Income Tax – Agricultural income – Addition as income from undisclosed sources – Sustainability – Appellant/assessee filed its return of income declaring total income and also claiming agricultural income – AO disbelieved agricultural income of assessee and added same to total income of assessee as income from undisclosed sources – CIT(A) upheld action of AO – Whether CIT(A) has erred in confirming action of AO in making addition of agricultural income by treating same as income from undisclosed sources – HELD – Assessee is an individual earning income from brokerage and agricultural activity – Undoubtedly, assessee has 1/7th share in agricultural land – In land records, there are certain agricultural produce mentioned with respect to each of year for past six years – With respect to proof of sale of agricultural produce, assessee has submitted Agricultural Produce Marketing Committees receipts on sample basis – Bills of APMC produced clearly show that assessee is engaged in agricultural activities – Looking to totality of facts, income in question cannot be considered as income from undisclosed sources – Addition made by AO of agricultural income shown by assessee as undisclosed income is unsustainable and deserves to be deleted – Appeals allowed

 

2024-VIL-521-ITAT-MUM

 

IN THE INCOME TAX APPELLATE TRIBUNAL

“C” BENCH, MUMBAI

 

ITA No. 2984/Mum/2023

(Assessment Year: 2014-15)

ITA No. 2985/Mum/2023

(Assessment Year: 2013-14)

ITA No. 2986/Mum/2023

(Assessment Year: 2016-17)

ITA No. 2987/Mum/2023

(Assessment Year: 2017-18)

ITA No. 2988/Mum/2023

(Assessment Year: 2015-16)

ITA No. 2989/Mum/2023

(Assessment Year: 2019-20)

ITA No. 2990/Mum/2023

(Assessment Year: 2018-19)

 

Date of hearing: 21.02 .2024

Date of pronouncement: 22.02.2024

 

SHRI PAWAN JAJOO

 

Vs

 

INCOME TAX OFFICE WARD 7(4), MUMBAI

 

Assessee by: Shri S.L. Jain, AR

Revenue by: Shri Jagdish Jangid, CIT DR

 

BENCH

SHRI AMIT SHUKLA, AM

SHRI PRASHANT MAHARISHI, AM

 

ORDER

 

PER BENCH

 

01. These are seven appeals filed by the assessee from A.Y. 2013-14 to 2019-20, involving common grounds of appeal, filed against the appellate order passed by learned Commissioner of Income-tax (Appeals)-49, Mumbai, [ the ld CIT [A]] on 6th June, 2023, dismissing the appeal of the assessee. Therefore, assessee is aggrieved and is in appeal before us.

 

02. Brief facts of the case shows that

 

i. Assessee is an individual engaged in the business of brokerage, interest on savings account and agricultural income.

 

ii. Search under Section 132 of the Act was carried out on 6th December, 2018, by investigation wing, New Delhi at the premises of locker no.104 at Fakir Chand Lockers and Vaults Pvt. Ltd, Khara Boli, held in the name of the assessee.

 

iii. in that locker cash amounting to Rs.14 lacs were found.

 

iv. Statement of the assessee was recorded under Section 132(4) of the Income-tax Act, 1961 (the Act), where the assessee has stated that cash of Rs.12 lacs belongs to him and the remaining Rs.2 lacs belongs to his sister.

 

v. The learned Assessing Officer found that this locker at Fakir Chand Lockers and Vaults Pvt. Ltd, Khara Boli, 6704A, Naya Bazar, Delhi. The locker was allotted without proper KYC and the lockers were also operated without any rules and regulations and further, CCTV cameras were also not working.

 

vi. As one of the lockers was allotted in the name of assessee, summons under Section 131 of the Income-tax Act, 1961 (the Act) was issued to him and Assessee appeared on 4th December, 2018 and statement was recorded on oath. He was questioned about Rs.14 lacs and its sources, wherein in answer to question no.8, he submitted that out of Rs.14 lacs, 12 lacs belongs to him and Rs.2 lacs belongs to her sister. She has given this money before one year to him to be placed in locker.

 

vii. With respect to the source of Rs.12 lacs, Assessee says that it is out of his savings from brokerage and agricultural income. He was also questioned that where his annual income is only Rs.3 lacs how Rs.14 lacs in denomination of new notes of Rs.2000 were found from locker. He expressed ignorance.

 

viii. With respect to the source of income he stated that he does not have any documentary evidence.

 

ix. With respect to the notes of new denomination of Rs.2,000/-, he did not give any information.

 

x. search warrant was issued in the name of the assessee on 6th December, 2018, wherein this sum was found.

 

03. During the course of assessment proceedings for A.Y. 2019-20, the assessee was asked to explain the source of cash found and also to substantiate that Rs.2 lacs belong to her sisters. The learned Assessing Officer also issued notice under Section 133(6) of the Act to Fakir Chand Lockers and Vaults Pvt. Ltd. on 12th April, 2021, asking for certain KYC information. However, no such information was received. The learned Assessing Officer questioned the assessee once again to file necessary details and assessee was given several opportunities.

 

04. On 19th May, 2021, the assessee submitted that he is engaged in agricultural activities and brokerage. The details were asked about these activities and its income such as, Mandi Bills, Purchase Invoices of the seeds and cultivation reports. The assessee was also asked the details about her sisters and when she deposited money with him. On submission of certain details, the learned Assessing Officer issued notice under Section 133(6) of the Act to his sisters, Anita Devi Baldeva [ sister of Assesee] on 21st May, 2021. Till the date of assessment no such details were filed and therefore, the learned Assessing Officer held that Rs.2000 denomination notes were not available prior to 8th December, 2016 and there is no explanation as to how assessee came into possession of the same. He made an addition of Rs.14 lacs under Section 69A of the Act to the total income of the assessee as per return of income filed on 30th September, 2020 of Rs.3,48,890/- and assessed the total income for A.Y. 2019- 20 at Rs.17,48,890/-.

 

05. For A.Y. 2013-14, assessee filed return of income on 29th March, 2015, declaring income of Rs.1,88,520/-, and agricultural income of Rs 1,68,000/- was claimed as exempt, in response to notice under Section 153A of the Act. The learned Assessing Officer passed an assessment order under Section 153A of the Act read with section 144 of the Act on 17th June, 2021, wherein addition of Rs.1,68,000/- was made as income from undisclosed sources to the total income of the assessee as declared by the assessee in his return of income as exempt income. In this case also assessee could furnish only the certificate from Patwari for agricultural land holding. Accordingly, total income of the assessee was assessed at Rs.3,56,520/- and addition of the agricultural income was made of Rs.1,68,000/- as assessee failed to prove the complete source of agricultural income.

 

06. For A.Y. 2014-15, assessee filed return of income on 30th March, 2016, at Rs.2,16,980/- and further, agricultural income was shown of Rs.1,76,000/-. The assessment order under Section 153A read with section 144 of the Act was passed on 21st June, 2021, treating the agricultural income as the normal income and total income was assessed at Rs.3,92,980/-.

 

07. For A.Y. 2015-16, assessee filed its return of income on 27th March, 2017, declared total income of Rs.2,59,810/- and also claimed agricultural income of Rs.1,84,000/-. The assessment order was passed on 17th June, 2021, assessing the total income of the assessee at Rs.4,43,801/-.

 

08. For A.Y. 2016-17, the assessee filed return of income on 27th March, 2017, showing income of Rs.2,68,540/- and claiming agricultural income of Rs.1,78,000/-. On similar facts, the assessment order under Section 153A read with section 144 of the Act was passed on 17th June, 2021, at the total income of Rs.4,46,540/-.

 

09. For A.Y. 2017-18, the assessee filed return of income on 29th March, 2018, declaring total income of Rs.2,94,820/- claiming agricultural income of Rs.1,89,500/- as exempt. On similar facts, assessment order under Section 153A read with section 144 of the Act was passed on 17th June, 2021, at the total income of Rs.4,84,320/-.

 

010. For A.Y. 2018-19, assessee filed his return of income on 31st August, 2018, declaring total income of Rs.3,46,730/- claiming agricultural income of Rs.1,98,000/-. The assessment order under Section 153A read with section 144A of the Act was passed on 17th June, 2021, determining the total income of the assessee at Rs.5,44,730/-.

 

011. Therefore, for all these assessment years except AY 2019-20, the learned Assessing Officer disbelieved agricultural income of the assessee and same was added to the total income of the assessee as income from undisclosed sources.

 

012. For A.Y. 2019-20, the addition of Rs.14 lacs was made to the total income of the assessee on account of cash found from the locker during the course of search u.s 69A opf the Act.

 

013. Assessee aggrieved with the assessment orders, preferred the appeal before the learned CIT (A)-49, Mumbai, who passed common order in these appeals from A.Y. 2013-14 to 2019-20, wherein assessee challenged the addition of Rs.14 lacs for A.Y. 2019-20 and addition of agricultural income from A.Y. 2013-14 to 2018-19 as income from undisclosed sources.

 

014. The learned CIT (A) passed an order on 6th June, 2023, wherein he found that several notices were issued to the assessee which remained unresponded. On 30th April, 2023, the assessee filed a common submission. It is the claim of the assessee before him that assessee has given detailed submission on 13th May, 2021, 19th May, 2021 and 24th may, 2021, which were not considered by the learned Assessing Officer in proper perspective. He reiterated his submission that out of Rs.14 lacs found 12 lacs belongs to him as out of his savings as he is a farmer and Petty Commission Agent. Commission activities are on a very small scale. The sum of Rs.2 lacs belongs to his sisters. He also submitted before the learned Assessing Officer the details of agricultural land owned by him and sales receipt of Rajasthan Government Anaj Mandi. He also submitted Patwari certificate of the land ownership which was produced before the learned Assessing Officer which was rejected and credit of agricultural income was not given. The learned CIT (A) was also submitted that as assessee is belonging to the village near Bikaner District Rajasthan and he infected with COVID, proper opportunity was not given. The evidences submitted by the assessee before the learned CIT (A) which were also produced before the learned Assessing Officer were considered by the learned CIT (A). Such evidences are; copies of the sales receipt from agricultural produce committee at Bikaner and further the certificate of land holding. The learned CIT (A) upheld the action of the learned Assessing Officer holding that these evidences are inadequate and therefore, he confirmed the addition of agricultural income for A.Y. 2013-14 to 2018-20 as income from undisclosed sources.

 

015. For A.Y. 2019-20, with respect to the addition of Rs.14 lacs he also upheld the addition for the reason that there is no plausible explanation of saving of the assessee of Rs.12 lacs put in the locker. He further held that as the cash was found in the denomination of Rs.2000/- notes which was only available after 8th December, 2016, could not have been available with the assessee in earlier years. With respect to the sum of Rs.2 lacs, belonging to her sisters, he held that the explanation of the assessee remains unsubstantiated. Accordingly, the addition of Rs.14 lacs was also confirmed.

 

016. Therefore, assessee aggrieved with appellate order is in appeal before us for all these years. The assessee submitted two paper books containing 73 pages and 32 pages before us. In paper book containing 32 pages of the submissions made before the lower authorities are enclosed. In paper book containing 73 pages, the assessee submitted that there is an agricultural land situated at village Rajdev Tehsil Dungargarh, District Bikaner, Rajasthan, wherein the assessee is part owner of 94.3 hectares of the land. The share of the assessee in the land is 1/7th. Therefore, he is owning 33.23 acres of land. For this, he submitted P-13-N statement of agricultural land holding. In those statements, the various agricultural produced were also mentioned.

 

017. For A.Y. 2013-14 to A.Y. 2018-19, he also submitted a statement of income which in fact were the copies of return originally filed. In the second paper book, he referred to page no.3 stating that he earned a meager agricultural income for all these years which were disbelieved by the learned Assessing Officer. He submitted that up to 2018-19, he has total agricultural income for all these six years amounting to Rs.10,93,500/-. He further stated that he has also accumulated brokerage income earned in earlier years of approximately of Rs.1,06,500/- which was kept in the locker. He also submitted that her sister residing at New Delhi, a sum of Rs.2 lacs for safe custody given to him, which was also placed in the locker.

 

018. Before us, he also submitted that [1] there is no notice issued to the assessee under Section 143(2) of the Act for A.Y. 2013-14 to 2018-19, and on this ground also the assessment order passed is invalid and [2] referred to the assessment orders and stated that agricultural income added in the hands of the assessee for earlier six years has once again being added in the hands of the assessee in A.Y. 2019-20, [3] He also challenged the fact that there is no incriminating material found during the course of search with respect to earlier years and therefore, for A.Y. 2013-14 to 2018-19, no addition could have been made in the hands of the assessee.

 

019. The learned Departmental Representative vehemently supported the order of the learned lower authorities and submitted that in absence of any substantial detail of agricultural activities, the agricultural income shown by the assessee has been correctly added as income from undisclosed sources in the hands of the assessee. Further, the argument of the assessee of Rs.2 lacs received from his sisters is also unsubstantiated and merely an affidavit is filed. He further stated that even if the income of the assessee is considered to be out of his past savings, there is no explanation that how he came into the possession of new notes issued of Rs.2,000/- post demonetization. In view of this, the orders of the lower authorities are sustainable.

 

020. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the paper books filed and arguments raised before us. The fact clearly shows that assessee is an individual earning income from brokerage and agricultural activity. In Locker no.104, with Fakir Chand Lockers and Vaults Pvt. Ltd. of New Delhi, assessee was found to be having that locker wherein cash of Rs.14 lacs was found. The explanation of the assessee that cash of Rs.12 lacs belongs to him out of his agricultural activities and past savings and further Rs.2 lacs is given to him by his sisters. This explanation was disbelieved by lower authorities. We find that undoubtedly, the assessee has 1/7th share in agricultural land situated at village Rajdev Tehsil Dungargarh, District Bikaner, Rajasthan. The total land holding pertaining to the assessee is Rs.33.24 acres. This land holding is undisputed. In the land records there are certain agricultural produce mentioned with respect to each of the year for past six years. The assessee has shown agricultural income in the range of Rs.1.68 lacs to Rs.1.98 lacs. With respect to the proof of sale of agricultural produce the assessee has also submitted the agricultural produce marketing committees receipts on sample basis. Undisputedly, assessee has not submitted complete details of the agricultural produce for all these years. However, on looking at the holding of the agricultural records of land holding, the agricultural produce mentioned there in and some of the bills of APMC produced before us clearly show that assessee is engaged in agricultural activities. Now the only issue remains is whether in absence of complete details of sale of agricultural produce the income shown by the assessee is acceptable or not. We find that on the basis of land holding, the assessee has shown annual agricultural income of Rs.6000/- per acre. Looking to the totality of the facts, we find that such income cannot be excessive and cannot be considered as income from undisclosed sources. Therefore, the addition made by the learned Assessing Officer of agricultural income shown by the assessee as undisclosed income for A.Y. 2013-14 to 2018-19, is unsustainable and deserves to be deleted.

 

021. Coming to the A.Y. 2019-20, where the additions of Rs.14 lacs is made, the source is explained by the assessee being Rs.12 lacs out of past savings. Source of this Rs.12 lacs is stated to be an agricultural income of Rs.10,93,500/- and balance of Rs.1,06,500/- out of his saving from Petty Commission Activities. On looking at the income offered by the assessee for A.Y. 2013-14 till 2019-20, it is apparent that assessee has disclosed total income of commission and bank interest for all these years of approximately Rs.10 lacs. Even after accounting for all expenditure out of this sum, the savings of only Rs.1,60,000/- being 5% of his other income cannot be disbelieved. Therefore, the additions to the extent of Rs.12 lacs in the hands of the assessee out of Rs.14 lacs are explained.

 

022. Coming to the sum of Rs.2 lacs, which assessee has stated to be belonging to her sisters is supported by an affidavit. The affidavit of Smt. Anita Devi Baldeva, shows her residential address and her Permanent Account Number, which clearly shows that she has kept a sum of Rs.2 lacs in cash with him, which was kept by assessee into locker. The source of such sum is from her past savings and out of Stredhan. She has also given her permanent Account Number. This is the explanation of the assessee since the date of search. Then, permanent Account number is also given and money is owned by his sister, the addition cannot be made in the hands of the assessee. The learned Assessing Officer though issued notice u/s 133(6) of the act to her which were not replied to. But that does not go against the assessee. Therefore, looking at the smallness of the amount and the affidavit of her sisters stating her Permanent Account Number the addition of Rs.2 lakhs comprising in total addition of Rs 14 lacs in the hands of the assessee is not sustainable. The reason of the learned Assessing Officer that the above sum was found in the locker in the denomination of new notes of Rs.2000/-. However, there is no evidence available with the Revenue authorities that new notes were placed in the locker. Therefore, solely on that basis, in view of the explanation supported with the evidence which is provided by the assessee, addition cannot be made.

 

023. Further, it is apparent that for A.Y. 2013-14 till A.Y. 2018- 19, no incriminating evidence is found during the course of search. On that basis also, there cannot be any addition in the hands of the assessee for those years where the addition is made, considering agricultural income as undisclosed income.

 

024. It is also apparent that for all these assessment years, there is no reference of issue of notice under Section 143(2) of the Act. The assessments have framed under Section 153A of the Act but no notice under Section 143(2) of the Act has been issued.

 

025. However, as the addition stands deleted on the merits itself, there is no reason to deal with the other legal grounds of incriminating material as well as non-issue of notice under Section 143(2) of the Act, which are left open.

 

026. In the result, all 7 appeals filed by the assessee are allowed.

 

Order pronounced in the open court on 22.02.2024.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that publisher is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.