2024 (9) TMI 1375 - AT - Income Tax

Unexplained deposit made in bank accounts during demonetization period - Receipt from the sale of agricultural produce - HELD THAT - The receipt shown as source from agriculture for making deposit during demonetization period was also a part of total agricultural receipts shown by assessee for the financial year 2016-17. Since the AO has accepted net agricultural income generated by assessee from gross receipts, the receipt of Rs. 6,00,000/- forming part of overall receipts of Rs. 9,19,400/- is also accepted by assessee. Therefore also, the AO is not justified in adopting a contradictory stand of rejecting the receipt while assessing the very same receipts as part of gross-receipts and for that matter net agricultural income of Rs. 2,29,100/- for the whole year. Receipt from the recovery of loans given to friends/relatives - The assessee has filed supporting evidences of all loan given and recovered which are A/c Confirmations, Notarised Affidavits of parties and Aadhar Cards of parties as ID proofs (death certificate in case of one deceased), copies of these documents were also filed to CIT(A). On examination, we find that the parties have given their A/c Confirmations in which details of loans taken from assessee and repayments made to assessee with dates are mentioned which tally with the details submitted by assessee to AO. The same details are also testified by respective parties by way of notarized affidavits (except one person which had already deceased). The id proof of parties in the shape of aadhar cards are also available. The evidences filed by assessee prove the transactions claimed by assessee. In that view of matter, the addition made by AO is found not sustainable. Assessee appeal allowed.

Summary

Issues Involved:
1. Validity of the receipt of Rs. 6,00,000/- from the sale of agricultural produce.
2. Validity of the receipt of Rs. 2,00,000/- from the recovery of loans given to friends/relatives.

Detailed Analysis:

Issue 1: Validity of the Receipt of Rs. 6,00,000/- from the Sale of Agricultural Produce
The assessee declared net agricultural income of Rs. 2,29,100/- for the financial year 2016-17, which included gross agricultural receipts of Rs. 9,19,400/- and expenses of Rs. 6,90,300/-. During the assessment proceeding, the AO questioned the source of cash deposits of Rs. 12,30,000/- made during the demonetization period. The assessee attributed Rs. 6,00,000/- to the sale of agricultural produce and submitted bills from M/s Piyush Traders.

The AO rejected the bills solely because M/s Piyush Traders did not respond to a notice issued under Section 133(6). However, the Tribunal noted that the bills contained complete details, including Bill No., Date, Name and address of both parties, Item, Quantity, Rate, Value, and TIN of M/s Piyush Traders. The Tribunal emphasized that the AO found no defects in these bills and that the non-response of M/s Piyush Traders to the notice could not be held against the assessee. The Tribunal referenced the Delhi High Court's decision in PCIT Vs. Wel Intertrade (P) Ltd., which held that an AO cannot make an adverse inference merely because a notice under Section 133(6) remains unanswered.

Moreover, the Tribunal noted that the AO had accepted the net agricultural income of Rs. 2,29,100/- declared by the assessee, which included the gross receipts of Rs. 9,19,400/-. Therefore, the AO's rejection of the Rs. 6,00,000/- receipt was contradictory as it formed part of the overall accepted receipts. Consequently, the Tribunal found the AO's action unjustified and deleted the addition of Rs. 2,40,000/-.

Issue 2: Validity of the Receipt of Rs. 2,00,000/- from the Recovery of Loans Given to Friends/Relatives
The assessee claimed Rs. 2,00,000/- as a recovery of loans given to friends/relatives. The assessee provided a detailed tabular format containing names, addresses, loan amounts, dates of loans, amounts received, and dates of receipts. The AO suspected the genuineness of these transactions and issued a show-cause notice. The assessee responded, stating that additional documents were being collected.

Despite the AO fixing the hearing date on 22.11.2019, the assessment order was passed on 18.11.2019, before the response due date. The assessee subsequently provided supporting evidence, including account confirmations, notarized affidavits, and Aadhar cards of the loan recipients. These documents confirmed the details initially submitted to the AO.

The Tribunal found that the evidences provided by the assessee, including account confirmations and notarized affidavits, substantiated the claim of loan recovery. Therefore, the Tribunal concluded that the addition of Rs. 2,00,000/- was not sustainable and deleted it.

Conclusion:
The Tribunal concluded that the addition of Rs. 4,40,000/- (Rs. 2,40,000/- for agricultural receipts and Rs. 2,00,000/- for loan recovery) made by the AO was unjustified. The appeal was allowed, and the said additions were deleted.

Order:
The appeal is allowed. Order pronounced in open court on 02.09.2024.