No section 68 addition for amount explained by assessee as derived from sale of agricultural produce

No addition under section 68 for cash amount explained by assessee as derived from sale of agricultural produce

(Assessment Year: 2009-10) – [Naresh Kumar v. ITO Date of Judgement : 08.03.2019 (ITAT Delhi)]

Assessee has explained source of the cash deposit in the bank account. Copies of the bills of sale of agricultural produce are filed in the paper book which supports the explanation of assessee that assessee received cash of Rs.14,65,480/- out of sale of agricultural produce. The Ld. CIT(A) partly accepted the agricultural income which supports the explanation of assessee that assessee had source from agricultural income. The Ld. CIT(A) also partly accepted the explanation of  assessee for sale of property, but, assessee explained that the share of property of assessee’s brother is also available to him being the amount getting in joint family. All these documents in the paper book have not been disputed by the authorities below. Learned Counsel for the Assessee further submitted that apart from it, assessee has salary incomes, which have not been taken into consideration. These facts clearly show that assessee has source to make deposit in the bank account. The explanation of assessee is thus accepted and entire addition is deleted.

Assessment – Search or requisition – No incriminating material was found in the course of search proceedings – Net agricultural income accepted during assessment proceedings – Addition cannot be made on net agricultural income.

Assessment years: 2006-07 to 2011-12) – [ACIT v. Mahesh Bhagwat Chaudhary.(2018) 65 ITR 343 (ITAT Pune)]

Addition cannot be made as no incriminating material was found in the course of search proceedings. Net agricultural income accepted.

Cash payments exceeding prescribed limits – Agricultural produce – Paddy from farmers – No disallowance can be made.

( Assessment year: 2001-02) – [CIT v Keerthi Agro Mills (P) Ltd. (2017) 405 ITR 192: 87 taxmann.com 31 (Ker)]

Dismissing the appeal of the revenue the Court held that; Agricultural produce i.e., Paddy purchased from the famers by making cash payments exceeding prescribed limits, no disallowances can be made. Section 40A(3) is a deeming provision and rule 6DD exempts agricultural produce.

Section 69C: Unexplained expenditure – Bogus purchases – Purchases of paddy recorded and matched with report of Agricultural Marketing Committee (AMC) – No disallowance on ground that failed to maintain proper books of account

( Assessment year: 2009-10) – [ACIT v. Sri Ramalingeswara Rice & Oil Mill (2017) 162 ITD 696 (ITAT Visakha)]

The Assessing Officer held that the assessee has not maintained proper gate passes for recording purchases of paddy, accordingly disallowed 5 percent of purchases. CIT(A), deleted the addition. On appeal the Tribunal held that the assessee had reconciled quantity of paddy purchases from the order passed by agricultural marketing committee (AMC) and its books of account and same were matched with AMC reports. Since, revenue failed to controvert finding of facts therefore: addition cannot be sustained as bogus purchase of paddy.

Cash payments exceeding prescribed limits – Agricultural land – Transaction would fall under exceptional circumstances covered under Rule 6DD

(Assessment year: 2006-07) – [ACIT v. Marigold Merchandise (P) Ltd (2017) 59 ITR 25 (SN) (ITAT Delhi)]

Dismissing the appeal of the revenue the Tribunal held that: there was no dispute on the fact that the identity of the payee was proved, the genuineness of the transaction was proved and the source payment was also established in as much as amount was found to be withdrawn from the bank account of the assessee In the case of Smt. Harshila Chordia v. CIT (2008) 298 ITR 349 (Raj), the High Court while interpreting the provisions of section 40A (3) had clearly held that when the genuineness of the transaction or payment was not disputed and the identity of the payee received was established then such case would fall under the exceptional circumstances covered under rule 6DD of the Income Tax Rules, 1962. Therefore the Commissioner (Appeals) had rightly held that the assessee’s case was covered under the exceptional circumstances under rule 6DD.

Agricultural income- Estimation of income without considering the land holding by the assesse was deleted

(Assessment Year: 2008-2009) – [Amarjit Singh v. ITO (2016)48 ITR 622 (ITAT Amritsar)]

Allowing the appeal of the assessee, the Tribunal held that, the Assessee had land holding of 75 acres therefore estimation of income was not justified.

Cutting of trees of spontaneous growth in tea garden and using would for own consumption – Not assessable as business income

[CIT v. Peria karamalai Tea & Produce Co. Ltd. (2015) 229 Taxman 200 (Mad.)]

Business of assessee was growing and producing tea and there was no intention to generate revenue from sale of trees, grown in tea garden. Tribunal concluded that cutting of trees, leaving stump as required by condition imposed by forest department was not for generating income out of trees, but for felling of wood for own consumption. Tribunal re-affirmed view that it was not a case of business income. No question of law, arose for consideration in instant appeal.

No addition can be made pursuant to section 153A/153C proceedings in the absence of any incriminating material or inquiries based on such material

[ACIT (C) v. Manoj Narain Aggarwal – Date of Judgement: 30.01.2014 (ITAT Delhi)]

Search and seizure operations were carried out on Gupta and company (P) Ltd. Group of cases on 10.02.2009, assessee is claimed to be one of the related entities. From facts also it emerges that assessee owns a fairly large agricultural holding known as prag farms. Agricultural income has been returned and accepted by department year after year. Confirmation from agricultural tenant is on record. It has been doubted by Assessing Officer on some conjectures like computer print, in that case he may have examined the tenant. Without carrying out such exercise Assessing Officer cannot reject documentary evidence on surmises and conjectures. Assessee has supported his claim based on relevant agricultural record. The tenant has confirmed that the agricultural expenses were borne by him and not by the assessee. Therefore, no adverse inference can be drawn to dislodge the explanation of the assessee. –

Section 68: Cash credits – Sale consideration from sale of agricultural land – Deposited into bank Rs.1.20 crores – Deed recorded only Rs.22.22.lakhs – Addition as undisclosed income was not justified

( Assessment year: 2008-09) – [CIT v. Intezar Ali (2014) 220 Taxman 72: 99 DTR 201(Mag.) (All.)]

The assessee sold his agricultural land and deposited sale consideration of Rs.1.20 Crs in his bank account. However, the purchasers stated that they had purchased the land for Rs.22.2 lakhs only. Sale deed also reflected sale value at Rs. 22.2 lakhs. The assessee produced witness to sale deed and the bank manager, who confirmed submission of the assessee and he had also produced the report of tehsildar to justify valuation of the property. Assessee had also filed complaint before stamp valuing authority about deficiency in stamp duty in sale deed but sale consideration in sale deed was not adjudicated in favour of assessee. The Assessing Officer did not disbelieve the evidence that the amount was received by sale consideration. He, however, relying only on the report of the Stamp Valuing Authority, treated the amount to be undisclosed income of assessee. The CIT(A) dismissed the appeal.  The Tribunal held that whatever the assessee had explained about the source of the deposit could not be doubted especially in absence of contrary material on record and deleted the addition. The High Court held that the assessee as an honest citizen not only made a complaint to the registering authority that the sale deed had been registered at a value much below the amount, which he has actually received, he deposited the entire amount in the bank and voluntarily filed return. There was no material whatsoever or any circumstance, which could have suggested that this amount was received by him from any other source. The deposition of witness of the sale deed, the bank manager and the evidence filed with regard to valuation of the property was more than sufficient to discharge the burden, which the Assessing Officer had unreasonably placed on the assessee. The Assessing Officer in disbelieving the evidence has not given any reasons whatsoever to discard the statement of the witnesses, deposit of the entire sale consideration in bank and the deposition of the bank manager. The High Court held that the Income Tax Officer did not act in bonafide manner. Overwhelming evidence led by him was discarded without givng any reasons at all. The assessment was framed only on the ipse dixit of the Assessing officer, which gives reason to believe that he had exceeded his authority with some ill will or with ulterior motive. Therefore, High Court directed the Registar General of the Court to forward a copy of this judgement to the Chairman of the Central Board of Direct taxes to cause an enquiry into the conduct and motives of Income Tax Officer, in framing the assessment and raising demand of income-tax against the petitioner.

Section 68: Cash credits – Agricultural income – Suspicion – Addition was not justified

( Assessment Year: 2005-06) – [CIT v. Landmark Innovation (P) Ltd. (2013) 218 Taxman 158 (Mag.) (All.)]

Assessee, being a private company, was maintaining regular books of account as required under Companies Act, which were also audited and accepted in AGM of company. Also, entries in books were not proved to be bogus. Since There was nothing under Act debarring assesse from selling agricultural produce in cash, and thus, additions based only on suspicion should not be sustained.