2018 (7) TMI 1879 - AT - Income Tax

Disallowance on account of agricultural income - CIT(A) admitting the additional evidence with respect to the assessee s claim of agricultural income without giving an opportunity to the AO to examine the same - Held that - When on one hand the Revenue is accepting continuously an agricultural income for the last more than 10 years and even during search, no evidence is there to the contrary and no inquiry is being made to show that the evidence in the form of Khasra Khatoni is not correct, in these circumstances the AO s action in treating the agricultural income as income from undisclosed sources, appears to be against the principle of consistency, notwithstanding the fact, that the principle of estoppels and resjudicata have not application to tax proceedings. Therefore, CIT(A) has rightly relied upon the decision in the case of Radhaswami Satsang vs. CIT 1991 (11) TMI 2 - SUPREME COURT and accordingly treated the AO s action in treating the agricultural income declared by assessee as income from undisclosed sources is not correct, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A). Unexplained cash credits u/s. 68 - all the partners were regularly filing their returns of income and had sufficient funds to invest in the AOP - Held that - CIT(A) has rightly held that the assessee had duly discharged the onus of proving the source of said cash received from M/s Veerandra Kumar (AOP) deposited in the bank account. As regards the amount received from M/s Triveni Motors and Triveni Media Ltd., the assessee duly submitted the PAN details of both these parties, along with the financial statements before the AO. A perusal of the financial statements of M/s Triveni Motors clearly shows that the party had sufficient own funds available with it. This fact has also been appreciated by the Ld. CIT(A). Therefore, in view of above submissions and evidences filed by the assessee, the assessee has duly established along with evidences the source of cash deposited by the assessee, and thus, the Ld. CIT(A) has rightly deleted the addition. Allowing the claim of business loss - loss of ₹ 3,62,384/- comprises of depreciation on JCB (Rs. 36,494/-) and loss on business transactions (Rs. 3,70,890) - Held that - From the perusal of computation sheet of the previous assessment years i.e. 2005-06 and 2006-07, the AO himself has been allowing depreciation in earlier years and there is no reason why the same should not be allowed in the year under consideration i.e. AY 2007-08. As regards the loss on business transaction (Rs. 3,70,890), we note that the income and expenditure account and cash flow statement were filed with the AO on 22.3.2013 and after that no query has been raised by the AO. Therefore, the AO s action in not allowing the business loss of ₹ 3,62,384/- does not appear to be correct especially when business transactions are duly been reflected in the cash book statement and income and expenditure account which were available with him, therefore, the Ld. CIT(A) has rightly allowed the loss of ₹ 3,62,384/-, which does not need any interference on our part. - decided against revenue

Summary

Issues Involved:
1. Deletion of disallowance of agricultural income.
2. Admission of additional evidence without AO's opportunity to examine.
3. Deletion of addition on account of unexplained cash credits under Section 68.
4. Acceptance of cash flow statement as correct.
5. Allowance of business loss claim.

Detailed Analysis:

1. Deletion of Disallowance of Agricultural Income:
The Revenue contested the deletion of the disallowance of ?4,92,000/- (AY 2007-08) and ?4,95,000/- (AY 2008-09) made by the AO on account of agricultural income. The CIT(A) deleted these additions, noting that the assessee had consistently shown agricultural income in preceding years, which the Revenue had accepted. The agricultural land was located in Dholpur, and evidence such as Khasra Khatoni indicated that the land was used for agricultural purposes. The CIT(A) held that the AO’s action was against the principle of consistency and relied on the Supreme Court decision in Radhaswami Satsang vs. CIT (1992) 193 ITR 321 (SC).

2. Admission of Additional Evidence Without AO's Opportunity to Examine:
The Revenue argued that the CIT(A) admitted additional evidence regarding the assessee's claim of agricultural income without giving the AO an opportunity to examine it. The CIT(A) had considered evidence such as the assessee’s consistent declaration of agricultural income since 1996-97 and the Khasra Khatoni records. The CIT(A) also noted that the AO did not conduct any inquiry to refute the assessee’s claims during the search assessments.

3. Deletion of Addition on Account of Unexplained Cash Credits Under Section 68:
For AY 2008-09, the AO added ?7,56,54,052/- to the assessee's income as unexplained cash credits. The assessee provided a cash flow statement showing sources such as agricultural income, rental income, sale of land, and amounts received from Triveni Media Ltd., Triveni Motors, and Veerandra Kumar (AOP). The CIT(A) accepted these explanations, noting that the assessee provided sufficient evidence, including sale deeds, financial statements, and confirmations from the parties involved. The CIT(A) also sent these documents to the AO, who did not respond despite multiple reminders. The CIT(A) found that the assessee had discharged the onus of proving the sources of cash deposits.

For AY 2007-08, the AO added ?26,90,000/- as unexplained cash credits. The CIT(A) accepted the assessee’s explanation that ?39,00,000/- was received from Mittal Traders, noting that the AO did not provide any contrary evidence.

4. Acceptance of Cash Flow Statement as Correct:
The Revenue argued that the CIT(A) erred in accepting the cash flow statement as it was a self-serving document without supporting proof. The CIT(A) found that the cash flow statement was supported by documentary evidence such as rental income, sale deeds, and confirmations from third parties. The CIT(A) held that the assessee had provided sufficient evidence to substantiate the cash deposits.

5. Allowance of Business Loss Claim:
For AY 2007-08, the AO disallowed the assessee's claim of business loss amounting to ?3,62,384/-. The CIT(A) allowed the claim, noting that the assessee had consistently claimed depreciation in earlier years, which the AO had allowed. The CIT(A) also found that the income and expenditure account and cash flow statement were provided to the AO, who did not raise any queries. The CIT(A) concluded that the AO’s action in disallowing the business loss was incorrect.

Conclusion:
The appeals by the Revenue were dismissed. The CIT(A)'s decisions to delete the disallowances and additions made by the AO were upheld, as the assessee provided sufficient evidence to substantiate their claims, and the AO failed to provide contrary evidence or adequately examine the additional evidence presented. The principle of consistency and the Supreme Court decision in Radhaswami Satsang vs. CIT were key factors in the judgment.