2017 (12) TMI 923 - AT - Income Tax

Unexplained cash deposits - Held that - AO did not cause necessary verification, even during the remand proceedings and the CIT(A) has deleted the addition after verification of the additional evidences furnished by the assessee during the appeal proceedings. During the appeal hearing also, the Ld.DR did not place any evidence to controvert the sources explained by the assessee before the Ld.CIT(A). It is settled position of law that the CIT(A) is vested with the powers of making independent verification at appeal stage and the Ld.CIT(A) has done the same. Therefore we do not find any reason to interfere with the order of the Ld.CIT(A), accordingly we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. Addition of agricultural income - Held that - All the evidences furnished before the Ld.CIT(A) were forwarded to the AO, but the AO was not inclined to make verification and investigation with regard to sources of income for cash deposits and agricultural income, instead opposed for admission of additional evidences by the CIT(A) under Rule 46A. The CIT(A) after considering the objections admitted the additional evidences and decided the appeal on the basis of the additional evidences produced by the assessee during the appeal hearing. Having declined to make verifications at the remand stage, the AO cannot agitate against the order of the Ld.CIT(A). Being failed to utilize the opportunity given by the Ld.CIT(A), the AO cannot make out a case for legal battle. CIT(A) has given a finding that the assessee has established the land holdings and receipt of agricultural income on sale of chillies, cotton etc. during the relevant period. After verification of the correctness of land holdings and the agricultural income. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of unexplained cash deposits of ?30,00,000/-.
2. Addition of disallowed agricultural income of ?6,74,667/-.

Detailed Analysis:

1. Addition of Unexplained Cash Deposits of ?30,00,000/-:

The Assessing Officer (AO) found cash deposits totaling ?30,00,000/- in the assessee's bank account and questioned the source of these deposits. The assessee initially could not explain the sources during a statement recorded under oath and agreed to the addition under Section 68 of the Income Tax Act. However, upon appeal, the assessee provided additional evidence, including a constructed cash book and details of withdrawals from capital accounts in firms where he was a partner, agricultural income, and earlier withdrawals from the same bank account. The Commissioner of Income-Tax (Appeals) [CIT(A)] forwarded these additional evidences to the AO for a remand report, but the AO did not conduct fresh inquiries and opposed the admission of additional evidence. The CIT(A) admitted the additional evidence, verified the sources, and deleted the addition of ?30,00,000/-. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to make necessary verifications even during the remand proceedings.

2. Addition of Disallowed Agricultural Income of ?6,74,667/-:

The AO disallowed ?6,74,667/- out of the declared agricultural income of ?10,12,000/- due to discrepancies in the pattadar passbooks and lack of response from the Mandal Tehsildar. The assessee explained that the agricultural lands were inherited from his father and provided additional evidence, including cold storage bonds and agreements of pledge with the Indian Bank. The CIT(A) forwarded these evidences to the AO for a remand report, but the AO did not conduct fresh inquiries. The CIT(A) verified the land holdings and agricultural income and deleted the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to utilize the opportunity to verify the evidence during the remand stage.

Conclusion:

The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order, which deleted the additions of ?30,00,000/- and ?6,74,667/- after verifying the additional evidence provided by the assessee. The Tribunal noted that the AO did not conduct necessary verifications during the remand proceedings and that the CIT(A) is vested with the powers to make independent verifications at the appeal stage. The cross objections filed by the assessee were allowed, as the Tribunal found that insufficient opportunity was given to the assessee to submit explanations.