2016 (5) TMI 246 - AT - Income Tax

Addition towards inflation of purchase of rice - Held that - What is to be seen is whether the assessee has purchased the paddy or not. In this case disallowance was made only on the ground that the assessee has not produced the bills and vouchers. The fact remains that the assessee has produced bought note which contains the names of the farmers and their village names. By referring to the village name and name of the farmers, one can easily identify the individual from whom the paddy was purchased. It is not necessary to mention their complete address of the farmers who are living in the village. Each and every agriculturist can be very much identified by referring to their individual name and the village. Therefore, the Assessing Officer may not be justified in saying that the bought note does not contain complete name and address of the farmers. The next contention of the Assessing Officer that the farmers could not preserve their paddy and sell in a later stage is farfetched. Paddy is not a perishable commodity. The paddy harvested by the agriculturists can be stored for a reasonable period of time. At the best, the moisture content may be reduced by passage of time. The paddy is not a perishable commodity. Therefore, merely because the bills were raised during the period when there was no harvest, that cannot be a reason to doubt the purchase itself. Rule 6DD relaxes the rigour of provisions of Section 40A(3) of the Act with regard to payment made to agricultural and forest produces purchased from cultivator, grower or producer of such articles. When Rule 6DD enables the purchaser to pay cash after taking into consideration of the economic condition in which the agriculturists of this country are living, expecting a bill/voucher from the agriculturists is something which cannot be obtained by the assessee. In those circumstances, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition - Decided in favour of assessee. Unexplained cash deposit in bank account - Held that - The CIT(Appeals), by following his own order in the assessee s own case for assessment year 2007-08, found that the net available cash as on 31.03.2007 was ₹ 5,23,773/-. Therefore, the CIT(Appeals) presumed that the assessee could explain the source for making investment in the bank account. As rightly submitted by the Ld.counsel for the assessee, this fact needs to be verified. Accordingly, the orders of the lower authorities are set aside and the issue of addition of ₹ 5,23,773/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue in the light of availability of funds as on 31.03.2007 and thereafter decide the matter in accordance with law after giving reasonable opportunity to the assessee.- Decided in favour of assessee by way of remand. Addition towards unexplained loans and advances - Held that - The Assessing Officer disallowed the claim of the assessee only on the ground that the balance sheet does not reflect the loan/advance said to be given by the assessee to his wife Smt. Punitha Balakrishnan. The fact remains that the loan was given through four cheques on four different dates. This fact is not disputed by the Revenue. When the amount was transferred from the bank by means of cheques, this Tribunal is of the considered opinion that rejection of claim of the assessee only on the ground that the balance sheet does not disclose the advance said to be made by the assessee is not justified. - Decided in favour of assessee

Summary

Issues:
1. Maintainability of appeals due to admitted tax being less than ?10 lakhs.
2. Addition of ?8,07,747 towards inflation of purchase of rice.
3. Disallowance of ?4,55,000 as unexplained cash deposit.
4. Addition of ?21,00,000 towards unexplained loans and advances.

Issue 1 - Maintainability of appeals:
The Tribunal dismissed Revenue's appeals as the admitted tax was less than ?10 lakhs, citing a CBDT circular. The Tribunal found the appeals not maintainable based on the circular, leading to the dismissal of the appeals.

Issue 2 - Addition of ?8,07,747 for inflated purchase of rice:
The Assessing Officer disallowed the amount due to lack of bills for the paddy purchase. The appellant argued that bills were not necessary as the agricultural market operates without formal invoices. The Tribunal agreed, emphasizing that the bought notes provided were sufficient to identify the farmers, and the absence of bills should not invalidate the purchase.

Issue 3 - Disallowance of ?4,55,000 unexplained cash deposit:
The CIT(A) deleted the addition based on available funds, but the Tribunal remitted the issue back for verification, emphasizing the need to confirm the source of the deposit. The Tribunal directed the Assessing Officer to re-examine the matter considering the funds available as of a specific date.

Issue 4 - Addition of ?21,00,000 for unexplained loans and advances:
The Assessing Officer questioned the loan to the wife due to its absence in the balance sheet. However, the CIT(A) allowed the claim, noting the transactions were through cheques. The Tribunal upheld the CIT(A)'s decision, highlighting that the loan was transferred through banking channels, making the absence in the balance sheet insufficient to disallow the claim.

The Tribunal dismissed the Revenue's appeals in I.T.A. Nos. 991 & 992/Mds/2014 and partly allowed I.T.A. No. 993/Mds/2014 for statistical purposes. The judgment provided detailed analysis on each issue, emphasizing the importance of proper documentation and verification in tax assessments.