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Income Tax Appellate Tribunal, CIRCUIT ‘SMC’ BENCH, VARANASI
Before: SHRI.VIJAY PAL RAO
IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT ‘SMC’ BENCH, VARANASI BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER Assessment Year: 2015-16 Shri. Mohd Ahamad, v. Income Tax Officer, Pagia, Karma Road, Sonbhadra- Ward-III(3), Chandi Tiraha, 231216 Robertsganj Sonbhadra- PAN-BKXPA2899B 231216 (Appellant) (Respondent) ITA No.02/VNS/2022 Assessment Year: 2016-17 Shri. Mohd Ahamad, v. Income Tax Officer, Pagia, Karma Road, Sonbhadra- Ward-3(3), Sonbhadra 231216 PAN-BKXPA2899B (Appellant) (Respondent) Appellant by: Sh. K.R. Singh, Advocate Respondent by: Sh. A.K. Singh, Sr. D.R. Date of hearing: 26.05.2022 Date of pronouncement: 03.06.2022 O R D E R SHRI VIJAY PAL RAO, JUDICIAL MEMBER: These two appeals by the assessee are directed against the two separate orders of CIT(A) dated 02.03.2020 and 01.11.2021 for the assessment years 2015- 16 and 2016-17 respectively, arising from penalty order passed under section 271A of the Income Tax Act. 2. The appeal for the assessment year 2015-16 is taken up as a lead case. The assessee has raised the following grounds:- “
1. The Ld. CIT(Appeals) erred in confirming the imposed penalty by not taking in care and adjudicating the declared income u/s 44AD of the Act on turnover of Rs. 32,45,900/- on the basis of sale record kept and maintained in accordance with register R-9 issued by Mandi Samiti. The appellant assessee was not under obligation to keep and maintain regular books of accounts.
2. The Ld. CIT(Appeals) erred on the facts and in the law in confirming the penalty of Rs. 25,000/- before disposal of quantum appeal whereas the main issue in the ITA No.123/VNS/2020 Mohd Ahamad quantum appeal is the unreasonable determination of trading transaction on Rs. 1,19,16,791/- on account of credit transaction against sale proceeds of own crop and repetition of cash deposit in bank accounts.
2. The assessee stated to be an agriculturist and also dealing in wholesale agriculture produce as per the license under U.P. Krishi Utpadan Mandi Samiti Adhiniyam. The assessee filed his return of income on 15.07.2016 declaring total income of Rs. 2,68,740/- under section 44AD of the Income Tax Act. The case was selected for limited scrutiny in respect of larger cash deposits in the saving bank account of the assessee in comparison to the turnover declared by the assessee. During the assessment proceedings, the Assessing Officer noted that a total of Rs. 1,19,16,791/- was deposited in the three saving bank accounts of the assessee with Allahabad Bank, Punjab National Bank and State Bank of India whereas the assessee has declared the income under section 44AD on the total turnover of Rs. 32,45,900/-. The assessee explained the reasons for the turnover declared by the assessee as the other amount is the sale proceeds of his own agriculture produce i.e. Tomato and onion as well as his family members produce. The Assessing Officer did not accept this contention and made the addition by taking the total deposits in the bank account as turnover of the assessee and computed the income by applying a net profit rate as declared by the assessee. Thus an addition of Rs. 7,16,778/- was made by the Assessing Officer to the total income of the assessee.
3. The Assessing Officer was of the view that the turnover of the assessee was more than One Crore therefore, the assessee was required to maintain the books of accounts under section 44AA of the Income Tax Act failing which the penalty under section 271A of the Income Tax Act was initiated by the Assessing Officer. The Assessing Officer levied the penalty of Rs. 25,000/-, vide order dated 26.6.2018. The assessee challenged the levy of penalty before the CIT(A) but could not succeed.
ITA No.123/VNS/2020 Mohd Ahamad
Before the Tribunal, the learned AR has submitted that the assessee is a farmer and basically does the agriculture farming a tomato and onion on his land as well as on the land of his father for which both of them have taken agricultural loan through Kisan Credit Card. The assessee used to sell the tomato of other farmers also alongwith his own and for this purpose he has got licence under U.P. Krishi Utpadan Mandi Adhiniyam. The assessee declared his turnover of Rs. 32,45,900/- on the basis of sale register kept and maintained in accordance with R-9 issued by Mandi Samiti, Robertsganj. Some farmers had also sold their products to the traders directly through assessee in the own capacity for which no R-9 was necessary. Despite these farmers, five others agriculturists namely Mohd Istiyak, Sarukh, Anwar Ali, Mohd Faiz, and Om Prakash along with their own products have also traded at low scale with the outside traders through the assessee bank a/cs. Further ld. AO has also not taken into consideration the transaction of personal nature and repetition of the cash transaction in the bank accounts. He has further submitted that the Assessing Officer has taken the entire deposits in the bank account of the assessee as turnover without considering the actual facts of sale proceeds of assessee’s own agriculture produce. Therefore, the provisions of section 44AA cannot be applied when the turnover of the assessee is below the threshold limit provided under section 44AA of the Income Tax Act which is also recorded in the register R-9 issued by the Mandi Simiti.
On the other hand, learned DR has submitted that the assessee has not produced any record or books of accounts to show that the deposits in the bank account is not representing the sale proceeds of the assessee in the business of wholesale trading of agriculture produce. The assessee has only made verbal submissions without support of any record therefore, once the turnover of the assessee is found to be more than One Crore, the assessee is under obligation to ITA No.123/VNS/2020 Mohd Ahamad maintain the books of accounts under section 44AA of the Income Tax Act. He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as relevant material on record. The assessee explained before the Assessing Officer during the assessment proceedings that the amount deposited in the bank account over and above the turnover declared by the assessee representing the sale proceeds of the assessee’s own agriculture produce i.e. Tomato and Onion. He has also explained that some of the amount in the bank belongs to the other farmers being the sale proceeds of their agriculture produce which is sold through the assessee. In support of his contention, the assessee has produced the land revenue record as well as the crop details maintained by the Land Revenue Department. Thus, it is clear that the assessee was having his own land and also grown the Tomato alongwith the other family members and therefore amount of the sale proceeds of assessee’s own agriculture produce was available with assessee. The assessee has also produced register R-9 issued by the Mandi Samiti under Krishi Utpadan Mandi as condition for the license issued to the assessee. Therefore, when the assessee has declared the turnover which is less than the threshold limit provided under section 44AA then the turnover which is found to be more than the limit by considering the bank deposits without taking into account the source of the bank deposits from the sale of agriculture produce of the assessee as well as other family members is a bonafide and reasonable cause for failure of the assessee to maintaining the books of accounts. Accordingly, the penalty levied under section 271A of the Income Tax Act is deleted.
For the Assessment Year 2016-17 An identical grounds are raised by the assessee. The CIT(A) has also confirmed the levy of penalty by following its order for the assessment year 2015- 4
ITA No.123/VNS/2020 Mohd Ahamad
Accordingly, in view of the finding for the assessment year 2015-16, the penalty levied under section 271A for the assessment year 2016-17 stands cancelled. 8. In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on 03.06.2022.