Officer observed that as regards the source of cash deposits the assessee had no explanation. In the same paragraph, details of cash/credits in the bank account of the assessee were referred to. Same need not be reproduced for ready reference.
Having gone through the entries in the statement of bank account of the assessee, the Assessing Officer observed that the assessee had deposited cash from different cities, including Delhi, Faridabad, Kolkatta, Alwar. The Assessing Officer also relied on decision inRoshan Di Hatti Vs CIT (SC), 107ITR 938 and in the case of Kale Khan Mohammad Hanif Vs CIT (SC), 50ITR 1, and extracted following observations made therein as regards onus to prove source of a sum. The portion extracted reads as: "Onus of proving the source of a sum of money found to have been received by an assessee is on him. When the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source."
Sh. Prem Chand Gupta vs. ITO Assessing Officer observed that after deposit of the said amounts, the assessee had withdrawn said amount immediately i.e. soon after deposit(s). Accordingly, the Assessing Officer was of the view that the said cash deposits were not taken as loan by the assessee from agriculturists. He further observed that it was not believable that the said agriculturists spread in different cities of India preferred the assessee for the purposes of lending of money. Another reason recorded by the Assessing Officer, in para 7 of the assessment order is that on one hand, the assessee claimed himself to be an agriculturist and to have not availed of loans from any one, but, on the other hand, he pleaded to have availed of loan from agriculturists. As a result, while resorting to the provisions of Section 69 of the Act, the Assessing Officer made an addition of Rs. 47,77,300/-, to the income of the assessee. Record reveals that when the appeal came up before Learned CIT(A), he called for remand report from the Assessing Officer. Said remand report was also made available to the assessee for his response. The assessee submitted his response as regards the remand report, on 23.06.2024 and at the same time uploaded invoices regarding sale of agriculture produce and confirmations from the farmers.
Sh. Prem Chand Gupta vs. ITO 10. It may be mentioned here that in the remand report, Ld. AO recommended that the additional evidence submitted by the assessee be not admitted, as prayer of the assessee did not fulfill conditions mentioned in Rule 46A of Income Tax Rules. However, Learned CIT(A) was of the view that cash book of the assessee and affidavits of farmers were also there which were not considered by the Assessing Officer. As regards production of invoice of sale of agriculture produce, Learned CIT(A) observed thatno reasons were furnished by the assessee for their non production thereof before the Assessing Officer. Therefore, Learned CIT(A) called upon the assessee to put forth his response in this regard. However, the assessee did not respond to the said notice issued by Learned CIT(A) to explain non production of said invoice regarding sale of agriculture produce before the Assessing Officer. Accordingly, Learned CIT(A) was of the view that the additional evidence sought to be submitted by the appellant i.e. in form of invoice for sale of agriculture produce, could not be admitted in evidences. Before us, Learned AR for the appellant has challenged said addition to the tune of Rs.11,25,484/-while submitting that the assessee led supporting evidence during remand proceedings, but same was not Sh. Prem Chand Gupta vs. ITO considered for no valid reasons. The contention is that said evidence should have been considered for ascertaining the legality of the assessment order passed.
It is true that the assessee had not produced said invoices before the Assessing Officer, and also failed to explain their non production before Learned CIT(A), but the point to be considered by Learned CIT(A), before whom said invoices were produced, was as to whether same were or were not relevant for the adjudication of the issue. In suchlike matters, invoices of sale in proof of sale of produce would be relevant piece of evidence. In the given situation, when remand report was called for, the Assessing Officer, instead of raising of technical objection about non fulfillment of the provisions of Rule 46A should have conducted enquiry about the documents sent to him by Learned CIT(A). In the enquiry, Learned AO could call upon the assessee to secure presence of the concerned persons or himself summon the concerned persons to verify the genuineness of the documents and then submitted report to Learned CIT(A). But, no enquiry was conducted by the Assessing Officer, and Sh. Prem Chand Gupta vs. ITO rather, he submitted report reporting non fulfillment of the provisions of Rule 46A of the Rules.
While dealing with the Ist addition of Rs. 47,77,300/-, after going through observations made by the Assessing Officer, and taking into consideration failure on the part of the assessee to lend supporting evidence as regard source of cash deposit and amounts received from other agriculturist, Learned CIT(A) observed that the assessee had claimed in the appeal proceedings thatas regards cash to the tune of Rs. 47,77,300/-and in this regard, the assessee had relied on 3 items: Firstly, that there were withdrawals of Rs. 36,51,816/-from the bank; Secondly that Rs. 20,77,800/-were by way of loans and advances,Thirdly, that there was an opening cash balance of Rs. 6,61,375/-.
Learned CIT(A) discussed each of the 3 items Item of Rs. 6,61,375/- 12. As regards the figure of Rs. 6,61,375/-, Learned CIT(A) observed that the assessee had failed to submit balance sheet and other supporting evidences and further that as regards the income earned in the assessment year 2011-12, he had failed to furnish cash flow statement of Sh. Prem Chand Gupta vs. ITO previous year. While so observing, Learned CIT(A) did not accept said claim of the assessee. In the course of arguments, Learned AR does not dispute non production of the abovesaid documents before the Assessing Officer. When said documents were not produced before the Assessing Officer, even Ld. CIT(A) was fully justified to make above observations and in rejecting the claim of the assessee. Learned AR has submitted that having regard to the previous cash balance of Rs. 6,61,375/- i.e. for the year 2011-12, no such addition could be made. Having regard to the material available on record and the facts recorded in the impugned order by Learned CIT(A), it cannot be said that the assessee had failed to explain this much amount, calling for any addition. Therefore, this addition deserves to be set aside. We order accordingly. 2nd item of Rs. 36,51,816/- 13. As noticed above, as regards second item of Rs. 36,51,816/- i.e. cash withdrawals, Learned CIT(A) accepted the claim put forth by the assessee, and rejected the reasons recorded by the Assessing Officer in rejecting the same.
Sh. Prem Chand Gupta vs. ITO In this regard, Learned CIT(A) was of the view that the Assessing Officer had not pointed out any instance or evidence regarding utilization of cash withdrawn by the assessee or that the amount withdrawn was not available with the assessee for being again deposited in his bank account. Consequently, Learned CIT(A) accepted the claim of the assessee regarding source of cash deposits i.e. by way of cash withdrawals, to the extent of Rs. 36,51,816/-.Department has not challenged said relief granted by Learned CIT(A) to the assessee. Item of Rs. 20,77,800/- 14. As regards third item of Rs. 20,77,800/-, Learned CIT(A) did not accept the claim of the assessee that said amount was received by him from other agriculturists by way of loan and advances. For this, he recorded the reason that the assessee had not established creditworthiness of the lending parties by producing supporting evidence during the Appellate proceedings. On consideration of the affidavits of the agriculturists, the Assessing Officer observed that only the evidence in the form of affidavits did not prove the genuineness of the transactions, identity and creditworthiness of the lending parties. Accordingly, the Assessing Officer observed that the Sh. Prem Chand Gupta vs. ITO assessee had failed to discharge onus on him and to prove source of cash deposits. Affidavit is also a form of evidence. It is true that the assessee could produce said agriculturists before Learned Assessing Officer, and he did not produce anyone of them. But, at the same time, the Assessing Officer could also secure presence of said agriculturists and production of record, if any available with them, for verification of the deposition contained in their respective affidavit. But, no such step appears to have been taken by the Assessing Officer. Therefore, the findings recorded by the authorities below on this aspect cannot be sustained so as to reject the claim of the assessee as regards loans and advances from the agriculturists. It is ordered accordingly.
2nd Addition Whether a case of agriculture income or income from other sources:- 15. As is available from the assessment order, the assessee, in his reply to the notice u/s 148 of the Act, claimed that during the year under consideration, he had agriculture income to the tune of Rs. 7,23,550/-.
Sh. Prem Chand Gupta vs. ITO In support of his reasons, the Assessing Officer relied on decision of 28 January, 1998, in the case titled as Sri Ranganatha Enterprises vs Commissioner of income Tax, 232 ITR 568 , wherein it was held that the burden lies on the assessee to prove that the income derived by him was agricultural income. When the assessee was called upon the lead evidence in support of the above said claim, he produced before the Assessing Officer land record, invoice regarding sale of agriculture produce, expenses incurred on cultivation, and Khasragirdavri for the relevant period. Abovesaid invoices included invoices regarding sale of onions to the tune of Rs. 1,75,000/-. As regards remaining agriculture income, the assessee, even after having claimed that he was having stock of Gwar crop of the value of Rs. 2,60,000/- and stock of Sarson crop of the value of Rs. 4,25,600/- during the relevant year. Assessing Officer observed that the assessee had failed to submit any document in the form of land record or Khasragirdawari to prove that he had sown such crops in his agriculture land.
Sh. Prem Chand Gupta vs. ITO As noticed above, the assessee had admittedly produced khasragirdawari as well. Therefore, it could not be said that no such document was produced to prove sowing of said crops in the land. The Assessing Officer observed that the assessee also failed to produce any evidence regarding expenditure. But, as noticed above, the Assessing Officer clearly mentioned about production of such record. Therefore, the same was required to be considered. As a result, the Assessing Officer did not believe claim of the assessee as regards stock of Sarson and Gwar crops, for want of proper evidence. It is a matter of common knowledge, that at times farmers do not sell the entire produce. They keep stock of some crops for personal use or future use or for sale in future. The Assessing Officer should have taken in to consideration these aspects as well. Therefore,the Assessing Officer should not have believed the claim of the assessee only as regards the sale of onions i.e. of the value of Rs. 1,75,000/-, but as regards the remaining sum of Rs. 5,48,550/- to the income of the assessee, as well.
Sh. Prem Chand Gupta vs. ITO Consequently, considering the agriculture income as claimed by the assessee, second addition deserves to be deleted. It is ordered accordingly. Result 16. For the foregoing discussion and findings, this appeal deserves to be allowed. Accordingly, same is allowed and the impugned order passed by Learned CIT(A) confirming the assessment order in part, is hereby set aside. Order pronounced in the open court on 27/01/2025.