9911796707
TMI Blog2023 (12) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Credit in respect of sale of her agricultural land would be available to the assessee even if she is an assessee under the Kerala Agricultural Income Tax Act, 1950, returning/reporting agricultural income thereunder inasmuch as the assessee, having access to those funds, could certainly have used them for his purposes, so that the source can be regarded as satisfactorily explained. As a corollary, all the income arising to the assessee s wife would stand to be assessed in his hands, statutorily mandated u/s. 64 of the Act. This shall obtain even where Mercy Kurian is an assessee under the 1950 Act. Agreement with assessee s brother, there is firstly nothing to show that the same was produced and relied upon before the Revenue authorities, whose orders bear no reference thereto. Why, Sh. Markose could not answer as to why and how this agreement was entered into 10 months before the actual purchase, with there being nothing to show that the purchase agreement had been entered into, or advance therefor made, at the relevant time. In fact, the copy on record not reflecting the back-side of the first page, the same, called for by the Bench to ascertain the said date, was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. That is, and, further, for the category (A, B, or C) of the land/s owned by the assessee at Anaviratty and Chakkupallom villages in Idduki District. Income shall correspond with the harvest period; the Anaviratty village land having been sold on 02.12.2010. Of course, where the assessee is also an assessee under the State Agricultural Income Tax, the income assessed under the said Act or, in its absence, returned there-under, shall be adopted for the purpose of assessment of agricultural income arising to the assessee and his wife, subject, of course, to the extent reported. The excess, if any, and that ascribed to brother, shall be taxed as unexplained money. We decide accordingly. Sale of agricultural land, that is, to the extent of 1.74 acres of land (out of 8.74 acres cardamom plantation), sold separately to one, Nikhil John - CIT(A) has, in computing the % age of total consideration ascribed to land, being in fact at 63%, wrongly worked it at 37%, which is in fact for building. The same would not, however, in any manner, impact the final conclusion, which is based on, firstly, the assessee s case being wholly unproved and, two, of land, forming the major proporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2.91 lacs, i.e., as stated before the ld. CIT(A), inasmuch as he has not adjudicated thereon. The onus though would be on the assessee. On the flip side, that would though mean that the assessee has no explanation for the source of Rs. 2.91 lacs found credited separately in his bank account. Also, we observe, non-deduction of the corresponding expenditure, which would need to be explained or, as the case may be, estimated. Income from other sources - received by way of sale of scrap of fixed assets, viz., furniture, machinery, etc. belonging to a firm, Greenland Rubbers, brought to tax u/s 56(1) - CIT(A), in appeal, directed the reduction of the said amount from the relevant block/s of assets where depreciation has been claimed thereon. It is this condition that is the cause of the assessee s grievance. The ld. CIT(A) has, as apparent, agreed with the assessee in principle, i.e., of it being a capital receipt. The rider that the depreciation should have been claimed and allowed is not necessary. This is as the reduction is to be only from the written down value (WDV) of the relevant block/s of assets, which would, in case of claim of depreciation, have the effect of reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying forward the closing cash as determined, where positive, or, as the case may be, at nil. Payment of income tax, inasmuch as the same is already in the know of the Revenue, where apparently not explained on the basis of the disclosed income, can also lead to s. 153A assessment, though, in absence of any other material, limited to the assessment, in whole or in part, for the said sum only. Decision - The assessments are, accordingly, setting aside the impugned orders in part, set aside to the file of the AO to re-work the additions, if any, for the years subject to s.153A assessment. He shall, in this, be guided by our adjudication herein. The assessee/s shall furnish all the information and workings as required by the AO and, further, within a reasonable time, i.e., participate and cooperate in the proceedings. Even otherwise incumbent, this becomes mandatorily so in view of the directions by the Hon'ble High Court, so that the proceedings are completed in a time bound manner - SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, JUDICIAL MEMBER For the Appellant : Shri Joseph Markose, Advocate For the Respondent : Smt. J.M. Jamuna Devi, Sr. D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admits the investments in immovable properties, and it is the validity or otherwise of his explanation as to the source thereof, including its quantum, which is the bone of contention or the subject matter of dispute between the parties. 2. The explanation by the assessee for the said investment was principally by way of a cash flow statement for the relevant year, i.e., F.Y. 2010-11, which finds reproduction at para 5 (pages 3-7) of the assessment order. The same enlists sources and application of funds, at Rs. 3,05,20,775 (Rs. 305.21 lacs) each, so that the closing cash-in-hand balances the two sides. The same included the following receipts: a) Sale of 8.86 acres of land by Smt. Mercy Kurian (wife) : Rs. 26.66 lakhs b) Sale of 8.82 acres of land by Shri Sunny Kutty Thomas : Rs. 26.54 lakhs c) Agricultural income (Rs.40.14 lakhs less agricultural expenses Rs. 17.50 lakhs) : Rs. 22.64 lakhs d) Sale of 1.74 acres of land : Rs. 16.82 lakhs The same did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on only apart from non- taxable agriculture income. b. Assessee didn't maintain any books of accounts to enable this office to verify the genuineness of the huge cash credits (of course debit also) to ostensibly claim the benefits of cash availability which is subsequently utilized both for payment of document prices as well as on money payment. c. The assessee was stated to be involved in a business activity before the search assessment. To avoid the rigour of explaining huge credits in the bank invented the theory of commission and non-maintenance of books of account. d. The gross receipts from all sources is miniscule compared to the total credit in all bank accounts for the ostensible purpose of explaining the source for everything. e. To enjoy the fruits of non-taxable agriculture income by clubbing the income attributable to his wife and brother without bother to explain the source for the acquisition of the agriculture lands owned by them. f. It is strange to observe that the assessee has filed a self-serving affidavit duly not arisen to the effect that bank accounts, loans, property transactions, agriculture income, in nut shell, the entire assets and lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to an examination by the assessing authority. 6. The next thing that we observe is the huge opening cash (as on 01.04.2010) at Rs. 33.25 lakhs. The assessee, it may be appreciated, is not a trader, much less qua a trade with substantial cash sales, in which case the same would rather find regular cash deposit in bank. To the extent the assessee seeks credit for the said balance, it forms a part of assessee s explanation for the source of funds. Further, it would be incorrect to say that as the AO has not made any separate addition for the same, he has accepted the same, for which one may only need to refer to clause g of his findings (at para 4 of this order). It is also pertinent to state that where the AO does not accept a particular source/s of cash inflow, a revised statement would have to be prepared excluding the same, and it is only the deficiency in cash arising thus for which an addition can, on facts and in law, be made for the relevant year, and not in the manner in which the AO has proceeded, even as pointed out by Shri Markose, the ld. counsel for the assessee, during hearing. This, though, is subject to a caveat, i.e., an addition made for any sum on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a principal actor in the transactions, as one of the family members usually is. The three withdrawals afore-noted, which are per cheques, have not been correlated with the respective purchase dates, nor indeed it is shown that there were no corresponding withdrawal/s in the accounts of the assessee s wife and brother. Further, Shri Markose, on an enquiry by the Bench, could not exhibit the withdrawal for the assessee s land, admittedly purchased at the same time. How could that be? Further still, even if the assessee had indeed funded the purchase of land by his wife and brother, it would, to be regarded as his, further require the ostensible purchaser being shown as the assessee s benami. This is as it may well be that the purchaser being a close relative, the assessee had helped him/her, particularly considering that it generates a source of income, and from an activity being undertaken by the assessee, giving rise to the confidence that it would be a profitable venture. The funds deployed by the assessee, assuming so, could be by way of a loan with or without interest, to be repaid, and which may well be from the income so arising. This is particularly so as there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, at the relevant time. In fact, the copy on record not reflecting the back-side of the first page, the same, called for by the Bench to ascertain the said date, was not produced. The agreement states of it being in view of the Kerala Land Ceiling Act. The argument is not supported by any material, even if a sworn affidavit by the assessee s brother qua his total land holding, for us to take the same with any seriousness. In fact, being against public policy, the same cannot be regarded as a valid agreement in law. The sale proceeds on land sale have expectedly, and contrary to what stands stated, gone to the respective bank accounts of the sellers, being sba/cs 5308 and 5309 (with MEUCB), i.e., of the assessee s brother and wife respectively. There is further no transfer of funds between the bank account of the assessee (sb 5026) and his brother, Sunny Kutty, even as the former bears credit for the sale of his 8.74 acres of land. Management of an estate/business, assuming so, would not, by itself amount to ownership of the property/sale proceeds. The assessee s case qua his brother s land is without merit and, in any case, unproved. Its rejection by the Revenue is, accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g more than that by the other two combined, even as his land holding is 28.7% of the total, and that by wife being less than half the assessee s. We have already noted that the same in any case would not prove the sale as being by an agricultural producer. As observed during hearing, why could not one trade therein. The assessee was, during hearing, specifically required to produce the sale bills since 2008, which he failed to. In fact, the assessee has not been able to, despite being called upon to by the AO, nay, at any stage, demonstrate the necessary infrastructure for heating and processing cardamom products, which plays a vital role in the ultimate quality of the yield, impacting in turn the price fetched. 9.3 In the absence of any credible material to exhibit and prove the agricultural income, we consider it appropriate that the income, for each year, be adopted on the basis of the estimate of agricultural income on cardamom as provided by the State Agricultural Board or University or that adopted by the bank while processing and advancing agricultural loans for cardamom plantation. That is, and, further, for the category (A, B, or C) of the land/s owned by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, according to the registered sale deed, a property consisting of building and the appurtenant land was transferred. The appurtenant land was integral part of the property that is transferred . In the present case, the land is valued at Rs 6,21,000/- out of total consideration of Rs 16,81,800/-, which is about 37% of the total consideration. The provisions of 10(37) are applicable in case of agricultural lands. But in the present case, the property under transfer is a building with the appurtenant agricultural land. Hence the appellant's ground is rejected and the addition made by the Assessing Officer is upheld for the A.Y 2011-12. (emphasis, ours) 10.3 Even before us there has been no improvement in his case by the assessee who, apart from reiterating the law, on which there is no, nor could be, any quarrel, has not brought any material on record. The issue, as apparent, is whether what has been sold is a house property, with land appurtenant thereto, or agricultural land on which there is an out-house, being, as stated before the ld. CIT(A) for the first time, and without any evidence, a smoke house. There is thus, even at the second appellate stage; bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of the assessee s land on prorate basis, i.e., by applying the average rate arrived at, being Rs. 2,02,000 per cent. The investment in land by the assessee was thus reckoned at Rs. 1.38,24,860, against which the assessee had though reflected Rs. 113.45 lakhs in his CFS. The balance Rs. 24.80 lakhs was accordingly brought to tax as unexplained investment u/s. 69B. 2.2 Before us, the assessee, as before the Revenue authorities, though disputes the addition, has not made out any case qua his claim that he had correctly recorded the investment made by him, i.e., in the CFS. It was though admitted by Shri Markose during hearing that the same uniform rate had been applied by the AO in the case of Shri Devasia as well. 2.3 We have considered the rival contentions, and perused the material on record. The basis of the addition is the Agreement dated 14.6.2011, found and seized during the search on 25.9.2014. Besides attracting the statutory presumption as to the truthfulness of its contents u/s. 292C of the Act, the same is admitted as true by Shri Devasia vide his deposition u/s.132(4) dated 25.9.2014. The same, an unregistered document, executed on stamp papers of Rs. 100, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said income. There is no reference, at any stage, to the per acre yield arising vis-a-vis per that regarded as normative. Why, the assessee could not even exhibit the infrastructure facilities forheating and processing cardamom products, nor indeed the storage facility, despite being called upon by the AO to. 3.2 We have, while deciding the same issue for AY 2011-12, also discussing the evidence in the form of sale bills, held for adoption of any of the standard and accepted methods for determination of agricultural income vis-a-vis land holding on cardamom, as also the circumstances in which that arising on the land holding in his wife s name is to be included in the assessee s income. Reference could be made to the norms, if any, adopted under State enactment. We decide likewise. C. AY 2014-15 1. We may take up each of the three additions for this year in seriatim. 2.1 Rs. 28,34,765/- : The same represents the short fall in the cash balance, i.e., upon excluding Rs. 46.57 lakhs (which includes Rs. 46.35 lakhs shown as received by the assessee from his brother-in-law, Shri Baby John, on 18.04.2013) and Rs. 18.23 lakhs (including Rs. 15.50 lakhs invested in purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, that would though mean that the assessee has no explanation for the source of Rs. 2.91 lacs found credited separately in his bank account. Also, we observe, non-deduction of the corresponding expenditure, which would need to be explained or, as the case may be, estimated. II. Shri. V.D. Devasia : 1. The facts and circumstances of the case are the same as for Shri C.T. Kurian, posted and heard along with. The opposing cases, as well as the findingsby the Revenue authorities under challenge, are also the same. This was also the common ground of the parties before us. The disputed additions, as for Sh. Kurian, are: (a) sale of cardamom plantation in the name of wife, Smt. Gracie Joseph; (b) agricultural income from cardamom in the name of Smt. Gracie Joseph; (c) shortage of funds on excluding income of Smt. Gracie Joseph; (d) sale of latex, on applying r. 7A of the Rules; and (e) scrap from Greenland Rubbers (AY 2013-14). 2.1 As would be readily seen, all the additions, except at 1(e) above, are common. Our adjudication in their respect in case of Sh. Kurian shall, accordingly, equally apply for these disputed additions as well, and for which we, for ready ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT [2012] 343 ITR 270 (SC); C.K. Gangadharan vs. CIT [2008] 304 ITR 61 (SC); the latter two being by the larger benches of the Apex Court. In all these cases, the Revenue s right to question, despite failure to challenge an adverse order earlier,the correctness of such an order, is not precluded, particularly when it involved a question of law. 3. Coming to the addition at II(1)(e) above, the same is for Rs. 3,20,000, claimed to have been received by way of sale of scrap of fixed assets, viz., furniture, machinery, etc. belonging to a firm, Greenland Rubbers, brought to tax under s. 56(1) of the Act. The ld. CIT(A), in appeal, directed the reduction of the said amount from the relevant block/s of assets where depreciation has been claimed thereon. It is this condition that is the cause of the assessee s grievance. The ld. CIT(A) has, as apparent, agreed with the assessee in principle, i.e., of it being a capital receipt. The rider that the depreciation should have been claimed and allowed is not necessary. This is as the reduction is to be only from the written down value (WDV) of the relevant block/s of assets, which would, in case of claim of depreciation, have the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, verify and determine the CFS, prepared date-wise, considering all the bank accounts, duly verified, for each of the years under reference, including the intervening years (viz. AY 2013-14 in case of Shri Kurian), carrying forward the closing cash as determined, where positive, or, as the case may be, at nil. The Revenue has also subject years subsequent to AY 2012-13 to s. 153A assessment. The same shall survive only where material in the form of investment in property; deposit in bank;(re)payment of bank loan/bank interest; bank balance, etc., warranting explanation, has been found in search, else not. This shall equally apply for the earlier years as well. Payment of income tax, inasmuch as the same is already in the know of the Revenue, where apparently not explained on the basis of the disclosed income, can also lead to s. 153A assessment, though, in absence of any other material, limited to the assessment, in whole or in part, for the said sum only. IV. Decision: The assessments are, accordingly, setting aside the impugned orders in part, set aside to the file of the AO to re-work the additions, if any, for the years subject to s.153A assessment. He shall, in this, be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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