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TMI Blog2023 (12) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... ted and unabated assessment was, in view of the decision in Pr. CIT vs. Abhishar Buildwell Pvt. Ltd. [2023] 454 ITR 212 (SC), overruling, besides others, the decision by the Hon'ble jurisdictional High Court in Gopakumar (E.N.) v. CIT [2017] 390 ITR 131 (Ker), would survive only where incriminating material had been found during search, initiated by issue of warrant on 22/9/2014, which led to the assumption of jurisdiction to assess and issue of notice u/s. 153A of the Act by the Assessing Officer (AO). 3. We shall proceed assessee-wise and year wise. I. Shri C.T. Kurian A. AY 2011-12 1. The return of income for this year was in the first instance filed on 31.5.2013 admitting an income of Rs. 2,13,840. The same, a valid return u/s. 139(4) of the Act, was processed u/s.143(1) on 10.06.2013, presumably without any adjustment. This was followed by issue of notice u/s.143(2) on 30.09.2014. Inasmuch as notice u/s. 143(2) of the Act could be issued and served by 30.09.2014, assessment for AY 2011-12 qualifies to be a pending assessment which, falling within six years preceding the assessment year relevant to the previous year in which the search is conducted, shall therefore ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife had no independent source of income and, in fact, her bank accounts were also being operated by the assessee. As regards his brother, he had entered into an agreement with him on 15.4.2004 (PB pgs. 14-15, 16-17) to the effect that 8.78 acres of land to be purchased in his name shall in fact belong to the assessee, and the ostensible owner would have no right or interest therein. That apart, sale of cardamom, which is the basis of the agricultural income, besides being evidenced by sale bills, also bearing the names of the buyers, issued by the Kerala Cardamom Processing the Marketing Co. Ltd., an independent body working under the auspices of the Spices Board, is supported by the closing stock maintained by the assessee, i.e., as on 31.03.2010 (at 145565.93 kgs). The same, therefore, cannot be doubted, as the Revenue does without any basis. 3.2 The ld. Sr. DR would, on the other hand, submit that the merits of assessee's explanation has been examined by the Revenue with reference to the explanations and documents furnished, no infirmity in which has been pointed out by the assessee, whose case is, as apparent, made-up. 4. We have considered the rival contentions, and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates are specified in both the source and application sections of the CFS. The same, listed separately, get split and, therefore, the availability of cash at any given date is not known, and would require being worked each time the source of investment oran outgoing is to be verified. No wonder, it has been not. The second deficiency in the said Statement is that it includes bank accounts as well. How would, again, one may ask, the bank balance explain a cash outgoing or, for that matter, vice versa. The two, i.e., cash and bank components of the statement, therefore, need to be segregated, though would bear cross references to each other, i.e., where cash is deposited with or withdrawn from, the bank. The assessee shall, accordingly, prepare such a statement, for which all that is required to be done is to segregate the cash and bank components of the single statement, tabulating it date-wise, i.e., in the form of cash-book or bank- book, which, had the assessee being maintaining accounts, would have been obviated. Expenses such as personal expenses, or otherwise those not documented, may be, where regular, entered on per month average basis. Similarly, agricultural income and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued his findings in the matter, as under: - "1. The material on record shows that Smt Mercy Kurian and Sri Sunny Kutty Thomas independently owned bank accounts, availed agricultural loans from banks, availed agricultural subsidy from the Government, made investments in shares and made investments in fixed deposits. Hence the financial transactions carried out by Smt. Mercy Kurian and Sri Sunny Kutty Thomas cannot be clubbed in the cash flow statements of the appellant. Hence the appellant's grounds are rejected and the additions made by the Assessing Officer on account cash deficits found after such exclusion of financial transactions carried out by Smt. Mercy Kurian and Sri Sunny Kutty Thomas are upheld." 8.2 The assessee has before us, toward the same, relied on withdrawals for Rs. 3.25 lakhs, Rs. 3.50 lakhs and Rs. 6.50 lakhs from his bank account with Meenachil East Urban Co-op. Bank Ltd. (MEUCB)(OD A/c 295) on 03.01.2005, 07.01.2005 and 03.02.2005 respectively. While the former two are stated to be in respect of the brother's land, the last, of his wife. The fact that all the three transactions of purchase of agricultural land are qua cardamom plantations, in the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wife, with there being transfers between their bank accounts with MEUCB. The assessee's explanation, to that extent, must therefore be regarded as acceptable. The matter, though principally factual, we are in this supported by decisions in State of Kerala vs. Mohammed Hassan [1997] 223 ITR 550 (Ker.); Sunny Kuriakose vs. CAIT [1996] 221 ITR 12 (Ker). Credit in respect of sale of her agricultural land would be available to the assessee even if she is an assessee under the Kerala Agricultural Income Tax Act, 1950, returning/reporting agricultural income thereunder inasmuch as the assessee, having access to those funds, could certainly have used them for his purposes, so that the source can be regarded as satisfactorily explained. As a corollary, all the income arising to the assessee's wife would stand to be assessed in his hands, statutorily mandated u/s. 64 of the Act. This shall obtain even where Mercy Kurian is an assessee under the 1950 Act. 8.4 As regards the agreement dated 15.4.2004 with Sunny Kutty, the assessee's brother, there is firstly nothing to show that the same was produced and relied upon before the Revenue authorities, whose orders bear no reference thereto. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould accordingly be accepted, though would stand to be included in the assessee's income for rate purposes. This sums our decision in principle. 9.1 The basis of the AO's working of the share of each and, consequently, of the assessee, is, however, not clear. The assessee, besides land at Anaviratty, has another cardamom plantation (4.33 acres) at Village Chakkupallom, Udumpanchola Taluk, Idukki District, making his holding at 13.06 acres, as against 17.68 acres of his wife and brother, resulting in his share being at 42.48% (71.30%, including wife's land). Two, the bifurcation of total cardamom sale, i.e., Rs. 40,14,249, is as under, resulting in assessee's share being at 28.33 % (41.80 % including wife's share): C.T. Kurian (assessee) : Rs. 11,36,805/- Mercy Kurian (wife) : Rs. 5,40,595/- Sunny Kutty (brother) : Rs. 23,36,849/- 9.2 The sale, even though through an independent body, would not by itself imply that the sale is in the capacity of an agricultural producer. As explained by the AO, the auction house does not insist on proof of land-holding to enable participation in the sale of cardamom. What is mandated is only the registration number. Why, the sale by each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the balance 7 acres of the Anaviratty land sold by the assessee, working the impugned long term capital gain at Rs. 7,38,244, quantum of which is not in dispute. 10.1 The assessee's case before us, making reference to the definition of agricultural income u/s. 2(1A) of the Act, was that buildings are a part of agricultural land. Nothing as such turns on the separate consideration being specified in the sale document for the building, and which has guided; rather, mislead the Revenue authorities in not regarding it as sale of agricultural land. 10.2 Our first observation in the matter is that the issue arising, given the clear law in the matter, i.e., s. 2(1A) r/w s. 10(37) of the Act, is principally factual, i.e., whether what has been sold was an agricultural land, in which case the building thereon, including the shed, becomes an integral part thereof, even if also used for his residence by the cultivator of land, so that specification of separate consideration in its respect would be of no moment. We find no such case made out by the assessee before the Revenue authorities, i.e., besides stating the primary facts, on which there is no dispute; the finding by the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilding, a depreciable asset, its valuation at 37% of the total consideration, as pointed out by the AO, is significant. Adjusting it for the land value, being over twice the normal, i.e., reckoned w.r.t. the normative land rate, the same would be, over55%, reinforcing the inference drawn of the land sold being, as described in the sale document, appurtenant thereto. Under the circumstances, we find no reason for interference and, accordingly, decline to. We decide accordingly. B. AY 2012-13 1. The background facts of the case, the nature of additions made, and indeed the respective cases of both the parties, are same as for AY 2011-12, which stands adjudicated by us per Para I (A1 to A10) of this order. The same shall therefore equally apply for the current year as well. We shall, nevertheless, briefly discuss each of the two additions made in assessment and under appeal. 2.1 The first, at Rs. 24,79,880, is in respect of investment in land at Meenachil Village, Pala. The assessee, along with two others, i.e., Sh. V.D. Devasia, the other appellant before us, and Shri V.M. Ansari, purchased 177.44 cents of land at Pala vide sale agreement dated 14.06.2011 for Rs. 358.25 lakhs, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire of the said plantation, i.e., save for 4.33 acres at Chakkupallom village, claims agricultural income on the basis of closing stock, and toward which he relies on stock register as well as sale bills issued by the Kerala Cardamom Processing & Marketing Co. Ltd. and The Cardamom Planter's Marketing Co-op. Society Ltd., both claimed as independent agencies. The assessee's case only needs to be stated to be rejected. To begin with, the income, though exempt from tax, had not been disclosed; the assessee returning Rs. 2,78,810, along with agricultural income at Rs. 2.95 lakhs. Why? This is quizzical, considering the said stock register and, more pertinently, the income being exempt? What better proof of the stock register being an after-thought and, manipulated. The assessee does not maintain any accounts, either for his taxable - stated as commission agency in timber business, or non-taxable income, a finding that has not been controverted at any stage, despite he being in business, and indeed an agriculturist, for long. Maintenance of accounts for agricultural income assumes significance also in view of it being taxable under State legislation; inclusion under the Act for rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 3. Rs. 10,18,925: The second addition being agitated is qua agricultural income on cardamom (i.e., receipt: Rs. 12,18,925, less expenses: Rs. 2,00,000). The same arising wholly out of opening stock, i.e., on the basis of the stock register, rejected by us in the preceding paras of this order, we confirm the addition. 4. Rs. 1,01,900: This sum, being 35 percent. of the income of Rs. 2,91,144 stated to arise on sale of latex, arises on application of r. 7A of the Income Tax Rules, 1962 ('the Rules'). The said rule is applicable only for manufacture of rubber, and not for sale of latex, the whole of which is to be regarded as agricultural income. The assessee, relying for the purpose on sale bills, has, however, not produced the same at any stage; rather, taking a different stand before the ld. CIT(A). The assessee's claim is allowed subject to production of the sale bills for the relevant year. The assessee is also at liberty to exhibit before the AO, i.e., while giving appeal-effect to this order, that agricultural income of Rs. 10.19 lacs includes the impugned income of Rs. 2.91 lacs, i.e., as stated before the ld. CIT(A), inasmuch as he has not adjudicated thereon. The onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the due process of law, i.e., on the assessee preferring an appeal there-against and obtaining a favourable verdict from a higher forum, with, in fact, the Tribunal, per the appeals under reference, being seized of the matter. As opined by us, what value the sale bills when neither they prove the capacity in which the agricultural produce is sold, i.e., as a cultivator or otherwise, nor the ownership of the said produce, with there further being no correspondence between the landholding and the sale of cardamom. This finding of fact shall equally apply for AY 2010-11 as well, i.e., where the same is raised before the Tribunal. The non-challenge by the Revenue could be for several reasons, including the legal bar u/s. 268A of the Act. The same though protects the Revenue, both in respect of filing appeals for other years, which, where so, are to be decided on merits, i.e., uninfluenced by the fact of non-filing of appeals for other years [s. 268A(2)/(3)]. On the broader principle, to which we advert to for the sake of completeness of the discussion, we may;there being no estoppel against law, refer, inter alia, to decisions in CIT vs. Goodwill Theatres [2018] 400 ITR 566 (SC); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfactorily explained, is to be assessed only for that year. The assessee/s, however, in a bid to explain the same, has built-up cash from an earlier period. Where and to that extent, therefore, the receipts are shown to arise during the earlier period, their taxability under the Act has to be with reference to the provisions applicable for that year, i.e., to the extent found taxable, and taxed for that year. The incriminating material found for a period could result in assessment of income for more than one year. However, where and to the extent the Revenue does not admit a receipt, the same has to be excluded from the cash flow for that year, and only the closing balance so arrived at carried forward to the following year, determining the short-fall, if any, for the year for which the investment/s has been found to be made. Where the closing, or for that matter, cash balance during the year, is negative, no addition shall arise for that year in the absence of any incriminating material for that year, and the cash balance carried forward to the following year would be nil. This negative balance can be taxed only in regular assessments or s. 147 assessment for that year. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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