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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year: 2017-18 Magaraj Mishrimal Rathi, Vs. ACIT, Circle-5, Pune. Sr.No.13/2, Sukhsagarnagar, Bibvewadi Road, Katraj, Pune- 411046. PAN : AFDPR1048D Appellant Respondent Assessee by : Shri Suhas P. Bora Revenue by Shri Ramnath P. Murkunde : Date of hearing 05.08.2024 : Date of pronouncement : 10.10.2024 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 20.02.2024 passed by LD CIT(A)/NFAC for the assessment year 2017-18.
The appellant has raised the following grounds of appeal :-
1. The learned CIT (Appeals), NFAC, Delhi erred in law and on facts in confirming the additions made by the A.O. u/sec. 144 of the Income Tax Act, 1961.
2. The learned CIT (Appeals), NFAC, Delhi has erred in confirming the addition of Rs. 3,64,994/- u/sec. 68 of the Income Tax Act, only on the ground that the reasons given by A.O. in the rectification order U/s. 154 dated 18.03.2021, without giving any finding on the submission made by the Appellant.
The learned CIT (Appeals), NFAC, Delhi has failed to appreciate and consider the submissions made by the Appellant without assigning any valid reasons and confirmed the addition inspite of the fact that the appellant has furnished complete details in respect of the loans of Rs. 3,64,994/-.
The learned CIT (Appeals), NFAC, Delhi has erred in confirming the addition of Rs. 95,52,296/- U/s. 68 of The Income Tax Act, in respect of sale of Agricultural land only on the ground that the reasons given by the A.O. in the rectification order U/s. 154 dated 18.03.2021, without giving any finding on the submission made by the Appellant.
5. The learned CIT (Appeals), NFAC, Delhi has failed to appreciate and consider the submissions made by the Appellant without assigning any valid reasons and confirmed the addition inspite of the fact that the appellant has furnished complete details in respect of the sale of said Agriculture land of Rs.95,52,296/- and further failed to appreciate that Sec. 68 is not applicable for the income claimed as exempt U/s. 10.
The learned CIT (Appeals), NFAC, Delhi has erred in confirming adhoc addition of Rs. 76,295/ made by the A.O. @15% of indirect expenses of Rs. 5,08,639/ only on the ground that verification of such expenses are not linked the business of the assessee without considering the submissions made by the appellant.
Without prejudice to Ground No. 6 above, adhoc disallowance confirmed by the CIT (Appeals) @15% of total expenditure is on higher side and therefore, it may please be reduced to 5% of the total expenditure.
The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
.”
3. The facts of the case, in brief, are, that the assessee is an individual e-filed his return of income on 23.07.2017 by declaring total income at Rs.22,48,700/- from the business of sale of sari’s & advertising business & also income from other sources & capital gains. The case was selected under scrutiny through CASS and accordingly notices u/s 143(2) and 142(1) were issued to the assessee through ITBA portal. Since the assessee did not responded, a final show cause notice was issued and due to non- compliance from the side of the assessee, the Assessing Officer proceeded to pass ex-parte assessment order vide order dated 12.12.2019, u/s 144 r.w.s. 143(3) of the IT Act by determining the taxable income at Rs.1,53,87,920/-. 3.1 Against this assessment order, the assessee simultaneously preferred first appeal before the ld. CIT(A)/NFAC on 02.01.2020 as well as moved rectification application u/s 154 on 13.01.2020. During the pendency of first appeal, an order dated 18.03.2021 u/s 154 of the IT Act was passed by the Assessing Officer, reducing the income to Rs 1,22,42,290/- as against the original assessed income of Rs.1,53,87,920/-.
4. In first appeal proceedings, after considering the reply of the assessee, vide order dated 20.02.2024, Ld. CIT(A)/NFAC sustained the additions made by the Assessing Officer and confirmed the 154 order passed by the Assessing Officer. It is this order against which the assessee is in appeal before this Tribunal.
5. The ld. AR submitted before us that the order passed by Ld. CIT(A)/NFAC is not correct. It was submitted before the Bench that the assessee has furnished all the relevant documents before the Assessing Officer along with 154 rectification application. All these documents were again produced before the ld. CIT(A)/NFAC also. But Ld. CIT(A)/NFAC has not considered any of the document but simply relied the order u/s 154 passed by the Assessing Officer and confirmed the same. It was submitted by the ld. AR of the assessee that only 3 additions are under challenge, they are (i) Addition of Rs.3,64,994/-, (ii) Addition of Rs.95,52,296/- and (iii) Ad-hoc addition of Rs.76,295/- out of indirect expenses. It was submitted that all the grounds raised in the appeal are related to the above 3 additions.
6. With respect to addition of Rs.3,64,994/-, it was submitted that in original assessment proceedings the AO made addition of Rs 30,00,000/- on the basis of cash deposit in bank account during demonetisation period. But in 154 proceedings the AO accepted the contention of the assessee to the extent of only Rs.26,35,006/- & made addition of Rs.3,64,994/- treating the same as deposited from unexplained money. In this regard, it is submitted that the assessee is a business man engaged in sale of Sarees and Rs.22,48,700/- during the period under consideration and out of the business cash receipt, Rs.1,88,000/- was deposited in bank. It was further submitted that on 04.04.2016 agricultural land was sold for Rs.5,00,000/- by the assessee. Therefore sufficient cash was available in the cash book of the assessee. Copy of sale deed of agricultural land was furnished before the Assessing Officer & also before LD CIT(A)NFAC. Accordingly Ld. CIT(A)/NFAC should have had accepted the grounds of appeal in this regard. But, Ld. CIT(A)/NFAC has not discussed any of the above facts which were already before the Assessing Officer as well as before him, and sustained the addition which is mistake apparent on the face of the record. The ld. Counsel of the assessee accordingly requested to delete the addition of Rs.3,64,954/-.
7. With respect to addition of Rs.95,52,296/-, it was submitted by ld. Counsel for the assessee that during the period under consideration the assessee has sold agricultural land to 10 different persons for an amount of Rs.1,08,62,500/- and after deducting purchase price of Rs.13,10,304/-, an amount of Rs.95,52,296/- was shown as net profit. It was submitted that agricultural income was of only Rs.3,22,971/- but profit on sale of agricultural land of Rs.95,52,296/- was inadvertently shown under the head agricultural income instead of u/s section 10 as exempt income being profit from sale of agricultural land. Ld. Counsel of the assessee submitted that all the registered sale deeds were produced before the Assessing Officer as well as before Ld. CIT(A)/NFAC but both of them have not considered this fact which is also a mistake apparent from the face of the record. It was accordingly requested before the Bench to delete the addition of Rs.95,52,296/- made by the Assessing Officer and sustained by the ld. CIT(A)/NFAC.
8. With respect to the addition of Rs.76,295/-, the ld. Counsel of the assessee submitted that regular books of accounts were prepared & furnished before the Assessing Officer as well as before LD CIT(A)/NFAC. But out of total indirect expenses of Rs.5,08,639/-, the Assessing Officer disallowed 15% on estimate basis which is not correct. It was further submitted that complete detail regarding indirect expenses was produced before the ld. CIT(A)/NFAC i.e. professional fees of Rs.37,990/-, depreciation of Rs.2,43,596/-, municipal taxes of Rs.59,661/-, vehicle expenses of Rs.94,398/- and vehicle insurance of Rs.64,687/- was produced before the ld. CIT(A)/NFAC but the same was neither considered Assessing Officer was simply sustained. Under these circumstances, it was prayed before the Bench to either delete or substantially reduce the estimated addition made under the above heads.
The ld. DR relied on the orders passed by the sub-ordinate authorities and requested to confirm the same.
We have heard the ld. Counsel from both the sides and perused the material available on record, including two paper books furnished by the ld. counsel of the assessee. We find that the assessee has raised total eight grounds of appeal
but in sum and substance all the grounds relates to only three additions i.e. (i) Addition of Rs.3,64,954/-, (ii) Addition of Rs.95,52,296/- and (iii) Ad-hoc addition of Rs.76,295/-. We find that in original assessment proceedings, the assessee remained absent and the orders were passed ex-parte u/s 144 r.w.s. 143(3) of the IT Act on a total income of Rs.1,53,87,920/-. Thereafter, the assessee moved rectification application u/s 154 of the IT Act which was partly allowed by the Assessing Officer and the total taxable income was reduced to Rs.1,22,42,290/-. Thereafter, in first appeal proceedings, the ld. CIT(A)/NFAC has not allowed any relief and Assessing Officer. It was the contention of the ld. Counsel of the assessee that with regard to all the above three additions, the documents such as copy of registered sale deeds of agricultural land, copy of proof regarding various indirect expenses of Rs.5,08,639/- and various ledgers maintained in the regular audited books of accounts were produced before the Assessing Officer as well as before the ld. CIT(A)/NFAC, but the same was neither considered by LD AO nor by ld. CIT(A)/NFAC. 10.1 We find that the ld. CIT(A)/NFAC has dismissed the appeal of the assessee by observing as under :- “4.4 As regards addition of Rs. 30,00,000/- u/s 68 of the Act by treating the cash deposits as unexplained credits is concerned the same has been reduced by AO to Rs. 3,64,994/-. The amount of Rs.3,64,994/- is confirmed for the reasons given by AO in the rectification order dated 18.03.2021. 4.5 As regards, disallowing the exemption of the agricultural income as claimed in ITR amounting to Rs. 98,75,267/- is concerned the appellant has submitted some documents relating to ownership of agricultural land. The AO has mentioned in the rectification order that However, as per the cash book and computation of income and Capital account in the balance sheet of the current year and earlier years, it is verified that the assessee has shown regular agricultural income of more than
3. Lakh. Further, it is also noticed that the amount as agricultural income, shown in cash book entry on different dates before demonetization period received in cash of Rs. 3,22,971/-. This is also considered during the rectification of Para- A of the assessment order mentioned above. As the assessee has shown this amount in the capital balance as of 31/03/2017 to the extent of Rs.3,22,971/- is allowed. The mistake apparent from the record, the rectification is done the disallowance accordingly on account of agricultural income remains to be Rs. 95,52,296/- (98,75,267 - 3,22,971) only, the penalty initiated is now restricted on account of Agricultural income to the extent of Rs.95,52,296/- only. I agree with AO on the issue and the addition is restricted to Rs. 95.52.296/-. Hence this ground is dismissed. 4.6 As regards disallowance of regular business expenses of Rs.5,08,639/-of the assessee and added back Rs76,295/- @15 percent of total expenses claimed by the assessee is concerned the same is confirmed for want of verification and its link to business of the assessee. 4.7 As regards, application of the sec. 40(a)(ja) to the assessee for non-deduction of TDS on loan interest paid of Rs. 6,25,522 to the Co- operative credit society and Bank is concerned. The same has been deleted by AO in the rectification onder. Hence not adjudicated.
As a result, the appeal of the assessee is party allowed.”
From perusal of the above order, we find that the ld. CIT(A)/NFAC has not applied his mind to the facts of the case and simply relied on the order passed by the Assessing Officer. However, we find that it is the claim of the assessee that inadvertently the profits from sale of agricultural land was shown under the head “agricultural income” but neither the Assessing Officer nor the ld. CIT(A)/NFAC has applied their mind to verify the fact that whether the agricultural land sold was an urban agricultural land or rural agricultural land. It is an admitted fact that the amount of Rs.95,52,296/- represents the profits from sale of agricultural land which was inadvertently shown in the wrong column, but the ld. CIT(A)/NFAC has not bothered to verify the fact that the impugned agricultural land sold by the assessee falls in the category of capital asset or not. If it is a rural agricultural land then it is not a capital asset & no tax can be imposed , but if it is an urban agricultural land then it will certainly fall in the category of capital asset as per section 2(14) of the IT Act and may attract income tax. Similarly the proof of indirect expenses were produced before the LD CIT(A)NFAC & copy of cash book in support of availability of cash was also produced but nothing was considered & simply the order of the AO was followed in verbatum. Under these circumstances, we are of the considered opinion that the Assessing Officer as well as ld. CIT(A)/NFAC without applying their mind added whole of the amount received from sale of agricultural land into the hands of the assessee as taxable income.
Regarding addition of Rs.3,64,994/- & ad-hoc addition of Rs 76,295/- @ 15% of total indirect expenses, we find that the documents & proofs furnished by the assessee were not considered by LD CIT(A)NFAC. Considering the totality of the facts, we deem it fit to set-aside the order passed by the ld. CIT(A)/NFAC and remand the mater back to the file of ld. CIT(A)/NFAC with direction to pass a fresh order as per fact & Law in the light of above observations after providing reasonable opportunity of being heard to the assessee. The assessee is also hereby directed to