THILAK RAM ANJANI RAM, KRISHNAGIRI V. ITO, WARD-1, KISHNAGIRI

ITA 327/CHNY/2021

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The case involves Thilak Ram Anjani Ram, a Chartered Accountant, who appealed against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, which sustained additions made towards cash deposits during the demonetization period. The Assessing Officer had initially made additions of Rs. 9,04,500 after allowing a deduction of Rs. 2.5 lakhs, considering the income declared by the assessee for the assessment year 2017-18. The Tribunal found that the Assessing Officer had partially accepted the assessee's explanation and allowed relief to the extent of Rs. 2,50,000. The Tribunal also noted that the Assessing Officer did not dispute the extent of land held by the assessee and the agricultural operations carried out. However, it was concluded that the assessee could not provide complete details to explain the source of all cash deposits, leading to the partial relief granted.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134711 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 01-08-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 13-09-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 69

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए (एस एम सी)’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A(SMC)’ BENCH, CHENNAI ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI MANJUNATHA. G, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 327/Chny/2021 िनधाᭅरण वषᭅ / Assessment Year: 2017-18 Thilak Ram Anjani Ram, 397, Santhur Village and Post, Pochampalli Tk, Krishnagiri 635 206. [PAN: ADRPT-7580-N] v. ITO, Ward-1, Krishnagiri. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri. R. Viswanathan, FCA ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. D. Hema Bhupal, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 02.08.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 11.08.2023 आदेश /O R D E R This appeal filed by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 16.07.2021 and pertains to assessment year 2017-18. 2. The assessee has raised the following grounds of appeal: “1. The order dated 16.07.2021 of the Learned CIT(A)- Salem in ITA No. /11210/2019-20 for the Assessment year AY 2017-2018 is contrary to facts, opposed to law and untenable. :-2-: ITA. No:327/Chny/2021 2. The Ld AO failed to follow the Standard Operating procedure as laid out by the CBDT in the instruction no 03/2017 2.1 The Ld AO failed to follow the spirit of the instruction no 4/2017 and failed to follow the instructions of CBDT on operation Clean money Assessments 3. The Learned CIT-A erred in making the addition on account of cash deposited in the bank account out of clear finding of facts alleging the same to be income chargeable to tax u/s 68 without appreciating the facts of the case and the scope of provisions of above section. 3.1 The Learned CIT A erred in making the addition in respect of cash deposited in the bank account which were represented by Sale of Agricultural products in the hands of the Appellant as per the books of account u/s 68 and in any case addition could not be made in respect of cash balance as per books of account as on 01.04.2016 in view of clear instructions No 03/2017 of CBDT in this regard. 4. The Learned CIT A ought to have considered Specified Bank Notes (Cessation of Liabilities) Act, 2017 clearly states that the specified bank notes shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act from the appointed date, i.e. 31 December, 2016 4.1 The Learned CIT A failed to appreciate the Section 5 of SBN (Cessation of Liabilities) Act, 2017 which mentions appointed dated as 31 December 2016 5. The Learned CIT A erred in applying provisions of Section 115BBE of the Act in the facts and circumstances of the case of Appellant and determining the tax-liability as per the aforesaid Section without appreciating that provisions of Section 68 were not applicable in the facts of the case and, therefore, provisions of Section 115BBE of the Act could not be invoked For these and other grounds that may be permitted to be adduced before or during the course of hearing, the Appellant prays that the appeal be allowed and the order of :-3-: ITA. No:327/Chny/2021 Learned Commissioner of Income Tax (Appeals) be deleted in so far as upholding the action of learned Assessing officer.” 3. The brief facts are that, the appellant is a Chartered Accountant, deriving income from profession, income from other source and income from agricultural activities. The assessee filed his return of income for the assessment year 2017-18, declaring total income of Rs. 2,38,240/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has deposited a sum of Rs. 11,54,500/- in specified bank notes during demonetization period to his bank account and thus, called upon the assessee to explain source for cash deposits. In response to the notice, the assessee vide his letters dated 16.10.2019 & 04.12.2019, submitted that source for cash deposits is out of agricultural income, being nursery activities carried out in the land. The assessee further submitted various evidences including details of land holding and certificate from the VAO to prove carrying out agricultural operations. The Assessing Officer, however was not satisfied with the explanation furnished by the assessee and according to the Assessing Officer, the assessee has not filed his return :-4-: ITA. No:327/Chny/2021 of income for earlier assessment years, even though he claims to have earned agricultural income. The Assessing Officer, further noted that although the assessee does not come under exempted category, but claims to have been accepted cash from various parties for sale of agricultural products. Therefore, rejected the arguments of the assessee and made additions towards cash deposits of Rs. 9,04,500/-, after allowing deduction for a sum of Rs. 2.5 lakhs, by considering the income declared by the assessee for the impugned assessment year and made additions u/s. 69 of the Income- tax Act, 1961 (hereinafter referred to as “the Act”). The assessee carried the matter in appeal before the first appellate authority, but could not succeed. The ld. CIT(A) vide their order dated 16.07.2021, rejected arguments of the assessee and sustained additions made towards cash deposits u/s. 69 of the Act. Aggrieved by the ld. CIT(A) order, the assessee is in appeal before us. 4. The Ld. Counsel for the assessee, referring to various documents including details of land holding and certificate of VAO submitted that, the Assessing Officer erred in disputing the fact that the assessee is carrying out agricultural :-5-: ITA. No:327/Chny/2021 operations. Further, although the assessee did not file his return of income for earlier assessment years, but fact of the matter is that the Assessing Officer cannot disregard land held by the assessee and agricultural operations carried out during the earlier period. Further, just because the assessee did not file his return of income, any adverse inference cannot be drawn against explanation offered for source for cash deposits. Therefore, he submitted that the Assessing Officer and CIT(A) are completely erred in not appreciating fact while making additions towards cash deposits during demonetization period. 5. The ld. DR, on the other hand supporting the order of the ld. CIT(A) submitted that, although the assessee claims to have carried out agricultural operations in the past, no return of income has been filed for earlier assessment years. Further, the assessee has filed return of income for the first time for the impugned assessment year and declared income from business, but no agricultural income has been declared. The Assessing Officer, after considering relevant facts has rightly made additions towards cash deposits during demonetization period and their order should be upheld. :-6-: ITA. No:327/Chny/2021 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The fact with regard to the impugned dispute are that the assessee has deposited a sum of Rs. 11,54,500/- in specified bank notes during demonetization period to his bank account. The assessee claims to have received cash from sale of agricultural products from various parties and deposited into his bank account. To support his arguments, the assessee has filed details of land holding including Patta, adangal etc., and also obtained a certificate from VAO to prove carrying out agricultural operations. The Assessing Officer, partially accepted the explanation of the assessee and has allowed deduction of Rs. 2,50,000/-, towards cash deposits in specified bank notes during demonetization period. Therefore, from the above, it is very clear that the Assessing Officer never disputed extent of land held by the assessee and deriving income from agricultural operations. In fact, there is no dispute with regard to the fact that the assessee is having huge extent of land and is carrying out various agricultural operations including nursery etc. The assessee had also filed relevant cash vouchers for receipt of cash from various parties for sale of agricultural products. Therefore, when the assessee :-7-: ITA. No:327/Chny/2021 is having sufficient land holding and also proved carrying out agricultural operations, then in our considered view the Assessing Officer ought to have accepted the explanation of the assessee regarding source of income for cash deposits during demonetization period, more particularly when the Assessing Officer has accepted partial explanation of the assessee and allowed relief to the extent of Rs. 2,50,000/- towards cash deposits during demonetization period. Just because, the assessee did not file his return of income for earlier assessment years, the available source in the form of agricultural income cannot be disputed. The filing of return in earlier years is hardly depending upon the taxable income of the assessee for those assessment years. In case the assessee does not have any taxable income, he need not to file income tax returns for those assessment years, even if he had earned agricultural income. Therefore, rejection of explanation furnished by the assessee, by the AO on the basis of non-filing of income tax return for earlier period is not acceptable. 7. Having said so, let us come back to the evidences filed by the assessee in support of claim for source for cash :-8-: ITA. No:327/Chny/2021 deposits. Although, the assessee claims to have filed details of land holding, cash receipts for sale of agricultural products, but could not file complete details to explain cash deposits of Rs. 11,54,500/-. Since, neither the Assessing Officer nor the assessee could prove their case with relevant evidences and reasons, we are of the considered view that the only option left with us is to settle the dispute between the assessee and the Assessing Officer, by estimating source for cash deposits during demonetization period. We, therefore considering the extent of land held by the assessee and other evidences filed during the course of assessment proceedings, we are of the considered view that, credit for agricultural income to the extent of Rs. 6,54,500/- needs to be given to the assessee. Thus, we direct the Assessing Officer to allow credit for source to the extent of Rs. 6,54,500/- out of agricultural income earned by the assessee for the impugned assessment year and balance amount of Rs. 5,00,000/- to be treated as unexplained money taxable u/s. 69 of the Act. In other words, the assessee gets partial relief of Rs. 6,54,500/- out of total cash deposits of Rs. 11,54,500/- and balance amount of Rs. 5,00,000/- towards cash deposits is hereby sustained. :-9-: ITA. No:327/Chny/2021 8. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the court on 11 th August, 2023 at Chennai. Sd/- (मंजुनाथ. जी) (MANJUNATHA. G) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 11 th August, 2023 JPV आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT 4.. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF