2022 (8) TMI 951 - AT - Income Tax

Assessment of the returned agricultural income as income from other sources - HELD THAT - Assessee, was unable to answer as to why the assessee, maintaining accounts, duly audited, wherein both the determinants of agricultural income (receipt expenditure) stand booked could not produce any evidence in respect of carrying out agricultural activities, including qua agricultural inputs. He was specifically asked by the Bench if the vouchers in this respect, i.e., material inputs; labour; electricity, etc. were available or produced for the other years being relied upon, to again no answer. Now, if these evidences were available for the other years which makes them thus distinguishable, why could not the same be produced for the current year, which appears to be the first year when the same were called upon to by the assessing authority. And if not available, the acceptance of the assessee s claim for the relevant years has no evidentiary value. As regards the sale proceeds from Krishi Upaj Mandi Samiti, the same is again to no consequence as the sale of agricultural produce does not in any manner show that the same stands cultivated by the seller, for which the assessee ought to have produced the revenue record. The assessee s claim is wholly unproved. The returned income is, accordingly, directed to be assessed as income from other sources. Unexplained cash credits - HELD THAT - We are completely at loss to understand the Revenue s case. The very fact that the money credited by VSPL to the assessee s account in it s books, originates from the assessee s bank account; rather, ought to be the reason for regarding the source of investment or movable property (in the form of loan) as explained instead of unexplained. Further, the same, duly accounted for in their regular accounts, both by the debtor (lendee) (VSPL) and the creditor (lendor), what, then, is the issue? The only concern and, further, for the reason that the source of the said credit/s is not referable to the assessee, is for the balance credit of Rs. 3 lacs. The ld. CIT(A) confirmed the same in the absence of any corroborative evidence furnished by the assessee. How could, one wonders, the assessee furnish one such, when, as per it, it has not made any investment, nor does the Revenue have any evidence in respect of the said investment as being by the assessee? The burden of proof in relation to a sum representing a transaction of the nature specified under s. 69/69A/ 69B/ 69C, etc., is on the Revenue. It is only when the Revenue has with it material exhibiting an investment/asset/expenditure, etc. qua the assessee, that the latter can be called upon by it to explain the nature and source thereof and, in the event of it being not satisfactorily explained, deem it as the assessee s income. In the instant case, the evidence relied upon, being a credit in the assessee s name in the books of a lendee, stands explained by the assessee who cannot be called upon to prove a negative, as not attributable to it, and which stands identified by the debtor-lendee, a related concern, as being received from another, correcting it s accounts in admission of the mistake, corroborating the assessee s claim/s. There is thus no adverse material with the Revenue in its respect. We find no merit in the said addition and, accordingly, direct its deletion. Disallowance of labour expenses at 5% - HELD THAT - As claim was not supported by proper bills or vouchers. The disallowance at 5% was accordingly made by him. And confirmed on the same basis; the assessee being unable to controvert the AO s finding of the labour expenditure being not supported by proper vouchers. The fact that the tax had been deducted would not by itself absolve the assessee from maintaining proper accounts. Even before us, the assessee s case continues to be the same, and which we find unacceptable for the same reasons as inform the order by the ld. CIT(A). We decide accordingly. Unexplained credit in the assessee s accounts - difference in credit entries in the accounts of MRI to the assessee s account therein - HELD THAT - It is only on the assessee handing over the drafts thereto, that MRI recorded it in it s books. For all we know, it may have been allowed credit in respect of the said bank drafts by MMC, as in fact appears to be the case, even as explained during hearing, with the assessee making a further payment of Rs. 29.50 lacs thereto during the current year, debiting it, again, to the account of MMC, to no explanation. MMC could not possibly allow credit against the impugned sums to two parties, both of which record the same as payments thereto in their accounts. Quizzical indeed. None of the payments , it is apparent, have been realized by MMC during the preceding year. How has the amount been adjusted in the assessee s accounts in future, with even the account for the current year, i.e., f.y. 2013-14, being conspicuous by its absence, is also relevant. The matter requires a thorough and proper examination, also bringing on record, where and the extent required, evidence from both MMC MRI; the assessee being wholly unable to explain the transactions and, as appears to us from his submisions by Shri Usrethe, in a confused state of mind. The matter being wholly indeterminate, we, vacating the findings by the first appellate authority, set aside the matter for fresh adjudication by the AO, who shall decide it in accordance with law upon issuing definite findings of fact, and after allowing the assessee a reasonable opportunity of being heard, as well as, as afore- stated, seeking evidence from MMC MRI in the matter. Disallowance of bonus expenses - HELD THAT - CIT(A) agreed with the AO in principle, but found no reason to extend the disallowance to other names, no doubt in respect of which had been expressed by the AO. He, accordingly, restricted the disallowance to the payments against the names at serial nos. 28-30, allowing the assessee relief for Rs. 6.25 lacs. Even as we do not find the inference drawn by the ld. CIT(A) as infirm, in our view he ought to have under the circumstances caused further investigation in the matter, or conducted it himself; his powers being coterminous powers with the AO. We further observe that the payments, beginning serial no. 28, extend to serial no. 32, aggregating to Rs. 36,500, with none being for Rs. 5000, as presumed by the ld. CIT(A). We, accordingly, direct the deletion at Rs. 6.035 lacs, and confirm the disallowance at Rs. 36,500. We decide accordingly.

Summary

Issues Involved:
1. Assessment of Agricultural Income
2. Addition of Unsecured Loan
3. Disallowance of Labour Expenses
4. Deletion of Addition due to Difference in Account Balances
5. Deletion of Disallowance of Bonus Payment

Issue-wise Detailed Analysis:

1. Assessment of Agricultural Income:
The first issue concerns the confirmation of the assessment of the returned agricultural income of Rs. 9,73,088 as income from other sources by the Assessing Officer (AO) at Rs. 5,50,000. The AO's adjustment was based on the assessee's failure to substantiate the claim of agricultural income. The CIT(A) provided partial relief based on the assessee's past history of agricultural income acceptance. However, the Tribunal found that the assessee failed to produce any evidence of agricultural activities, including inputs and expenses, for the current year. The Tribunal directed the returned income of Rs. 9.73 lacs to be assessed as income from other sources, thereby dismissing the assessee's claim.

2. Addition of Unsecured Loan:
The second issue pertains to the addition of Rs. 170 lacs due to a discrepancy in the balance of an unsecured loan to M/s. Vanshika Sugar and Power Industries Ltd. (VSPL). The assessee explained that the discrepancy was due to an accounting error by VSPL, which was later corrected. The Tribunal found that the entries were duly accounted for and corroborated by the debtor's books, thus directing the deletion of the addition. The Tribunal emphasized that the burden of proof was on the Revenue to show the investment as unexplained, which it failed to do.

3. Disallowance of Labour Expenses:
The third issue involves the disallowance of Rs. 6.27 lacs in labour expenses, which was 5% of the total claimed expenditure. The AO found the expense vouchers to be unverifiable, with some being self-made and unsigned. The CIT(A) upheld the disallowance, and the Tribunal agreed, noting that the assessee failed to maintain proper accounts and could not controvert the AO's findings.

4. Deletion of Addition due to Difference in Account Balances:
The fourth issue is about the deletion of an addition of Rs. 109.50 lacs due to a difference in the balance with Smt. Manjula Chandel, Prop. M/s. Maa Reva Infrastructure (MRI). The assessee reconciled the difference, explaining that the amounts were debited to the account of M.P. State Mining Corporation (MMC) and not claimed as expenditure. The CIT(A) accepted this explanation and directed the deletion of the addition. However, the Tribunal found the CIT(A)'s order self-contradictory and noted that the nature of the transactions was not satisfactorily explained. The Tribunal set aside the matter for fresh adjudication by the AO, emphasizing the need for a thorough examination and evidence from MMC and MRI.

5. Deletion of Disallowance of Bonus Payment:
The final issue concerns the deletion of a disallowance of Rs. 6.40 lacs in bonus payments. The AO disallowed the entire expenditure due to discrepancies in the payment list, while the CIT(A) restricted the disallowance to Rs. 15,000. The Tribunal found that the CIT(A) should have conducted further investigation and directed the deletion of Rs. 6.035 lacs, confirming the disallowance of Rs. 36,500.

Conclusion:
The Tribunal partly allowed the assessee's appeal and partly allowed and partly allowed for statistical purposes the Revenue's appeal. The Tribunal emphasized the need for proper documentation and evidence to substantiate claims and directed fresh adjudication where necessary.