Loading judgment…
No AI summary yet for this case.
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 08/12/2023 in DIN No. ITBA/NFAC/S/250/ 2023-24/1058582990(1) for the assessment year 2016-17.
The only issue raised by the assessee is that the ld. CIT(A) erred in confirming the order of the AO by treating the cash deposit in the bank account amounting to Rs. 1,28,85,820/- as unexplained investment u/s 69 of the Act ignoring the agricultural operation carried out by the assessee.
ITA No.1170/Bang/2023 Page 2 of 8
2.1 There were cash deposits in the bank account of the assessee amounting to Rs. 1,28,85,820/- only. It was explained by the assessee that such cash deposit was out of the sale proceeds of agricultural operations. As per the assessee, the major amount was received in cash from 3 parties against the sale of agricultural operation. However, the AO upon enquiry from the party namely M/s NKG India Coffee, found that the party has denied having made any payment to the assessee in cash against the purchase of agricultural produce. As such, the party admitted having made advance payment to the assessee for a sum of Rs. 22,09,451/- against the purchase of agricultural produce and that too through banking channel. Furthermore, as per the AO, the assessee has not furnished complete address of the other parties and therefore, no verification was carried out by him about the sources of cash deposit in the bank. In view of the above, the AO treated the entire amount of cash deposit as unexplained investment and added to the total income of the assessee.
Aggrieved, assessee preferred an appeal to the ld. CIT(A).
The assessee before the ld. CIT(A) contended that the confirmation from the parties could not be obtained to justify the source of cash deposit as the parties were not traceable after the COVID pandemic. The assessee also submitted that she has been showing income from agricultural operations consistently since many years and this fact was also admitted by the revenue in the assessment framed u/s 143(3) of the Act for the assessment year 2015-16. According to the assessee, there was no other source of cash deposit with her other than from agricultural operation. It was also submitted by the assessee that
.
ITA No.1170/Bang/2023
Page 3 of 8
the party M/s NKG India Coffee has also admitted having made payment of Rs. 22,09,451/- against the purchase of agricultural produce. The assessee submitted that the deposit of cash is out of the agricultural operation and, therefore, the same cannot be treated as unexplained investment provided u/s 69 of the Act. However, the ld. CIT(A) rejected the contention of the assessee by observing as under: “6.1 The appellant in the course of the appellate proceedings filed its written submission and stated that the cash was out of the sale of the bicultural produce. The submission of the appellant is examined however not found to be tenable. The appellant has failed to establish the claim that the cash was out of the sale of agricultural produce which had been established by the AO by making the factual enquiry. Further even during the appellate proceedings the appellant failed to establish the source of the cash so deposited and reiterated what has been stated before the AO. Taking into account factual matrix of the case the addition of Rs. 12885820/- made by the AO is sustained. The ground of appeal no. 2 is dismissed.”
Being aggrieved by the order of ld. CIT(A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from 1 to 61 pages and contended that the fact that the assessee is engaged in agricultural activity was admitted by the Revenue in the earlier assessment years. This year as well, therefore, the amount of cash deposits in the bank is nothing but represents the sale proceeds of agricultural produce. The ld. AR reiterated the submissions made before the ld. CIT(A).
On the other hand, the ld. DR vehemently supported the orders of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, there
.
ITA No.1170/Bang/2023 Page 4 of 8
was a cash deposit in the bank accounts of the assessee, the source of which was not explained by the assessee suitably based on the cogent materials. Although the assessee during the assessment proceedings tried to justify the source of cash deposit in his bank account by stating that the major source of cash deposits represents the sale proceeds from 3 parties of the agricultural produce cultivated by her. The details of the parties are available on pages 2 and 3 of the assessment order. However, as per the AO, there was incomplete address with respect to 2 parties and therefore, it was not possible to carry out any verification. Likewise, in the case of one-party namely M/s NKG India Coffee denied having made any cash payment to the assessee against the purchase of agricultural produce during the year. However, the party namely M/s NKG India Coffee agreed having made an advance payment through banking channel amounting to Rs. 22,09,451.00 for the purchase of agricultural produce from the assessee. Nevertheless, the AO was not satisfied with the submission of the assessee and treated the amount of cash deposit of ₹ 1,28,85,820 as unexplained investment under section 69 of the Act which was subsequently confirmed by the learned CIT-A.
8.1 Upon analyzing the facts discussed above, primarily it appears that the assessee has failed to discharge the onus cast upon it as far as the source of cash deposits in the bank account is concerned. However, before we proceed further, it is necessary to take a note of the facts which are of glaring nature and available on record as detailed below: i. The assessee is the owner of agricultural land admeasuring 117.05 acres.
.
ITA No.1170/Bang/2023 Page 5 of 8
ii. The company namely M/s NKG India Coffee agreed having made advance payment to the assessee through the banking channel for the purchase of agricultural produce. iii. The assessee has been showing income from agricultural operation consistently since earlier years which has been accepted by the revenue including in the assessment framed under section 143(3) of the Act for the AY 2015-16 vide order dated 29 December 2017 placed on pages 51 to 53 of the paper book.
8.2 After reading of the cumulative facts stated above, we are of the view that the assessee undeniably was engaged in the activity of agricultural operations. This fact was also asserted by the assessee before the learned CIT-A which is reproduced as under:
“6.1 The appe1lan 1n the course of appellate proceedings filed its written submission and stated that the cash was out of the sale of the agricultural produce. The submission of the appellant is examined however not found to be tenable. The appellant has failed to establish the claim that the cash was out of the sale of agricultural produce which had been established by the AO by making the factual enquiry. Further even during the appellate proceedings the appellant failed to establish the source of the cash so deposited and reiterated what has been stated before the AO. Taking into account factual matrix of the case the addition of Rs. 12885820/- made by the AO is sustained. The ground of appeal no. 2 is dismissed.”
8.3 The fact that the assessee was engaged in the agricultural operation was not denied by the learned CIT-A. What has been observed by the learned CIT-A is this that the assessee failed to establish the nexus between the cash deposits in the bank viz a viz proceeds against the sale of agricultural produce. But on analyzing all the facts stated
.
ITA No.1170/Bang/2023
Page 6 of 8
above, we are of the view that entire cash deposit if treated as income is going to cause a genuine hardship to the assessee. It is because the revenue itself in the earlier year has accepted the agricultural operations carried out by the assessee.
8.4 We are conscious about the fact that the primary onus lies upon the assessee to justify the claim and that too based on cogent materials. But it appears that the assessee failed to discharge the same in the given fact and circumstances. In such a situation, thus the next controversy arises whether cash deposits in the bank can be treated as unexplained investment under section 69 of the Act after ignoring the glaring facts discussed above. In simple words, a person has to evaluate the circumstantial evidence so as to find out the nature of cash deposits in the bank instead of blaming to the assessee for his failure to justify his stand based on direct evidence. In the given facts and circumstances, we are of the view that the revenue has not brought anything on record suggesting that the source of cash deposit by the assessee was other than the source of agricultural operation. As such the assessee time and again before the learned CIT-A has agitated that she has no other source of cash deposit but from the agricultural operation. The submission of the assessee has already been explained somewhere in the preceding paragraph. Thus, we are of the view that the benefit of doubt goes in favour of the assessee. The ITAT in Delhi Benches in the case of Gudwala & Sons reported in 155 taxmann.com 532 has observed as under: “9.1.1 Having regard to the nature of business, i.e. trade in bullion, where stocks are identifiable and the price is also governed by market forces with little scope for manipulations; the purchases duly accounted for; the transaction of only 2 parties doubted despite extensive enquiry on 122 parties etc. we find potency in the plea of bonafides. There can be variety of reasons for non-attendence by unrelated third parties and it is not always within the domain of assessee to enforce attendence of third
.
ITA No.1170/Bang/2023
Page 7 of 8
parties. Nothing adverse need to be imputed in such circumstances, more so, where the payments have been made through banking channel. 9.1.2 In the light of the factual context and balance of probabilities, we see a greater degree of plausibility in the version of the assessee. The issue is thus adjudicated in favour of the assessee. Hence, the action of the CIT(A) is set aside and the additions/disallowances made on this count are cancelled.”
8.5 In view of the above and after considering the facts in detail, we are of the opinion that the justice shall be served to the assessee and the revenue if we calculate the agricultural income of the assessee based on the last year finding of the AO. In the earlier assessment year 2015- 16, the AO has taken 10% of net agricultural income being 5,57,000 of Rs. 55,77,023.00 as income from other sources by sustaining the addition. Likewise, we are of the view that the same basis should also be adopted for the year under consideration. However, we note that the assessee in the year under consideration has shown net agricultural income at 3,44,396.00 which is significantly less than the last assessment year. If we adopt the same basis being 10% of the net income of ₹ 3,44,396.00 it will work out only for a sum of ₹ 34,400.00 which doesn’t commensurate with the disallowance of the last assessment year. Accordingly, we feel that an ad hoc disallowance of ₹ 5 lakhs should be treated as income from other sources which is liable to be added to the total income of the assessee.
8.6 It is also pertinent to note that the entire cash deposits as per the AO stands at Rs. 1,28,85,820.00 whereas the assessee tried to explain the source of cash deposit at Rs. 1,23,48,271 only, leaving the difference of Rs. 5,37,549.00 only which was not explained. Accordingly, we also confirm the addition for the difference amount of Rs. 5,37,549.00 to the total income of the assessee. As such, the total addition of Rs.
.
ITA No.1170/Bang/2023 Page 8 of 8
10,37,549.00 (5,00,000 plus 5,37,549) is hereby confirmed. Hence, the ground of appeal of the assessee is hereby partly allowed.
In the result, the appeal filed by the assessee is hereby partly allowed. Order pronounced in court on 22nd day of July, 2024
Sd/- Sd/- (GEORGE GEORGE K) (WASEEM AHMED) Vice President Accountant Member Bangalore, Dated, 22nd July, 2024
/ vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore
.