2019 (12) TMI 1113 - AT - Income Tax

Unexplained cash credit u/s 68 - sale of agricultural crops - HELD THAT - ITO found the nature of Business of assessee as 'Trading of green tea leaf and production of green tea leaf and other agricultural products. Total sale receipt from the agriculture crops was ₹ 25,50,349/-, out of which payment amounting ₹ 11,21,439/- received through bank, a copy of ledger account attached in page 47 of PB. The ld DR however, reiterated the stand taken by the AO. The assessee has submitted these all significant evidences during the appellate proceedings. Neither the AO nor the CIT(A) disputed the fact that the assessee is not owner of land. Considering this factual position, we delete the addition of ₹ 14,28,910/-. Bogus sundry creditors - During the course of scrutiny proceedings, the A/R gave the name and address of eleven sundry creditors. The sundry creditors are linked with purchases done by assessee. We note that assessee s purchases were not doubted by the assessing officer. Assessee s books of accounts are audited by a chartered accountant. Books of accounts of the assessee has not been rejected by assessing officer. Once the transaction gets completed, it may happen that the creditor may not cooperate in income tax proceedings and does not respond to notice under section 133(6) of the Act issued by AO during scrutiny assessment. The assessee submitted before the bench that brought forward balance of ₹ 41,84,399/- relates to assessment year 2012-13 and AO had already examined them in the assessment proceedings for A.Y.2012-13, therefore, these should not be treated bogus sundry creditors. In assessee s case some of the creditors also replied the notice under section 133(6) of the Act. The ld DR for the Revenue did not doubt the factual position narrated above. Considering the entirety of the facts and circumstances of the case, we delete the addition - Decided in favour of assessee.

Issues Involved:
1. Addition of ?14,28,910/- as unexplained cash credit from the sale of agricultural crops.
2. Addition of ?25,04,195/- as bogus sundry creditors.
3. Direction to initiate proceedings for alleged violation of Section 269SS.
4. Cumulative addition of ?1,14,44,050/- on various grounds including unexplained loan, undisclosed investment, unaccepted agricultural income, and unproved sundry creditors.

Detailed Analysis:

1. Addition of ?14,28,910/- as Unexplained Cash Credit:
The assessee argued that the amount was from the sale of agricultural crops. The AO noted that expenses claimed to generate the agricultural income were disproportionately low. The AO suspected the assessee was introducing undisclosed income as agricultural income, which is exempt from tax. The CIT(A) partially upheld the AO's decision, allowing only the amount received through banking channels (?11,21,439/-) as explained and treating the remaining ?14,28,910/- as unexplained. The Tribunal found that agricultural operations often involve cash transactions and that the AO did not reject the assessee's books of accounts. Therefore, the Tribunal deleted the addition of ?14,28,910/-.

2. Addition of ?25,04,195/- as Bogus Sundry Creditors:
The AO added ?66,74,070/- as bogus sundry creditors, including ?24,89,671/- as current creditors and ?41,84,399/- as brought forward creditors. The AO noted that notices sent to creditors were returned unserved, and the creditors did not respond to summons. The Tribunal observed that the assessee's purchases were not doubted, and the books of accounts were audited and not rejected. The Tribunal found that some creditors had responded to notices and that the brought forward balance related to the previous assessment year had already been examined. Consequently, the Tribunal deleted the addition of ?66,74,070/-.

3. Direction to Initiate Proceedings for Alleged Violation of Section 269SS:
The CIT(A) directed the AO to initiate proceedings under Section 269SS of the Income Tax Act, 1961, for accepting cash exceeding the prescribed limit. The Tribunal did not explicitly address this issue in the final decision, focusing instead on the substantive additions made by the AO.

4. Cumulative Addition of ?1,14,44,050/-:
The cumulative addition included ?8,00,000/- as unexplained loan, ?14,19,634/- as undisclosed investment, ?25,50,349/- as unaccepted agricultural income, and ?66,74,070/- as unproved sundry creditors. The Tribunal analyzed each component:

- Unexplained Loan of ?8,00,000/-: The AO treated the amount as unexplained money. The CIT(A) found that the identity, capacity, and creditworthiness of the lender were confirmed, and the transaction was in cash. The Tribunal upheld the CIT(A)'s direction to initiate proceedings under Section 269SS but deleted the addition as unexplained income.

- Undisclosed Investment of ?14,19,634/-: The AO added this amount as undisclosed investment. The CIT(A) found that the director of the company had made the investment on behalf of the company from his own account, and the source of funds was not doubted. The Tribunal deleted the addition, directing that any necessary action should be taken in the hands of the director.

- Unaccepted Agricultural Income of ?25,50,349/-: The AO doubted the agricultural income due to low expenses claimed. The CIT(A) allowed only the amount received through banking channels. The Tribunal deleted the addition of ?14,28,910/- as unexplained credit, accepting the assessee's explanation of cash transactions in agricultural operations.

- Unproved Sundry Creditors of ?66,74,070/-: The AO treated the amount as bogus sundry creditors. The CIT(A) confirmed the addition for the current year but directed the AO to add the brought forward creditors in the previous year. The Tribunal deleted the entire addition, noting that the purchases were not doubted and some creditors had responded to notices.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the additions made by the AO and partially upheld by the CIT(A). The Tribunal emphasized the importance of verifying transactions and the need for proper documentation and evidence in tax assessments.

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