Mohan Shankarrao Jadhav (HUF), Kolhapur V. Income tax Officer,

ITA 252/PUN/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9356 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 12-06-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Unexplained cash credit; Search and seizure; Earning of tax free income
• Section: 234B

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.252/PUN/2017 / ASSESSMENT YEAR : 2013-14 MOHAN SHANKARRAO JADHAV (HUF), 250, B PLOT, 41, NAGALA PARK, KOLHAPUR 416 003 PAN : AAHHM9482K . /APPELLANT VS. ITO, WARD-2(1),KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI M.K. KULKARNI / RESPONDENT BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 12.06.2018 / DATE OF PRONOUNCEMENT: 15.06.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A)-2, KOLHAPUR, DATED 01-12-2016 FOR THE ASSESSMENT YEAR 2013-14. 2. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT ASSESSEE IS AN HUF AND FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.3,05,69 0/-. ASSESSEE CLAIMED AGRICULTURAL INCOME TO THE TUNE OF RS.45,7 5,868/- FROM THE SALE OF VARIOUS AGRICULTURAL PRODUCE, THE DETAILS OF WHICH ARE GIVEN IN PARA NO.4.1 OF THE ASSESSMENT. SALE PROCEEDS WER E RECEIVED BOTH IN CASH AND CHEQUE. AO NOTICED THAT ASSESSEE RE CEIVED RS.23,53,568/- THROUGH CHEQUE AND RS.22,22,300/- IN CASH. ASSESSEE CLAIMED INCURRING OF EXPENDITURE OF RS.11,31,453/-, TOWARDS AGRICULTURAL EXPENSES FOR EARNING THE ABOVE SAID INCOME. T HIS EXPENDITURE WORKS OUT TO 24.72% OF THE GROSS AGRICULTUR AL RECEIPTS. 2 ASSESSEE CLAIMS GROWING CROPS IN SURGARCANE, GROUNDNUT, SOYABEEN, COCONUT, MANGO, SITAFAL, CHIKU, LEMON, BANANA AND SUGARCANE SEEDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO RELIED ON THE DECISIONS OF PUNE BENCH OF THE TRIBUNAL FOR THE PROPOSITION THAT THE AGRICULTURAL EXPENSES IN THIS KIND OF CROPS IS IN THE RANGE OF 40 TO 45% OF THE GROSS RECEIPTS APPROXIMATELY. CONSIDERING THE SAM E, AO ESTIMATED THE AGRICULTURAL EXPENSES APPLYING FLAT RATE OF 40% ON GROSS RECEIPTS OF RS.45,75,868/- THAT WORKS OUT TO RS.18,30,347/ -. AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN ADDITIO N, AO MADE OTHER ADDITION OF RS.6,66,690/-, A PART OF THE CASH SALES AN D ALSO RS.7,50,000/-, I.E. CASH DEPOSIT IN THE CAPITAL ACCOUNT AS PER THE DISCUSSION GIVEN IN PARA NOS. 4.8 AND 6.5 OF THE ASSESSMENT RESPECTIVELY. 3. REGARDING THE DISALLOWANCE OF RS.6,66,690/-, THE FACTS INCLU DE THAT THE ASSESSEE RECORDED CASH RECEIPTS OF RS.22,22,300 /- OUT OF GROSS RECEIPTS OF RS.45,75,868/-. AO HELD THAT THE ASSESSEE EX AGGERATED THE SALE PROCEEDS AND THEREFORE, DECIDED TO DISALLOW THE SAID A MOUNT OF RS.6,66,690/- WHICH WORKS OUT TO 30% OF THE CASH SALES OF RS.22,22,300/-. 4. REGARDING THE ADDITION OF RS.7,50,000/-, THE RELEVANT FACT S INCLUDE THAT ASSESSEE SHOWS WITHDRAWAL OF ONLY RS.6,00,000/ - DURING THE YEAR UNDER CONSIDERATION AND HOWEVER, INTRODUCED CA SH OF RS.7,50,000/- IN THE CAPITAL ACCOUNT. THE EXPLANATION GIVEN BY THE ASSESSEE WAS FOUND UNSATISFACTORY. AO OPINED THAT CASH C REDIT INTRODUCED BY THE ASSESSEE IN THE CAPITAL ACCOUNT IS NOT HING BUT UNEXPLAINED CASH CREDIT AND THUS DISALLOWED THE SAME U/S.6 9 OF THE ACT. CONTENTS OF PARA NO.6.5 OF THE ASSESSMENT ORDER ARE RELEVANT . 3 5. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE RAISED ALL THESE 3 ISSUES AND VEHEMENTLY ARGUED FOR DELETION OF ALL THE ADDITIO NS. CIT(A) GAVE PART RELIEF ON THE ADDITION OF RS.6,66,690/- (30% OF CASH RECEIPTS OF RS.22,22,300/-. CIT(A) HELD THAT CERTAIN CROPS WERE NOT A T ALL GROWN AS PER THE 7/12 EXTRACTS FURNISHED BY THE ASSESSEE BEFORE CIT(A). THUS, CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.4,97,235/- ON THIS ACCOUNT. 6. REGARDING THE ADDITION OF RS.18,30,347/- ON ACCOUNT OF EXAGGERATION OF AGRICULTURAL EXPENSES, THE CIT(A) GAVE RELIEF TO THE ASSESSEE. CIT(A) REASONED THAT BY DISALLOWING RS.6,66,690/-, THE ESTIMATION OF AGRICULTURAL EXPENDITURE GOES UP TO 55 TO 60 % WHICH IS FAR ABOVE SAID RANGE OF 40-45% CONFIRMED BY THE TRIBUNAL OF PU NE BENCHES. ACCORDINGLY, THE CIT(A) DELETED THIS ADDITION OF RS.18,30,347/ -MADE BY THE AO. 7. AT THE END OF THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE ADDITION OF RS.7,50,000/- ON ACCOUNT OF UNEXPLAINED CAS H CREDIT IN THE CAPITAL ACCOUNT. CONTENTS OF PARA NO.5.2 OF HIS ORDER ARE RELEVANT. 8. REVENUE IS NOT IN APPEAL. HOWEVER, AGGRIEVED WITH THE P ART RELIEF BOTH ON ACCOUNT OF ESTIMATED DISALLOWANCE OF CASH SALES A T RS.4,97,235/- AS WELL AS RS.7,50,000/- ON ACCOUNT OF UNEXPLAIN ED CASH CREDIT IN THE CAPITAL ACCOUNT, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE ME WITH THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE CRO PS LIKE COCONUT, SITAFAL, CHIKU ETC., WERE NEVER GROWN AS THERE IS NO EVIDENC E OF SUCH CROPS GROWN AS MENTIONED BY TALATHI REPRODUCED ON PAGE 8 OF THE ORDER. IT IS COMMON KNOWLEDGE THAT SUCH TREES BEARING FRUIT ARE NOT MEN TIONED IN 7/12 RECORD 4 MAINTAINED. THE REJECTION OF CLAIM OF AGRICULTURAL INCOME TO THE EXTENT OF RS.4,97,235/- IS NOT JUSTIFIED. THE SAME BE DELETE D. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDIT ION OF RS.7,50,000/- MADE BY THE AO WHEREIN THE AO HAD HELD THAT THE ASS ESSEE-HUF HAD NO NEED TO KEEP THE CASH WITHDRAWN EARLIER. THE RECOR D SHOWS THAT THE ASSESSEE-HUF HAS NO OTHER INCOME EARNING ACTIVITY E XCEPT AGRICULTURAL INCOME. THE AGRICULTURAL ACTIVITIES ARE SUCH THAT IT REQUIRES HOLDING OF CASH FOR ANY UNEXPECTED EVENTUALLY. IN THE EVENT O F HAVING MAINTAINED THE BOOKS OF ACCOUNT SUCH DISALLOWANCE IS ALSO NOT SUSTAINABLE. IT BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW AND CONSIDERING THE ONLY INCOME EARNING ACTIVITY BEING AGRICULTURAL IT WAS NOT OBLIGATORY ON THE ASSESSEE-HUF OF ANY ADVANCE-TAX P AYMENT. IN VIEW OF THIS THERE IS NO LIABILITY TO PAY INTEREST UNDER SE CTION 234B OF THE ACT. THE INTEREST LEVIED BE DELETED. 9. REGARDING GROUND NO.1, LD. COUNSEL FOR THE ASSESSEE ARG UED THAT CASH SALES ARE GENUINE AND THEREFORE, NO REQUIREMENT OF E STIMATING THE DISALLOWANCE IN THESE KINDS OF CROPS LEAVEALONE CONFIRMING TH E ADDITION PARTLY BY THE CIT(A). 10. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE, I PERUSE D THE ORDER OF CIT(A) AND FIND THE PARA NO.5.1 OF HIS ORDER DEALS WITH THIS I SSUE. AFTER PERUSING THE SAID PARAGRAPH, I FIND THE CIT(A) EXAMINED THE 7/12 EXTRACTS AND ANALYSED THE CROPS GROWN IN THE LAND OWN ED BY THE ASSESSEE AND FOUND CERTAIN CROPS LIKE COCONUT, SITAFUL, CHIKU , LEMON AND SUGARCANE SEEDS ARE NOT REFERRED TO IN THE 7/12 EXTRACTS/DOCUMENTS. PROPORTIONATELY, THE CIT(A) CONFIRMED THE ADDITION OF RS.4,97,235/- AGAINST THE ADDITION OF RS.6,66,690/-. THE RE LEVANT DISCUSSION OF CIT(A) IS EXTRACTED HERE AS UNDER : 5.1 . . . . . . . . . . . .FROM THE TABLE ABOVE BASED ON THE DETAILS OF 7/12 EXTRACTS PROVIDED BY THE APPELLANT HIMSELF, IT IS E VIDENT THAT THE CROPS OF COCONUT, SIFAFUL, CHIKU, LEMON AND SUGARCA NE SEEDS, ARE NOT GROWN AT ALL. THEREFORE THE QUESTION OF SALE OF THESE CROPS DOES NOT ARISE. FACTUALLY THEREFORE THE APPELLANT CANNOT EX PLAIN THE ALLEGED CASH SALE OF THESE CROPS. FROM THE DETAILS AS MENTIONED IN THE ASSESSMENT ORDER, THE APPELLANT CLAIMS TO HAVE SOLD COCONUT FO R RS.2,18,155/-, SITAFAL RS.88,200/-, CHIKU RS.2,880/-, LEMON RS.2,0 00/- AND SUGARCANE SEEDS RS.1,23,000/-. THIS CONTENTION OF THE APPELL ANT CANNOT BE ACCEPTED 5 IN THE LIGHT OF THE EVIDENCE AGAINST THE APPELLANT AS TABULATED ABOVE. THE AO HAS NOT EXAMINED THIS CRUCIAL ASPECT ON FACTS. BE THAT AS IT MAY, I THEREFORE HOLD THAT THE ALLEGED CASH SALES FROM COC ONUT, SITAFUL, CHIKU, LEMON AND SUGARCANE SEEDS TOTALLING TO RS.4,97,235/ - IS BOGUS CASH SALE RECORDED BY THE APPELLANT. THE SOURCE OF THIS CASH RECEIPT IS THEREFORE UNEXPLAINED IN THE HANDS OF THE APPELLANT AND DESER VES TO BE ASSESSED AS UNEXPLAINED CASH CREDIT IN HIS BOOKS U/S.68. TH E ADDITION MADE BY THE AO OF RS.6,66,690/- IS SUSTAINED TO THE EXTENT OF RS.4,97,235/-. 11. CONSIDERING THE ABOVE STATED POSITION, I FIND THE LD. C OUNSEL FOR THE ASSESSEE COULD NOT DEMONSTRATE WITH ANY EVIDENCE T O SHOW THAT THE OBSERVATION OF THE CIT(A) IS NOT BASED ON FACTS. IN MY VIE W, THE CIT(A) HAS ANALYSED THE 7/12 EXTRACTS PLACED ON RECORD BEFOR E HIM AND FOUND THERE IS NO REFERENCE TO THE SAID CROPS MENTIONED IN THE SAID DOCUMENTS. CIT(A) CALCULATED THE CASH SALES RELATABLE TO T HE SAID CROPS, I.E., COCONUT, SITAFUL, CHIKU, LEMON AND SUGARCANE SEEDS ETC ., THAT WORKED OUT TO RS.4,97,235/- AND CONFIRMED THE SAME IN TH E FIRST APPELLATE PROCEEDINGS. I FIND THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, T HE GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 12. REGARDING THE OTHER ADDITION OF RS.7,50,000/- CONFIRMED B Y THE CIT(A), I FIND THE CONTENTS OF PARA NO.5.2 ARE RELEVANT IN TH IS REGARD. AFTER HEARING BOTH THE SIDES AND ON PERUSING THE FINDING OF THE CIT(A) ON THIS ISSUE, I FIND IT RELEVANT TO REPRODUCE THE SAID FINDING HERE AS UNDER : 5.2 GROUND 3: THIS IS AGAINST THE ACTION OF THE AO IN ADDING RS 7,50,000 BEING THE CAPITAL INTRODUCED IN CASH BY TH E APPELLANT IN HIS CAPITAL ACCOUNT. RS. 2,50,000 EACH HAS BEEN INTRODU CED IN CASH ON 25/04/2012, 24/05/2012 & 20/06/2012. WHEN ASKED TO EXPLAIN THE SOURCE, THE APPELLANT STATED BEFORE THE AO THAT THE KARTA MAINTAINS AN AVERAGE CASH BALANCE OF RS 3 TO 5 LAKHS. THE APPELLANT FURTHER STATED THAT THE FAMILY HAD WITHDRAWN RS. 5,15,300 IN FY 20 12-13 AND RS. 12,50,320 IN FY 2011-12 AND THE CASH NOT CONSUMED O UT OF THESE WITHDRAWALS IS INTRODUCED AS CAPITAL. THE AO DISBEL IEVED THE SUBMISSIONS OF THE APPELLANT AS HE WAS OF THE OPINI ON THAT THERE IS NO NEED FOR THE APPELLANT TO KEEP THE CASH WITHDRAWN I N THE EARLIER YEARS WITH HIM AS UNUTILIZED. BEFORE. ME IT WAS SUBMITTED THAT THE TRANSACTIONS OF WITHDRAWALS ARE REFLECTED IN THE BOOKS OF THE AP PELLANT AND THEREFORE THERE COULD BE NO ADDITION OF UNEXPLAINED CAPITAL. TOWARDS THIS END, THE APPELLANT PRODUCED A COPY OF HIS DRAWING ACCOUNT IN THE BOOKS OF THE 6 HUF FOR THE PERIOD 01/04/2011 TO 31/03/2012, I.E. T HE IMMEDIATELY PRECEDING YEAR. IT IS SEEN FROM THE SAME THAT THE IST WITHDRAWAL IS ON 30/04/2011 AND THERE HAVE BEEN SUBSEQUENT WITHDRAWA LS THROUGHOUT THE YEAR BUT THE SAME HAVE BEEN SHOWN AS BEING ACCU MULATED. THE CLOSING CASH BALANCE IS RS 12,50,320 AS NONE OF THE CASH WITHDRAWN HAS BEEN UTILIZED. I FIND FROM THE NARRATION OF THE ENT RIES IN THE DRAWINGS ACCOUNT THAT THESE ARE TITLED 'CASH WITHDRAWN FOR P ERSONAL EXPENSES'. THE APPELLANT THEREFORE HIMSELF ADMITS THAT THE STATED P URPOSE FOR WITHDRAWAL OF CASH IS FOR 'PERSONAL PURPOSE'. YET AT THE SAME TIME, THE APPELLANT WOULD HAVE ME BELIEVE THAT THE SAME CASH WITHDRAWN FOR PERSONAL PURPOSE HAS ACTUALLY NOT BEEN UTILIZED. THIS IS OF COURSE WITHOUT ANY EVIDENCE TO PROVE THE SAME. LOGICALLY THIS IS POSSI BLE ONLY ONCE OR TWICE. BUT THERE ARE 14 CASH WITHDRAWALS IN FY 2011-12. IF THE APPELLANT HAS FIRST WITHDRAWN CASH IN APRIL 2011 AND THEN NOT UTI LISED IT, IT DOES NOT SEEM PROBABLE THAT SOMEONE WOULD IN THE NORMAL CIRC UMSTANCES WITHDRAW MORE CASH NOT ONCE OR TWICE BUT 14 TIMES. THE DEFENCE OF THE AAPPELLANT IS THEREFORE STRETCHING MY IMAGINATION T OO FAR. I AM THEREFORE INCLINED TO AGREE WITH THE AO ON THIS ISSUE AND HOL D THAT IT IS TOO FAR FETCHED TO SAY THAT CASH WITHDRAWALS MADE ABOUT 14 MONTHS EARLIER HAVE NOT BEEN UTILISED BY THE APPELLANT AND HAVE BEEN RE INTRODUCED AS CAPITAL IN HIS BOOKS IN THE PRESENT A.Y. I THEREFORE CONFI RM THE ACTION OF THE AO ON THIS COUNT AND DISMISS GROUND NO.3. FROM THE ABOVE, IT IS EVIDENT THAT THE EXPLANATION OF THE ASSESSEE IS VERY GENERAL IN NATURE. ASSESSEE ATTEMPTS TO LINK TO THE CAS H WITHDRAWAL OF THE ASSESSEE IN THE PAST ASSESSMENT YEARS AND NO SPE CIFIC EXPLANATION WAS FURNISHED. SUCH GENERAL EXPLANATIONS ARE NOT SUSTA INABLE IN THE INCOME-TAX PROCEEDINGS. IT IS NOT THE CASE THERE THE A SSESSMENT WAS MADE UNDER SEARCH AND SEIZURE PROVISIONS AND THEREFORE, THE AO HAS TO GIVE REBUTTAL WHEN AN EXPLANATION IS GIVEN BY THE ASSESSE E ON THIS KIND OF ADDITION. IT IS ALSO A SETTLED LEGAL PROPOSITION IN LAW THAT THE ASSESSEE IS UNDER OBLIGATION TO PROVE THAT THE SAID WITHDRAWN MONE Y IN CASH WAS USED FOR INTRODUCING INTO THE CAPITAL ACCOUNT. ASSESSEE NEEDS TO DISCHARGE HIS ONUS, WHEN IT COMES TO THE EARNING OF AGRIC ULTURAL INCOME, AN EXEMPT INCOME. HE NEEDS TO DISCHARGE THE SAM E WHEN HE ATTEMPTS TO LINK SUCH EXEMPT INCOME TO THE CASH INTRODU CED INTO THE CAPITAL ACCOUNT DIRECTLY OR INDIRECTLY. FROM THIS POINT OF VIEW AND CONSIDERING THE ABOVE FINDING OF CIT(A), I AM OF THE OPINION T HAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY 7 INTERFERENCE. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE ASSESSEE IS DISMISSED. 13. GROUND NO.3 RAISED BY THE ASSESSEE IS CONSEQUENTIAL IN NATURE AND THEREFORE, THE SAID GROUND IS DISMISSED AS SUCH. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JUNE, 2018. SD/- (D.KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; DATED : 15 TH JUNE, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-2, KOLHAPUR 4. / THE PR.CIT-2, KOLHAPUR 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE