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TMI Blog2024 (3) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. CIT(A). [2] The Ld. CIT (A) was grievously erred in confirming the addition made by the Ld. A.O. of Rs. 16,800/- being the difference in transportation expenses in previous year AY 2016-2017 and there was a mistake in the opening balance and therefore the addition made as increase in capital is illegal. [3] The Ld. A.O. has initiated the penalty proceedings u/s. 271AAC is likely to be withdrawn looking to the merits of the case. [5] The appellant therefore requests your Honour to kindly delete the above mentioned additions made by the Ld. A.O. which were confirmed by the Ld. CIT (A) looking to the merits of the case. [6] The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal." 3. Succinctly, the fact as culled out from the records is that return of income declaring total income of Rs. 10,32,850/- was e-filed by the assessee on 30.10.2017 which was processed u/s 143(1). Subsequently the case was selected for scrutiny under CASS, accordingly, notice u/s. 143(2) was issued on 20.08.2018 fixing the date of hearing on 27.08.2018. A notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BBE and show cause notice issued on 28.12.2019 by giving 1 day opportunity and 29th December is Sunday so it assessed to high pitch assessment. It is understood from the Assessment Order that during the course of assessment, the AO has observed that the appellant has declared income from agricultural activity. For examination of the claim of agricultural income, the AO called for the details and accordingly the details were submitted. It was the observation of the AO that during the previous years i.e. 2014-15 and 2015-16 there were no agricultural income declared by the appellant and the bills produced in support of the sale of agricultural produce were not continuously numbered. Few of the bills were shown as estimates instead of showing it as sale bill. Further it was the AO's claim that the appellant is the holder of small piece of land out of which it was not possible to earn Rs. 26,00,000/-. In view of these observations the AO did not accept the claim of the appellant and brought to tax the agricultural income under the head "Income without Source and brought to tax u/s 69A r.w.s. 115 BBE of the Income Tax Act, 1961 amounting to Rs. 22,01,479/- after allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that the cash in hand was utilized for some other activities. Thus added a sum of Rs. 24,60,000/- made during the period 07/11/2018 to 08/11/2016. On the other hand the appellant has uploaded the bank statements including the statement of withdrawals for the month of November 2016. It was submitted that out of the cash earlier withdrawn and savings made, deposits have been made during demonetization period. The unsecured loans shown were nothing but the outstanding salary payable and no loan was taken as stated by the AO as unsecured loan. Therefore requested to consider the plea based on the documents uploaded and produced before the AO. The uploaded documents have been carefully examined and it is a fact that as stated by the AO there was a closing cash in hand balance of Rs. 32,01,318/- as on 20/10/2016. After making certain deposits and withdrawal, the closing cash balance as on hand on 3/11 / 2016 was Rs. 25,49,643/- which will cover the cash deposit made by the appellant during the course of demonetization period i.e. on 7th and 8(th) of November 2016. The AO has not controverted this fact of availability of cash in hand in the books of account on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital account has been uploaded, it does not clearly show the details of cheque and bank details for transfer of the funds. Therefore in the absence of clear clarity in the credit of the bank account, the source for the introduction of capital cannot be accepted as correctly explained. The AO at Para 5 of Page 19 of the assessment order as clearly and categorically given the finding that the sources for this credit have not been explained even during the course of assessment. Under the circumstances there must be a corresponding credit and debit entries maintained by the partners in the firm which has been proved by the appellant with material evidence. Therefore I am of the considered opinion that the AO has rightly made the addition of Rs. 18,45,000/-. Accordingly the ground raised is dismissed. Ground No. 4: There is a difference of Rs. 16,800 is the difference of transportation expense in PY 2015-16. There is mistake on taking the opening balance and hence the addition made as increase in capital is illegal and illogical. It was observed by the AO that the opening capital adopted by the firm was to the tune of Rs. 52,44,864/- as against the previous year& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds and similar seeds items. 1.3. There is no new introduction of the capital as there is only transfer of amount from his saving account to current account and the revenue has erred in making addition of Rs 18,45,000/- which is unjustified and illogical. 1.4. The appellant submitted that there was no new capital introduced into the business. It is a agriculture Income which is transferred from his saving account to his business account i.e. Krishna Agri Genetics. 1.5. The appellant has maintained two separate books of accounts,one in the name of Krishna Agri Genetics and this account is bearing No. 1337 in Bank of Baroda and only trading activity operations are employed in this bank account. 1.6. The other bank account in Bank of Baroda bearing a/c No. 0261 is a saving account and only agricultural income employed in this account. On 27.03.2017 an amount of Rs 18,00,000/- was credited in capital account and was transferred from the account of agriculture unit. 1.7. There is no new introduction in capital as it is really transfer of Rs 18,00,000/- which is from one bank account to another bank account. Rs. 45,000/- was transferred of cash to business entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rejected assesses explanation and added amount deposited to his income under section 69A - On appeal, Commissioner (Appeals) as well as Tribunal came to a categorical finding that amount was withdrawn from parents account and deposited in account of assesses solely to facilitate his immigration to Canada - They also took into consideration fact that assesses did migrate to Canada as confirmation of permanent resident was also placed before Commissioner (Appeals) - Accordingly, impugned addition made by Assessing Officer was deleted - Whether on facts, no substantial question of law arose for determination in background of case due to transfer of funds inter se between family members and, thus, revenue's appeal was to be dismissed - Held, yes in favour of assesses. 1.14 Your kind attention is also invited towards the decision of Hon'ble Apex court in 273 ITR Page 1 in D.P. Sandhu Brothers in which it has been held that if section 45 cannot be applied, it is not open to the department to impose tax on such capital receipt by the assesses under any other Section. The Hon'ble Supreme Court, in United Commercial Bank Ltd. v. CIT (1957) 32 ITR 688, held that the heads of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were computed on the basis of such margin, the profits shown on the sales so made is already forming part of the total income, resulting into no addition on any ground. 1.19 In view of above facts of the case and in view of the judicial decisions, it is submitted that the addition made may kindly be deleted. 2. Re: Gr. No. 2: Charging of Income Tax u/s 115BBE: 2.1 It is respectfully submitted that though this ground was not specifically raised, but this is purely a legal ground and relates to charging of tax on the income assessed by the ld. AO. The said ground is part of the addition challenged. The ld. AO has erred in charging tax u/s 115BBE in relation to the addition made on undisclosed deposit in the bank account treating the same as undisclosed income chargeable to tax under the said section. 2.2 The reason and purpose of the provision was explained by the explanatory memorandum to the Finance Bill 2012 as under: 1) "Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deleted and if the said contention is accepted, consequently the charging of tax u/s 115BBE would also not get attracted. 2.7 Alternatively, even if the addition on account of deposit in the bank account is found be fully or partly sustainable, still the charging of tax u/s 115BBE would not be justified. The deemed income u/s 68 to 69D does not obliterates the classification of five heads of income u/s 14 in view of the saving clause u/s 14 and therefore deems these incomes in a classless manner irrespective of the fact that such deemed income could also possibly be in the nature of any one of five heads u/s 14. 2.8 When source of any item of cash/ asset/ entry, etc. remains unsubstantiated within the scope of provisions of ss 68 to 69D, there can still be piercing the veil created under the deeming fiction, obliterating the classification of heads of income u/s 14 and still attempt to classify the nature of unexplained income into any of the head u/s 14, even though such income was not at all recorded or incorrectly recorded in books of accounts maintained for such known activity, if any 2.9 The real purpose of introducing this provision was to charge higher tax at the max ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "While it is true that section 153C is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by virtue of the amendment, there is merely a change in the procedural provisions affecting the assesses who were covered by the unamended provision. By the amendment, a new class of assesses are sought to be brought within the sweep of section 153C, which affects the substantive rights of the assesses and cannot be said to be a mere change in the procedure. Since the amendment expands the scope of section 153C by bringing in an assesses if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, inasmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court in the case of CIT Vs. Nirmal Textiles [1997] 224 ITR 378 (Gujarat) considered the question as to whether the nature of capital asset (short term or long term) has to be determined in accordance with provisions of law as standing on date of transfer of asset and has held that, "Insofar as the first part of imposition of tax is concerned, namely, what persons in respect of what property are liable to pay tax is to be determined with reference to law as on the date of the occurrence of the event which creates or attracts the liability to tax, unless the statute by express or by necessary implication provides otherwise. In computing such liability what is to be excluded or included or conditions or allowances of deductions or exemptions and the like matters, the law as it exists on 1st of April of the relevant assessment year governs the assessment. Applying the aforesaid principles, the taxable event which attracted liability to tax was the transfer of immovable property as a result of which the income in the nature of capital gain arose during the previous year. 2.17 In determining, the nature of the Act, regard must be had to the substance rather than to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. When additional tax has imprint of penalty, the revenue cannot be heard saying that levy of additional tax is automatic under section 143(1A). If additional tax could be levied in such circumstances, it would be punishing the assesses for no fault of it. That cannot ever be the legislative intent. It shocks the very conscience if in the circumstances section 143(1A) could be invoked to levy the additional tax. In the circumstances of the case, levy of additional tax taking into account the income by way of cash compensatory support was not warranted. b. CIT v. Vatika Township (P.) Ltd. 367 ITR 466 (SC) Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. One principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Philips v. Eyre [1870] LR 6 QB 1 a retrospective legislation is contrary to the general principle that legislation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assesses to pay service tax. Interest was levied by the revenue on the payment of the service tax. The question which arose was whether the liability to pay interest would only arise on default and is really in nature of a quasi-punishment and such liability although created retrospectively by amending Act, could not entail punishment of payment of interest with retrospective effect. The Hon'ble Apex Court held that, "It is well established that while it is permissible for the Legislature to retrospectively legislate, such retrospectively is normally not permissible to create an offence retrospectively. There were clearly judgments, decrees or orders of courts and Tribunals or other authorities, which were required to be neutralised by the validation clause. We can only assume that the judgments, decrees or orders, etc. had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would have been so punishable if the section had not come into force. The liability to pay interest wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Benami Transactions (Prohibition) Amendment Act, 2016: - By now, it is well settled law that unless a contrary intention is reflected, a legislation is presumed and intended to be prospective. For in the normal course of human behaviour, one is entitled to arrange his affairs keeping in view the laws for the time being in force and such arrangement of affairs should not be dislodged by retrospective application of law. The principle of law known as lex prospicit non prospicit (law looks forward not backward), is a well-known and accepted principle. The retrospective legislation is contrary to general principle for legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried out in the faith of the then existing law. Thus, the principle against retrospectivity is the principle of 'fairplay' and unless there is a clear and unambiguous intendment for retrospective effect to the legislation which affects accrued rights or imposes obligations or castes new duties or attaches a new disability is to be treated as prospective. [Para 80] It is trite law th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accorded with the law and claim a benefit accordingly; the benefit cannot be taken away by law with retrospective effect by imposing a new condition which the citizen at that stage is incapable of complying, whereas if such promise (by the legislature) was not there, the citizen could have arranged his affairs in a different way to get the same or at least some part of the benefit." 2.27 The in-between amendment in the Act by the Second Amendment as on 15th December, 2016, resulted increased tax rate which was not there in the Finance Act, 2016 which was presented on 28th February, 2016 and got its assent from the President of India on 14th May, 2016. In view of the above judicial pronouncements, such amendment cannot be retrospective and such charging of tax u/s 115BBE on the addition made was not justified in any case. 3. Addition for Rs 16,800/- as an unexplained u/s 69A: 3.1 The ld. CIT has erred in making addition of Rs 16,800/-.There is difference of transportation expenses in PY 2015-16.There is mistake on taking the opening balance and hence the addition made as increase in capital is illegal and illogical. 3.2 The appellant explained that the difference is of Rs 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 18,45,000/- sustained by the ld. CIT (A) who has considered all the aspects of the matter argued by the assessee before ld. CIT (A) but the same does not find any merit and therefore, he prayed that the finding of ld. CIT (A) be sustained. 9. We have heard the rival contentions and perused the material placed on record. The bench noted the brief fact of the case related to the ground No. 1 is that the ld. AO found that the additions to capital account of the his proprietary concern of the assessee credited by a sum of Rs. 18,45,000/-. When the assessee confronted about the source of the money credited in the capital account. The assessee submitted that he has on 27th March, 2027 transferred a sum of Rs. 18,00,000/- from his saving bank account No. 43280100000261 and Rs. 45,000/- was introduced out of cash balance arising from the agricultural activities. The ld. AO did not find any substance in the contentions of the assessee and therefore, the said amount was added as income of the assessee. The assessee on the issues taken as ground No. 3, before the ld. CIT (A) who has supported the finding of the AO and confirmed the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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