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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 05.08.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 26.12.2018 passed by learned ITO- Ward-2(3), Ujjain [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal.
The background facts leading to present appeal are such that the assessee-individual is engaged in the business of bricks. For AY 2016-17, the assessee filed return declaring a total income of Rs. 4,04,750/- and Rajendra Sharma AY 2016-17 agricultural income of Rs. 6,40,000/-. The return was selected under CASS for “Limited scrutiny” to verify “Large cash deposit in savings bank account(s)”. Ultimately, the AO passed assessment-order u/s 143(3) after determining total income at Rs. 43,85,710/- and agricultural income at Rs. 2,00,000/-. Aggrieved, the assessee filed appeal to CIT(A) and partly succeeded. Still aggrieved, the assessee has come in next appeal before us.
Originally the assessee raised as many as three grounds in Appeal Memo (Form No. 36). Subsequently, the assessee revised grounds on 08.05.2024 raising only one ground as under:
“That in the facts and on the circumstances of the case, the Ld. CIT(Appeals) was not justified in sustaining the addition of Rs. 20,09,200/-; which was duly explained by the assessee”. During hearing, Ld. AR for assessee submitted that while filing original grounds in Appeal Memo (Form No. 36), the assessee has inadvertently raised grounds relating to all additions made by AO in assessment-order without considering the relief already granted by CIT(A). Therefore, the assessee has filed revised grounds raising only limited grievance for which the relief was not granted by CIT(A), in other words the addition has been sustained by CIT(A). Ld. DR for revenue did not have any objection to filing of revised ground. Therefore, the hearing is proceeded to adjudicate the above narrated revised ground.
Finally, the assessee is in appeal claiming that the CIT(A) was not justified in sustaining addition of Rs. 20,09,200/- made by AO on account
Rajendra Sharma AY 2016-17 of unexplained cash-deposits in bank. Precise facts relating to this issue are such that during assessment-proceeding, the AO found that the assessee made a total cash deposit of Rs. 67,19,200/- in two accounts with Bank of India. When the AO asked the assessee to explain sources of deposits, the assessee submitted three sources, namely (i) Business turnover of Rs. 45,10,000/- was deposited, (ii) Proceeds of agriculture of Rs. 10,00,000/- was deposited, and (iii) Opening cash balance of Rs. 12,09,200/- available with assessee as on 01.04.2015 was deposited. So far as 1st source of Rs. 45,10,000/- from business turnover is concerned, the AO accepted partly to the extent of Rs. 30,00,000/- but the CIT(A) has ultimately accepted Rs. 45,10,000/- claimed by assessee and the revenue is not in appeal against CIT(A)’s order. Therefore, the issue stands closed. So far as the 2nd source of Rs. 10,00,000/- from agricultural proceeds is concerned, the AO accepted partly upto Rs. 2,00,000/- and the CIT(A) has also confirmed AO’s action; therefore the difference of Rs. 8,00,000/- is not accepted. The 3rd source of Rs. 12,09,200/- from opening balance is not accepted in toto by both of the lower-authorities. This has effectively resulted in an addition of Rs. 20,09,200/- (Rs. 8,00,000 + Rs. 12,09,200) for which the assessee is contesting in present appeal.
Proceeds of agriculture:
We first deal with the proceeds of agriculture. It is submission of assessee that although he has declared net agricultural income of Rs.
Rajendra Sharma AY 2016-17 6,40,000/- in the return, the gross sale proceeds of agriculture was Rs.
10,00,000/- which was a source for deposit in bank a/c. The AO has, however, accepted only Rs. 2,00,000/- as agricultural income as well as available source for making cash deposit in bank a/c. The AO has recorded following observations in Para 3 and 4 of assessment-order in this regard:
“3……The AR for assessee was also asked to produce agricultural sales bills to justify amount of Rs. 10,00,000/- as agricultural receipts. In response, the AR for assessee has produced only land records, showing ownership of 1.880 Hectares i.e. about 10 Bighas land only by the assessee. The contention of the assessee is not acceptable because he has failed to justify his submission on the basis of documentary evidences of agriculture income viz. Sales bills etc…….Merely filing documents in respect of agricultural land holding is not sufficient to prove agricultural income. In the absence of any evidence to show that lands were actually cultivated, the income could not be treated as agricultural income merely relying on entries in revenue records. The necessary evidence in support of basic operations or subsequent operations i.e. Tending, pruning, cutting, harvesting and rendering the produce fit for market was not made available in the present case. It was held by Supreme Court in CWT Vs. Officer-in-charge (1976) 105 ITR 133 that the classification in the revenue records is not conclusive. Since there was absolutely no evidence of any crop having been raised in these lands and in absence of any such crop having been raised, the classification in the revenue register would have no evidentiary value. In the present case, the assessee also failed to explain as to what kind of crop was raised by him, what sort of expenses were borne by him, whether these agricultural expenses were fully vouched or not. What was the yield of such crops, whether sale of such crop was supported by bills or not, whether the sale of agricultural crop was fully voucher or not? In absence of such documentary evidences, I fail to agree with the contentions of the assessee that he had agricultural income/receipts and cash available out of agricultural operations to be deposited in saving bank accounts. Thus, the claim of assessee having agriculture income and veracity of the same has not been explained with cogent documentary evidences. Further, the agriculture income/receipts shown by the assessee appear to be much more on higher side vis-à-vis his land holdings and yield of agriculture produce. …… As mentioned above, the agricultural income/receipts shown by the assessee appear to be much more on higher side vis-à-vis his land holding and yield of agriculture produce which as per normal trend is MP may be Rs. 5000 to 8000/- p.a. per bigha. Accordingly, the agriculture income on 25 bighas of land holding as stated by the assessee cannot be more than Rs. 2,00,000/-.
Rajendra Sharma AY 2016-17 4. As mentioned above in para 3, the agriculture income/receipts shown by the assessee has been held to be much more on higher side vis-à-vis his land holding and yield of agriculture produce and as per normal trend in MP the same has been held to be in the range of Rs. 5000 to 8000/- p.a. per bigha. Accordingly, it has been held that the agriculture income on 25 bighas of land holding as stated by the assessee cannot be more than Rs. 2,00,000/-. The assessee in the return of income has shown agriculture income at Rs. 6,40,000/- meaning thereby the difference of Rs. 4,40,000/- is nothing but income of the assessee from undisclosed sources and has been shown in the garb of agriculture income. The same would be required to be added as income from undisclosed sources. However, since the addition of Rs. 35,29,200/- has already been made on account of cash deposits in bank out of undisclosed sources of income, the assessee is being given benefit of telescopic effect and therefore, no separate addition is being made on this count. However, the income for rate purpose shall be reduced to that extent and be taken at Rs. 2,00,000/-.”
During first-appeal, the CIT(A) has passed following order:
Para 4 / Page 10: “…..Regarding agricultural income, the A/R was asked by the AO to submit agriculture sales bills in order to prove the agricultural income of Rs. 10,00,000/-. However, in response to the same, the A/R submitted only land records which showed that the ownership of 1.880 hectare i.e. 10 bighas land was in the name of the appellant, instead of the appellant’s claim of 25 hectares of land. The appellant did not produce documents regarding the crop which had been raised, what sort of expenses were borne by the appellant, whether these agricultural expenses were fully vouched or not, what was the yield of such crops, whether sale of such crop was supported by the bills or not etc. The appellant could not counter with evidence the AO’s consideration of yield of agricultural produce of land in M.P. as Rs. 5,000/- to Rs. 8,000/- per hectare per year. Taking the highest yield of Rs. 8,000/- per hectare per year and applying the same on all of 25 hectares of land (though appellant could provide ownership of only 10 hectares of land, the AO calculated that the agricultural income should not be more than Rs. 2,00,000/-. It is the onus of the appellant to substantiate what has been claimed in the return of income. On that count the appellant failed miserably by not being able to provide an iota of evidence to prove agricultural operation and income generated thereof, excepting the ownership of 10 hectares of agricultural land. The appellant did not controvert the reliance placed on the Supreme Court’s judgement by the AO in assessment-order. In view of this, I am unable to interfere with the calculation of the AO of agricultural income of Rs. 2,00,000/- instead of Rs. 10,00,000/- claimed by the appellant and taking the same for rate purpose.”
Before us, Ld. AR for assessee has filed following Written-Synopsis and argued on the same lines:
Rajendra Sharma AY 2016-17 “Agriculture income amounting to Ro, 10,00,000/- a. The assessee along with his family members owns land as follows:
Name of the owner Address and size of the land PB reference (relation with assessee) Rajendra Sharma Survey No. 2538/2 Rakba 29-48 (size 0.763 Hectare) Chudamani Sharma Survey No. 2569 Rakba 49-65 (Wife of the assessee) (size 0.627 Hectare) Total 1.390 hectare (i.e. 3.434 acres) b. The assessee contended that there were agricultural sale receipts of Rs. 10,00,000 and after deducting agricultural expenses, Net Agricultural Income was Rs. 6.40,000. c. Ld. AO accepted the agricultural income of Rs. 2,00,000 treating it to be reasonable, and therefore the source of deposits to the tune of Rs. 2,00,000 was taken from agricultural income. it is pertinent to mention that there was no addition made in respect of the agricultural income treating it as Income from Other Sources. Therefore, the Ld. AO himself contradicted by not making any separate addition for rejecting the agricultural income of Rs. 6,40,000 as offered by assessee; but while considering the deposits in bank, taking the agricultural income of Rs. 2,00,000 as only explaining the source of such deposits. d. A reasonable agricultural income may kindly be estimated and considered for explaining the source of the deposits. e. Without prejudice, it is submitted that on perusal of the Tentative Cash book at PB 22, it would be clear that at any point of time, the cash balance with the assessee did not fall below Rs. 10,00,000/-. Hence even if the entire agricultural turnover of the assessee is not considered towards deposits in bank, still the source of the deposits will be duly explained.”
Ld. DR for revenue relied upon the orders of lower-authorities and iterated their observations.
After consideration, we find that the AO has noted that the assessee filed land records showing ownership of 1.880 hectares equivalent to about 10 bighas. But ultimately, the AO has accepted agricultural income at Rs.
Rajendra Sharma AY 2016-17 2,00,000/- @ Rs. 8,000/- p.a. per bigha on the basis of 25 bighas as stated by assessee [For clarity, the CIT(A) has inadvertently mentioned 10/25 hectares in place of 10/25 bighas in his order]. However, in the Written- Synopsis filed before us as re-produced above, there is a claim of 1.390 hectares of land on the basis of documents filed in Paper-Book at Page 29- 65 wherein the assessee’s portion is only 0.763 hectare. The assessee has also filed a copy of Form P-II and Rin Pustika in Paper-Book at Page 23-28 showing land of 0.480 + 0.180 = 0.660 in the name of assessee. Thus, there are variations in the land holding of assessee and the position is not very clear. That apart, both of the lower-authorities have also made a concurrent finding that the assessee has not shown any evidence (except landholding) of cultivation, etc. But the aforesaid Form P-II and Rin Pustika reflect that the land is irrigated. Further, the crop ‘soyabin’ is shown in Form P-II as cultivated on the land during the financial year 2017-18 which can give a clue that the assessee must be pursuing cultivation activity in the financial 2015-16 relevant to AY 2016-17 under consideration as well. In any case, the lower-authorities have themselves estimated agricultural income at Rs. 2,00,000/- and the assessee’s request in Point No. (d) of the Written- Synopsis is only for estimation of a reasonable amount of agricultural income. Although the lower-authorities have already made an estimation but the assessee should still be given a chance to convince the AO as to the reasonable amount of income which could be derived. Hence, it would be most appropriate to re-store this issue to AO for consideration afresh so that Rajendra Sharma AY 2016-17 the AO can make a fair and proper estimation after considering assessee’s representation.
Opening cash balance:
Now, we take up the opening cash balance of Rs. 12,09,200/- claimed by assessee. The AO has rejected assessee’s claim by following order:
“3….. He has not maintained any regular books of accounts. Therefore, credit for last year withdrawals from bank accounts cannot be allowed.” 11. The CIT(A) has passed following order:
Para 5 / Page 11: “…..Regarding cash of Rs. 12,09,200/- the appellant took a different stand in appeal by stating that the same represent business turnover for which profit at the rate of 8% on such amount is required to be added. However, in spite of opportunities provided during the appellate proceedings, the appellant failed to provide evidence in support of such assertion, which he took after rescinding from his earlier stance as stated above in this order. Neither before the AO nor during the appellate proceedings, the appellant could substantiate any of the two contentions taken by him. It is patently clear that having failed to substantiate the contention made before the assessing officer regarding source of deposit of the above cash, on afterthought, the appellant has taking a different plea in appeal without providing any supporting evidence. Appellant himself has retracted from his earlier stand taken before the assessing officer, which, ex-post facto, ratifies the rejection of the stand by the assessing officer in the order of assessment. Appelland has failed to provide evidence in support of his stand in appeal on this issue, the addition of Rs. 12,09,200/- as un-explained cash deposit is upheld.”
Before us, Ld. AR has filed a cash-flow statement for the period Nov.
2014 to March, 2015 at Page 5 of Written-Submission in an attempt to show the closing balance of Rs. 12,09,200/- as on 31.03.2015 carried forward as opening balance on 01.04.2015. The statement is scanned and re-produced below:
Rajendra Sharma AY 2016-17 13. Ld. DR relied upon the orders of lower-authorities and iterated their observations.
After consideration, we find that during assessment-proceeding before AO, the assessee insisted upon opening balance but the AO has rejected assessee’s explanation merely by saying that the assessee has not maintained regular books of account. From records, we find that the assessee has opted for presumptive taxation u/s 44AD and therefore not maintained books of account. But even in absence of books, if the assessee claims and proves that the opening balance has come from earlier year, the AO cannot brush aside assessee’s explanation, he has to look into assessee’s claim and allow credit of appropriate amount, if any. Before CIT(A), the assessee has claimed for application of net profit rate of 8% qua opening balance. Although the CIT(A)’s treated this as a contradictory claim but it could be an alternative claim of assessee also. Therefore, the assessee’s primary claim of opening balance brought forward from preceding year as a source for bank deposit, could not be rejected. In any case, the assessee has filed a cash-flow statement of preceding year to explain the accumulation of opening balance and the assessee is very much harping upon same. The assessee’s claim is substantial and has to be looked into. However, the statement submitted by assessee needs a careful examination and verification by AO. Therefore, we remand this issue also to the file of AO.
Rajendra Sharma AY 2016-17 15. Thus, we remand both of the above issues to the AO for a fresh consideration. It is made clear that the AO shall carry out necessary exercise after giving opportunities to the assessee and take an appropriate view without being influenced by his previous order. The assessee is also directed to make a clear and complete explanation to AO.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 31.05.2024.