2020 (1) TMI 784 - HC - Income Tax

Unexplained cash credit - Addition u/s 68 - onus to prove - genuineness of sale proceeds of agricultural produce of the land - HELD THAT - Sources of income of the assessee are agriculture and also rental income from HUF properties situated at Nalgonda and Suryapet. Though he mentioned about a petrol bunk since according to the assessee the petrol bunk business commenced only in 2012 the income from the petrol bunk business cannot be said to be a source of income for the assessee to deposit in the Bank Accounts for the assessment years 2009-10 and 2010-11. He also stated that he was doing real estate business at Hyderabad and was entering into agreements of sale and by keeping certain margin he was selling the same to others. Though he stated that he was getting an average income of 4, 00, 000/- p.a. from the real estate business since 2010 and he claims to have done small ventures at Uppal Bus Depot and promised to furnish details there is nothing to show that he did furnish any details. Therefore the cash deposits which are admitted by him to be from real estate business or rental income have also to be taken into account. It was the duty of the assessee to disclose these aspects before the Assessing Officer or the CIT (Appeals)-1 Hyderabad or the Tribunal because these are within his exclusive knowledge. Having admitted that he was also doing real estate business and was also having rental income and by not furnishing any details of the same he cannot blame the Assessing Officer or the Tribunal for drawing conclusion that his source of money for making deposits other than agricultural income is the real estate business. No doubt in exercise of appellate jurisdiction under Section 260-A of the Act this Court has power to interfere with the findings of fact which are vitiated by use of inadmissible material and if a decision is based on conjectures surmises and suspicions or irrelevant material or if there is perversity but the instant case does not fall in any of these categories. The several opportunities given to the assessee to persuade him to reveal the sources of income have already been mentioned in the order passed by the AO. The assessee therefore cannot have any complaint against the Department when he was not furnishing all the details as sought by the Department though he agreed to do so in the statement given by him to the Department on 16-10-2015. We are of the opinion that in the instant case no error of law has been committed by the Assessing Officer or the CIT (Appeals)-1 Hyderabad or the Tribunal in treating a portion of the unexplained deposits as income of the Assessee. - Decided against assessee.

Summary

Issues Involved:
1. Legitimacy of cash deposits as agricultural income.
2. Compliance with notices under Sections 147, 148, and 142(1) of the Income Tax Act.
3. Validity of the assessment orders under Section 143(3) r/w Section 147.
4. Consideration of real estate and petrol bunk income.
5. Evaluation of unexplained income under Section 69 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of Cash Deposits as Agricultural Income:
The assessee claimed that all cash deposits in his bank accounts were derived from agricultural income. He and his family possessed substantial agricultural land, and he argued that all expenses and income related to his family were operated through his bank account. However, the Assessing Officer (AO) only accepted ?30,00,000/- per annum as agricultural income for both assessment years, considering the rest as unexplained income. The CIT (Appeals) and the Tribunal upheld this view, noting the lack of evidence supporting the assessee's claim of higher agricultural receipts.

2. Compliance with Notices under Sections 147, 148, and 142(1) of the Income Tax Act:
The Department initiated action under Section 147 and issued notices under Sections 148 and 142(1) to verify the source of cash deposits. The assessee failed to respond to these notices initially, leading to a show cause notice. Only after a final show cause notice did the assessee provide an explanation, which was deemed insufficient by the authorities.

3. Validity of the Assessment Orders under Section 143(3) r/w Section 147:
The AO passed assessment orders treating a significant portion of the cash deposits as income from unexplained sources. The CIT (Appeals) and the Tribunal confirmed these orders, noting that the assessee did not provide adequate evidence to substantiate his claims of agricultural income. The Tribunal partially allowed the appeals by treating 50% of the deposits as unexplained income and the balance as agricultural income, in addition to the ?30,00,000/- already accepted by the AO.

4. Consideration of Real Estate and Petrol Bunk Income:
The AO referred to the assessee's sworn statement, which mentioned income from real estate and a petrol bunk business. Although the petrol bunk started only in 2012, the AO considered the real estate income as a source for the cash deposits. The Tribunal also acknowledged this, noting the lack of detailed evidence from the assessee regarding his real estate transactions.

5. Evaluation of Unexplained Income under Section 69 of the Income Tax Act:
The assessee argued that the authorities did not specify the provision under which the alleged income was assessable and cited the Supreme Court decision in CIT Vs. PK Noorjahan. The Court held that the AO has discretion under Section 69 to treat unexplained investments as income. The High Court found no error in the AO's decision to treat a portion of the unexplained deposits as income, given the assessee's failure to provide satisfactory explanations.

Conclusion:
The High Court dismissed the appeals, affirming the orders of the AO, CIT (Appeals), and the Tribunal. It held that there was no substantial question of law warranting interference, as the assessee failed to substantiate his claims of agricultural income and did not provide adequate details of his real estate and rental income. The Court emphasized the discretion of the AO under Section 69 in treating unexplained investments as income.