2017 (12) TMI 50 - AT - Income Tax

Addition of agriculture income as income from other sources - AR submitted that the necessary evidence regarding agriculture income were never demanded by the either AO or by the ld. CIT(A) - Held that - As necessary evidence submitted now in form of copy of jamabandi and proof of agriculture income and the same may kindly be admitted. The ld DR fairly submitted that the matter may be remanded to the AO for verification. In light of the same, the evidence in support of agriculture income is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes. Considering the interest income as income from other sources - AR has submitted that interest income was already declared while calculating business income, Net profit and disclosed in audited profit and loss account and same may be deleted - Held that - From perusal of assessment order, we noted that the AO has brought to tax income from other sources as per return of income amounting to ₹ 90,256. However, there is no finding that said figures includes the figure of ₹ 48,231. Hence, the matter is remanded back to the file of the AO to examine the same and where it is found that the figure of ₹ 90,256 already includes the figure of ₹ 48,231, allow the necessary relief to the assessee as the same income cannot be brought to tax twice. In the result, the ground of appeal is allowed for statistical purposes. Disallowance of deduction u/s 80C - CIT(A) observed that no documents or supporting evidences have been furnished either in assessment proceedings or in the appellate proceedings - AR submitted that evidence regarding investment eligible for deduction u/s 80C were never demanded by AO or ld. CIT(A) and the addition evidence regarding said investment in form of LIC receipt and tuition fees has now being submitted and the same may kindly be admitted - Held that - In light of the same, the evidence in support of deduction under section 80C is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes.

Issues Involved:

1. Deletion of addition made under Section 68 for unexplained bank deposits.
2. Determination of correct sales figures.
3. Rejection of books of accounts and estimation of net profit.
4. Treatment of agricultural income and interest income.
5. Disallowance of deduction under Section 80C.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68 for Unexplained Bank Deposits:

The Revenue challenged the CIT(A)'s action in deleting the addition of ?4,39,72,094/- of unexplained bank deposits under Section 68, instead applying a 5% net profit rate on presumed sales of ?3,52,40,960/-. The Tribunal found that the assessee had maintained various bank accounts and only one account was initially furnished. The AO added all credit entries in these accounts as unexplained cash credits under Section 68. The CIT(A) accepted that the cash deposits were sales proceeds from the assessee’s poultry business, adjusted the sales figures, and applied a 5% net profit rate. The Tribunal upheld the CIT(A)'s findings, noting the AO's failure to verify the nature of deposits adequately.

2. Determination of Correct Sales Figures:

The assessee disputed the sales figures of ?3,52,40,960/- taken by the CIT(A) instead of ?3,40,35,960/- as shown in the audit report. The CIT(A) enhanced the sales figures after verifying inter-transfer entries, RTGS/NEFT failures, and other adjustments, but did not verify opening cash and debtors due to lack of preceding year books. The Tribunal remanded the matter to the AO for verification of these opening balances, recognizing the need for a detailed examination of the assessee’s contentions.

3. Rejection of Books of Accounts and Estimation of Net Profit:

The CIT(A) rejected the books of accounts under Section 145(3) due to substantial cash purchases without proper bills and no stock register. The Tribunal noted the conflicting claims about cash purchases and the inherent nature of the business involving cash transactions. Given the first year of formalized accounts and sufficient documentation for purchases and sales, the Tribunal found the CIT(A)'s rejection of books and net profit estimation inappropriate. The Tribunal accepted the book results and net profit declared by the assessee, except for the verification of opening balances.

4. Treatment of Agricultural Income and Interest Income:

The assessee challenged the addition of ?1,92,350/- as income from other sources instead of agricultural income. The Tribunal admitted new evidence regarding agricultural income and remanded the matter to the AO for verification. For the interest income of ?48,231/-, the Tribunal remanded the issue to the AO to verify if it was already included in the income from other sources, ensuring no double taxation.

5. Disallowance of Deduction Under Section 80C:

The assessee contested the disallowance of ?51,215/- under Section 80C. The Tribunal admitted new evidence for the deduction and remanded the matter to the AO for verification, allowing the assessee an opportunity to substantiate the claim.

Conclusion:

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee’s appeal for statistical purposes, remanding specific issues for further verification by the AO. The cross-objection by the assessee was treated as infructuous as the grounds were already adjudicated. The order was pronounced in the open court on 28/11/2017.

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