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TMI Blog2024 (10) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA No.770/SRT/2023 for AY 2010-11 is treated as lead case. The assessee in his appeal has raised the following grounds of appeal: "1. The Ld.CIT(A)-NFAC erred on facts and in law not adjudicating the issue relating to assumption of jurisdiction u/s 147 of the Act by issuing notice u/s 148 of the Act without appreciating that deposit of cash in bank accounts per se is not escaped income. 2. The Ld.CIT(A)-NFAC erred on facts and in law in confirming addition of Rs. 1,16,14,000/- [i.e., Rs. 1,22,94,000/- less Rs. 6,80,000/-] u/s 69A of the Act without appreciating the explanations and submissions made in the course of assessment as well as appellate proceedings citing technicalities instead of determining real income of the appellant. 3. The Ld.CIT(A)-NFAC erred on facts and in law in upholding treatment of agricultural income of Rs. 3,10,700/- by the Assessing Officer to be as 'income from other sources'." 3. The facts of the case in brief are that assessee filed his return of income (ROI) on 30.03.2012 declaring total income of Rs. 6,12,955/-. Thereafter, based on the information available with Department, case was reopened after recording reason and getting prior approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced reasons for re-opening at page-6 of the written submission. He also relied on the some decisions of Hon'ble Courts and contended that in absence of any compliance of the directions of the Hon'ble Court issuance of notice u/s 148 itself is invalid and assessment so made is liable to be quashed. Thereafter, assessee made submissions on merits of the case. He had also mentioned that though assessment order was passed u/s 143(3) r.w.s. 147 of the Act on 21.12.2017 but the language and tenor of the assessment order indicates that assessment has been made as if the assesses had not furnished any evidence during the course of assessment proceedings which is contrary to the facts. After considering the submission of the assessee, the Ld. CIT(A) dismissed the grounds in respect of unexplained cash deposit and agricultural income by elaborate discussion starting from pages 21 to 37 of the appellate order. He has allowed relief of Rs. 6,80,000/- out of the total addition of Rs. 1,26,04,700/- . Aggrieved by the order of Ld. CIT(A), assessee has filed present appeal before the Tribunal. 5. The Learned Authorized Representative (Ld. AR) of the assessee strongly objected the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30.08.2023 by enclosing various decisions and also explanation regarding the cash deposit which was added by the AO. The CIT(A) has reproduced the submission of the assessee (para-3.1 to 3.8) which is at pages 4 to 21 of the appellate order. The submission of assessee regarding validity of re-opening is at para 3.3. to 3.5 of the written submission. The assessee had also extracted the reasons for re-opening below para-3.3 of the written submission. The CIT(A) has given his decision after considering the assessment order and submission of the assessee at pages 21 to 37 of the appellate order. He has given his decision on (A) unexplained cash deposit and (B) agricultural income. However, he has not given any finding in respect of the submission made by the assessee regarding validity of re-opening u/s 147 and issue of notice u/s 148 of the Act. The assessee had in fact made submission on the issue and has relied upon various decisions of Hon'ble High Courts in support of his contention that re-opening was not valid. 6.2 It is an undisputed fact that assessee had filed return of income electronically on 30.03.2012 declaring total income of Rs. 6,12,955/-. The Ld. CIT(A) has mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed objections to the AO exercising the power of reassessment. In true spirit, if the communications were examined, the assessee was objecting to the process of reopening. If such objections had been raised before the AO, the AO ought to have disposed of the objections in terms of the decision of the Hon'ble Supreme Court in the case of G. K. N. Driveshafts (India) Pvt. Ltd. vs. ITO, 259 ITR 19 (SC). However, facts of the present case are somewhat peculiar and no useful purpose would be served in ensuring only cosmetic purpose of completing formality and then inviting a fresh litigation. Therefore, respectfully following the Hon'ble jurisdictional High Court in the case of Thakorbhai Maganbhai Patel vs. ITO, (2016) 74 taxmann.com 225 (Guj.), we deem it proper to examine the merits of the appellant's challenge to the reopening also and decide the issue of reopening in the following paras. For appreciating the issue, it would be proper to reproduce the reasons for reopening for AY.2010-11 which is as under: "The information is available in this office that the assessee has deposited cash of Rs. 1,22,94,000/- in his saving bank accounts maintained with HDFC Bank and State Bank of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs. ITO, (2021) 127 taxmann.com 679 (Guj.) to support above view. In the said case, the Hon'ble High Court was dealing with a case where the AO issued reopening notice against assessee on the ground that an information was received from NMS (Non-filer monitoring system) that assessee had received cash deposit in a bank account but had not disclosed same in its return of income. Since, assessee has failed to submit supporting evidences and source of income with regard to same cash deposits, the impugned reopening notice issued against the assessee was held to be justified by the Hon'ble Gujarat High Court. The facts of the present case are similar; assessee had deposited Rs. 1,22,94,000/- in his bank accounts but he had not disclosed it in his return of income and there is no reason as to why the ratio would not be applicable to the present case. 6.4 As stated earlier, there was no scrutiny assessment u/s 143(3) in the present case. The case was only processed u/s 143(3) of the Act. Under similar situation, the Hon'ble Gujarat High Court in the case of CIT vs. Kiranbhai Jamnadas Sheth (HUF), 39 taxmann.com 116 (Guj.) has held that where original assessment of assessee was acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice u/s 133(6) on 01.02.2017, but assessee did not file any reply with evidence till the date of reopening on 27.03.2017. Hence, the AO was left with no option but to reopen the case u/s 147 and issue notice u/s 148 of the Act. The case relied upon by the assessee in case of D.B.S Financial Services Pvt. Ltd. (supra) of the Bombay High Court is an earlier decision and was under different set of facts. The information called for was in the nature of general information in respect of all card holders whose accounts showed annual expenditure of Rs. 5,000/-. However, in the present case it is a specific query to only the assessee in respect of information in possession with the department that the assessee had deposited Rs. 1,22,94,000/- in his bank account with HDFC and State Bank of India. Hence, the decision of Hon'ble Bombay High Court is not applicable. On the other hand, the decision of Hon'ble Delhi High Court in case of Abhishek Jain (supra) is applicable to the present case and the AO had validly reopened the assessment u/s 148 of the Act. 6.6 The appellant has also raised objection that the guidelines issued by Hon'ble Delhi High Court in case of Sabh Infrastructure Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the details filed by the assessee. Hence, there is no failure on part of the AO to follow the mandate of the Hon'ble Supreme Court. In view of the facts discussed above and decision cited supra, challenge of reopening is rejected. 7. The assessee has also requested for admission of additional evidence under Rule 29 to 31 of the Income Tax (Appellate Tribunal) Rules, 1963. The additional evidence is in the form of various sale deeds and copies of ITR acknowledgements with statement of total income corresponding to sale of properties for AYs 2012-13 to 2015-16. The assessee has filed affidavit stating that these documents were referred to by him in cash flow statement during appellate proceedings at pages 10 to 21 of appellate order. It is further submitted that though reference was made about sale deed in cash flow statement but assessee could not submit the same in appellate proceedings because copies of registered sale deeds were not readily available with him. He also submitted that he had received advance from the buyers both in cash as well as in cheque but no sale deeds were executed. The cash received from the customers were deposited in the bank accounts mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR submitted that the CIT(A) in his decision at point no.5 in page 21 of the appellate order has admitted that the appellant had disclosed SBI A/c No.10804281880 in the returns of income for AY.2010-11 and 2011- 12. Had he examined the said account, he would have came to know the other SBI A/c in name of M/s Shrijee Infraproject because of frequent transfer transactions between these two accounts. He stated that the HDFC Bank A/c is also a disclosed account of the appellant in which FDR prematurity amount was credited against which appellant disclosed interests of Rs. 32,955/- in the return of income. The appellant disclosed one bank A/c in the returns of income because A/c no. of one bank is required to be mentioned in the return for refund of tax, if any, payable to assessee. He further submitted that during the appellate proceedings, the assessee submitted cash flow statement after removing errors committed in preparation of memorandum cash book as submitted during assessment proceedings. He has referred to the cash flow submitted during the appellate proceeding and submitted that the appellant was not keeping funds in the bank accounts but principally in cash and therefore, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to in the cash flow statement wherein payment by buyers is admitted have been placed in paper book at page 143 - 154. The Ld. AR submitted the ITR particulars for AYs.2012-13 to 2015-16 in which sale deeds were executed, for which cash was received in the year under consideration. The booking receipts were Rs. 48,35,600/-, Rs. 75,33,224/-, Rs. 76,10,980/- and Rs. 85,12,930/- for AYs.2012-13 to 2015-16 respectively. The bank account of M/s Shrijee Infraproject was opened on 28.07.2009 and the account was used to meet construction and development expenses. Cash deposited in other accounts were transferred to this account for other purpose. The Ld. AR further submitted that contract income u/s 44AB has been disclosed at of 15% of the turnover for AYs.2013-14 to 2015-16 and 12.07% for AY.2012-13. The Ld. AR submitted that AO accepted receipt of consideration through cheques but refused to accept consideration in cash. No corresponding amount of cash was found deposited in the bank accounts in subsequent year as a consequence of which no reopening was made in said assessment years. The Ld. AR further submitted that both AO and CIT(A) have not given credit for opening cash balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) in his decision on "unexplained cash deposit" at point no.5 in page 21 of the appellant order has mentioned that except A/c No.10804281880, other two bank accounts are not disclosed. Therefore, assessee has deposited Rs. 71,79,000/- in his disclosed bank a/c no.10804281880 maintained with SBI. The other SBI account having cash deposit of Rs. 10,501/- has not been considered for addition by AO or enhancement by CIT(A). The HDFC Bank A/c No.99531000008769, where cash deposit of Rs. 51,15,000/- was made, is considered by CIT(A) as an undisclosed bank account. The AO has added cash deposits of both disclosed and undisclosed bank accounts maintained with SBI and HDFC Bank. We find that the assessee has disclosed income u/s 44AD @ 15% of the gross receipt. The AO has not rejected such income u/s 44AD. The AO has also not held that return of income to be defective or invalid. We also find that both AO and CIT(A) have accepted the credits through bank transactions and cheques in the bank accounts as explained. However, the cash deposits were not accepted. The Ld. AR has submitted that assessee received both cash and cheques from the buyers of shops. During the subject year itself, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business carried on by the assessee. Though the income of the project, M/s Shrijee Infraproject has been offered for taxation u/s 44AD of the Act in subsequent assessment years, the assessee has shown cash receipts from the customers in this year. The appellant has also offered income u/s 44AD in receipt of contract receipts. However, the nexus between the gross receipt offered of presumptive tax u/s 44AD of the Act and the cash deposits has not been fully explained and established. On the other hand, no new source of income has been found by the AO. Therefore, as submitted by appellant, only the profit element and not the entire amount can be added as income of the assessee. Since, the assessee has offered net profit @ 15% u/s 44AD, it would be fair and reasonable if the profit on the cash deposit is estimated @ 8% of the cash deposits. Accordingly, addition of Rs. 9,83,520/-, being 8% of Rs. 1,22,94,000/-, is upheld which shall be over and above the income shown by the assessee in his return of income. The AO is directed to delete the remaining addition. This ground is partly allowed. 10. The next ground is treatment of agricultural income of Rs. 3,10,700/- as income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He submitted that the assessee failed to produce the contractors who have allegedly given the rent income from agricultural operation on the land owned by the assessee. 14. We have heard rival submissions and perused the material available on record. We find that the assessee has been consistently showing agricultural income in his returns of income from AY.2008-09 to 2015-16. There was scrutiny assessment for AY.2008-09 and AY.2011-12 wherein the agricultural income of assessee was accepted. The CIT(A) has also accepted agricultural income of assessee for AY.2011-12. The reason for not accepting agricultural income in the immediately preceding year is not very clear. As the appellant has consistently disclosed agricultural income, such claim cannot be brushed aside for the impugned assessment year. However, in absence of complete details as pointed out by the lower authorities, it would not be proper to allow the entire agricultural income disclosed by the assessee. We, therefore, deem it proper to disallow 20% of agricultural income i.e., Rs. 62,140/- and allow Rs. 2,48,560/-. This ground is partly allowed. 15. In the result, the appeal for the AY.2010-11 is partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e working of capital gain in respect of properties under registration deed No. 9646/2010 and 9645/2010. There is no difference in respect of the property in registration deed No.9645/2010. The difference in value u/s 50C was Rs. 5,74,300/- in respect of property sold vide registration deed no.9646/2010. The assessee had claimed cost of compound work and other charges for Rs. 1,75,600/- and Rs. 1,84,250/- (Total Rs. 3,59,850/-) which has not been accepted by AO. Therefore, the total addition/disallowance of Rs. 9,34,150/- (Rs.5,74,300 + Rs. 3,59,850) from which the loss of Rs. 2,22,350/- computed by the appellant during assessment proceedings was allowed. In the result, net addition was Rs. 7,11,800/-. The Ld. AR submitted that the addition of Rs. 5,74,300/- is not justified because the prevailing market rate was lower than the jantri rate. The Ld. AR submitted that AO has accepted sale consideration received below the jantri rates for registration deed no.9645 but made addition for registration deed no.9646. The sub-register levied and charged additional stamp duty for both registration deed where payment of additional stamp duty of Rs. 26,865/- was made for registration deed no.96 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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