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TMI Blog2024 (10) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... D in receipt of contract receipts. The nexus between the gross receipt offered of presumptive tax u/s 44AD and the cash deposits has not been fully explained and established. On the other hand, no new source of income has been found by the AO. Therefore, as submitted by appellant, only the profit element and not the entire amount can be added as income of the assessee. Since, the assessee has offered net profit @ 15% u/s 44AD, it would be fair and reasonable if the profit on the cash deposit is estimated @ 8% of the cash deposits. Accordingly, addition being 8% is upheld which shall be over and above the income shown by the assessee in his return of income. AO is directed to delete the remaining addition. Treatment of agricultural income as income from other sources - We find that the assessee has been consistently showing agricultural income in his returns of income from AY.2008-09 to 2015-16. There was scrutiny assessment for AY.2008-09 and AY.2011-12 wherein the agricultural income of assessee was accepted. The CIT(A) has also accepted agricultural income of assessee for AY.2011-12. Reason for not accepting agricultural income in the immediately preceding year is not very clear. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DER PER BIJAYANANDA PRUSETH, AM: These two appeals by the assessee emanate from the separate orders passed under section 250 of the Income-tax Act, 1961 (in short, the Act ) by the Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, CIT(A) ], orders dated 15.09.2023 and 05.01.2024 for assessment years (AY) 2010-11 and 2011-12 respectively, which in turn arose out of separate assessment orders passed by the Assessing Officer (in short, AO ) under section 143(3) r.w.s. 147 of the Act on 21.12.2017 and 26.12.2018. Since the issues are common and the grounds of appeal raised by the appellant are similar except variance of amount, hence, the appeals were heard together and a consolidated order is being passed for the sake of brevity and convenience. Appeal in ITA No.770/SRT/2023 for AY 2010-11 is treated as lead case. The assessee in his appeal has raised the following grounds of appeal: 1. The Ld.CIT(A)-NFAC erred on facts and in law not adjudicating the issue relating to assumption of jurisdiction u/s 147 of the Act by issuing notice u/s 148 of the Act without appreciating that deposit of cash in bank accounts per se is not escaped income. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69A and added Rs. 1,22,94,000/- to the total income of assessee. The AO also added agricultural income of Rs. 3,10,700/- because assessee could not produce the contractors who had given cash for harvesting of agricultural produce i.e., mango, chikku and coconut on the 7 acres of land at village Dehari and Gobara. 4. Aggrieved by the order of AO, assessee preferred appeal before CIT(A). Before CIT(A), assessee filed written submission which is at pages 1 to 57 of the paper book. The CIT(A) has briefly discussed facts of the case and reproduced the submission made by the assessee. Though the appellant has not taken up any ground relating to re-opening of the assessment, he had at para 3.3 to 3.5 (pages 5 to 8) of the submission challenged validity of reopening u/s 147 of the Act. He had reproduced reasons for re-opening at page-6 of the written submission. He also relied on the some decisions of Hon ble Courts and contended that in absence of any compliance of the directions of the Hon ble Court issuance of notice u/s 148 itself is invalid and assessment so made is liable to be quashed. Thereafter, assessee made submissions on merits of the case. He had also mentioned that though ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reliance was placed on the decisions of Hon ble Bombay High Court in the case of DBS Financial Services (P) Ltd. vs. Smt. M George, Second Income-tax Officer reported at 207 ITR 1077 (Bom). The assessee had also referred to the decision of Hon ble Delhi High Court in case of Sabh Infrastructure Ltd. vs. ACIT [2017] 398 ITR 198 (Del). 6.1 In view of the above contention of the Ld.AR of the assessee, we have again perused the appellate order and the submissions made by the assessee before the CIT(A).We have also deliberated on the decisions relied upon by the Ld. AR. We find that the assessee had raised four grounds of appeal before CIT(A) but no specific ground regarding validity of re-opening was raised. However, during the appellate proceedings, assessee filed written submission on 30.08.2023 by enclosing various decisions and also explanation regarding the cash deposit which was added by the AO. The CIT(A) has reproduced the submission of the assessee (para-3.1 to 3.8) which is at pages 4 to 21 of the appellate order. The submission of assessee regarding validity of re-opening is at para 3.3. to 3.5 of the written submission. The assessee had also extracted the reasons for re-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, assessee had challenged the issue of reopening along with the submissions on merit of additions relating to the cash deposits and agricultural income. We find that the Ld. CIT(A) has passed a detailed on the merits of the case. However, he has not discussed and decided about the objection of the assessee for reopening the case, probably because no specific ground was raised by the assessee. The Act does not place any restriction or limitation on exercise of appellate power in entertaining a new ground raised during the appellate proceedings. As no specific ground was raised, the order of Ld. CIT(A) in not deciding the objection sans relevant grounds could at best be treated as an irregularity and nothing more. It is true that in the communication, the appellant has raised objections to the AO exercising the power of reassessment. In true spirit, if the communications were examined, the assessee was objecting to the process of reopening. If such objections had been raised before the AO, the AO ought to have disposed of the objections in terms of the decision of the Hon ble Supreme Court in the case of G. K. N. Driveshafts (India) Pvt. Ltd. vs. ITO, 259 ITR 19 (SC). Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at assessee had deposited substantial cash of Rs. 1,22,94,000/- in savings bank accounts maintained with HDFC Bank and State Bank of India. However, assessee had shown income of Rs. 6,80,000/- only u/s 44AD of the Act. The assessee had also not shown any bank balance in the return of income. The assessee also did not explain the source of cash deposit in response to the letter dated 01.02.2017. Therefore, the AO had reasonable ground to believe that there were non-disclosure as regards some facts which would have a material bearing on the question of under assessment. That would be sufficient to give jurisdiction to AO to issue notice u/s 148 of the Act. Useful reference may be made to the decision of the Hon ble jurisdictional High Court in the case of Silverdale Inn (P.) Ltd. vs. ITO, (2021) 127 taxmann.com 679 (Guj.) to support above view. In the said case, the Hon ble High Court was dealing with a case where the AO issued reopening notice against assessee on the ground that an information was received from NMS (Non-filer monitoring system) that assessee had received cash deposit in a bank account but had not disclosed same in its return of income. Since, assessee has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued notice u/s 148 against assessee. After three months assessee has raised an objection stating that he is regularly filing return with the ITO and the notice u/s 148 was illegal and without territorial jurisdiction. In the said case, the AO had also issued notice u/s 133(6) but there was no response and reply to the above notice. Left with no option, the AO issued notice u/s 148 after recording reasons to believe that income escaped assessment. As to the question whether in terms of section 124(3)(b) of the Act, assessee could not call-in question jurisdiction of an AO after expiry of one month from the date of service of reassessment notice, the answer of the Hon ble High Court was in the affirmative. In the present case also, facts are similar. The AO had issued notice u/s 133(6) on 01.02.2017, but assessee did not file any reply with evidence till the date of reopening on 27.03.2017. Hence, the AO was left with no option but to reopen the case u/s 147 and issue notice u/s 148 of the Act. The case relied upon by the assessee in case of D.B.S Financial Services Pvt. Ltd. (supra) of the Bombay High Court is an earlier decision and was under different set of facts. The informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court is law of the land in terms of Article 141 of the Constitution and hence, the above law laid down by the Hon ble Supreme Court is applicable to both sides i.e., AO and the assessee. After receipt of notice u/s 148, the assessee was to file the return and if he desired, seek the reasons for issuing the notice. In the present case, the assessee filed the return u/s 148 after considerable delay. Subsequently, the assessee has been supplied with the reasons for issuing the notice. The assessee was entitled to file objections after receipt of the notice but he has not filed any objection before the AO. Rather, he has furnished details before the AO in respect of the issues called in question by the AO. The order u/s 147 was passed by AO after considering the details filed by the assessee. Hence, there is no failure on part of the AO to follow the mandate of the Hon ble Supreme Court. In view of the facts discussed above and decision cited supra, challenge of reopening is rejected. 7. The assessee has also requested for admission of additional evidence under Rule 29 to 31 of the Income Tax (Appellate Tribunal) Rules, 1963. The additional evidence is in the form of vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cash received from customers along with details of sale deed executed in the subsequent years (page 72 of PB). Evidence that cash was paid by the customers for purchase of shops is evident from the copies of sale deeds at page 1 - 113 for AY.2010-11. Though the appellant did not maintain the books of account as admitted in the initial reply, yet in order to support the contentions the appellant prepared memorandum cash book, bank book etc. and submitted the same to the AO during assessment proceeding. The appellant also furnished confirmation of various partis from whom amounts were received and deposited in the bank account through cheques and, therefore, source of entire cash deposited in the bank account was explained (Page 74 of PB) 8.1 The Ld. AR submitted that the CIT(A) in his decision at point no.5 in page 21 of the appellate order has admitted that the appellant had disclosed SBI A/c No.10804281880 in the returns of income for AY.2010-11 and 2011- 12. Had he examined the said account, he would have came to know the other SBI A/c in name of M/s Shrijee Infraproject because of frequent transfer transactions between these two accounts. He stated that the HDFC Bank A/c is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the buyer. It becomes income of the appellant in the year in which right to retain such receipt is acquired by the assessee. Prior to this, buyer has a right to cancel the booking and take back the advance paid by him. The Ld. AR submitted that non-filing of upon certain information in return of income disclosed u/s 44AD does not make legitimate transaction to be non-legitimate. At most, it can make the return of income defective. The AO has not estimated income based on information furnished and examined by him. The appellant submitted that advance cash received from customers was Rs. 43,21,000/- against which only Rs. 20,52,500/- was considered in the cash flow and the remaining amount was taken to the subsequent year. Copies of the sale deed referred to in the cash flow statement wherein payment by buyers is admitted have been placed in paper book at page 143 154. The Ld. AR submitted the ITR particulars for AYs.2012-13 to 2015-16 in which sale deeds were executed, for which cash was received in the year under consideration. The booking receipts were Rs. 48,35,600/-, Rs. 75,33,224/-, Rs. 76,10,980/- and Rs. 85,12,930/- for AYs.2012-13 to 2015-16 respectively. The bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not accepted the explanation of assessee regarding the sources of cash deposit in the bank accounts. The CIT(A) has concluded that assessee did not have sufficient explanation regarding cash deposits in the bank accounts. He observed that assessee prepared a cash flow statement without disclosing the sources. The assessee has not furnished details of customer from whom the cash deposits were received. The assessee has also posted lump-sum amounts as construction /contract income u/s 44AD and advances received from customers. The explanation was not accepted and addition of total cash deposit u/s 69A was upheld. 9.1 We have again gone through the orders of lower authorities and the submission and explanation of the appellant. We find that the CIT(A) in his decision on unexplained cash deposit at point no.5 in page 21 of the appellant order has mentioned that except A/c No.10804281880, other two bank accounts are not disclosed. Therefore, assessee has deposited Rs. 71,79,000/- in his disclosed bank a/c no.10804281880 maintained with SBI. The other SBI account having cash deposit of Rs. 10,501/- has not been considered for addition by AO or enhancement by CIT(A). The HDFC Bank A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption from maintaining of books of account has been provided and presumptive tax @ 8% of the gross receipt itself is basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit unless such entry had no nexus with the gross receipt. In this case the assessee has offered presumptive tax u/s 44AD of the Act in respect of the contract receipt during the year under consideration and also for subsequent assessment years upto AY. 2015-16 for its gross receipts from sale of shops. We find that he has gross net profit @ 15% on gross receipt from AY.2010-11 to 2015-16 except AY 2012-13, where net profit is declared @ 12.07%. The net profit declared is reasonable having regard to the nature of business carried on by the assessee. Though the income of the project, M/s Shrijee Infraproject has been offered for taxation u/s 44AD of the Act in subsequent assessment years, the assessee has shown cash receipts from the customers in this year. The appellant has also offered income u/s 44AD in receipt of contract receipts. However, the nexus between the gross receipt offered of presumptive tax u/s 44AD of the Act and the cash deposits ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed agricultural income of Rs. 3,55,290/- in AY.2011-12 for which assessment order was passed by AO disallowing the claim but no addition was made to the total income. In the appellate order, the CIT(A) has not enhanced the income as no addition was made by AO. Hence, agricultural income in the immediately succeeding year has been accepted by both AO and CIT(A). The Ld. AR further stated that assessee has disclosed agricultural income of Rs. 4,10,930/-, Rs. 4,22,390/-, Rs. 4,41,700/- and Rs. 3,43,960/- in AYs.2012-13 to 2015-16 respectively. These have been accepted and no reopening was made by the AO. Hence, the Ld. AR requested that the addition may be deleted. 13. On the other hand, Ld. Sr. DR relied on the orders of the lower authorities. He submitted that the assessee failed to produce the contractors who have allegedly given the rent income from agricultural operation on the land owned by the assessee. 14. We have heard rival submissions and perused the material available on record. We find that the assessee has been consistently showing agricultural income in his returns of income from AY.2008-09 to 2015-16. There was scrutiny assessment for AY.2008-09 and AY.2011-12 wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation cell for determination of market value of the property u/s 50C of the Act. The AO submitted a remand report where it was stated that assessee had submitted only letter head invoices in respect of expenditure incurred for cost of improvement. The CIT(A) observed that assessee had not furnished particulars sale of properties. The appellant has not objected to the full value of consideration adopted by AO as per section 50C of the Act. The appellant paid stamp duty fixed by the Stamp Valuation Authority (SVA) and property was sold vide document no.9646/2010. In absence of evidence regarding cost of improvement, the AO has rightly computed the capital gain, hence the ground was dismissed. 20. Before us, the Ld. AR has given the working of capital gain in respect of properties under registration deed No. 9646/2010 and 9645/2010. There is no difference in respect of the property in registration deed No.9645/2010. The difference in value u/s 50C was Rs. 5,74,300/- in respect of property sold vide registration deed no.9646/2010. The assessee had claimed cost of compound work and other charges for Rs. 1,75,600/- and Rs. 1,84,250/- (Total Rs. 3,59,850/-) which has not been accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch details are not given cannot be a ground to delete the addition made by the AO for the other property due to operation of a specific provisions u/s 50C of the Act. As per section 50C of the Act, where the sale consideration due to transfer of a capital asset is less than value adopted or assessed or assessable by the Stamp Valuation Authority, the value so adopted or assessed or assessable shall be the full value of consideration for the purpose of capital gain. Further, as observed by CIT(A), appellant has not objected to full value of consideration adopted by AO u/s 50C of the Act. Hence, the AO has rightly applied the provision and made the addition. Hence, no interference is necessary in respect of the addition made u/s 50C of the Act due to difference in market value and the amount mentioned in the sale deed by the sub-Registrar. Regarding the cost of improvement, the assessee has submitted photographs appearing in the sale deed which evidences a compound wall. Therefore, the claim of the assessee that it had incurred expenses for compound wall and develop cost cannot be rejected in full. Normally, the land is filled up and levelled before a wall is raised. We are of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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