BHAGABAN NATH,KORAPUT vs. ITO, JEYPORE

This is an appeal filed by the assessee against the order of CIT(A)-

Berhampur, dated 24.2.2014 for the assessment year 2009-2010.

the CIT(A) erred in confirming the action of the Assessing Officer making

addition of Rs.1 lakh as investment in the capital of the firm.

authorities and materials available on record. The Assessing Officer

observed that the assessee invested Rs.6,00,000/- in the capital of the firm

M/s. Sunley Jewellers, in which the assessee is a partner. The assessee

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explained the source of the capital in the firm to be out of his earlier year’s

income for which the assessee filed copies of return of income of last three

years before the Assessing Officer, wherein, the assessee has shown

returned income of Rs.1,22,290/- and agricultural income of Rs.30,000/-

in assessment year 2007-08, returned income of Rs.1,35,750/- and

agricultural income of Rs.30,000/- in assessment year 2008-09 and

returned income of Rs.5,79,680/- and agricultural income of Rs.60,240/-

in assessment year 2009-10. The Assessing Officer did not accept the

explanation of the assessee on the ground that all the returns of income

were filed by the assessee after survey was conducted in the premises of

the firm on 3.3.2009 and added Rs.6,00,000/- to the income of the

assessee as unexplained investment of the assessee.

his house for Rs.21,00,000/- and paid tax of Rs.91,956/- during the year

under appeal. Out of the sale proceeds, he has invested Rs.6,00,000/-

during the year in appeal towards his contribution in the capital of the firm.

Therefore, the addition of Rs.6,00,000/- made by the Assessing Officer

should be deleted.

verification and comments, in response to which, vide letter dated

17,1,2014, the Assessing Officer stated that the investment in the firm of

Rs.6,00,000/- could not be explained by the assessee during the

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assessment proceedings. The opening capital shown by the assessee at

Rs.5,46,316/- was introduced as capital in the firm. Since no return of

income was filed prior to assessment year 2007-08, the opening capital of

Rs.5,46,316/- is not acceptable. However, investment in the firm must be

restricted to the available source of capital excluding the opening capital .

submissions and argued that the assessee sold his house on 24.4.2008 for

a total consideration of Rs.21,00,000/- which itself can explain the

investment made in the firm.

as the remand report of the Assessing Officer held that he was inclined to

agree with the view of the Assessing Officer that the capital contribution of

Rs.6,00,000/- in the firm cannot be accepted to be out of capital of

Rs.5,46,316/- in absence of corroborative evidence. He held that as argued

by the assessee that the assessee has sold house property for Rs.21 lakhs

on 20.4.2008 and that this amount was available with the assessee for

investment in the firm carries force. He has also observed that in the

remand report, the Assessing Officer has not commented on the contention

of the assessee that due to availability of the sale proceeds of his house of

Rs.21 lacs with him and the same was the source of investment in the

capital of the firm. He observed that on consideration of the facts on record

and from perusal of the bank account maintained with State Bank of India,

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Koraput, where the sale proceeds of Rs.21 lakhs have been deposited in

April, 2008, he was inclined to grant the benefit of availability of this

amount for the purpose of making investment in the firm. He noted that

as per the copy of the bank account available on record, amounts have

been withdrawn in cash against deposit of Rs.21 lakhs only on 21.8.2008

onwards and before that the assessee has contributed Rs.50,000/- each on

15.5.2008 and 30.6.2008 towards capital in the firm. These amounts have

been invested before any part of the amount of Rs.21 lakhs is available

with the assessee and cannot be explained out of investments being made

from sale proceeds. Therefore, he deleted the addition of Rs.5,00,000/-

and sustained Rs.1 lakh and partly allowed the appeal of the assessee.

submissions made before the lower authorities. He could not file any

evidence before me to explain the source of investment of Rs.1,00,000/- in

the capital of the firm being Rs.50,000/- each made on 15.5.2008 and

30.6.2008. Therefore, I do not find any good and justifiable reason to

interfere with the order of the CIT(A) and hence, this ground of appeal of

the assessee is dismissed.

the CIT(A) erred in confirming the action of the Assessing Officer in

disallowing agricultural income of Rs.60,240/-.

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authorities and materials available on record. The Assessing Officer

observed that the assessee had disclosed agricultural income of

Rs.60,240/-. The assessee explained that the assessee had agricultural

land of Ac.2.00 from which he has produced sugar cane worth

Rs.1,19,400/-. The Assessing Officer made enquiries through Income tax

Inspector who reported that the assessee could not produce any details of

such landed property and other details relating to agricultural income.

Therefore, the Assessing Officer did not accept the claim of the assessee

about agricultural income and made addition of Rs.60,240/- as income from

other sources.

agricultural activity and received income from the same for Rs.60,240/-.

He furnished details like ownership of the land, agricultural activity carried

out and yield received etc. The Assessing officer rejected the claim and

alleged that the assessee has not furnished any details. He relied on the

report furnished by the report of the Inspector who confirmed that the

assessee did not carry the agricultural activity during the assessment year.

Without keeping any material on record to say that the assessee has not

carried out the agricultural activity, treating the agricultural income as

taxable income and added the same to the returned income was unjust and

arbitrary.

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vide letter dated 17.1.2014 stated that the assessee could not furnish the

source of agricultural income of Rs.60,240/- and the addition was justified

as income from other sources..

submissions made earlier.

observed that it was a settled principle of law that the burden is on the

assessee to prove that the income was agricultural income. He relied on

the decision of Hon’ble Supreme Court in the case of CIT vs. Genkateswamy

Naidu, 29 ITR 529 (SC), wherein, it has been held that in order to claim an

income which the assessee considers as agricultural income, the assessee

has to put before the authorities materials which will enable them to come

to a conclusion that the income which was sought to be assessed was

agricultural income. It was not for the authorities to prove that it was not

agricultural income. He observed that from perusal of assessment records,

it is seen that the assessee filed a lease deed ostensively showing that he

had taken agricultural land on lease from 1.2.2008 to 31.9.2009 for

Rs.4,000/-. The assessee stated that he produced sugar cane on such

leased land and the income was derived therefrom. He observed that most

of the family members of the assesse, whose appeals are being disposed

of namely, Natabar Nath, Smt. Suna Nath, Pradip Kumar Das, Khetrabasi

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Nath, Batakrushna Nath and Ranjan Kumar Nath have all claimed that they

had derived agricultural income by way of sale of sugar cane out of leased

land. If their contentions are accepted then the total sugar cane apparently

sold by the family members of the assessee will exceed Rs.8 lakhs. He

observed that it was surprising that the assessee was unable to give a shred

of evidence in support of his sugar cane cultivation or in support of sale of

such sugar cane which will normally be to a sugar mill. In absence of any

such evidence, he was not inclined to accept the contention of the assessee

regarding its claim of agricultural income. Therefore, he confirmed the

order of the Assessing Officer treating the agricultural income shown by

the assessee as income from other sources and dismissed the ground of

appeal of the assessee.

submissions made before the lower authorities.

totality that the Assessing Officer has not considered the income of

Rs.60,240/- shown by the assessee as agricultural income but treated the

same as income from other sources of the assessee on the ground that the

assessee failed to produce evidence of sugar cane cultivation and sale of

sugar cane. Before me also the assessee has failed to produce any

evidence in this regard. Therefore, I find no good and justifiable reason to

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interfere with the orders of the lower authorities and dismiss the ground of

appeal of the assessee.

the CIT(A) erred in confirming the action of the Assessing Officer in

estimating the interest on term deposit in bank.

authorities and materials available on record. In the instant case, the

Assessing Officer observed that the assessee had fixed deposits of

Rs.1,05,000/- with Micro Finance. He estimated the interest @ 10% on the

deposit on accrual basis and added Rs.10,500/- to the income of the

assessee.

has shown income from fixed deposit on receipt basis as it was following

cash system of accounting. The interest income is deemed to accrue only

on the date of due date of fixed deposit. The interest income is not

calculated year to year. He relied on the decision of Hon’ble Bombay High

Court in the case of DIT vs. Credit Suisse First Boston (Cyprus) Ltd., (2012)

23 Taxman 424 and prayed that the addition of Rs.10,500/- should be

deleted.

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vide letter dated 17.1.2014 stated that the addition of accrued interest of

Rs.10,500/- was justified and did not offer any comment.

the submissions made earlier.

remand report of the Assessing Officer held that the assessee has invested

in fixed deposit during the year and has not shown any interest income

from the said deposit in the return. The interest on the fixed deposit

accrues by the end of the year and, therefore, the Assessing Officer cannot

be faulted for taking such interest on an estimated basis on 10% which is

quite reasonable and, accordingly, dismissed the ground of appeal of the

assessee.

me.

submissions made before the lower authorities. He contended that interest

income of fixed deposit was offered to tax by consistently following method

of offering interest income to tax in the year of receipt. When questioned

by the Bench what is the evidence that the assessee has offered to tax the

interest income on fixed deposit of Rs.1,05,000/- in the year on receipt, ld

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Authorised Representative of the assessee expressed his inability to

produce any such evidence. In absence of the same, the argument of the

ld A.R. of the assessee cannot be accepted. Therefore, I do not find any

good reason to interfere with the order of the CIT(A),which is hereby

confirmed and ground of appeal of the assessee is dismissed.

SR.PRIVATE SECRETARY ITAT, Cuttack