Sanjay Pralhad Bhokar,Surendra Motilal Lodha, Sangli V. Joint Commissioner of Income-tax,

ITA 308/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7476 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: HARI KRISHAN
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Income from undisclosed sources; Deemed to accrue or arise in india; Fair market value
• Section: 69C; 143(3); 133A; 69

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.308/PUN/2014 [ [ / ASSESSMENT YEAR : 2006-07 SHRI SANJAY PRALHAD BHOKARE, M/S. DAILY JANPRAVAS & HOTEL, GANDHARVA, BHOKARE GALLI, MIRAJ, DIST SANGLI. PAN NO. ABPPP3566N. . / APPELLANT V/S JT. COMMISSIONER OF INCOME TAX, RANGE 2, SANGLI. . / RESPONDENT / APPELLANT BY : SHRI HARI KRISHAN / RESPONDENT BY : SHRI MUKESH JHA, JCIT / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) KOLHAPUR, DT.29.11.2013 FOR THE ASSESSMENT YEAR 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN HOTEL BUSINESS AND SALE OF NEWSPAPERS. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y.2006-07 ON 31.10.2006 DECLARING TOTAL INCOME OF RS.21,82,030/- / DATE OF HEARING : 20.06.2017 / DATE OF PRONOUNCEMENT: 15.09.2017 2 AND AGRICULTURAL INCOME OF RS.6,71,575/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.22.12.2008 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS.65,61,070/- AND AGRICULTURAL INCOME AT RS.3,50,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DT.29.11.2013 (IN APPEAL NO.SNL/83/11-12) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.18,70,360.00 MADE BY THE LEARNED ASSESSING OFFICER EXCLUSIVELY ON ASSUMPTION / PRESUMPTION BASIS OF LESS PROFIT SHOWN AND LESS DISCLOSURE DURING THE SURVEY ACTION. THE AFORESAID ADDITION BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJECTURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE IMPUGNED ADDITION MAY PLEASE BE DELETED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.8,50,000.00 AND RS.3,20,000.00 MADE BY THE LEARNED ASSESSING OFFICER MERELY ON THE BASIS OF STATEMENT TAKEN DURING THE SEARCH WITHOUT ANY CORROBORATIVE EVIDENCE. THE AFORESAID ADDITIONS BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJECTURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITIONS. THE IMPUGNED ADDITION MAY PLEASE BE DELETED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,21,575.00 MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES, INSPITE OF THE ACT THAT, THE APPELLANT ASSESSEE IS HAVING AGRICULTURAL INCOME AND SUPPORTED WITH CORROBORATIVE EVIDENCE. THE AFORESAID ADDITION BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE IMPUGNED ADDITIONS MAY PLEASE BE DELETED. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.50,000.00 MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF EXCESS REMUNERATION PAID EXCLUSIVELY ON ASSUMPTION / PRESUMPTION. THE AFORESAID ADDITION BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE IMPUGNED ADDITIONS MAY PLEASE BE DELETED. 3 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.50,000.00 MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF NON-CAPITALIZATION OF INTEREST FROM BANK. THE AFORESAID ADDITION BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE IMPUGNED ADDITIONS MAY PLEASE BE DELETED. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.81,739.00 MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF DISALLOWANCES OF VARIOUS EXPENSE, INSPITE OF THE FACT THAT, THE SAID EXPENDITURE ARE SUPPORTED WITH CORROBORATIVE EVIDENCE. THE AFORESAID ADDITION BEING ARBITRARY, PERVERSE, BASED ON SURMISES AND CONJURE THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE SAID ADDITION. THE IMPUGNED ADDITIONS MAY PLEASE BE DELETED. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT HE DID NOT WISH TO PRESS GROUND NOS.2 AND 5. CONSIDERING THE SUBMISSION OF THE LD.A.R., THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 4. GROUND NO.1 IS WITH RESPECT TO ADDITION OF RS.18,70,360/-. 4.1 A SURVEY U/S 133A WAS CONDUCTED ON 07.02.2006 AND IT WAS FOUND THAT THE BOOKS OF ACCOUNTS WERE WRITTEN TILL 31.01.2006. ON THE BASIS OF DISCREPANCIES NOTICED DURING THE COURSE OF SURVEY ACTION, ASSESSEE DISCLOSED ADDITIONAL INCOME OF RS.34,64,894/- ON VARIOUS ACCOUNTS INCLUDING UNACCOUNTED INCOME FROM UN-RECORDED SALES OF RS.22,09,393/-, EXCESS CASH OF RS.75,501/-, INVESTMENT IN ASSETS AT RS.10,30,000/- AND FURNITURE MATERIAL STOCK AT RS.1,50,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE, AO NOTICED THAT ASSESSEE HAD DISCLOSED NET PROFIT OF RS.20,00,210/- AND NO TRADING ACCOUNT WAS FILED BY THE ASSESSEE. AO WAS OF THE VIEW THAT THE UNRECORDED SALES BY THE SURVEY PARTY WAS TO THE TUNE OF RS.22,09,393/- COULD HAVE FORMED PART OF PROFIT AND LOSS ACCOUNT 4 BUT THE CASH DISCLOSURE AND INVESTMENTS IN ASSETS AND FURNITURE SHOULD NOT HAVE BEEN DISCLOSED IN THE PROFIT AND LOSS ACCOUNT AS IT WAS DISCLOSED UNDER DEEMING PROVISIONS OF SECS.69A AND 69B RESPECTIVELY AS UNACCOUNTED INCOME AND UNACCOUNTED INVESTMENT. HE WAS OF THE VIEW THAT HAD THE AMOUNT OF CASH DISCLOSURE AND INVESTMENT IN FURNITURE AND ASSETS NOT CONSIDERED WHILE CALCULATING THE NET PROFIT, THE NET PROFIT WOULD HAVE BEEN RS.7,44,709/- WHICH ALSO INCLUDED THE PROFIT ON UNRECORDED SALES OF RS.22,09,393/-. HE WAS FURTHER OF THE VIEW THAT IF THE UNACCOUNTED INCOME FROM UNRECORDED SALES IS REDUCED FROM THE NET PROFIT, THE ASSESSEE HAS VIRTUALLY SHOWN NEGATIVE PROFIT OF RS.14,64,684/-. THE ASSESSEE WAS THEREFORE ASKED TO RECONCILE AND EXPLAIN THE NET PROFITS. THE SUBMISSION OF THE ASSESSEE WAS FOUND NOT ACCEPTABLE TO THE AO. AO THEREAFTER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT AND THEN COMPUTED THE NET PROFIT AFTER TAKING INTO CONSIDERATION OF THE PROFITS SHOWN IN LAST THREE YEARS. HE AFTER CONSIDERING THE ESTIMATED NET PROFIT AS WORKED OUT BY HIM AND AFTER INCLUDING THE ADDITIONAL INCOME FROM UNACCOUNTED SALES OF NEWSPAPER AND THE DISCLOSURE MADE BY THE ASSESSEE, DETERMINED THE ADDITION TO TOTAL INCOME AT RS.18,70,360/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 8. AFTER GOING THROUGH THE ASSESSEE'S SUBMISSION AND THE ASSESSMENT ORDER I FIND THAT THE ASSESSING OFFICER WAS VERY MUCH JUSTIFIED IN DERIVING THE CONCLUSION THAT THE APPELLANT HAS NOT DISCLOSED FULL INCOME OFFERED DURING SURVEY OPERATION. APPELLANT CONTENDS THAT DUE TO SEVERAL DEDUCTIONS AND ALLOWANCES, FINAL INCOME IS REDUCED. HOWEVER, IT IS SEEN IN THE COMPUTATION THAT THERE ARE HARDLY ANY DEDUCTIONS AND ALLOWANCES. THE APPELLANT'S INCOME IS REDUCED BY ACCOUNTING ADJUSTMENTS AS POINTED OUT BY THE ASSESSING OFFICER. IF THE INVESTMENT WAS MADE OUT OF UNACCOUNTED SALES, NO DETAILS FOR THE SAME WERE FOUND DURING SURVEY. APPELLANT ALSO 5 CONTENDED THAT IF ASSESSING OFFICER HAD OBJECTION TO INCORPORATING RS.34,64,894/- HE SHOULD POINT OUT THE CORRESPONDING ENTRIES IN ASSET SIDE OF THE BALANCE SHEET. THE REPLY OF THIS CONTENTION WOULD BE THAT THE ASSESSING OFFICER HAS POINTED OUT THESE IRREGULARITIES TO SHOW THAT ALL IS NOT WELL WITH THE APPELLANT'S BOOKS OF ACCOUNT AND THE SAME ARE NOT RELIABLE. THERE CAN BE SEVERAL POSSIBLE ENTRIES ON THE ASSET SIDE WHICH ONLY THE APPELLANT WOULD KNOW SUCH AS, INCREASE IN CASH, INCREASE IN DEBTORS ETC. I AM IN AGREEMENT WITH THE ASSESSING OFFICER'S FINDING THAT BY MAKING VARIOUS ADJUSTMENTS IN THE BOOKS OF ACCOUNT THE APPELLANT HAS NEGATED WHAT WAS OFFERED AS ADDITIONAL INCOME DURING THE SURVEY. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS SUSTAINED AND THE GROUND IS REJECTED. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND FURTHER SUBMITTED THAT THE INVESTMENTS AND EXCESS CASH FLOW PERTAINS TO BUSINESS INCOME AS SUCH THEY WERE RIGHTLY INCLUDED UNDER THE HEAD INCOME FROM BUSINESS. HE FURTHER SUBMITTED THAT, THOUGH NOT ADMITTED, AT THE MOST, INCLUDING THE DISCLOSURES MADE U/S 69 OF THE ACT IN THE PROFIT AND LOSS ACCOUNT COULD BE AN ERROR ON THE PART OF THE ASSESSEE BUT IT CANNOT BE CONSIDERED FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. HE THEREFORE SUBMITTED THAT THE BOOKS OF ACCOUNTS SHOULD NOT HAVE BEEN REJECTED AND THEREFORE THE AO SHOULD NOT HAVE ESTIMATED THE PROFITS. LD.D.R. ON THE OTHER HAND POINTED TO THE VARIOUS OBSERVATIONS OF AO AND SUPPORTED THE ORDER OF AO AND LD. CIT(A). HE FURTHER SUBMITTED THAT THE PRINTING STOCK OF PAPER AS ON 01.04.2009 AND ON THE DATE OF SURVEY IS SAME WHICH IS NOT CORRECT CONSIDERING THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE MORE SO WHEN THE ASSESSEE HAD ADMITTED TO UNACCOUNTED SALES AT THE TIME OF SURVEY. HE FURTHER SUBMITTED THAT ASSESSEE HAD WRONGLY 6 INCLUDED THE DISCLOSURE ACCOUNT OF INVESTMENT, FURNITURE AND STOCK MATERIALS AGGREGATING TO RS.12,55,501/- IN THE PROFIT AND LOSS ACCOUNT WHILE ARRIVING AT GROSS PROFIT. HE SUBMITTED THAT THE SAME CANNOT BE CONSIDERED FOR ARRIVING GROSS PROFIT AS THE ADDITIONS WERE MADE UNDER DEEMING PROVISIONS U/S 69A, 69B AND 69C OF THE ACT. HE THUS SUPPORTED THE ORDER OF AO AND LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO REJECTION OF BOOKS OF ACCOUNTS AND THEREAFTER THE ESTIMATION OF INCOME. WE FIND THAT AO WHILE REJECTING THE BOOKS OF ACCOUNTS HAVE LISTED VARIOUS REASONS WHICH LED HIM TO BELIEVE THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN MAINTAINED PROPERLY. SOME OF THE REASONS POINTED OUT BY HIM ARE NO PROPER EXPLANATION FOR IDENTICAL OPENING AND CLOSING STOCK, WRONGLY CONSIDERING EXCESS CASH AND UNEXPLAINED INVESTMENT IN FURNITURE AND MATERIAL WHICH PERTAINED TO DEEMED INCOME U/S 69A AND 69B OF THE ACT IN THE PROFIT AND LOSS ACCOUNT WHILE WORKING OF THE GROSS PROFIT / NET PROFIT FOR THE YEAR, DISCREPANCIES IN PAPER CONSUMPTION AND OTHER EXPENSES. THE AFORESAID FINDINGS OF AO HAVE NOT BEEN CONTROVERTED BY LD.A.R NOR HAS ASSESSEE POINTED OUT ANY MISTAKE OR FALLACY IN THE FINDINGS OF AO. IN SUCH CIRCUMSTANCES, WE UPHOLD THE ACTION OF AO IN REJECTING BOOKS OF ACCOUNTS. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3) OF THE ACT, THE NEXT STEP IS TO ESTIMATE THE PROFITS. WE FIND THAT FOR THE PURPOSE OF ESTIMATING PROFITS, AO HAS CONSIDERED THE NET PROFITS OF THE ASSESSEE FOR PAST THREE YEARS AND TO IT ADDED THE ADDITIONS MADE U/S 69A AND 69B OF THE ACT AND AFTER GRANTING THE 7 CREDIT FOR THE AMOUNT DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME, MADE ADDITION OF THE BALANCE AMOUNT. BEFORE US, THE LD.A.R. HAS NOT POINTED OUT ANY GRAVE ERROR IN THE METHOD OF ESTIMATION CONSIDERED BY AO. IN SUCH CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS, THE GROUND OF THE ASSESSEE IS DISMISSED. 7. GROUND NO.3 IS WITH RESPECT TO ADDITION IN RESPECT OF AGRICULTURAL INCOME. 7.1 AO NOTICED THAT ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.3,21,575/-. THE ASSESSEE WAS ASKED TO FURNISH THE EVIDENCE OF AGRICULTURAL INCOME AND AGRICULTURAL EXPENSES. ASSESSEE FURNISHED THE CHART OF AGRICULTURAL INCOME / EXPENDITURE (WHICH IS REPRODUCED AT PAGE 25 OF THE ASSESSMENT ORDER). ASSESSEE ALSO FURNISHED THE COPIES OF 7/12 EXTRACTS OF AGRICULTURAL LAND OWNED BY HIM. AO NOTICED THAT ASSESSEE COULD FURNISH THE EVIDENCE OF SALE OF SUGARCANE OF RS.1,11,707/- WHICH WERE DIRECTLY CREDITED TO THE BANK ACCOUNT. WITH RESPECT TO RECEIPT OF BALANCE AMOUNT OF RS.7,15,315/-, THE SUBMISSION OF THE ASSESSEE WAS THAT THE AGRICULTURAL PRODUCE WAS SOLD IN OPEN MARKET TO VARIOUS CUSTOMERS AND THE CASH MEMOS AND BILLS WERE NOT MAINTAINED. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO. AO CONSIDERING THE NET AGRICULTURAL INCOME OF THE ASSESSEE TO BE AT RS.3,50,000/- AND THE BALANCE NET AGRICULTURAL RECEIPTS OF RS.3,21,575/- WERE TREATED AS INCOME FROM OTHER SOURCES. AGGRIEVED 8 BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 9. ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.6,71,575/-. TOTAL AGRICULTURAL RECEIPTS WAS RS.8,27,022/- AND EXPENSES WERE RS.1,55,447/-. DETAILS OF THE INCOME AND EXPENDITURE RELATING TO AGRICULTURAL INCOME WERE CALLED FOR THE ASSESSING OFFICER ALSO ASKED TO FURNISH DETAILS AND EVIDENCES OF EXPENDITURE INCURRED FOR EARNING THE AGRICULTURAL INCOME I.E. EVIDENCES OF SEEDS, FERTILIZER, PESTICIDES, EXPENDITURE TOWARDS CULTIVATION, TILLING AND HARVEST, EXPENDITURE TOWARDS LABOUR PAYMENT AND ANY OTHER EXPENDITURE. THE ASSESSING OFFICER ALSO ASKED FOR DETAILS OF AGRICULTURAL RECEIPTS AND EXPENSES FOR LAST THREE YEARS. THE APPELLANT WAS ALSO SHOW CAUSED THAT IN CASE HE FAILED TO FURNISH THESE DETAILS, TO EXPLAIN WHY NOT THIS INCOME BE TREATED AS INCOME FROM OTHER SOURCES. THE APPELLANT, VIDE LETTER DATED 12/12/2006, FURNISHED COPES OF 7/12 EXTRACT, COPIES OF BILLS AND VOUCHERS. IT WAS STATED THAT COPIES OF RECEIPT OF AGRICULTURAL INCOME WILL BE PRODUCED AT THE TIME OF HEARING. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS ONLY FURNISHED EVIDENCE OF SALE OF SUGARCANE IN RESPECT OF RS.1,11,707/- WHICH WERE DIRECTLY CREDITED TO ACCOUNT WITH SDCC BANK. NO DETAILS AND EVIDENCES IN RESPECT OF BALANCE OF RS.7,15,315/- OF AGRICULTURAL RECEIPTS COULD BE FURNISHED. THE APPELLANT HAS REPLIED THAT BALANCE SALE WAS MADE IN CASH DIRECTLY IN THE MARKET AND, THEREFORE, THERE IS NO SEPARATE EVIDENCE. THE ASSESSING OFFICER CONCLUDED THAT WHEN THE ASSESSEE COULD SELL SUGARCANE TO SUGAR FACTORY IN RESPECT OF SALE OF RS.1,11,707/- WHICH WAS DIRECTLY CREDITED TO ASSESSEES BANK ACCOUNT, WHAT PREVENTED THE ASSESSEE TO MAINTAIN THE BILLS AND VOUCHERS PERTAINING TO THE SALES OF OTHER AGRICULTURAL PRODUCE. THE ASSESSEE DID NOT MAINTAIN ANY BILLS / CASH MEMOS FOR SALE OF ANY AGRICULTURAL PRODUCE TO PROVE THE VERACITY OF AGRICULTURAL RECEIPTS. FURTHER, DEBIT VOUCHERS IN RESPECT OF VARIOUS EXPENSES WERE SELF MADE VOUCHERS. IN VIEW OF THESE OBSERVATIONS, THE ASSESSING OFFICER CONSIDERED AGRICULTURAL RECEIPT TO BE RS.3,50,000/- AND TREATED THE BALANCE OF RS.3,21,575/- AS INCOME FROM OTHER SOURCES. 10. IN APPEAL THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REPEATED THE ARGUMENTS PRODUCED BEFORE THE ASSESSING OFFICER THAT AGRICULTURAL PRODUCE WAS SOLD IN OPEN MARKET THROUGH TRADERS ETC. IT WAS SUBMITTED THAT THE ASSESSEE HAS FURNISHED DETAILS OF AGRICULTURAL LAND, BILLS AND VOUCHERS OF AGRICULTURAL EXPENSES AND DETAILS OF AGRICULTURAL RECEIPTS. HOWEVER, THE APPELLANT HAS NOT REPLIED TO THE ASSESSING OFFICERS OBSERVATION THAT EXPENSES WERE MOSTLY SUPPORTED BY SELF-MADE VOUCHERS; EVEN THE PURCHASE OF FERTILIZERS WAS SUPPORTED BY SELF-MADE VOUCHERS. THEREFORE, I FIND THAT THE ASSESSING OFFICERS ACTION IN CONSIDERING RS.3,21,575/- AS INCOME FROM OTHER SOURCES IS JUSTIFIED. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 9 8. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE OWNS 8 ACRES OF LAND. HE FURTHER SUBMITTED THAT ASSESSEE HAD SHOWN NET AGRICULTURAL INCOME OF RS.4,70,000/- IN A.Y. 2002-03, RS.5,20,000 IN A.Y. 2003-04, RS.6,40,000/- IN A.Y. 2004-05 AND RS.6,71,575 IN A.Y. 2005-06. HE SUBMITTED THAT THE LAND OWNED BY THE ASSESSEE IS WELL IRRIGATED AND HE GROWS CROPS LIKE SUGAR CANE, COCONUT ON THESE LANDS. IT WAS SUBMITTED THAT IN SUCH A SITUATION, THE INCOME SHOWN BY THE ASSESSEE FROM AGRICULTURAL OPERATIONS COULD NOT BE DOUBTED. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE ESTIMATION OF AGRICULTURAL INCOME. BEFORE US, IT IS ASSESSEES SUBMISSION THAT THE LAND OWNED BY HIM IS WELL IRRIGATED AND HE RAISED CROPS LIKE SOYABEAN, SUGARCANE ETC. FURTHER THE SUBMISSION OF THE ASSESSEE THAT HE HAS BEEN SHOWING AGRICULTURAL INCOME IN EARLIER YEARS WHICH RANGED FROM RS.4,70,000/- IN A.Y. 2003-04 TO RS.6,71,575/- IN A.Y. 2005-06 . THE AFORESAID SUBMISSIONS OF ASSESSEE HAVE NOT BEEN CONTROVERTED BY REVENUE. BEFORE US, REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD, TO SHOW THAT THE ASSESSEE DOES NOT OWN THE LAND OR HAS SOLD THE LAND OR THE LAND IS NOT WELL IRRIGATED. CONSIDERING THE INCOME SHOWN BY THE ASSESSEE IN EARLIER YEARS WHICH HAS ALSO NOT BEEN DOUBTED BY THE REVENUE AND CONSIDERING THE FACT THAT THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME OF RS.6,71,575/- IN THE YEAR UNDER CONSIDERATION AS COMPARED TO THE INCOME OF RS.6,40,000/- SHOWN IN IMMEDIATELY 10 PRECEDING YEAR, THE INCOME SHOWN BY THE ASSESSEE SEEMS TO BE REASONABLE. CONSIDERING THE TOTALITY OF THESE FACTS, WE ARE OF THE VIEW THAT THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE DOES NOT REQUIRE ANY INTERFERENCE AND THE AO WAS NOT JUSTIFIED IN ESTIMATING THE AGRICULTURAL INCOME AND TREATING RS.6,71,575/- AS INCOME FROM OTHER SOURCES WITHOUT ANY EVIDENCE TO THE CONTRARY. IN VIEW OF THE AFORESAID FACTS, WE SET ASIDE THE ORDER OF AO IN TREATING THE INCOME OF RS.3,21,575/- AS INCOME FROM OTHER SOURCES AND DIRECT TO CONSIDER IT AS INCOME FROM AGRICULTURE. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 10. 4 TH GROUND IS WITH RESPECT TO ADDITION OF RS.50,000/- ON ACCOUNT OF EXCESS REMUNERATION 10.1 ON PERUSING THE DETAILS OF ACCOUNTS FURNISHED, AO NOTICED THAT ASSESSEE HAD PAID RS.1,56,000/- AS SALARY TO SMT. POURNIMA S. BHOKARE, WIFE OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO JUSTIFY THE PAYMENT OF SAID SALARY TO WHICH ASSESSEE INTER-ALIA SUBMITTED THAT SHE IS A GRADUATE AND HELPS THE ASSESSEE IN THE NEWS PAPER PRINTING BUSINESS LIKE READING, EDITING AS THE NEWSPAPER HAS TO BE PRINTED AND PUBLISHED IN TIME. THE SUBMISSION OF THE ASSESSEE WAS FOUND NOT ACCEPTABLE TO THE AO, IN VIEW OF THE FACT THAT ASSESSEE HAD PAID SALARY RANGING BETWEEN RS.78,620/- TO A MAXIMUM OF RS.1,06,485/- TO VARIOUS EMPLOYEES. HE THEREFORE CONSIDERED THE SALARY PAID TO HIS WIFE TO BE EXCESSIVE. HE WAS OF THE VIEW THAT THE REASONABLE SALARY SHOULD BE RS.1,06,000/- AND ACCORDINGLY DISALLOWED THE BALANCE AMOUNT OF RS.50,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE 11 CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 12. REGARDING THE DISALLOWANCE OUT OF WIFES SALARY, THE APPELLANT HAD SUBMITTED THAT SHE HAS SHOULDERED SEVERAL ADDITIONAL RESPONSIBILITIES DUE TO WHICH THERE WAS INCREASE IN THE BUSINESS, THEREFORE, SHE DESERVED A RAISE IN HER SALARY. MOREOVER, THE PAYMENT TO A RELATIVE IS ALWAYS LIKELY TO BE MORE THAN A NON-RELATIVE BECAUSE OF THE LEVEL OF CONFIDENCE A RELATIVE INSPIRES. HOWEVER, THESE REASONS CANNOT BE ACCEPTED. I FIND THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS.50,000/- FROM THE SALARY PAID TO ASSESSEES WIFE. APPELLANTS GROUND IS REJECTED. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US. 11. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND FURTHER SUBMITTED THAT IN EARLIER YEARS THE SALARY TO THE WIFE WAS RS.1,42,000/- AND DURING THE YEAR IT WAS INCREASED TO RS.1,56,000/- (I.E., 13,000/- PER MONTH). HE SUBMITTED THAT FOR INVOKING PROVISIONS OF SEC.40A(2)(B) IT HAS TO BE SHOWN AS TO HOW THE AMOUNT IS EXCESSIVE OR HOW THE AMOUNT IS NOT REASONABLE AND THE AO IS REQUIRED TO ASSESS FAIR MARKET PRICE AND GIVE COMPARATIVE INSTANCES FOR PAYMENT. IN THE PRESENT CASE, HE SUBMITTED THAT THE SERVICES RENDERED BY THE WIFE OF THE ASSESSEE HAS NOT BEEN DOUBTED. IN SUCH CIRCUMSTANCES, THE AO WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SEC.40A(2)(B) OF THE ACT. HE THEREFORE SUBMITTED THAT NO DISALLOWANCE WAS CALLED FOR. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF AO AD LD. CIT(A). 12 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE U/S 40A(2)(B) OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE PAYMENT OF SALARY TO ASSESSEES WIFE IS COVERED UNDER THE PROVISIONS OF SEC.40A(2)(B) OF THE ACT. IT IS ALSO A FACT THAT THE ASSESSEE HAS PAID SALARY TO HIS WIFE IN EARLIER ALSO AND THE INCREASE IN SALARY AS COMPARED TO EARLIER YEAR IS 10%. IT IS ALSO A FACT THAT THE SERVICES RENDERED BY THE WIFE OF THE ASSESSEE TO THE BUSINESS OF THE ASSESSEE HAVE NOT BEEN DOUBTED BY THE REVENUE. FOR INVOKING PROVISIONS OF SEC.40A(2)(B) OF THE ACT. AO IS REQUIRED TO FORM AN OPINION HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES RENDERED. THE AO HAS TO RECORD A FINDING AS TO WHETHER THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE IN RELATION TO THE REQUIREMENTS OF SEC.40A(2)(B) OF THE ACT. AO HAS TO PROVE THAT THE TRANSACTION IS NOT BONAFIDE OR THE VALUE OF SERVICES PAID BY THE ASSESSEE IS NOT IN CONSONANCE WITH THE FAIR MARKET VALUE. THE OPINION OF THE AO SHOULD BE FORMED OBJECTIVELY FROM THE POINT OF VIEW OF A PRUDENT BUSINESSMAN AND TAKING INTO CONSIDERATION ALL THE RELEVANT CIRCUMSTANCES. IN THE PRESENT CASE, WE ARE OF THE VIEW THAT AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE SALARY OF THE WIFE OF THE ASSESSEE IS EXCESSIVE SO AS TO INVOKE THE PROVISIONS OF SEC.40A(2)(B) OF THE ACT. IN SUCH A SITUATION WE ARE OF THE VIEW THAT NO DISALLOWANCE OF EXPENSES ON ACCOUNT OF EXCESS SALARY PAYMENT WAS CALLED FOR. THUS THE GROUND OF THE ASSESSEE IS ALLOWED. 13 13. GROUND NO.6 IS WITH RESPECT TO DISALLOWANCE OF RS. EXPENDITURE OF RS.81,739/-. 13.1. AO NOTICED THAT ASSESSEE HAD DEBITED VARIOUS EXPENSES ON ACCOUNT OF TELEPHONE CHARGES AND TRAVELLING EXPENSES AGGREGATING TO RS.4,08,699/- (THE DETAILS OF WHICH ARE PLACED AT PAGE 33 OF THE ASSESSMENT ORDER). AO WAS OF THE VIEW THAT SINCE ASSESSEE HAS NOT MAINTAINED ANY TELEPHONE / MOBILE CALL REGISTER, THE ELEMENT OF PERSONAL EXPENSES CANNOT BE RULED OUT. HE ACCORDINGLY DISALLOWED RS.20% OF EXPENSES AND MADE DISALLOWANCE OF RS.81,739/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 14. DISALLOWANCE OF VARIOUS EXPENSES FOR PERSONAL NATURE IS HEREBY CONFIRMED. THE DISALLOWANCE OF POOJA EXPENSES OF RS. 5,369/- IS DELETED BECAUSE THESE KIND OF EXPENDITURE ARE CUSTOMARY EXPENDITURE WHICH ARE TO BE INCURRED IN THE SOCIETY. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE US. 14. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAD INCURRED SIMILAR EXPENSES IN EARLIER YEARS BUT NO ADHOC DISALLOWANCE WAS MADE IN ASSESSEES CASE IN EARLIER YEARS. HE THEREFORE SUBMITTED THAT THE DISALLOWANCE OF EXPENSES IS NOT WARRANTED. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AO HAD DISALLOWED 20% OF TELEPHONE AND 14 TRAVELLING EXPENSES CONSIDERING THAT THE PERSONAL ELEMENT OF EXPENSES IS NOT BEING RULED OUT. BEFORE US, ASSESSEE HAS STATED THAT NO SUCH EXPENSES HAVE BEEN DISALLOWED BY REVENUE IN EARLIER YEARS. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE ENDS OF JUSTICE SHALL BE MET IF THE DISALLOWANCE OF EXPENSES IS RESTRICTED TO 10% OF THE EXPENSES. WE THUS DIRECT ACCORDINGLY. THUS THE GROUND OF ASSESSEE IS PARTLY ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 15 TH DAY OF SEPTEMBER, 2017. SD/- SD/- SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 15 TH SEPTEMBER, 2017. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A), KOLHAPUR. CIT-I / II, KOLHAPUR / CIT(CENTRAL), PUNE. , , / DR, ITAT, A PUNE; [ / GUARD FILE. / BY ORDER , // / TRUE C / / // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE.