SAVITABEN ARJANBHAI SINDHAV,,RAJKOT vs. INCOME TAX OFFICER, WARD-2(1)(5),, RAJKOT

This assessee’s appeal for A.Y. 2013-14, arises from order of the CIT(A)-2, Rajkot dated 13-09-2017, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.

The assessee has raised the following grounds of appeal:-

On merits, the facts of the case are that during the year under consideration, the assessee has shown income from job work of silver and agricultural income. During the year, the assessee had purchased a piece of agricultural land at Kuvada for an amount of � 1,16,86,000/- along with Shri Vashrambhai and Smt. Bhartiben. The assessee’s share comes to � 45,10,700/- (including stamp duty and registration). During the course of assessment, the AO asked the assessee to explain the source of investment and in response, the assessee submitted that the source of investment of the properties was out of sale of agricultural produce worth � 22.93 lakhs to M/s Vaibhav Cotton, from sale of agricultural produce to unregistered farmers amounting to � � 3 lakhs and unsecured loan of 20 lakhs from Shri M.S. Sojitra.

On verification of details, the AO observed that the assessee had purchased agricultural land at Kuvada on 05-01-2013. The assessee did not have agricultural land before the date. Despite of not having any agricultural Page No 3 Savitaben Arjanbhai Sindhav vs. ITO land in financial year 2011-12, the assessee has shown agricultural income of � 1.58 lakhs. Further, during the impugned assessment year, the assessee has shown agricultural income of � 25.93 lakhs which is very intriguing. The AO observed that the assessee has not been able to furnish any supporting evidence to prove the genuineness of loan of � 20 lakhs taken from Mr. Sojitra and therefore, the same remains unverified. The AO further observed that in the original return of income filed on 30-01-2014, the assessee had shown “Nil” unsecured loan, whereas in the revised return filed by the assessee on 31-03-2015, the assessee has shown unsecured loan of � 10.5 lakhs. This fact shows that the assessee had filed revised return of income only after the case was selected for scrutiny and the AO was seized of the matter. Regarding the sale of agricultural produce to M/s Vaibhav Cotton, the AO observed that the assessee acquired several bills from M/s Vaibhav Cotton for very close dates and hence the sale bills produced by the assessee are clearly not genuine. Accordingly, notice under section 133 (6) was issued to M/s Vaibhav Cotton, which remained uncompiled with since M/s Vaibhav Cotton did not respond to the aforesaid notices issued by the Ld. Assessing Officer . Therefore, the assessee was requested to produce books of accounts, but the assessee failed to produce the same as well. Further, the AO observed that the assessee had not incurred any agricultural expenses as well during the year under consideration. Accordingly, the AO held that from the facts of the case, it is evident that the assessee has shown agricultural income and unsecured loan in order to cover up the investment in property. Accordingly, in the instant facts, the AO held that the investment in property amounting to � 45,10,700/- as unexplained and Page No 4 Savitaben Arjanbhai Sindhav vs. ITO unaccounted investment under section 69 of the Act and added the same to the total income of the assessee.

In appeal before Ld. CIT(Appeals), he dismissed the appeal of the assessee with the following observations:

The assessee is in appeal before us against the order passed by Ld. CIT(Appeals) dismissing the appeal of the assessee. Despite several Page No 5 Savitaben Arjanbhai Sindhav vs. ITO opportunities given to the assessee for appearance, none has appeared before us on behalf of the assessee to argue the case in merits. Accordingly, we are passing the order on the basis of material before us. On going through the assessment and the appellate records, we find no infirmity in the order of AO/ CIT(Appeals) so as to call for any interference. The assessee had purchased land in Kuvada and when asked to explain the source of such investment, the assessee submitted that the same was funded firstly out of sale of agricultural produce to M/s Vaibhav Cotton and secondly out of sale of agricultural produce to unregistered farmers amounting to � 3 lakhs and further from amount of � 20 lakhs taken as unsecured loan from one Mr Sojitra. As per observations made by the AO in the assessment order, and notice under section 133(6) issue to M/s Vaibhav Cotton, the AO observed that the assessee has not been able to establish sale of agricultural produce to M/s Vaibhav Cotton. Further, even the sale of agricultural produce to unregistered farmers remained unverified. Further, the AO observed that the assessee has not incurred any agricultural expenses during the year under consideration. He further observed that in the original return filed by the assessee, he had shown unsecured loans at “Nil” and subsequently when the case of the assessee was taken up for scrutiny, the assessee filed revised return of income declaring unsecured loan at � 10.5 lakhs and fixed assets of � 45.44 lakhs. Accordingly, the AO observed that from the facts it is evident that the revised return was filed by the assessee only with a view to cover of the source of investment for purchase of land situated at Kuvada, which was subject to scrutiny by the AO during the course of assessment proceedings. In our considered view, the AO and Ld. CIT(Appeals) have rightly held that assessee has not been able to explain the source of Page No 6 Savitaben Arjanbhai Sindhav vs. ITO investments made by the assessee in the aforesaid property and rightly added the aforesaid sums as unexplained investments in the hands of the assessee under section 69 of the Act.