ACIT, CIRCLE-1, NAMAKKAL vs. NAGARAJAN TAMILSELVI, TIRUCHENGODE

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), Salem, dated 31.10.2017 and pertains to assessment year 2013-14.

Shri M. Mathivanan, the Ld. Departmental Representative, submitted that the Assessing Officer found a deposit of ₹32,50,000/- in the bank account of the assessee. According to the Ld. D.R., the assessee claimed before the Assessing Officer that these amounts were received from various farmers for providing agricultural services. However, the assessee could not give details of farmers from whom the money was collected. According to the Ld. D.R., the Assessing Officer doubted the transaction in the absence of any material to support the claim of receipt of money from various farmers for providing services and therefore, made an addition of ₹32,50,000/- under Section 68 of the Income-tax Act, 1961 (in short 'the Act').

Shri M. Mathivanan, the Ld. Departmental Representative, further submitted that the Assessing Officer has also found that the assessee claimed set off of losses in the trading of equity shares against the income said to be derived from agricultural related services. According to the Ld. D.R., the CIT(Appeals) found that the income assessed under Section 68 of the Act in respect of cash credit has to be set off against the loss suffered in equity share trading. However, the loss was not verified by any of the authorities below. According to the Ld. D.R., the CIT(Appeals) having power of coterminous that of the Assessing Officer, he himself ought to have examined the genuineness of so-called loss claimed by the assessee. Since such an exercise was not done by the CIT(Appeals), according to the Ld. D.R., the matter may be remitted back to the file of the Assessing Officer to examine the claim of loss in accordance with law.

On the contrary, Shri M. Karunakaran, the Ld.counsel for the assessee, submitted that no doubt, the Assessing Officer found credit of ₹32,50,000/- on various days. According to the Ld. counsel, the assessee is providing various services to the farmers, including locating the source of water. The assessee collected fees for providing the services and the same was deposited in the bank account. According to the Ld. counsel, the assessee has collected fees from about 210 farmers. However, the details of farmers could not be filed. Therefore, according to the Ld. counsel, the CIT(Appeals) confirmed the addition made by the Assessing Officer under Section 68 of the Act and no further appeal was filed by the assessee before this Tribunal. According to the Ld.counsel, the assessee has also suffered loss in share trading business.

We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer found cash credit of ₹32,50,000/- during the course of assessment in the books of account. The assessee claims that the said money was collected from various farmers for providing agricultural services. However, the assessee could not furnish the details of farmers from whom the money was collected. Therefore, the addition was made under Section 68 of the Act. In fact, the CIT(Appeals) confirmed the order of the Assessing Officer and no appeal was filed by the assessee. Therefore, the issue of addition of ₹32,50,000/- under Section 68 of the Act attained finality.

Now, the only issue before this Tribunal is whether the loss suffered by the assessee in share trading business has to be set off against the cash credit under Section 68 of the Act? The CIT(Appeals) by referring to amendment made in Section 115BBE of the Act with effect from 01.04.2017, found that the assessee is eligible for set off. The CIT(Appeals) has not verified the genuineness of the so-called loss in the share trading business.

In the result, the appeal filed by the Revenue is allowed for statistical purposes.