MAHESHKUMAR NATVARBHAI PATEL,GANDHINAGAR vs. THE ITO WARD-3, GANDHINAGAR

The assessee has taken the following grounds of appeal:-

The brief facts of the case are that the assessee is an individual earning income from agricultural activities. The Ld. Assessing Officer received information that the assessee had deposited a sum of � 18,63,000/- in its bank account but had not filed return of income. Accordingly notice u/s 148 of the Income Tax Act, 1961 (Act) was issued requiring the assessee to filed return of income. In response to notice issued by the Department, the Page No. 3 Shri Maheshkumar Natvarbhai Patel vs. ITO assessee submitted copy of abstract of 7/12 for proof of ownership of land and submitted that assessee had availed loan of � 30,91,292/- against agricultural produce. However, Ld. Assessing Officer was not satisfied with the explanation regarding proof of agricultural income, expenses and details of crop grown in respect of assessee’s claim for cash deposit from loan taken for agricultural activity and redeposit of the loan out of that cash. Accordingly, Ld. Assessing Officer made an addition of � 33, 12,000/- being the cash deposited by the assessee in his bank account, to the total income of the assessee with the following observations:

In appeal, Ld. CIT(A) confirmed the addition made by the Ld. Assessing Officer with the following remarks:

Before us, the counsel for the assessee has submitted that the assessee did not file return of income under the bona fide belief that since the assessee is an agriculturalist and deriving only income from sale of agricultural produce, it is not under an obligation to file return of income. Further, the counsel for the assessee submitted that the addition made in reassessment proceedings are not sustainable for the reason that the revenue authorities did not appreciate the detailed evidence placed on record to show that the assessee was in receipt of agricultural income. The counsel for the assessee submitted that he has substantial agricultural land holding and drew our attention to pages 48 to 82 of paper book containing details of land ownership account of the appellant of different agricultural land ownership 7/12 and 8A account. Counsel submitted that the assessee is in possession of 80 bighas of land on which agricultural cultivation is done and this fact has not been disputed either by the Ld. Assessing Officer or the Ld. CIT(A). The counsel for the assessee submitted that during the impugned assessment year, the assessee obtained agricultural loan from Kotak Mahindra Bank of a sum of � 30,91,292/- against the agricultural produce, which was transferred to his aforesaid bank account on 07-04-2014. He drew attention to page 14 of the paper book being the “Kotak Mahindra Loan Sanction Letter” against Page No. 7 Shri Maheshkumar Natvarbhai Patel vs. ITO pledge of cold storage receipt. The counsel for the assessee submitted that Ld. Assessing Officer without application of mind treated the entire cash deposited with the bank as income of the assessee. The counsel for the assessee further drew our attention to pages 17-18 of paper book being the “Kotak Mahindra Agricultural Loan Account” and submitted that a perusal of the same would show that the sum of � 30,91,000/- was withdrawn as cash to mitigate the agricultural expenses. He further submitted, that the assessee was mainly engaged in potato production which was kept with cold storage for obtaining better price at the time of sale. It was the cold storage (Shiv Ganga cold storage) in which the stock of potato was stored which was maintaining books of accounts on behalf of the assessee. The counsel for the assessee drew our attention to pages 15 to 16 of the paper book being the complete potato sale with quantity, value and sale receipt during the year under consideration. The counsel submitted that Shiv Ganga cold storage charged rent at the time of sale on the basis of days the goods are kept in the cold storage. He drew attention to pages 23 to 45 of the paper book as proof of cold storage Contra confirmation and copy of Contra ledger account of the agricultural crop purchase parties along with copies of purchase business of potato purchased from the assessee. The counsel for the assessee also submitted that during the impugned financial year, the assessee received sale proceeds in cash and deposited the same with his Kotak Mahindra agricultural loan account, Naranpura Branch, Ahmedabad and made cash withdrawals of � 30,91,000/- from the same bank account to meet out the agricultural expenses and various purchases to be made. The counsel for the assessee also draw our attention to pages 46 to 47 of the paper book being the certificates issued by Sarpanch of Gram Panchayat regarding agricultural Page No. 8 Shri Maheshkumar Natvarbhai Patel vs. ITO produce of potato done by the assessee and regarding ownership of around 80 bighas of agricultural land held by the assessee. The counsel for the assessee submitted that in light of the above evidences placed on record, the addition of � 33,12,000/- is not sustainable in law and on facts in the instant case. In response, the Ld. Assessing Officer relied upon the observations of Ld. CIT(A) in the appeal order.

We have heard the rival contentions and perused the material on record. On the basis of documents produced before us, we find considerable force in the argument of the assessee that in the instant set of facts, no addition is called for. The assessee has substantial landholdings (approximately to the tune of 80 bighas) and this fact has not been disputed by the revenue authorities at any stage. Also, the assessee on the basis of his potato produce has secured loan from Kotak Mahindra Bank which was deposited in the bank account. The assessee has also produced before us details of potato produce grown during the year under consideration and has also produced certificates from the Sarpanch of Gram Panchayat as proof of land holding of around 80 bighas of agricultural land and also as proof of the fact that the assessee is an agriculturalist and is cultivating potato in winter. Further, the assessee has also shown details of potato produced during the impugned year and also demonstrated that the same have been kept in cold storage and sold subsequently at later date when the selling price is appropriate. It is against this stock of potatoes kept in cold storage that the assessee secured a bank loan from Kotak Mahindra Bank and it is this loan obtained from Kotak Mahindra Bank which was deposited in the bank account on the basis of which reassessment proceedings were initiated. From Page No. 9 Shri Maheshkumar Natvarbhai Patel vs. ITO the above facts, we are of the view that the assessee has been able to substantiate the source of deposits made in the bank account. On the basis of the above evidence and submissions of the counsel for the assessee, we are of the considered view that the entire evidence placed on record by the assessee has not been given due consideration and in the instant facts, the Ld. CIT(A) has erred in facts and in law in sustaining addition of � 33,12,000/- to the income of the assessee on account of alleged cash sale of potatoes.

In the result, the appeal of the assessee is allowed.