2023 (3) TMI 858 - AT - Income Tax

Additions u/s. 69A r.w.s 115BBE - unexplained cash deposits in bank accounts - gift from mother-in-law - HELD THAT - As find from the translated copies of the sale deed produced by the AR confirms the sale of two lands for Rs. 9 lakhs each. In view of the above, the claim made by the assessee that it is a gift from mother-in-law and it was deposited into the bank account on 30/07/2016 itself in our considered view is acceptable and allowed. Addition on account of sale of paddy, fertilizers and pesticides - AO has merely relied on the reported turnover as per VAT returns and has considered the submissions of the assessee as illogical. We find merit in the arguments of the Ld. AR that the assessee has acted as a mediator between the rice millers and the farmers for a commission and has routed the transactions through his account. This commission was also disclosed in the return of income filed by the assessee. We therefore are inclined to delete the addition made by the Ld. Revenue Authorities on account of sale of paddy. Unaccounted agricultural income - We find that the Ld. AO has not considered this exempt income as disclosed by the assessee in his return of income. AO has therefore erred in treating the agricultural income of Rs. 4 lakhs as unexplained. We therefore direct the Ld. AO to delete this addition as it has been properly explained and disclosed in the return of income filed by the assessee. Addition out of savings - Considering the submissions, this amount was out of surplus available with the assessee and which has been deposited into the bank account, we are inclined to direct the Ld. AO to delete the addition which was made out of the savings of the assessee. Addition of cash deposits made by the assessee into the bank account - Deposits during the demonetization period for Rs. 33,00,000/- in both the bank accounts by way of cash is out of the capital alleged to be introduced by the partners of the firm. In the absence of any substantiated evidence with regard to deposits of the cash into the assessee s account instead of partnership firm s account we could not accept that these deposits are from explained sources. We are therefore inclined to uphold the addition of Ld. Revenue Authorities to the extent of Rs. 33,00,000/- deposited by way of cash during the demonetization period and hereby confirm the order of the Ld. Revenue Authorities. Cash deposited during the demonetization period we find that these cash deposits in the bank account of the assessee arise out of the alleged cash contribution by the partners. Revenue Authorities have erred in disallowing the same cash deposits and we therefore direct the Ld. AO to delete the addition.

Summary

Issues:
The appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) involved the addition of Rs. 1,34,40,000 made by the Ld. AO U/s. 69A of the Act towards alleged unexplained cash deposits in bank accounts.

Summary:
1. The assessee, an individual deriving income from purchase and sale of fertilizers and pesticides, filed its return of income for AY 2016-17 admitting a total income of Rs. 5,10,480 under presumptive taxation. The case was selected for "limited scrutiny" to verify cash deposits. The Ld. AO made additions under various heads, including disallowance of a gift, amount received from farmers, unexplained agricultural income, and unexplained cash deposits.

2. The Ld. CIT(A)-NFAC dismissed the appeal and upheld the Ld. AO's order. The assessee raised three grounds in the appeal, primarily focusing on the addition of Rs. 1,34,40,000 as unexplained cash deposits.

3. The Ld. AR argued that the cash deposits were from legitimate sources, such as sales commissions, agricultural income, and contributions from partners of a firm. The Ld. DR contested these claims, questioning the legitimacy of the sources and the nature of transactions.

4. The Tribunal analyzed each addition separately:
- Gift from mother-in-law: Accepted based on evidence provided.
- Sale of paddy, fertilizers, pesticides: Addition deleted as legitimate income.
- Unexplained agricultural income: Addition deleted as properly disclosed.
- Unexplained cash deposits: Addition deleted as sourced from savings.
- Cash deposits for partnership firm: Addition upheld due to lack of evidence.
- Cash deposits during demonetization: Partially upheld based on lack of evidence.

5. The Tribunal partly allowed the appeal, directing the Ld. AO to delete certain additions and confirming others. The decision was pronounced on 17th March 2023.