CHHAGAN CHANDRAKANT BHUJBAL,MUMBAI V. INCOME TAX OFFICE 20(1)(3), MUMBAI

ITA 3767/MUM/2023

AI Insights

The case involves Shri Chhagan Chandrakant Bhujbal, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed an addition of Rs.21,23,463/- to his income for the Assessment Year 2013-14. The addition was initially part of a larger disallowance of agricultural income amounting to Rs.50,19,100/- made by the AO under section 68 of the Income Tax Act, 1961. The assessee argued that the income was derived from agricultural activities and provided some documentation to support his claims. However, the AO found discrepancies in the transactions and the documentation provided, leading to the addition of the entire agricultural receipts as unexplained cash credit. The CIT(A) later reduced the addition but upheld the need for further verification of some transactions. The Tribunal's decision to restore the matter to the AO was based on the need for a thorough examination of the remaining disputed amount.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473422 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA KUMAR
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Unexplained cash credit; Earning of tax free income; Non compliance
• Section: 143(3); 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.3767/Mum/2023 (Assessment Year :2013-14) Shri Chhagan Chandrakant Bhujbal 5th Floor, Militia Apartment Mathar Pakhadi Road Mazagaon, Mumbai-400 010 Vs. The Income Tax Officer Ward ITO 20(1)(3) / CPC Piramal Chamber Parel, Mumbai-400 012 PAN/GIR No.AACPB9259L (Appellant) .. (Respondent) Assessee by Shri Bhupendra Shah & Shri S Saboo Revenue by Shri Krishna Kumar Date of Hearing 25/11/2024 Date of Pronouncement 31/12/2024 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 14/10/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) for the A.Y.2013-14. 2. The assessee is mainly aggrieved by addition of Rs.21,23,463/- confirmed by the ld. CIT(A), out of total addition ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 2 made by the ld. AO of Rs.50,19,100/- on account of disallowance of claim of agricultural income added u/s 68. 3. The brief facts are that assessee is an individual has declared total income of Rs.2,65,850/- in his return filed on 24/03/2024. During the course of assessment proceedings, ld. AO noted that assessee had shown exempt income from agricultural activities at Rs.42,46,926/-. In response to the show-cause notice assessee had submitted 7/12 extract of agricultural land and some copies of bills pertaining to agricultural expenses. The assessee had claimed total agricultural receipts of Rs.50,19,100/- out of which he has shown total agricultural expenses of Rs.7,74,000/-. The ld. AO noted that assessee had only furnished two bills of expenses for sums aggregating to Rs.53,197/-. one was from Yunus Khan Pathan of Rs.21,582/- dated 05/02/2012 and other from Unique Biochem for Rs.31,614/- dated 07/12/2012. The ld. AO issued notices u/s. 133(6) to the parties which assessee has claimed to have made sale of crops, i.e., grapes. These parties were (i) M/s. Venus Cellars Pvt. Ltd., (ii) M/s. Nashik Vintners Pvt. Ltd. & (iii) M/s. Rajdheer Wines Pvt. Ltd. 4. In response, only two parties filed letter, i.e., M/s. Venus Cellars Pvt. Ltd., and M/s. Rajdheer Wines Pvt. Ltd. M/s. Venus Cellars Pvt. Ltd submitted following letter:- 1 M/s. Venus Cellars Pvt. Ltd. is engaged in the production of bulk wine. During the F.Y. 2012-13 company sold wine to M/s. Nashik Vinteners Pvt. Ltd. (Sula Vineyards Pvt. Ltd.) to maintain the good quality of wine the purchase of wine grapes is under the control of M/s. Nashik Vinteners Pvt. Ltd to assure the good quality supply ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 3 of grape and to make prompt and regular payment to the farmers M/s. Nashik Vinteners Pvt. Ltd. (Sula Vineyards Pvt. Ltd.) done the purchase agreement of grapes with farmers directly. In this process M/s. Nashik Vinteners Pvt. Ltd (Sula Vineyards Pvt. Ltd.) made the payment of grapes directly to the farmers and adjust the same in the account of Venus Cellars Pvt. Ltd. Due to that in the ledger of farmers who supply grapes to N.D. Wines, the payment of the same is made by Nashik Vinteners Pvt. Ltd. (Sula Vineyards Pvt. Ltd.) directly to the farmers. 2. During the year our company not did any transaction with Shri Chagan C. Bhujbal. Our company purchases grapes 34135 kg. from Hirabai Magan Bhujbal proprietor of Bujbal Farm. The payment of Rs.1723260/- paid to Hirabai M. Bhujbal by cheque in next financial year from Nahis Vinteners Pvt. Ltd. On behalf of Venus Cellars Pvt. Ltd. against purchase of grapes. During the FY 2012-13 Rs.507050/- paid to Hirabai M Bhujbal of last financial year grape purchase payment by cheque from Nashik Vintners Pvt. Ltd. on behalf of Venus Cellars Pvt. Ltd.\" 5. From this letter, ld. AO deduced that assessee had no transaction with M/s. Venus Cellars Pvt. Ltd., and they had only transaction with Hirabai M Bhujbal, proprietor of Bhujbal farms. Secondly, even the bills raised by Yunus Khan Pathan, there is a stamp of ‘Bhujbal farm’ and not of the assessee. Ld. AO further noted that Venus Cellars Pvt. Ltd., has given payment for purchase of grapes to ‘Bhujbal farm’, i.e., to Hirabai M Bhujbal, Proprietor and the copy of ledger account of Bhujbal farm in the books of Venus Cellars Pvt. Ltd., have been incorporated. Thus, the ld. AO held that assessee has not dealt with Venus Cellars Pvt. Ltd., hence, the sales shown by assessee of Rs.5,54,000/- to Venus Cellars Pvt. Ltd., is not genuine. In response to the show- cause notice by the AO, assessee had submitted following reply: ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 4 \"1.With regards to your honour's query regarding non compliance to your honour's notice issued u/s 133(6) of the Income Tax Act, 1961 to M/s Rajdheer Wines Pvt. Ltd and why in absence of any reply the income of aRs.6880,100/- should not be treated as income from other sources, in this regard we understand that M/s Rajdheer Wines Pvt Ltd. has complied to your honours' notice by filing reply to your honour's office. It is further submitted that M/s. Rajdheer Wines Pvt Ltd. had filed its reply vide its letter dated 16.03.2016 along with copy of its Acknowledgment of ITR for A.Y. 2013-14, copy of purchase bill of Rs 6,80,100/-, copy of weighting slip and copy of ledger account for period under consideration are enclosed. Further it is submitted that the above mentioned party has submitted the details and complied with your honours' notice and confirmed that payment of Rs.6,80,100/- made by them is in relation with sales of goods by your assessee. It is submitted to your honour that such income is agricultural income and the same is clearly explained and evident from the reply filed by the said party. It is therefore prayed to your honour that income should not be treated as income out of unexplained source and should not be added to the total income under the head Income from other sources,\" 2. With regards to the reply filed by M/s. Venus Cellars Pvt. Ltd. in response to your honours notice u/s. 133(6) issued to the above mentioned party, it is submitted that as per representation made by M/s. Venus Cellars Pvt. Ltd. to your honours regarding the purchase transaction is done between assessee and M/s. Venus Cellars Pvt. Ltd. It is submitted that above mentioned party has already submitted the statement to your honours describing the nature of transaction along with the relevant details and supporting documents further copy of Acknowledgment of ITR, copy of Ledger account from Venus Cellars Pvt Ltd is enclosed. Further with regard to the reply filed by the said party stating that it had not paid to the assessee, rather the party has mentioned that it had paid the amount for purchase of grapes to M/s. Nashik Vinterners Pvt ltd. In this regard, it is submitted that M/s. Venus Cellars Pvt Ltd clearly mentioned the process of grapes which is reproduced herebelow: ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 5 \"M/s. Venus Cellars Pvt Ltd is engaged in the production of bulk wine. During the F.Y. 2012-13 company sold wine to M/s. Nashik Vinteners Pvt Ltd (Sula Vineyards Pvt Ltd) to maintain the good quality of wine the purchase of wine grapes is under the control of M/s. Nasik Vinteners Pvt Ltd (Sula Vineyards Pvt Ltd) done the purchase agreement of grapes with farmers directly. In this process M/s. Nasik Vinteners Pvt Ltd. (Sula Vineyards Pvt Ltd) made the payment of rapes directly to farmers and adjust the same in the account of Venus Cellars Pvt Ltd. Due to that in the ledger of farmers who supply grapes to ND Wines, payment of the same is made by M/s. Nasik Vinteners Pvt Ltd. (Sula Vineyards Pvt Ltd) directly to the farmers.\" In this regard it is submitted that M/s. Nasik Vinteners Pvt Ltd. had made payment to your assessee on behalf of M/s. Venus Cellar Pvt. Ltd. In this regard we understand that M/s. Venus Cellar Pvt Ltd had filed a reply clarifying the above fact that the payment is made by M/s. Nasik Vinteners Pvt Ltd. to the assessee on behalf of M/s. Venus Cellar Pvt Ltd. Thus, the above clarifies that your assessee has sold the grapes to M/s. Venus Cellar Pvt. Ltd. 3. We further understand that M/s. Nashik Vinteners have filed reply to the satisfaction of your honour in response to notice issued u/s. 133(6) of the Income Tax Act, 1961. It is therefore prayed to your honour not to draw any adverse inference in this regard and oblige.\" 6. However, the ld. AO rejected the said contention and added the entire agricultural receipts of Rs.50,19,100/- and unexplained cash credit to be added u/s.68. 7. Before the ld. CIT (A), assessee had stated as under:- “It is submitted that the appellant has shown the Agricultural income (gross) amounting to Rs. 50.19 lacs from agricultural ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 6 activities carried out during the year under consideration. It is submitted that your assessee among other activities was engaged in producing grapes from its farm in the name of proprietary concern namely \"Amrut Farm It is submitted that appellant has a separate bank account in the name of \"Amrul Farm\" which was duly submitted vide our submission dated 17.08.2017. It is submitted that your appellant has sold ils agricultural produce majorly to three parties. It is submitted that receipt of amount of agricultural income is majorly to three parties. It is submitted that receipt of amount of agricultural income is majorly through banking channels. The details of agricultural income is as under:- Sr. No. Name of the Party Quantity Rate per Kg Amount in Rs. Amt received in Bank during the year Rs. 1 M/s Vintners Ltd. Nashik Pvt. Ltd. 13435 25.5 3,42,592 20,61,005 4440 62 2,75,280 18560 26.8 4,97,408 10110 50 5,05,500 20305 60 12,18,300 2 M/s Rajdheer Wines Pvt. Ltd 11335 60 6,80,100 3 M/s Venus Cellar Pvt. Ltd. 10870 51 5,54,320 4 Cash Sales 9,45,600 Total 50,19,101 ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 7 Agricultural Receipts Less Expenses (as per Capital account) 7,39,158 Net agricultural income 42,79,943 8. However, the ld. CIT (A) has reduced the addition to Rs.21,23,463/- after observing as under:- “5.5 Considering the above facts. I am of the view that the agriculture income has been inflated to a large extent. The appellant has claimed expenses of Rs. 7,39,158/- against the gross receipts of Rs. 50.19 101/ from agriculture which comes to 14.72%. It is mentioned here that the expenses incurred in agriculture activity is comparatively high and sometime oven the farmers incur losses. Il is a case whore the agriculture Income declared is on higher side. Further, the appellant didn't maintain proper records of the income and didn't furnish any details of expenses with evidence. No evidence of cash sales of Rs. 9,45.600/- has been furnished. It is therefore, reasonable if the agriculture income of Rs. 42,46,926/ is estimated at 50% of the income shown, the appellant get relief of Rs 28,95,637/- (i.e. 50,19,100 - 21,23,463) 9. We have heard both the parties and also perused the relevant finding given in the impugned orders as well as material referred to before us. The only issue involved is whether the agricultural income shown by the assessee is genuine or not. Here in this ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 8 case the ld. AO treated the entire agricultural receipts as unexplained cash credit, whereas the ld. CIT(A) has partly accepted the agricultural income and he has estimated the agricultural income at Rs.28,95,637/- and also accepted expenses shown by the assessee. Since department is not in appeal, therefore, the assessee’s income from agricultural income is liable to be accepted except the quantum of addition confirmed by the ld. CIT (A) is justified or not? From the submissions made before ld. CIT (A), it is seen that assessee has made sales of grapes to various wine companies and some of the amount has also been received through cheque especially from M/s. Nashik Vintners Pvt. Ltd. However, sales from other entities it is very difficult to accept, because in case of Venus Cellars Pvt. Ltd., they have stated that they have bought the grapes from Bhujbal Farms, proprietor Hirabai M Bhujbal. Since all the facts and records especially for sales have not been brought on record before us, therefore, we deem fit that this matter should be restored back to the file of the ld. AO. Assessee should substantiate the sales by furnishing sale bills, bank statement etc., to show that the amount has been received through cheques. Assessee is also directed to file confirmation copy of ledger account from these parties. If the sales from these parties are found to be genuine, then no addition should be made. The assessee should also furnish the complete details of sales and expenses before the ld. AO. Accordingly, the matter is restored back to the file of the ld. AO and since part of the agricultural income to the extent of Rs.28,95,637/- has been accepted, the ITA No.3767/Mum/2023 Chhagan Chandrakant Bhujbal 9 only issue of dispute would be with regard to Rs.21,23,463/-, for which assessee has to demonstrate that the sales made to these parties are genuine through proper bills and copy of ledger accounts. 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced on 31st December, 2024. (GIRISH AGRAWAL) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 31/12/2024 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "