2022 (12) TMI 1379 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - AO partly accepting assessee s explanation accepted the source of investment, whereas, he treated the balance amount as unexplained cash credit - HELD THAT - As in course of assessment proceedings, while the AO accepted the withdrawals from bank and past savings, he rejected the claim of loan from mother and brother as well as part of agricultural income, claimed to have been received from sale of potato. However, he accepted that the assessee received some amount from the sale of crops like sugarcane and maize. In course of first appellate proceedings, Commissioner (Appeals) had directed the AO to examine the evidences including sale invoices of agricultural produce and in the remand report, AO has partly accepted assessee s claim on sale of potato - He has rejected balance amount only because sale invoices were not produced by the assessee. The fact that the assessee has sold agricultural produce, cannot be disputed because, even, the departmental authorities have accepted a part of assessee s receipts from sale of agricultural produce. Only a part of amount claimed to have been received from sale of potato has been rejected due to alleged non-furnishing of evidence. When the assessee has established on record that it had receipts from sale of agricultural produce, only because some invoices relating to sale are not available, assessee s claim cannot be rejected. More so, considering the reasonable quantum of sale proceeds. The assessee has furnished the details of agricultural land holdings, which clearly supports assessee s claim of receipts from sale of agricultural produce. Thus, assessee s claim that he received Rs.24,00,000 from sale of potato, can be accepted. In such a scenario, the source of investment in purchase of land stands explained. That being the factual position emerging on record, the addition cannot be sustained.We delete the addition sustained by Commissioner (Appeals).

Summary

Issues:
1. Addition under Section 68 of the Income-Tax Act, 1961.
2. Validity of assessment order passed under Section 147 read with Section 144 of the Act.

Issue 1: Addition under Section 68 of the Income-Tax Act, 1961:
The dispute in the present appeal centered around the addition of Rs.20,63,695 under Section 68 of the Income-Tax Act, 1961. The Assessing Officer had reopened the assessment under Section 147 of the Act upon discovering that the assessee had made investments in purchasing immovable property. The assessee explained the source of investment as loans from family members and income from the sale of agricultural produce. The Assessing Officer accepted part of the explanation but treated the remaining amount as unexplained cash credit under Section 68, adding it to the assessee's income. The assessee contested this addition, leading to the appeal before the learned Commissioner (Appeals).

Issue 1 Analysis Continued:
During the appellate proceedings, the assessee provided additional evidence, which was examined by the Assessing Officer. It was found that a portion of the claimed income from the sale of agricultural produce was genuine. Consequently, the learned Commissioner (Appeals) deleted a portion of the addition made by the Assessing Officer. However, the dispute continued as the Assessing Officer rejected part of the claimed income due to lack of supporting documentation. The Tribunal noted that while some invoices were missing, the fact that the assessee had indeed sold agricultural produce was acknowledged by the authorities. The Tribunal found that the reasonable quantum of sale proceeds indicated the credibility of the claim.

Issue 1 Analysis Continued:
The Tribunal further observed that the details of the agricultural land holdings provided by the assessee supported the claim of income from the sale of agricultural produce. Consequently, the Tribunal accepted the assessee's explanation regarding the source of investment in purchasing the land. Given the established factual position, the Tribunal concluded that the addition could not be sustained and proceeded to delete the addition sustained by the learned Commissioner (Appeals).

Issue 2: Validity of assessment order passed under Section 147 read with Section 144 of the Act:
The assessee had raised additional grounds challenging the validity of the assessment order passed under Section 147 read with Section 144 of the Act. However, during the hearing, the assessee did not press these additional grounds, and they were subsequently dismissed. The Tribunal, having decided on the merits of the primary issue regarding the addition under Section 68, deemed the legal grounds raised by the assessee as academic and unnecessary for adjudication.

Conclusion:
Ultimately, the Tribunal allowed the appeal, deleting the addition sustained by the learned Commissioner (Appeals) regarding the income from the sale of agricultural produce. The decision was based on the assessee's substantiated claim and supporting evidence, which established the credibility of the source of investment in purchasing the land. The Tribunal's ruling on the primary issue made the legal grounds raised by the assessee irrelevant, leading to the overall allowance of the appeal.