2019 (1) TMI 593 - AT - Income Tax

Addition of agricultural income - agricultural land was in the name of the deceased father of the assessee at Dholpur and the assessee had not filed any proof regarding the agricultural activity carried out on the said land - Held that - The assessee filed certain acknowledgements of income-tax returns and in all the years from 1996-97 to 2004-05, the assessee has been consistently declaring the agricultural income and it is not the case of the revenue that in any of the previous years, such an income was treated as the income from undisclosed sources. Learned CIT(A), therefore, rightly concluded that the khasrakhatauni indicating the annual lagan establishes that the land in dispute was put to agricultural use and the assessee has been consistently declaring the same in the return of income and the revenue has been accepting the same without raising any objection. Reliance of the learned CIT(A) on the decision in the case of Radhaswami Satsang vs CIT 1991 (11) TMI 2 - SUPREME COURT in respect of the necessity of following the rule of consistency cannot be found fault with. On this aspect, the approach of the learned CIT(A) is perfect and needs to be confirmed. We accordingly decline to interfere with the same. Hence, ground No.1 of the appeal is dismissed. Addition u/s 68 - identity, creditworthiness and genuineness of transactions of all the partners -- Held that - When the learned CIT(A) transmitted the documents submitted by the assessee to the learned AO calling for the report, record speaks that there was no response from the learned AO in spite of three reminders. No explanation is forthcoming from the revenue even before us as to what prevented the learned AO to verify the documents to submit report if there is a serious objection on the identity and creditworthiness of such partners. We are convinced that the reasoning of the learned CIT(A) that he addressed a letter to DIT (Systems) for the purpose of identity and creditworthiness of these partners and to proceed with the matter having analyzed the report and the documents submitted by the assessee. No other course was left open to the learned CIT(A) in view of the non response of the learned AO to the letter dated 22.5.2014 of the learned CIT(A). In these circumstances, we hold that the approach of the learned CIT(A) cannot be found fault with and the learned CIT(A) did the possible exercise that should have been done in the given circumstances. - Decided against revenue

Summary

Issues Involved:
1. Addition of agricultural income.
2. Addition under Section 68 of the Income-tax Act, 1961.
3. Verification of identity, creditworthiness, and genuineness of transactions.

Issue-wise Detailed Analysis:

1. Addition of Agricultural Income:
The original return of income filed by the assessee declared a total income of ?2,82,271/-. Post search operations, a revised return declared ?7,26,490/-. The Assessing Officer (AO) added ?4,90,800/- claimed as agricultural income, arguing the land was in the name of the deceased father and no proof of agricultural activity was provided. The Commissioner of Income-tax (Appeals) [CIT(A)] deleted this addition, referencing consistent declarations of agricultural income from 1996-97 to 2004-05, which the department had accepted without objections. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in Radhaswami Satsang vs CIT, emphasizing the necessity of following the rule of consistency.

2. Addition under Section 68 of the Income-tax Act, 1961:
The AO added ?5,01,90,000/- under Section 68, questioning the cash credits in the assessee's bank account and deeming the cash flow statements as self-serving without supporting evidence. The CIT(A) deleted this addition after verifying the identity, creditworthiness, and genuineness of transactions involving entities like M/s Vivek Commodities, M/s Mittal Tin Container Industry, TIDCO, and Triveni Motors. The CIT(A) scrutinized financial accounts and obtained a report from the Directorate of Income-tax (Systems) to verify the partners' details. The Tribunal upheld the CIT(A)'s approach, noting the AO's non-response to verification requests and the thorough verification conducted by the CIT(A).

3. Verification of Identity, Creditworthiness, and Genuineness of Transactions:
- Puja Mittal Case: The AO added ?75 lakhs and ?50 lakhs received from Smt. Seema Rajesh Sharma and M/s Vivek Commodities. The CIT(A) verified substantial deposits in Sharma’s bank account and confirmed the transactions' genuineness and creditworthiness. For Vivek Commodities, the CIT(A) conducted an in-depth verification of partners' details, confirming the genuineness of transactions.
- Urvashi Mittal Case: The AO added ?1,25,03,000/- and ?75 lakhs for the respective assessment years. The CIT(A) verified the identity and creditworthiness of Mittal Traders' partners, referencing proceedings in Sumit Mittal's case, where similar transactions were validated. The Tribunal upheld the CIT(A)'s findings, noting no substantial material was provided by the revenue to counter the conclusions.

Conclusion:
The Tribunal dismissed the revenue's appeals and the assessee's cross-objections, affirming the CIT(A)'s thorough and reasoned approach in verifying the identity, creditworthiness, and genuineness of transactions. The judgment emphasized the importance of consistency in tax assessments and the necessity of substantial evidence to support any additions under Section 68. The Tribunal found no illegality or irregularity in the CIT(A)'s orders, thereby confirming them.