2021 (10) TMI 25 - AT - Income Tax

Addition being cash deposited in the bank account of the assessee - assessee s submissions that assessee had given his portion of land of 17.40 Acres of cultivable land on which cash crops are grown to his brother for cultivation at an annual lease for which cash deposited in the bank account of the assessee - HELD THAT - The fact that the land being purchased at Chhattisgarh by the assessee along with his brother Pratap Singh who is staying at Chhattisgarh and cultivating his portion of land and also taken over the land of the assessee on lease has not been controverted by the Revenue. The contention of the assessee that the agreement for lease of land being an oral agreement simply cannot be brushed aside in view of the fact that the lease of land is to the real brother of the assessee who is also an agriculturists and the confirmation of brother of having taken the land on lease from assessee and the payment of lease in cash. In such a situation, the agreement in the form of oral understanding between the blood relations cannot be discarded without there being any evidence to the contrary. - Thus source of cash deposits to be explained. - Decided in favour of assessee. Estimation of household expenses - HELD THAT - AR submission that we during the relevant period assessee was staying in a village with his wife and two minor sons who were not school going and the milk and grains which are available from his own farm and cattle was sufficient to meet his basic daily requirements has not been controverted by Revenue by placing any contrary evidence on record - expenditure of ₹ 1,00,000/- towards household expenses shown by the assessee cannot be discarded without any evidence to the contrary - Decided in favour of assessee.

Summary

Issues:
1. Proper service of notice u/s 148
2. Addition of cash deposit of ?5,70,000
3. Addition of ?1,00,000 for household expenses

Analysis:

Issue 1: Proper service of notice u/s 148
The appeal raised concerns about the legality of the assessment due to improper service of notice u/s 148. The assessee contended that the AO's order was invalid as the notice was not properly served. However, the Learned AR representing the assessee decided not to press this ground, leading to its dismissal.

Issue 2: Addition of cash deposit of ?5,70,000
The dispute revolved around the addition of ?5,70,000 as cash deposited in the assessee's bank account. The assessee, an agriculturist, leased a portion of his land to his brother for cultivation, receiving the rent in cash. The absence of a written agreement was the basis for the addition by the AO. However, the ITAT found the explanation provided by the assessee credible, considering the agricultural nature of the transaction and the confirmation by the brother. The ITAT directed the AO to delete the addition, ruling in favor of the assessee.

Issue 3: Addition of ?1,00,000 for household expenses
The controversy arose from the estimation of household expenses at ?1,00,000 by the assessee, which the AO deemed insufficient for a family of four. The AO estimated expenses at ?25,000 per month, which was upheld by the CIT(A). The ITAT, after considering the explanation provided by the assessee regarding the availability of food grains and vegetables from his farm to meet basic needs, disagreed with the AO's estimation. The ITAT ruled in favor of the assessee, directing the deletion of the estimated household expenses. Consequently, the appeal was partly allowed.

In conclusion, the ITAT's judgment addressed the issues of proper notice service, cash deposit addition, and household expense estimation. The ITAT ruled in favor of the assessee regarding the addition of cash deposits and estimated household expenses, highlighting the importance of credible explanations and supporting evidence in tax assessments.