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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
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.
In & 992/Mds/2014, the admitted tax is less than `10 lakhs. In view of the circular of CBDT in Circular No. 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.
Now coming to the first issue arises for consideration is with regard to addition of `8,07,747/- towards inflation of purchase of rice.
Dr. B. Nischal, the Ld. Departmental Representative, submitted that the assessee deposited a sum of `43,03,588/- in 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/-.
On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that it is not correct to say that bought note was not produced before the Assessing Officer. Referring to the 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.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing 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 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.
The next contention of the Assessing Officer appears to be 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 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/-.
The next ground of appeal is with regard to disallowance of `4,55,000/-.
Dr. B. Nischal, the Ld. Departmental Representative, 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.
On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that there was an addition of `4,55,000/- 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.
We have considered the rival submissions on either side and 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 thereafter decide the matter in accordance with law after giving reasonable opportunity to the assessee.
The next ground of appeal is with regard to addition of `21,00,000/- towards unexplained loans and advances.
13. Dr. B. Nischal, the Ld. Departmental Representative, 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 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.
On the contrary, Shri G. Baskar, the Ld.counsel for the 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.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed the claim of the assessee only on the ground that 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.
In view of the above, this Tribunal has no reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.
In the result, Revenue’s appeals in & 992/Mds/2014 are dismissed and I.T.A. No.993/Mds/2014 is partly allowed for statistical purposes.