2014 (5) TMI 623 - AT - Income Tax

Additions u/s 68 - cash credit - Failure to produce supporting evidences Source of cash deposited in back Held that - The deposit and withdrawal from the bank accounts were in thousands only, sometimes even in hundreds - The deposit or withdrawal at a time has never touched even Rs.50,000 - The bank balance is also in thousands of Rupees - the assessee derives income from business - the fact that assessee carried on the business is not in dispute - the explanation of the assessee that the deposit in the bank account and withdrawal there from were relating to the assessee s business cannot be ruled out - In the absence of complete day-to-day details having been maintained by the assessee, CIT(A) has already sustained the addition of Rs.1 lakh - Even if the theory of peak credit is applied, then also, the addition will not exceed Rs.1 lakh there was no reason to interfere in the order of the CIT(A) Decided against Revenue. Deletion of agricultural income made - Failure to give proof of land holding and sale bills of agricultural produce Held that - The assessee did not give any explanation with regard to his land holding or any evidence for the agricultural income - He simply stated that the AO is not justified to reject the agricultural income declared by the assessee and the same was simply accepted by the CIT(A) - the assessee did not furnish any details with regard to his agricultural holding or any evidence for earning of agricultural income even in front of Tribunal the CIT(A) was not justified in deleting the addition Decided in favour of Revenue. Levy of penalty u/s 271(1)(c) of the Act - Failure to produce any documentary evidence Cash deposits in bank account - Failure to give proof of land holding and sale bills of agricultural produce Held that - The CIT(A) rightly was of the view that with regard to addition of Rs.19,51,940/- because in respect of such addition, the assessee has given explanation that the deposit was relating to assessee s business receipt - the assessee had income from business - Though in the quantum appeal learned CIT(A) sustained the addition of Rs.1 lakh on adhoc basis, in the penalty appeal, he has arrived at the conclusion that on such lump sum estimated addition, penalty u/s 271(1)(c) is not warranted - the assessee has given an explanation with regard to bank deposit which is partly accepted by the CIT(A) and partly rejected on estimated basis Decided partly in favour of Revenue. With regard to agricultural income of Rs.55,400/-, the assessee has not given any explanation either before the AO or before the CIT(A) or before the Tribunal he has not furnished the details of agricultural holding, if any, by the assessee thus, penalty u/s 271(1)(c) would be justified on addition of Rs.55,400 Decided in favour of Revenue.

Summary

Issues:
1. Addition of cash deposits in bank accounts
2. Deletion of agricultural income addition
3. Deletion of penalty on cash deposits
4. Justification of penalty on unexplained agricultural income

Issue 1: Addition of cash deposits in bank accounts

The appeal by the Revenue was against the deletion of an addition of Rs.18,51,940 due to unexplained cash deposits in the assessee's bank accounts. The Assessing Officer made the addition as the assessee failed to provide satisfactory explanation for the deposits. The CIT(A) sustained an adhoc addition of Rs.1 lakh, reducing the total addition. The Revenue argued for the full restoration of the Assessing Officer's addition. However, the ITAT upheld the CIT(A)'s decision, considering the assessee's business income and the nature of transactions in the bank accounts. The ITAT found the sustained addition reasonable and rejected the Revenue's appeal on this ground.

Issue 2: Deletion of agricultural income addition

The second ground of appeal was regarding the deletion of an addition of Rs.55,400 related to agricultural income. The Assessing Officer made the addition as the assessee failed to provide proof of land holding or sale bills of agricultural produce. The CIT(A) deleted the addition without proper justification, accepting the assessee's claim without supporting evidence. The ITAT reversed the CIT(A)'s decision, noting the lack of evidence provided by the assessee regarding the agricultural income. The ITAT allowed the Revenue's appeal on this ground, restoring the Assessing Officer's addition.

Issue 3: Deletion of penalty on cash deposits

In a separate appeal, the Revenue challenged the deletion of a penalty of Rs.7,51,496 related to the cash deposits in the bank accounts. The CIT(A) cancelled the penalty, considering that the quantum additions were deleted, except for an adhoc addition of Rs.1 lakh. The ITAT agreed with the CIT(A) on the deletion of penalty concerning the cash deposits, as the assessee provided an explanation related to business receipts. The ITAT upheld the decision to cancel the penalty on this aspect.

Issue 4: Justification of penalty on unexplained agricultural income

Regarding the penalty on unexplained agricultural income, the ITAT found that the assessee failed to provide any explanation or evidence for the declared agricultural income of Rs.55,400. As a result, the ITAT held that the penalty under Section 271(1)(c) was justified for this unexplained income. The ITAT directed the Assessing Officer to compute the minimum penalty on the unexplained agricultural income. Both appeals of the Revenue were partly allowed by the ITAT, with the penalty upheld for the unexplained agricultural income while the penalty related to cash deposits was cancelled.

This detailed analysis of the judgment covers the issues raised in the appeals before the ITAT and the reasoning behind the decisions made in each case.