AI Insights
The case involves Shri Gopal Agarwal, who appealed against the order of the CIT (A) confirming the additions made by the Assessing Officer for the assessment year 2009-10. The Assessing Officer had estimated the agricultural income of the assessee at Rs.1,60,000 per annum, rejecting the claimed income of Rs.16,12,000 due to lack of evidence. Additionally, a substantial addition of Rs.14,46,00,000 was made under section 68 of the I.T. Act, which was also upheld by the CIT (A). The Tribunal dismissed the appeal, agreeing with the lower authorities that the assessee failed to substantiate his claims and did not prove the source of substantial cash credits in his bank accounts.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 128952 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
8 year(s) 11 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-05-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB-A
Next Hearing Date
02-05-2023
Assessment Year
2009-2010
Appeal Filed On
02-06-2014
Judgement Text
ITA No 1118 of 2014 Gopal Agarwal Page 1 of 15 आयकर अपील य अ धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.1118/Hyd/2014 Assessment Year: 2009-10 Shri Gopal Agarwal Secunderabad PAN:ACLPA3785D Vs. Dy. C. I. T. Circle 1(3) Hyderabad (Appellant) (Respondent) Assessee by : Advocate Shri C.P. Ramaswami Revenue by: Dr. Rajendra Kumar, CIT(DR) Date of hearing: 03/05/2023 Date of pronouncement: 16/05/2023 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 24.02.2014 of the learned CIT (A)-II, Hyderabad, relating to A.Y.2009-10. 2. Facts of the case, in brief, are that the assessee is an individual and derives income from salary, house property and other sources. He filed his return of income on 31.07.2009 declaring total income of Rs.14,87,486/- and agricultural income of Rs.16,12,000/-. The case was selected for scrutiny through CASS and statutory notices u/s 143(2) & 142(1) were issued and served on the assessee to which the A.R of the assessee appeared ITA No 1118 of 2014 Gopal Agarwal Page 2 of 15 before the Assessing Officer from time to time and furnished the requisite details. 3. During the course of assessment proceedings, from the details furnished by the assessee, the Assessing Officer noted that the assessee owns 4.3 acres of land at Shamirpet Village and that his son Mayur owns another 3.5 acres of land. It was claimed by the assessee that paddy is grown in this land and that there are teak wood trees adjacent to the agricultural land which were sold. It was accordingly claimed that the assessee has earned agricultural income of Rs.16,12,000/-. However, no proof of sale of agricultural produce was furnished. The Assessing Officer noted that the assessee has claimed Rs.12,53,000/- as income from sale of paddy from a land holding of around 8 acres. According to the Assessing Officer, earning of such huge income from 8 acres of land is unbelievable. He therefore, estimated such income at Rs.20,000/- per acre and determined the agricultural income at Rs.1,60,000/- per annum. So far as the income from teak wood trees which were grown on the boundaries and sold for Rs.3,59,000/- is concerned, the same was rejected by the Assessing Officer in absence of supporting evidence. The Assessing Officer accordingly determined the total agricultural income at Rs.1,60,000/- per annum and made the balance addition of Rs.14,52,000/- treating the same as income from other sources. 4. The Assessing Officer further noted that a survey u/s 133A of the Act was conducted in the case of M/s. Basai Steels & Power (P) Ltd wherein the assessee is the Managing Director and also the head of the promoter’s family. During the survey, certain documents/materials were impounded. From the impounded ITA No 1118 of 2014 Gopal Agarwal Page 3 of 15 documents, pages 1, 2 & 5 are ledger account statements of Shri Ramakrishna for the periods June 2008 to May, 2009 which contained details of cash given to Shri Ramakrishna on various dates totaling to Rs.18.28 crores. Similarly, pages 7 & 8 with heading “Account of Gopal Agarwalji (2009) with marking “Ramakrishna Dubai” contained the details for the period 1.1.2009 to 27.05.2009. The contents of these sheets evidenced receipt of amounts in Indian Rupees in Hyderabad and remittances made to Shri Gopal Agarwal and his family members’ Bank Accounts with HDFC Bank & AXIS Bank. The impounded documents were found from the chamber of Shri Gopal Agarwal in assessee’s business premises. 4.1 During the course of survey Shri Piyush Agarwal, s/o Shri Gopal Agarwal stated that these papers relate to transactions in Dubai and Shri Ramakrishna is an employee in Samchira DMCC and that his father Shri Gopal Agarwal could explain the transactions better. Subsequent inquiries from HDFC & AXIS Banks Secunderabad revealed that the credits to Shri Gopal Agarwal and his family member’s Bank Accounts was from “ALROSTMA”, a money exchanger in Dubai. Summons were issued to Shri Gopal Agarwal’s family members for the purpose of examination about the source for the credits into their bank accounts. In response to the same, wife of Shri Gopal Agarwal and his three sons and their spouses have filed affidavits wherein it was deposed that Shri Gopal Agarwal is the only person who is aware of all the transactions in respect of amounts received into their Bank Account at Hyderabad. In the sworn statement recorded from Shri Gopal Agarwal on 13.07.2011, he denied knowledge of the documents (pages 1, 5 & 6) impounded from his chamber and also denied any knowledge about Sri Ramakrishna ITA No 1118 of 2014 Gopal Agarwal Page 4 of 15 and gave a vague explanation about the transactions recorded in (pages 7 & 8) which reflected the amounts given at Hyderabad and in turn having remittances in equal amounts in HDFC & AXIS Banks. The Assessing Officer noted from the statement furnished by the HDFC Bank, Secunderabad through letter dated 21.07.2011 that the remitter’s name in all the 88 instances happened to Sri Ramakrishna except on 10 occasions in which Shri Gopal Agarwal was himself the remitter. The assessee also deposed that the amounts credited into HDFC and AXIS Bank accounts represented loans raised from a person in Dubai but had not disclosed the name(s) of the person(s) from whom such loans were raised despite adequate opportunity. In absence of any satisfactory explanation, the Assessing Officer invoked the provisions of section 68 of the I.T. Act and made addition of Rs.14,46,00,000/- to the total income of the assessee, by observing as under: ITA No 1118 of 2014 Gopal Agarwal Page 5 of 15 5. In appeal, the learned CIT (A) confirmed both the additions. 6. So far as the addition of Rs.14,46,00,000/- u/s 68 of the I.T. Act is concerned, the learned CIT (A) confirmed the addition by observing as under: ITA No 1118 of 2014 Gopal Agarwal Page 6 of 15 ITA No 1118 of 2014 Gopal Agarwal Page 7 of 15 ITA No 1118 of 2014 Gopal Agarwal Page 8 of 15 7.3 It is also pertinent to mention that Hon’ble Delhi High Court in the case of CIT vs. Titan Securities Ltd.(2013) 84 CCH 184, held that where the company which has subscribed to share capital is found to be hawala company providing accommodation entries, the Hon’ble Delhi High Court held, mere furnishing of income-tax returns, balance sheet, statement of affairs and bank statements without any explanation for deposits in its accounts may not meet the requirements of section 68. It was further held that it is necessary to note that the business activities of share subscribers in order to ascertain whether they are financially sound and are able to purchase the shares for substantial amount. The decision of the Hon’ble Supreme Court in the case of M/s. Lovely Exports Pvt.Ltd. was also considered by the Hon’ble Delhi High Court. Just because the investors had filed confirmations and produced copies of Income tax Returns and PAN Cards, will not substantiate its creditworthiness to invest huge amounts in appellant’s company, unless the sources are satisfactory explained. 7. So far as the agricultural income of Rs. 14,52,000/- treated by the AO as income from other sources is concerned, the ld.CIT(A) upheld the same by observing as under:- 8.2 He admitted agricultural income of Rs.16,12,000/-. During the course of assessment proceedings, the details were called for. He owns 4.3 acres of land at Shamirpet Mandal and his son Shri Mayur Gopal Agarwal owns another 3.5 acres. The assessee claims that paddy is grown in this land of approximately 8 acres and income from sale of paddy was shown at Rs.12,53,000/-. He also claimed that the income from Teak plantations on the boundaries of the farm fetched him Rs.3,59,000/-. The Assessing Officer held that the income shown from agriculture was astronomical and estimated the income at Rs.20,000/- per acre per annum. There was no evidence of purchase of seeds/fertilizers. There was no evidence regarding receipt of amounts pertaining to sales of paddy and teak wood. Such evidence was neither produced during the assessment proceedings nor during the appellate proceedings. The Assessing Officer estimated agricultural income @ Rs.20,000/- per acre per annum, i.e., Rs.1,60,000/- and treated the balance amount of Rs.14,52,000/- (Rs.1,60,000-Rs.1,60,000) as income from ‘Other Sources’. The agricultural income estimated by the Assessing Officer is very reasonable. Therefore, no interference is called for. Therefore, the action of the Assessing Officer in treating Rs.14,52,000/- as income from other sources is confirmed. ITA No 1118 of 2014 Gopal Agarwal Page 9 of 15 8. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds: “1. The order of the learned Commissioner of Income Tax (Appeals) is against law, and probabilities of case. 2. The learned Commissioner of Income Tax erred in confirming an addition of Rs.14.46.00,000/- made u/s 68 of the IT Act. 3. The learned Commissioner of Income Tax ought to have waited for the outcome of the enguiries by the Enforcement Directorate which are being made on the complaint made by the Income Tax Department, in respect of genuineness of the loans received from Dubai. 4. The learned Commissioner of Income Tax erred in confirming the addition of Rs. 14.52,000/- admitted as agricultural income but treated as income from other sources by the Assessing Officer. 5. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary.” 9. Ground of appeal 1 & 6 being general in nature are dismissed. 10. Ground of appeal No.2 & 3 filed by the assessee relates to the addition of Rs.14,46,00,000/- made by the Assessing Officer u/s 68 of the I.T. Act. 10.1 The learned Counsel for the assessee at the outset submitted that the entire money has come through banking channel and the RBI has not found any irregularity in the transactions. He submitted that the money so obtained have been invested in Basai Steel Works (P) Ltd and addition has already been made in the hands of Basai Steel Works (P) Ltd and the appeal filed by Basai Steel Works (P) Ltd has been dismissed by the Tribunal. He submitted that no protective addition should be made in the hands of the assessee including the amount of ITA No 1118 of 2014 Gopal Agarwal Page 10 of 15 Rs.14,46,00,000/- since larger addition has been made in the hands of Basai Steel Works (P) Ltd which has been confirmed by the Tribunal. He submitted that because of the NCLT order, no recovery proceedings can be taken in the hands of Basai Steel Works, therefore, no protective recovery should be made more so when the assessee has been divested of the shares. Relying on a series of decisions, the learned Counsel for the assessee submitted that no addition should be made in the hands of the assessee u/s 68 of the I.T. Act. 11. The learned DR, on the other hand, heavily relied on the order of the Assessing Officer and the learned CIT (A). He submitted that under the provisions of section 68 of the I.T. Act, the three ingredients namely, the identity and capacity of the loan creditor and the genuineness of the transaction has to be furnished by the assessee and the onus lies on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer regarding the above three ingredients. In the instant case, the assessee failed to discharge the onus cast on him. Therefore, merely because the addition has been sustained in the hands of Basai Steel Works (P) Ltd, addition cannot be deleted in the hands of the assessee for failure to discharge the onus cast on him under the provisions of section 68 of the I.T. Act. So far as the various decisions relied upon by the learned Counsel for the assessee are concerned, he submitted that those are distinguishable and not applicable to the facts of the present case since the assessee in the instant case has miserably failed to discharge the onus cast on him. 12. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and ITA No 1118 of 2014 Gopal Agarwal Page 11 of 15 the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.14,46,00,000/- in the hands of the assessee u/s 68 of the I.T. Act on the ground that the impounded material clearly evidences that cash was received in Indian Currency in Hyderabad and equivalent amount were received from Dubai and credited in the bank account maintained by family members with HDFC Bank and AXIS Bank branches and the assessee failed to discharge the onus cast on him by proving the identity and creditworthiness of the lenders and the genuineness of the transaction. We find the learned CIT (A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that the entire money has come through banking channels and that the amounts so invested in the shares of Basai Steel Works (P) Ltd have been added u/s 68 of the I.T. Act in the hands of Basai Steel Works (P) Ltd and the addition has been confirmed by the Tribunal. Therefore, the addition of the same in the hands of the assessee would amount to double taxation. It is also his submission that there cannot be any protective addition in the hands of the assessee. It is the submission of the learned DR that when the loose sheets impounded from the business premises of the assessee clearly indicate that equivalent amount in cash which were given to Shri Rama Krishna tallies exactly with the amount credited in the HDFC and Axis Bank accounts of the assessee and family members and the assessee failed to give the names of the lenders, rate of interest, if any, date of repayment etc., the addition sustained by the learned CIT (A) is justified. ITA No 1118 of 2014 Gopal Agarwal Page 12 of 15 13. A perusal of the impounded documents placed in the paper book shows that the dates and the amounts of cash given to Shri Ramakrishna tallies exactly with the amounts received from Dubai and credited in the bank accounts of family members maintained with HDFC Bank and Axis Bank Accounts. The assessee in the instant case failed to give the names and address of the lenders, the details of interest payment, if any, the date of repayment if any etc. The assessee has not fulfilled the onus cast on him in terms of provisions of section 68 of the I.T. Act by proving the 3 ingredients namely the identity and creditworthiness of the lenders and the genuineness of the transaction. Merely because the amounts so obtained from Dubai has been invested in Basai Steel Works (P) Ltd and addition has been confirmed in the hands of Basai Steel Works (P) Ltd by the Tribunal and therefore, no addition can be made in the hands of the assessee cannot absolve the assessee from proving the three ingredients of provisions of section 68 while deciding the case in his individual capacity. Since the learned CIT (A) while deciding the issue has given exhaustive reasons and considering the failure of the assessee by not providing the full details such as the names and address of the lenders, rate of interest, if any, date of repayment of the loan etc., and further considering the fact that the dates and amounts of cash given to Shri Ramakrishna tallies exactly with the amounts received from Dubai and credited in the above two Bank accounts of the assessee, therefore, we do not find any illegality or perversity in the order of the learned CIT (A) on this issue. Accordingly, the first issue raised by the assessee in Grounds of appeal 2 & 3 are dismissed. ITA No 1118 of 2014 Gopal Agarwal Page 13 of 15 14. In ground of appeal No.4, the assessee has challenged the addition of Rs.14,52,000/- as “income from other sources” as against agricultural income declared by him. 14.1 After hearing both the sides, we find that the assessee has shown agricultural income of Rs.14,52,000/- from landholding of 8 acres. According to the assessee, he has earned an amount of Rs.12,53,000/- from sale of paddy on his holding of 8 acres of agricultural land and Rs.3,59,000/- from sale of teak wood grown on the boundaries of such agricultural land. The Assessing Officer rejected the claim of the assessee and estimated the agricultural income at Rs.20,000/- per annum per acre and determined such income at Rs. 1,60,000/- and treated the balance of Rs.14,52,000/- as “income from other sources” on the ground that the assessee failed to substantiate with evidence to his satisfaction regarding the earning of such agricultural income of Rs.12,53,000/- from sale of paddy and Rs.3,59,000/- from sale of teakwood. We find the learned CIT (A) sustained the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. We do not find any infirmity in the order of the learned CIT (A) on this issue. Admittedly, the assessee neither before the Assessing Officer nor before the learned CIT (A) nor even before us could produce any evidence to support his astronomical agricultural income of Rs.12,53,000/- from 8 acres of landholding by selling paddy and Rs.3,59,000/- from sale of teakwood trees. Under these circumstances and in view of the detailed reasonings given by the learned CIT (A) on this issue, we do not find any infirmity in the same. Accordingly, the order of the learned CIT (A) on this issue is also upheld and the grounds raised by the assessee is dismissed. ITA No 1118 of 2014 Gopal Agarwal Page 14 of 15 15. In the result, appeal filed by the assessee is dismissed. Order pronounced in the Open Court on 16 th May, 2023. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 16 th May, 2023. Vinodan/sps Copy to: S.No Addresses 1 Shri Gopal Agarwal, Plot No.22, TMC Colony, Mahindra Hills, Secunderabad 2 Dy. CIT, Circle 1(3) Aayakar Bhavan, Hyderabad 3 Pr.CIT, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order
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