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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ( Conducted Through Virtual Court ) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT आयकर अपील सं./ITA No.1026/Ahd/2016 (�नधा�रण वष�/Assessment Year : 2010-11) Sahebsingh Bindrasingh The ITO बनाम/ Sengar HUF Ward-4(2)(4) Vs. 1361, Moti Vasan Sheri Ahmedabad Joshi No Khancho Saraspur Ahmedabad-380 001 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAKHS 0022 G .. (��यथ� / Respondent) (अपीलाथ�/Appellant) अपीलाथ� ओर से/ Appellant by : Shri Hardik Vora, Advocate ��यथ� क� ओर से/Respondent by: Shri V.K. Singh, Sr.DR
सुनवाई क� तार�ख/ Date of Hearing 04/01/2022 घोषणा क� तार�ख /Date of Pronouncement 27/01/2022 आदेश / O R D E R
This is an appeal filed by the assessee against the order of Ld. Commissioner of Income Tax(Appeals)-6, Ahmedabad [‘CIT(A)’ in short] vide order in CIT(A)-6/52/13-14 dated 25/01/2016 passed for the Assessment Year (AY) 2010-11 (As per Form No.36, the year of assessment has wrongly been mentioned as AY 2011-12).
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 2 -
The Assessee has raised following grounds of appeal:
The Ld.CIT(A) erred on facts and in law in confirming addition of Rs.16,00,000/- on account of alleged unexplained cash introduced in the capital account of Prop concern Pavan Associates. 2. The Ld.CIT(A) erred on facts and in law in confirming addition of Rs.1,20,000/- by treating part of agricultural income to be as income from undisclosed sources. 3. The Ld.CIT(A) erred on facts and in law in confirming disallowance out of depreciation and petrol expenses to the extent of Rs.36,203/- by treating the same to be personal in nature.
The brief facts of the case are that, the assessee is an HUF. It has filed its Return of Income on 13/06/2011 for AY 2010-11 declaring total income of Rs.9,36,577/- and the same was processed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The case was selected for scrutiny and notice u/s.143(2) of the Act was issued. After scrutiny, the assessment order u/s.143(3) of the Act was passed by the Assessing Officer on 14/03/2013 and has made additions/disallowances of Rs.17,56,203/- on account of various counts.
Regarding first two grounds of this appeal, Shri Hardik Vora, the Ld. counsel for the assessee, has challenged the addition confirmed by Ld. CIT(A) for (1) Rs. 16,00,000/- under Section 68 of the Income-tax Act, 1961 (in short 'the Act') on account of unexplained cash and (2)
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 3 - Rs.1,20,000/- by treating part of agricultural income to be as income from undisclosed sources, both these sums were introduced in the capital account of Proprietary concern M/s. Pavan Associates.
Brief facts of these two grounds are that during the scrutiny proceedings undertook by the Ld AO it was revealed that a sum of Rs. 19 Lacs was introduced as capital in its proprietary-concern Ms/ Pavan Associates by way of cash deposited. Thereafter, Ld AO requested the assessee to furnish source of cash deposit of Rs. 19 Lacs but upon non response by the assessee the Ld AO has issued a show cause letter to the Assessee on 01/02/2013, “requesting to show cause as to why the said cash deposit of Rs. 19 Lacs should not be added to your total income treating the same as your undisclosed income.”
In response the assessee replied and explained the source of cash in capital account as under:- (i) Withdrawal from his capital account with Pavan Associates of Rs.10,64,100/- (Rs.7 lacs on 08/02/2008) and withdrawal of Rs. 3 lacs on11/02/2008 which was credited into his HUF personal account.
(ii) Withdrawal of Rs.3 lacs from SB alc. no. 17072 standing in the name of Sabebsingh B. Sengar Individual.
(iii) Rs. 3 lacs agricultural income for the F.Y. 2009-10 relevant A. Y. 2010-11 which was not originally declared in the return of income. (iv) Remaining amount Rs.3 lacs from past saving from agricultural activities.
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 4 - 5.1. Assessee had further explained that such huge cash balances in personal account were kept, looking to the nature of its business activities i.e. transport activities for Government Agencies having delay in collection of business receipts. Also these transportation activities carry huge risk of vehicle damages and risk to human life on account of accidents.
5.2. Ld AO has not accepted the contention of assessee stating that the amount withdrawn in February 2008 of Rs.10 Lakhs was not utilized by the assessee in its day to day business by introducing the same in piece meal cash deposits for almost 14 months whereas routing business expenses like repair of vehicle, medical treatment etc. were met from the regular withdrawals from bank account of the assessee.
5.3. Further, the amount withdrawn from personal account of Karta of the HUF Mr. Sahebsingh B. Sengar, Individual. On 10/07/2007 was introduced as capital on 01/03/2010 i.e. after 31 months, the assessee could not provide any evidence to support of its contention.
5.4. Regarding, agricultural income of Rs. 3.00 lakhs from agricultural activities, which was declared by the assessee by way of filing a revised return of income during the assessment proceedings, also produced a copy of bill showing agricultural receipt of Rs. 3 lakhs along with proof of land holding. Ld AO has accepted the claim of assessee having agricultural receipt of Rs. 3.00 lakhs but had disallowed 40% of the amount i.e. Rs 1.20 lakhs being cost of cultivation relying on ration
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 5 - decided by the Hon’ble ITAT Ahmedabad Bench “D” vide ITA No. 2025/Ahd/2005.
5.5. Regarding, remaining amount of Rs. 3.00 lakhs, out of past saving from agricultural activities. Ld AO has mentioned that the assessee has never shown his agricultural income in any of his previous year’s ITR for rate purpose except first time by way of filing a revised return for the AY 2010-11, the year under assessment. Therefore, the Ld AO had not accepted the contention of the assessee having a sum of Rs. 3.00 lakhs as past savings are without any supporting evidence.
5.6. The Ld AO by stating that the assesses had failed to furnish any supporting evidence to explain the source of cash and thereby failed to prove the genuineness of the cash deposited in capital account.
5.7. The Ld AO has placed his reliance on the decision of the Hon’ble Calcutta High Court in the case of CIT vs. United Comm. And Industrial Co. Pvt. Ltd. Reported in 187 ITR 596 (Cal.), whereby, the Hon’ble Calcutta High Court has held that the primary onus lies on the assessee to prove the nature and source of credits in its account.
5.8. Hence, the ld AO has made an addition of Rs. 17.20 lakhs in respect of the first 2 grounds of this appeal.
Aggrieved by the assessment order of the AO, the assessee preferred an appeal before the ld.CIT(A) Ahmedabad and the same was
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 6 - dismissed by the Ld.CIT(A). And therefore this appeal filed by the assessee.
The ld. AR for the assessee has explained first 2 ground of the assessee’s case by taking me through the facts of the case by showing the submissions by way of paper-book at page No.33 of the paper-book having withdrawals of Rs.16,78,693/- for AY 2007-08. Entries were also shown as Cash receipt of Rs.7 lakhs and Rs.3 lakhs in February-2008 from the Proprietor HUF of M/s.Pawan Associates. The Ld.AR also explained that amount withdrawn during the year 2008 was kept with the HUF as a reserve fund to meet any contingencies like immediate repair expenses due to damage of vehicles, compensation for death or medical treatment of human beings due to accident immediate fund for medical treatment of employees, litigation cost, etc. As per the terms of agreement with AMC assessee has to provide uninterrupted flow of buses being essential services and looking to the nature of assessee’s business, assessee has to keep such cash funds in hand to cater its immediate needs.
7.1. The ld. AR further stated that out of the total agricultural receipt of Rs.3 lakhs, only 60% be treated as cash introduced in the business of the appellant and the balance of Rs.1,20,000/- be treated as expenditure incurred for agricultural activity. The Ld.AR submitted that the appellant has not incurred any expenses in the present case for earning agricultural income. Cultivation of the agricultural land of the Appellant is undertaken by a local farmer who shares receipts from sale of the
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 7 - produce in an agreed ratio with the appellant. As per the arrangement between the appellant and farmer, all expenses of crop cultivation are to be borne by the farmer and the appellant receives certain proposition of the sale proceeds of the cultivated produce. Consequently, agricultural receipt and income of the appellant are the same, in the absence of any agricultural expenditure.
Shri V.K. Singh, the ld.DR, on the other hand, has relied upon the orders of Revenue authorities.
I have duly considered the rival contentions and gone through the submissions carefully. As far as the first contention of ld.counsel for the assessee is concerned, that a sum of Rs.10 lakhs was withdrawn by the assessee in February-2008 and it was introduced as a capital in April- 2009, the Ld.AO has rejected the explanation of the assessee for source of capital contribution simply for the reason that there is a time gap of 14 months and this amount must have been used for different purpose. To my mind, it is quite difficult to dig out the intention of an individual and his behavior. Every person cannot be brushed with one paint only, i.e. the claim of the assessee has been rejected simply on the notion that cash must have been used by the assessee for some other reason. But this argument can be applicable in the same manner on behalf of the assessee that cash must have been kept in safe custody for any contingency and then it was deposited after a gap of 14 months. Therefore, to my mind, there is nothing in the possession of the Revenue to disbelieve this claim of the assessee. I accept the contention of the ld.counsel for the assessee
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 8 - and delete the addition to the extent of Rs.10 lakhs out of the total addition made by the AO on account of unexplained cash credit.
9.1. In other words, an addition of Rs.10 lakhs is deleted from the total addition of Rs.17,20,000/-. Thus, this ground of appeal is partly allowed.
9.2. The next aspect is that the assessee has shown agricultural income of Rs.3 lakhs out of that Assessing Officer has disallowed 40% on account of expenditure incurred by the assessee.
I have perused the records carefully. On perusal of the assessment order would reveal that the ld.AO did not dispute landholding owned by the assessee. He has not made any discussion on that point. He has also not disputed the earning of agricultural income. The Assessing Officer was of the view that for earning this income of Rs.3 lakhs, there must be some expenditure incurred by the assessee. But this opinion is an estimated opinion without investigating the facts, he applied yardstick of 40% as expenditure attributable to earning of agricultural income. I failed to understand from which provision of Income Tax Act he had attributed it. The case of the assessee is, that he has earned agricultural income on Crop Sharing Basis. In other words, all expenditure and labour input must be incurred by the person with whom assessee got the agricultural activity done. The Assessing Officer has not assigned any reason to disbelieve this aspect. There is no such standard disallowance provided in the Income Tax Act that whenever anybody claims agricultural income, then 40% would be disallowed out of them.
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11 - 9 - Therefore, I do not find any justification for making addition of Rs.1,20,000/-. This addition is deleted.
10.1 In other words, to be more specific under ground No.1, assessee has challenged the addition of Rs.16,00,000/- and under ground No.2 assessee has challenged the addition of Rs.1,20,000/-. Out of these two additions, only addition of Rs.6 lakhs is confirmed. In other words, addition out of Rs.16 lakhs, Rs.10 lakhs is deleted and the addition challenged under ground No.2 of Rs.1,20,000/- by treating part of agricultural income be as income as from undisclosed source is deleted. In this way, appeal of the assessee is partly allowed.
Regarding ground No.3, the ld. AR stated that the assessee has three motor cars and the same are in its business use. For personal use, assessee was using another car registered in personal name of the Karta of HUF and Two Wheeler registered in the name of his son. The copy of RC book of vehicles for the personal purpose are also produced to the Assessing Officer. Ld AO however have not appreciated the submission of the assessee and made an addition of Rs. 36203/- being 10% of the total expenses on vehicle under the head Depreciation and Petrol Expense aggregating to Rs.3,62,037/-. Also the appeal of the assessee in this regard with CIT(A) was dismissed.
I have duly considered the rival contentions and gone through the submissions carefully regarding Ground No3, the submissions and
ITA No.1026/Ahd/2016 Sahebsingh B. Sengar vs. ITO Asst.Year - 2010-11
- 10 - explanations given by the ld. AR for the assessee are justifiable and, hence, I allow this ground of appeal of the assessee.
In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 27/01/2022
Sd/- ( RAJPAL YADAV ) VICE PRESIDENT
Ahmedabad; Dated 27/01/2022 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-6, Ahmedabad 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 10.1.22/27.1.22 (dictation pad 12+ 7pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S … 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….27.01.22 7. Date on which the file goes to the Bench Clerk…………………27.01.22 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………