2022 (8) TMI 1080 - AT - Income Tax

Disallowance on account of agriculture expense at the ad hoc rate of 30% as unexplained cash in hand - CIT(A) deleted the substantial addition, observing that AO tried to disprove the claim of agriculture income by referring to discrepancies in the statement of Ranjit L. Thakur (mango contractor who entered into Kabala agreement with the assessee) - HELD THAT - Out of total cash deposit of Rs.21,12,000/-, Rs.4,21,537/- is treated as unexplained cash in the hands of assessee. As regards the other credit entries, ld CIT(A) find that the assessee has explained the credit entries properly and the AO has not brought out any concrete evidences to reject the same. Most of the credit entries are found to be pertaining to opening balance in the said bank accounts, FD closure proceeds and other sources receipts. Thus, the addition of Rs.59,29,739/- pertaining to cash deposits and other credits was restricted to Rs.4,21,537/- by ld CIT(A). We note that ld CIT(A) failed to prove that amount of Rs. 4,21,537/- is out of unaccounted income. The assessee submitted enough proof and ld CIT(A) has not refuted or discredited these evidences. The ld CIT(A) does not mention why he is not accepting these evidences. Therefore, we delete the balance addition of Rs. 4,21,537/-. STCG on share market transactions and speculative gain in share transactions - HELD THAT - Losses incurred in the trading of shares were adjusted in short term capital gain therefore these were not appearing in the original return of income, that is, losses were claimed in the original return of income, however, because of set off from short term capital gain, they disappeared. Hence, we do not find any merit in the submission of DR and therefore, the addition are hereby deleted. Hence, we allow ground No. 3 and 4 raised by the assessee. Addition pertaining to stamp duty in cash and LIC premium paid in cash - HELD THAT - We do not agree with ld DR for the Revenue, as the assessee explained the source of payment stating that part payment was made from his wife account and from his parents. Considering these facts, we delete the additions. Cash deposit in the bank account - AO rejected the claim of the assessee by stating that the cash deposits made during the year is more than agriculture income claimed in her Return of Income - HELD THAT - Once agriculture income was proved on the basis of record of title and possession and agriculture land and evidence of agriculture operations earning income therefrom, the same has not to be proved every year separately. Hence based on this factual position, we delete the addition.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 148 of the Income Tax Act.
2. Disallowance of agricultural expenses at an ad hoc rate of 30%.
3. Addition of short-term capital gain (STCG) and speculative gain from share market transactions.
4. Addition pertaining to stamp duty paid in cash.
5. Addition pertaining to LIC premium paid in cash.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Under Section 148:
The assessee did not argue the validity of the reassessment proceedings under Section 148 of the Income Tax Act. Therefore, this ground was dismissed as not pressed/argued.

2. Disallowance of Agricultural Expenses at an Ad Hoc Rate of 30%:
The main grievance was the confirmation of disallowance on account of agricultural expenses at an ad hoc rate of 30%, amounting to Rs.4,21,537/- as unexplained cash in hand. The assessee did not file a return of income for the year under consideration. The Assessing Officer (AO) noticed cash deposits of Rs.13,00,000/- in the assessee's bank account and issued a notice under Section 148. The AO made a detailed inquiry and added Rs.59,29,739/- to the income. The Commissioner of Income Tax (Appeals) [CIT(A)] restricted this addition to Rs.4,21,537/-. The Tribunal noted that the CIT(A) failed to prove that the amount of Rs.4,21,537/- was unaccounted income, as the assessee provided sufficient evidence. Therefore, the Tribunal deleted the addition of Rs.4,21,537/-.

3. Addition of Short-Term Capital Gain (STCG) and Speculative Gain from Share Market Transactions:
The AO noted that the assessee had earned STCG of Rs.28,888/- and speculative gain of Rs.32,357/- from share transactions, which were not declared in the return of income. The assessee contended that losses incurred in share trading were adjusted against the STCG and speculative gain. The Tribunal found merit in the assessee's submission and deleted the additions of Rs.28,888/- and Rs.32,357/-.

4. Addition Pertaining to Stamp Duty Paid in Cash:
The AO noted that the assessee made a cash payment of Rs.19,800/- towards stamp duty for immovable property purchase. The assessee argued that part of the payment was made from the bank accounts of his wife and parents. The Tribunal found that the AO did not disprove this fact and deleted the addition of Rs.19,800/-.

5. Addition Pertaining to LIC Premium Paid in Cash:
The AO added Rs.3,21,982/- to the income, noting that the assessee did not establish the availability of cash for LIC premium payments. The assessee contended that part of the payment was made from his bank account and the rest from the accounts of his wife and parents. The Tribunal found the assessee's explanation satisfactory and deleted the addition of Rs.3,21,982/-.

Conclusion:
The appeals were partly allowed. The Tribunal deleted the disallowances and additions related to agricultural expenses, STCG, speculative gain, stamp duty, and LIC premium payments, finding the assessee's explanations and evidence satisfactory. The reassessment proceedings under Section 148 were not contested by the assessee and were dismissed as not argued.