2024 (7) TMI 491 - AT - Income Tax

Addition u/s 69C - cash paid for purchase of livestock - HELD THAT - It is not in dispute that the assessee and his wife are partners in Daurau Farms LLP engaged in the main business activity of sale of farm fresh milk of cows. The contention of the assessee all along has been that the above transactions of Rs. 10 lakhs each has been entered into through Mr. Deepak for the purchase of cows for Daura Farms LLP and that Mr. Deepak has been providing knowledge/assistance to the assessee as partner of the firm as deposed by him in statement recorded u/s 132(4) of the Act. As to the reply of Shri Rahish Pal Singh in response to the summon issued u/s 131(1A), the stand of the assessee has been that it is factually correct that the assessee had no business transactions with Shri Rahish Pal Singh during the year. However, cash given on 31.12.2019 to Mr. Deepak to purchase quality breed of cows for the firm was received back by the assessee on 05.01.2020 through Mr. Rahish Pal Singh who is relative (spouse of sister in law) of the assessee. Mr. Deepak had handed over the amount to Mr. Rahish Pal Singh in his daily meeting in regular course of business to return the same to the assessee on his behalf. The explanation furnished by the assessee has been considered by the Ld. AO as afterthought without bringing on record any cogent material to establish its falsity. CIT(A) has only dittoed the view of the Ld. AO. As to the source, the assessee s explanation has been that Rs. 10 lakh has been given by the assessee to Mr. Deepak in the capacity of partner of Daurau Farms LLP in support of which cash book pertaining to the Financial Year 2019-20 had been produced during the assessment proceedings. As per the income expenditure statement of the firm for Financial Year 2019-20 brought on record it had cash sales of Rs. 8,40,400 in local market and sale of Rs. 17,46,798/- as reflected in the bank statement of the firm. Therefore it is not a case of failure to explain the source of the impugned amount on the part of the assessee. It is not the case of the Revenue that the entire amount of Rs. 30 lakhs was given by the assessee to Mr. Deepak in one go. In our opinion, the assessee discharged his onus of explaining the nature and source of the transactions noticed in his phone during the course of search proceedings. The impugned addition has been made by the AO and sustained by the Ld. CIT(A) on the basis of suspicion and surmises alone. Keeping in view the nature of business of the assessee, we hold that there is no justification on facts and in law for the impugned additions which we direct the Ld. AO to delete. Appeal of the assessee is allowed.

Summary

Issues involved:
1. Addition of Rs. 30,00,000 under section 250 of the Income Tax Act, 1961.
2. Alleged investigation carried out without informing the appellant.
3. Rejection of explanations and evidences by the LD. CIT(A).
4. Sustaining the addition under section 69C without assuming jurisdiction.
5. Passing order under section 250 without disposing off objections.
6. Justification of the impugned additions.

Issue 1: Addition of Rs. 30,00,000 under section 250 of the Income Tax Act, 1961
The case involved a search and seizure operation under section 132 of the Income Tax Act, 1961, where the assessee made cash payments totaling Rs. 30 lakhs to an individual in three installments. The Assessing Officer added this amount to the income of the assessee under section 69C as the source of cash remained unexplained. The CIT(A) sustained this addition, stating the explanation provided by the assessee was not supported by independent evidence. However, the Tribunal found that the assessee consistently explained the transactions, supported by evidence, and directed the AO to delete the addition, emphasizing that it was based on suspicion and surmises, lacking legal justification.

Issue 2: Alleged investigation carried out without informing the appellant
The appellant contended that investigations by the Income Tax Department were conducted without his knowledge, and no material or outcomes were shared with him. This lack of transparency was raised as a procedural issue, affecting the appellant's ability to confront evidence or provide explanations. However, the Tribunal did not delve deeply into this issue as the focus was primarily on the justification of the additions made by the authorities.

Issue 3: Rejection of explanations and evidences by the LD. CIT(A)
The LD. CIT(A) rejected the explanations and evidences provided by the appellant, particularly regarding the cash transactions and the source of funds. The appellant argued that the assessment should not be based on assumptions and presumptions, citing legal precedents. However, the LD. CIT(A) upheld the addition, stating that the appellant failed to provide sufficient independent evidence to support the claims. This issue was crucial in determining the validity of the addition made by the authorities.

Issue 4: Sustaining the addition under section 69C without assuming jurisdiction
The appellant challenged the jurisdiction of the authorities to sustain the addition under section 69C without proper legal grounds. The argument revolved around the legality and procedural aspects of the addition, questioning whether the authorities had the appropriate jurisdiction to make such an addition. The LD. CIT(A) upheld the addition, leading to the appellant's appeal to the Tribunal for a review of this decision.

Issue 5: Passing order under section 250 without disposing off objections
The appellant raised concerns about the order passed under section 250 without addressing the objections filed, highlighting a procedural irregularity. This issue focused on the due process followed by the authorities in reaching the decision to add the amount to the appellant's income. The Tribunal did not delve deeply into this issue as the primary focus was on the justification of the additions made by the authorities.

Issue 6: Justification of the impugned additions
The Tribunal analyzed the explanations provided by the appellant, the evidence presented, and the actions of the assessing authorities in making the addition of Rs. 30,00,000 to the appellant's income. It found that the appellant had adequately explained the nature and source of the transactions, supported by documentary evidence. The Tribunal concluded that the addition was unjustified, lacking legal and factual basis, and directed the AO to delete the addition. This issue was central to the final decision of the Tribunal in favor of the appellant.

This detailed analysis of the judgment covers all the relevant issues involved in the case, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.