ITO, VELLORE vs. PUNITHA BALAKRISHNAN, TIRUVANNAMALAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

The Revenue has filed these appeals against the respective orders of the Commissioner of Income Tax (Appeals) –VII, dated 30.12.2013, in respect of two independent assessees, for the

assessment years 2007-08 and 2008-09. Since common issue arises for consideration in these appeals, we heard all these appeals together and disposing of the same by this common order.

21/2015 dated 10.12.2015, this Tribunal is of the considered opinion that these two appeals filed by the Revenue are not maintainable before this Tribunal. Accordingly, I.T.A. Nos.991 & 992/Mds/2014

are dismissed.

inflation of purchase of rice.

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Indian Bank, Thiruvannamalai Branch. No books of account were maintained. The assessee clarified that the deposit of `33,78,600/-

was purported to be in connection with Trading, Profit & Loss

account of the assessee. The assessee claimed before the

Assessing Officer that he has purchased paddy from farmers for a sum of `8,07,747/-. The assessee has maintained bought notes

wherein the names of the farmers and the dates of purchase were

said to be mentioned. According to the Ld. D.R., the bought notes

were not produced before the Assessing Officer. It was produced

only before the CIT(Appeals). The Assessing Officer found that the assessee has exported rice for `33,78,600/-. The Ld. D.R. further

submitted that the assessee could not produce any invoice / bill for

purchase of paddy from so-called agriculturists. In the absence of

any material for the purchases made, the Assessing Officer disallowed a sum of `8,07,747/-.

assessee, submitted that it is not correct to say that bought note

was not produced before the Assessing Officer. Referring to the

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assessment order, more particularly page 5, para 1.3, the

Ld.counsel submitted that the Assessing Officer in categorical terms

says that “the bought note purchase bills examined”. However, the

Assessing Officer has added that it does not contain complete

names and address of the farmers. Referring to the dates

mentioned in the bought note, the Assessing Officer observed that

the period of yielding is different and the farmers could not sell their

products at any time when the bills were raised. According to the

Assessing Officer, the agriculturists could not preserve their paddy

and sell the same in a later stage. According to the Ld. counsel, the

paddy can be very much stored and it can be sold at any point of

time. Since the purchases are made from farmers, the assessee

cannot be expected to get any purchase bill for purchase of paddy

from agriculturists. If the disallowance is made as proposed by the

Assessing Officer, then the gross profit of the ratio would go to 52%

which is abnormal. Referring to the export made by the assessee to the extent of `33,78,600/-, the Ld.counsel submitted that unless

purchase was made, the assessee could not have exported the rice.

perused the relevant material available on record. The Assessing

5 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

Officer doubted the purchase of paddy to the extent of `8,07,747/-.

It is not in dispute that the paddy was purchased from agriculturists.

The agricultural produce in this country are sold in unregulated

market. Expecting bills from the farmers for purchase of paddy is

something impossible in this country. Majority of the agriculturists in

this country are illiterate and they would sell the agricultural

produce, including the paddy, to the persons who are offering the

highest price. The agriculturists being not in regular trade like

merchants, they are not in the habit of issuing any bills for sale of

their agricultural produce. This fact which prevails in this country

cannot be ignored by the Income-tax Department, when the

agricultural produces are purchased from the agriculturists. What is

to be seen is whether the assessee has purchased the paddy or

not. In this case disallowance was made only on the ground that

the assessee has not produced the bills and vouchers. The fact

remains that the assessee has produced bought note which

contains the names of the farmers and their village names. By

referring to the village name and name of the farmers, one can

easily identify the individual from whom the paddy was purchased.

It is not necessary to mention their complete address of the farmers

6 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

who are living in the village. Each and every agriculturist can be

very much identified by referring to their individual name and the

village. Therefore, the Assessing Officer may not be justified in

saying that the bought note does not contain complete name and

address of the farmers.

that the farmers could not preserve their paddy and sell in a later

stage. The argument of the Assessing Officer is farfetched. Paddy

is not a perishable commodity. The paddy harvested by the

agriculturists can be stored for a reasonable period of time. At the

best, the moisture content may be reduced by passage of time. The

paddy is not a perishable commodity. Therefore, merely because

the bills were raised during the period when there was no harvest,

that cannot be a reason to doubt the purchase itself. Rule 6DD

relaxes the rigour of provisions of Section 40A(3) of the Act with

regard to payment made to agricultural and forest produces

purchased from cultivator, grower or producer of such articles.

When Rule 6DD enables the purchaser to pay cash after taking into

consideration of the economic condition in which the agriculturists of

this country are living, expecting a bill/voucher from the

7 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

agriculturists is something which cannot be obtained by the

assessee. In those circumstances, this Tribunal is of the

considered opinion that the CIT(Appeals) has rightly deleted the addition of `8,07,747/-.

submitted that the assessee has disclosed opening cash balance of `5,23,773/- by way of cash deposit in the assessee’s bank account.

The assessee has not furnished any cash flow statement before the

Assessing Officer or before the CIT(Appeals). In the absence of any

cash flow statement, the CIT(Appeals) should have called for

remand report from the Assessing Officer. The CIT(Appeals)

deleted the addition made by the Assessing Officer on the ground

that the cash deposit was within exclusive knowledge of the

assessee. When the assessee could not explain the source of

deposit, according to the Ld. D.R., the CIT(Appeals) ought not have

deleted the addition.

8 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

towards unexplained cash deposit in bank account. The Ld.counsel

further submitted that the CIT(Appeals) deleted the addition accepting the available funds to the extent of `5,23,773/- as on

31.03.2007. But, this fact needs to be verified. Further, the

Ld.counsel submitted that the matter may be remitted back to the

file of the Assessing Officer for verification.

perused the relevant material available on record. The

CIT(Appeals), by following his own order in the assessee's own

case for assessment year 2007-08, found that the net available cash as on 31.03.2007 was `5,23,773/-. Therefore, the

CIT(Appeals) presumed that the assessee could explain the source

for making investment in the bank account. As rightly submitted by

the Ld.counsel for the assessee, this fact needs to be verified.

Accordingly, the orders of the lower authorities are set aside and the issue of addition of `5,23,773/- is remitted back to the file of the

Assessing Officer. The Assessing Officer shall re-examine the

issue in the light of availability of funds as on 31.03.2007 and

9 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

thereafter decide the matter in accordance with law after giving

reasonable opportunity to the assessee.

submitted that while explaining the cash deposit for the assessment

year 2008-09 in the case of Smt. Punitha Balakrishnan, it was

claimed that there was transfer of funds from the assessee to the extent of `21,00,000/-. However, the loan said to be advanced by

the assessee to his wife Smt. Punitha Balakrishnan was not

reflected in the balance sheet at all. Therefore, the Assessing

Officer doubted the liability of Smt. Punitha Balakrishnan to repay the loan. Accordingly, made an addition of `21,00,000/-. On appeal

by the assessee, the CIT(Appeals) found that the loan was given by

the assessee to his wife by way of cheques. The CIT(Appeals)

found that since the loan was advanced through banking channel,

merely because the loan was not reflected in the balance sheet that

cannot be a reason to disallow the claim of the assessee.

According to the Ld. D.R., the fact that the loan said to be given to

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the assessee’s wife Smt. Punitha Balakrishnan is not reflected in

the balance sheet is not disputed. Therefore, the amount said to be

receivable is questionable. Therefore, the Assessing Officer has

rightly assessed the same as unexplained loan and advance.

assessee, submitted that during the year under consideration, a sum of `21,00,000/- was transferred to Smt. Punitha Balakrishnan

by way of four cheques. The details of the dates on which the

cheques were issued and transferred by the bank are available at

page 8 of the CIT(Appeals)’s order. The Assessing Officer

disallowed the claim of the assessee only on the ground that the

loan given by the assessee to his wife does not find place in the

balance sheet. When the loan was given through banking channel,

which is recorded, merely because the same was not reflected in

the balance sheet cannot be a reason to disallow the claim of the

assessee.

perused the relevant material available on record. The Assessing

Officer disallowed the claim of the assessee only on the ground that

11 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

the balance sheet does not reflect the loan/advance said to be given by the assessee to his wife Smt. Punitha Balakrishnan. The fact remains that the loan was given through four cheques on four different dates. This fact is not disputed by the Revenue. When the amount was transferred from the bank by means of cheques, this Tribunal is of the considered opinion that rejection of claim of the assessee only on the ground that the balance sheet does not disclose the advance said to be made by the assessee is not justified.

Order pronounced on 24th March, 2016 at Chennai. sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

12 I.T.A. No.991/Mds/14 I.T.A. No.992 & 993/Mds/14

चे�नई/Chennai, �दनांक/Dated, the 24th March, 2016.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondents 3. आयकर आयु�त (अपील)/CIT(A)-VII, Chennai-34 4. आयकर आयु�त/CIT-VIII, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.