2024 (8) TMI 1005 - AT - Income Tax

Cash deposit during the demonetization period - unexplained cash credit u/s 68 - CIT(A) construed nature of the appellant's professional income as exclusively from cash receipts - CIT(A) has sustained addition u/s 69A - HELD THAT - According to the ld. CIT(A), entire amount has been shown as receipt from Nursing Home by way of cash and there is no supporting evidence to come to the conclusion that how the assessee has received the entire amount by way of cash and there are no credit cards or payment through bank transfers and no details are given to prove the same. In our opinion, it is the duty of the assessee to place necessary corroborative material to show that the above amount has been received by way of cash receipts from Nursing Home by producing the relevant documents. The ld. A.R. made a plea before us that the assessee maintained the regular books of accounts and audited u/s 44AB of the Act and the same has been disclosed as professional income and due credit to be given. In our opinion, this issue has been considered by this Tribunal in the case of Bhoopalam Marketing Services Pvt. 2022 (11) TMI 331 - ITAT BANGALORE wherein held abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non- availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. In view of the above order of the Tribunal, we are inclined to remit the issue in dispute to the file of ld. AO for fresh consideration to examine in the light of above order of the Tribunal. Unsecured loan receipts - assessee has not submitted any details which can prove the genuineness of the unsecured loan and creditworthiness of persons who have advanced the loan - D.R. is that there is a doubt about the capacity of the lenders and genuineness of the transactions and documents produced by the assessee are self- serving document as not enough to justify the claim of the assessee - HELD THAT - As seen from the facts of present case, the lower authorities concerned has to examine the evidences furnished by conducting independent enquiry and there after to state whether he is satisfied with the details of evidences produced by the assessee and conducting of enquiry made by him. If he is not satisfied with the details of evidence and enquiry made by him after confronting the same to the assessee, he should take a decision to make an addition or not to make addition. At this point of time, it is not possible to hold that assessee has successfully discharged its primary onus cast upon him to explain the source of alleged credits in its books of accounts. Though the lower authorities noted the various shortcomings in the compliance made by the assessee, the lower authorities has not carried out the enquiry to the full extent. AO can also refer to any material or evidence available with him and call upon the assessee to file their response and a general and universal procedure or method to be adopted by AO while verification of facts cannot be laid down. However, the manner, the mode of conducting assessment proceedings has to be left to the discretion of the AO and same should be just, fair and should not cause any harassment to the assessee. The provisions of Evidence Act are not applicable, but the AO being a quasi-judicial authority must take care and caution to ensure that decision is reasonable and satisfied the balance of equity, fairness of justice and the principles of preponderance of probabilities apply - It is appropriate to remit this issue in dispute to the file of ld. AO to carry out necessary enquiry on this issue as deemed fit and to decide accordingly. Addition as income u/s 68 declared by assessee as an agricultural income - contention of the ld. D.R. that the assessee has not placed necessary evidence with regard to earning of agricultural income along with details of land holdings and also details of expenditure incurred for the purpose of earning agricultural income - HELD THAT - A.R. made a plea that in earlier assessment years, the agricultural income declared by the assessee has been accepted. It was submitted that on similar line, the agricultural income declared by assessee in this AY to be accepted. In our opinion, the principles of res judicata does not applicable to the income tax proceedings. More so, there is no evidence produced by the assessee to suggest that in earlier assessment years, the agricultural income has been accepted by the department vide scrutiny assessment u/s 143(3) of the Act. The agricultural income earned by assessee in each assessment year depend upon the various factors and the assessee is required to establish in each assessment year that he has earned the agricultural income declared in his return of income. Being so, in the interest of justice, it is appropriate to remit the issue in dispute to the file of ld. AO to examine these facts with regard to earning of agricultural income.

Summary

Issues Involved:

1. Principle of Natural Justice
2. Cash Deposits During Demonetization
3. Unexplained Cash Credit under Section 68
4. Applicability of Section 69A
5. Unsecured Loans
6. Agricultural Income

Issue-wise Detailed Analysis:

1. Principle of Natural Justice:

The appellant argued that the NFAC order violated the principle of natural justice. However, no specific arguments were presented during the hearing for this ground, and it was dismissed as not pressed.

2. Cash Deposits During Demonetization:

The assessee deposited Rs. 61,98,000/- during the demonetization period. The explanation provided was that Rs. 31,98,000/- was from professional receipts, and Rs. 30,00,000/- was unexplained cash declared under PMGKY. The AO added the entire amount as unexplained cash credit under Section 68, citing a lack of supporting evidence for the professional receipts and the absence of Form 4 for PMGKY immunity.

During the first appeal, the CIT(A) accepted the Rs. 30,00,000/- declared under PMGKY but upheld Rs. 21,98,000/- as unexplained under Section 69A, questioning the logic behind the cash balance and the nature of the professional income. The CIT(A) noted the lack of evidence for the claimed cash receipts and the improbability of all transactions being in cash.

3. Unexplained Cash Credit under Section 68:

The assessee argued that the cash balance of Rs. 26,94,953/- as of 09-Nov-2016 was from professional and rental income, and the remaining Rs. 5,03,047/- was from daily receipts. The CIT(A) found this explanation illogical and unsupported by evidence. The CIT(A) also noted the absence of service tax returns and bank statements, which contradicted the claim of all transactions being in cash.

The assessee cited various judgments, including those from ITAT Mumbai and Ahmedabad, arguing that cash deposits from professional receipts recorded in audited books should not be added under Section 68. The assessee also argued against double taxation and the CIT(A)'s change of the applicable tax provision from Section 68 to Section 69A without notice.

4. Applicability of Section 69A:

The CIT(A) changed the applicable provision from Section 68 to Section 69A, which the assessee argued was beyond the CIT(A)'s powers under Section 251(1)(a). The assessee cited judgments from ITAT Chennai and Bangalore, arguing that the CIT(A) cannot change the provision of law under which the AO made an addition without giving specific notice.

5. Unsecured Loans:

The assessee showed unsecured loans of Rs. 3,96,81,929/-. The AO added this amount as unexplained cash credit under Section 68, citing a lack of evidence for the genuineness and creditworthiness of the loans. The CIT(A) accepted Rs. 1,98,10,565/- as relating to previous years and deleted this portion. However, the remaining Rs. 1,98,71,364/- was upheld as unexplained.

The assessee argued that Rs. 1,10,05,034/- from Vishwanathareddy HUF included adjustment entries from previous years, and only Rs. 14,26,612/- was actual loan. The remaining Rs. 88,66,330/- from Mrs. Nivedita was explained through bank statements and returns of income. The assessee cited various judgments, arguing that once the identity and genuineness of the transactions are established, the burden shifts to the AO to prove otherwise.

6. Agricultural Income:

The assessee declared agricultural income of Rs. 5,69,500/-. The AO added 30% of this amount (Rs. 1,70,850/-) as income from other sources, citing a lack of evidence for the expenditure incurred to earn the agricultural income. The CIT(A) upheld this addition, noting the absence of land records, agricultural income certificates, and expenditure details.

The assessee argued that the agricultural income was net of expenditure and supported by land records and sales bills. The assessee cited a judgment from ITAT Chennai, arguing that expecting detailed records for agricultural income is impractical and that the agricultural income should be accepted based on the land holdings and past declarations.

Conclusion:

The appeal was partly allowed for statistical purposes. The issues regarding cash deposits during demonetization and unsecured loans were remitted to the AO for fresh consideration and necessary enquiry. The addition related to agricultural income was also remitted to the AO for examination of the evidence and facts. The principle of natural justice and other grounds were dismissed as not pressed.