Standard

It is unsustainable to make additions based just on loose paper.

Facts and Issue of the case

The present appeal has been filed by the assessee against the order of the ld. CIT( A)-17 , New Delhi dated 21 .11.2017 .
The only tangible ground taken up by the assessee is as under:

“2. That on the facts and circumstances of the case and in law the ld. CIT(A) was not justified in upholding the action of AO in making addition of Rs.55 ,00,000/- on the basis of contents of the seized document, page – 8 of Annexure A-5/RS-1, by treating the amount as unexplained and invoking section 69C of the Income Tax Act, 1961 .”

A search and survey operation u/ s 132/133A of the Income tax Act, 1961 was carried out on 15.10 .2013 in SRM group of eases by the Investigation Wing, New Delhi. Simultaneously, a survey was carried out on M/s Shree Raj Mahal Jewellers Ltd., M/ s PLB Infrastructure Pvt. Ltd., M/ s Shree Raj Mahal Diamonds Pvt. Ltd., at 2633 & 2634, Bank Street, Karol Bagh, New Delhi wherein papers/ documents related to M/s Solitaire World Pvt. Ltd. was found and impounded. Subsequently, the case was centralized from Ward-68 (2), New Delhi u/ s 127 of the IT Act, 1961, by the jurisdictional CIT vide order F.No. CIT- B/Delhi/Centralization/2014 -15/686 dated 06 .02. 2015 and the assessment u/s 143(3) has been completed on 29.03.2016.

During the survey proceedings Annexure A-5, Page No.8 was impounded which shows transactions and on top of the paper ‘Received A/ c’ and ‘Payment A/c’ is written. In the said document, in the ‘Received A/ c’ side property description “62 /1 Ajmal Khan Park” was found mentioned. During the post survey proceedings, on being asked to explain the contents of the said document, it was submitted that the above property description belong to M/s Solitaire World Pvt, Ltd. which is a part of SRM group of company. During the assessment proceedings, the assesses was asked vide letter dated 23.02 .16 to furnish the following details with respect to aforesaid document.

After going through the replies, the Assessing Officer held that the assessee failed to reconcile the amounts mentioned therein with its books of accounts. It was held that the assessee has only mentioned that figures on seized Pages were reconciled with some other page and rent accounted for in books of accounts and accordingly, an amount of Rs. 11,17,000 /- has been surrendered on the basis Annexue A-1 seized, from premises R-4 for pages 4-6 , As far as the impounded document is concerned, the assessee admitted that the amounts are written in thousands and accordingly made the surrender. In the same manner, in this document also, the amounts are bound to be mentioned in thousands. Hence, the amount of Rs.55 ,00,000 /- and an amount of Rs.20,00 ,000/- totaling to Rs.75 ,00,000 /- has been added to the total income of the assessee based on the notings on the documents on 04 /12 being 5500 and 2000 CHQ. Aggrieved the assessee filed appeal before the ld. CIT( A).

The ld. CIT( A) gave remission of Rs.20 ,00,000 /- paid by cheque as forming part of the regular books of accounts. The revenue accepted the decision of the ld. CIT( A) on the issue of remission of Rs.20 ,00 ,000/- and no appeal has been filed. Aggrieved the assessee filed appeal before the Tribunal against the confirmation of Rs.55, 00,000/-.

Before this court, the ld. AR argued that the entries cannot be read in isolation but they have to be read holistically. It was argued that the total receipts on the said impounded page have to be taken into consideration. It was argued as per the page the total receipts (Received A/ C) were to the tune of Rs.2 ,19,70 ,000/- whereas the total expenditure ( Payment A/C) was Rs.3,32 ,89,000/- (Payment A/ C). He relied on the orders of the Co- ordinate Bench of ITAT in the case of D. Suresh Vs. ACIT in ITA Nos. 462 & 463/Bang./2020, ACIT Vs Sharad Chaudhary 55 Taxmann.com 324 and the judgment of Hon’ ble Kolkata High Court in the case of Pr. CIT Vs. Ajanta Foot Care 84 Taxmann.com 109.

On the other hand, the ld. DR relied on the order of the ld. CIT( A). Placing reliance on the ld CIT( A)’s order and that no explanation was provided in appellate proceedings nor any supporting document was adduced as regards to the figure of 5500 as stated by CIT( A) in para 5.2 of impugned appellate order dated 21. 03.2018. It was argued that the assessee has not explained as to the source of Rs.55 lacs and the additions under section 69 C of the Act are, therefore, justifiable and may kindly be upheld. Therefore, in the light of the definition of the expression ‘ document’ and in the light of admissibility of the said document based upon the statements made by the assessee, the additions made by the Assessing Officer cannot be found fault with. Though there was a retraction of those statements by the assessee, those retractions were rightly rejected on the appreciation of the return filed on 27 .09 .2002 where admittedly, a particular amount was shown as undisclosed income. Therefore, the retraction is of no avail in l ight of section 132( 4) and its Explanation. In view of the above, the question of law are answered in favour of the appellant/ Department and the appeal is allowed. No costs.”

Observation of the court

Heard the arguments of both the parties and perused the material available on record. Court finds that the case quoted by the ld. DR of the Hon’ ble Madras High Court in the case of S. S. Shankar Vs. ITO (107 Taxmann 55 ) dealt with issue of expenditure on credit cards which is not applicable to the facts of the instant case before us.

Similarly, in the case of S. A. Prajapati Vs. ACIT, CC-22 , Ahmadabad (88 Taxmann 369) dealt with cash withdrawals. Hence, not applicable to the facts of the instant case before this court. CIT Vs. Narendra Kumar Gupta (55 Taxmann 371) dealt with the issue of bogus bills, hence, not applicable to the facts of the instant case before us. ACIT Vs. Subhash Verma (125 TTJ 865) deals with the issue of cash loans and subsequent payment to LIC. Hence, not applicable to the facts of the instant case before us. Grand Bazar Vs. ACIT (166 Taxmann 232 ) dealt with the issue of cash credits in the books of account. Hence, not applicable to the facts of the instant case before this court.

Similarly, the ld. DR’s reliance on the judgment of Hon’ ble Apex Court in the case Pradeep Kumar Vs. ITO ( 101 Taxmann 131) is not applicable to the facts of the instant case as the said judgment of the Hon’ ble Apex Court dealt with the gross profit rate and the stock reconciliation. In the instant case, the impounded material reflects receipts and payments and the assessee has already paid the difference of the amounts to taxation after going through the entire set of papers. The property 62/1 , Ajmal Khan Park has been purchased on 08.11.2012 whereas the notings reflect 04.12.2012. The transaction of purchase of the said property has culminated on 08 .11.2012. Hence, the probability of any payment post, purchase of a property is also ruled out. The assessee has offered to tax the amount on account of the payments A/ c and receipts A/ c. The case laws relied upon by the revenue are not applicable to the facts of the case. Reliance is being placed on the order of the Co-ordinate Bench of ITAT in the case of D.S. Suresh Vs. ACIT in ITA No. 462 & 463/Bang./2020 wherein it was held that there should be material on record to show that there is an undisclosed income on the basis of material on hand with the Assessing Officer and guess work is not possible. The Assessing Officer shall have the basis for assuming that the assessee has not disclosed the income for taxation. Reliance was also placed on the decision of Hon’ ble Supreme Court in the case of CBI Vs. V.C. Shukla 3 SCC 410. In the case of ACIT Vs. Sharad Chaudhary in 55 Taxmann 324, it was held that the loose paper found on standalone could not be used as a basis for making the addition without the company of any other supportive material and evidence, more so when the contents were not interlinked. Hence, keeping in view the fact that the assessee has offered the amounts mentioned on the impounded material which has been accepted by the revenue and also keeping in view that revenue has not brought anything on record to prove that the assessee is liable to pay the taxes more than what has been already disclosed and also keeping in view the fact that the transactions of Ajmal Khan Park, 62 /1 stands culminated, we hereby direct that the addition made be deleted.

Conclusion

The appeal of the assessee was allowed by the court.

Solitare-World-Pvt.-Ltd-Vs-ACIT-ITAT-Delhi

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June, 17
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Income Tax
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Standard

The scope of section 143(1) does not include adjustments or intimation on debatable/controversial topics.

Facts and Issue of the case

This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), New Delhi [Ld. CIT(A)”, for short], dated 03.12.2021 for Assessment Year 2018-19. Grounds taken in this appeal of Assessee are as under:

That the Ld CIT(A)-NFAC has erred in facts and in law in sustaining an addition of Rs. 29,52,674.00 on illegal and untenable grounds. Hence, the addition as such may be deleted.

The Ld AO has erred in law and on facts in invoking the provisions of section 36(va) for making addition of late deposits of ESI and EPF as per due date under respective act which is against the spirit of law and intention of legislature. The Honorable CIT(A)-NFAC has erred in confirming the same. Hence, the addition as such may be deleted.
The Ld AO has erred in law and on facts for making addition of late deposits of ESI and EPF ignoring the facts that under PF act employer contribution includes employee contribution and hence the section 43B will apply and not 36(va). The Honorable CIT(A)-NFAC has erred in confirming the same. Hence, the addition as such may be deleted.
That the LD AO(CPC) has erred in facts and in law in making an addition of Rs. 29,52,674.00 while processing u/s 143(1) on illegal and untenable grounds. The Honorable CIT(A)-NFAC has erred in confirming the same. Hence, the addition as such may be deleted.

That the LD AO(CPC) has erred in facts and in law in making an addition of Rs. 29,52,674.00 while processing u/s 143(l)(iv) on illegal and untenable grounds. The Honorable CIT(A)-NFAC has erred in confirming the same. Hence, the addition as such may be deleted

That the Honorable CIT(A)-NFAC has erred in law and on facts in sustaining the addition of Rs.29,52,674.00 ignoring the facts that condition stipulated in section 36(va) is impossible to be performed by him. Hence, the addition as such may be deleted.

That the appellant craves leave to add, substitute, modify or delete any ground of appeal on or before the date of hearing. All the above grounds of appeal are without prejudice to each other.”

Though there are several grounds of appeal, the only addition in dispute in this appeal is regarding the additions amounting to total of Rs. 29,52,674/- made u/s 36(1)(va) of Income Tax Act. For the sake of convenience, all the grounds of appeal are being taken up together. These payments by way of employees’ contribution to ESI/Provident Fund were deposited by the assessee after the specified date prescribed under the relevant laws governing ESI and Provident Fund. However, payments were deposited by the assessee well before due date of filing of return of income under Section 139(1) of Income Tax Act. The aforesaid additions totaling Rs. 29,52,674/- were made by way of adjustments u/s 143(1) of Income Tax Act; vide intimation dated 14.11.2019. The assessee filed appeal before Ld. CIT(A), which was disposed of by the Ld. CIT(A) vide impugned appellate order dated 03.12.2021; wherein the Ld. CIT(A) confirmed the aforesaid additions amounting to Rs. 29,52,674/-. In coming to this conclusion, the Ld. CIT(A) took the view that the amendment to section 43B of Income Tax Act (by insertion of Explanation-5); and amendment to section 36(1)(va) of Income Tax Act, (by insertion of Explanation -2) by Finance Act, 2021 are retrospective in nature, and are applicable for Assessment Year 2018-19 to which the present case pertains.

Aggrieved, the assessee has filed this present appeal in Income Tax Appellate Tribunal (“ITAT” for short) against the aforesaid impugned appellate order dated 03.12.2021 of the Ld. CIT(A). Vide order sheet noting dated 08.04.2022, Co-ordinate Bench of ITAT, Delhi ordered Early Hearing of this appeal; accepting the assessee’s application for grant of Early Hearing. At the time of hearing before us, the Ld. Authorized Representative (“AR” for short) for the assessee submitted that the Ld. CIT(A) should have deleted the additions, instead of sustaining the aforesaid additions amounting to Rs. 29,52,674/-. The Ld. Sr. DR relied upon the impugned appellate order dated 03.12.2021 of the Ld. CIT(A).

Observation of the case

Court has perused the materials on record. Relevant facts are not in dispute. Employees’ contribution to ESI/Provident Fund, totaling the aforesaid amount of Rs. 29,52,674/- was deposited by the assessee after the specified date prescribed under laws providing ESI/Provident Fund. However, these payments were deposited by the assessee well before due date of filing of return of Income Tax prescribed u/s 139(1) of Income Tax Act. The aforesaid addition of Rs. 29,52,674/ has been made by way of adjustment and intimation u/s 143(1) of Income Tax Act.

The present appeal pertains to Assessment Year 2018-19. The issue before this court is whether, the additions amounting to aforesaid total of Rs. 29,52,674/- by way of adjustments and intimation u/s 143(1) of Income Tax Act in respect of payments of Employee’s contribution to ESI/Provident Fund, made by the assessee [payments made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] are to be sustained or deleted. We are aware about amendments to section 36(1)(va) and 43B of Income Tax Act, brought into effect by Finance Act, 2021. As regards whether these amendments are prospective in nature and applicable with effect from 01.04.2021 or retrospective in nature having applicability even before 01.04.2021; it may be mentioned that the present appeal before us pertains to Assessment Year 2018-19; which is before 01.04.2021. Court is aware of some reported orders of ITAT, passed after the aforesaid amendments were brought in by Finance Act, 2021; in which the issue in dispute for Assessment Years prior to Assessment Year 2021-22 (i.e. for periods before 01.04.2021) has been decided in favour of the assessee and against Revenue.

Even if Revenue does not accept the view, that the aforesaid amendments are prospective in nature having no application for Assessment Years prior to Assessment Year 2021-22; it is clearly established in the light of aforesaid decisions of Income Tax Appellate Tribunal (ITAT); referred to in this paragraph earlier, that the issue whether the aforesaid amendments are prospective or retrospective, is at least debatable and controversial, on which a view in faour of the assessee (that the aforesaid amendments are prospective) can legitimately exist, even if such a view favorable to the assessee is contested by Revenue. It is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act. This view was taken by the Hon’ble Supreme Court in the case of CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC), in which the view of Hon’ble Kolkata High Court in the case of Modern Fibotex India Ltd. & Anr. Vs. DCIT & Ors.[1995] 212 ITR 0496 (Calcutta) was approved. Same view was taken by the Hon’ble Madhya Pradesh High Court in the case of CIT vs. Satish Traders [2001] 247 ITR 0119 (Madhya Pradesh).

In view of foregoing discussion, court come to the following conclusions: The fact that payments amounting to aforesaid Rs. 29,52,674/- by way of employees contribution to provident fund and ESI were made by the assessee after stipulated date prescribed under the relevant laws governing provident fund and ESI, but before the due date of filing of return of income prescribed u/s 139(1) of Income Tax Act; is not in dispute.
Whether the aforesaid amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial.
Adjustments made by Revenue u/s 143(1) of Income Tax Act, whereby aforesaid additions of Rs. 29,52,674/- were made, were unfair, unjust and bad in law.
Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act on debatable and controversial issues is beyond the scope of Section 143(1) of Income Tax Act. Revenue was clearly in error in making the aforesaid adjustments.
Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act, on the basis of retrospective amendment to Income Tax Act is beyond the scope of Section 143(1) of Income Tax Act.
In the present appeal before this court, addition of aforesaid amount of Rs. 29,52,674/- has been made by way of adjustments and intimation u/s 143(1) of Income Tax Act, on a debatable and controversial issue, and Ld. CIT(A) did err in law, in not deleting this addition.
Court sets aside the impugned appellate order dated 03.12.2021 of the Ld. CIT(A), and direct the Assessing Officer to delete the aforesaid addition of Rs. 29,52,674/-.

Conclusion

The appeal of the assessee was partly allowed by the court.

SVS-Guarding-Services-Pvt.-Ltd.-Vs-ITO-ITAT-Delhi

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June, 15
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Standard

Interest on enhanced compensation is not taxable under the Land Acquisition Act: Delhi ITAT

Facts and Issue of the case

The assessee has filed his original return of income at Rs.3,34,10,040/- on 03.08.2016. Later on, return was revised at Rs.1,70,83,650/- which was filed on 23.03.2018. The case of the assessee was selected for limited scrutiny under CASS on the following grounds :-
“Sale consideration of property reported by the assessee in schedule CG of ITR is less than the compensation on acquisition of immovable property reported by transferee of property in TDS return (for TDS u/s 194L and 194LA).”

The assessee has declared interest received on enhanced compensation u/s 28 under the Land Acquisition Act, 1894, of Rs.3,31,93,013/-. Later on, in the revised return, the assessee has claimed 50% deduction u/s 57 of the Act on the said interest. The AO accepted the interest income at Rs.1,70,83,650/- as shown in revised return. However, during the course of assessment proceedings, the assessee had raised a claim by way of letter that even the balance amount of 50%, i.e., Rs.1,70,83,650/- itself was not taxable as enhanced interest was awarded u/s 28 of the Land Acquisition Act and, therefore, such interest income partakes the nature of compensation as held by Hon’ble Supreme Court in the case of UOI & Ors. Vs. Hari Singh reported in 302 CTR 458 (SC) and CIT vs. Ghanshyam (HUF) (2009) 315 ITR 1. According to the assessee, since the land was agricultural land being used for agricultural operations in for last many years of acquisition and, therefore, such agricultural land which was acquired by the Government and thus compensation received from the Government is exempt u/s 10(37) of the Act. The AO however did not accept this claim.

The assessee then raised this issue before the NFAC. Ld. NFAC however, instead of dealing with the controversy raised in the grounds of appeal and was subject matter of appellate proceedings that amount of interest received on the acquisition of land u/s 28 of the Land Acquisition Act is exempt, has held that the land itself is not agricultural and, therefore, there is no question of any exemption u/s 10(37) of the Act. Accordingly, there was an enhancement All the evidences filed before the first appellate authority to substantiate that it was agricultural land have been rejected and finally, it was held that the land was not agricultural land albeit it had commercial value having a strategic location and, therefore, exemption u/s 10(37) cannot be allowed.

Before this court, ld. counsel for the assessee, Dr. Rakesh Gupta submitted that insofar as the interest on enhanced compensation u/s 28 of the Land Acquisition Act in respect of agricultural land also partakes the character of a compensation and, therefore, he is entitled for compensation u/s 10(37) of the Act. In support, he relied upon various judgments. Thus, insofar as the assessee’s claim for exemption u/s 10(37) is concerned, the same cannot be denied insofar as interest on enhanced compensation received u/s 28 of the Land Acquisition Act. He also referred to copy of award, as appearing in pages 140 to 146 of the paper book, passed by Land Acquisition Collector where it has been categorically mentioned that the award classified the land as “Chahi” which means irrigated land.

Ld. NFAC issued notice u/s 251(2) that land does not fall under the parameter of agricultural land. In response, the assessee had submitted the entire evidences showing that land acquired was agricultural land and for which copy of jamabandi, Form-D, copy of award, etc. was enclosed. The assessee had also submitted the girdwari which gives the description of the crops produced in various years. Hence, Ld. Counsel submitted that ld. NFAC erred on law and facts in holding that compensation which was awarded on the acquisition of the land by the Government was not an agricultural land. In the light of these evidences and record, he submitted that such a finding should be reversed.

On the other hand, ld. DR for the Revenue submitted that first of all, interest received u/s 28 of the Land Acquisition Act is not part of compensation and is taxable and in support decisions of Hon’ble Punjab & Haryana High Court in case of Manjit Singh (2016) 65 taxman.com, Mahender Pal Narang vs. CBDT 423 ITR 13 and Punit Singh vs. CIT (A) 110 taxman 16. Thus, AO has rightly denied the exemption u/s 10(37) of the Act holding that interest received on enhanced compensation u/s 28 of the Land Acquisition Act is taxable. Insofar as observation and the finding of the ld. NFAC that it was not agricultural land, he strongly relied upon the finding and reasoning of the ld. first appellate authority.

Observation of the court

Court has heard rival submissions and also perused the relevant findings given in the impugned order as well as the material referred to before us. Here in this case, the assessee is having agricultural land in Haryana. The assessee’s land was acquired by the Government of Haryana and Land Acquisition Collector had announced award on 16.07.2007 fixing the market value of the land at Rs.20,00,000/- per acre. Later on, it was awarded enhanced compensation of Rs.95,00,000/- per acre by Hon’ble Supreme Court. The assessee was awarded interest u/s 28 of the Land Acquisition Act of Rs.3,31,93,013/- and had claimed deduction of 50% in the revised return and accordingly, in the return of income, the assessee has shown income on this amount of interest at Rs.1,70,83,650/-. Later on, during the course of assessment proceedings, the assessee claimed that this interest is not taxable at all, because such interest is enhanced income u/s 28 of the Land Acquisition Act and, therefore, it partakes the character of compensation which is held to be not taxable by Hon’ble Supreme Court in the case of CIT vs. Ghanshyam HUF and in the case of UOI vs. Hari Singh (supra)

First of all, court will deal with the contention raised by the ld. DR for the Revenue that whether interest awarded u/s 28 of the Land Acquisition Act is part of compensation is taxable or not. According to the provisions of Land Acquisition Act, when the land is acquired the Collector may be directed to pay interest on excess compensation to the landowner u/s 28 of the Land Acquisition Act which is by the order of the Court and for the period the till excess compensation is deposited in the court.

The claim before the Hon’ble court by the assessee is that payment of interest is only a payment in consideration of loss of enjoyment of the possession of the land by the owner and not by way of any charge on compensation and therefore it was not exigible to income tax. It was also the claim that definition of interest u/s 2 (28A) is confined only to money lending business between a debtor and the creditor. The Hon’ble High Court of Punjab and Haryana in that case has held that the interest is not part of compensation but it is awarded for depriving assessee of user of such compensation due to delay in payment and such is income.

Then in July 2019 the Hon’ble Supreme Court had another occasion to determine the interest on compensation received by the assessee in case of [2009] 182 Taxman 368 (SC)/[2009] 315 ITR 1 (SC)/[2009] 224 CIT versus Ghanshyam (HUF). The Hon’ble Supreme Court was once again seized of the issue in case of Union of India versus Hari Singh and others where the order was passed on September 15, 2017 wherein it has been held that when the compensation is paid the assessing officer should keep into mind the provisions of Section 28 of the land acquisition act and the law laid down by the Hon’ble Supreme Court in case of can sham HUF in order to ascertain whether the interest given Under the said provision amounts to compensation or not.

By the Finance Act (Number 2) Act 2009 with effect from I April 2010 there is an amendment Under the provisions of Section 56 (2) (viii) which provided that income by way of interest received on compensation or on enhanced compensation referred to in clause (B) of Section 145A is an income. A corresponding provision was also introduced u/s 57 (iv) providing for deduction of a sum equal to the 50% of the income chargeable to tax under the above provision. The provisions of Section 145A (B) was also introduced providing that interest received by the assessee shall be deemed to be the income of the year in which it is received. Subsequently with retrospective effect from 1.4.2017 The Finance Act 2018 provided that income by way of interest received on compensation or enhanced compensation is chargeable to tax as income from other sources Under the provisions of Section 56 (2) (viii) of the act.

Hon’ble High Court of Punjab and Haryana has taken a consistent view that interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. Such view was after considering the order of the Hon’ble Supreme Court in Dr Shyam Lal Narula, Bikram Singh, (supra). Thus, there are divergent views on this taxability of interest on the enhanced compensation awarded u/s 28 of the Land Acquisition Act wherein the Hon’ble Punjab & Haryana High Court has consistently taking a view that it is an income to be treated under the head ‘income from other sources’. The Hon’ble Gujarat High Court has decided this issue in favour of the assessee following the decision of Hon’ble Supreme Court in the case of Ghanshyam (supra). Since the AO of the present case falls under the jurisdiction of Hon’ble Delhi High Court, therefore following the dictum that, if one High Court is in favour of the assessee, then in absence of any jurisdictional High Court, that should be followed in favour of the assessee. Thus, ratio of Hon’ble Punjab & Haryana High Court may not have any binding precedent. Thus, the interest on the enhanced compensation u/s 28 of the Land Acquisition Act is not taxable.

Coming to the issue of whether the land was an agricultural land or not, from the bare perusal of various evidences which were filed before the ld. first appellate authority viz. –

Award showing the land as irrigated land;
Existence of tubewells, tress and kharif crops;
Form No.D issued by Land Acquisition Officer which was signed by him and also by Patwari & Kanungo clearly mentioned that the amount paid to the assessee is against agricultural land;
Jamabandi showing the nature of crops produced; and
Income-tax returns showing agricultural income;

it cannot be inferred even remotely that the land which was acquired by the Government was not an agricultural land. The observation and the finding of the ld. first appellate authority despite noting down these evidences does not have any basis to negate these evidences nor any independent enquiry has been made to counter these evidences. In fact the entire impugned order revolves around on various case laws and the facts discussed herein which has been distinguished by ld. counsel before us. However, we do not find it relevant to discuss here, as none of the case laws are relevant for the present case in the light of these evidences. Once the Land Acquisition Officer as well as court have awarded the compensation treating to be an agricultural land and not only that, all the Revenue departments have certified that it was an agricultural land and substantial proof has been given that agricultural activities were being carried out, then to say that it was a commercial land and not an agricultural land, is unjustifiable.

Conclusion

Court held that it was an agricultural land on which the compensation has been awarded by the court; and secondly, the interest received on enhanced compensation u/s 28 of the Land Acquisition Act is part of compensation and hence is not taxable, accordingly assessee is entitled for exemption u/s 10(37) of the Act.

Pranav-Saran-Vs-ACIT-ITAT-Delhi

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May, 14
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Income Tax
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Standard

Out of earlier cash withdrawals no addition for cash deposits During Demonetization

Facts and Issue of the Case

The assessee is an Individual and senior citizen aged about 79 years old who has retired as Senior Government servant, Addl. Secretary Department of Legal Affairs, Ministry of law, Government of India. The assessee had shown income from Pension, earning of bank interest in his Individual capacity and has declared income at Rs.19,06,400/-. The assessee is also Karta of HUF, ‘Om Prakash Nahar HUF’ which was earning rent from property deposited in Bank of Baroda and has been shown separately in HUF’s Income Tax return. The ld. Assessing Officer noted that there was cash deposit during demonetization period and accordingly a notice under Section 143(2) of the Act was issued on 24.09.2018 as the case was selected under CASS for limited scrutiny to verify the cash deposit. The Assessing Officer noted that the assessee had deposited cash of Rs.63,63,000/- in his bank account maintained by the Bank of Baroda during demonetization period. In reply the assessee submitted that, he is retired Govt. servant receiving pension in UCO Bank, Patiala House and he is also having huge rental income as Karta. The saving bank account of HUF was opened in individual name of Om Parkash Nahar, but the rental income was deposited in the Bank of Baroda which stands in his Individual name, but right from beginning, the income of the HUF was being deposited in the said account and shown in HUF’s return. The amount of Rs.63,63,000/- was deposited out of withdrawals from the same account from time to time made during the years 2014, 2015 and 2016, because of his serious illness and old age. The assessee was in the habit of withdrawing the money and keeping in the form of cash at home. The ld. Assessing Officer rejected the assessee’s explanation and held that there is no substantial justification given by the assessee as to, firstly, why the PAN of the Individual was used in opening the bank account as the income was from property held by the HUF. Secondly, assessee has not declared cash deposit during demonetisation period in the column in the return for Assessment Year 2017-18; and lastly, the assessee’s reply that he has withdrawn money being old and suffering from disabling ailment, and allegedly withdrew to be distributed to his family members, which cannot be believed and accordingly he added the entire amount of Rs.63,63,000/- under Section 69A / 115BB of the Act. The ld. CIT (Appeals) has given part relief and restricted the addition to Rs.44,13,000/- after holding that cash withdrawn from account from 1.04.2016 to 9.11.2016 for sums aggregating to Rs.19,50,000/- can be held to be out of money withdrawn from the bank account, which was deposited after demonetization.

Observation of the court

Court has heard both the parties and perused the material and finding given by the impugned order as well as various documents filed in the paper book on record including several bank statements for the impugned assessment year. The additions made on account of deposit made by the assessee in the bank account from the period 10.11.2015 to 13.12.2016 for sums aggregating Rs.63,63,000/-.

The assessee who is a senior citizen and a retired Govt. servant is deriving income from pension, bank interest and is also earning rent from property as a Karta of HUF. It is also an accepted fact that the rental income has been shown in the return of income for HUF, which has been deposited in the Individual bank account of the assessee, which he has opened in his Individual name.

The assessee’s explanation is that looking to his old age and suffering from various ailments as he had suffered a heart attack and had juvenile diabetes, therefore, for his mental security he was in the habit of keeping huge cash with him. This is also evident from the fact as brought out on record by the ld. Counsel that since beginning, assessee has been withdrawing cash and keeping it with him after withdrawing from his bank account. It has also been submitted by him that the assessee had under-went bypass surgery and operation in the past and looking to his ailment and staying alone with his wife, therefore, he has been withdrawing and keeping cash for his personal and psychological security. In support of this explanation, he has shown the bank accounts of the assessee and pattern of his cash withdrawals and filed a chart depicting cash in hand after withdrawing from bank starting from 1.11.2012.

Thus, Ld. Counsel submitted that looking to the peculiar facts of the assessee’s case and in the habit of withdrawing the money and keeping in the form of cash at home cannot be doubted. When the Govt. announced the demonetisation, the cash kept by him over a period of time has been deposited in the bank account and the entire source is from the money withdrawn by him from his own bank account from time to time.

The ld. DR strongly relied upon the order of the Assessing Officer and the ld. CIT (Appeals) and submitted that the amount which assessee had withdrawn before the demonetisation, i.e. from 1.04.2016 to 9.11.2016 already the ld. CIT (Appeals) has given benefit. It is improbable that money withdrawn years ago has been kept in the form of cash and suddenly on the day of demonetisation assessee had to deposit the said amount. Such explanation without any proper material to support cannot be accepted.

Court has heard the rival submissions. After considering the facts and material on record and on perusal of the bank statement, court finds that the assessee had been making huge withdrawals from time to time. The assessee is having huge income from rent which is Rs.2,58,750/- per month which the assessee has been receiving through cheque in his bank account and such rental income has been disclosed in the return of income of Om Prakash Nahar, HUF. Apart from that, assessee is also getting pension from Government of India. Besides this, the assessee has no source of income or is involved in any business or profession. From the perusal of the history of cash withdrawals starting from the financial year 2014-15, we find that assessee has been regularly withdrawing huge cash amount on various dates and there was hardly any credit balance left in his bank account. The funds flow statement as incorporated above clearly shows that each and every withdrawal has been mentioned and utilization thereof and the money being withdrawn from the bank account. Even after house-hold withdrawal, there was a huge amount available with the assessee in the form of cash. Under these facts and circumstances stated by the assessee, it cannot be held to be improbability that assessee did not have any availability of cash at the time of demonetisation. It has not been brought on record whether assessee was carrying out any business or profession or was having income from undisclosed sources of income which can be said to be available with the assessee in the form of cash. If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him. Under these circumstances, we find that the explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee and without any adverse material it cannot be presumed that the cash deposited by the assessee is out of some his undisclosed source. Accordingly, the addition of Rs.44,13,000/- as sustained by the CIT (Appeals) is deleted.