Malvinder Singh Garwal, New Delhi vs Department Of Income Tax

ITO, Ward 42 (3), vs. Shri Malvinder Singh Garwal, New Delhi. C/o Bharaya Co-op. Farms, P.O. Rudra Bilas Mill, Bilaspur, Distt. Rampur (U.P.)

(PAN : ACZPG2829C)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri K.V.S. Gupta, FCA REVENUE BY : Shri P. Dam Kanunjna, Senior DR

Date of Hearing : 29.04.2015 Date of Pronouncement : .04.2015

ORDER

PER H.S. SIDHU, JUDICIAL MEMBER :

The revenue has filed the present appeal against the order of the CIT

(Appeals) -XXX, New Delhi dated 13.05.2011 for the assessment year

2008-09 on the following grounds :-

"On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) has erred in :-

Deleing the addition of Rs.23,57,000/- made by A.O. in deleting the addition the CIT (A) has failed to appreciate the fact that on a small land holding of 1.262 hectare of land agricultural produce to the tune of Rs.25 lacs cannot be grown.

2 ITA No.3647/Del./2011 The appellant craves the right to alter, amend, add or substitute the grounds of appeal."

2. The facts relating to the issue in dispute are that the assessee filed

his return of income on 25.08.2008 declaring total income at Rs.3,04,713/-

and the agricultural income of Rs.25 lacs. The Assessing Officer

processed the same u/s 143(1) of the Income-tax Act, 1961 (hereinafter

referred to as 'the Act') at the returned income. Later on, the case of the

assessee was selected for scrutiny on the basis of AIR information that the

assessee has deposited cash of Rs.57,57,000/- in his bank account

no.083000100084898 with Punjab National Bank, Rudrapur, Uttarakhand.

The Assessing Officer issued notice u/s 143(2) of the Act on 03.09.2009

fixing the case of the assessee for 14.09.2009. In response to the same, the

assessee's authorized representative appeared. The Assessing Officer

again issued notice u/s 143(2) and 142(1) of the Act along with a

questionnaire on 01.09.2010 fixing the case of the assessee for 10.09.2010.

In response to the same, authorized representative of the assessee appeared

and filed necessary details which were examined by the Assessing Officer.

The main source of the income of the assessee is pension from Air Force,

agricultural income and income from other sources. The Assessing Officer

asked the assessee to explain the cash deposit of Rs.57,57,000/- in the said

bank account. In response to the same, the assessee submitted that

Rs.34,00,000/- was received on sale of ancestral property in Punjab for 3 ITA No.3647/Del./2011

which necessary details and documents were filed. Regarding balance

amount of Rs.23,57,000/-, the assessee submitted that this deposit is from

sale proceeds of agricultural produce. The assessee has also filed the

details of sale proceeds of Rs.7 lacs from poplar trees from one Attim

Khan and Hamid Khan, sons of Sabir Khan, resident of Bilaspur, Distt.

Rampur. The details of Rs.4,02,000/- were also submitted before the

Assessing Officer being received on account of giving his Amrud Bagh on

lease to Jamil Khan, s/o Sher Khan, Ruderpur, Uttrakhand and as regards

to Rs.70,000/-, the assessee has not submitted any explanation. The

Assessing Officer issued notice u/s 133 (6) of the Act for seeking the

information from two parties which were received back to the Assessing

Officer with remarks "no such person at the given address". Lastly, the

Assessing Officer, after examining the documentary evidence filed by the

assessee, completed the assessment and made an addition of

Rs.23,57,000/- while processing the return u/s 143(3) of the Act on

27.12.2010. Aggrieved by the assessment order, the assessee filed the

appeal before the ld. First Appellate Authority who by impugned order

dated 13.05.2011 deleted the addition in dispute by allowing the appeal

filed by the assessee.

3. Now, the revenue being aggrieved by the impugned order dated

13.05.2011 has filed the present appeal before us.

4 ITA No.3647/Del./2011

4. At the time of hearing, ld. DR relied upon the order passed by the

Assessing Officer. On the contrary, ld. AR relied on the order of the ld.

First Appellate Authority. He drew our attention to the paper book filed by

the assessee containing pages 1 to 75 in which assessee has attached copy

of F.No. 35 dated 24.01.2011 along with statement of facts & grounds of

appeals, copy of Bank A/c in PNB No. 84898 Rudrapur in the name of Mr.

M S Grewal & Mandeep Grewal, copy of reconciliation of AIR with cash

deposit exceeding Rs.10 Lakhs in PNB A/c No. 84898 submitted before

Assessing Officer, copy of IKRARNAMA of assessee submitted before

Assessing Officer with letter dated 23.11.2010 regarding sale proceeds of

poplar trees, Rs.7,00,000/- to Sh. Attim Khan & Hamid Khan and

Rs.11,85,000.00 to Sh. Murtja Khan, confirmation letter dated 16.12.2010

issued by Tehsildar, alongwith cropwise detail issued by patwari for

Ranbir Collective Co-Op. Farming Society Ltd filed before Assessing

Officer, Kisan Bahi i.e. evidence of land ownership filed before Assessing

Officer regarding land owned by assessee in individual capacity (1.262

Hectare) and land owned by Ranbir Collective Co-Op Farming Society Ltd

filed before A.O. (42.12 Hectare), evidence regarding agricultural income

of Ranbir Collective Co-Op Farming Society Ltd filed before Assessing

Officer, letter dated 04.01.2011 sent by assessee to Assessing Officer

regarding contractors i.e. Sh. Murtja Khan, Sh. Attim Khan & Hamid Khan

and copy of letter dated 23.02.2011 filed before ld. CIT(A). Ld. AR for 5 ITA No.3647/Del./2011

the assessee argued that in view of the order passed by ld. First Appellate

Authority as well as the documentary evidences filed by the assessee

before the revenue authorities, the impugned order passed by ld. First

Appellate Authority may be upheld by dismissing the appeal filed by the

revenue.

5. We have heard both the parties and gone through the orders passed

by the revenue authorities as well as the documentary evidences in the

shape of paper book containing pages 1 to 75. It is very much necessary to

reproduce the relevant portion of the assessment order and for the sake of

convenience, the same is reproduced as under :-

"The assessee's main sources of income are Pension from Air Force, agricultural income and income from other sources. The assessee was asked to explain the sources of cash deposit amounting to Rs.57,57,000/- in his bank account maintained with PNB, Rudrapur. The A R of the assessee submitted that Rs.34,00,000/- was received on sale of ancestral property in Punjab for which necessary details/documents have been filed. Regarding balance amount of Rs.23,57,000/-, the AR submitted that this deposit is from sale proceeds of agricultural produce. The details of this sale proceeds were filed i.e. a sum of Rs.7 lacs on account of sale proceeds of poplar trees from one Sh Attim Khan and Hamid khan sons of Sabir Khan, resident of Bilaspur, Distt. Rempur and Rs.4,02,000/- on account of giving his "AMRUD BAGH" on lease to Sh Jamil Khan S/o Sher Khan, Ruderpur, Uttrakhand and about balance amount of Rs.70,000/-, no explanation has been furnished. On test checking the truth the assessee, information u/s 133(6) was sought from two parties i.e. Murtza Khan and Sh Atim Khan & Hamid Khan at the given addresses. The letter sent to Murtza Khan has been received back unserved with the remarks of the postal authority" No Such Person at the given address". Sh Atim Khan and Hamid Khan did not furnish the required information sought for in 6 ITA No.3647/Del./2011

the letter. The A R of the assessee was also informed about the facts that the required information has not been furnished by these two persons. He was further show caused that the deposits in cash of Rs.23,57,000/- alleged to have been from sale of agriculture produce shall be treated as income from undisclosed sources and added to the total Income of the assessee vide order sheet entry dated 24.12.2010. The A R of the assessee did not furnish any reply to this query. Further, I am satisfied that the assessee has furnished inaccurate particulars of his income, hence penalty proceedings u/s 271 (1)( c) have been initiated separately."

After perusing the aforesaid relevant portion of the assessment order, we

are of the view that on the basis of AIR information, the Assessing Officer

asked the assessee to explain the source of cash deposit amounting to

Rs.57,57,000/- in his bank account no.083000100084898 maintained with

Punjab National Bank, Rudrapur, Uttarakhand. In response to the same,

the assessee filed the evidence of sale proceeds of property in Punjab for

Rs.34,00,000/- which was accepted by the Assessing Officer. As regards

to the balance amount of Rs.23,57,000/- which the assessee has deposited

in cash in his aforesaid bank account, no doubt the assessee has produced

some documentary evidence before the Assessing Officer as well as before

the ld. First Appellate Authority but assessee could not substantiate his

version before the Assessing Officer. Secondly, the assessee has stated

that a sum of Rs.7 lacs was received on account of sale proceeds of poplar

trees from one Attim Khan and Hamid Khan, sons of Sabir Khan, resident

of Bilaspur, Distt. Rampur and Rs.4,02,000/- were received on account of

giving his Amrud Bagh on lease to Jamil Khan, s/o Sher Khan, Ruderpur, 7 ITA No.3647/Del./2011

Uttrakhand and as regards to Rs.70,000/-, the assessee has not submitted

any explanation to the Assessing Officer. On the basis of this information,

the Assessing Officer issued notice u/s 133(6) of the Act to two parties,

namely, Murtza Khan and Atim Khan & Hamid Khan at the given

addresses. The letter sent to Shri Murtza Khan has been received back

unserved with the remarks of postal authorities "no such person at the

given address". Atim Khan and Hamid Khan did not furnish the required

information sought for by the Assessing Officer. The Assessing Officer

has given another opportunity to assessee by issuing a show-cause notice

regarding source of cash deposit of Rs.23,57,000/- alleged to have been

received from sale of agricultural produce. But the assessee failed to

substantiate with any solid evidence before the Assessing Officer and

lastly, the Assessing Officer has made the addition of Rs.23,57,000/- as

unexplained cash deposit in the bank account of the assessee and

completed the assessment on 27.12.2010. But the ld. First Appellate

Authority has deleted the addition in dispute without any basis and without

any evidence. The ld. First Appellate Authority has believed the version of

the assessee which is contrary to the law and facts on the file. For the sake

of convenience, it is very much relevant to reproduce the relevant portion

of the impugned order passed by the ld. First Appellate Authority which is

at paras 3 & 4 at pages 2 to 7 and the same is reproduced as under :- 8 ITA No.3647/Del./2011

"3. The appellant was a gallantry award winner from Airforce. He retired from Airforce in the year 1985 and settled in a place in Bilaspur near Ruderpur of Nainital District of Uttrakhand. His pension income from military is exempt u/s 10(18) of the I.T. Act being a gallantry awardee receiver. In the 1970 war the appellant was imprisoned by Pakistan for one year and when he came back to India he was awarded a gallantry award. The assessee with his family is doing agricultural operation in about 53 hectres of agricultural land where he had multiple crops and mango, guava, orchard. He grew poplar trees for Plywood Industries on which the Tehsildar/ patwari of the local area had given a certificate of agricultural receipts of Rs.30 lakhs per year. This certificate translation is produced as under:-

"Sh.Malvinder Singh Grewal s/o Sh.Mehra Singh Grewal is a permanent resident and agriculturist of Gram Kota Ali Nagar, Tehsil Bilaspur, Distt.Rampur. He is a secretary in Ranvir Co-operative Farming Society Ltd. He is the authorized person for doing all the agricultural activities on the land and having income of Rs.30,00,000/-. An oath letter is enclosed. Submitted."

The appellant had given explanation about agricultural income, reconciliation and agricultural expenses made during the year which are reproduced for ready reference:-

"On the basis of all the Khasara, khatauni documents duly certified by patwa:, bank statements and explanation provided by the Mr. Melvinder Singh Garew we are certifying following:

a) Agricultural Income Reconciliation:

I. Cash deposited in bank (declared as agricultural receipts)

Date Mode Amount Narration 18-May-07 Cash 300,000.00 Sale Proceeds 28 May-07 Cash 200,000.00 Sale Proceeds 04-Jun-07 Cash 100,000.00 Sale Proceeds 26-Jul-07 Cash 200,000.00 Sale Proceeds 30-Jul-07 Cash 100,000.00 Sale Proceeds 08-Aug-07 Cash 100,000.00 Sale Proceeds 26-0ct-07 Cash 165,000.00 Sale Proceeds 02-Nov-07 Cash 120,000.00 Sale Proceeds 28-Nov-07 Cash 100,000.00 Sale Proceeds 01-Dec-07 Cash 300,000.00 Sale Proceeds 07-Dec-07 Cash 250,000.00 Sale Proceeds 17-Dec-07 Cash 225,000.00 Sale Proceeds 13-Feb-08 Cash 39,000.00 Sale Proceeds 04-Mar-08 Cash 38,000.00 Sale Proceeds 11-Mar-08 Cash 200,000.00 Sale Proceeds 25-Mar-08 Cash 100,000.00 Sale Proceeds 23,57,000.00 9 ITA No.3647/Del./2011

2. Cheque Deposited in Bank (Declared as Agricultural Receipts)

Date Mode Amount Narration 20-Jun-07 Cheque 64,140.00 Crops Sale Proceeds 27-Jul-07 Cheque 21,640.00 Crops Sale Proceeds 04-Aug-07 Cheque 213,800.00 Crops Sale Proceeds 17-0ct-07 Cheque 20,000.00 Crops Sale Proceeds 22-0ct-07 Cheque 49,000.00 Crops Sale Proceeds 22-Mar-08 Cheque 19,526.00 Crops Sale Proceeds 3,88,106.00

3. Cash withdrawal from Bank (for agricultural expenses)

Date Mode Amount Narration 01-Jun-07 Self Cheque 48,804.00 Diesel Payment 19-Jun-07 Self Cheque 100,000.00 Withdrawal for Agricultural Exp.

20-Jun-07 Self Cheque 100,000.00 Expenses towards Farming Agricultural 21-Jun-07 Self Cheque 100,000.00 Expenses towards Farming Agricultural 04-Jul-07 Self Cheque 10,000.00 Expenses towards Farming Agricultural 12-Jul-07 Self Cheque 100,000.00 Expenses towards Farming Agricultural 12-Jul-07 Self Cheque 100,000.00 Expenses towards Farming Agricultural 14-Jul-07 Self Cheque 35,000.00 Expenses towards Farming Agricultural 22-Aug-07 Self Cheque 213,800.00 Expenses towards Farming Agricultural 29-Aug-07 Self Cheque 20,000.00 Expenses towards Farming Agricultural 31-Aug-07 Self Cheque 22,850.00 Diesel Payment 18-Sep-07 Self Cheque 50,000.00 Expenses towards Farming Agricultural 26-0ct-07 Self Cheque 14,000.00 Withdrawal for Agricultural Exp 01-Nov-07 Self Cheque 27,333.60 Withdrawal for Agricultural Exp 03-Nov-07 Self Cheque 100,000.00 Withdrawal for Agricultural Exp 29-Jan-08 Self Cheque 20,175.00 Withdrawal for Agricultural Exp 10,61,962.60 10 ITA No.3647/Del./2011

Payment from Bank (for agricultural expenses)

Date Mode Amount Narration 30-Mar-07 Cheque 46,860.00 Payment for fertilizer 29-Aug-07 Cheque 20,000.00, Purchase of seeds 20-Nov-07 Cheque 42,718.00 Payment for seeds 20-Feb-07 Cheque 7,158.00 Agricultural Exp. 27-Mar-08 Cheque 28,753.20 Agricultural Exp.

1,45,490.00

Agricultural Income :

Cash deposited in Bank (As per Point No.1) 2,357,000.00

Cheque deposited in Bank (As per Point No.2 388,106.00 2,745,106.00

Agricultural Income :

Cash withdrawl by Bank (As per Point No.1) 1,091,962.60

Payment by Cheque (As per Point No.4) 145,490.00 1,237,452.60

Net Agriclutural Income (Calculated on the basis of Bank statement) 1,507,653.40

Agricultural income declared in Income tax return 25,00,000.00

b) Land used by assessee in Agricultural activities

Owner Name Hectare Land in the name of Malvinder Singh Garewal 1,262

Land in the name of Ranbir Collective Co-operative Farming Society 41,264

Land in the name of Mini Collective Co-operative Farming Society 12.6 Total land 55.126

1) Mr. Malvinder Singh Grwal is the secretary in Ranbir Collective Co-

operative Farming Society Ltd. He is the authorized person for doing all the agricultural activities on the land.

11 ITA No.3647/Del./2011

2) Further also, Mr.Grewal is also authorized person for doing all agricultural activities on the land related to Mini Collective Co-operative Society.

Enclosed documents a. Certificate by assessee, patwari b. Computation of income

3) According to signed certificate and affidavit duly certified by assessee,

patwari of lkehapal, around 30 lacs agricultural receipts from land during the F.Y.

4) Assessee shows approximately agriculture net income Rs.25 lacs in his income tax return.

4. From the computation of agricultural income made by the appellant and his AR, it is found that the net agricultural income of the assessee is around Rs.15 lakhs in the previous year related to assessment year 2008-09. The assessee had returned agricultural income of Rs.25 lakhs in his returned of income which is on the excessive side. Since the assessee had a source of cash receipts of Rs.30 lakhs from agricultural as receipts certified by the local Tehsildar, cash deposit of Rs.23,57,0001- in the bank account of the assessee stands explained. However, the income computation made by the assessee will be changed to the extent of total income of Rs.3,04,710/- + agricultural income of Rs.15 lakhs and other income exempt u/s 10 (18) pension from Airforce for gallantry award of Rs.2,30,942/-. Thus the AO is directed to recomputed the tax liability and charge interest in accordance with the law. Since the assessee is involved wholly in agricultural operation and he is not having any other business activity, excess agricultural income returned by the appellant in his return of income should not be taken as unexplained business income. In future the appellant is advised to keep an accountant to maintain his books of account from all sources of income so that he shall be able to produce audited books of accounts before AO and the department in future. Since the assessee is managing co-operative society for cooperative farming, he should maintain books of accounts audited for such purposes. Whenever, the professional receipts exceeds Rs.I0 lakhs, he should maintain books of accounts under section 44AA of the I.T.Act. The AR should guide the appellant in maintaining books of account in future for agricultural income and other income separately."

We find that the assessee has given his explanation about the agricultural

income, reconciliation and agricultural expenses made during the year

which the ld. First Appellate Authority has reproduced in pages 3 to 6 of 12 ITA No.3647/Del./2011

his order. After reproducing of the same, the ld. First Appellate Authority

has given his finding in para no.4 at pages 6 & 7 of his order and deleted

the addition in dispute which we have reproduced in the foregoing

paragraph. After going through the explanation of the assessee along with

the additional evidence filed by the assessee and the finding of the ld. First

Appellate Authority, we are of the considered view that assessee has filed

additional evidence under Rule 46A of the Income-tax Rules, 1962 and the

Assessing Officer on 14.03.2011 has also given remand report in the case

of assessee and strongly objected the admission of additional evidence.

The Assessing Officer has given sufficient opportunity to the assessee to

furnish documentary evidence in support of his claim of sale of

agricultural produces grown on the land owned by the assessee but

assessee did not file any documentary evidence in support of additional

evidence. We find that ld. First Appellate Authority did not even indicated/

discussed about the additional evidence and the remand report of the

Assessing Officer dated 14.03.2011 which the assessee has attached in the

paper book at pages 53 to 55 of the paper book and rebuttal by the assessee

to the remand report of the Assessing Officer dated 20.04.2011 which is at

pages 56 to657 of the paper book. Meaning thereby, the ld. First Appellate

Authority has not applied his mind while deleting the addition in dispute

and the addition was dismissed merely on the basis of surmises and 13 ITA No.3647/Del./2011

conjectures without any evidence. Therefore, the impugned order is not

sustainable in the eye of law.

5.1 We further find that no doubt, the assessee was a gallantry award

winner from Air Force and has been retired from Air Force in the year

1985 and is settled in a place in Bilaspur near Ruderpur of Nainital District

of Uttrakhand. His main source of income is pension from Air Force,

agricultural income and income from other sources. As per the record, the

assessee is an owner of 1.262 hectares of land (as stated above) but the rest

of the land belongs to Ranbir Collective Cooperative Farming Society is

42.92 hectares. In the nutshell, the assessee is owner of only 1.262

hectares. As regards to the sale proceeds of Rs.7 lacs from poplar trees

from one Attim Khan and Hamid Khan, sons of Sabir Khan, resident of

Bilaspur, Distt. Rampur and Rs.4,02,000/- on account of giving his Amrud

Bagh on lease to Jamil Khan, s/o Sher Khan, Ruderpur, Uttrakhand, the

assessee has submitted some details but the same were not substantiated

with corroborating evidences. But the ld. First Appellate Authority has

deleted the addition in dispute merely on the basis of presumptions and

assumptions and keeping in view of the background of the assessee which

is not permissible under the law. As regard Rs.70,000/-, the assessee has

not submitted any explanation before the Assessing Officer as well as

before the ld. First Appellate Authority. Keeping in view of the impugned

order reproduced above, we are of the view that ld. First Appellate 14 ITA No.3647/Del./2011

Authority merely reproduce the explanation of the assessee regarding

agricultural income and agricultural expenses made during the year under

consideration. The assessee has also submitted his cash flow statement

before the ld. First Appellate Authority which establishes that assessee has

deposited cash frequently in his bank account alleging that these cash he

has received on account of sale proceeds and crop sale proceeds. The

assessee has also pleaded before the revenue authorities that he has

incurred some expenses towards farming agriculture but he has not

established that these expenses have been incurred by the assessee on

account of earning agricultural income. But ld. First Appellate Authority

has deleted the addition in dispute without any basis merely on the basis of

presumption and assumption and keeping in view of the status of the

assessee being a retired Air Force officer, which is not permissible under

the law. From the documentary evidence filed by the assessee before the

ld. First Appellate Authority i.e. cash statement, the assessee has not

established that assessee has deposited the cash on account of sale

proceeds of agricultural crops. The assessee has also not established that

he has received Rs. 7 lacs on account of sale of poplar trees from Atim

Khan and Hamid Khan and Rs.4,02,000/- on account of giving his Amrud

Bagh on lease to Jamil Khan. As regards to the land measuring 42.92

hectares belonging to Ranbir Collective Cooperative Farming Society, the

assessee has not established that he has received agricultural income from 15 ITA No.3647/Del./2011

this farming society in spite of the fact that this land is belonging to Ranbir

Collective Cooperative Farming Society. The assessee has also not

produced any lease deed establishing that he is doing agriculture on the

land measuring 42.92 hectares. Keeping in view of the facts and

circumstances of the present case and the order passed by the revenue

authorities as well as the evidences produced by the assessee before the ld.

First Appellate Authority in the shape of paper book, we are of the view

that ld. First Appellate Authority has deleted the addition merely on the

basis of surmises and presumptions which is not permissible under the law.

In our considered view, the impugned order is not sustainable in the eyes

of law, therefore, we cancel the impugned order dated 13.05.2011 passed

by the ld. First Appellate Authority and upheld the assessment order dated

27.12.2010 passed by the Assessing Officer u/s 143(3) of the Act by

allowing the appeal filed by the revenue.

6. In the result, the appeal filed by the revenue is allowed.

Order pronounced in open court on this 30th day of April, 2015.

Sd/- sd/- (R.S. SYAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated the 30th day of April, 2015 TS 16 ITA No.3647/Del./2011

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-XXX, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.