Shri Hitesh S. Patel, Navsari V. ITO, Ward-2, , Navsari

ITA 103/SRT/2018

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9279 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 11-10-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Transactions in derivatives; Additional evidence
• Section: 131; 148; 143(3)

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT ‘SMC BENCH’ BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA Nos.103/SRT/2018 (AY 2008-09) (Hearing in Physical Court) Shri Hitesh S Patel 70K, Vachalu Failu, Karod Kothava, Jalalpore, Navsari PAN : ARRPP 3672 M Vs Income Tax Officer, Ward-2, Navsari, अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by Shri Sapnesh R Sheth, C.A राजèव कȧ ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of hearing 12.10.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 31.10.2022 Order under section 254(1) of Income Tax Act Per Pawan Singh, Judicial Memebr; 1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-Tax (Appeals)-Valsad [for short to “Ld.CIT(A)”] dated 20.12.2017 for the assessment year 2008-09, which in turn arises against assessment order passed under section 143(3) r.w.s. 147 of Income-Tax Act,1961 (hereinafter referred to as ‘the Act’) dated 30.03.2016. The assessee has raised the following grounds of appeal: ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 2 “1. On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in reopening assessment by issuing notice u/s 148 of the I.T. Act 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in making addition of Rs.6,02,894/- by treating agricultural income as undisclosed income from business. 3.On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in enhancing the addition made by learned assessing officer from Rs.6,02,894/- to Rs.21,55,000/-. 4.It is therefore prayed that above addition made by the assessing officer and the enhancement made by Commissioner of Income-tax (Appeals) may please be deleted.” 2. At the outset of hearing Ld. Authorized Representative (AR) for the assessee submits that he is not pressing the ground No.1 of appeal, which relates to validity of re-opening and issuance of notice under section 148 of the Act. Considering the submission of Ld. AR for the assessee the ground No.1 is dismissed as ‘not pressed’. 3. Brief facts of the case leading to the additions and enhanced by ld. CIT(A) are that during the assessment proceedings initiated under section 147 of the Act the Assessing Officer noted that ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 3 assessee has made deposit of Rs.21,55,000/- in his saving bank account and also invested in mutual fund and share. The assessing officer issued show cause notice to the assessee on 24.10.2016 to substantiate such deposits in his bank account. The contents of show cause notice is reproduced in para-4 of assessment order. In the show cause notice, the Assessing Officer recorded that he has got information about cash deposits of Rs.21,55,000/- in the saving bank account during the period of 01.04.2007 to 31.03.2008 asked to explain as to why such deposit should not have been treated as unexplained cash credit. The Assessing Officer recorded that in response to such notice, the assessee filed his reply dated 30.03.2016 and provided details of sales bills, copy of extract of Form-7/12 of the land record of the assessee, confirmation of purchases of fruits. On verification of such details, the Assessing Officer noted that assessee has not provided any evidence of sales of Rs.6,02,894/- to Sheikh Mahammad Kallu, retail sundry sale of mango and chikko and miscellaneous vegetable income. In absence of such evidence, the Assessing Officer took his view that assessee could not ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 4 substantiate the genuineness of income of Rs.6,02,894/- and the same was added to the income of assessee. 4. On appeal before Ld. CIT(A) the assessee filed detailed written submission. The submission of assessee are recorded in para-3.2 of the order of Ld. CIT(A). The assessee in his submission, submitted that Assessing Officer failed to consider the fact that assessee was doing agricultural activities since long and earned agricultural income from his agriculture land, acquired as ancestral and/or purchased by him later on from agriculture income. The assessee has submitted relevant proof of income about agriculture holding by furnishing extract of Form-7/12, confirmation of Raim Basirbhai Munsi and Sheikh Mahammad Kallu for Rs.16,11,000/- and Rs.3,65,000/- respectively along with their identity prof (ID) proof. The assessee also submitted bills from Magaubhai & Sons Chikko Commission agency at Agriculture Market Committee (APMC) Karket, Amalsad for Rs.4,16,267/-. Thus, the assessee furnished the evidence of Rs.23,92,267/-. The Assessing Officer failed to verify and accepted the evidences partially. The assessee again furnished ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 5 bifurcation of his sales of various agricultural produce. The assessee stated that on sales of Rs.6,02,894/-, the Assessing Officer considered sale to Sheikh Mohammed Kallu and made addition of sale of mango and chikko and miscellaneous vegetable items at Rs.3,65,000/- +18,732 + 1,19,162/- total of which is Rs.5,02,895/-. Thus, the Assessing Officer has not put much conscious by considering the fact and evidence. The addition of Rs.6,02,894/- is totally wrong. The Assessing Officer has accepted the evidence of 94.50% of total agricultural produce sale and only evidence of 5.45% of agricultural sale no evidence was filed. 5. On the submission of assessee, the Ld. CIT(A) called remand report from the Assessing Officer. The Assessing Officer furnished his remand report dated 17.07.2017. In the remand report, the Assessing Officer stated that assessee has not produced the details and confirmation in case of Shaikh M. Kallu, details sales of miscellaneous vegetable. The AR of the assessee has not objected such addition of Rs.6,02,894/- and during assessment the Ld. AR of the assessee made his signature of his consent. The ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 6 assessee has produced self-declaration of Shaikh M Kallu on stamp paper who has paid Rs.3,55,300/-. The assessee has not produced any supportive evidence and confirmation in this regard also. The Assessing Officer also reported that assessee has now produced any additional evidence pertaining to all parties from whom sales receipt in cash has been claimed. Ongoing through such additional evidence, it is seen that assessee has filed only affidavit of Mahammad Kallu Serali Pathan and Raim Basirbhai Munsi who have made payment of Rs.3,65,000/- and Rs.16,11,000/- respectively. The assessee has not produced any agreement for doing such agricultural activities on his land. The assessee has not produced any sales bills, vouchers expense and proof of agriculture produce. The Talati-cum-Mantri has certified annual income of the assessee on presumptive basis. The assessee could not substantiate the genuineness of his income. On confirmation letter, in the form of affidavit, the assessing officer reported that the purchaser’s parties who have made payment to assessee are not assessed to income tax or even do ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 7 not have the PAN. On the basis of such report the Assessing Officer supported the addition of Rs.6,02,894/-. 6. The assessee filed his rejoinder to the remand report of Assessing Officer, vide rejoinder dated 16.08.2017, wherein assessee reiterated his earlier submission. 7. The Ld. CIT(A) after considering the submission of assessee held that during the assessment, the Assessing Officer held that assessee could not substantiate the genuineness of income to the extent of Rs.6,02,894/- which pertains to sales bills issued by Sheikh Mahammad Kallu and Raim Basirbhai Munsi which was added to the total income of assessee. During the appellate stage, the assessee filed certain additional evidence in the form of affidavit of Shaikh Mohammad Kallu, such evidence was remanded to the file of Assessing Officer for his remand report. The Assessing Officer furnished remand report dated 17.07.2017 and reported that only affidavits of Shaikh Mohammad Kallu and Rami Basirbhai Munsi indicating payment of Rs.3,65,000/- and Rs.16,11,000/- paid to the assessee. These parties were not assessed to tax neither they had PAN. The assessee in his ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 8 rejoinder again stressed that these evidences indicated sale of agricultural produce and evidence indicates sale of agricultural produce and agricultural income of assessee which was utilized for cash deposits in assessees bank account. The Ld. CIT(A) held that on going through the affidavit of both the persons, he noted that there is no reference and what amount of labour payments and other expenses incurred by the two parties who have given back by the assessee. The pertaining of affidavit indicates that contents are merely an after-thought to justify agricultural income. The Ld. CIT(A) on perusal of evidence and copy of bank statement, noted that most of the cash deposits are found to be made in the first and second week of the October, 2007, whereas the mango season sales end in the months of May-June itself. There is no reason as to why the assessee could hold on cash for 4-5 months. After cash deposits, funds are transferred in the name of persons, Anand, Navratan. On the basis of such cash deposits pattern, the assessee was asked to furnish the details of payment to Navratan and Anand and cash deposits from assessment year 2006-07 to 2010-11. On the direction of Ld. ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 9 CIT(A) the assessee furnished the details of payment to Navratan and Anand and the details of cash deposits from 2006-07 to 2010- 11. 8. The Ld. CIT(A) on perusal of such details found that assessee made cash deposits of Rs.6,53,166/- in A.Y. 2007-08, Rs.21,55,000/- in A.Y. 2008-09 (current year), Rs.9,95,000/- in A.Y. 209-10, Rs.53,66,655/- in A.Y.2010-11, Rs.18,84,000/- in A.Y. 2011-12 and Rs.6,59,000/- in A.Y. 2012-13. The cash deposits for A.Y Rs.100/- and for A.Y. 2006-07 it was “0”. It was noted by ld CIT(A) that this pattern of substantial fluctuation in cash deposits from year-to-year, do not in any way, indicate earning of agricultural income. Anand and Navratan are share broker as explained by assessee. In current financial year 2007- 08, the assessee suffered loss of Rs.17,72,965/- in Future and Option (F & O) trading. The assessee was directed to furnish F&O expense of cash deposits by the assessee and payment made to Anand and Navratan. On perusal of such details, the Ld. CIT(A) was of the view that deposits were made, whenever the payments were required for F & O transactions, losses and margins, the ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 10 assessee deposited cash in his bank account. On considering cash deposits, the ld CIT(A) was of the view that such patterns of deposits clearly indicate that assessees claim of agricultural income is an eyewash and the affidavit evidence is also an after- though story. 9. On the basis of such observation, the Ld. CIT(A) issued notice for enhancement vide his notice dated 04.10.2017. The contents of such show cause notice was recorded on pages 16-18 of the order of Ld. CIT(A). The assessee filed his reply dated 02.12.2017. The contents of reply of assessee is recorded on pages 18-20 of the order of Ld. CIT(A). The assessee in his reply stated that he is a farmer and doing agricultural activity since long and most of the seasonal agricultural produce are sold cash. There is no restriction for making transaction in cash in agriculture activities. Nobody issue the demand bills for fruit purchase and sale. The assessee made sales to three persons who made payment gradually as and when they realised from their customers. In horticulture farming, there are tradition to hand over whole farm to a single person in season due to labour issues and theft of fruits ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 11 at the time of ripping fruits. The assessee had given mango crops to different persons and realised the amount in a phase manner. Therefore, the cash deposit in bank was different period within the mango season. The assessee has filed affidavit and confirmation of persons in support to his claim. The assessee has also furnished bills of Maganbhai & Sons Chikoo Commission Agency at APMC Market Amalsad of Rs.4,16,267/-. 10. It was also stated that considering the size of land and fertility and trees available at the period under consideration, the agricultural income claimed by assessee cannot be denied. There is no denial of the fact that assessee is not an agriculturist. The Assessing Officer has not raised any doubts about the veracity of documents furnished by the assessee during the remand proceedings but only objected that these documents may not be taken on record at this stage. The assessee has furnished the document for agricultural land to the extent of 38 vighas. The Assessing Officer / Ld. JCIT in their remand report had not raised any doubt of the genuineness of confirmation given by purchaser of fruits even during the remand proceedings. They have issued ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 12 any summons to verify the content of the affidavit filed those persons and all the evidence furnished during the assessment proceedings as well as remand proceedings. Thus, the onus lies upon the Department to establish the contention put forth by assessee is wrong. The assessee has no other source of income except agricultural income shown in his return of income. 11. The Ld. CIT(A) after considering the reply of assessee, contents of assessment order, submission of assessee and the remand report furnished by Assessing Officer held that assessee merely making stress of his claim of earning agricultural income whereas facts and circumstances of the present case discussed disprove the agricultural income by substantial verification in quantum from year-to-year as well as evidence of F&O transaction made by assessee. The assessee was engaged in F & O transaction to prove profit of Rs.66,73,666/- and loss of Rs.84,46,631/- were shown from Navratan and Anand Rathi during the period under consideration, whereas no return of income was filed by assessee. Thus, the Ld. CIT(A) held that the amount of cash deposits of Rs.21,55,000/- cannot be accepted as derived out of agricultural ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 13 income. Accordingly, Ld. CIT(A) enhanced the undisclosed income from Rs.6,02,894/- to Rs.21,55,000/-. Further aggrieved the assessee has filed present appeal before the Tribunal. 12. I have heard the submission of Ld. AR for the assessee and Ld. Senior Departmental Representative (Sr-DR) for the Revenue and have gone through the orders of lower authorities carefully. The ld.AR for the assessee submits that during the assessment proceedings, the Assessing Officer made addition of Rs.6,02,894/- by taking view that assessee has not furnished evidence for sales to Sheikh Mahammad Kallu and detailed sundry sale of mango and chikko and miscellaneous vegetable sale. Aggrieved by such addition of Rs. 6,02,894/-, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee furnished the affidavit, confirmation of purchaser confirming the handover of sale procedure of assessee along with affidavit. The assessee also filed affidavit and identity and furnished complete details of land holding in the name of assessee owned agricultural land of 38 vighas. The assessee is primarily an agriculturist and his yield are mango and chikoo which are cash crop. The assessee ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 14 sold his fruit crops to Mohammad Kallu and Rami Basirbhai Munsi who have taken over to mango trees and after realising the sale proceed he has given Rs.16,11,000/- to assessee and such amount was paid in cash on various dates. The assessee also filed affidavit of Raim Basirbhai Munsi who has given an affidavit about the sale proceed of mango of Rs.3,61,000/- along with confirmation. 13. The ld. AR for the assessee submits that ld. CIT(A) instead of deleting the addition made by assessing officer issued enhancement notice by taking view that the pattern of cash deposits in different assessment years are substantial and fluctuation thereon do not indicate earning of agricultural income. The Ld. CIT(A) on his presumption issued show cause notice to assessee. The Ld. CIT(A) failed to appreciate that 38 vighas of land are not a small piece of land. The Ld. CIT(A) has no evidence to disprove the fact brought on record about holding of agricultural land and numbers of mangos and chikko trees in agricultural land. The assessee has filed affidavit of purchaser / contractor but no adverse evidence was brought on record and no ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 15 cross-examination of such persons were conducted either by Assessing Officer during remand proceedings or by Ld. CIT(A) of his appellate order nor any investigation was conducted to disprove the evidence furnished by assessee. The assessee suffered huge loss in transaction of F & O transaction. Thus, there was no taxable income by assessee and therefore, the assessee has no reason to file his return of income. The Ld. AR for the assessee submits that he has also filed evidence on various cash receipt on different dates, as per details filed by assessee on pages 16-17. The Ld. AR for the assessee submits that there is no direction of issuing fruits bills and receipt of various payments as per practice in other business activities. The ld. AR for the assessee prayed to delete the entire additions including the enhancement made by ld. CIT(A). 14. On the other hand, Ld. Sr-DR for the Revenue supported the order of Ld. CIT(A). Ld. Sr-DR for the Revenue submits that most of the cash deposits made in bank account assessee was noted in first & second week of October, 2007 whereas the mango season ending in the months of May-June respectively. The assessee has ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 16 transferred immediately in the name of Anand and Navratan who are broker of assessee in F&O transaction. The summary of cash deposits from whom the assessee himself produce the receipt reveals that there is substantial fluctuation in cash deposits from year-to-year do not indicate the real picture of earning of agricultural income. The Ld. CIT(A) after appreciating the evidence enhanced in the income of assessee. 15. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I have also perused all the documentary evidences filed by the assessee on record. I find that the Assessing Officer made addition to the extent of Rs.6,02,894/- by taking view that assessee could not provide mango and chikoo and miscellaneous vegetable sale. As recorded above, before Ld. CIT(A), the assessee filed detailed written submission. The ld. CIT(A) after seeking remand report from Assessing Officer on the submission of assessee direct the assessee to furnish the cash deposits from previous assessment years and subsequent assessment year of cash deposits. On examination of such cash deposits, the ld. CIT(A) was of the view ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 17 that substantial fluctuation in cash deposits from year-to-year does not indicate the earning of agricultural income. On such basis, the Ld. CIT(A) issued notice of enhancement. In response to enhancement, the assessee contested by filing detailed reply, which was already narrated above. The Ld. CIT(A) after considering the reply of assessee took his view that assessee has merely made stress about the agricultural income though the fact that circumstances disprove the claim of agricultural income. 16. I find that Ld. CIT(A) or the Assessing Officer has not disputed the area of agricultural land owned by assessee. Further the lower authorities have not disputed the numbers of mango and chikoo tress in agriculture holding. The assessee has filed affidavit of contractor / persons who have received the agricultural produce before the lower authorities. The Lower authorities have not exercised their power to examine such persons under section 131 nor directed the assessee to produce such persons for verification of facts or for their cross-examination. No physical verification of mango trees and chikoo trees or other agricultural produce was conducted. I am conscious of the fact that case of assessee was ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 18 related to assessment year 2007-08 and the Ld. CIT(A) passed the appellate order on 20.12.2017. However, from number of trees the estimation of yields of fruits could be easily got estimated. No such exercise was conducted before making any enhancement. The Ld. CIT(A) relied on the pattern of cash deposits by taking view that there was substantial fluctuation instead of examining the fact that agricultural produce depends on various factors like weather, wind temperature in the season or natural calamities etc. In absence of adverse evidence against furnishing by assessee, Ld. CIT(A) was not justified in making enhancement. Therefore, I direct to set-aside the order of enhancement. In the result, ground No. 3 of the appeal is allowed. 17. So far as the addition made by the Assessing Officer to the extent of Rs.6,02,894/- is concerned, I find that such addition was made for want of evidence. The assessee has furnished affidavits of contractors / purchaser before ld CIT(A). They have specified in their affidavit that as and such payments were made to the assessee. No doubt that such affidavit was sworn in the month of July, 2017, but still the assessing officer has not directed the ITA Nos.103/SRT/2018 (A.Y 08-09) Sh. Hitesh S Patel 19 assessee to produce such person for their cross examination. However, in keeping in view of the facts that during assessment, the ld AR for the assessee, who was representing the assessee, has agreed for such addition and no contrary fact is shown to me, the addition made by the Assessing Officer to the extent of Rs. 6,02894/- is confirmed. Hence, ground No. 2 of appeal is dismissed. 18. In the result, assessee’s appeal is partly allowed. Order pronounced in the open court on 31/10/2022. Sd/- (PAWAN SINGH) [᭠याियक सद᭭य JUDICIAL MEMBER] स ू रत /Surat, Dated: /10/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat