TaxTMI 
TaxTMI 
2024 (3) TMI 29
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....me Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in deleting the addition made towards unexplained credits u/s. 68 to the extent of Rs. 19,22,37,000/- in respect of cash claimed to have been received by the assessee from recovery of farmers' advances earlier granted. 2.1. The Ld. CIT(A) erred in observing that the farmers' advances recovered during the financial year relevant to AY 2016-17 could be the subject matter of enquiry for the assessment year 2017-18, without appreciating that the amounts had been credited in the books of account in the previous year relevant to the assessment year 2016-17 and the assessee had not provided explanation for the source of credits to the satisfaction of the assessing officer. 2.2. The Ld.CIT(A) erred in failing to appreciate that Shri V. Sathish, one of the directors of the company admitted in his sworn statement recorded during the enquiry conducted by Investigation wing that there was no evidence for the collection of cash from the farmers. 2.3. The Ld. CIT(A) failed to note that the assessee had filed ITR and Audit Report only upto AY 2014-15 on the date of enq....
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....ent proceedings for AY 2016-17, it transpired that the assessee received cash of Rs. 2502.32 Lacs during the year which was duly credited in the cash book. To substantiate the same, the assessee was directed to produce financial statements, cash book, bank summary and source for advancing loans / investments. The assessee complied with the notices and filed various documents and submissions in support of source of cash deposit. 3.3 The assessee submitted that it was advancing money to the farmers to ensure the supply of raw sugarcane to the assessee at the time of harvesting which would be basic raw material for the assessee. Approx. 10 to 12 months advances were lying with farmers and it was revolving in nature. The same was reflected in Balance Sheet as 'receivables'. The assessee further submitted that there was opening cash balance of Rs. 25.86 Crores out of which Rs. 19.22 Crores was collected during the harvest season through the rearrangement of supply of sugarcanes. The same was used to make the deposit in the bank account. 3.4 During the course of earlier search and survey operations, the assessee had provided a list containing names of the farmers to the Investigati....
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....oans for AY 2014-15 were only Rs. 1.13 Lacs. The same suddenly jumped in AY 2015-16 to Rs. 3717.86 Lacs. Therefore, it was a well-planned arrangement by the assessee to accommodate his unexplained demonetized money as received during demonetization period. In the above background, Ld. AO held that the assessee could not substantiate the cash deposit of Rs. 2502.32 Lacs and the same was added to the income of the assessee u/s 68. 3.7 In AY 2017-18, Ld. AO similarly noted that the assessee deposited sum of Rs. 40.28 Crores in demonetized notes in the bank account and the same was used to settle the bank loan taken by the assessee. Shri T. Rajkumar and Shri V. Sathish, director explained that the company gave sugarcane advances to cane growers (farmers) during financial years 2009-10 to 2012-13. From 2013-14 onwards, the advances were returned back by the farmers to the company and the money was kept in the custody of Shri T. Rajkumar. During demonetization period, the cash was remitted to the bank. 3.8 During the course of assessment proceedings for AY 2017-18, the assessee produced Balance Sheet details for FYs 2009-10 to 2016-17. The Ld. AO found discrepancies in the same and....
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.... from State Bank of Hyderabad which was under one time settlement (OTS) scheme. Pending OTS settlement, the cash so collected from the farmers was accumulated by the assessee and subsequently deposited into the loan account to settle the same. The advances to the farmers were sourced out of bank loan availed by the assessee from the bank. During the course of assessment proceedings, the assessee furnished the names, address, holding details of the farmers. Total cash received during AY 2016-17 was Rs. 2502.32 Lacs out of which amount of Rs. 1922.37 Lacs represent advances recovered from the farmers during this year. For AY 2017-18, the assessee drew attention to the fact that confirmations furnished by the assessee were duly verified which was noted by Ld. AO also in the assessment order and therefore, there could be no occasion to disbelieve the same. The assessee also assailed the applicability of Sec.68 / 69A to the facts of the case. Another plea was that the same amount was taxed twice in two years. Reliance was placed on various judicial decisions in support of various submissions. 4.2 The Ld. CIT(A) duly considered the detailed submissions of the assessee and noted that t....
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....015-16 25,86,10,218 19,22,37,000 6,63,73,218 2016-17 6,63,73,218 3,43,42,491 3,20,30,727 The assessee also summarized the cash position for financial year 2015-16 which has been extracted in para 6.5.9 of the impugned order as under: - Total cash received during the year 2015-16 25,02,32,500 SOURCES: Withdrawal from Bank Axis Bank -CA-913020041436726-CBE 3,25,20,000 OBC-10441131001677 2,15,32,000 Axis Bank - CA-090010200038216 9,25,000 Damaged wet sugar sale A/c (Already offered to income under the head sales in P&L) 30,18,500 Advance recoveries from farmers 19,22,37,000 Total of the above 25,02,32,500 Unexplained credit NIL The assessee submitted that advances received from the framers during this year was only Rs. 1922.37 Lacs whereas entire cash credits appearing in the cash ledger was brought to tax u/s 68 which was completely erroneous. The assessee further submitted that the name of the farmers and details of advances so recovered from them were already avail....
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....careful examination of the facts of the case for the instant assessment year as well as the subsequent assessment year 2017-18, it is considered that the addition of the amount of advances recovered from the farmers of Rs. 19.22 crores u/s 68 in the assessment order for AY 2016-17 is not justified. It is apparent from the contents of the assessment order for the subsequent AY 2017-18 that the appellant made cash deposits of Rs. 40.28 crores in its bank accounts during the demonetisation period and explained the same to be out of recovery made from farmers advances during the previous years relevant to AYs 2015-16, 2016-17 and 2017-18. The AO examined the issue of genuineness of the sources of the said cash deposits in the bank accounts during the course of the assessment proceedings for AY 2017-18 by causing necessary enquiries with the farmers from whom the advances were recovered and arrived at a finding regarding the extent to which the claim of the appellant regarding recovery of advances from farmers during the previous years relevant to AYs 2015-16, 2016-17 and 2017-18 can be accepted as the source for the cash deposits made in the bank accounts during the demonetisation peri....
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.... the subject matter of enquiry in the assessment for AY 2017-18 for the purpose of ascertaining unexplained money u/s 69A as such recoveries from farmers were stated to be sources for the cash deposits made in the bank accounts during the demonetisation period in AY 2017- 18. Consistent with the same view, the amount of farmers advances recovered during the financial year relevant to AY 2016-17 could not be the subject matter of addition u/s 68 in the assessment for AY 2016-17. Moreover, no enquiries were made by the AO regarding the genuineness of the recovery of farmers advances during the assessment proceedings for AY 2016-17, whereas the AO made necessary enquiries during the assessment proceedings for AY 2017-18 in respect of the entire amount of recovery of farmers advances pertaining to AYs 2015-16, 2016-17 and 2017-18 since the same were explained to be the sources for the cash deposits made in the bank accounts during the demonetisation period in AY 2017-18. 6.6.11 In view of the aforesaid discussion, it is held that the addition of the amount of recovery of farmers advances for Rs. 19,22,37,000/- u/s 68 of the Act in the assessment order for AY 2016-17 is not sus....
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....from Rs. 1250/- to 3,00,000/-. The appellant filed a list of 104 confirmation letters from the farmers during the assessment proceedings, out of which 48 farmers with repayment of advances in cash in excess of Rs. 125,000/- were selected for verification by the AO. Since the sugar factory was located in Maharashtra and the advances were made to the farmers located in and around Kolhapur district of Maharashtra, a request was made by the AO to the Deputy Commissioner of Income-tax, Circle-2, Kolhapur to verify the existence and genuineness of the farmers and their confirmations by issuing commission to him. 6.6.14 In pursuance of the same, the Deputy Commissioner of Income-tax, Circle-2, Kolhapur issued notices to all the 48 farmers in the sample selected by the AO to appear before him for verification. Out of the 48 farmers to whom notices were issued, 21 persons appeared before him and submitted confirmations. The details furnished by the said 21 persons appeared before him and their signatures were compared with that of the details furnished by the assessee and the same were found to be matching with each other. This confirms the existence of the advances to the farmers ....
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....was unreasonable or perverse or based on no evidence. fl the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise." The High Court was, therefore, right in refusing to refer the questions sought for. 6.6.18 The decisions rendered in the following cases also bring out the obligation on the part of the AO to examine the creditworthiness of the persons who are claimed to have contributed the share capital: a) The Hon'ble Delhi High Court in the case of CIT v/s Divine Leasing and Finance Limited (299 ITR) 268. The Hon'ble Delhi High Court in the case of Modi Creations (P) Limited v. Income Tax Officer (2011) 13 Taxmann.com 114 Delhi) 6.6.19 It is noticed on going through the assessment order that the AO made a distinction between the 21 farmers who have appeared in response to summons issued by DCIT, Circle-2, Kolhapur and gave their confirmations and the 27 farmers who have not responded to the summons issued for examination. The AO considered the claim of recovery of advances from the 21 farmers as genuine, whereas he considered the claim of recovery of advances from the 27 ....
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....ubstantiated as make addition u/s 69A. Even that would not be correct for the reasons stated in the preceding paragraph. The action of the AO in treating the advances recovered to the extent of Rs. 24,16,93,910/- (60% of the total advances recovered) as unsubstantiated on a proportionate basis without discharging the onus of bringing adverse evidence on record with regard to them, when the appellant has already discharged the initial onus that lay on him by furnishing the details of all the farmers is not sustainable. It is held that no such addition can be made on the basis of mere presumption. 6.6.21 In view of this, the addition of Rs. 24,16,93,910/- made by the AO towards unexplained money u/s 69A of the Act for A.Y 2017-18 is hereby deleted. Accordingly, the grounds raised by the appellant on this issue are hereby allowed. Aggrieved as aforesaid, the revenue is in further appeal before us for both the years. Our findings and Adjudication 5. From the facts, it emerges that the assessee is engaged in manufacturing of Sugar and it would require sugarcanes as a raw material to run its business. As part of business practices and to ensure smooth supply of raw mate....
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....8 farmers and forwarded them to DCIT, Kolhapur for verification of the same. Out of this list, 21 farmers filed details along with confirmation letters which completely matched with the details furnished by the assessee. The remaining 28 farmers did not appear. However, merely because some farmers did not turn up, no adverse inference could be drawn since the assessee had discharged the primary onus of furnishing the requisite details to Ld. AO and it was onus of Ld. AO to controvert the same. However, there is nothing on record which would show that the details furnished by the assessee were not correct. There is not material on record to controvert the details furnished by the assessee. 8. We also find that these advances have been given by the assessee in earlier years and recovery of the same has been made by the assessee starting from FYs 2014-15 onwards. The case for AY 2015-16 was reopened by Ld. AO subsequent to the completion of the assessment for AYs 2016-17 and 2017-18 to verify the cash deposits. During the course of assessment proceedings, the assessee submitted requisite cash book and other books of account which were accepted by Ld. AO and finally, the returned in....