Case Law Details
Shri Jafrudin Kaji Vs The ITO (ITAT Ahmedabad)
It is an undisputed fact that the assessee sold land for Rs.72 lakhs as evident from the sale deed. Therefore, the argument of the learned counsel for the assessee that the amount of cash deposits represents the sale consideration of agriculture land is without any substance. However, we note that the affidavit has been duly furnished by the assessee stating that the sum of Rs. 10 lakhs was received from the purchasers of agriculture land. Thus, in such circumstances and the interest of the justice, we feel that the AO should have verified the purchase consideration from the purchasers for determining the actual sale price of such land and after providing the opportunity of cross-examination to the assessee. Therefore, we incline to restore this issue to the file of the AO to verify the purchase consideration from the purchasers for the agricultural land in dispute and accordingly, adjudicate the issue afresh after giving the reasonable opportunity of being heard to the assessee as per the provisions of law. Similarly, we also restore the issue for the balance amount of Rs. 1.39 lacs deposited in cash in the bank account of the assessee for fresh adjudication by the provisions of the law. Hence, the ground of appeal filed by the assessee is allowed for statistical purposes.
FULL TEXT OF THE ITAT JUDGMENT
The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-4, Ahmedabad [CIT(A) in short] vide old appeal no. CIT(A)-4/XV/XXI/1147/Wd.13(1)/14-15 and new appeal no.CIT(A)- 4/68/Wd.13(1)/14-15 dated 13.02.2015 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 31.01.2014 relevant to Assessment Year (AY) 2011-12.
2. The grounds of appeal raised by the assessee are as under:-
“1. The assessee being a villager and service in govt. department is not much aware about the laws and rules like businessman. He relying on the tax consultant filed a return of income for the A. Y 2011-12 showing total income Rs. 4,22,790/-.
2. The assessee has sold the rural agricultural land exempt U/s. 2(14) 82 lakhs. However, the tax consultant has shown only amount received by cheque i.e Rs.72 lakhs. The assessee received Rs.10 lakh in cash for the sale transaction, which he has deposited in the bank. But due to error of the tax consultant the same is not shown in the return. The ITO has added Rs. 11.39 lakhs to the total income stating it as unexplained cash deposits.
3. Also, the assessee has Interest accrued on investment in NSC 60,554/-. The same is not offered to income as it is recognized on cash accounting system u/s 145(1), Moreover, none of them have been matured during the previous year. Hence, the same has not been included in the total income following the cash basis. However the ITO has added the same to the total income.
4. The assessee has paid all the tax with interest as assessed under Section 143(3). The copy of the challans are enclosed.
5. The assessee has preferred appeal to the CIT (A) against the order of ITO. The learned CIT (A) has justified the Assessing officer and dismissed the appeal on both the grounds. The assessee has filed further appeal to the ITAT for the above mentioned grounds.”
3. The first issue is general and does not require any separate adjudication. Therefore, we dismiss the same.
4. The second issue raised by the assessee is that the learned CIT (A) erred in confirming the order of AO by sustaining the addition of Rs. 11.39 lacs as an unexplained cash credit.
5. Briefly stated facts are that the assessee is an individual and declared his income under the head salary & other sources. The assessee during the year has deposited cash of Rs. 11.39 lacs in its bank account. The Assessee during the assessment proceedings explained the sources of cash by submitting that he has sold an agriculture land for Rs.82 lacs only during the year. The sale consideration was received for the sale of agricultural land in a cheque as well as in cash. An amount of Rs. 72 lacs was received through banking channel, and the balance of Rs. 10 lacs was received in cash, which was subsequently deposited in the bank account. The assessee accordingly claimed that the agricultural land is not a capital asset as per the definition of section 2(14) of the Act, therefore, the entire sale consideration of Rs. 82 lacs is exempt from tax.
Similarly, the assessee has withdrawn a sum of Rs. 1,44,000/- from the bank during the year and balance amount of Rs. 1,39,000/- was deposited out of such amount. The Assessee also claimed that he had agricultural income during the year.
However, the AO disregarded the contention of the assessee by observing that entire amount of sale consideration was received for Rs. 72 lacs through banking channel as evident from the sale deed of the agricultural land sold during the year. Therefore, the argument of the assessee that he has received sum of Rs.10 lacs in cash against the sale of agricultural land was rejected.
The AO also observed that the assessee had sold the agricultural land at the beginning of the financial year. Therefore, there is no question of having income from the agricultural activity during the year.
Similarly, the AO also observed that the money had been withdrawn from the bank on regular intervals which must have been used for household expenses. The assessee has also not given any documentary evidence for incurring his household expenses.
In view of above the AO treated the amount of cash deposit for Rs. 11.39 lacs as unexplained cash credit u/s 68 of the Act and added to the total income of the assessee.
6. Aggrieved, assessee preferred an appeal to learned CIT(A). The assessee before the learned CIT(A) submitted that he has sold an agriculture land for Rs.82 Lacs. The agriculture land is not capital assets as per the provisions of section 2(14) of the Act. Therefore, there is no question of charging any income under the head capital gain on the sale of such agricultural land.
The assessee also claimed that he had received a sum of Rs.10 lacs from the party against the sale of such agricultural land in cash and therefore, the AO erred in treating the amount of cash deposits to the extent of Rs.10 lacs as unexplained cash credit u/s 68 of the Act. The assessee to this effect has also filed an affidavit before the AO during the assessment proceedings.
The assessee also submitted that he requested the AO to take the confirmation from the purchasers to determine the actual amount of sale consideration for the impugned agricultural land after cross verification with him. But the AO has not only taken any confirmation from such purchasers and accordingly no opportunity for the cross-examination was provided.
The assessee also submitted that he has the only source of income from the salary. Therefore, cash deposits cannot be treated as unexplained cash credit in his hands.
However, the learned CIT(A) disregarded the contention of the assessee and confirmed the order by observing as under:
“4.2 1 have carefully considered the submissions made by the appellant and have gone through the assessment order as well.
4.2.1 The contentions raised by the appellant cannot be accepted. The facts of the issue are as below:
1. Undisputedly, there were cash deposits of Rs.11,39,000/- in the bank account of the appellant.
2. The rural agricultural land was sold by the appellant and as per the sale deed total consideration was Rs. 72 lakhs which is also disclosed in the returns of income of the
3. In the sale deed, there is no mention of any cash component of Rs.10 lakhs over and above Rs.72 lakhs.
4. The alleged cash component of Rs. 10 lakhs is not disclosed by the appellant in the return of income
5. Stamp duty has been paid on 72 lakhs only.
4.2.2 All the above facts clearly prove that the said rural agricultural land was sold only for the 72 lakhs. The affidavit filed by the appellant is a self-serving document which cannot be relied especially when the relevant transaction and the relevant sale consideration has already been disclosed in the return of income filed by the appellant. If appellant has received any amount over and above the disclosed consideration, he should have filed a revised return disclosing such extra consideration. There is no confirmation from the buyers confirming payment of cash of Rs.10 lakhs to the appellant. In view of above facts, it is held that appellant could not explain the source of cash deposits of Rs.11,39,000/- in his bank account. As per the provisions of the income tax act, the burden is on the appellant to explain the source of cash deposits in his bank account which he has failed to discharge Accordingly, the addition made by the assessing officer of Rs.11,39,000/- is, sustained. Ground number 3 is dismissed.”
Being aggrieved by order of learned CIT (A) assessee is in the second appeal before us.
The learned AR before us filed a paper book comprising pages from 1 to 11 and submitted that all the necessary details along with PAN No. and address of the purchasers were duly furnished before the AO but AO has not verified the claim made by him along with an affidavit from these parties. As such the amount of cash deposited for Rs. 10 lacs represents the sale consideration of agricultural land.
For the remaining amount of Rs.1,39,000/- the learned counsel for the assessee submitted that it was deposited from the following sources.
1. Cash was withdrawn from the bank
2. Agriculture income
3. Personal saving of the earlier years.
The learned AR before us further pleaded that the lower authorities failed to obtain the confirmation from the purchasers although all the necessary details about the purchasers were available with them. Therefore, the learned counsel for the assessee requested to restore the matter to the file of the AO for fresh adjudication.
On the other hand, learned DR vehemently support the order of authorities below.
7. We have heard the rival contentions and perused the materials available on record. It is an undisputed fact that the assessee sold land for Rs.72 lakhs as evident from the sale deed. Therefore, the argument of the learned counsel for the assessee that the amount of cash deposits represents the sale consideration of agriculture land is without any substance. However, we note that the affidavit has been duly furnished by the assessee stating that the sum of Rs. 10 lakhs was received from the purchasers of agriculture land. Thus, in such circumstances and the interest of the justice, we feel that the AO should have verified the purchase consideration from the purchasers for determining the actual sale price of such land and after providing the opportunity of cross-examination to the assessee. Therefore, we incline to restore this issue to the file of the AO to verify the purchase consideration from the purchasers for the agricultural land in dispute and accordingly, adjudicate the issue afresh after giving the reasonable opportunity of being heard to the assessee as per the provisions of law. Similarly, we also restore the issue for the balance amount of Rs. 1.39 lacs deposited in cash in the bank account of the assessee for fresh adjudication by the provisions of the law. Hence, the ground of appeal filed by the assessee is allowed for statistical purposes.
8. The second issue raised by the assessee in this appeal is that learned CIT(A) erred in confirming the addition of Rs.60,554/- on account of interest income accrued on investment in NSC.
The assessee has shown investment in NSC, FDR and saving bank account but failed to declare the income accrued on such investments in income tax return. The assessee claimed to disclose such income on the maturity of same. However, the AO disregarded the contention of the assessee and worked out the income accrued on such investment for Rs.60,554/- and added to the total income of the assessee.
9. Aggrieved, assessee preferred an appeal to learned CIT(A). The assessee before the learned CIT(A) submitted that he has been following the cash system of accounting and therefore, the income corresponding to the investment will only to accounted in the year of receipt. However, the learned CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under:
“5.2 I have carefully considered the submissions made by the appellant and have gone through the assessment order as well.
5.2.1 Admittedly, appellant has earned interest income of Rs.60,554/- on NSC, FDR and from saving bank account. Such income has accrued to the appellant during the relevant previous year. Accordingly, the same is required to be taxed in the relevant assessment year. For above, reliance is placed on following judicial pronouncements:
1] SDB CISCO (India) Ltd, v. Asst. GIT (2004) 88 ITD 373 (Chennai-Tri) :
“When the assessee company is switching over to accrual intern on a compulsion made to the Company Law, the assessee cannot argue that it is not maintaining its accounts on accrual system for the simple reason that its day to day accounts are maintained on cash basis.”
2] In the case of CIT v. Smt. Singari Bat (1945) 13 ITR 224 (All.) it was held that the assessee could not for the purposes of more conveniently carrying on his business adopt the cash system of accounting.
5.2.2 In view of above, it is held that AO was justified in taxing the interest income of Rs.60,554/- in this assessment year. Ground Number 4 is accordingly dismissed.”
Being aggrieved by order of learned CIT(A) assessee is in the second appeal before us.
The learned Counsel for the assessee before us submitted that the assessee has been following cash system of accounting. Therefore, the income will be offered to tax in the year of receipt. On a specific query from the bench to furnish the details of the ITR in which such income has offered to tax, but counsel for the assessee failed to furnish the same. However, learned counsel for the assessee pleaded before us to restore the matter to the file of the AO so that he can demonstrate the documentary evidence that the accrued income has offered to tax in the year of receipt. The learned DR did not object if the matter is referred back to the file of the AO for fresh adjudication as per the provisions of law.
In view of above, we hold that if the assessee has already offered the income on investment on receipt basis then charging the interest income on an accrual basis will lead to double addition which is contrary to the provision of law. Therefore, we are inclined to restore this issue to the file of the AO for fresh adjudication as per the provisions of law and to verify whether the assessee has offered the income on such investments on receipt basis. Thus the ground of appeal filed by the assessee is allowed for statistical purposes.
10. Ground No.4 and 5 are general and do not require any Therefore, we dismiss both the grounds.
11. In the result, assessee’s appeal allowed for statistical purposes.
This Order pronounced in Open Court on 20/06/2018
