2018 (10) TMI 1866 - AT - Income Tax

Addition on account of sales of sugarcane as income from unexplained cash credit u/s 68 - HELD THAT - We find that the agricultural land holding of 9.80 hectares is not in dispute. The assessee has filed copies of bills of agricultural produce during the course of assessment proceedings and copy of ledger account showing sale of sugarcane at ₹ 8,37,33 as given in para 3 of the table of assessment order. The assessee has also produced Shri Mahendrabhai Patel and Shri Krunalbhai Lad for examination through whom sale of sugarcane was effected. The learned counsel for the assessee has filed a chart-showing yield @ 637.50 per hectares during relevant period and rate of sale @ 130 per quintal. Accordingly, the estimate of sugarcane sale comes to ₹ 8,12,175 637.50 X 9.80 hectares 8,12,175 . Beside, this the assessee has also earned income from sale of cotton etc., which is also supported by 7/12 extract and 8A. Therefore, considering the facts and the circumstances of the case and taking a holistic view, we are of the considered opinion that the assessee might have earned the Gross agricultural income at ₹ 8,12,175/-, therefore, considering the expenditure @ 40% of gross income the net income would be at ₹ 4,87,305/- (₹ 8,12,175/ - ₹ 3,24,870/- ₹ 4,87,305/-). Further, the AO accepted ₹ 79,837/- agricultural income earned by the assessee as reasonable. Thus net agricultural income is considered at ₹ 5,67,142/- (₹ 4,87,305/- ₹ 79,837/-) as against the agricultural income credited in the books of accounts of the assessee at ₹ 9,17,170/-, accordingly, the addition on account of agricultural income is restricted to ₹ 4,87,305/- and accordingly the assessee gets relief. Penalty u/s 271(1)(c) - CIT(A) has treated the addition on account of sugarcane receipts, therefore, the AO levied a penalty treating the income from unexplained sources - HELD THAT - We find that the assessee the AO has made addition on account of agricultural income treating the same as unexplained which the CIT (A) has further, reduced by ₹ 1 Lakh in appeal. As we have also reduced the quantum addition to ₹ 4,87,305/-. In such situation the penalty is also required to be recalculated. Therefore AO is directed to calculate penalty on unexplained income at Rs. ₹ 4,87,305/- only. This grounds of appeal is therefore, allowed partly allowed.

Summary

Issues:
1. Addition of income from unexplained cash credit under section 68 of the Act.
2. Penalty under section 271(1)(c) for the assessment year 2010-11.

Issue 1: Addition of Income from Unexplained Cash Credit:
The assessee's appeal contested the addition of ?7,37,333 as income from unexplained cash credit under section 68 of the Act. The AO made the addition after discrepancies arose regarding the sales of sugarcane. Despite the assessee's ownership of agricultural land and some evidence of agricultural income, the AO found inconsistencies in the transactions related to the sales of sugarcane. The CIT (A) partially upheld the addition but allowed relief of ?1 lakh on account of agricultural income. The Tribunal considered various factors, including the land holding, sales receipts, and statements of involved parties. After a detailed analysis, the Tribunal estimated the net agricultural income at ?4,87,305, leading to a partial allowance of the appeal.

Issue 2: Penalty under Section 271(1)(c):
The penalty under section 271(1)(c) amounting to ?2,01,021 was imposed due to the addition of ?7,37,333 as unexplained income. The CIT (A) confirmed the penalty, stating that the assessee's explanation was insufficient. The assessee argued against the penalty, citing relevant case laws and contending that the penalty was invalid as no positive concealment of income was proven. The Tribunal observed that since the quantum addition was reduced to ?4,87,305, the penalty needed recalibration. Consequently, the penalty was directed to be calculated based on the revised unexplained income amount. As a result, the appeal for the penalty was partly allowed.

In conclusion, the Tribunal's judgment partially allowed the assessee's appeals concerning the addition of income from unexplained cash credit and the penalty under section 271(1)(c) for the assessment year 2010-11. The detailed analysis considered various aspects of agricultural income, evidentiary support, and legal precedents to arrive at a fair decision in each issue presented before the Tribunal.