VITLAPURA KALLESHAPPA REVANASIDDAPPA,CHIKMAGALORE vs. INCOME TAX OFFICER, WARD-1, CHIKAMAGALUR

7. That the learned Commissioner of Income Tax (Appeal) erred in law and facts in confirming the additions without considering the submissions made by the appellant stating that the deposits made arc out of agricultural proceeds.

. Each of the above grounds is without prejudice to one another, the appellant seeks the leave of the Hon'ble Income Tax Appellate Tribunal Bangalore to add, delete, modify or otherwise amend or otherwise modify one or more of the above grounds either before or at the time of hearing of this appeal.”

3. The brief facts of the case show that assessee has not filed his return of income for AY 2016-17, however, information was available with the ld. AO that assessee has deposited cash of Rs.1,29,46,500 in the bank account maintained by him with Cauvery Grameen Bank. Therefore notice u/s. 148A(b) was issued to assessee resulting into an order u/s. 148A(d) of the Act on 29.3.2023. Assessee was given several opportunities during the course of hearing where part details were submitted. Assessee submitted that cash deposit of Rs.1,29,46,500 is part of circular transaction where the amount was withdrawn and subsequently deposited in bank account which ultimately resulted into fixed deposit receipt which was pledged with the bank for obtaining loan. The assessee submitted that all these activities were done as per guidance of the Bank Manager. Assessee submitted that he is also an agriculturist and submitted his bank account, land records, cash book and fixed deposit receipts. On verification of details, Assessee was asked to submit further details, mainly of Rs.20 lakhs which was shown by assessee as opening cash on hand at the beginning of the previous year. The AO also questioned that assessee is having agricultural land admeasuring 6.25 acres and has shown agricultural income of Rs.22 lakhs against which agricultural expenses of only Rs.2 lakhs have been incurred resulting into net agricultural income of Rs.20 lakhs. It was further found that assessee has received a sum of Rs.5 lakhs from M/s. V.N. Enterprises for which necessary details were asked for.

5. The ld. AO did not believe that assessee has opening balance of Rs.20 lakhs generated out of his personal savings and agricultural income of earlier years, the main reason being that a prudent person keeps cash in his bank account and further assessee has obtained cash credit limit on which interest is charged. Thus, addition of Rs.20 lakhs was made

on account of unexplained money u/s. 69A of the Act. The ld. AO further noted that looking at the agricultural produced sold by assessee, assessee should be incurring an expenditure of Rs.10 lakhs as agricultural expenditure, therefore agricultural income shown by assessee of Rs.20 lakhs is not proper and therefore he made an addition of Rs.10 lakhs as undisclosed income u/s. 69A of the Act. The sum of Rs.5 lakhs received from M/s. V.N. Enterprises could not be substantiated by assessee and therefore same was added to total income of assessee u/s. 69 of the Act. Accordingly reassessment order u/s. 143(3) r.w.s. 147 was passed on 13.2.2024 computing total income of assessee at Rs.35 lakhs.

6. Aggrieved with the reassessment order, assessee preferred appeal before the ld. CIT(A), wherein addition of Rs.20 lakhs on account of opening balance available with assessee not accepted, so confirmed. Addition of Rs. 10 lakhs towards agricultural expenditure was also confirmed. This is so as the assessee could not produce the bill vouchers and other details justifying the expenditure made for earning agricultural income. Addition of Rs.5 lakhs was also confirmed as assessee failed to establish the identity, genuineness and creditworthiness of the M/s V N Enterprises and also did not file any confirmation letter. Accordingly appellate order was passed dismissing appeal of assessee on 4.7.2024. The assessee is aggrieved with the same and is in appeal before us.

8. The ld. AR vehemently submitted that addition of Rs.35 lakhs made by the ld. AO denying benefit of opening cash balance and further making addition of Rs.10 lakhs on account of agricultural income is not correct. It was further stated that with respect to a sum of Rs.5 lakhs received from M/s. V.N. Enterprises, it was out of agricultural proceeds.

The findings of the ld. lower authorities clearly show that they have accepted that assessee is an agriculturist. It is also an admitted fact that assessee is having agricultural land for agricultural activities. In the other addition of Rs.10 lakhs made by the ld. AO, he himself has accepted in para 5 of the assessment order that assessee is showing lesser agricultural expenditure. In fact, the ld. AO accepted the sale proceeds of Rs. 22 lakhs for this year, but estimated that assessee should have incurred expenditure of Rs.10 lakhs to earn agricultural income of Rs. 22 lakhs. Therefore, admittedly, the ld. lower authorities have accepted that assessee is having agricultural income of at least Rs.10 lakhs for this year. Therefore without any contrary evidence, loo king to the facts of accepting substantial agricultural income this year, assessee could not have been denied benefit of opening cash in hand available out of agricultural income of earlier years. Merely denying the credit of opening cash in hand for the reason that a prudent person who is having cash credit account could not have kept such a huge cash at house is not a valid reason. It is the assessee’s prerogative to keep money in cash at home or in his bank account. On this ground, this addition could not have been made. The ld. CIT(A) while confirming the order of the ld. AO, has also merely reiterated the findings of the AO without giving his own finding that why assessee could not have cash in hand out of his agricultural income for earlier years, when he is accepted as an agriculturist holding agricultural land.

Pronounced in the open court on this 22nd day of November, 2024.