SHRI HARMINDER SINGH, AMRITSAR V. INCOME TAX OFFICER WARD 4 (2), AMRITSAR

ITA 3/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3345 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-01-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 01-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Business income; Opportunity of being heard; Additional evidence; Capital receipt; Set aside
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 03/ASR/2018 AS SESSMENT YEAR: 2006-07 HARMINDER SINGH, HOUSE NO. 62-VILLAGE BHAINI BAHESHIAN P.O. BHORSHI RAJPUTANA, P S KHALCHIAN BABA BAKALA, AMRITSAR [PAN: AYCPS 7047K] VS. INCOME TAX OFFICER, WARD-4(2), AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 14.02.2019 DATE OF PRONOUNCEMENT: 20.03.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL ARISING OUT OF THE ORDER BY THE C OMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR ('CIT(A)' FOR SHORT) DATE D 22.11.2017, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING HIS ASSESSMENT U/S . 144 OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR THE ASSESSMENT YEA R (AY) 2006-07 VIDE ORDER DATED 24.12.2008. 2. RETURN DISCLOSING BUSINESS AND AGRICULTURAL INCO ME AT RS.1,03,500/- AND RS.2,85,000 RESPECTIVELY FOR THE RELEVANT YEAR WAS FILED BY THE ASSESSEE ON 30.3.2007. THE SAME WAS SUBJECT TO THE VERIFICATION PROCEDURE UNDER THE ACT ON RECEIPT OF INFORMATION ABOUT CASH DEPOSITS OF RS.11 .35 LACS IN THE ASSESSEES SAVING ITA NO. 03/ASR/2018 (AY 2006-07) HARMINDER SINGH V. ITO 2 BANK ACCOUNT WITH HDFC BANK, KABIR PARK, AMRITSAR. AS, HOWEVER, NOTICES U/S. 143(2) (THREE IN NUMBER), DULY SERVED (THE FIRST BE ING ON 16.01.2008), REMAINED UNRESPONDED, ASSESSMENT WAS COMPLETED U/S. 144 BY B RINGING THE SAID CASH DEPOSITS IN THE ASSESSEES BANK ACCOUNT TO TAX. THE AGRICULTURAL INCOME, IN THE ABSENCE OF ANY EVIDENCE, WAS TREATED AS BUSINESS IN COME, ASSESSING THE TOTAL INCOME, THUS, AT RS.15.24 LACS. THE APPEAL, HOWEVER , CAME TO BE FILED ONLY ON 29.6.2017 , WHICH WAS REGARDED AS VALID BY THE LD. CIT(A) AS THE ASSESSMENT ORDER HAD NOT BEEN COMMUNICATED, AND THE NOTICE OF DEMAND SERVED ON THE ASSESSEE ONLY ON 23.06.2017. THE CASH DEPOSITS (OF RS.11.35 LACS) COMPRISED, IN THE MAIN, OF TWO MAJOR AMOUNTS, I.E., RS.2.25 LACS (ON 05.11.2005) A ND RS.9 LACS (ON 20.2.2006). THE FORMER WAS EXPLAINED AND ACCEPTED AS OUT OF CAS H WITHDRAWALS OF RS.1.95 LACS ON 21.10.2005 (RS.30,000) AND 28.10.2005 (RS.1,65,0 00). THAT IS, TO THAT EXTENT. THE ASSESSEE FURNISHING J-FORMS (FOR SALE OF AGRICU LTURAL PRODUCE) FOR RS.5,18,196, THE LD. CIT(A) ALLOWED FULL CREDIT FOR THE SAME. NO CREDIT FOR MINOR SUMS, AGGREGATING TO RS.25,000, WITHDRAWN DURING THE YEAR , WAS THOUGH ALLOWED, REGARDING THE SAME AS FOR HOUSEHOLD AND/OR AGRICULT URAL PURPOSES. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. BEFORE ME, THE ASSESSEES CASE WAS THAT NO CREDI T FOR THE RETURNED INCOME HAD BEEN ALLOWED. THE ASSESSEE HAD IN FACT RETURNED AGRICULTURAL INCOME AT RS.9.33 LACS FOR AY 2011-12, WHICH HAD BEEN ACCEPTED AS SUC H (PB PGS. 41 - 44). THE REVENUES CASE IS THAT THE ASSESSEE HAD BEEN ALLOWE D EXCESS CREDIT TOWARD AGRICULTURAL INCOME IN-AS-MUCH AS THE SAME IS ADMIT TED AT RS.2.85 LACS ONLY. NO ADJUSTMENT FOR HOUSEHOLD EXPENSES HAD ALSO BEEN MAD E, I.E., IN ARRIVING AT THE CASH AVAILABILITY WITH THE ASSESSEE. 4. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. ITA NO. 03/ASR/2018 (AY 2006-07) HARMINDER SINGH V. ITO 3 4.1 MY FIRST OBSERVATION IN THE MATER IS THAT THE F RAMING OF ASSESSMENT U/S. 144 OF THE ACT IS NOT UNDER CHALLENGE, BEING NOT SO EVE N BEFORE THE APPELLATE AUTHORITY. 4.2 MY SECOND OBSERVATION IS THAT THE LD. CIT(A) HA S NOT ISSUED ANY FINDING AS TO THE STATUS OF RS.2.85 LACS RETURNED AS AGRICULTURAL INCOME, THOUGH ASSESSED AS BUSINESS INCOME, WHICH WAS FOR WANT OF EVIDENCE. WH ILE THIS COULD BE AS THE SAME WAS NOT DISPUTED BEFORE HIM, THE AGRICULTURAL INCOM E, EVEN TAKING IT AT THE ADMITTED AMOUNT, IT COULD NOT EXCEED RS.2.85 LACS, EVEN AS O BSERVED DURING HEARING. THE LD. CIT(A), ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46 A(1)(C), OUGHT TO HAVE SOUGHT THE AOS REPORT IN THE MATTER, AS ENVISAGED BY LAW (RULE 46A(3)). THIS WOULD HAVE LED TO, APART FROM VERIFICATION OF THE ASSESSEES C LAIMS, INPUTS OF THE ASSESSING AUTHORITY, OF WHICH THERE IS NO REFERENCE IN THE OR DER, EVEN AS HE STATES OF HAVING CONFRONTED THE SAID EVIDENCE TO THE AO PER ORDER-SH EET ENTRY. IN FACT, THE LD. CIT(A) HAVING FOUND THE ASSESSEE TO BE DURING THE R ELEVANT YEAR OWNER OF 8 KILLAS OF LAND, OUGHT TO HAVE CORRELATED HIS THIS FINDING WITH DISCLOSURE AND, MORE IMPORTANTLY, THE ASSESSMENT OF AGRICULTURAL INCOME, WHICH CONTINUES TO BE AT NIL. THAT IS, WHILE THE ASSESSEE IS FOUND TO HAVE SOME A GRICULTURAL INCOME FOR THE YEAR, HIS ENTIRE INCOME IS ASSESSED AS NON-AGRICULTURAL. THE SECOND INCONSISTENCY IS THAT THE CREDIT ALLOWED TOWARD AGRICULTURAL INCOME COULD NOT EXCEED THAT ASSESSED, WHICH IS, THUS, AT NIL. THE THIRD INCONSISTENCY, AS POINTED OUT BY THE COUNSEL FOR THE ASSESSEE, SH. ARORA, IS THE NON-ALLOWANCE OF ANY CR EDIT AGAINST INCOME RETURNED (AND ASSESSED), I.E., RS.1.04 LACS, THOUGH, WITHOUT DOUBT, WITHDRAWAL FOR HOUSEHOLD PURPOSES, BE IT FROM AGRICULTURAL OR NON-AGRICULTUR AL INCOME, IS TO BE TAKEN INTO ACCOUNT, WHICH HAS NOT BEEN BY THE LD. CIT(A), AGAI N EMPHASIZING THE NEED FOR SEEKING A REMAND REPORT BY HIM, PARTICULARLY AS THE ASSESSMENT WAS MADE IN THE ABSENCE OF ANY EXPLANATION BY THE ASSESSEE BEFORE H IM BY THE AO. ITA NO. 03/ASR/2018 (AY 2006-07) HARMINDER SINGH V. ITO 4 4.3 CONTINUING FURTHER, THE CREDIT ALLOWED IN EXPLA INING A BANK DEPOSIT, IT MUST BE APPRECIATED, IS ONLY ON THE PRINCIPLE THAT THE S AME INCOME CANNOT BE SUBJECT TO TAX TWICE, I.E., ON IT BEING EARNED WHETHER AGRIC ULTURAL OR NON-AGRICULTURAL, AND, THEN, ON ITS DEPOSIT IN BANK. THE TOTAL INCOME RETU RNED IS RS.3.89 LACS, WHILE THE CREDIT ALLOWED OTHER THAN FOR REDEPOSIT OF CASH W ITHDRAWALS, IS RS.5.18 LACS, EVEN AS, WITHOUT DOUBT, A PART OF THE INCOME WOULD HAVE BEEN CONSUMED FOR HOUSE-HOLD PURPOSES. NO DOUBT, IT COULD BE ARGUED THAT RS.5.18 LACS REPRESENTS THE SALE PROCEEDS OF AGRICULTURAL PRODUCE AND NOT THE INCOME IMBEDDED THEREIN. THAT IS, THE BALANCE REPRESENTS THE CAPITAL INVOLVED IN THE AGRI CULTURAL ACTIVITY. THE QUESTION, HOWEVER, IS IF THIS CAPITAL, DEPOSITED IN BANK, IS NOT WITHDRAWN, AS IT HAS NOT BEEN THERE BEING NO SIGNIFICANT WITHDRAWALS AFTER 28/10/ 2005 (PB PGS. 4-5), HOW DOES THE ASSESSEE EXPLAIN THE SUSTENANCE OF AGRICULTURAL ACTIVITY OR THE AGRICULTURAL INCOME OF THE NEXT SEASON (RABI), WITH IN FACT THE AGRICULTURAL INCOME SHOWING AN INCREASING TREND, SO THAT, RATHER, A LARGER CAPITAL WOULD HAVE BEEN DEPLOYED. IN OTHER WORDS, WHILE THE EXTENT OF AGRICULTURAL INCOME IS N OT DETERMINED, CREDIT STANDS ALLOWED BY THE LD. CIT(A) AGAINST CAPITAL RECEIPT, WHICH CANNOT BE, AT LEAST IN THE NORMAL COURSE. THAT IS, UNLESS PROPER ACCOUNTS ARE MAINTAINED, IN WHICH CASE THE CAPITAL DEPLOYED AT DIFFERENT TIMES IN VARIOUS ACTI VITIES WOULD ITSELF GET REFLECTED. IN ANY CASE, AS ALSO INDICATED EARLIER, AND EVEN AS TH E ASSESSEE HAS NOT CONTESTED THIS ASPECT OF HIS ASSESSMENT BEFORE THE TRIBUNAL, THE A GRICULTURAL INCOME, BEING EVEN OTHERWISE TAX-EXEMPT (THOUGH INCLUDED FOR RATE PURP OSES) OUGHT TO BE DETERMINED, I.E., IN KEEPING WITH THE FACT OF THE ASSESSEE BEIN G DURING THE YEAR AN OWNER/CULTIVATOR OF 8 KILLAS OF LAND. IN FACT, THER E IS A VAST VARIATION IN THE YIELD (OUTPUT) FOR THE TWO HARVESTS SEASONS, I.E., RS.906 03 (RABI) AND RS.4,27,593 (KHARIF), WHICH ALSO NEEDS TO BE SATISFACTORILY EXP LAINED. IS IT, FOR INSTANCE, THAT SOME AGRICULTURAL LAND IS TAKEN ON LEASE IN THE SEC OND HALF OF THE YEAR? WHAT IS THE ITA NO. 03/ASR/2018 (AY 2006-07) HARMINDER SINGH V. ITO 5 NATURE OF THE PRODUCE; DOES THE QUANTITY CORRESPOND WITH THE LAND UNDER CULTIVATION, ETC. THIS ALSO ASSUMES RELEVANCE AS THE SAID INCOME IS TAX-EXEMPT. THE OTHER PART OF THE ADJUSTMENT AS DIRECTED BY THE LD. CIT(A), I.E., REDEPOSIT OF CASH WITHDRAWALS (RS.1.95 LACS), IS APPARENTLY I N ORDER. HOWEVER, IN-AS-MUCH AS THE SAME MAY RELATE TO AGRICULTURAL ACTIVITY/S, IT WOULD ALSO NEED TO BE REVISITED. THIS IS AS TO THE EXTENT THE SAME MAY REPRESENT WIT HDRAWALS OF THE DEPOSIT OF PROCEEDS OF AGRICULTURAL PRODUCE (AS, FOR EXAMPLE, RS.90,603, RECEIVED ON 23.4.2005), IT MAY NOT BE PROPER TO ISSUE ANY FINAL FINDING IN ITS RESPECT. THIS IS AS CREDIT FOR A PARTICULAR RECEIPT CANNOT BE ALLOWED T WICE. THE WITHDRAWAL OF RS.1.95 LACS MAY BE OUT OF RS.2.29 LACS RECEIVED BY THE ASS ESSEE ON 07.10.2005. IT IS TO BE NOTED THAT FORM-J (FOR RS.1,98,409), AS WELL AS THE CASH DEPOSIT (OF RS.2.25 LACS), IS VERY PROXIMATE, BOTH IN AMOUNT AND TIME, BEING DATE D 02.11.2005 AND 05.11.2005 RESPECTIVELY, SO THAT IT COULD AND, RATHER, MOST LI KELY WOULD BE, THE DEPOSIT OF THE AGRICULTURAL PROCEEDS. THE WITHDRAWAL WOULD ALSO EXPLAIN THE NEED TO MAINT AIN THE CAPITAL IN THE AGRICULTURAL ACTIVITY, REFERRED TO E ARLIER. 5. THE IMPUGNED ORDER, FOR THE AFORESAID REASONS, I S INCHOATE. THE SAME IS, ACCORDINGLY, VACATING THE FINDINGS ISSUED THEREBY, SET ASIDE, AND THE APPEAL RESTORED BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY F OR DETERMINING AFRESH THE ISSUES ARISING, DELINEATED ABOVE, AFTER ALLOWING THE PARTI ES BEFORE HIM PROPER OPPORTUNITY OF BEING HEARD, PER A SPEAKING ORDER. IT IS TO BE A PPRECIATED THAT THE NATURE AND SOURCE OF CASH DEPOSITS, WHICH ARE TO BE EXPLAINED SATISFACTORILY BY THE ASSESSEE, IS INEXTRICABLY LINKED TO THE EARNING OF THE INCOME ON ONE HAND, AND THE AVAILABILITY OF CASH ON THE OTHER, I.E., HAVING REGARD TO THE NEED TO MAINTAIN CAPITAL AS WELL AS HOUSE-HOLD NEEDS. THE ASSESSEE NOT MAINTAINING ACCO UNTS, A MONTHLY CASH FLOW STATEMENT, TAKING ALL THE RELEVANT FACTORS INTO ACC OUNT, DRAWING REASONABLE INFERENCES THERE-FROM, SHOULD LEAD TO A PROPER CONC LUSION. BEFORE PARTING WITH THIS ITA NO. 03/ASR/2018 (AY 2006-07) HARMINDER SINGH V. ITO 6 ORDER, I CONSIDER IT PERTINENT TO THE MENTION THAT THOUGH THE ADMISSION OF ADDITIONAL EVIDENCES BY THE LD. CIT(A), STRICTLY SPEAKING, COU LD NOT BE AS IT AMOUNTS TO CONVERTING A SECTION 144 NOT CHALLENGED, ASSESSME NT INTO A S.143(3) ASSESSMENT, IT IS PARAMOUNT THAT THE JUSTICE PREVAILS. ONLY A PROP ER APPLICATION OF MIND WOULD ENSURE THAT BY CAUSING TO BRING ONLY THE CORRECT IN COME TO TAX. NEEDLESS TO ADD, TO THE EXTENT THE INCOME IS ASSESSED AS AGRICULTURAL, THE SAME IS TAX-EXEMPT (THOUGH INCLUDED FOR RATE PURPOSES). I DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN CO URT ON MARCH 20, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 20.03.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: HARMINDER SINGH, HOUSE NO. 6 2-VILLAGE BHAINI BAHESHIAN P.O. BHORSHI RAJPUTANA, P S KHA LCHIAN BABA BAKALA, AMRITSAR (2) THE RESPONDENT: INCOME TAX OFFICER, WARD-4( 2), AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED TRUE COPY (5) THE SR. DR, I.T.A.T. BY ORDER