Muralikrishna K, Bangalore V. Assistant Commissioner of Income tax, Bangalore

ITA 1299/BANG/2014

• Counselvise Citation: 129921114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 21-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: P DINESH
• Keywords: Unexplained cash credit; Source of fund
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1299/BANG/2014 ASSESSMENT YEAR : 2003-04 SHRI MURALIKRISHNA K., NO.845, 5 TH CROSS, 10 TH MAIN, 2 ND STAGE, INDIRANAGAR, BANGALORE 560 038. PAN: AEQPM 9619H VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI P. DINESH, ADVOCATE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT (DR) DATE OF HEARING : 19.10.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 11.07.2014 OF THE CIT(APPEALS)-I, BANGALORE RELATIN G TO ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF PROCURING MAN-POWER. FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION, ASSESSEE FILED ITA NO.1299/BANG/2014 PAGE 2 OF 15 RETURN OF INCOME DECLARING AN INCOME OF RS.12,99,03 9 AND AGRICULTURAL INCOME OF RS.10,75,000. ASSESSMENT U/S. 143(3) WA S COMPLETED BY THE AO MAKING THE FOLLOWING ADDITIONS:- 3. CASH DEPOSIT IN THE BANK ACCOUNT RS.35,72,550 : IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER F OUND VARIOUS DEPOSITS IN ASSESSEES BANK ACCOUNT IN STATE BANK OF MYSORE. WITH REGARD TO THE DEPOSIT OF RS. 15 LAKHS ON 12.03.2003, RS.9 LAKHS O N 25.03.2003 AND RS.9 LAKHS ON 29.03.2003, IT WAS SUBMITTED THAT IT WAS O UT OF THE AGRICULTURAL INCOME OF RS.10,75,000/- AND SHARE INCOME FROM THE HUF OF RS.6 LAKHS AND SOME OTHER WITHDRAWALS FROM THE BANK ACCOUNT. T HE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE AN ADDITION OF RS.33 LAKHS AS UNEXPLAINED CREDITS IN THE ASSESSEES BANK ACCOUNT. 4. BEFORE THE CIT(APPEALS), IT WAS SUBMITTED THAT T HE EVIDENCE OF HAVING RECEIVED THE AGRICULTURAL INCOME IN THE FORM OF CONFIRMATION LETTERS FROM THE TENANTS OF THE AGRICULTURAL LANDS HELD BY THE ASSESSEE HAD ALSO BEEN PRODUCED BEFORE THE ASSESSING AUTHORITY AT THE TIME OF THE ITA NO.1299/BANG/2014 PAGE 3 OF 15 ASSESSMENT PROCEEDINGS. IT WAS FURTHER SUBMITTED TH AT ASSESSEE OWNS NEARLY 48 ACRES OF LAND AND SALE DEED FOR PURCHASE OF LAND WAS ALSO PRODUCED BEFORE THE AO. FURTHER, THE DATES ON WHIC H THE AMOUNTS HAD BEEN WITHDRAWN FROM THE BANK AND RE-DEPOSITED WAS A LSO PLACED BEFORE THE AO. IT WAS SUBMITTED THAT THE AO WITHOUT EVEN VER IFYING THE DETAILS PRODUCED, PROCEEDED TO COMPLETE THE ASSESSMENT MAKI NG THE ADDITION TREATING THE SAME AS UNEXPLAINED CREDIT. 5. THE ASSESSEE STATED BEFORE THE CIT(A) HIS SHARE FROM THE HUF IN WHICH THE ASSESSEE WAS A COPARCENER, TO AN EXTENT O F RS.6 LAKHS WAS ALSO DENIED BY THE AO ON THE GROUND THAT IT WAS NOT CLEA R AS TO WHAT THE HUF WAS DOING AND ITS SOURCES OF INCOME. 6. AS REGARDS THE DEPOSITS BETWEEN 05.04.2002 AND 2 0.05.2002, IT WAS SUBMITTED THAT THIS WAS THE DEPOSIT OF THE RETURN O F ADVANCE AMOUNT GIVEN FOR PURCHASE OF LAND. AS THE TRANSACTION DID NOT MA TERIALIZE, THE AGREEMENTS WERE DESTROYED AND THE AMOUNT RETURNED. IN FACT, TH ESE AMOUNTS HAD BEEN PAID FOR PURCHASE OF LAND AND AS THE LAND WAS NOT S UITABLE DUE TO DEFECTIVE TITLE, THE ASSESSEE DID NOT PROCEED WITH THE TRANSA CTION AND TOOK BACK THE ADVANCE PAID WHICH WAS DEPOSITED IN THE BANK ACCOUN T IMMEDIATELY ON RECEIPT. 7. WITH REGARD TO THE DISALLOWANCE OF THE AGRICULTU RAL INCOME SHOWN TO THE EXTENT OF RS. 10,75,000/- ON THE GROUND THAT PR OOF REGARDING SALE OF AGRICULTURAL PRODUCE AND THE DETAILS OF EXPENDITURE INCURRED ON LABOUR HAD ITA NO.1299/BANG/2014 PAGE 4 OF 15 NOT BEEN PRODUCED, THE ASSESSEE SUBMITTED BEFORE TH E CIT(A) THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT BY 10-12 F ARMERS WHO HAD TAKEN THE AGRICULTURAL LANDS OF THE ASSESSEE ON LEASE AND RENTAL INCOME WAS GIVEN TO THE ASSESSEE AT RS.22,500/- PER ACRE. IT WAS SUBMITTED THAT DETAILED RENTAL AGREEMENTS COULD NOT BE ENTERED INT O WITH THE FARMERS AS THEY WOULD BE GETTING THE RIGHTS OVER THE PROPERTY AND THERE WAS HIGH CHANCE THAT THE ASSESSEE WOULD LOOSE THE PROPERTY I TSELF. IT WAS SUBMITTED THAT DURING THE ASSESSMENT YEAR 2002-03, THE APPELL ANT HAD CLAIMED AGRICULTURAL INCOME OF RS.5 LAKHS. COPY OF THE RETU RN AND THE RETURN OF KVR HUF IN WHICH THE ASSESSEE IS A COPARCENER WAS FILED BEFORE THE CIT(A), WHEREIN THE AMOUNT OF RS.6 LAKHS IS ALSO SHOWN AS G IVEN TO THE ASSESSEE. 8. THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS.35, 72,550 INCLUDES RECEIPT OF AGRICULTURAL INCOME AND THE SHARE OF INC OME FROM THE HUF AND CONSEQUENTLY SEPARATE ADDITION ON AGRICULTURAL INCO ME AND SHARE INCOME FROM KVR HUF AMOUNTS TO DOUBLE ADDITION. 9. WITH REGARD TO CASH DEPOSITS IN THE BANK, THE CI T(APPEALS) AT PARAS 3 TO 3.3 HAS MENTIONED THE DETAILS OF CASH DEPOSITS OF THE ASSESSEE WITH STATE BANK OF MYSORE BEARING ACCOUNT NO.311208 AND ALSO THE REPLY OF THE ASSESSEE DATED 30.11.2005 TO THE AO. WITH REGARD T O THE CLAIM OF AGRICULTURAL INCOME OF THE ASSESSEE, THE CIT(APPEAL S) OBSERVED THAT ASSESSEE IS FOUND TO BE THE OWNER OF ABOUT 48 ACRES OF LAND IN NELLORE DISTRICT WHICH WAS PURCHASED ON 17.06.2000 FROM M/S . VISHWAPRAKRUTI ITA NO.1299/BANG/2014 PAGE 5 OF 15 FARMS & PLANTATIONS PVT. LTD. THE AGRICULTURAL OPER ATIONS THEREON WERE STATED TO BE CARRIED ON BY 10 TO 12 FARMERS AND IT WAS CLAIMED THAT THEY HAD GROWN TOMATOES, VEGETABLES ETC. THERE IN THE FIRST YEAR OF LAND OWNERSHIP I.E. FY 2000-01 WHEREIN THE ASSESSEE HAD CLAIMED AG RICULTURAL INCOME OF RS.3,73,000 AND RS.5,00,000 IN FY 2001-02. THE CIT (A) NOTED THAT THE INCOME HAS MORE THAN DOUBLED IN THE NEXT FY 2002-03 TO REACH RS. 10,75,000. 10. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE, ADMITTEDLY, DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT IN RESPECT OF ANY AGR ICULTURAL OPERATIONS AND NEITHER DO THE 10 TO 12 FARMERS WHO ARE STATED TO H AVE CARRIED ON THE AGRICULTURAL OPERATIONS AS TENANTS. REGARDING THE ASSESSEES CLAIM THAT THESE FARMERS HAD TAKEN THE AGRICULTURAL LANDS OF T HE ASSESSEE ON LEASE AND RENTAL INCOME WAS RECEIVED AT RS.22,500 PER ACR E AND DETAILED RENTAL AGREEMENTS COULD NOT BE ENTERED INTO WITH THE FARME RS AS THEY WOULD BE GETTING THE RIGHTS OVER THE PROPERTY AND THERE WAS HIGH CHANCE THAT THE ASSESSEE WOULD LOOSE THE PROPERTY ITSELF, THE CIT(A ) OBSERVED THAT EVIDENCE FURNISHED BEFORE HIM IN THE FORM OF PHOTOC OPIES STATED TO BE CONFIRMATIONS FROM THE TENANTS FOR THE AMOUNT PAID TO THE ASSESSEE WAS OF POOR EVIDENTIARY QUALITY WHICH NETHER CARRY THE IDE NTITY PARTICULARS NOR THE ADDRESS OF THE PERSONS OR EVEN THE DATE OF CONFIRMA TION. 11. THE CIT(APPEALS) CONCLUDED THAT DUE TO LACK OF APPROPRIATE EVIDENCE, THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME IS NOT ESTABLISHED. ITA NO.1299/BANG/2014 PAGE 6 OF 15 HOWEVER, HE CALLED FOR A REMAND REPORT AND THE AO I N HIS REMAND REPORT STATED AS FOLLOWS:- AS ABOVE THE ASSESSEE STATED THAT MOST OF THE AGR ICULTURAL PRODUCE SOLD THROUGH AGENTS BY WAY OF CASH AND INCO ME/ACRE IS 22,500 (APPROX.). CONSIDERING FACTS AND CIRCUMSTAN CES, THE ASSESSEES CLAIM SEEMS TO BE REASONABLE. HOWEVER, FOR 46 A 39 GUNTAS, TOTAL AGRICULTURAL INCOME COMES TO RS.10,56 ,937 BUT NOT RS.10,75,000. THEREFORE THE DIFFERENCE OF RS.18063 MAY BE TREATED AS UNEXPLAINED INCOME. 12. THE CIT(APPEALS) HELD THAT AO HAS ERRED BY MAKI NG A SEPARATE ADDITION IN RESPECT OF AGRICULTURAL INCOME TREATING IT AS INCOME FROM OTHER SOURCES AFTER DISBELIEVING THE SAID SOURCE AS EXPL ANATION FOR PART OF THE CASH DEPOSIT AND SINCE THE CASH DEPOSITS ARE TREATE D AS UNEXPLAINED INCOME, TAXING THE AGRICULTURAL INCOME AS OTHER SO URCES WILL LEAD TO DOUBLE TAXATION. HENCE, THE CIT(A) DIRECTED THE AO TO DEL ETE THE SEPARATE ADDITION TOWARDS AGRICULTURAL INCOME. IN SHORT, THE CIT(A) DID NOT ACCEPT THE CLAIM OF CASH DEPOSITS MADE OUT OF UNEVIDENCED AGRICULTURAL INCOME. 13. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF AP PEAL WHICH READ AS FOLLOWS:- 1. AUTHORITIES BELOW FAILED TO EXAMINE THE CLAIM O F THE APPELLANT (WITH) REGARD TO THE EXEMPTIONS FROM THE POINT OF SEC. 2(14)(III)(A) OF THE ACT. 2. AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THAT AGRICULTURAL INCOME TO THE EXTENT OF RS.10,75,000 W AS NOT ITA NO.1299/BANG/2014 PAGE 7 OF 15 REQUIRED TO BE ADDED INCOME FROM OTHER SOURCES AND THEREFORE WAS REQUIRED TO BE EXCLUDED FROM RS.35,72,550/-. 3. AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THAT THE INCOME FROM KVR-HUF OF RS.6,00,000/- WAS ALSO REQUI RED TO BE EXCLUDED FROM RS.35,72,550/-. 15. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADDITIONAL GROUNDS RAISED ARE PURELY QUESTIONS OF LAW AND NO NEW FACTS HAVE TO BE LOOKED INTO. THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE IS ACC EPTED AND ADDITIONAL GROUNDS ARE ADMITTED. 16. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US REIT ERATED THE CONTENTIONS PUT FORTH BEFORE THE CIT(APPEALS) WITH RESPECT TO A GRICULTURAL INCOME. THE LD. COUNSEL SUBMITTED THAT VEGETABLES WERE SOLD THR OUGH COMMISSION AGENTS WHO FREQUENTED THE FARM LANDS AND THE CONSID ERATION IS RECEIVED AT THE TIME OF HARVESTING OF CROPS. HE ALSO FILED CON FIRMATIONS WITH CONFIRMATIONS WITH DETAILED IDENTIFICATION AND ADDR ESSES OF TENANT FARMERS. THE CIT(A) OBSERVED THAT THE AO HAD NOT ACCEPTED TH E CLAIM EARLIER, BUT IN THE REMAND REPORT THE AO WAS CONVINCED WITH THE ASS ESSEES CLAIM THAT LANDS WERE GIVEN TO ABOUT 10 TO 12 FARMERS WHO HAD GROWN TOMATOES AND VARIOUS OTHER VEGETABLES AND AGRICULTURAL INCOME WA S RECEIVED OUT OF SALE PROCEEDS. THE AO HAD THUS STATED THAT FOR 46 ACRES 39 GUNTAS, TOTAL AGRICULTURAL INCOME COMES TO RS.10,56,937 AND NOT R S.10,75,000 AND THEREFORE DIFFERENCE OF RS.18,063 IS TO BE TREATED AS AGRICULTURAL INCOME. ITA NO.1299/BANG/2014 PAGE 8 OF 15 THE CIT(APPEALS) SUSPECTED THE MOTIVE BEHIND THE CH ANGE OF OPINION BY THE AO. 17. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH T HE RECORDS. IT IS NOT DISPUTED THAT THE ASSESSEE OWNS 46 ACRES 39 GUN TAS OF LAND WHICH IS CULTIVABLE. HENCE THE ASSESSEES CLAIM OF AGRICULT URAL INCOME AT RS.22,500 PER ACRE SUBSTANTIATED BY CONFIRMATION LETTERS GIVE N BY THE PARTIES WHO HAVE TAKEN THE PRODUCE WOULD ENTITLE THE ASSESSEE T O CLAIM AGRICULTURAL INCOME OF RS.10,56,937. THE ADDITION OF RS.18,063 IS SUSTAINED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED AGRICULTURAL INCOME AS RECOMMENDED BY THE AO IN HIS REMAND REPORT. THIS I SSUE IS PARTLY ALLOWED. 18. THE NEXT ISSUE IS THE CLAIM OF RECEIPT OF RS.6 LAKHS FROM KVR HUF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE EXPLAINED THAT HUF WAS GENERATING AGRICULTURAL INCOME AND ASSESSEE BEING COPARCENER OF HUF WAS GIVEN INCOME OUT OF HUF. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME OF HUF FOR THE RELEVANT ASSESSMENT YEAR W HEREIN THE RENTAL INCOME OF RS.2,39,830 AND AGRICULTURAL INCOME OF RS .45,000 HAD BEEN DECLARED. THE AO WAS OF THE VIEW THAT WHEN HUFS I NCOME IS ONLY TO THE TUNE OF RS.2,84,830, THERE COULD BE NO POSSIBILITY OF ASSESSEE GETTING RS.6 LAKHS TOWARDS HIS SHARE. 19. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT THE AMOUNT WAS RECEIVED OUT OF HUF FUNDS. THE HUF HAS BEEN EARN ING INCOME OVER A ITA NO.1299/BANG/2014 PAGE 9 OF 15 PERIOD OF TIME AND THAT THERE WERE ADEQUATE ACCUMUL ATED FUNDS, OUT OF WHICH THE ASSESSEE COULD DRAW RS.6 LAKHS DURING THE RELEVANT YEAR. 20. THE CIT(APPEALS) HELD AT PARA 4 OF THE IMPUGNED ORDER AS FOLLOWS:- 4. THE CLAIM OF RECEIPT OF RS.6,00,000 FROM HVR HU F OF WHICH THE APPELLANT IS A MEMBER WAS SOUGHT TO BE ES TABLISHED THROUGH THE RETURN FILED BY THE HUF SHOWING RENTAL INCOME OF RS.2,39,830 AND AGRICULTURAL INCOME OF RS.45,000 FO R AY 2003- 04. IT WAS CLAIMED THAT THE RECEIPT RELATES TO SHA RE FOR FY 2001- 02 BUT NO EVIDENCE OF THIS CLAIM WAS FILED. IT WAS CLAIMED THAT THE HUF OWNS 21 TO 30 CENTS OF AGRICULTURAL LAND AT GOPINADHA PATNAM AND VILIGAPADU WHICH ARE LEASED OUT FOR A RE NTAL OF RS.2,55,000. THE BALANCE SHEET OF THE APPELLANT DO ES NOT REFLECT THE CLAIMED RECEIPT FROM THE HUF AND THE AVAILABILI TY OF THE FUNDS FROM WHICH THE AMOUNT OF RS.6,00,000 IS STATE D TO HAVE BEEN DISBURSED (ON 10.05.2002 AND 12.06.2002) IS AL SO NOT EVIDENCED THROUGH ANY BANK ACCOUNT MAINTAINED BY TH E HUF OR CASH FLOW STATEMENT EVIDENCING SAVINGS OF THAT EXTE NT WITH SUPPORTING BOOKS OF ACCOUNT. CONSIDERING THIS EVID ENTIARY DEFICIT THE APPELLANTS CLAIM OF AVAILABILITY OF RS.6,00,00 0 FRO THIS SOURCE CANNOT BE ACCEPTED. HOWEVER, THE AO HAS ERRONEOUSL Y MADE A DOUBLE ADDITION BY MAKING A SEPARATE ADDITION TOWAR DS THE AMOUNT RECEIVED FROM HUF, AFTER TREATING THE CASH D EPOSIT AS BEING UNEXPLAINED. THE ADDITION UNDER THE HUF ACCO UNT IS DIRECTED TO BE DELETED. 21. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND STATED THAT THE ASSESSEE HAD ALREADY FURNISHED RETURN OF INCOME OF HUF SHOWING THE RENTAL INCOME OF RS.2,89,830 AND AGRICULTURAL INCOM E OF RS.45,000 FOR THIS YEAR. FURTHER, HE ALSO ARGUED THAT ACCUMULATED FUN DS AND ASSETS OF THE HUF WERE ALREADY EXISTENT AND ASSESSEE COULD DRAW R S.6 LAKHS FROM THE HUF FUNDS DURING THE RELEVANT YEAR. ITA NO.1299/BANG/2014 PAGE 10 OF 15 22. WE FIND THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME OF HUF. AVAILABILITY OF FUNDS OF THE HUF SHALL BE ESTABLISH ED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND HENCE WE SET ASIDE THIS I SSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE SHALL EXPLAIN AND PROVE THAT ACCUMULATED FUNDS ARE AVAILABLE IN SUPPORT OF HIS CLAIM. 23. WITH RESPECT TO EXPLANATION FOR BALANCE CASH DE POSITS IN THE BANK ACCOUNT WHICH IS RELATED TO CASH WITHDRAWALS OF THE SAID BANK ACCOUNT ON VARIOUS DATES TOTALING TO RS.12,58,265, THE CIT(APP EALS) HELD AT PARA 5.1 OF THE IMPUGNED ORDER AS FOLLOWS:- 5.1 THE ABOVE WITHDRAWALS ON 11 OCCASIONS ARE PAR T OF THE EXPLANATION FOR THE CASH DEPOSITS TOTALING RS.12,58 ,265 BUT THEY UN COUNTER TO HUMAN PROBABILITY AS BROUGHT OUT IN T HE AOS ORDER WHICH QUESTION THE NECESSITY FOR WITHDRAWING SMALL AMOUNTS OF CASH AND MERELY STORING IT FOR SOME FUTURE RE-DEPOS IT. IF CASH OF RS.2,00,000 WAS WITHDRAWN ON 10,07.2002 IT NATURALL Y IMPLIES THAT CASH OF RS.50,000 WITHDRAWN A DAY EARLIER ON 9 ,7.2002 HAD ALREADY BEEN EXPENDED FOR THE PURPOSE FOR WHICH IT WAS DRAWN AND WAS NOT AVAILABLE WITH THE ASSESSEE. THE SAME L OGIC APPLIES TO EACH OF THE SUBSEQUENT DRAWINGS ALSO. THE AR HAS ADMITTED INABILITY TO FURNISH DETAILS OF INTENDED AND ACTUAL UTILIZATION OF EVERY INSTANCE OF WITHDRAWAL WITH SUPPORTING EVIDEN CE. THE APPELLANTS LONG FAMILIARITY WITH BANKING PRACTICE AND THE SECURITY AND INCOME WHICH IT AFFORDS TESTIFY TO HIS PRUDENCE AND COMMERCIAL KNOWLEDGE. THE EXPLANATION GIVEN, THEREF ORE, IS NOT IN SYNC WITH THE EXPECTED CONDUCT OF SUCH A PRUDENT INDIVIDUAL AND IT IS ALSO NOT BACKED BY ANY DETAI1 OR EVIDENCE AS MENTIONED. THE FACT THAT THE CASH BALANCES ARE REFLECTED IN TH E CASH BOOK DOES NOT ALTER THIS CONCLUSION SINCE THE CASH BOOK ITSEL F IS CONSIDERED INCOMPLETE AND QUESTIONABLE IN SO FAR AS OTHER INC OME BEING AGRICULTURAL INCOME OF RS. 4,75,000 AND RS.3,00,000 CLAIMED TO BE RECEIVED IN CASH ON 26.03.2003 AND 28.03.2003 HA VE ALREADY ITA NO.1299/BANG/2014 PAGE 11 OF 15 BEEN HELD TO BE NOT AVAILABLE TO THE ASSESSEE AND T HE BREAKUP WITH EVIDENCE OF PARTIES FROM WHICH SUCH CASH WAS RECEIV ED ON THOSE DATES IS ALSO NOT AVAILABLE AS DISCUSSED SUPRA. 24. THE CIT(APPEALS) THEREFORE CONCLUDED THAT THE C ASH DEPOSITS IN THE BANK ACCOUNT HAVE NOT BEEN EVIDENCED BY THE ASSESSE E AND HENCE CONSIDERED THE SAME CONSIDERED AS HIS UNEXPLAINED I NCOME. 25. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US SUBM ITTED THAT WITH REGARD TO THE AMOUNT OF RS.4,59,000 WHICH FORMS PAR T OF THE DEPOSIT MADE ON 25.03.2003, THE SAME WAS THE AGRICULTURAL INCOME RECEIVED DURING THE YEAR OUT OF THE PREVIOUS YEARS INCOME WHICH HAS BE EN DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME. A COPY OF THE RET URN OF INCOME FILED FOR THE PRECEDING YEAR WAS FURNISHED AND THUS THE AMOUN T IS FULLY EXPLAINED. 26. WITH RESPECT TO THE AMOUNT OF RS. 12,58,265 BEI NG THE CASH DEPOSIT OUT OF THE CASH BALANCE AVAILABLE, IT WAS SUBMITTED THAT FROM THE CASH BOOK EXTRACTS OF THE ASSESSEE FROM THE BEGINNING OF THE YEAR, IT MAY BE NOTICED THAT THE DEPOSIT OF RS. 12,58,265 WHICH FORMS PART OF RS. 15 LAKHS DEPOSITED ON 12.03.2003 WAS OUT OF THE CASH BALANCE AVAILABLE AS ON THAT DATE. THE AO DISBELIEVED THE ASSESSEE AS THE AO WAS OF THE VIEW THAT WHEN THE ASSESSEE IS OPERATING BANK ACCOUNT, HE WOU LD NOT HAVE KEPT CASH IN HAND. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CASH BOOK IS A PRIMARY DOCUMENT AND THE ASSESS EES ACCOUNTS HAD BEEN AUDITED AND AUDIT REPORT U/S. 44AB HAD ALSO BE EN OBTAINED. NO ITA NO.1299/BANG/2014 PAGE 12 OF 15 DISCREPANCY IN THIS REGARD HAS BEEN NOTED AND THUS THE ENTRIES MADE IN THE CASH BOOK ARE CORRECT. IT WAS SUBMITTED THAT THE FA CT THAT THERE IS ACCUMULATION OF CASH IN THE CASH BOOK CANNOT BE DOU BTED AND THE AO CANNOT SIT IN JUDGMENT ON THE PRUDENCE OF THE PERSO N TO KEEP CASH IN HAND JUST TO DISBELIEVE AND TO MAKE THE IMPUGNED ADDITIO N ON SURMISE. IT WAS HIS SUBMISSION THAT THE PRIMARY EVIDENCE OF CASH BOOK B EING AVAILABLE WHICH HAD BEEN DULY AUDITED, THE IMPUGNED ADDITION IS TOT ALLY UNWARRANTED WHICH IS ONLY ON MERE SURMISE AND REQUIRED TO BE DELETED IN TOTO. IN THIS CONNECTION, RELIANCE WAS PLACED UPON THE JUDGMENT O F THE KARNATAKA HIGH COURT IN THE CASE OF S.R. VENKATA RATNAM VS. CIT (1981) 127 ITR 807 AND ALSO THE RECENT JUDGMENT OF THE KARNATAKA HIGH COUR T IN THE CASE OF SMT. P. PADMAVATHI IN ITA NO.414/2009 DATED 06.10.20 10 . 27. WE FIND THAT THE CASH BOOK AND THE ASSESSEES A CCOUNTS HAVE BEEN AUDITED AND AUDIT REPORT U/S. 44AB HAS ALSO BEEN OB TAINED. NO DISCREPANCY HAS BEEN NOTED AND THE ENTRIES MADE IN THE CASH BOOK ARE THEREFORE CORRECT. THE FACT THAT THE CASH BOOK IS AVAILABLE WHICH HAS BEEN AUDITED MAKES THE IMPUGNED ADDITION UNWARRANTED. H ENCE, THE ADDITION OF CASH DEPOSITS AS UNEXPLAINED INCOME IS DELETED. 28. THE NEXT ISSUE IS WITH RESPECT TO CAPITAL GAINS . THE AO NOTED THAT THE ASSESSEE ALONG WITH SRI G. NITYANAND PURCHASED A PROPERTY AT HYDERABAD AS PER SALE DEED DATED 7.12.1998 FOR RS.1 ,40,000. DUE TO SOME DISPUTE WITH THE SELLER, ACTUAL POSSESSION OF THE LAND WAS TAKEN ONLY ITA NO.1299/BANG/2014 PAGE 13 OF 15 DURING FY 2002-03. THEREAFTER, THE LAND WAS SOLD F OR RS.18,00,000 AS PER SALE AGREEMENT DATED 27.11.2002. THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAINS OF RS.6,12,500. THE AO HELD THE TRAN SACTION AS RESULTING IN SHORTER TERM CAPITAL GAINS OF RS.16,60,000 AND BROU GHT TO TAX 50% THEREOF IN THE ASSESSEES HAND AT RS.8,30,000. 29. BEFORE THE CIT(APPEALS), THE ASSESSEE FILED ADD ITIONAL GROUND OF APPEAL CLAIMING THAT THE AGRICULTURAL LAND IN QUEST ION WAS SITUATED BEYOND THE NOTIFIED AREA AND HENCE THE SALE WAS EXEMPT U/S . 2(14) OF THE ACT. HOWEVER, IN THE ABSENCE OF EVIDENCE OF LAND LOCATIO N IN SUPPORT OF THE ASSESSEES CLAIM, THE CIT(APPEALS) REJECTED THE ASS ESSEES CLAIM. 30. BEFORE US, IT WAS SUBMITTED THAT THE AO HAS ACC EPTED THE PROFIT ON SALE OF LAND AS LONG TERM CAPITAL GAIN IN THE RETUR N OF INCOME AFTER VERIFICATION OF THE PERIOD OF HOLDING. HOWEVER, ON FURTHER EXAMINATION IT WAS FOUND BY THE ASSESSEE THAT THE LAND IS SITUATED BEY OND THE NOTIFIED AREA AND THUS DID NOT FALL WITHIN THE DEFINITION OF CAPI TAL ASSET U/S. 2(14) OF THE ACT. IT WAS ACCORDINGLY SUBMITTED THAT NO CAPITAL G AIN IS LIABLE TO BE TAXED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE BY OVERSIG HT HAD OFFERED THE CAPITAL GAIN UNDER LONG TERM CAPITAL GAIN AND THIS DECLARATION OF THE ASSESSEE WAS WRONG. THE ENTIRE PROFIT ON SALE OF L AND IS REQUIRED TO BE EXCLUDED FROM TAXATION SINCE THE LAND WAS NOT A CAP ITAL ASSET. IN THIS REGARD, A COPY OF THE NOTIFICATION AND THE PHANI E XTRACTS OF THE LAND HAS BEEN FILED. ITA NO.1299/BANG/2014 PAGE 14 OF 15 31. THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTE D OUT TO A MEMO OF THE REVENUE DEPARTMENT AT PAGE 125 OF THE PAPERBOOK , WHEREIN IT HAS BEEN MENTIONED THAT THE POPULATION IN THE VATTINAGULAPAL LY VILLAGE OF RAJENDRANAGAR MANDAL AS PER 2001 CENSUS IS 2204 PER SONS AND THE POPULATION AS PER 2011 IS 3673 PERSONS, AND THE DIS TANCE OF SY.NO.189 FROM VATTINAGULA PALLY VILLAGE IS 2.5 KMS. HENCE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO EXAMINE THE DETAILS WITH RESPECT TO THE LAND AS TO WHETHER IT SATISFIES THE CLAIM FOR EXEMPTION U/S. 2(14) OF THE ACT. 32. GROUNDS NO.5 & 6 ARE NOT PRESSED BY THE ASSESSE E. 33. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 30 TH NOVEMBER, 2015. /D S/ ITA NO.1299/BANG/2014 PAGE 15 OF 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.