Case Law Details
Ravindra Dattu Jadhav Vs ITO (ITAT Pune)
Introduction: The case of Ravindra Dattu Jadhav vs. ITO, heard at ITAT Pune, involves an individual engaged in small-scale land trading and agricultural activities. The Assessing Officer treated a significant bank deposit as undisclosed income, leading to a dispute. The CIT(A) partially upheld the addition, prompting the appellant to approach ITAT Pune for relief.
Detailed Analysis: Ravindra Dattu Jadhav, involved in land trading and assisting his parents in running a tea shop, also undertakes agricultural activities on rented land. The Assessing Officer flagged a bank deposit of Rs.47,20,000 as undisclosed income. The appellant explained that the amount originated from prior bank withdrawals, agricultural income, and represented business turnover.
The CIT(A) acknowledged the appellant’s ability to justify certain cash deposits but found a portion inadequately substantiated. He accepted explanations for Rs.21,40,000, attributed to prior withdrawals and refunded advances. However, the remaining Rs.25,80,000, allegedly comprising gross agricultural income and turnover from land transactions, faced skepticism. The CIT(A) doubted the appellant’s agricultural involvement, asserting that possession of agricultural land was insufficient for claimed net income of Rs.28 lakhs.
Despite the appellant furnishing bills supporting agricultural produce sales, the AO dismissed them as sourced from a nonexistent merchant. The CIT(A) failed to consider the appellant’s agricultural activity adequately. While the appellant asserted that advances from customers were refunded before year-end, no verification occurred.
The lack of evidence regarding customer advances’ refund led ITAT Pune to modify the CIT(A) order. Considering the absence of confirmation, ITAT Pune restricted the addition to 50% of Rs.25,80,000, amounting to Rs.12,90,000. The modified order aligns with the non-disclosure related to customer advance refunds in land transactions.
Conclusion: ITAT Pune’s decision offers partial relief to Ravindra Dattu Jadhav, emphasizing the need for thorough verification and consideration of evidence. The case underscores the significance of substantiating claims, especially in the context of agricultural income and land transactions. ITAT Pune’s modification of the CIT(A) order serves as a reminder of the importance of due diligence in assessing undisclosed income claims.
Taxpayers engaged in land-related businesses should meticulously document transactions and provide verifiable evidence to avoid unwarranted additions to their income. The case reinforces the principle that thorough scrutiny is essential for accurate assessments and highlights the need for both taxpayers and tax authorities to diligently examine the evidence presented.
We note that the assessee is an individual engaged in the business of trading in land on very small scale, helping his father and mother who running a tea shop at Adgaon. The assessee also conducts agricultural activity on land taken on rent. The AO treated an amount of Rs.47,20,000/- found in the bank account of the assessee as undisclosed income.
The assessee contended that the said amount deposited out of earlier withdrawals from bank accounts, agricultural income and represents the turnover of business. The CIT(A) observed that that the assessee could able to prove cash deposits with reasons but some extent not fully proved beyond doubt. Further, he also held that the deposits to an extent of Rs.21,40,000/- were explained in respect of deposits out of earlier withdrawals and advance received which was refunded later on.
According to CIT(A) the balance deposit of Rs.25,80,000/- (Rs.47,20,000/– Rs.21,40,000/-), it was claimed consists of gross agricultural income and turnover on account of advances received from customers in land transactions. We note that the CIT(A) observed that advances received from customers and refunded before the year end and was of the opinion that the assessee could not substantiate that he is into agricultural activity or a contract farmer.
The net agricultural income of Rs.28 lakhs is not possible in view of possession of agricultural land in 52R which is not sufficient. It is also noted the sale bills of agricultural produce were furnished before the AO but however the AO held the bills obtained from merchant who is non-existent. There is no dispute with regard to possession of agricultural land whether it is own or on rent by the assessee and the balance amount out of the addition made by the AO u/s. 68 are out of gross agricultural income or turnover on account of land transactions activity.
The assessee also furnished bills substantiating production of agricultural produce. Therefore, the CIT(A) ought to have considered the agricultural activity. It is also noted it was claimed by the assessee that the advances received from customers were refunded before year end but we find no such verification done by both the authorities below to confirm whether such advances were refunded or not.
The ld. AR also did not bring on record anything to show that the advances from customers refunded before year end either before the CIT(A) nor before us. Therefore, we deem it proper to restrict the addition to an extent of Rs.12,90,000/- being 50% of Rs.25,80,000/- on account of non furnishing of requisite details regarding the refund made to customers on account of advances received on land transactions. Thus, the order of CIT(A) is modified as indicated above accordingly and grounds raised by the assessee are partly allowed.
ITAT restricts addition to 50% for non furnishing of requisite detail related to refund of advances from customers
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee against the order dated 28-10-2016 passed by the Commissioner of Income Tax (Appeals)-2, Nashik [‘CIT(A)’] for assessment year 2013-14.
2. The assessee raised two grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) is justified in confirming the addition of Rs.25,80,000/- ignoring the claim of agricultural income in the facts and circumstances of the case.
3. Heard both the parties and perused the material available on record. We note that the assessee is an individual engaged in the business of trading in land on very small scale, helping his father and mother who running a tea shop at Adgaon. The assessee also conducts agricultural activity on land taken on rent. The AO treated an amount of Rs.47,20,000/- found in the bank account of the assessee as undisclosed income. The assessee contended that the said amount deposited out of earlier withdrawals from bank accounts, agricultural income and represents the turnover of business. The CIT(A) observed that that the assessee could able to prove cash deposits with reasons but some extent not fully proved beyond doubt. Further, he also held that the deposits to an extent of Rs.21,40,000/- were explained in respect of deposits out of earlier withdrawals and advance received which was refunded later on. According to CIT(A) the balance deposit of Rs.25,80,000/- (Rs.47,20,000/– Rs.21,40,000/-), it was claimed consists of gross agricultural income and turnover on account of advances received from customers in land transactions. We note that the CIT(A) observed that advances received from customers and refunded before the year end and was of the opinion that the assessee could not substantiate that he is into agricultural activity or a contract farmer. The net agricultural income of Rs.28 lakhs is not possible in view of possession of agricultural land in 52R which is not sufficient. It is also noted the sale bills of agricultural produce were furnished before the AO but however the AO held the bills obtained from merchant who is non-existent. There is no dispute with regard to possession of agricultural land whether it is own or on rent by the assessee and the balance amount out of the addition made by the AO u/s. 68 are out of gross agricultural income or turnover on account of land transactions activity. The assessee also furnished bills substantiating production of agricultural produce. Therefore, the CIT(A) ought to have considered the agricultural activity. It is also noted it was claimed by the assessee that the advances received from customers were refunded before year end but we find no such verification done by both the authorities below to confirm whether such advances were refunded or not. The ld. AR also did not bring on record anything to show that the advances from customers refunded before year end either before the CIT(A) nor before us. Therefore, we deem it proper to restrict the addition to an extent of Rs.12,90,000/- being 50% of Rs.25,80,000/- on account of non furnishing of requisite details regarding the refund made to customers on account of advances received on land transactions. Thus, the order of CIT(A) is modified as indicated above accordingly and grounds raised by the assessee are partly allowed.
4. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 07th June, 2022.
