2024 (12) TMI 1556 - AT - Income Tax

Addition u/s 68 cash deposits during the demonetization period and assessee failed to explain genuineness of the agricultural income claimed - AO invoked provisions of section 115BBE - HELD THAT - Assessee has deposited cash of Rs. 19, 60, 000/- during Demonetization however Assessing Officer has made an addition of Rs. 12, 07, 960/- only. As per Cash Book opening cash in hand on 10.11.2016 is more than the addition made by the Assessing Officer. The Assessing Officer has not challenged the cash book. Assessing Officer in para 7.8(V) has merely alleged that Assessee during demonetization period accepted cash either from known or unknown person and deposited in banks . Assessing Officer has made a bald statement without any basis. Therefore based on all facts and circumstances of the case the Assessee has apparently explained the source of cash deposits. We direct the AO to delete the addition. Assessee has received Agricultural Income - There is discrepancy between the crop appearing in the Revenue Records i.e. 7/12 Extract and crop claimed to have been grown by assessee. We specifically asked ld.AR to explain the difference. Ld.AR submitted that sometimes land revenue officers do not update their records therefore there is difference. However ld.AR has not filed any document to substantiate his claim. There was only oral averments. In this scenario we cannot doubt the land revenue records i.e. 7/12 Extract copy of which has been submitted by assessee himself during assessment proceedings during appeal before the ld.CIT(A). Hence we are of the opinion that in the absence of any contradictory documentary evidence findings recorded in the 7/12 Extract has to be taken as True. Therefore the assessee s claim that assessee has sold GINGER on 11.06.2016 for Rs. 5, 52, 310/- claimed to have been grown in his own land is factually incorrect and hence cannot be accepted. Assessee has not shown any agricultural income for earlier year. It is also to be noted that Assessee has shown Rs. 5, 52, 310/- as Agricultural Income which is the exact amount appearing in the copy of sale bill it means assessee has not incurred any Expenditure for earing the so-called agricultural income which is impossible - Decided against assessee. Addition made u/sec. 68 at 60% under section 115BBE - The applicability of Section 115BBE has been decided in the case of Maruthi Babu Rao Jadhav 2021 (1) TMI 481 - KERALA HIGH COURT held that provisions of Section 115BBE of the Act as amended by second amendment Act by the Taxation Laws (second amendment) Act 2016 will apply w.e.f 1-4-2017 on enhanced rate of tax @60% instead of @30%. The enhanced rates applies from the commencement of the assessment year relevant to previous financial year. In this case this applies to Financial Year 2016-17 relevant to Assessment Year 2017-18. Thus we hold that Assessing Officer has rightly invoked section 115BBE to tax the addition made for A.Y. 2017-18.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the addition of Rs. 12,07,960 under Section 68 of the Income Tax Act, 1961, due to cash deposits during the demonetization period, is justified.
• Whether the disallowance of the claim of agricultural income amounting to Rs. 5,52,310 and its treatment as unexplained cash credit under Section 68 is warranted.
• Whether the application of the amended Section 115BBE, taxing the additions at 60%, is applicable for transactions that occurred before the amendment date of December 15, 2016.

ISSUE-WISE DETAILED ANALYSIS

Ground No. 1: Addition of Rs. 12,07,960

Relevant legal framework and precedents: The addition was made under Section 68 of the Income Tax Act, which deals with unexplained cash credits. The assessee relied on the decision of the Karnataka High Court in PCIT Vs. Basetteppa B Badami.

Court's interpretation and reasoning: The Tribunal noted that the assessee had provided a cash book showing an opening balance sufficient to cover the cash deposits made during the demonetization period. The Assessing Officer did not challenge the cash book's authenticity but made a general allegation without evidence.

Key evidence and findings: The cash book indicated an opening cash balance of Rs. 18,24,582 as of April 1, 2016, and a balance of Rs. 21,16,177 on November 5, 2016. The Tribunal found that the cash in hand as of November 10, 2016, was sufficient to explain the deposits.

Application of law to facts: The Tribunal concluded that the assessee had adequately explained the source of cash deposits, and the addition was unwarranted.

Treatment of competing arguments: The Revenue's argument was based on a bald assertion without challenging the cash book, which the Tribunal found insufficient.

Conclusions: The Tribunal directed the deletion of the addition of Rs. 12,07,960.

Ground No. 2: Disallowance of Agricultural Income of Rs. 5,52,310

Relevant legal framework and precedents: The burden of proof lies on the assessee to substantiate claims of agricultural income, as per the Supreme Court ruling in Commissioner of Customs vs. Dilip Kumar & Company.

Court's interpretation and reasoning: The Tribunal found discrepancies between the crops listed in the 7/12 extract (revenue records) and the crops claimed to have been sold by the assessee. The assessee failed to provide evidence to reconcile this discrepancy.

Key evidence and findings: The 7/12 extract showed crops as "GRASS & RICE," while the sale invoice claimed the sale of "GINGER." The land was also not in the assessee's name.

Application of law to facts: The Tribunal held that the assessee's claim was factually incorrect and unsupported by evidence.

Treatment of competing arguments: The Tribunal found the assessee's reliance on various case laws inapplicable due to distinguishable facts.

Conclusions: The Tribunal confirmed the addition of Rs. 5,52,310 as unexplained cash credit.

Ground No. 3: Application of Section 115BBE

Relevant legal framework and precedents: The amended Section 115BBE, effective from April 1, 2017, increased the tax rate on unexplained income to 60%. The Kerala High Court's decision in Maruthi Babu Rao Jadhav upheld its applicability for the assessment year 2017-18.

Court's interpretation and reasoning: The Tribunal followed the Kerala High Court's interpretation that the amendment applied from the assessment year 2017-18, covering the financial year 2016-17.

Key evidence and findings: The Tribunal noted that no contrary decision from the jurisdictional High Court was presented.

Application of law to facts: The Tribunal held that the enhanced tax rate applied to the assessee's case.

Treatment of competing arguments: The Tribunal rejected the assessee's argument against the retrospective application of the amendment.

Conclusions: The Tribunal upheld the application of Section 115BBE at the enhanced rate of 60%.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The assessee has apparently explained the source of cash deposits." "The assessee's claim that assessee has sold GINGER... is factually incorrect and hence cannot be accepted." "The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year."

Core principles established: The Tribunal emphasized the importance of documentary evidence in substantiating claims of income and the applicability of amendments in tax law based on the assessment year.

Final determinations on each issue: The Tribunal allowed the appeal regarding the addition of Rs. 12,07,960, dismissed the appeal regarding the disallowance of agricultural income, and upheld the application of the amended Section 115BBE.