2023 (6) TMI 427 - AT - Income Tax

Unexplained cash deposits - Genuiness of Agricultre income - Sale of mango and chikoo and miscellaneous vegetable - AO held that assessee could not substantiate the genuineness of income which pertains to sales bills issued which was added to the total income of assessee - CIT(A) after considering the reply of assessee took his view that assessee has merely made stress about the agricultural income though the fact that circumstances disprove the claim of agricultural income - HELD THAT - CIT(A) or the AO has not disputed the area of agricultural land owned by assessee. The lower authorities have not disputed the numbers of mango and chikoo trees in agriculture holding. Assessee has filed affidavit of contractor / persons who have received the agricultural produce before the lower authorities. Lower authorities have not exercised their power to examine such persons u/s 131 nor directed the assessee to produce such persons for verification of facts or for their cross-examination. No physical verification of mango trees and chikoo trees or other agricultural produce was conducted. I am conscious of the fact that case of assessee was related to assessment year 2007-08 and the Ld. CIT(A) passed the appellate order on 20.12.2017. However, from number of trees the estimation of yields of fruits could be easily got estimated. No such exercise was conducted before making any enhancement. CIT(A) relied on the pattern of cash deposits by taking view that there was substantial fluctuation instead of examining the fact that agricultural produce depends on various factors like weather, wind temperature in the season or natural calamities etc. In absence of adverse evidence against furnishing by assessee, Ld. CIT(A) was not justified in making enhancement. Decided in favour of assessee. Addition was made for want of evidence - As assessee has furnished affidavits of contractors / purchaser before ld CIT(A). They have specified in their affidavit that as and such payments were made to the assessee. No doubt that such affidavit was sworn in the month of July, 2017, but still the assessing officer has not directed the assessee to produce such person for their cross examination. However, assessee, has agreed for such addition and no contrary fact is shown addition made by the Assessing Officer to the extent of Rs. 6,02894/- is confirmed. Hence, ground of appeal is dismissed.

Issues Involved:
1. Validity of reopening the assessment by issuing notice under section 148 of the Income Tax Act.
2. Addition of Rs. 6,02,894/- by treating agricultural income as undisclosed income from business.
3. Enhancement of the addition from Rs. 6,02,894/- to Rs. 21,55,000/- by the Commissioner of Income Tax (Appeals).

Detailed Analysis:

1. Validity of Reopening the Assessment:
The first issue pertains to the validity of reopening the assessment by issuing a notice under section 148 of the Income Tax Act. The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as 'not pressed.'

2. Addition of Rs. 6,02,894/- as Undisclosed Income:
The Assessing Officer (AO) noted that the assessee deposited Rs. 21,55,000/- in his savings bank account and invested in mutual funds and shares. Upon issuing a show cause notice, the AO found that the assessee could not provide sufficient evidence for sales amounting to Rs. 6,02,894/-, which included sales to Sheikh Mahammad Kallu and sundry sales of mango, chikoo, and miscellaneous vegetables. The AO added this amount to the assessee's income, treating it as unexplained cash credit.

Upon appeal, the assessee provided additional evidence, including affidavits and confirmation letters from purchasers, and details of agricultural holdings. However, the AO, in the remand report, stated that the assessee failed to produce adequate supporting evidence, such as sales bills and proof of agricultural produce. The AO maintained that the affidavits were insufficient as the purchasers were not assessed to income tax and lacked PAN.

The Commissioner of Income Tax (Appeals) [CIT(A)] considered the additional evidence and the remand report, noting discrepancies in the cash deposit patterns and the timing of deposits relative to the mango season. The CIT(A) found the affidavits to be an afterthought and upheld the addition of Rs. 6,02,894/-.

The Tribunal observed that while the AO and CIT(A) did not dispute the agricultural landholding or the number of mango and chikoo trees, they failed to conduct a thorough verification of the agricultural produce. The Tribunal noted that the affidavits were not cross-examined, and no physical verification was conducted. Despite these observations, the Tribunal upheld the addition of Rs. 6,02,894/- due to the lack of contrary evidence and the assessee's representative's agreement during the assessment.

3. Enhancement of Addition to Rs. 21,55,000/-:
The CIT(A) enhanced the addition from Rs. 6,02,894/- to Rs. 21,55,000/-, questioning the substantial fluctuations in cash deposits across different assessment years and linking them to the assessee's involvement in Futures and Options (F&O) trading. The CIT(A) issued a show cause notice for enhancement, to which the assessee responded by reiterating the agricultural nature of his income and the lack of restrictions on cash transactions in agriculture.

The Tribunal found that the CIT(A)'s reliance on cash deposit patterns was misplaced, as agricultural income can vary due to multiple factors. The Tribunal emphasized the lack of adverse evidence against the assessee's claims and the failure to conduct cross-examinations or physical verifications. Consequently, the Tribunal set aside the enhancement made by the CIT(A).

Conclusion:
The Tribunal partly allowed the assessee's appeal by setting aside the enhancement of the addition to Rs. 21,55,000/- but upheld the original addition of Rs. 6,02,894/-. The decision was pronounced in the open court on 31/10/2022.

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