Shri Hiralal Premjibhai Kevadia(HUF), Surat V. The Income tax Officer,Ward-8(1), Surat

ITA 47/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0375 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.47/AHD/2009 ASSESSMENT YEAR: 2005-06 DATE OF HEARING:28.8.09 DRAFTED:15.9.09 HIRALAL PREMJIBHAI KEVADIA (HUF), 58, KUBERNAGAR, KATARGAM DARWAJA, KATARGAM, SURAT PAN NO.AAFHK7224P V/S . INCOME TAX OFFICER, WARD- 8(1), SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RASESH SHAH, AR RESPONDENT BY:- SHRI C.K. MISHRA, SR. DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT IN APPEAL NO.CAS-V /294/2007-08 DATED 29- 10-2008. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD -8(1), SURAT U/S.143[3] OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDER DATED 28-12-2007 FOR THE ASSESSMENT YEAR 2005-06. 2. THE TWO INTER-CONNECTED ISSUES IN THIS APPEAL OF THE ASSESSEE ARE THAT, THE MAKING OF ADDITION OF RS.4.50 LAKHS ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT CONFIRMED BY CIT(A) A ND ALSO PARTLY CONFIRMING ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 2 THE ADDITION OF RS.2.10 LAKHS OUT OF THE TOTAL ADDI TION OF RS.4,08,596/- ON ACCOUNT OF AGRICULTURAL INCOME, TREATING AS INCOME FROM OTHER SOURCES. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING TWO INT ER-CONNECTED GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN MAKING ADDITION OF RS.4,50,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE ADDITION OF RS.2,10,000/- OUT OF ADDITION OF RS.4,08,596/- MADE BY ASSESSING OFFICER TREATING AG RICULTURE INCOME AS INCOME FROM OTHER SOURCES. 3. ON QUERY FROM THE BENCH, LD. DEPARTMENTAL REPRES ENTATIVE STATED THAT THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE DE LETION OF ADDITION OF AGRICULTURAL INCOME PARTLY BY THE CIT(A). 4. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FAIRL Y STATED THAT HE IS ASKING OF TELESCOPING OF THE AGRICULTURAL INCOME AGAINST T HE ADDITION OF UNEXPLAINED CASH CREDITS ADDED BY THE ASSESSING OFFICER U/S.68 OF THE ACT AMOUNTING TO RS.4.50 LAKHS WHICH IS GREATER. 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AND THE ORDER OF CIT (A), WE FIND THAT THE ASSESSEE IS IN THE BUSINESS OF PROPERTY DEVELOPMENT AND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT COMPLETED THE PROJECT. IT WAS OBSERVED THAT THE ASSESSEE HAD TAKEN OFFICE BOOKING AMOUNT FROM VARIOUS PARTIES IN ALL AMOUNTING TO RS.7.50 LAKHS AND THE D ETAILS OF WHICH IS GIVEN IN THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO FUR NISH THE CONFIRMATIONS OF THOSE PARTIES ALONG WITH IDENTITY AND COPY OF AC KNOWLEDGEMENT OF INCOME- TAX RETURN IN RESPECT OF SUCH PARTIES. THE ASSESSEE IN THIS REGARD STATED THAT THE KARTA OF HUF HAD EXPIRED AND THEREFORE THE OTHE R COPARCENERS WERE NOT ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 3 HAVING SUCH DETAILS. SHRI UMESH HIRALAL KAVADIA SON OF LEGAL HEIR OF KARTA OF HUF ATTENDED AND SUBMITTED X-EROX COPIES OF IDENTIT Y CARD OF SHRI RAMESHBHAI KEVADIA, DINESHBHAI KEVADIA, JADAVBHAI K ASODRIYA, NATHUBHAI MORADIYA AND LAXMANBHAI LATHIYA ASSESSEE ALSO FURNI SHED X-EROX COPIES OF ACKNOWLEDGEMENT COPY OF INCOME-TAX RETURN OF SMT. PARULBEN K GABANI. HOWEVER, HE WAS ASKED TO FURNISH OTHER DETAILS AS P ER ORDER SHEET DATED 03- 12-2007 AND THE ASSESSEE WAS THEN ASKED TO GIVE THE DETAILS TO PROVE THE CREDITWORTHINESS OF SUCH PARTIES WHICH ACCORDING TO THE AO THE ASSESSEE HAD FAILED TO FURNISH AND THEREFORE IN ABSENCE OF DETAI LS THE AO TREATED SUCH AMOUNT AS INCOME FROM UNDISCLOSED SOURCES AND ADDED AS INCOME OF THE ASSESSEE U/S.68 OF THE ACT. AGGRIEVED, THE ASSESSE E PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE ADDITION AT RS.4.50 L AKHS OUT OF THE TOTAL CASH CREDITS OF RS.7.50 LAKHS BY GIVING FOLLOWING FINDIN G:- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO FROM THE FACTS IT IS SEEN THAT THE APPELLANT HAD FILED CONFIRMATIONS AND PHOTO IDENTITY CARD IN RESPECT OF SHRI RAMESHBH AI KEVADIA, DINESHBHAI KKALUBHAI, JADAVBHAI KASODRIYA, NATHUBHA I MORADIYA, AND LAXMANBHAI LATHIYA. HE ALSO FURNISHED XEROX COPIES OF ACKNOWLEDGMENT COPY OF IT RETURN OF SMT. PARULBEN K GABANI. WHERE AS IN RESPECT OF TWO OTHER CREDITOR VIZ. DINESH ASH OKBHAI SHAH AND SAILESH CHANDULALA SHAH FROM WHOM SUM OF RS.100000/ - EACH WAS RECEIVED AS ADVANCE WERE REPAID SINCE THE CONSTRUCT ION ACTIVITIES COULD NOT COMPLETED FOR ILL HEALTH OF KARTA OF HUF. HOWEV ER APART FROM SUCH DETAILS NO OTHER DETAILS WERE FILED DESPITE THE FAC T THAT TIME AND AGAIN THE APPELLANT WAS ASKED TO FURNISH INFORMATION WHIC H COULD PROVE THE CREDITWORTHINESS OF THOSE CREDITORS AND GENUINENESS OF SUCH TRANSACTIONS. HOWEVER THE APPELLANT HAD MISERABLY F AILED TO DO SO AND THEREFORE IN ABSENCE OF SUCH DETAILS AO IS RIGHT IN MAKING SUCH ADDITION. FURTHER BARRING ONLY ONE SMT. PARULBEN NO OTHER PER SON WAS ASSESSED TO TAX NOR ANY PA NO. WAS GIVEN BY THE APPELLANT AN D THEREFORE IT COULD NOT BE SAID THAT ONUS LIED ON THE ASSESSEE WAS DULY DISCHARGED MORE PARTICULARLY WHEN THE FACT THAT THE AO WAS KEEN TO PROVE THE CREDITWORTHINESS AND SUCH CREDITORS AND GENUINENESS OF SUCH TRANSACTIONS. FURTHER FROM THE DETAILS FILED IT IS SEEN THAT IN MOST OF THE CASES BARRING THAT OF PARULBEN AND SHAILESHBHAI SHA H AND DINESHBHAIO SHAH ALL OTHER PAYMENTS WERE RECEIVED IN CASH AND T HAT TO IN SMALL INSTALLMENTS OF RS.1000/- RS.150000/- ETC. MERE PRO DUCTION OF PHOTO IDENTITY CARD AND CONFIRMATIONS IT COULD NOT BE SAI D THAT ONUS LIED ON THE ASSESSEE WAS DISCHARGED MORE SO WHEN THE CREDITORS WERE NOT ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 4 ASSESSED TO TAX FURTHER IN RESPECT OF SHAILESHBHAI SHAH AND DINESHBHAI SHAH EVEN THE CONFIRMATIONS WERE ALSO NOT FILED AND THEREFORE BARING PARULBEN IN NO OTHER CASE THE APPELLANT COULD DISCH ARGE THE ONUS LIED ON IT AND THEREFORE ADDITION MADE BY THE AO CAN NOT BE DISPUTED. HOWEVER IN CASE OF PARULBEN GABANI SINCE THE APPELL ANT HAD RECEIVED AMOUNT THROUGH ACCOUNT PAYEE CHEQUES WHICH WERE ALS O SUBSEQUENTLY RETURNED BY ACCOUNT PAYEE CHEQUES AND THAT HER PA N O AND COPIES OF RETURN OF INCOME BEING PRODUCED BEFORE THE AO I AM UNABLE TO ACCEDE TO THE AO'S ACTION IN MAKING ADDITION IN HER CASE M ERELY BECAUSE SHE HAD INCOME FROM TAILORING BUSINESS. IF THE AO WAS N OT SATISFIED WITH THE CONFIRMATIONS SO FILED HE SHOULD HAVE VERIFIED THE DETAILS FROM EITHER IT RECORDS OR WOULD HAVE CALLED UPON PARTY TO JUSTIFY SUCH CLAIM BUT HAVING NOT ISSUED SUMMONS U/S.131 OR FOR THAT MATER NOTICE U/S.133(6) APPELLANT COULD NOT BE HELD RESPONSIBLE. IN THIS RE GARD RELIANCE PLACED BY THE APPELLANT IN CASE OF JUDGEMENT OF APEX COURT REPORTED IN 159 ITR 78 ORISSA CORPORATION IS APT AND SUPPORT THE APPELL ANTS PLEA. THUS CONSIDERING THE FACTS OF THE CASE IN SO FAR AS ADDI TION IN RESPECT OF PARULBEN GABANI IS CONCERNED ADDITION MADE BY THE A O IS DELETED. HOWEVER IN ALL OTHER CASES THE APPELLANT HAD NOT DI SCHARGED INITIAL ONUS LIED ON HIM MORE SO AS REMINDED BY THE AO TIME AND AGAIN AND HENCE ADDITION MADE ON THOSE CASES ARE CONFIRMED. AGGRIEVED, THE ASSESSEE CAME IN SECOND APPEAL BEFOR E US ON PART CONFIRMATION. 6. BEFORE PARTING WITH THE DECISION, NOW WE HAVE GO NE THROUGH ANOTHER ISSUE OF AGRICULTURAL INCOME TREATED BY THE ASSESSI NG OFFICER AS INCOME FROM OTHER SOURCES. THE AO OBSERVED THAT THE ASSESSEE C LAIMED TO HAVE RECEIVED RS.4,08,596/- AS INCOME EARNED FROM AGRICULTURAL PR ODUCE. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAD CULTIVATED COTTON WH ICH WAS SOLD AT RS.7,08,596/- AND HAD CLAIMED TO HAVE INCURRED EXPE NSES AMOUNTING TO RS.300,000/- ACCORDING TO THE DETAILS TOTAL COTTON SOLD WORKED OUT TO 27100 KGS. OUT OF 3.16 HECTORS OF LAND AND IN THE OPINION OF AO THE AMOUNT OF COTTON CROP OF 27100 KG. WAS MUCH HIGHER THAN THE LAND AVA ILABLE FOR CULTIVATION AND THEREFORE HE WAS ASKED TO EXPLAIN SUCH DETAILS AND IN RESPONSE, THE ASSESSEES REPRESENTATIVE HAD SUBMITTED THAT APART FROM THE OWN LAND THE ASSESSEE HAD CULTIVATED OTHER LAND FOR WHICH HE WOU LD SUBMIT THE DETAILS LATER. HOWEVER, NO SUCH DETAILS WAS EVER PRODUCED AND IT W AS FURTHER OBSERVED BY ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 5 THE AO THAT IN THE SUCCEEDING YEAR THE ASSESSEE HAD SHOWN TO HAVE EARNED INCOME FROM AGRICULTURAL ACTIVITIES AT RS.2,47,666/ - AS GROSS RECEIPTS WHICH ACCORDING TO THE AO WAS REASONABLE AS COMPARED WITH THE LAND OWNED BY THE ASSESSEE-HUF. THUS, CONSIDERING THE CROP RECEIPTS A T RS.3 LAKHS AS REASONABLE AND AFTER REDUCING 40% OF EXPENSES THE A O ALLOWED RS.1.80 LAKHS AS NET INCOME FROM AGRICULTURAL INCOME WHERE AS BAL ANCE AMOUNT OF RS.4,08,756/- WAS TREATED AS INCOME FROM OTHER SOUR CES. AGGRIEVED AGAINST THE ACTION OF THE AO THE CIT(A) RESTRICTED THE ADDI TION AT RS.2.10 LAKHS BY GIVING FOLLOWING FINDINGS:- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE ASSESSING OFFICER. IT IS NOT IN DISPUTE THAT TH E APPELLANT HAS BEEN HOLDING 3.18 HECTOR OF LAND WHEREFROM HAS CLAIMED T O HAVE TAKEN CROP OF COTTON TO THE TUNE OF 27100 KGS. THE APPELLANT H AS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW AS TO HOW HE COULD GET SUCH A BUMPER CROP WITH SUCH MEAGER LAND AND THEREFORE IN ABSENCE OF S UCH DETAILS AO WAS RIGHT IN ASSUMING THAT INCOME FROM OTHER SOURCE WAS CLAIMED TO HAVE BEEN EARNED UNDER THE GUISE OF AGRICULTURAL INCOME WITH A VIEW TO TAKE ADVANTAGE OF EXEMPTION. AND THEREFORE THE APPELLANT S CLAIM THAT TOTAL INCOME EARNED UNDER THE HEAD OF AGRICULTURAL INCOME SHOULD BE ACCEPTED AS IT IS CAN NOT FIND FAVOUR. NEVERTHELESS IT IS ALSO TRUE THAT WHILE MAKING AN ADDITION THE AO SHOULD HAVE TAKEN N ET INCOME AS BASE AND SHOULD HAVE ADDED THE BALANCE AMOUNT AS INCOME FROM OTHER SOURCE SINCE IF EXPENSES CLAIMED TO HAVE BEEN INCUR RED IS TREATED AS SUCH THEN IN THAT CASE THE APPELLANTS CLAIM THAT T OTAL RECEIPTS WERE CORRECT WOULD FIND FAVOUR SINCE ACCEPTING EXPENSES AS FOR AGRICULTURAL PRODUCE WOULD MEAN THAT INCOME THEREFROM AT 60% OF SUCH EXPENSES WOULD HAVE BEEN EARNED IN SUCH CASE. AND THEREFORE I AM IN AGREEMENT WITH THE APPELLANT THAT IF AT ALL THE ADDITION BE M ADE THE SAME SHOULD BE ON NET INCOME BASIS AND NOT ON GROSS RECEIPTS AS HA S BEEN DONE BY THE AO. THUS CONSIDERING THE FACT THAT APPELLANT HAD SH OWN TO HAVE EARNED INCOME FROM AGRICULTURAL PRODUCE AT RS.3,90,000/- A ND THAT AO HAS ACCEPTED SUCH INCOME AT RS.1,80,000/- AS REASONABLE ADDITION WOULD BE RESTRICTED TO RS.2,10,000/- AND AS SUCH AO IS DI RECTED TO RECOMPUTE THE INCOME ACCORDINGLY. 7. IN VIEW OF THE ABOVE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS CASH CREDITS SUSTAINED BY THE AO AT RS.4.50 LAKHS S HOULD BE ALLOWED SET OFF AGAINST THE AGRICULTURAL INCOME, WHICH WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES. WE FIND THAT THE ASSESSEE HAS ACCEPT ED THE OFFICE BOOKING ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 6 DEPOSIT OF RS.7.05 LAKHS DURING THE PREVIOUS YEAR R ELEVANT TO ASSESSMENT YEAR 2005-06 AS UNDER:- SR. NO. NAME PAYMENT DETAILS DATE TOTAL AMOUNT 24.04.04 11000 02.05.04 15000 04.06.04 15000 1. SHAILESH CHANDULAL SHAH CASH PAYMENT 11.06.04 9000 50000 25.04.04 11000 02.05.04 15000 04.06.04 15000 2. SHAILESH CHANDULAL SHAH -DO- 11.06.04 9000 50000 21.04.04 15000 03.05.04 15000 04.06.04 10000 3. RAMESH BALWANTBHAI KEVADIA -DO- 10.06.04 10000 50000 24.04.04 11000 30.04.04 15000 03.06.04 15000 4. DINESHBHAI KALUBHAI PATEL -DO- 09.06.04 9000 50000 23.04.04 15000 03.05.04 15000 03.06.04 10000 5. JADAVBHAI DHARAMSHIBHAI PATEL -DO- 09.06.04 10000 50000 30.04.04 15000 6. NATUBHAI CHHAGANBHAI MORADIA -DO- 04.05.04 15000 50000 ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 7 07.06.04 10000 11.06.04 10000 7. LAXMANBHAI MEGHIJIBHAI LATHIYA -DO- 21.04.04 04.05.04 05.06.04 10.06.04 11000 15000 15000 9000 50000 8. PARULBEN K. GABANI -DO- 21.04.04 04.05.04 05.06.04 100000 100000 100000 300000 9. DINESHBHAI ASHOKCHAND SHAH -DO- 19.02.05 100000 100000 750000 8. THE ASSESSING OFFICER REQUESTED THE ASSESSEE TO SUBMIT THE DETAILS LIKE CONFIRMATIONS, IDENTITY, COPY OF ACKNOWLEDGEMENT, R ETURN FILED BY THESE DEPOSITORS BEFORE THE ASSESSING OFFICER. THE ASSES SEE COULD NOT SUBMIT ANYTHING IN RESPECT OF CREDITORS EXCEPT SMT. PARULB EN K GABANI, WHO IS INCOME-TAX PAYEE AND ALSO MADE PAYMENT BY CHEQUES. THE CIT(A) ACCEPTED THE CASH CREDIT OF SMT. PARULBEN K GABANI ON WHICH REVENUE IS NOT IN APPEAL. FOR THE BALANCE CASH CREDITS, THE ASSESSEE IS IN AP PEAL FOR AN AMOUNT OF RS.4.05 LAKHS AND REQUESTED FOR SET OFF AGAINST THE AGRICULTURAL INCOME OF RS.4,08,596/- ASSESSED BY THE AO AS INCOME FROM OTH ER SOURCES. THE CIT(A) HAS PARTLY CONFIRMED THE ADDITION OF RS.2.10 LAKHS AS INCOME FROM OTHER SOURCES OUT OF THE TOTAL ADDITION OF AGRICULTURAL I NCOME MADE BY THE ASSESSING OFFICER AT RS.4,08,596/-. ON QUERY FROM THE BENCH, LD. DR FAIRLY CONCEDED THAT IN CASE THE SET OFF IS ALLOWED HE HAS NO OBJEC TION FOR THE SAME. WE FIND THAT THESE CASH CREDITORS MIGHT HAVE ACCRUED OUT OF THE AGRICULTURAL INCOME TREATED BY THE AO AS INCOME FROM OTHER SOURCES AND ACCORDINGLY WE ALLOW THE ITA NO.47/AHD/2009 A.Y. 2005-06 HIRALAL P KEVADIA (HUF) V. ITO WD-8(1), SURAT PAGE 8 SET OFF AND DIRECT THE AO TO RE-COMPUTE THE INCOME. ACCORDINGLY, THE AO WILL MAKE ADDITION OF RS.4.05 LAKHS UNDER ONE HEAD TREAT ING THE AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES. THE TWO INTER- CONNECTED ISSUES OF THE ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED AB OVE. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09/10/2009 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 09/10/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD