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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT.ANNAPURNA GUPTA & T.R. SENTHIL KUMAR
PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER
This appeal is filed by the assessee against order dated 28.3.2018 passed by the Commissioner of Income-tax (Appeals), Jamnagar relating to the Asst.Year 2009-10.
The assessee has raised following substantial grounds in his appeal:
“1. The ld.CIT(A) has erred on facts as well as in law in confirming addition of Rs.6,50,000 (Rs.10,00,000 – Rs.3,50,000) as stated in his order) deposited in bank during the year on account of allege unexplained cash deposited in bank account, knowing the fact that appellant had opening cash balance of 2 Rs.10,66,663/- and ld.CIT(A) himself has treated it as fully explained for opening balance in para 5.2 on page no.12 of the order. Based on this fact, the addition of Rs.6,50,000/- may kindly be deleted.
2. The ld.CIT(A) erred on fact as well as on law to enhance assessment by Rs.5,75,250/- contrary to the provisions of section 44AD hence the same may kindly be deleted.
3. The ld.CIT(A) erred in law as well as on fact to initiate proceedings u/s.271(1)(c) hence the same may be directed to drop.”
Brief facts of the case is that the assessee is an individual deriving income from small contract work as well as income from agriculture activities. The assessee has not filed regular return of income for the Asst.Year 2009-10. However, in response to the assessment proceedings under section 147 of Income Tax Act, 1961 ("the Act" for short) and in response to the notice under section 142(1) and 143(2) of the Act, assessee filed return of income on 27.7.2016 disclosing income of Rs.1,26,020/- from labour job work under section 44AD of the Act and bank interest of Rs.10,7065/- and agricultural income of Rs.1,18,707/-.
In the course of assessment proceedings, the ld.AO noticed that the assessee had shown opening capital balance of Rs.34,56,281/- during the year under consideration. The ld.AO also noticed that the assessee has made cash deposits of Rs.2,00,000/- and Rs.8,00,000/- in his two bank accounts with Bank of Baroda and the Commercial Cooperative Bank Ltd. The ld.AO doubted the amount of opening capital balance as well as deposits in the bank accounts, more so, since the assessee has not filed return of income voluntarily, but filed for the first time on 27.7.2016 pursuant to the notice under section 148 of the Act. Therefore, the ld.AO issued show cause notice to the assessee and sought explanation from the 3 assessee as to source of cash deposits to the tune of Rs.10.00 lakhs and substantial increase in his capital account of Rs.34,56,281/-. It was explained by the assessee that the capital account of Rs.34,56,281/- was accumulation of earning and investment made in earlier years, and therefore, the same could not be assessed as income in the current year. Further, the cash deposits to the tune of Rs.10.00 lakhs were made out of cash available in books of accounts from earlier withdrawals from the bank. However, the ld.AO did not accept the explanation of the assessee. He was of the view that since the assessee has never filed his return for income till Asst.Year 2009-10, and the return filed by him for the Asst.Year 2009-10 was not voluntary rather it was filed in response to the notice under section 148 of the Act on 29.3.2016. He further observed that had no notice been issued and proceedings under section 147 not initiated, the assessee would not have filed the return. For these reasons, the ld.AO rejected the explanation of the assessee, and he made addition of Rs.34,56,281/- under section 69 of the Act and Rs.10,00,000/- under section 68 of the Act.
Aggrieved, the assessee filed appeal before the ld.CIT(A). Before the ld.CIT(A) assessee filed a detailed submissions, which appellate authority has reproduced from page no.4 to 9 of the impugned order. Crux of the submissions made by the assessee before the ld.CIT(A) can be summarized as follows: i) The assessee is mainly engaged in agriculture activities, and during the off-season, the assessee also undertakes contractor labour work; ii) Agriculture income is exempt under section 10 of the Act and there is no need to maintain books of accounts, whereas contract receipt was assessed under section 44AD of the Act, and profit of Rs.1,26,020/- earned from the contract work was accordingly offered to tax; iii) Since under the above income earned by the assessee was below the taxable limit of Rs.1,60,000/- stipulated at the relevant point of time, the assessee was not liable and mandatory to file return, therefore, no return was filed for the earlier years. iv) So far as cash deposits of Rs.10.00 lakhs is concerned, it was submitted that the assessee has intended to make investment. Therefore, he withdrew an amount of Rs.2.50 lakhs and Rs.9.00 lakhs from the bank on 2.1.2008 and 4.1.2008 respectively and kept with the assessee. However, due to change of decision, the above cash was re-deposited in the bank. Therefore, the same was shown as cash deposits in the bank account, and to prove the same, assessee has filed bank statements during the assessment proceedings. v) So far as opening balance of capital account of Rs.34,56,281/- is concerned, it was explained that the same represented the investments made in earlier years, and not invested during the year under consideration, and therefore, the same could not be treated as income or investment made in the current year. The assessee has shown in a tabular form the break-up of the impugned amount of capital account. For ready reference, we extract the investment and the source narrated by the assessee in statement form as follows:
Particulars Amounts Particulars investments Amounts of source Capital 34,56,281 Agr. Land at village 3,09,050 Dabasang purchased on 17.10.2006 (copy of registered deed already submitted with submission with AO during hearing) Misc. 2,25,000 Agr. Land at village Moti 3,80,000 outstanding Khavdi purchased on 27-10-02007 (copy of registered deed already submitted with submission with AO during hearing Motor cycle purchase 46,500 don 19-1-2007 Investment made by 10,35,000 cheque upto 21-3-2008 with AKSHAR VATIKA LAND Loans and advance 8,10,000 given to Trivedi Family by cheque upto 18-3- 2008 Bank balances 34,098 Cash withdrawn Hathu 10,66,663 account (1150000-8337 spent agr etc) Bank balance 34,098 Total 36,81,281 Total 36,81,281 vi) Assessee submitted that during the assessment the above details were filed before the AO with proof. Even the AO has recorded a finding to the fact in para 5.1 that the opening capital account balance of Rs.34,56,281/- stood explained as investment of earlier years, but decided to disbelieve the claim of the assessee on the ground that the assessee has filed return of income for the first time, though the position of law remains that since the income of the assessee far below the taxable income, the assessee was not mandatorily required to file the return. vii) In the submission, the assessee has also explained each and every investments made and break-up thereof and submitted that the impugned investments were made in the earlier years, the same could not be treated as income of the assessment year under consideration. viii) The assessee has also submitted cash flow statement for the period 1.4.2008 to 31.3.2009. According to which, the fund available with the assessee as on 1.4.2008 was Rs.10,66,633/-, which represented cash withdrawals from the bank of Rs.2,50,000/- and Rs.9,00,000/- on 2.1.2008 and 4.1.2008 respectively, which could be seen from the bank statements. During the off-seasons, the assessee has done contract work, from which the assessee has a gross contract receipt of Rs.15,72,250/- and expenditure towards labour charges and other expenses net profit was of Rs.1,26,020/-, which was offered under section 44AD of the Act and the same was accepted by the AO. When the assessee undertook the contract work, the labour payment and material purchases were to be met by the assessee, and this was 6 being done from the opening balance available with the assessee. After completion of the contract work, the assessee received payment in instalments viz. Rs.3,00,000/-, Rs.2,50,000/- and Rs.2,50,000/- from contractee and the same was deposited in the Commercial Cooperative Bank on 19.1.2009, 30.1.2009 and 2.2.2009, and therefore, the same stand explained. The assessee also deposited an amount of Rs.2,00,000/- in Bank of Baroda on 11.7.2008 out of available cash balance of Rs.10,66,633/- as on 1.4.2008. Therefore, to that extent also, deposits made in the bank stand explained. ix) It was submitted that the AO has not disputed the investment made during earlier year or has proved that all such investments made during earlier is unexplained, therefore, addition of Rs.34,56,281/- of opening balance and Rs.10,10,000/- deposited with the bank should be deleted.
The ld.CIT(A) considered submissions of the assessee and also remand report submitted by the AO. So far as the issue of addition on account of opening capital balance of Rs.34,56,281/- is concerned, the ld.CIT(A) accepted the contentions of the assessee that the same represented investments made prior to 31.3.2008, and therefore, the same cannot be treated as income for the current year. In other words, the CIT(A) held that addition on account of investment could be made only in the year in which the investment was made and not during the year under consideration.
So far as addition of Rs.10.00 lakhs made by the AO under section 68 of the Act is concerned, the ld.CIT(A) noticed that the assessee has shown gross contract receipt of Rs.15,75,250/- and offered Rs.1,26,020/- which is 8% of the gross receipt under section 44AD of the Act. The ld.CIT(A) has sought break-up of the gross receipt, which was submitted by the assessee as under:
7 Mahendra Jadeja : Rs.2,00,000/- Petty contract work : Rs.5,75,250/- Mohan Narshibhai Dalwadi : Rs.3,00,000/- Ramesh Satwara : Rs.1,75,000/- Pravin Satwara : Rs.1,75,000/- Kachubha Jadeja : Rs.1,50,000/- Rs.15,75,250/- 8. To verify the claim of the assessee, summons were issued to the above parties. Out of five, two parties viz. Mahendra Jadeja and Kachubha Jadeja attended the hearing and confirmed payment of contract work of Rs.3.00 lakhs and 1.50 lakhs respectively to the assessee. Therefore, addition of Rs.10.00 lakhs made by the AO which was part of contract receipt of Rs.15,75,250/- disclosed by the assessee under section 44AD reduced to Rs.6,50,000/- giving assessee a relief of Rs.3,50,000/-. However, the remaining part of contract receipt i.e. Rs.5,75,250/- (Rs.15,75,250/- minus Rs.10,00,000/-) representing contract receipts from petty contract work, the assessee could not furnish any documents or evidences to support his claim. The ld.CIT(A) observed that during the course of assessment proceedings or during the course of remand proceedings, the assessee could not substantiate his claim of Rs.5,75,250/- received from small petty contracts, because except two persons, identities in respect of other three persons could not be proved by the assessee. Therefore, since the assessee failed to explain the nature and sources of cash deposits of Rs.5,75,250/-, this amount was treated as unexplained cash credit under section 68 of the Act and directed the AO to enhance the assessment/income of the assessee for the Asst.Year 2009-10 by Rs.5,75,250/-. In sum, out of total addition of Rs.44,56,281/-, the ld.CIT(A) has deleted Rs.34,56,281/- representing opening capital balance and confirmed an addition of Rs.6,50,000/- under section 68 of the Act. He further directed the AO to enhance
8 income/assessment of the assessee for the Asst.Year 2009-10 by Rs.5,75,250/- on account unexplained contract receipts. Against this order of the ld.CIT(A), the assessee is now before the Tribunal.
Before us, the ld.counsel for assessee’s submissions are more or less on similar line as were made before the lower authorities, and copy of the submissions made before the CIT(A) is also placed on record in paper book from page no.1 to 6. Accordingly, based on these submissions, the ld.counsel for the assessee sought deletion of entire impugned additions. On the other hand, the ld.DR relied on the order of the ld.CIT(A) and submitted that the assessee has been given substantial relief by the appellate authority, and a part of the impugned additions confirmed by the ld.CIT(A) was because of the fact that the assessee was unable to substantiate the same with any evidence or proof. Therefore, the impugned order requires to be upheld and the appeal of the liable to be dismissed.
We have heard both the parties; perused record and the submissions of the assessee made before the lower authorities. We find from the assessment order that the AO has made two additions viz. (i) addition on account of opening capital account of Rs.34,56,281/-, which was deleted by the ld.CIT(A), and (ii) addition of Rs.10,00,000/- made by the AO on account of unexplained cash credit under section 68 which was restricted by the ld.CIT(A) to the extent of Rs.6,50,000/-. Further, the ld.CIT(A) has also enhanced income/assessment of the assessee for the Asst.Year 2009-10 by Rs.5,75,250/-. This amount represented difference of gross contract work receipt of Rs.15,75,250/- and Rs.10,00,000/-. The ld.CIT(A) noticed that addition of Rs.10,00,000/- made by the AO under section 68 of the Act was part of contract receipt of Rs.15,75,250/-. Accordingly, the ld.CIT(A) has sought for detailed break-up of gross
9 receipt of Rs.15,75,250/-, which the assessee has furnished. We have extracted such break-up hereinabove. This amount has two compartments, viz. contract receipt of Rs.10,00,000/- from five parties and remaining amount of Rs.5,75,250/- received from petty contract receipts. On cross-verification by the ld.CIT(A), only two parties who made contract payment of Rs.3,50,000/- to the assessee, have come forward in response to the summons and confirmed the same, however, for the remaining amount of Rs.6,50,000/- paid by other three parties, nobody appeared during the appellate proceedings nor the assessee could explain the source and nature of the balance amount with any supporting document or evidence. Therefore, the ld.CIT(A) made addition of Rs.6,50,000/- as unexplained cash credit. Similar is position with regard to second part of contract receipt i.e. Rs.5,75,250/- which the assessee was unable to prove. Therefore, the ld.CIT(A) issued notice under section 251(2) of the Act to the assessee show causing as to why assessment for Asst.Year 2009-10 be not enhanced by this amount, as identities of the persons from whom such receipts were claimed to have been made and evidence thereof, could not be produced by the assessee. It was explained by the assessee that since the assessee filed the return of income under the scheme of section 44AD, he was exempted from maintaining books of accounts. Except this submission, there was nothing on record to prove the case of the assessee that the amount of Rs.5,75,250/- claimed to have been received as contract receipts. In the absence of the material evidence to prove his case, the ld.CIT(A) increased an amount of Rs.5,75,250/- to the income of the assessee and enhanced the assessment according by invoking provisions of section 251(1) of the Act. It was also noticed by the ld.CIT(A) that the assessee has not filed any return of income voluntarily, and only after issuance of 10 notice under section 148 the assessee came forward and filed the return for the Asst.Year 2009-10. Had there been no proceedings under section 148 of the Act, the assessee would not have filed any return of income. Even before us also, there is no fresh material evidence to support claim of the assessee except submissions and materials as were placed before the lower authorities. In this view of the matter, we do not find any infirmity in the order of the ld.CIT(A), which we uphold, and the grounds of appeal of the assessee are rejected.
In the result, appeal of the assessee is dismissed.
Order pronounced in the Court on 3rd June, 2022 at Ahmedabad.