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Facts
The assessee declared total income and agricultural income for AY 2017-18. The Assessing Officer (AO) noticed a discrepancy in agricultural income compared to previous years and made additions on account of unexplained cash credits and disallowed certain agricultural income. The CIT(A) confirmed the AO's additions.
Held
The Tribunal deleted the addition of Rs. 5,17,797/- concerning AY 2016-17 as it was not picked for scrutiny and could not be disturbed without reassessment. For AY 2017-18, a part of the addition (Rs. 2,00,000/-) was upheld, and the remaining was deleted. The addition taxed at the enhanced rate under Section 115BBE was directed to be taxed at the normal rate as the provision was not retrospective.
Key Issues
Whether the additions made by the AO and confirmed by the CIT(A) on account of unexplained cash credits and agricultural income were justified. Applicability of Section 115BBE at an enhanced rate.
Sections Cited
68, 115BBE, 143(3), 234A, 234B, 234C, 234D, 271AAC, 274
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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
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 20.03.2024 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 follows: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.10,09,859/ on account of alleged unexplained cash credits u/s.68 r.w.s. 115BBE of the Act, while the appellant has properly adhered to every notice and direction of Ld. AO and has fully co-operated during the whole assessment proceedings.
2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in /AY.2017-18 Manjulaben Madhuben Hapania confirming the action of the Assessing Officer in making addition u/s.68 of the Income Tax Act without considering the documents/supporting evidences available on record and also considering opening cash balance as income and made addition u/s.68 of the Act.
3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in considering the submission made during the assessment proceedings u/s.143(3) and finalize the assessment without considering proof of agriculture income submitted during the course of assessment proceedings.
4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in rejecting the explanation and requisite documents submitted during the course of assessment proceedings, which were also duly supported by the bills, contra confirmation etc. submitted.
5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.5,17,797/- in AY 2016-17 u/s.68 of the Act and raised demand u/s.115BBE of the Act which is beyond the scope of the assessment proceedings.
6. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in levying interest u/s.234 A/B/C/D of the Act. To add further, the AO has also erred in law in levying penalty u/s.271AAC of the Act.
7. On the facts and in the circumstances of the case as well as the law on the subject, the case appellant craves for admission of addition evidence in the interest of natural justice and equity.
8. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper.
9. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
The facts of the case in brief are that the assessee filed her return of income for AY.2017-18 on 07.03.2018, declaring total income of Rs.2,38,920/- and agricultural income of Rs.6,92,062/-. The case was selected for complete scrutiny under CASS. The assessee submitted copy of ITR along with computation /AY.2017-18 Manjulaben Madhuben Hapania of income, profit and loss account, capital account, balance sheet, cash book and bank book etc. The assessee had deposited cash of Rs.11,43,500/- during 09.11.2016 to 30.12.2016 in her bank accounts, maintained with Axis Bank and The Varachha Co-op. Bank Ltd. She submitted that the same was from cash-on- hand and business receipts in cash. A show cause noticed was issued to the assessee on 10.12.2019, calling for the reply and explanation. The Assessing Officer (in short, ‘AO’) noticed that assessee had shown net agricultural income of Rs.6,92,062/- for AY.2017-18 and Rs.7,17,797/- for AY.2016-17. However, net agricultural income of Rs.1,32,825/-, Rs. Nil and Rs.50,000/- were declared in the returns of income filed for AYs.2013-14 to 2015-16. There was big difference in agricultural income shown in the returns of income filed after demonetization period and filed for earlier years. The AO allowed agricultural income of Rs.2,00,000/- each for AYs.2016-17 and 2017-18 and asked assessee as to why the excess amount of Rs.10,09,859/- (Rs.4,92,062 + Rs.5,17,797) should not be disallowed. The AO found that assessee had credited Rs.6,92,062/- with narration "Agricultural income" which is 60% of the gross receipts of Rs.11,53,438/-. The AO observed that the agricultural income for the year under consideration was neither reflected in cash book nor in the bank account. The assessee had shown Rs.6,92,062/- in the asset side with narration 'Other assets - Agricultural Income A/c’. The assessee was having agriculture land at B.No.23/2/1, Village - Anida, Taluka - Khambha, Dist. - Amreli, admeasuring area 14300 square meters. The AO estimated the agricultural income at Rs.2,56,041/- (1.43 X 3581 X 50) and after /AY.2017-18 Manjulaben Madhuben Hapania deducting agricultural expenses @ 40%, net income was calculated at Rs.1,53,625/-. Since the net agricultural income of Rs.1,32,825/- was declared in the return of income, the AO determined the agriculture income at Rs.2,00,000/- each for AY.2016-17 and 2017-18. The differential amounts of Rs.5,17,797/- and Rs.4,92,062/- were treated as unexplained cash credits u/s 68 of the Act and were taxed @ 60% u/s 115BBE of the Act. The AO assessed the total income of Rs.12,48,769/- against the returned income of Rs.2,38,910/-. Penalty proceedings also initiated by AO u/s 274 r.w.s. 271AAC of the Act.
Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The findings of the CIT(A) are at pages 5 to 7 of the appellant order, which are similar to the findings of AO in the assessment order. The CIT(A) observed that agricultural income was upped compared to last year but the tax-payer had to explain the source of such enhanced agricultural income. Since the taxpayer could not satisfactorily explain the source of such income, it was treated as unexplained income u/s 68 of the Act. The CIT(A) relied on the decision of Hon’ble Supreme Court in case of Durga Prasad More vs. CIT and Sumati Dayal vs. CIT, (1995 AIR 2109) and confirmed the addition made by AO. The CIT(A) concluded that the assessee has failed to explain the nature and source of differential agricultural income, which was rightly added u/s 68 of the Act. Hence, the CIT(A) dismissed the appeal of the assessee.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee /AY.2017-18 Manjulaben Madhuben Hapania submitted a paper book including the written submissions before AO, return and computation of income for AYs.2015-16 to 2017-18, agricultural land extract 7/12 and 8A and details of bank account and bank statements. The ld. AR submitted that the AO has added Rs.10,09,859/- which includes income of earlier AY.2016- 17, which has been processed u/s 143(1) of the Act and accepted by the Department. He submitted that in AY.2016-17 and 2017-18, assessee himself supervised agricultural operation, which yielded higher income. The ld. AR relied upon the following decisions of Co-ordinate Bench of ITAT, Surat: (i) Chandrakant Jashubhai Patel vs. ITO, (ii) Jehan Percy Variav vs. ITO, ITA No. 612/SRT/2024, (iii) Jayantibhai Dahyabhai Anghan vs. ITO, ITA No. 451/SRT/2024, (iv) Ishwarbhai Karshanbhai Patel vs. ITO, ITA No. 385/SRT/2024 and (v) Ashwinbhai Somabai Patel vs. ITO, ITA No. 34/SRT/2024.
On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of lower authorities.
We have head both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the ld. AR. It is seen that the AO has added Rs.5,17,797/- and Rs.4,92,062/- which pertain to differential agricultural income of AY.2016-17 and 2017-18 respectively. The AO has allowed agricultural income of Rs.2,00,000/- each in both these assessment years and the excess amount has been added to the total income. It is seen that the assessee had filed the return of income for AY.2016-17 wherein agricultural income Rs.7,17,797/- was declared. The same was processed u/s 143(1) of the /AY.2017-18 Manjulaben Madhuben Hapania Act and the case was not picked up for scrutiny. Therefore, the AO could have added the impugned sum by re-opening the assessment for AY.2016-17. However, he has allowed agricultural income of Rs.2,00,000/- and disallowed the remaining amount of Rs.5,17,797/-. In our considered view, income offered in the earlier year cannot be disturbed without scrutinizing the return by way of regular assessment or re-assessment u/s 143(3) or 147 of the Act respectively. Therefore, the addition of Rs.5,17,797/- is deleted. 7.1 As regards, addition of Rs.4,92,062/-, the AO has added it u/s 68 of the Act by holding that higher exempted agricultural income was declared only to explain the cash deposit during demonetization period. The appellant submitted that apart from her own agricultural holding, she had taken on rent the agricultural land of some other land owner, due to which more agricultural income was earned in the subject assessment year. The AO has examined such claim of assessee which is at page 8 to 10 of the assessment order. She has concluded that (i) no tenant details are available on government record, (ii) details of crop cultivated shows ‘Padtar’, which means no agricultural activity has been undertaken on the land and (iii) that there was no irrigation facility in the land. These findings have not been disproved by the appellant before CIT(A) or the Tribunal. Therefore, the plea of extra agricultural income cannot be accepted. However, we find that the assessee was also engaged in the retail trading business in the name of ‘Shreeji Paints & Ply’. The business address was Shop No.2, Plot No.14, Akshar Dham Society, Nr. Sarthana Jakat Naka, Opp. Navjivan /AY.2017-18 Manjulaben Madhuben Hapania Hotel, Surat – Kamrej, Katargam. Therefore, benefit of cash sales and debtors realization cannot be denied to assessee till the date of cash deposit. The appellant has relied on the decisions in cases of (i) Chandrakant Jashubhai Patel vs. ITO (supra), (ii) Jehan Percy Variav vs. ITO (supra), (iii) Jayantibhai Dahyabhai Anghan vs. ITO (supra), (iv) Ishwarbhai Karshanbhai Patel vs. ITO (Supra), and (v) Ashwinbhai Somabai Patel vs. ITO (supra) where similar issue has been decided in favour of assessee. Considering the above facts and the decisions (supra), we are of the considered view that disallowance of Rs.2,00,000/- would be sufficient to avoid possibility of revenue leakage. Accordingly, addition of Rs.2,00,000/- is upheld and the remaining amount is deleted. The ground is partly allowed.
So far as taxing the addition at the enhanced rate of tax u/s 115BBE is concerned, we find that provisions of section 115BBE of the Act was enacted on 15.12.2016 and hence cannot be applied for the year under consideration. The ld. AR has relied on various decisions which are placed in the paper book. We find that the Division Bench of this Tribunal in cases of Samir Shantilal Mehta vs. ACIT, in Arjunsinh Harisinih Thakor vs. ITO, in ITA No. 245/SRT/2021, Jitendra Nemichand Gupta vs. ITO, in ITA No.211/SRT/2021 and Sanjaybhai Mansukhbhai Patel vs. DCIT, in ITA No.869/SRT/2023; the Indore Bench in DCIT vs. Punjab Retail Pvt. Ltd., in ITA No.677/Ind/2019 and the Jabalpur Bench in ACIT vs. Sandesh Kumar Jain, in ITA No.41/Jab/2020 held that applicability of amended provision of Section 115BBE of the Act is not retrospective. There is no reason not to follow above decisions. Thus, the AO is