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2015 (10) TMI 1075 - ITAT AHMEDABAD

2015 (10) TMI 1075 - ITAT AHMEDABAD - TMI - Unexplained income - Held that:- It is clearly accepted at the level of AO as well as CIT(A) that the assessee was engaged in the agricultural activities and was holding agricultural land measuring 69913 sq. metres (as per 7/12) which was purchased by him in parts from 21.6.1989 to December, 1994. The appellant has shown that he was cultivating crops like bajra, maka, etc. and his main source of income, therefore, he was not filing return of income and .....

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d after meeting household expenses some savings cannot be ignored. However, this is also a fact that the assessee has not been able to furnish proper details of his savings and earnings in previous years which in normal cases are being rarely maintained by the agriculturists as their income is exempt from tax. Therefore, in the light of the facts and circumstances as well as nature of source of income of the assessee and estimates made by CIT(A) it will be justifiable to reduce the addition from .....

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or AY 2003-04. The assessment was framed by ACIT, Central Circle-2(4), Ahmedabad vide his order dated 31st December, 2010. The concise grounds of filed by the appellant are as under :- 1. On the facts and in the circumstances of the case of the appellant, the learned CIT(A) has erred in confirming the addition of ₹ 637,000/- made on account of unexplained income, when no such addition ought to have been sustained. The same may be deleted. 2. On the facts and in the circumstances of the cas .....

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ance as on 01/04/2002 of capital account of ₹ 11,33,680/-. 3. Brief facts of the case, as per the order of AO & Paper Book submitted by ld. AR, are that search and seizure action under section 132 of the Act was carried out on 23.5.2008 at the residential premises of the appellant. Thereafter the case was analysed and notices u/s 153A for AY 2003-04 to 2008-09 for filing return of income were issued. In response the assessee filed return of income declaring total income of ₹ 90,0 .....

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/4/2002 was shown at ₹ 11,33,682. The AO thereby made addition of ₹ 11,33,682/- to the income of the assessee stating that the reply of the assessee was not genuine and because of the fact that the assessee has never filed any return of income prior to issuance of notice under section 153A and also took the view that if the assessee was primarily engaged in agricultural operation what was the need for the assessee to appoint the C.A. and as such he treated the capital shown as openin .....

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n account of opening capital balance. However, this cannot be accepted as universally true in all the cases. If the appellant has been filing the balance sheet and the return of income of the earlier assessment years and the opening balance in the year under consideration represent the closing balance of immediately preceding year, then under no circumstances the addition of the opening balance can be made in the year under consideration, even if the appellant is not able to explain the source t .....

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has earned that much income in that particular previous year. If the assessee is not able to prove that he had earned that much of in that particular year, then the AO can reject the claim of that assessee in respect of earning of that income. In other words, if the appellant is able to prove that he had the capital balance of ₹ 11,33,682/- as on 31.3.2002, then the AO cannot make any addition in assessment year 2003-04. If however, it is proved that the appellant had no source of income .....

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#8377; 104,152 is shown as on 31.3.2002. Besides this the appellant has also shown cash in hand to the tune of ₹ 660,916 and bank balance ₹ 726. During the year the appellant has shown the profit to the extent of ₹ 207,469 most probably in the form of the agricultural income. In the order of CIT(A) reference was made, the details of investment in land made by assessee in which assessee purchased agricultural land (as per 7/12) since 21.6.1989 till 9th December 1994 during which .....

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emium at ₹ 104152 and bank balance of ₹ 726 was also allowed by CIT(A) subject to verification by AO. However, CIT(A) did not accept the claim of appellant that he had cash in hand of ₹ 660916 as on 31.3.2002 with the basis of detailed working of agricultural production yield for last four years with the valuation of agricultural produce at minimum support price, possible production of bajra and jawar as per the statistics of the Government and estimated savings, which possibly .....

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a year upto assessment year 2003- 04. From 1994 to March 2002 in eight years, the appellant could have saved ₹ 16,000 x 8 = ₹ 128,000. As stated earlier, the appellant himself has shown investment in the policy of LIC to the extent of ₹ 104,152 out of the saving till 31/3/2002. This means, the appellant was left with only ₹ 24,000 approximately for further investment as on 31/3/2002. As against this, the appellant has shown cash in hand to the extent of ₹ 660916. In .....

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me in support of the fact that the appellant has deposited the agricultural income in his bank account. Therefore, the appellant has tried to explain the source of cash of rupees 637,000 of the year relevant to assessment year 2003-04 as pertaining to earlier years. In other words, as against the total additions of ₹ 11,33,682/- on account of opening capital balance, the addition of ₹ 637,000 only is sustained. 5. Being further aggrieved, the assessee is now in appeal before the Trib .....

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accounts were also submitted during the proceedings before him and demonstrated how the opening balance in capital account was drawn. However, the Assessing Officer did not accept the contention of the appellant on the ground that the appellant had never filed any return of income prior to the issuance of the notice under section 153A of the Act. According to the AO there was no need for the appellant to engage a CA, when the appellant is engaged in agricultural operations. The learned AO there .....

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uments too from time to time in the course of hearing before the CIT(A). However, the ld. CIT(A) has sustained the addition of ₹ 637,000 and granted relief for the balance on this score. (iii) It is respectfully submitted that the appellant has submitted a fairly detailed written submission dated 22nd March, 2011 before the ld. CIT(A). Further, it was emphasized that in conformity with the statement recorded under section 132(4) of the Act, in the course of search proceedings at answer No. .....

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tion along with the breakup of the said balance and the AO had not denied such details. The appellant further submits that said balance of ₹ 11,33,682/- consisted of the value of various land purchased before 31.03.2002 and income generated over the years. It is therefore submitted that the entire opening capital balance is duly explained and hence no adverse inference in that regard was warranted in the present case of appellant. (v) Without prejudice to above, the appellant submits that .....

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, it would be completely unjustified to presume that part of the opening capital balance shown by the appellant is undisclosed income of the year under consideration. The ld. CIT(A) has however not accepted the explanation of the appellant in true and proper perspective and has granted partial relief. (vi) Vide para 4.1 of the impugned appellate order, on one hand, the CIT(A) has fully agreed that normally there cannot be any addition on account of opening capital balance and on the other hand, .....

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sed the copy of balance sheet which were already on the record of the Assessing Officer as well as produced before him and he has noted the fixed assets in the form of agricultural land, animals, investment and also noted cash in hand to the extent of ₹ 660,916/- and bank balance of ₹ 726/- and has not doubted agricultural earnings of the appellant. (vii) In para 4.2 the ld. CIT(A) has observed that the appellant had made investment in the land from the year 1987 till December, 1994 .....

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balance cash on hand i.e. 637,916/- as on 31st March, 2002, the learned CIT(A) has viewed the explanation of appellant differently. While doing so the ld. CIT(A) has estimated the agricultural production on estimated basis adopting the estimated sale-price of the crops sold and has allowed set off of 35% of expenses having incurred by the appellant towards cost of seed cultivation etc. and has proceeded to work out the agricultural income at ₹ 76,212/- only. Besides, the ld. CIT(A) has est .....

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furnished by the appellant and the point is that the hard facts and figures, furnished on the basis of record cannot be brushed aside by the authority below. It is submitted that the ld. CIT(A) has unjustifiably proceeded to work out the availability of cash on hand on estimated formula. This cannot form basis for sustaining the addition in part, which has resulted in violation of principles of natural justice. (viii) It is respectfully submitted that the orders of the learned CITA) in restrict .....

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