9911796707
TMI Blog2011 (10) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... as transferred under section 127 of the Income-tax Act from the Central Circle-I, Ludhiana to Central Circle-III, Ludhiana. In view of the docu ments found during the course of search, reasons were recorded under sec tion 147 of the Act and notice under section 148 was issued to the assessee. In response to the notice the assessee furnished return of income on December 4, 2008 declaring the same income as declared in the original return of income. During the course of assessment proceedings the Assess ing Officer issued show-cause notice to the assessee proposing additions on the following grounds : (a) Investment in purchase of land at Abhor Road, Muktsar evidenc ing which agreement dated January 3, 2001 was found as per which the assessee paid the total consideration of Rs. 15 lakhs. (b) The addition on account of the agreement dated March 22, 2001 for purchase of house from Shri Harcharan Singh to whom advance of Rs.1,15,000 was paid in cash. (c) Interest income from certain agriculturists/debtors which was not disclosed in the return of income, which was admitted by the assessee dur ing the course of statement recorded under section 132(4) of the Act. The assessee had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search, the statement of the assessee was recorded on November 21, 2007 in which he admitted to have earned interest on advances given to farmers from April 1, 2000 and the said income was not reflected in the return of income. The relevant portion of the statement of the assessee is incorporated at page 5 of the assessment order. In view of the abovesaid statement the Assessing Officer concluded that the interest at 18 per cent. was to be charged on the advances of Rs. 75,30,404 due from farmers as reflected in the books of account. Further advances were made totalling Rs. 25,25,000 to various persons as tabulated at page 9 of the assessment order. The said advances were entered in the kachi cash book and ledger maintained by the assessee and seized during the course of search and seizure operation. As the source of the said advances were unexplained the same were to be included as income of the assessee. However, advance of Rs. 5,30,000 was made during the year and Rs. 19,95,000 was made during the preceding year/s. The interest on the total advances at 18 per cent. works out to Rs. 4,54,500. Thus addition of Rs. 9,84,500 (Rs. 5,30,000 + Rs. 4,54,500) was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,31,000 was paid by the assessee on April 16, 2001. In conclusion the learned authorised representative for the assessee fairly conceded that the addition in the year under consideration is warranted only if no addition is made in the succeeding year. The learned Departmental representative for the Revenue placed reli ance on the order of the Commissioner of Income-tax (Appeals) and con cession of the learned authorised representative for the assessee to stress that the addition is warranted in the year itself. We have heard the rival contentions and perused the record. During the search and seizure operation carried out at the premises of the assessee, agreements of the Act sale dated January 3, 2001 were found under which the assessee had agreed to purchase land measuring 2 kanal 1 marla new (old about 50 marla) in Muktsar. As per the English translation of the agreement placed at pages 1 and 2 of the paper book-II the sale consi deration was fixed at Rs. 30,000 per old marla, i.e., totalling Rs. 15 lakhs. As per the agreement a sum of Rs. 3,50,000 was paid as earnest money on the spot. The Assessing Officer had treated the total aggregate price of Rs. 15 lakhs as an investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest was received or accrued and also disbelieving the affidavits of farmers, copies of which were already filed. Above all notwithstanding the above facts and it is submitted that rate of interest as applied by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals)-I is higher." The issue in the abovementioned grounds is against the addition of Rs.13,55,472 being the interest income on the amount due from the far mers totalling Rs. 75,30,404. The learned authorised representative for the assessee pointed out that the assessee was engaged as commission agent and was an adhatia for sale and purchase of agricultural produce. Our attention was drawn to the ledger account of the various farmers for the period under consideration and it was pointed out that the said ledger account reflected the transac tions between the assessee and the aforesaid farmers in respect of purchase and sale of agricultural produce and the commission earned therefrom. In some of the cases there was advancement of cash and there were debits and credit balances in the regular account of the farmers. The learned authorised representative for the assessee stressed that these were the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of its business and has also furnished on record the proof of identity of the said persons and the affidavit of the respective persons. In the entirety of the facts and circumstances of the case we find no merit in the stand of the authorities below in charging interest on the closing balance of the said farmers as the alleged income of the assessee for the year under consideration. Reliance was placed by the authorities below on similar addition being made in the assessment year 2005-06. However, from the perusal of the record we find that the addition in the assessment year 2005-06 was made in respect of advancement of money to different persons with whom the assessee had no business transaction, though the said persons were farmers. The said transactions were not recorded in the books of account and the assessee admitted to have not recorded the said advancement of loan in the books of account, which was added as income of the assessee and even interest on the said advances was included as income of the assessee. However, in the facts before us in respect of the advancement at some instances during the year certain amounts were advanced to the farmers against their c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warranted. We have heard the rival contentions and perused the record. During the course of search and seizure operation kachi cash book and ledger main tained by the assessee were seized which revealed the assessee to have advanced sum of Rs. 25,25,000 to various persons on different dates. The tabulated details of the advances made date-wise are incorporated at page 9 of the assessment order. The total of the said advances was Rs. 25,25,000 and the source of the said advances admittedly is unexplained. During the year under consideration the assessee had advanced Rs. 5,30,000 and the balance of Rs. 19,95,000 was advanced in the earlier years. The Assessing Officer had made an addition of Rs. 5,30,000 being relatable to the year under consideration. Though the learned authorised representative for the assessee has raised the issue vide ground Nos. 7 and 8 but during the course of hearing had not contested the said addition of Rs. 5,30,000. In view thereof we uphold the order of the Assessing Officer/Commissioner of Income-tax (Appeals) in respect of the addition of Rs. 5,30,000. The second addition made in connection with the abovesaid advances was the interest receivable on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Naib Singh and a sum of Rs. 39,750 was advanced to Shri Middu Singh. The Assessing Officer computed the interest on such advance at Rs. 12,330 and thus the total addition of Rs.2,72,080. The learned authorised representative for the assessee drew our atten tion to the copies of the pronotes placed at pages 30, 31, 37 and 38 of the paper book. The learned authorised representative for the assessee further made a reference to the copy of the account of Shri Naib Singh in the books of account of the assessee under which the said advance of Rs.2,20,000 is recorded in the books of account at page 35 of the paper book. In respect of the second person Shri Singh it was pointed out that the opening balance of Rs. 33,000 and on August 2, 2000, further a sum of Rs. 6750 was paid in cash and pronotes totalling Rs. 39,750 was signed by the said party. The learned Departmental representative for the Revenue placed reli ance on the order of the authorities below. We have heard the rival contentions and perused the record. The first transaction in respect of which the addition was made in the hands of the assessee is a sum of Rs. 2,20,000 advanced to Shri Naib Singh in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income-tax (Appeals) the assessee filed his written submissions stating that the fixed deposit receipts were accounted for and interest had been disclosed since 1975 in the hands of the family members. In respect of the fixed deposit receipts in the names of minor children, it was claimed that the income from such fixed deposit receipts had been disclosed in the hands of the assessee in the earlier years. The Commissioner of Income-tax (Appeals) rejected the claim of the assessee as no documentary evidence was furnished to explain the source and date of acquisition of the fixed deposit receipts and Kissan Vikas Patras. The learned authorised representative for the assessee before us fairly conceded that the verification exercise may be carried out by the Assessing Officer in respect of the claim of the assessee. The perusal of the list of Kissan Vikas Patras placed at page 40 of the paper book-II enlisted the said Kissan Vikas Patras being purchased in the name of the assessee and his family members. The assessee claimed that the investment in the said Kissan Vikas Patras was made in the respective years starting from April 1, 2001 and are not related to the y ..... 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