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2019 (5) TMI 1002 - AT - Income TaxAddition u/s 68 - HELD THAT - The assessee has deposited INR 1,700,000 as addition to capital in a partnership firm namely M/s M S Traders. The assessee has also deposited a sum of INR 2,200,000 in the state bank of India bank account of the assessee. From the state bank of India bank account assessee has issued cheques for deposit into the partnership firm of INR 17, 00,000. Therefore out of the deposit of INR 2,200,000 in cash in the bank account with state bank of India which is the source, the assessee after depositing the above sum in cash has issued the cheques of INR 1,700,000 in favor of the partnership firm as his capital. Therefore it is apparent that INR 2,200,000 has been added by the assessing officer as an income and once again the addition of INR 1,700,000 is also made, therefore it is apparent that there is a double addition in the hands of the assessee. For this reason we direct AO reversing the order of the CIT A, to delete the addition of INR 1,700,000 on account of deposit in the partnership firm as his capital. In view of this ground number 1 and 2 of the appeal of the assessee are allowed. Agricultural income - HELD THAT - Assessee is having an agricultural land which can result in to agricultural produce. Admittedly, the assessee is having the agricultural land of more than 38 acres, the documents for which have already been submitted before the learned CIT A. As originally the assessee stated that he is having agricultural land of only 23 acres, despite the documents of the agricultural land holding produced before the learned CIT A, only for the reason that assessee is initially not aware about the area of land, he disbelieved the holding of 38 acres of the land. As assessee has produced the documentary evidence of 38 acres of the land in the name of the assessee on which the agricultural activities are carried on, the land holding of the assessee cannot be denied. Therefore the CIT A committed an error by not accepting the ownership of the land despite having the title deeds placed on record. Production of lemon on already planted trees - HELD THAT - Year to year assessee is showing an agricultural land and agricultural income deriving there from. During the year the assessee produced the sale bill of 36722 kg of lemons INR 1062700. The sale bill is not disputed by the AO of CIT appeal but the original production of the lemon is disputed. When assessee has sold the lemon and produces the bills before the lower authorities without examining and proving the bill of the lemon sale falls it cannot be stated that the assessee has not sold lemon at all. This is so also because of the reason that in earlier years also the assessee has sold lemon and same have been accepted in assessment proceedings under section 143 (3) of the act for assessment year 2006 07. Even otherwise till to date the assessment under section 143 (3) for assessment year 2006 07 has not been disturbed. Expenditure on agriculture - HELD THAT - With respect to the agricultural expenditure the assessee has stated that he has deputed the farmers who contribute for the cost of agricultural activities including seeds and they keep one third of the agricultural produce as their share for labour and expenditure. The two third of the share of the agricultural produce remains with the assessee and which has sold. The assessee submitted that this is an oral agreement and there is no written agreement with the cultivators. Just because there is no written agreement with those persons, in view of the sale bill of the lemon, consideration of which has been received by the assessee, holding of the agricultural land sufficient to generate so much of agricultural produce the claim of the assessee cannot be rejected. Agricultural income accepted by revenue in earlier years - HELD THAT - In the earlier year the assessee has shown agricultural income of rupees 1124800/ for assessment year 2006 07 which has been accepted by the assessing officer, therefore the revenue has accepted the claim of the assessee that assessee is agricultural income. This year the agricultural income shown by the assessee is less than what has been shown by the assessee in earlier years despite being the same area of the agricultural land. Sale of agricultural produce to various parties from whom cash is received - CIT A instead of making enquiries from these 4 persons, he merely referred to the various telephone numbers mentioned on those bills and held that this belongs to different locations - HELD THAT - It is true that all these observations of the learned CIT A on the basis of the information submitted by the assessee, however, when the learned CIT A so much of account on the veracity of the bills, before saying that the bogus, he should have asked the assessee to either produce those parties or made independent enquiry with respect to the buyers. In absence of these it is merely an allegation is which has not substantiated. Merely on allegation and doubts the addition cannot be made. They needs to be substantiated by due enquiry. Whether provision of section 68 applies when the assessee has not maintained the book of accounts? - HELD THAT - This issue is no more an issue of debate in view of the decision of Honourable Mumbai High court in case of Arun J Muchalla V CIT 2017 (8) TMI 1137 - BOMBAY HIGH COURT where in it has been held that even in case of deposits in bank accounts provision of section 68 applies. The Hon Bombay High court in that case relied up on the decision of Honourable Supreme court in Sudhir Kumar Sharma (HUF) v. CIT 2016 (5) TMI 928 - SC ORDER Therefore we reject that argument of the assessee that provision of section 68 does not apply when the amounts are credited in the bank account as assessee has not maintained the books of accounts.
Issues Involved:
1. Ignoring details in the capital account and personal savings bank account. 2. Treating cheque deposits as cash deposits. 3. Disputing agricultural income claims. 4. Alleged duplicate addition in income. Detailed Analysis: 1. Ignoring Details in Capital Account and Personal Savings Bank Account: The assessee contended that the CIT(A)-XXII ignored the details provided in the capital account of the firm M/s M.S. Traders, the personal savings bank account, and the personal statement of affairs for the financial year 2006-07 to explain the deposit of ?17,00,000. The Tribunal noted that the assessee had deposited ?2,200,000 in cash in the State Bank of India account, from which ?1,700,000 was transferred to the partnership firm. The Tribunal acknowledged that this led to a double addition and directed the deletion of the ?1,700,000 addition. 2. Treating Cheque Deposits as Cash Deposits: The CIT(A)-XXII treated the deposit of ?17,00,000 by cheques as cash deposits, which the assessee argued was incorrect. The Tribunal found that the ?2,200,000 cash deposit in the bank account was the source, and the subsequent transfer of ?1,700,000 to the partnership firm should not be treated as a separate cash deposit. Therefore, the Tribunal allowed the assessee's appeal on this ground. 3. Disputing Agricultural Income Claims: The CIT(A)-XXII disputed the agricultural income of ?11,24,800 for FY 2005-06 and ?10,62,700 for FY 2006-07. The Tribunal examined several aspects: - Ownership and Valuation of Agricultural Land: The Tribunal noted that the assessee owned 38 acres of agricultural land, supported by title deeds. The CIT(A)'s rejection based on initial incorrect land area information was deemed erroneous. - Production of Lemons: The Tribunal found that the assessee consistently showed agricultural income from lemon production, supported by sale bills. The CIT(A)'s doubts were not substantiated by evidence. - Agricultural Expenditure: The Tribunal accepted the assessee's claim that one-third of the produce was given to laborers as their share, with no written agreement required. - Acceptance of Agricultural Income in Earlier Years: The Tribunal noted that the agricultural income was accepted in previous assessments, and the current year's lower income should not be disputed. - Sale of Agricultural Produce: The Tribunal criticized the CIT(A) for not verifying the buyers of the lemons and relying on unsubstantiated allegations about the sale bills. - Applicability of Section 68: The Tribunal rejected the assessee's argument that Section 68 did not apply to bank deposits, citing relevant case law. 4. Alleged Duplicate Addition in Income: The assessee argued that the ?17,00,000 addition was a duplicate since it was already accounted for in the ?22,00,000 cash deposit. The Tribunal agreed, noting that the ?2,200,000 cash deposit was the source, and the transfer of ?1,700,000 to the partnership firm was not a separate addition. This ground was deemed infructuous after addressing the double addition issue. Conclusion: The Tribunal partly allowed the appeal, directing the deletion of the ?1,700,000 addition due to double counting and partially accepting the agricultural income claims. The Tribunal emphasized the need for substantiated evidence and proper verification by the lower authorities. The order was pronounced on 15/05/2019.
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