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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 03.08.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 26.10.2019 passed by learned ITO, Sendhwa [“AO”] u/s 144 of Income-tax Act, 1961 [“the Act”] for Assessment- Year [“AY”] 2017-18, the assessee has filed this appeal on following grounds:
“(1) The Ld. AO was not justified in passing the order, which is bad-in-law, void ab initio barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 (2) The ld. CIT(A) was not justified in confirming the order, which is bad-in- law void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled. (3) The Ld. CIT(A) was not justified in confirming the addition of Rs. 11,46,500/- against cash deposits during demonetization period. (4) The Ld. CIT(A) was not justified in confirming the application of section 68 and moreover adopting section 115BBE.
The background facts leading to present appeal are such that the assessee-individual is a farmer having sole source of income as agriculture.
The revenue, from an information available in AIMS/ITBA module that the assessee has made cash deposits of Rs. 11,46,500/- in an a/c with Indusind Bank during demonetization period from 08.11.2016 to 30.12.2016, issued notice dated 14.03.2018 u/s 142(1) requiring the assessee to file return by 31.03.2018. In response, the assessee filed a belated return on 20.05.2019 declaring interest income of Rs. 4,537/- and agricultural income of Rs. 21,20,298/-. Although in Para No. 2 and 3 of assessment-order, the AO has noted that the assessee did not file any return, subsequently in Para No. 4.3 of same order the AO has accepted filing of belated return on 20.05.2019 declaring aforesaid incomes. The AO issued notices dated 13.08.2019 and 18.09.2019 u/s 142(1) requiring the assessee to explain the sources of cash-deposits but the assessee did not make any compliance. Ultimately, the AO completed assessment u/s 144 whereby he accepted agricultural income to the extent of Rs. 9,63,798/- out of income of Rs. 21,20,298/- declared by assessee. The AO rejected balance of agricultural income and thereby treated the cash deposits of Rs. 11,46,500/- as unexplained money u/s 69A read with section 115BBE.
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 Aggrieved, the assessee carried matter in first-appeal. During first-appeal, the assessee filed a detailed submission which is re-produced by CIT(A) in Para No. 6 of his order. However, the CIT(A) rejected assessee’s submission and did not grant any relief. Now, aggrieved by CIT(A)’s order, the assessee has come in next appeal before us.
Ld. AR for assessee prayed for non-pressing of ground No. 1 and 2.
Ld. DR did not have any objection. Therefore, ground No. 1 and 2 are dismissed as non-pressed.
We take up next ground No. 3 wherein the assessee has challenged the addition of Rs. 11,46,500/- made by AO u/s 69A treating the cash- deposits in bank as unexplained. With regard to this ground, Ld. AR carried us to the orders of lower-authorities. He submitted that it is a fact that the assessee being an agriculturist and being unaware of income-tax proceedings, was not able to make any submission before AO during assessment-proceeding but the assessee made a detailed submission during first-appeal which is noted by CIT(A) in Para No. 6 of his order. He invited our attention to Point No. 3 of assessee’s submission [Page No. 6 of CIT(A)’s order] wherein the assessee filed documentary evidences of agricultural income in the shape of Khasra copy, Invoice/Mandi Receipts and an Affidavit to CIT(A) in terms of Rule 46A of Income-tax Rules, 1962. The CIT(A), however, rejected assessee’s submission and upheld AO’s addition precisely for two reasons, (i) the assessee’s documents were in the form of land ownership records and certain sales bills which seems in the form of Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 self-serving documents, and (ii) the assessee cannot keep that much of cash idle at home while availing KCC (Kishan Credit Card) loan [Para No. 7.1 and 8.8 of CIT(A)’s order]. Then, Ld. AR carried us to his Written-Submission and also corroborated the same with reference to the pages of paper-book mentioned therein, to show that the assessee was having sufficient land and the crops like Banana, Makka, Chilli, Kapas, Sugarcane were grown and the produce was sold. The Written-Submission filed by assessee is re-produced below for an immediate reference:
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18
Drawing us to the documents filed in Paper-Book and referred in the above Written-Submission at different places, Ld. AR submitted that the assessee is holding sufficient land for earning agricultural income; that the assessee has also availed KCC loan for the purpose of cultivation on lands; that the assessee has sold agriculture produce in market which is evident from sample bills. He submitted that the assessee is an agriculturist and has not kept complete record and all sale bills though enough sale was in fact made. He submitted that the assessee has declared agricultural income of Rs. 21,10,298/- out of which the AO has accepted only agricultural income of Rs. 9,63,798/- without any basis. Ld. AR submitted that the AO has picked figure of Rs. 9,63,798/- just to leave approximate amount to treat the cash deposit of Rs. 11,46,500/- as unexplained to enable him to make addition u/s 69A. Ld. AR strongly contended that the assessee’s full time occupation is agricultural activities and nothing else. He submitted that the assessee has already provided a few bills of agricultural income and it is practically not possible to maintain documents of 100% agricultural produce because the assessee is selling a part of crop directly to the consumers. Ld. AR submitted that the assessee has filed an affidavit to CIT(A) with averments that he has no income except agriculture and that the deposits made in bank a/c were solely from sale proceed of agricultural produce. Ld. AR submitted that the agricultural sector in our country is not fully organized. It is a known fact that the agriculturists are selling part of their crop to the established dealers and part of their crop directly to consumers. This practical fact is very much accepted in the decisions referred by him in his Written-Submission. Ld. AR relied heavily upon one of those decisions decided by ITAT, Indore in Shri Madhusudan Dhakad Vs. ITO, order dated 28.06.2022. With these submissions, Ld. AR argued that the agricultural income shown by assessee in the return of income must have been accepted and no addition ought to have been made by AO. Ld. AR prayed to delete the same.
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18
Per contra, the Ld. DR supported the addition made by AO. He submitted that the AO has passed order u/s 144 for the very reason that the assessee did not file any detail before him. He also emphasized that the assessee has made the impugned bank deposits during demonetization period. Therefore, the addition made by AO is in order and must be upheld.
We have considered rival submission of both sides, perused the material held on record and considered the legal precedents referred by Ld. AR. Having considered arguments of both sides and after perusal of the documents filed in Paper-Book as well as Written-Submission filed by Ld. AR to which our attention has been drawn, we find that the assessee is having ownership of agricultural lands and also sold agricultural produce in market. The assessee has filed some sample copies of pakka bills/ documents of firms named M/s Maarewa Sugars Pvt. Ltd. (sugar division), M/s Chaturbhuj Kela Group, M/s Rajlaxmi Kela Group, M/s Mahalaxmi Toll Kanta, etc. Although these are few bills which do not aggregate to the income of Rs. 21,10,298/- but the assessee himself accepts that these are few bills only and he being agriculturist is unable to maintain complete record/bills of entire sales, more particularly the crops directly sold to the customers. We also find that the assessee is having agriculture as sole source of income and there is no other source of income brought on record by Ld. AO. The assessee has also filed a solemnized affidavit to CIT(A) making averment that he has no income except agriculture. Since agricultural income is fully exempt, the assessee does not have any taxable
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18 income and therefore the addition u/s 69A cannot be made. These aspects get full support from direct decision by Co-ordinate Bench of ITAT, Indore in Madhusudan Dhakkad (supra); we extract below a few paras of decision relevant to present case of assessee:
“6……Ld. AR submitted that the agricultural sector in our country is not fully organized. It is a known fact that the agriculturists are selling part of their crop to the established dealers and part of their crop directly to consumers. This fact is very much accepted by Hon’ble ITAT, Chennai in Smt. Annakkalanjiam Mathivanan order dated 22.01.2019: “5. The Assessing Officer as well as the CIT(Appeals) have to appreciate the fact that the agricultural products in this country are traded in unorganized sector. The workforce in the agricultural sector is unorganized. When the agricultural products are traded in unorganized sector in the country, expecting the assessee to produce bills for sale of agricultural produce is something which cannot be produced by the assessee. Moreover, when the assessee engages labourers in carrying out agricultural operation and incur expenditure, producing vouchers is something uncalled for. What is to be seen is that whether the assessee has cultivated the land as claimed. When the assessee claims that the land was cultivated with certain crops and when the Assessing Officer has taken up the assessment for examination after three or four years from the relevant financial year, no material evidence will be available on the land to show that the assessee has cultivated as claimed. The only evidence available is the record maintained by the State Government in its Revenue Department. As per the Revenue Board’s standing orders of Government of Tamil Nadu, the Village Administrative Officer in his official duty has to go round the village and take stock of the cultivation made at the relevant field and it has to be recorded in Village Account No.2. The Village Account No. 2 is otherwise known as adangal. Therefore, the only official document maintained in the course of administration is the adangal extract maintained by the Village Administrative Officer. Beyond this, the assessee cannot produce any evidence for establishing the cultivation.” Ld. AR submitted that against the cash-deposits of Rs. 33,91,841/-, the assessee has already submitted the Bills / Vouchers of Rs. 24,49,148/- which is about 72% and the difference is 28% only. Ld. AR submitted that the assessee’s explanation that he could not maintain Bills / Voucher for sale of a part of the crop made directly to consumers, is a reasonable explanation and it must be accepted holistically having regard to the fact that the assessee is a renowned agriculturist who has received so many certificates, awards and appreciation from Govt. for his dedicated engagement in agricultural activities.
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18
XXX 8. Lastly the Ld. AR stressed that the assessee is a full time agriculturist as is evident from several certificates and awards received and news items published in the media. Ld. AR submitted that the assessee does not have any income except agricultural income. Ld. AR submitted that when there is no source of income except agricultural income, it is but natural that the assessee has made cash-deposits in the bank account out of agricultural income only. According to Ld. AR, agricultural income is non-taxable and hence there cannot be any addition on account of taxable income u/s 69A. Ld. AR relied upon the decision of Indore Bench in ITO Vs. Smt. Shahnaj Bano, order dated 07.01.2005 and claimed it to be directly applicable to the assessee: “8. As regards investment in flat, the AO has not brought on record any source of income except the income from agriculture claimed by the assessee. If a person has only agricultural income and no other income, then no addition can be made to the total income unless and until the AO proves that the assessee has any other source of income which is taxable under the Income-tax Act. The AO has not brought on record any material or evidence to show that the assessee was having any other source of income except agricultural income which is not taxable. CIT(A) was, therefore, justified in deleting the addition of Rs. 3,45,356/- to the total income made by the AO because the assessee has no income taxable and agricultural income is not taxable.” XXX 11. We have considered rival submission of both sides, perused the material held on record and considered the legal precedents cited before us. At the outset we observe that the Ld. AO has not made addition of Rs. 9,42,063/- on account of unproved agricultural income, the addition is on account of unexplained cash-deposits in the bank accounts. Therefore we have to see whether the assessee had sufficient sources to prove cash-deposits made in the bank accounts or not. In this regard, firstly we observe that the assessee is a renowned and dedicated agriculturist. On perusal of various evidences placed by Ld. AR, we find that the assessee has received so much of recognition, awards and certificates from the Government or Governmental authorities in appreciation of agricultural activities done by him. We also observe that the assessee has submitted Bills / Vouchers to the tune of Rs. 24,49,148/- and also submitted he had made sale of crops directly to ultimate consumers for which the evidences could not be maintained. We find much weightage in the submission of assessee. This submission of assessee finds direct support from Smt. Annakkalanjiam Mathivanan ITA No. 2451/Chny/2018 (supra). Therefore, the assessee’s submission deserves credence and acceptance….Thirdly, we also find that the assessee is having agriculture as sole source of income and there is no other source of income brought on record by Ld. AO. Since agricultural income is fully exempt, the assessee does not have any taxable income and therefore the addition u/s 69A cannot be made as decided in ITO Vs. Smt. Shahnaj Bano (supra).”
Shri Sanjay Jat, Barwani vs. ITO Sendhwa AY 2017-18
In view of above discussions, for the reasons stated therein and taking support from judicial rulings noted above, we are of the considered opinion that the addition of Rs. 11,46,500/- made by AO u/s 69A is not sustainable.
We, therefore, delete this addition. The assessee’s ground No. 3 is allowed.
Ground No. 4 challenges the invocation of section 115BBE to the impugned addition made by AO. Since we have deleted the addition made by AO itself, the Ground No. 4 which is consequential in nature, does not have basis to survive. Therefore, this ground does not require any adjudication.
In the result, this appeal of assessee is allowed.
Order pronounced in open court on 23.01.2024