TMI Blog2018 (4) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... Treating the agricultural income earned by the appellant as unexplained income - Held that:- CIT(A) has not appreciated the facts and circumstances of the case properly and rejected the entire claim of agricultural income of the assessee, ignoring the land holding of the assessee. In our opinion, in view of land holding and “Land Revenue” records of sowing crops over the land, some agricultural income cannot be denied and in such circumstances, we have no alternative other than estimation of agricultural income. Keeping in view the facts and circumstances of the case, we feel it appropriate to restrict agriculture income of ₹ 10,000 per acre and, thus, according to the land holding of approx. 15 acres, the agriculture income of the assessee is restricted to ₹ 1,50,000/- and balance agriculture income shown by the assessee is held as undisclosed income of the assessee. The grounds No. 1 to 3 of the appeal are accordingly partly allowed. Addition on unexplained entries appearing in bank account and deemed dividend - admission of additional evidence by CIT-A- Held that:- CIT-(A) has not complied with the provisions of Rule 46A(3) of the Rules and accepted the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and also challenged the addition on merit. The Ld. CIT-(A) though upheld additions on legal ground, however on merit, he partly deleted the additions related to credit in bank account and deemed dividend, whereas upheld the addition related to agriculture income. ITA Nos. 5519, 5520 5521/Del/2014 and ITA Nos. 5830, 5831 5832/Del/2014 4. Before us, in assessment years 2005-06 to 2007-08, the Ld. counsel of the assessee, first challenged the validity of the addition made relying on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Kabul Chawla (2015) (380 ITR 573) and argued that in absence of any incriminating material no addition could have been made in completed assessments. Accordingly, we are taking first appeals of the assessee and the Revenue for assessment years 2005-06 to 2007-08 for adjudication. 5. The grounds raised by the assessee in ITA No. 5519/Del/2014 for assessment year 2005-06, ITA No. 5520/Del/2014 for assessment year 2006-07 and ITA No. 5521/Del/2014 for assessment year 2007-08 being identical except change of amount, we are reproducing only grounds of appeal in ITA No. 5519/Del/2014 as under: 1. That on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 even though the AO has not mentioned the relevant note which informs an assessee that failure on the part an assessee to comply with the terms of notice 142(1) will entail ex-parte assessment in the notice under section 142(1) of the Income tax Act, 1961 issued by the AO. 6. Similarly, grounds raised by the Revenue in ITA No. 5830/Del/2014 for assessment year 2005-06; ITA No. 5831/Del/2014 for assessment year 2006-07 and ITA No. 5832 for assessment year 2007-08 are identical except change of amount and, therefore, we are reproducing only grounds raised in ITA No. 5830/Del/2014 as under: 1. The Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in deleting the addition of ₹ 1,28,00,000/- out of total addition of ₹ 1,46,63,000/- made on account of unexplained entries appearing in bank account. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in admitting the additional/fresh evidences under rule 46A in respect of addition of ₹ 1,46,63,000/- 3. (a) The order of the Ld. CIT(Appeals) is erroneous and not tenable in law and on fact. (b) The appellant craves leave to add, alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kabul Chawla (supra) would not apply. 7.2 We have heard the rival submissions and perused the relevant material on record. The Ld. counsel of the assessee has relied on the decision of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) and submitted that no addition could have been made in the assessment years 2005-06 to 2007-08 in view of no incriminating material found during the course of search and assessments already attained finality, before taking of search action dated 17/09/2010. The relevant finding of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) is reproduced as under: Summary of the legal position 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income already assessed. 7.3 Thus, we find that in para- 37(vii), the Hon ble High Court has held that, wherever the assessments have attained finality, the Assessing Officer can make addition only on the basis of some incriminating material unearthed during the course of search. 7.4 As far as condition of assessments attained finality prior to the date of search is concerned, we find for assessment year 2005-06 to assessment year 2007-08, originally no assessment under section 143(3) of the Act have been carried out. Further, as on the date of search the limitation for selecting the case under scrutiny through issue of notice 143(2) of the Act already expired. Thus, the assessments under Section 143(1) of the Act attained finality. The Ld. counsel has referred various pages of the paper book to substantiate the date of return filed for assessment year 2005-06 to 2007-08. We note that, in this case search action under section 132 of the Act was carried out on 17/09/2010 and date of filing of return and last date for issue of notice under section 143(2) of the Act in respect of assessment year 2005-06 to assessment year 2007-08 as submitted by the assessee are reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend income also, she could not point out any incriminating material found or seized during the course of search from the premises of the assessee. 7.8 In view of the above, we are of the opinion that in respect of assessment years 2005-06 to 2007-08, the assessments had already attained finality before the date of search and no incriminating material was found or seized from the premises of the assessee, and, thus, respectfully following the finding of the Hon ble Delhi High Court in the case of Kabul Chawla (supra) no addition could have been made in these assessment years. As no additions could have been made, other grounds of appeal challenging the merit of the addition, both in the appeal of the assessee as well as in the appeal of the Revenue, are rendered infructuous and accordingly dismissed. No other grounds of the appeals of the assessee have been argued by the Ld. counsel of the assessee and accordingly remaining grounds of appeal of the assessee are also dismissed as infructuous. 8. In the result, the appeals of the assessee for assessment years 2005-06 to 2007-08 are partly allowed, whereas the appeals of the Revenue for assessment years 2005-06 to 2007-08 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no loan or advance has been given by M/s AIMS Promoters Private Limited to the appellant through Mis Nagar Dairy Private Limited other than normal business transactions. 5. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in upholding the validity of assumption of jurisdiction by the AO to assess the case of the appellant under section 144 of the Income tax Act, 1961 without issuing statutory notice under section 144 of the Income tax Act, 1961. 6. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in upholding the validity of assumption of jurisdiction by the AO to assess the case of the appellant under section 144 of the-Income tax Act, 1961 even though the AO has not mentioned the relevant note which informs an assessee that failure on the part an assessee to comply with the terms of notice 142(1) will entail ex-parte assessment in the notice under section 142(1) of the Income tax Act, 1961 issued by the AO. 7. That the appellant craves leave to add, amend or alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in kind. (iv) Proof of having rendered the produce raised or received by him in a fit condition for being taken to the market. (v) No process other than ordinarily employed by a cultivator or receiver of rent in kind has been employed. (vi) Outside the jurisdiction of any municipality or cantonment board having a population of not less than 10,000/- persons. (vii) Proof of selling the agricultural produce in a raw state or after application to it of any process ordinarily employed by a cultivator or received of rend in kind to render it fit. (viii) The proof of inclusion of the net agricultural income for rate purposes in the total income of an assessee as set out in Part-IV of the Schedule to the relevant Finance Act. (ix) Proof/evidence of market value of the agricultural produce sold. (x) Evidence of the rate, quality and kind of the produce sold. (xi) Proof of having granted rights to the user of the land if it is claimed that the land was given to some share cropper for cultivation. (xii) Proof of having carried out agricultural operations to earn the agricultural income shown by the beneficiary. (xiii) Distance of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of agriculture goods sold (iii) proof of ownership of lands 10.3 After appraising the evidences of the assessee, the Ld. CIT-(A) upheld the addition with following observation: . The above submissions of the appellant were duly considered by me. Upon appreciating the entire facts and circumstances of the case, I am of the firm view that the appellant failed to establish its case by producing evidence of basic operations carried out by it for earning agricultural income. It did not meet the entire requirements of the statute in respect of agricultural income in as much as it failed to produce the proof of performance of any process ordinarily employed by a cultivator or receiver of rent in kind, proof of having rendered the produce raised or received by him in a fit condition for being taken to the market without applying any process other than ordinarily employed by a cultivator or receiver of rent in kind, proof/evidence of the market value of the agricultural produce sold, evidence of the rate, quality and kind of the produce sold, proof of having granted rights to the user of the land where it was given to some share cropper of cultivation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the land of the assessee (available on page 269 to 272), Dhan is not mentioned. Further, there are no records or evidence as to the volume of agriculture produce produced from the land. In view of the above deficiencies or inconsistencies in the documentary evidence supporting the agriculture income filed by the assessee, the quantum of agriculture income shown by the assessee cannot be justified. However, at the same time in view of the ownership of the agricultural land of approximately 15 Acre (page 268 of the paper book) earning of some agriculture income cannot be denied. 10.7 The Ld. CIT(A) has not appreciated the facts and circumstances of the case properly and rejected the entire claim of agricultural income of the assessee, ignoring the land holding of the assessee. In our opinion, in view of land holding and Land Revenue records of sowing crops over the land, some agricultural income cannot be denied and in such circumstances, we have no alternative other than estimation of agricultural income. Keeping in view the facts and circumstances of the case, we feel it appropriate to restrict agriculture income of ₹ 10,000 per acre and, thus, according to the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences. The Ld. CIT-(A) forwarded explanation of the assessee as well as supporting documents to the Assessing Officer for his comment. The Assessing Officer in his remand report only reiterated finding of the assessment order that the assessee failed to furnish the complete detail with explanation in regard credit entries. In view of the remand report, the Ld. CIT-(A) inferred that the Assessing Officer had no reservation on the genuineness of the explanation given by the assessee in regard to the credit entries of ₹ 4,17,35,528/-. The Ld. CIT-(A) analyzed each and every entry and deleted the addition except amount of ₹ 7,59,528/-, which was the amount of agriculture income claimed by the assessee as exempt. Since the learned CIT-(A) already held those credits as income from other sources, therefore, directed the Assessing Officer not to consider for addition as unexplained credit in bank account. The relevant finding of the Ld. CIT-(A) are reproduced as under: Coming to my findings on the credit entries in the impugned bank account. The last column of the chart above indicates the sources of the credits in the bank account. As regards deposits of ₹ 25,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book forwarded to the AO for his comments. Accordingly, on a consideration of the evidence filed the amount of ₹ 50 lakhs is deleted being explained. In respect of Madhusudan Realtors P Ltd the confirmation filed indicated that it was a repayment of the loan earlier given by the appellant in the assessment year 2006-07 to the appellant during the impugned AY. Accordingly, on a consideration of the evidence filed the amount of ₹ 50 lakhs is deleted being explained. In respect of Jam India P. Ltd. the confirmation filed with the paper book was further supplemented by its return of income and the copies of the cheque by which the amount of ₹ 50 lakhs was paid to the appellant. The money was received by the appellant in the course of running transactions. Accordingly, on a consideration of the evidence filed the amount of ₹ 50 lakhs is deleted being explained. In respect of Sanjeev Chugh, the confirmation filed with the paper book was further supplemented by zerox copy of the bank statement of Sanjeev Chugh which reflects the repayment of money given by the appellant in the course of business. The money was received by the appellant in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal of the assessee relates to addition as deemed dividend under section 2(22)(e) of the Act. The ground No. 2 of the appeal of the Revenue also relate to this addition. 12.3 The facts qua the addition are that during the relevant year M/s Nagar Dairy Private Limited (NDPL) received unsecured loan of ₹ 73,69,560/-from M/s Aims Promoter Private Limited (APPL). The assessee i.e. Sh. Malook Nagar was having 50% shareholding in APPL and 66.33% in NDPL. According to the Assessing Officer, the assessee was having substantial interest in both the companies and the amount of loan was given on the direction of the assessee being controlling person in both the companies, the said loan was in the nature of deemed dividend under section2(22)(e) of the Act and in view of the accumulated profit of ₹ 9,56,634/- as on 31/03/2008, he restricted the addition of deemed dividend to the extent of ₹ 9,56,634/-. 12.4 Before the Ld. CIT-(A), the assessee submitted additional evidences in the form of copy of MOU entered between APPL and NDPL for purchase of land at Shahpur, Hapur, Ghaziabad and, contended that the transaction between the companies were normal business transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dairy P. Ltd. for which advances were given by M/s. AIMS Promoters P Ltd. were also not there. The approvals of the government authorities for constructing commercial complexes at Meerut and residential colonies at village shakarpur, paragana Tehsil Hapur, Distt.-Ghaziabad were also missing. Moreover, the reason why the sums of money instead of being credited into the bank account of M/s. AIMS Promoters P Ltd. were deposited in the appellant s bank account was also not clear. To crown it all the shareholder cum director Sh. Malook Nagar received the money even before the commencement of the so called projects which was highly questionable as the advances were contingent on the happening of certain events in future failing which the entire amount would become refundable to the lender i.e. M/s. Nagar Dairy P Ltd. It is pertinent to add here that trade advances do not carry any obligation of repayment normally. In the instant case M/s. AIMS Promoters P Ltd. was restrained from making any investments out of the advances received till the time the conversion of the lands on which the projects were to come up into non-agricultural from agricultural was obtained. In the impugned ASSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the issue of additional evidences raised by the Revenue and, thus, we are first taking up the issue of admitting additional evidences by the Ld. CIT(A) raised by the Revenue in ground No. 3 of the Appeal, which goes to the root of the addition toward credits in bank account and deemed dividend. 13.3 The Ld. CIT-(A) while admitting the additional evidences, held that the requirement of intensive enquiry into the evidence was only perfunctory statement without application of mind and it was made in the customary fashion without sanction of law and manner not known to the law. Thereafter, the learned CIT-(A) referred the para of the remand report and observed that according to the Assessing Officer no additional evidences were furnished. The learned CIT-(A) thereafter considered the documents/evidences filed by the assessee and decided appeal. The issue of admitting of additional evidences and thereafter providing opportunity to the Assessing Officer for his comments has been discussed by the Hon ble High Court of Delhi in the case of COMMISSIONER OF INCOME TAX vs. MANISH BUILD WELL (P) LTD reported in (2011) 245 CTR 0397. The relevant paragraph of the decision of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty [whether on his own motion or on the request of the Assessing Officer under cl. (a) of sub-s. (1) of s. 251 or the imposition of penalty under s. 271. We are highlighting these aspects only to press home the point that the conditions prescribed in r. 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the rule has to be strictly complied with so that the rule is meaningfully exercised and not exercised in a routine or cursory manner. A distinction should be recognized and maintained between a case where the assessee invokes r. 46A to adduce additional evidence before the CIT(A) and a case where the CIT(A), without being prompted by the assessee, while dealing with the appeal, considers it fit to cause or make a further enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of r. 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make r. 46A otiose and it would open up the possibility of the assessees contending that any additional evidence sought to be introduced by them before the CIT(A) cannot be subjected to the conditions prescribed in r. 46A because in any case the CIT(A) is vested with coterminous powers over the assessment orders or powers of independent enquiry under sub-s. (4) of s. 250. That is a consequence which cannot at all be countenanced. 13.4 Thus, the Hon ble High Court has reproduced relevant Rules in above paragraphs and held that the Ld. CIT-(A) after admitting additional evidences must comply with the Rule 46A(3) of Rules and provide a reasonable opportunity of examining the evidences and rebut the same to the Assessing Officer. In the said case, the additional evidences were admitted and accepted as genuine without any comments or verification at the end of the Assessing Officer. The Hon ble High Court held that providing opportunity to rebut those additional evidences, is an indispensable requirement and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re held to be out of undisclosed income and the same was added to the income of the assessee. From the above, it is inferred by me that the AO had no reservations on the genuineness of the explanations given by the appellant in the paper book in regard to the credit entries of ₹ 4,17,35,528/- 13.7 In our opinion, the Ld. CIT-(A) has not complied with the provisions of Rule 46A(3) of the Rules and accepted the genuineness of the explanation of the assessee on the basis of inference drawn on the submission of the Assessing Officer in the remand report. We find that the Assessing Officer clearly asked for opportunity to examine the additional evidences, which the Ld. CIT-A did not allow to the Assessing Officer. 13.8 We also note that in the case of Smt. Sudha Nagar (supra), the identical issues of addition for bank entries and deemed dividend were involved and additional evidences were submitted before the Ld. CIT(A) in violation of Rule 46A of the Income Tax Rules. The Tribunal in the said case has restored the matter to the file of the Assessing Officer. The relevant paragraph of the order of the Tribunal is reproduced as under: 5.1 Keeping in view of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 2009-10 to 2011-12 respectively are identical to the grounds raised in ITA No. 5833/Del/2014 for assessment year 2008-09, and thus decision in the case of ITA No. 5522/Del/2014 and 5833/Del/2017 might be applied mutatis mutandis. 19. Accordingly, we apply the decision in the grounds raised in ITA No.5522/Del/2014 and in ITA No. 5833/Del/2014 for assessment year 2008-09 mutatis mutandis in the appeals referred above and, accordingly, those appeals of the assessee are allowed partly for statistical purpose and appeals of the Revenue are allowed for statistical purposes. 20. In the result, decision in the appeals of the assessee and Revenue is summarized as under: Sr. No. ITA No. (Assessee/Revenue) Assessment year Result 1. 5519, 5520 5521/Del/2014 2005-06 to 2007-08 Partly allowed 2. 5522, 5523, 5524 5525/Del/2014 2008-09 to 2011-12 Partly allowed for statistical purposes 3. 5830, 5831 5832/D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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