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2019 (1) TMI 686 - AT - Income TaxAssessment u/s 153C r.w.s. 153A - rejecting the books of accounts by invoking the provisions of section 145(3) - Held that - A search and seizure operation were carried out at the premises of Shri Vinod Sharma on 30.05.2008 at Bhopal and various incriminating materials relating to the assessee were also found which resulted in issuance of notice u/s 153C of the Act. Assessee also declared an amount of ₹ 4 lakhs for Assessment Year 2008-09 for not recording the transactions in the books of accounts. Various other loose papers were seized which contained transactions through bank as well as cash for which satisfactory reply was not given by the assessee during the course of assessment proceedings. After going through the relevant records there seems no dispute to the fact that during the course of search various incriminating material/documents were found and the assessee was unable to explain/correlate them with the entries in the regular books of accounts and therefore in this given facts and circumstances, we find no infirmity in the action of the Ld.A.O rejecting the books of accounts by invoking the provisions of section 145(3) of the Act. We find that the assessee has nowhere given specific reply for each of the loose paper as well as the entries mentioned therein which have been reproduced by the Ld.A.O in the impugned assessment order referring to 42 entries. Undoubtedly the assessee has not disclosed the total business receipts in the regular books of accounts and when the assessee himself was unable to explain the entries there remains no option before the lower authorities except to estimate the income. In our considered view when the book results have been rejected and profits have been estimated on the estimated gross receipts then it will not be justified to apply the same net profit rate as has been declared by the assessee because the turnover taken by both the lower authorities is different from the one shown by the assessee. As the assessee has failed to discharge its onus to explain the entries appearing in the loose papers, estimation of receipts and net profit has rightly been carried out but we in order to be fair to both the parties, we decide to estimate the receipt at two times of the alleged bank transactions and compute the net profit @8% and in case the net profit declared by the assessee is more than the estimate net profit @8%, then no addition shall be made for that particular assessment year. On application of our above view of computing gross receipts at two times of the unexplained bank transactions and application of net profit rate @8% only the addition of ₹ 16,518/-, 14,29,754/- and ₹ 7,38,003/- needs to be sustained for Assessment Year 2006-07, 2007-08 and 2008-09 respectively - Decided in favour of assessee partly Treating the agriculture income as income from undisclosed - Held that - The assessee has filed necessary evidence to show that there exists an ancestral parental land measuring approximate 10 acres at Masan Gaon, Harda which is the part of the Hindu Undivided Family. This land is regularly cultivated. Agricultural produce is sold which is duly evidenced by Rin Pustika giving details of various items sold. We are satisfied with the submissions made by the assessee that the alleged agricultural income is share of the assessee out of the net profit from sale of agricultural produce after deducting all incidental expenses which is being distributed to the members of the Hindu Undivided Family. We accordingly set aside the findings of both the lower authorities and direct the A.O to treat the income as agricultural income. - Decided in favour of assessee. Addition of unexplained investment for purchase of agriculture land at Gram Kal Kheda measuring 0.809 acre. - Held that - Denying the assessee s claim for the mere reason that cash withdrawal was on 29.3.2008 whereas it was allegedly paid on 28.3.2008 will not be justified and fair in the interest of justice as one cannot ignore the possibility that all the sellers of the land being farmers may have received the cash on 29.3.2008, as submitted by the Ld. Counsel for the assessee that after the registry formalities were completed cash was handed over to the farmers on 29.3.2008. We therefore in the given facts and circumstances of the case find no justification in the finding of the lower authorities sustaining the addition of ₹ 5 lakhs for unexplained cash investment and accordingly direct the Ld.A.O to delete the addition of ₹ 5 lakhs for the unexplained investment in purchase of agriculture land at Gram Kal Kheda. - Decided in favour of assessee. Unexplained cash investment towards purchase of land at Mindori - Held that - Material fact seems to have escaped the kind attention of the Co-ordinate Bench because the alleged sale letter has been signed by two of the proposed sellers namely Shri Vijit Raj Patni and Shri Hukum Chand and one of the buyer Shri Vinod Sharma which makes it amply clear that a transaction certainly took place wherein cash advance of ₹ 44,00,000/- was paid to four co-owners by the two buyers along with issuing four cheques of ₹ 1,50,000/- each. As the Income Tax Appellate Tribunal is the last fact finding body, we respectfully decline to follow the finding of the Tribunal in this issue relating to addition of unexplained cash investment of ₹ 34.50 lakhs as the facts discernable from records clearly shows that there was cash advance of ₹ 44 lakhs given jointly by Shri Vinod Sharma and Shri Harish Patel and we further hold that the alleged sale letter is not a dump document as it contains details of cheque issued by the assessee and the other buyer Shri Vinod Sharma given to the four co-owners of the land and the same were returned back on account of cancellation of the deal. We accordingly confirm the addition of ₹ 22,00,000/- and partly allow Ground raised by the assessee
Issues Involved:
1. Rejection of books of accounts and estimation of income. 2. Treatment of agricultural income as income from other sources. 3. Addition of unexplained investment for purchase of agricultural land. 4. Addition of unexplained cash investment for land at Mindori. Detailed Analysis: 1. Rejection of Books of Accounts and Estimation of Income: The Assessing Officer (AO) rejected the books of accounts under Section 145(3) of the Income Tax Act, 1961, due to unexplained entries and substantial cash transactions. The AO estimated the gross receipts at five times the bank deposits and applied an 8% net profit rate. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the estimation to two times the bank deposits for Assessment Years (AY) 2003-04 to 2008-09 and three times for AY 2009-10, applying the same net profit rate as declared by the assessee. The Tribunal found that the assessee failed to explain the entries in the loose papers and upheld the rejection of books of accounts. However, it modified the estimation to two times the bank deposits with an 8% net profit rate, resulting in sustained additions for AY 2006-07, 2007-08, and 2008-09. 2. Treatment of Agricultural Income as Income from Other Sources: The AO treated the agricultural income declared by the assessee for AY 2003-04 to 2006-07 as income from other sources due to a lack of supporting documents. The assessee argued that the income was from parental agricultural land. The Tribunal accepted the assessee's explanation, supported by evidence of ancestral land and agricultural produce, and directed the AO to treat the declared amounts as agricultural income. 3. Addition of Unexplained Investment for Purchase of Agricultural Land: For AY 2008-09, the AO added ?5 lakhs as unexplained investment for the purchase of agricultural land at Gram Kal Kheda. The CIT(A) increased this to ?5,74,950, including stamp duty. The Tribunal found that the cash withdrawal on 29.03.2008 was sufficient to cover the payment and that the timing discrepancy did not justify the addition. The Tribunal directed the AO to delete the addition. 4. Addition of Unexplained Cash Investment for Land at Mindori: The AO added ?34.50 lakhs for unexplained cash investment in land at Mindori based on a sale agreement and loose papers indicating cash payments. The CIT(A) confirmed this addition. The Tribunal found that the sale agreement, partially signed and corroborated by returned cheques, indicated a genuine transaction involving a ?22 lakh cash advance by the assessee. The Tribunal confirmed the addition of ?22 lakhs but did not find sufficient evidence for the remaining ?12.50 lakhs. Conclusion: The appeals were partly allowed, with modifications to the additions based on the Tribunal's detailed examination of the facts and evidence. The Tribunal upheld the rejection of books of accounts but adjusted the income estimation and confirmed specific additions while deleting others based on the merits of each case.
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