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Facts
The assessee declared agricultural income of Rs. 31,25,000/- but later stated it was Rs. 3,12,500/- due to a typographical error. The AO treated the difference of Rs. 28,12,500/- as undisclosed income. The CIT(A) upheld the addition, stating that a revised return should have been filed if the mistake was genuine and that the appellant's claim was an afterthought.
Held
The Tribunal admitted additional evidence regarding unsecured loans received by the assessee. It noted that this evidence was not considered by the lower authorities and that the power to admit additional evidence exists for substantial cause to ensure justice. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for fresh assessment.
Key Issues
Whether the addition of Rs. 28,12,500/- on account of alleged undisclosed income was justified, considering the assessee's claim of a typographical error in reporting agricultural income and the submission of additional evidence regarding unsecured loans.
Sections Cited
Section 250 of the Income-tax Act, 1961, Section 5 of the Income-tax Act, 1961, Section 139(5) of the Income-tax Act, 1961, Section 69A of the Income-tax Act, 1961, Section 270A of the Income-tax Act, 1961
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Before: SHRI PAWAN SINGH & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 22.08.2024 by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18.
The grounds of appeal
raised by the assessee are as under: “1. Whether on the facts and circumstances and in law, the Ld. Commissioner of Income-tax (Appeals) was justified in making addition under the head of income from other sources of Rs.28,12,500 where the subject addition does not fall within the scope of income as per Section 5 of the Act.
2. Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) was justified in making the addition of Rs.28,12,500 under the head of income from other sources on presumption/belief that the Appellant may have other sources of income as he was short of funds for carrying out business and personal expenditure.
/AY.2017-18 Takhatsinh F. Dodia 3. Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) was justified in making addition of Rs.28,12,500 on merely making a presumption that - no expenditure has been incurred to earn agriculture income.
Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) was justified in making addition of Rs.28,12,500 on the ground that tax rebate on agriculture income was deliberately claimed at higher amount.
Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) was justified in making addition of Rs.28,12,500 by disregarding the rectification/revise claim made by the appellant during the assessment stage as well as first appellate stage which was supported by legal document.
6. Whether on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) was justified in making addition of Rs.28,12,500 on the ground that -revise/belated return is not filed by the appellant.
7. Whether on the facts and circumstances of the case, the Ld. Officer was justified in making addition of Rs. 28,12,500 as unexplained money u/s 69A of the Act by passing separate rectification order dated 12.03.2024.
The appellant craves leaves to add, modify, amend or alter any grounds of appeal
at the time of, or before, the hearing of appeal.
9. It is prayed that the order of Commissioner of Income Tax (Appeals-NFAC) is set-aside.”
3. Brief facts of the case are that the assessee filed his return of income on 01.08.2017, declaring total income of Rs.2,69,760/- (claiming exemption on agriculture income of Rs.31,25,000/-). The case was selected for limited scrutiny under CASS to examine the issue of ‘agricultural income’. During the assessment, the assessee has shown agricultural income of Rs.31,25,000/- under the Schedule EI of the return of income. The Assessing Officer (in short, ‘AO’) requested assessee to furnish the details of ledger account of agricultural receipts, details of the agricultural holdings, documentary evidence/sale bills /AY.2017-18 Takhatsinh F. Dodia of agricultural commodities, purchase bill of raw crops, manpower, fertilizer bill, water bill, electricity bill, transportation charges etc. The assessee failed to furnish the requisite details as called for. The AO issued show cause notice and asked assessee as to why the agricultural income of Rs.31,25,000/- should not be disallowed. The assessee stated that his agricultural income was Rs.3,12,500/- instead of Rs.31,25,000/-. His tax consultant made mistake by mentioning one ‘Zero’ more while filing the return of income. TheAO did not accept explanation of assessee. The AO treated the alleged excess agricultural income of Rs.28,12,500/- [31,25,000 (-) 3,12,500] as undisclosed income. Hence, the AO made the addition of Rs.28,12,500/-. The AO assessed the total income of Rs.30,82,260/- against the returned income of Rs.2,69,760/-. Penalty proceedings u/s 270A of the Act was also initiated by AO.
4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) observed that if there was a genuine mistake in reporting the agricultural income, then the appellant should have filed his revised or belated return. As per section 139(5), if any person who has furnished return of income under sub-section (1) of section 139 discovers any omission or any wrong statement therein, he may furnish the revised return at any time before the end of the relevant financial year or before the completion of assessment whichever is earlier. From the details filed by the appellant in the Schedule EI, Column No.4, the gross agricultural receipts are reported at Rs.31,25,000/-. No expenditure had been claimed by the appellant on the agricultural income of /AY.2017-18 Takhatsinh F. Dodia Rs.31,25,000/-. Even if there was genuine mistake in reporting gross agricultural receipt, there should have been some expenditure figure i.e., as low as Rs.1,000/- to earn the agricultural income. The CIT(A) stated that the bank statement and affidavit were duly examined and he agreed with the conclusion of AO that shortage of funds is visible from the accounts of the appellant. The CIT(A) observed that claim of appellant that he had mistakenly declared agricultural income at Rs.31,25,000/- instead of Rs.3,12,500/- and the affidavit in this regard are clearly afterthought of the assessee. Hence, the CIT(A) confirmed the addition of Rs.28,12,500/- made by AO and dismissed the appeal of the appellant.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorised Representative (ld. AR) of the assessee filed a paper book containing 99 pages. He has submitted that pages 60 to 78 are submitted for the first time before the ITAT. These pages contain detail of confirmation, identity proof, PAN and returned of income of Chhatrasinh Jaysinh Thakor and Digvijay Fatehsinh Dodia, who have given unsecured loan of Rs.17,00,000/-, which is reflected in the bank statement of the assessee at page 18 of the paper book. The ld. AR submitted that the AO has wrongly concluded that assessee was short of funds and that assessee may be having any other source of income. He submitted that assessee received agricultural income of Rs.3,12,500/- only and not Rs.31,25,000/-. The agricultural income shown in the return was by mistake enhanced by putting one more zero to the /AY.2017-18 Takhatsinh F. Dodia actual agricultural income of Rs.3,12,500/-. Therefore, the addition of Rs.28,12,500/- is not justified. He further submitted that credit entries in the bank account for the entire year was Rs.20,80,603/- out of which Rs.17,00,000/- was received as unsecured loan from two persons, namely, Mr. Chhatrasinh Jaysinh Thakor (Rs.10,00,000/-) and Mr. Digvijay Fatehsinh Dodia (Rs.7,00,000/-). The ld. AR further submitted that the CIT(A) disregarded the genuine mistake in reporting of agricultural income. The rebate in computation of income and tax liability of Rs.8,37,500/- was system generated with no manual intervention. Higher claim of rebate is direct effect of the higher agricultural income mistakenly shown by the assessee. It was not a deliberate mistake by the Chartered Accountant to file the return. The ld. AR requested that the claim and mistake admitted by the appellant is supported by explanations and documents. He relied on the decisions in cases of National Thermal Power Co. Ltd. vs. CIT, (1998) 229 ITR 383 (SC), PCIT vs. Zydus Wellness Ltd., 87 taxmann.com 82 (Gujarat) and CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd., 349 ITR 336 (Bombay).
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities. He submitted that the assessee should have filed a revised return to correct the mistake in the original return of income.
We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the ld. AR.
/AY.2017-18 Takhatsinh F. Dodia The assessee has filed additional evidence regarding unsecured loan of Rs.17,00,000/- received from 2 persons for the first time before the Tribunal. The ld. AR submitted that though the bank statement had been given to the AO, which is at page 18 of the paper book, the credit entries had not been explained with confirmation, return of income and other details of the lenders. This additional evidence and the explanation of the assessee furnished before the Tribunal, have not been considered by the lower authorities. The Hon’ble Gujarat High Court in case of Saurashtra Salt Manufacturing Co. vs. CIT, (1967) 66 ITR 404 (Gujarat) held that the power conferred on the Tribunal is in the widest term, because the Tribunal can pass such order on appeal as it thinks fit. It could not be seen why the Tribunal cannot pass an order setting aside an assessment and directing AO to make fresh assessment after giving due notice to the assessee. Rule 29 of ITAT Rules, 1963 permits ITAT to admit additional evidence for any substantial cause. The intention behind the Rule is that the substantial justice should be done and the interest of justice should be the overriding the consideration. Therefore, in the interest of justice, we admit the additional evidence and set aside the order of CIT(A) and remand the matter to the file of AO for fresh assessment. The submission and evidences furnished by the assessee before the Tribunal may be considered by him after giving adequate opportunity of being heard. The AO may call further details as deemed fit after considering the facts and reply of the assessee. The assessee is directed to be more vigilant and diligent and to furnish all details and /AY.2017-18 Takhatsinh F. Dodia explanations as needed by the AO by not seeking adjournment without valid reasons. With these directions, the grounds of appeal raised by the assessee are allowed for statistical purposes.
8. In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 05/03/2025.