2018 (11) TMI 1888 - AT - Income Tax

Addition of claim of sundry creditors - addition u/s 69A - Assessee has not maintained books of accounts - HELD THAT - AO in the order has noted that assessee has not maintained the books of accounts and the case of the assessee is that he is assessed under presumptive tax u/s 44AE of the Act. The fact is that the turnover declared by the assessee has not been doubted or disturbed by the Revenue. Co-ordinate Bench of Chandigarh Tribunal in the case of Nand Lal Popli 2016 (6) TMI 883 - ITAT CHANDIGARH has held that where profits declared by the assessee under presumptive taxation was accepted, AO could not make separate addition by invoking provisions of Sec.69C of the Act. Before us, Revenue has not placed any contrary binding decision in its support nor has pointed out as to how the decision in the case of Nand Lal Popli (supra) are not applicable to the present facts - therefore relying on the aforesaid decision of Nand Lal Popli (supra) hold that no addition can be made u/s 69A in the present case and therefore direct its deletion. Thus the ground of assessee is allowed Addition being agricultural income - AO held that assessee has taken shelter of agricultural income to explain the unexplained investment in purchase of flat - HELD THAT - Assessee had claimed agricultural income which was held to be income from other sources by the AO as according to him assessee could not prove the genuineness of claim - assessee had claimed agricultural income in AY 2009-10 and the claim of the assessee was accepted in the assessment framed u/s 143(3) of the Act. Before me, it is assessee s contention that the area of land in the year under consideration has not reduced and assessee had also placed on record the copy of 7/12 extract to prove the ownership of land and sample sale patties. The aforesaid contention of the assessee has not been controverted by Revenue. In such a situation, when the Ld.CIT(A) has accepted the agricultural income at ₹ 1,08,000/- and against which Revenue is not in appeal then on such facts, the contention of the assessee cannot be discarded without there being any material on record to prove that the claim of assessee is wrong - therefore set aside the order of LD.CIT(A) to the extent of ₹ 70,110/- which has been disallowed by Ld.CIT(A). Thus, the ground of assessee is allowed.

Summary

Issues Involved:
1. Addition of ?5,22,020 on account of sundry creditors.
2. Disallowance of ?70,110 from agricultural income and its reclassification as income from other sources.

Issue-wise Detailed Analysis:

1. Addition of ?5,22,020 on account of Sundry Creditors:

The assessee, engaged in retail trading, declared a total income of ?2,43,110 and agricultural income of ?1,78,110 for AY 2010-11. The Assessing Officer (AO) scrutinized the case and determined the total income at ?9,43,240, including an addition of ?5,22,020 for sundry creditors. The AO noticed sundry creditors in the balance sheet and issued letters under Section 133(6) to verify their identity and genuineness. Only one creditor responded, leading the AO to conclude that the claim was unsubstantiated and made an addition of ?5,22,020.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, stating that the assessee failed to provide credible evidence to substantiate the sundry creditors. The CIT(A) observed that the assessee did not maintain books of accounts and revised the list of creditors multiple times, raising doubts about the genuineness of the transactions. The CIT(A) confirmed the addition under Section 69A as unexplained money.

Upon appeal, the assessee argued that since the total turnover was accepted under presumptive taxation u/s 44AF, the sundry creditors arising from the same business should not be challenged. The assessee contended that Section 69A, applicable to unexplained money, bullion, etc., was wrongly invoked as no books of accounts were maintained. The Tribunal relied on the Chandigarh Tribunal’s decision in Nand Lal Popli, which held that no separate addition could be made under Section 69C when profits were declared under presumptive taxation. The Tribunal directed the deletion of the addition, allowing the assessee’s ground.

2. Disallowance of ?70,110 from Agricultural Income:

The AO scrutinized the agricultural income of ?1,78,110 declared by the assessee, who provided 7/12 extracts and sale patties as evidence. The AO rejected the claim, stating that mere ownership of land does not prove agricultural income, and the sale patties could be related to trading activities. The AO reclassified the income as "income from other sources," suspecting that the assessee used agricultural income to explain unexplained investments.

The CIT(A) partially upheld the AO’s decision, reducing the disallowed amount to ?70,110. The CIT(A) noted that the assessee failed to provide evidence of agricultural operations, such as expenses for seeds, fertilizers, and labor. The CIT(A) referenced several legal precedents emphasizing the need for concrete evidence to substantiate agricultural income claims.

On appeal, the assessee argued that the landholding remained unchanged from the previous year, where agricultural income was accepted. The Tribunal found that the assessee had provided sufficient evidence, including 7/12 extracts and sale patties, and that the Revenue did not dispute the land ownership. The Tribunal set aside the CIT(A)’s disallowance of ?70,110, allowing the assessee’s ground.

Conclusion:

The Tribunal allowed the appeal, deleting the addition of ?5,22,020 for sundry creditors and the disallowance of ?70,110 from agricultural income. The Tribunal emphasized the need for concrete evidence in both cases and relied on legal precedents to support its decision. The order was pronounced on November 30, 2018.