2016 (11) TMI 1240 - AT - Income Tax

Unexplained income under section 69A - unexplained cash deposits - Held that - On perusing the affidavit that has been filed by the assessee before us, we find that if the assessee has inter-alia contended that the source of cash deposits to be out of agricultural activities and sale of agricultural land and that he was never told by his tax consultant that proceeds of agricultural land had to be co-related with the cash deposits in bank and that assessee has now found link of cash deposits with supporting documents of sale of land, receipt of cheques, deposits in bank and withdrawal from one bank and deposit it another bank account. We find that the aforesaid affidavit has been furnished before us for the first time and therefore the lower authorities did not have an opportunity to examine the contents of the affidavit. Considering the submissions of ld. AR, the additional evidences submitted are admitted. However, since these evidences were not available before the lower authorities, we are of the view that in the interest of justice and fair play, the issue raised in appeal needs to be considered afresh in the light of additional evidences submitted by the assessee. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Addition of ?23,31,000 as unexplained income under Section 69A of the Income Tax Act.
2. Disbelief regarding the source of funds for bank deposits.
3. Disregard of agricultural income claims.
4. Disallowance of salaries at 10%.
5. Partial relief on account of a fall in gross profit.

Detailed Analysis:

1. Addition of ?23,31,000 as Unexplained Income under Section 69A:
The core issue revolves around the addition of ?23,31,000 as unexplained income under Section 69A. The Assessing Officer (AO) noted that the assessee had deposited cash of ?23,31,000 in a savings bank account but failed to disclose this in the balance sheet or books of account. Despite several opportunities, the assessee did not provide adequate documentary evidence to explain the source of these cash deposits. The AO rejected the explanation that the funds were generated from agricultural income of the Hindu Undivided Family (HUF) and treated the amount as unexplained income under Section 69A.

2. Disbelief Regarding the Source of Funds for Bank Deposits:
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, emphasizing that the assessee did not maintain books of accounts for the HUF and failed to provide substantial evidence for the agricultural income claim. The CIT(A) noted discrepancies such as the absence of the HUF in the 7/12 extracts and the significant distances of the lands from the assessee’s place of residence, which questioned the feasibility of agricultural activities. Additionally, the CIT(A) pointed out that the lands were mortgaged for loans, indicating business purposes rather than agricultural activities.

3. Disregard of Agricultural Income Claims:
The CIT(A) further scrutinized the agricultural income claims, highlighting that no expenses related to agricultural activities were documented, and the sale vouchers provided were self-made. The CIT(A) referenced Supreme Court judgments, emphasizing that the onus was on the assessee to prove the agricultural income, which was not satisfactorily done. The CIT(A) concluded that the cash deposits were unexplained and could be presumed as undisclosed business income or income from other sources.

4. Disallowance of Salaries at 10%:
The CIT(A) sustained the disallowance of salaries at 10%, amounting to ?84,450, made by the AO. The disallowance was based on conjectures and surmises, as the assessee failed to provide adequate evidence to justify the salary expenses. The CIT(A) noted that the assessee, being a proprietor, needed to employ persons for contract execution, but the evidence provided was insufficient to substantiate the claimed expenses.

5. Partial Relief on Account of Fall in Gross Profit:
The CIT(A) granted only partial relief concerning the fall in gross profit. The assessee argued that the fall was marginal and due to various commercial factors, but the CIT(A) found the explanation inadequate and upheld the AO’s decision to grant only partial relief.

Tribunal’s Decision:
The Tribunal considered the additional evidence submitted by the assessee, including an affidavit explaining the sources of cash deposits from agricultural activities and the sale of agricultural land. The Tribunal admitted the additional evidence and remitted the issue back to the AO for fresh consideration in light of the new evidence. The AO was directed to provide adequate opportunity for the assessee to present further details and to decide the issue in accordance with the law.

Conclusion:
The appeal was allowed for statistical purposes, with the matter remitted back to the AO for a fresh decision after considering the additional evidence provided by the assessee. The Tribunal emphasized the need for a thorough examination of the new evidence to ensure a fair and just resolution of the issues raised.

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