SHIVENDRA NAGOJIRAO PATANKAR,(HUF),KOLHAPUR vs. INCOME-TAX OFFICER, WARD - 1(2), KOLHAPUR

आदेश / ORDER

PER D. KARUNAKARA RAO, AM

This appeal is filed by the Assessee against the order of CIT(A)-1,

Kolhapur, dated 28-11-2017 for the A.Y. 2014-15. Revenue also filed the

Cross Objection justifying the order of CIT(A).

Cross Objections raised by the Revenue in CO No.53/PUN/2018 are

extracted here as under :

Grounds by Assessee :

“1. On the facts and circumstances of the case and in law the Ld.CIT(A) was not justified in confirming the addition made by the AO of Rs. 81,00,000/- rejecting the source explained as from agricultural income only. The addition be deleted. 2. On the facts and circumstances of the case and in law the assessee comes from a Royal Family. The assessee's forefathers were awarded agricultural lands by the then Rulers for their work done. The land holdings of about 250 Acres of land were in the possession of the assessee, and were under actual cultivation through the appointed tenants. The assessee earned sufficient agricultural income to explain the source of investment. The addition of Rs. 81 Lakhs was not justified. It be deleted. 3. On the facts and circumstances of the case and in law the facts show that the addition made by the AO of Rs. 81 Lakhs under section 68 of the Act was changed by Ld. CIT(A) invoking S. 292B as mistake and treating the same as under section 69 of the Act. The assessee has not maintained books of account and the bank account cannot be considered as his books of account. In view of this the addition confirmed by Ld. CIT(A) under section 69 is also not justified. It deserves to be deleted. 4. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in invoking S. 292B of the Act holding that it was mistake committed by AO. In fact and law the S. 292B applies when question comes and up when Return of Income is challenged as “invalid S.292B protects the validity of the Return of Income. The present issue is simply taxability of agricultural income and its deposits into bank account. Neither S.69 not S.68 applies. The addition is unsustainable. It be deleted. 5. On the facts and circumstances of the case and in law the facts show that the assessee coming from the Royal Family and having large holding of agricultural lands had no other source of income as he was not engaged in any other income earning activities. The only source was agricultural income. It is not proved otherwise. Therefore, the explanation

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of the assessee regarding source of deposits into bank account as from agricultural income be accepted and addition be deleted. 6. On the facts and circumstances of the case and in law the difficulties arose solely because the Advocate of the assessee who had appeared before Ld. CIT(A) could not explain the facts and law properly. The assessee was not properly represented before appellate authority. The assessee may be given one more opportunity to explain the points of law and facts by setting aside de-novo the order of the Ld. CIT(A) to assessing authority. 7. On the facts and circumstances of the case and in law the assessee was represented by Chartered Accountant before AO who was in fact not CA but a "Consultant". He did not attend properly before AO in assessment proceedings. On this count also the assessee deserves to be afforded one more opportunity so do complete justice to him.

Cross Objections by Revenue :

“1. On the facts and circumstances relating to addition of Rs.81,00,000/-, the CIT(A) erred in confirming the same u/s.69 instead of section 68 of the IT Act which was rightly done by the AO.

the Cross Objection, include that the assessee (is an HUF) and claimed

that the HUF is in an agricultural activity. Assessee earns an

agricultural income as well as income from other sources. Assessee, Mr.

Patankar Shivendra Nagojirao, is assessed as the Karta of the HUF.

Assessee filed the return of income declaring total income of

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Rs.4,97,210/- and the same was revised repeatedly. Details of the

income/revised income are given in tabular form in Page 2 of the

assessment order. In the scrutiny assessment, AO examined the bank

accounts of the assessee and found that there are huge cash deposits to

the tune of Rs.1,50,20,600/-. AO added the same u/s.68 of the Act.

Further, AO also added another sum of Rs.2,07,716/- on account of

undisclosed interest income as per the discussion given in Para No.6.1 of

the assessment order. At the end of the assessment proceedings, the

assessed income is determined at Rs.1,55,84,838/-.

Rs.1,50,20,500/- are that the assessee claims he has huge track of

lands. Assessee acquired these lands from the Royal families in the

past. Assessee filed relevant 7/12 extracts in support of the same. On

the cash deposit of Rs.1,50,20,600/-, the source of the said cash

deposits was the issue for scrutiny by the AO. Assessee filed the written

submissions stating that Rs.81 lakhs is the cash deposits out of

agricultural income and the balance of Rs.69 lakhs constitute cheque

entries received from Mr. Umesh V.Kashikar (Rs.34 lakhs) and Shri

Rakesh Mulchand Mehta (Rs.35 lakhs).

submission of the assessee include that the same constitute agricultural

income pertaining to the period of 5 to 10 years of agricultural activity in

the lands utilized by 250 to 300 cultivators of the lands. Further,

assessee submitted that Mr. Vinayak B. Bakare was managing the said

lands and he is authorized to receive the money towards rent/sale

produce from the said cultivators. On receipt, Mr. Vinayak B. Bakare

deposited the same into the bank accounts of the assessee with Vijaya

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Bank, Kolhapur. In response to AO’s query on the existence of any

agreement between the assessee and Mr. Vinayak B. Bakare and the

cultivators, the assessee furnished the copy of agreement dated 14-06-

2013. AO directed the scrutiny against Mr. Vinayak B. Bakare during

the assessment proceedings. Notice u/s.131 was issued and there is no

compliance. All attempts were made by the AO including employing the

services of the income tax inspector. Inspector was deputed to bring Mr.

Vinayak B. Bakare to income-tax office for examination. But the same

did not materialize as non-cooperation of Mr. Vinayak B. Bakare

continued. Eventually, the AO held that the cash deposits in the Vijaya

Bank, Kolhapur stand unexplained and made addition u/s.68 of the Act

on the bonafide of the said agreement. AO opined that the agreement

furnished by the assessee was not an authentic document. There are

some problems with the hand-writing and the contents of the document

contracts in many aspects. Eventually, the AO invoked the provisions of

section 68 of the Act. Infact, there is some mess in the deposit of said

cash originally in the capital gains account with the said bank and

subsequently into the normal bank account of the assessee.

lakhs include that the said amount was credited in the bank account

with narration ‘BY SUS RECEIPT DEPOSIT’. Like the sum of Rs.81

lakhs, this amount was also originally deposited in the capital gains

account scheme 1988 before the same is transferred to normal bank

account. Considering the assessee’s failure to demonstrate with

evidence the source of both the amounts, i.e. Rs.81 lakhs as well as

Rs.69 lakhs, the AO proceeded to make addition as unexplained cash

deposits amounting to Rs.1,50,20,500/-. Contents of Para Nos. 5.1 to

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5.6 contain the summary of the discussion and the reasoning given by

the AO in the assessment order.

Thus, it is a case of the Revenue that the assessee failed to

evidence the correctness of the arrangement between Mr. Vinayak B.

Bakare, the assessee and the cultivators qua the generation of exempt

agricultural income. Assessee failed to produce Mr. Vinayak B. Bakare

for examination and failed to demonstrate the existence of agricultural

income. As such, the documentary evidences furnished by the assessee

are not foolproof. Mr. Vinayak B. Bakare never cooperated with the

Investigation/Scrutiny of the AO.

include that the assessee reported earning of the interest income of

Rs.5,74,338/- and the TDS certificate differs both in earning of gross

income as well as TDS amount deducted by the banker out of the said

interest earnings. On finding the assessee furnished merely

Rs.3,66,612/- in the income tax return, for want of reconciliation, the

AO proceeded to make addition of Rs.2,07,716/- on account of different

amount between the gross interest income and the interest disclosed in

the return of income (Rs.5,74,338 – Rs.3,66,612/-) Contents of Para

Nos. 6.1 to 6.2 are relevant. While making the said addition of

Rs.2,07,716/- the AO considered the eligible deduction u/s.80TTA of the

Act relating to ‘deduction in respect of investment on deposits in saving

account’.

before the CIT(A). Assessee could not improve his case during the said

proceedings. After considering the written submissions of the assessee

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on one side and the obtaining of remand report from the AO on the

other, the CIT(A) partly allowed the appeal of the assessee after

considering the reasoning given by the AO in making the said additions.

To sum up, the CIT(A) confirmed the addition of Rs.81,20,500/- on

account of cash deposited in Vijaya Bank, Kolhapur and however,

granted relief of Rs.69 lakhs considering the fact that the said amount is

explained. In Para No.5.17, the CIT(A) gave the reasoning for granting

relief of the said amount of Rs.69 lakhs. CIT(A) appreciated the

confirmation letters of the two creditors, i.e. Mr. Rakesh Mulchand

Mehta and Mr. Umesh V. Kashikar. Notice u/s.131 of the Act, dated 04-

08-2016 issued to the Bank Manager, Vijaya Bank helped the assessee

to get the said relief.

finding of the CIT(A) that the assessee failed to prove that this amount

credited constitute agricultural income and assessee has also failed to

pass the tests envisaged by the Hon’ble Supreme Court in the cases of

CIT Vs. Siddharth J. Desai 139 ITR 628, Sarifa Bibi Mohamed Ibrahim

Vs. CIT 204 ITR 632, Mahavir Enterprises Vs. UOI 244 ITR 781 (Raj.).

Contents of Para No.5.16 of the order of CIT(A) are relevant.

assessee brought our attention to the paper book on facts as well as on

case laws and submitted that the assessee holds huge tracks of

Agricultural lands and therefore, is an agriculturist in HUF capacity.

The income so earned by him as Karta of HUF out of the lands constitute

genuine agricultural income. Therefore, the claim of the assessee qua

the sources of income for Rs.81 lakhs should be accepted. Further, Ld.

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Counsel for the assessee filed an affidavit of Mr. Vinayak B. Bakare,

dated 13-08-2018 and submitted that the same is being filed for the first

time before us and the claim of the assessee has support of the said

affidavit. Bringing our attention to the said affidavit, Ld. Counsel

submitted that Mr. Vinayak B. Bakare confirms the facts stated by the

assessee and volunteered to help the assessee to collect the agricultural

rent from the farms. Contents of the same can be verified by the AO in

remand proceedings if the Bench finds it necessary. Further, on the

applicability of the Hon’ble Supreme Court judgment in the case of

Sarifa Bibi Mohamed Ibrahim Vs. CIT 204 ITR 632 (supra), Ld. Counsel

submitted that assessee passes all the tests. Therefore, the explanation

given by the assessee about the sources should be accepted. Without

prejudice, Ld. Counsel submitted that considering the gaps on facts the

matter can be remanded to the file of AO for fresh examination of the

issues. Further, he submitted that the Cross Objection filed by the

Revenue basically strengthens the order of CIT(A) qua the applicability of

the provisions of section 292B of the Act. Thus, this Cross Objection

also indirectly relates to the addition of Rs.81 lakhs on account of cash

deposit.

order of CIT(A) is fair and reasonable in granting relief to the extent of

Rs.69 lakhs after considering the evidences furnished by the assessee.

Therefore, the Revenue is not in appeal on this issue. However,

regarding the confirmation of addition of Rs.81 lakhs on account of cash

deposits in Vijaya Bank, Kolhapur, the order of CIT(A) is fair and

reasonable and the same needs to be confirmed. Regarding the request

of the Ld. Counsel for the assessee for remanding the entire issue to the

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file of AO, Ld. DR strongly relied on the orders of AO/CIT(A). Referring to

the said Affidavit of Shri Vinayak B. Bakare, Ld. DR submitted that the

same constitutes a self-serving paper and hence, needs to be rejected

and dismissed.

and the paper book filed by the assessee before us. So far as the Cross

Objection filed by the Revenue is concerned, we find the same relates to

the decision of CIT(A) in confirming the addition of Rs.81 lakhs u/s.69 of

the Act in place of section 68 of the Act as invoked by the AO in the

assessment order. In the impugned order, CIT(A) held that such

changes in sections is permissible by the provisions of section 292B of

the Act. In any case, this issue relates to the addition of Rs.81 lakhs.

12.1 So far as the confirmation of said addition of Rs.81 lakhs is

concerned, we find there is need for bringing more facts on to the record.

There is a requirement of investigating into the fact of existence of 250 to

300 farmers who claims to have cultivated the assessee’s lands in the

hilly areas. Further, AO is required to investigate on the details of crops

grown on the hilly and rocky areas over the years. AO is also to

investigate the arrangement of these farmers giving rentals/sale

proceeds and the reasons for giving the same to Mr. Vinayak B. Bakare

on five yearly basis and not on the set market practice of annually or

half yearly.

12.2 Further, coming to the assertions made by Mr. Vinayak B. Bakare

in his affidavit, AO is directed to probe deeply into each and every claim

of Mr. Vinayak B. Bakare made in the affidavit. We find Mr. Vinayak B.

Bakare, has gone on record in stating that he has voluntarily offered

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himself for collecting/recovering the rent/sale proceeds from the farmers

and there is a requirement of knowing the reasons for such voluntary

act. This voluntary act of Shri Vinayak B. Bakare require deeper

scrutiny of facts.

12.3 As pronounced in the open court, Mr. Vinayak B. Bakare is

directed to produce himself before the assessing authorities for

examination during the remand proceedings, failing which, the AO is free

to take an adverse decision which has already taken in the first round of

the assessment proceedings. It is the case of claiming exemption

u/s.10(1) of the Act relating to ‘Agricultural income’ and the duty is cast

on the assessee to produce Mr. Vinayak B. Bakare and also to produce

evidences to prove that the cash payments received by Mr. Vinayak B.

Bakare are from the farmers and out of the agricultural activities, i.e.

from the 250 to 300 farmers who are using the assessee’s lands. It is

unfortunate that the assessee does not know the precise number of

farmers using his lands for agricultural activities. He should be specific

whether it is 250 or 300. He shall not quantify them the language of the

band of 250 to 300. Assessee is under the obligation to provide the

names precisely and updated addresses of the farmers for facilitating the

investigation by the AO/investigation wing of the Department, as the

case may be. It is also observed that it is a case of weirdness that the

amounts are received by assessee in lump-sum pertaining to the period

of 5 years. It is not the existing convention in the field of Agricultural

income. The same goes against the norms of the agricultural practices

that the tiller pays the rent annually or half yearly. AO is directed to

examine all these aspects and pass a speaking order on facts after

conducting thorough enquiries on (1) farmers; (2) Mr. Vinayak B.

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Bakare; and (3) Assessee. If necessary, AO is directed to invoke all the

relevant provisions for bringing requisite facts on the issue relating to

the existence of lands, agricultural practices and transfer of money from

the pockets of farmers to Mr. Vinayak B. Bakare and then to the

assessee.

12.4 With these directions, as requested in Grounds 6 & 7 of the

appeal, we remand the entire issue pertaining to the addition of Rs.81

lakhs along with the Cross Objections raised by the Revenue to the file of

AO for want of relevant facts as well as a speaking order on each and

every issue discussed above.

12.5 Thus, Ground Nos. 1 to 5 being connected to the merits as well as

legal issues of the addition are allowed for statistical purposes. Ground

Nos. 6 and 7 being related to granting of one more opportunity are

allowed in favour of the assessee. Ground No.8 being consequential is

dismissed. Cross Objections by the Revenue being connected to the

Ground No.4 stands remanded for harmonious adjudication of the

relevant issues.

Objection of the Revenue are allowed for statistical purposes.

Order pronounced in the open court on 28th September, 2018.

Sd/- Sd/-

(िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER पुणे / Pune; िदनांक / Dated : 28th September, 2018. Satish

12 ITA No.260/PUN/2018 & CO No.53/PUN/2018 Shri Shivendra Nagojirao Patankar (HUF)

आदेश की %ितिलिप अ'ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT (Appeals)-1, Kolhapur 4. The Pr.CIT-1, Kolhapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune