TMI Blog2024 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... the requisite details to Ld. AO and it was onus of Ld. AO to controvert the same . However, there is nothing on record which would show that the details furnished by the assessee were not correct. There is not material on record to controvert the details furnished by the assessee. Once the debtors balance is accepted, the recovery of the same could not be doubted unless some positive material was brought on record to establish that the cash was not received by the assessee from such debtors. As noted that the assessee has made further recoveries during AY 2016-17 and 2017-18 which have duly been credited in the cash book. The cash balance available with the assessee has been deposited in the bank and the same has been used to settle the bank loan taken by the assessee. Thus, the source of cash deposit was cash balance as available with the assessee in the books of accounts. In such a case, the impugned additions as made u/s 68 for AY 2016-17 has no legs to stand. The addition made u/s 69A in AY 2017-18 has also no basis since the cash deposited by the assessee is duly supported by the cash balance as available with the assessee in the cash book. The cash so deposited could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in deleting the addition made towards unexplained credits u/s. 68 to the extent of Rs. 19,22,37,000/- in respect of cash claimed to have been received by the assessee from recovery of farmers' advances earlier granted. 2.1. The Ld. CIT(A) erred in observing that the farmers' advances recovered during the financial year relevant to AY 2016-17 could be the subject matter of enquiry for the assessment year 2017-18, without appreciating that the amounts had been credited in the books of account in the previous year relevant to the assessment year 2016-17 and the assessee had not provided explanation for the source of credits to the satisfaction of the assessing officer. 2.2. The Ld.CIT(A) erred in failing to appreciate that Shri V. Sathish, one of the directors of the company admitted in his sworn statement recorded during the enquiry conducted by Investigation wing that there was no evidence for the collection of cash from the farmers. 2.3. The Ld. CIT(A) failed to note that the assessee had filed ITR and Audit Report only upto AY 2014-15 on the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings for AY 2016-17, it transpired that the assessee received cash of Rs. 2502.32 Lacs during the year which was duly credited in the cash book. To substantiate the same, the assessee was directed to produce financial statements, cash book, bank summary and source for advancing loans / investments. The assessee complied with the notices and filed various documents and submissions in support of source of cash deposit. 3.3 The assessee submitted that it was advancing money to the farmers to ensure the supply of raw sugarcane to the assessee at the time of harvesting which would be basic raw material for the assessee. Approx. 10 to 12 months advances were lying with farmers and it was revolving in nature. The same was reflected in Balance Sheet as receivables . The assessee further submitted that there was opening cash balance of Rs. 25.86 Crores out of which Rs. 19.22 Crores was collected during the harvest season through the rearrangement of supply of sugarcanes. The same was used to make the deposit in the bank account. 3.4 During the course of earlier search and survey operations, the assessee had provided a list containing names of the farmers to the Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding loans for AY 2014-15 were only Rs. 1.13 Lacs. The same suddenly jumped in AY 2015-16 to Rs. 3717.86 Lacs. Therefore, it was a well-planned arrangement by the assessee to accommodate his unexplained demonetized money as received during demonetization period. In the above background, Ld. AO held that the assessee could not substantiate the cash deposit of Rs. 2502.32 Lacs and the same was added to the income of the assessee u/s 68. 3.7 In AY 2017-18, Ld. AO similarly noted that the assessee deposited sum of Rs. 40.28 Crores in demonetized notes in the bank account and the same was used to settle the bank loan taken by the assessee. Shri T. Rajkumar and Shri V. Sathish, director explained that the company gave sugarcane advances to cane growers (farmers) during financial years 2009-10 to 2012-13. From 2013-14 onwards, the advances were returned back by the farmers to the company and the money was kept in the custody of Shri T. Rajkumar. During demonetization period, the cash was remitted to the bank. 3.8 During the course of assessment proceedings for AY 2017-18, the assessee produced Balance Sheet details for FYs 2009-10 to 2016-17. The Ld. AO found discrepancies in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 40 Crores from State Bank of Hyderabad which was under one time settlement (OTS) scheme. Pending OTS settlement, the cash so collected from the farmers was accumulated by the assessee and subsequently deposited into the loan account to settle the same. The advances to the farmers were sourced out of bank loan availed by the assessee from the bank. During the course of assessment proceedings, the assessee furnished the names, address, holding details of the farmers. Total cash received during AY 2016-17 was Rs. 2502.32 Lacs out of which amount of Rs. 1922.37 Lacs represent advances recovered from the farmers during this year. For AY 2017-18, the assessee drew attention to the fact that confirmations furnished by the assessee were duly verified which was noted by Ld. AO also in the assessment order and therefore, there could be no occasion to disbelieve the same. The assessee also assailed the applicability of Sec.68 / 69A to the facts of the case. Another plea was that the same amount was taxed twice in two years. Reliance was placed on various judicial decisions in support of various submissions. 4.2 The Ld. CIT(A) duly considered the detailed submissions of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial Year Opening Balance Advances given during the year Advances recovered during the year Closing Balance 2013-14 42,18,45,610 81,18,108 -- 42,99,63,718 2014-15 42,99,63,718 17,13,53,500 25,86,10,218 2015-16 25,86,10,218 19,22,37,000 6,63,73,218 2016-17 6,63,73,218 3,43,42,491 3,20,30,727 The assessee also summarized the cash position for financial year 2015-16 which has been extracted in para 6.5.9 of the impugned order as under: - Total cash received during the year 2015-16 25,02,32,500 SOURCES: Withdrawal from Bank Axis Bank CA-913020041436726-CBE 3,25,20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts. 4.6 After considering detailed submissions of the assessee, Ld. CIT(A) noted that advancing money to farmers was a regular feature in assessee s business. The total outstanding balance from the farmers as on 31.03.2014 amounted to Rs. 4299.63 Lacs which was not disputed by Ld. AO. In AY 2016-17, the assessee received back advances to the extent of Rs. 1922.37 Lacs whereas the remaining cash receipts were withdrawal from the bank and sugar sale proceeds whereas Ld. AO made addition for entire amount which was not correct. The Ld. AO did not record any adverse findings in the assessment order in respect of other cash receipts credited in the cash books. The recoveries of farmer s advances were duly reflected in the cash book for FYs 2014-15 to 2016-17. On these facts, the impugned addition made for AY 2016-17 u/s 68 as well u/s 69A for AY 2017-18 was not justified. The substantial adjudication of Ld. CIT(A) was as under: - 6.6.9 On careful examination of the facts of the case for the instant assessment year as well as the subsequent assessment year 2017-18, it is considered that the addition of the amount of advances recovered from the farmers of Rs. 19.22 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources for the cash deposits made in the bank accounts during the demonetisation period in A Y 2017-18. 6.6.10 In this connection. it is pertinent to observe that with regard to AY 2015-16, being the first year in which the farmers advances were stated to have been recovered, the AO reopened the assessment by issue of notice u/s 148 dated 31.03.2021 (subsequent to the completion of assessment for AY 2016-17 on 31.12.2018) and completed the re-opened assessment vide order dated 16.02.2022. In the said assessment for AY 2015-16, the AO did not make any addition u/s 68 towards the cash of Rs. 17,13,53,500/- credited to the cash book towards recovery of farmers advances. Thus, it is seen that the AO has also taken the view in re-assessment order for AY 2015-16 which is same as the view stated by the undersigned in the preceding paragraph that the recovery of farmers advances shown during the previous years AY 2015-16, 2016-17 and 2017-18 can only be the subject matter of enquiry in the assessment for AY 2017-18 for the purpose of ascertaining unexplained money u/s 69A as such recoveries from farmers were stated to be sources for the cash deposits made in the bank accounts during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings, the appellant submitted the list of farmers advances recovered during the previous years relevant to the assessment years 2015-16, 2016-17 and 2017-18 along with confirmation letters in 104 cases. The appellant has discharged the initial onus with regard to the identity, creditworthiness and genuineness of the transactions by producing the relevant details along with 104 confirmation letters before the AO. This year being the year in which the cash so recovered was deposited into the bank accounts and since the appellant had discharged the initial onus cast on it, the parameters such as the identity of the farmers, genuineness of the transactions and creditworthiness of the farmers were subjected to necessary verification by the AO during the assessment proceedings. 6.6.13 The farmers list containing the details of advances given and recovery made contains more than 10,000 entries ranging from Rs. 1250/- to 3,00,000/-. The appellant filed a list of 104 confirmation letters from the farmers during the assessment proceedings, out of which 48 farmers with repayment of advances in cash in excess of Rs. 125,000/- were selected for verification by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 ITR 78 is relevant to the issue. The Hon'ble Supreme Court held that; In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. fl the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for. 6.6.18 The decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 60% of the total amount of recovery of advances of Rs. 40,28,23,185/- pertaining to more than 10,000 farmers is non-genuine on a proportionate basis, since 27 farmers out of a sample of 48 farmers did not respond to the summons which represented non-compliance by 56.25% of the sample size. Accordingly, the AO made addition of 60% of the total amount of advances recovered which worked out to Rs. 24,16,93,910/- u/s 69A. The said addition of the AO by making estimation on a proportionate basis based on verification made on a sample basis is wholly unjustified and not acceptable particularly when the appellant had furnished the details of all the farmers to the department and it was the AO who chose to make verification of only 48 persons due to his own constraints. The AO at best can treat the amount of recovery pertaining to the 27 farmers of Rs. 40,33,000/- as unsubstantiated as make addition u/s 69A. Even that would not be correct for the reasons stated in the preceding paragraph. The action of the AO in treating the advances recovered to the extent of Rs. 24,16,93,910/- (60% of the total advances recovered) as unsubstantiated on a proportionate basis without discharging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the framers. The assessee had recovered farmer advance of Rs. 1922.37 Lacs whereas Ld. AO has brought entire cash receipts to tax as unexplained cash credit u/s 68. Therefore, the action of Ld. AO is clearly erroneous one. 7. It could further be seen that the assessee was earlier subjected to enquiries by the investigation wing wherein the assessee provided a list containing names of the said farmers to the investigation Wing which was made available to Ld. AO. The said box file contained details of farmers, centre name and amount so received over various years. Still no independent enquiries were made by Ld. AO to support the impugned addition made u/s 68 for AY 2016-17. It could further be seen that during assessment proceedings for AY 2017-18, certain enquiries, on sample basis were done Ld. AO. In this year, Ld. AO selected, on sample basis, the details of 48 farmers and forwarded them to DCIT, Kolhapur for verification of the same. Out of this list, 21 farmers filed details along with confirmation letters which completely matched with the details furnished by the assessee. The remaining 28 farmers did not appear. However, merely because some farmers did not turn up, no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. AO has considered the entire amount of Rs. 39.78 Crores in AY 2017-18 again for the purpose of making the proportionate addition. The aforesaid amount of Rs. 39.78 Crores already includes the amount of Rs. 19.22 Crores which has separately been added in AY 2016-17. Therefore, the addition to that extent is clearly a double addition and the impugned addition could not be sustained for AY 2016-17. 10. We are also concur with the observations of Ld. CIT(A) that Ld. AO made artificial distinction between the 21 farmers who have appeared in response to summons issued by DCIT, Circle-2, Kolhapur and gave their confirmations and the remaining 27 farmers who have not responded to the summons issued for examination. The AO considered the claim of recovery of advances from the 21 farmers as genuine whereas he considered the claim of recovery of advances from the 27 farmers as unsubstantiated and bogus one. Such a conclusion is unjustified since Ld. AO is accepting only a part of the explanation offered by the assessee while accepting the fact that the assessee made advances to farmers in earlier years. No adverse conclusion could be drawn against the assessee for non-appearance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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