TaxTMI 
TaxTMI 
2015 (10) TMI 1075
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....assing the impugned order. The order cannot stand and deserves to be reversed. 3. The appellant craves leave to add, alter, amend and /or withdraw any ground of appeal either before or during the course of hearing of appeal. 2. The only issue in the appeal of the assessee is in regard to addition of Rs. 6,37,000/- made on account of unexplained income out of the opening balance as on 01/04/2002 of capital account of Rs. 11,33,680/-. 3. Brief facts of the case, as per the order of AO & Paper Book submitted by ld. AR, are that search and seizure action under section 132 of the Act was carried out on 23.5.2008 at the residential premises of the appellant. Thereafter the case was analysed and notices u/s 153A for AY 2003-04 to 2008-09 for filing return of income were issued. In response the assessee filed return of income declaring total income of Rs. 90,000/- plus agricultural income of Rs. 169,407/- only. The assessee had never filed return of income earlier. During the assessment proceedings assessee submitted that he was involved in agricultural activities and is engaged in agricultural operations and allied activities for last many years and has been earning agricultural ....
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....ome. In other words, if the appellant is able to prove that he had the capital balance of Rs. 11,33,682/- as on 31.3.2002, then the AO cannot make any addition in assessment year 2003-04. If however, it is proved that the appellant had no source of income till 31/3/2002, in that case, the AO can make addition of the unexplained amount in assessment year 2003-04. In view of this, the appellant was asked to state the source of capital as on 31/3/2002. The appellant had filed a copy of balance sheet prepared after the date of search before the AO as well as before me, as per which as on 31/3/2002, the appellant had fixed assets in the form of agricultural land of Rs. 337,888/- and animals of Rs. 30,000/-. Investment in LIC to the extent of Rs. 104,152 is shown as on 31.3.2002. Besides this the appellant has also shown cash in hand to the tune of Rs. 660,916 and bank balance Rs. 726. During the year the appellant has shown the profit to the extent of Rs. 207,469 most probably in the form of the agricultural income." In the order of CIT(A) reference was made, the details of investment in land made by assessee in which assessee purchased agricultural land (as per 7/12) since 21.6.1989....
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.... in his bank account. No evidence has been furnished before me in support of the fact that the appellant has deposited the agricultural income in his bank account. Therefore, the appellant has tried to explain the source of cash of rupees 637,000 of the year relevant to assessment year 2003-04 as pertaining to earlier years. In other words, as against the total additions of Rs. 11,33,682/- on account of opening capital balance, the addition of Rs. 637,000 only is sustained." 5. Being further aggrieved, the assessee is now in appeal before the Tribunal. 6. The ld. AR of the assessee submitted as under :- "(i) During the course of assessment proceedings , the appellant was called upon to explain the availability of the aforesaid opening cash balance as on 1st April, 2002. In the reply of the appellant, it was submitted that in the statement recorded under section 132(4) of the Act the appellant had categorically deposed that he has been maintaining books of accounts and were available with his CA at the time of search. Further such books of accounts were also submitted during the proceedings before him and demonstrated how the opening balance in capital account was drawn. Howev....
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.... the AO in relation to opening balance of capital account carried forward from the previous years, the same cannot be considered as income for the relevant year under consideration. It may also be kindly noted that the ld. AO apart from arbitrarily rejecting the explanation of appellant has failed to bring on record any material or evidence to show existence of any unaccounted sources of income of appellant. In the absence of any such finding by the AO, it would be completely unjustified to presume that part of the opening capital balance shown by the appellant is undisclosed income of the year under consideration. The ld. CIT(A) has however not accepted the explanation of the appellant in true and proper perspective and has granted partial relief. (vi) Vide para 4.1 of the impugned appellate order, on one hand, the CIT(A) has fully agreed that normally there cannot be any addition on account of opening capital balance and on the other hand, he has opined that this cannot be accepted as universally true in all the cases. The ld. CIT(A) has further misdirected himself in coming to the conclusion that appellant's argument is not acceptable since the appellant had not filed return ....
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....t the ld. CIT(A) has unjustifiably proceeded to work out the availability of cash on hand on estimated formula. This cannot form basis for sustaining the addition in part, which has resulted in violation of principles of natural justice. (viii) It is respectfully submitted that the orders of the learned CITA) in restricting the addition of Rs. 637,000/- on account of opening cash balance in the capital account is unfair and it may be held as wholly unjustified and the orders of the lower authority to that extent may kindly be reversed." 7. On the other hand, the ld. DR relied on the orders of lower authorities. 8. We have heard the rival contentions and gone through the facts and circumstances of the case. It is clearly accepted at the level of AO as well as CIT(A) that the assessee was engaged in the agricultural activities and was holding agricultural land measuring 69913 sq. metres (as per 7/12) which was purchased by him in parts from 21.6.1989 to December, 1994. The appellant has shown that he was cultivating crops like bajra, maka, etc. and his main source of income, therefore, he was not filing return of income and it is apparent that these facts have not been dispu....