Smt Sonal D Sadarangani v. The Dy CIT Cir-1
[Citation -2006-LL-0809-4]

Citation 2006-LL-0809-4
Appellant Name Smt Sonal D Sadarangani
Respondent Name The Dy CIT Cir-1
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 09/08/2006
Judgment View Judgment
Keyword Tags opportunity of being heard • disallowance of interest • agricultural income • written agreement • adequate evidence • interest payment • payment of loan • interest income • ex-parte order • interest paid • cash balance • cash deposit • cash flow
Bot Summary: The assessee submitted cash flow statement before the learned CIT(A) which is reproduced in Para 3.1 of the impugned order and submitted that cash was also withdrawn from the bank account and agricultural income is earned on account of sale of sugarcane and sale of cotton and after deducting the expenditure the assessee earned agricultural income. The assessee submitted several details before the learned CIT(A) to explain the deposits in the bank accounts and the learned CIT(A) on verification of the same accepted substantial contentions of the assessee. Details of interest payments have been furnished to the AO. Further, the assessee earned income by way of various investments made by the assessee which have been shown in the return of income totaling to Rs.2,37,572/- which includes dividend and interest etc. The learned Counsel for the assessee reiterated the submissions made before the learned CIT(A) and referred to PB10 and 11 to show that the assessee earned dividend which was explained before the learned CIT(A) on making investment in shares out of the funds and further submitted that in preceding assessment year similar interest has not been disallowed by the AO. ITA No.3534/Ahd/2002 8 Sonal D. Sadarangani Vs DCIT, Central Cir-, Baroda Therefore, no addition could be made and relied upon the decision of the Hon ble Karnataka High Court in the case of CIT Vs Shridev Enterprises, 192 ITR 165. Further, the assessee alternatively contended that since the assessee made investments in shares which are appearing in the balance sheet and if such investments/assets would have been utilized for payment of loans taken from bank, no interest income would have been earned. All these submissions of the assessee should have been examined in the light of the decisions relied upon by the learned Counsel for the assessee referred to above. Considering the totality of the facts and circumstances in the light of the decisions cited by the learned Counsel for the assessee we are of the view the matter required reconsideration at the level of the AO because the contentions of the assessee raised for the first time before the learned CIT(A) have not been appreciated and taken into consideration while deciding the above issue.


IN INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN ALANKAMONY, AM) ITA No.3534/Ahd/2002 A. Y.: 1996-97 Sonal D. Sadarangani, Vs D. C. I. T., Cen Cir-(1), 23/A, Kunj Society, Aayakar Bhavan, Alkapuri, Baroda Race Course Circle PA/GIR No. AC (INV)CIR-S1-26S Baroda (Appellant) (Respondent) Appellant by Shri M. J. Shah, AR Respondent by Shri B. L. Yadav, Sr. DR Date of hearing: 09-02-2012 Date of pronouncement: 10-02-2012 ORDER PER BHAVNESH SAINI: This appeal by assessee is directed against order of learned CIT(A)-III, Baroda dated 16th August, 2002, for assessment year 1996-97. 2. Earlier this appeal was dismissed in default in liminie vide order dated 09-08-2006. said order was recalled by allowing Misc. Application No.182/Ahd/2010 dated 06-01-2012. This appeal was, therefore, re-fixed for hearing on merit. ITA No.3534/Ahd/2002 2 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda 3. We have heard learned representatives of both parties and perused findings of authorities below. 4. On ground No.1, assessee challenged addition of Rs.1,52,145./- out of addition of Rs.5,95,000/- on account of various deposits made in bank accounts. AO made addition of Rs.5,95,000/- on account of various unexplained deposits in bank accounts. This grievance also includes grievance relating to AO s treatment of agricultural income of Rs.2,24,145/- as bogus claim. AO framed assessment u/s 144 of IT Act. AO finalized assessment on basis of material available on record. assessee furnished cash summary for this year, according to which, assessee has shown deposit of cash in bank account of Rs.3,30,000/- (actually Rs.4,05,000/-) against agricultural receipts of Rs.2,24,145/-. bank statements of Central Bank of India and Canara Bank were furnished in which AO noticed that cash of Rs.2,90,000/- on two dates was deposited with Central Bank of India and Rs.3,05,000/- was deposited in Canara Bank in cash, CC and transfer on six dates. details are noted in Para 3 of impugned order of learned CIT(A). Thus, total deposits were Rs.5,95,000/-. AO asked assessee to clarify cash deposits and to produce necessary evidence regarding agricultural income. assessee submitted explanation regarding deposits through various entries which is reproduced at page 4 of impugned order. With regard to agricultural income, it was submitted that two accounts were agricultural income i.e. sugarcane and cotton were produced to explain sale of sugarcane and cotton ITA No.3534/Ahd/2002 3 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda and after deducting expenditure, assessee earned agricultural income. AO however, did not accept explanation of assessee because assessee has not furnished any bill of sale of sugarcane. AO considering material on record did not accept contention of assessee and made addition. assessee submitted cash flow statement before learned CIT(A) which is reproduced in Para 3.1 of impugned order and submitted that cash was also withdrawn from bank account and agricultural income is earned on account of sale of sugarcane and sale of cotton and after deducting expenditure assessee earned agricultural income. Bills of sale of cotton were produced but not of sugarcane. It was also pointed out that AO accepted agricultural income in preceding assessment year 1995-96 and while doing so AO estimated expenses @60% of receipts. Therefore, addition should be deleted. learned CIT(A) considering explanation of assessee and material on record restricted addition to Rs.1,52,145/-. His findings in Para 3.2 of appellate order are reproduced as under: 3.2 Facts of case and submissions of appellant s counsel are considered. It is seen that Assessing Officer has considered credit in two bank accounts which are different in nature. There are certain cash deposit and some credit by transfer. cash deposit is on four dates amounting to Rs.4,05,000/-. sources of these cash deposits has been explained through cash flow statement given above. In said statement, there is opening balance of Rs.1,42,210/-. This amount is supported by balance sheet of appellant for year 31.3.95 which has been filed along with return of that year and as such this has to be accepted. receipts in cash flow statement is on two counts. One withdrawal from ITA No.3534/Ahd/2002 4 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda bank account of Central Bank of India in name of appellant and agricultural income. It is seen that withdrawals are in various installments and almost every month. amounts are also not very high, maximum being Rs.15,000, otherwise Rs.4000 to Rs.6000. As against that, withdrawal for household expenses from cash flow statement has been shown constantly at Rs.2,500 per month. It is not understood when sum of Rs.1,42,210/- was available in cash with appellant in beginning of year, why there would be withdrawals in cash every month from bank account in Central Bank of India. I, therefore, hold that withdrawal from Central Bank of India in small amount are for personal expenses of appellant and cannot be taken note of while considering availability of cash for deposits in bank account. I, therefore, ignore receipt in cash flow statement by way of withdrawals in cash from Central Bank of India Account. So far as, receipt by way of agricultural income of Rs.2,24,145/- in cash flow statement is concerned, I find that appellant has not satisfactorily explained income by way of agricultural activities and expenses claimed by way of bills & vouchers in this regard. However, considering fact that Assessing Officer has treated income of Rs.1,13,483/- as agricultural income in A. Y. 95-96, appellant has agricultural land and bills regarding sale of cotton has been shown, entire agricultural income shown by appellant cannot be ignored. Considering past period, I, estimate agricultural income for this year at Rs.1,15,000/-. This income together with opening cash balance totals upto Rs.2,57,210/- and considering closing balance of cash of Rs.4,355/-, Rs.2,52,855/- is considered to be available for cash deposits in bank account. In view of this, balance of Rs.1,52,145/- remains unexplained. In same Para learned CIT(A) also considered sources of other deposits and found that sources of deposits in bank accounts have been explained and accordingly part of addition was deleted. Ultimately, out of total addition of Rs.5,95,000/- ITA No.3534/Ahd/2002 5 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda learned CIT(A) reduced addition substantially and confirmed addition of Rs.1,52,145/-. 5. learned Counsel for assessee reiterated submissions made before learned CIT(A) and submitted that addition is on excessive side and further benefit may be given by considering agricultural income. On other hand, learned DR relied upon order of learned CIT(A). 6. Considering rival submissions and findings of authorities below, we do not find any merit in this ground of appeal of assessee. assessee submitted several details before learned CIT(A) to explain deposits in bank accounts and learned CIT(A) on verification of same accepted substantial contentions of assessee. However, assessee was not able to furnish complete details of earning of agricultural income. Therefore, learned CIT(A) was justified in estimating agricultural income for year under consideration. learned CIT(A) also found that evidences of earning of agricultural income have not been filed to satisfaction of authorities below. In preceding assessment year AO estimated agricultural income in sum of Rs.1,13,483/-. Therefore, learned CIT(A) rightly estimated agricultural income in assessment year under appeal at Rs.1,15,000/-. No further evidence or material has been produced before us to prove that addition is on excessive side. In absence of adequate evidence on record, we do not find it appropriate to ITA No.3534/Ahd/2002 6 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda interfere with order of learned CIT(A). We confirm his findings and dismiss this ground of appeal of assessee. 7. On ground No.2, assessee challenged disallowance of interest of Rs.2,96,515/. AO noted that assessee has shown income from other sources of Rs.59,005/- after claiming interest on loans of Rs.51,216/- paid to various persons and interest of Rs.2,45,359/ paid to bank. Thus, total interest payment was of Rs.2,96,575/-. This amount was not allowed in absence of books of accounts and evidence and lack of evidence on record to prove that interest payment was made for business purposes. It was submitted before learned CIT(A) that assessee had paid interest of Rs.2,45,359/- to several banks and also paid interest of Rs.51,216/- to several parties. Details of same have been noted in Para 4.1 of impugned order. It was also contended that assessee had taken loan in earlier years from various branches of Canara Bank and other banks and from various other parties. Details of interest payments have been furnished to AO. Further, assessee earned income by way of various investments made by assessee which have been shown in return of income totaling to Rs.2,37,572/- which includes dividend and interest etc. It was, therefore, submitted that assessee had certain investments as appearing in balance sheet and if such investments/assets have been utilized for payment of loan taken from bank, there could have been no income which assessee has earned. It was further clarified that amounts of loan taken from bank were deposited with M/s. Risona Fin Agro Ltd. under agreement that said concern would invest amounts in various companies and ITA No.3534/Ahd/2002 7 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda dividend, other income earned on such investments would be shared between assessee and said concern. It was added that however, no income was received from said concern. It was argued that interest bearing loan taken by assessee had been invested in profit earning investments and, therefore, amount is allowable. learned CIT(A) however, confirmed addition and dismissed this ground of appeal of assessee. His findings in impugned order at Para 4.2 are reproduced as under: 4.2 I do not agree with contention of appellant s counsel. It is seen that appellant has taken loans from various banks which had been deposited with M/s. Risona Fin Agro Ltd. and plea has been taken that this was done to earn income in manner discussed above. But there is no written agreement in this regard and it is further gathered that M/s. Risona Fin Agro Ltd. is group concern and said concern has invested amount received from appellant and various other family members in shares etc. of group concerns only. appellant has not established that loan was deposited with said concern to earn any profit. Further, no correlation has been established between loans taken from various persons and investment made on which income has been earned as mentioned above. Hence, I hold that claim of interest cannot be allowed to be deducted from income from other sources and accordingly, action of Assessing Officer in this regard is confirmed. 8. learned Counsel for assessee reiterated submissions made before learned CIT(A) and referred to PB10 and 11 to show that assessee earned dividend which was explained before learned CIT(A) on making investment in shares out of funds and further submitted that in preceding assessment year similar interest has not been disallowed by AO. ITA No.3534/Ahd/2002 8 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda Therefore, no addition could be made and relied upon decision of Hon ble Karnataka High Court in case of CIT Vs Shridev Enterprises, 192 ITR 165. He has also relied upon decision of Hon ble Supreme Court in case of CIT Vs Rajendra Prasad Moody, 115 ITR 519, in which it was held that interest paid on investments in shares deductible even if no dividend received. He has submitted that same principle was followed by ITAT Mumbai Bench in case of ATE Enterprises Ltd., 286 ITR (AT) (Mumbai) 101. He has also referred to PB-10 and 11 referred to above in support of his contention. On other hand, learned DR relied upon orders of authorities below. 9. On consideration of rival submissions, we are of view that matter requires reconsideration at level of AO. AO passed ex-parte order u/s 144 of IT Act on basis of material available on record. It was further noted that since books of accounts and other evidences were not produced, therefore, interest was disallowed. However, assessee explained before learned CIT(A) that interest was paid to banks and others in respect of loans taken in earlier year and no disallowance was made in earlier year. Therefore, such matter should have been investigated by authorities below. Further, assessee has explained that assessee has earned interest on making investments in shares in sum of Rs.2,37,572/- and details have been noted in appellate order. Such aspects have also not been investigated by authorities below. assessee further explained that earning of interest has been shown in return of income which ITA No.3534/Ahd/2002 9 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda we find support from facts noted in assessment order. Further, assessee alternatively contended that since assessee made investments in shares which are appearing in balance sheet and if such investments/assets would have been utilized for payment of loans taken from bank, no interest income would have been earned. All these submissions of assessee should have been examined in light of decisions relied upon by learned Counsel for assessee referred to above. Considering totality of facts and circumstances in light of decisions cited by learned Counsel for assessee we are of view matter required reconsideration at level of AO because contentions of assessee raised for first time before learned CIT(A) have not been appreciated and taken into consideration while deciding above issue. We accordingly, set aside orders of authorities below and restore this issue to file of AO for reconsideration in accordance with law. AO shall give reasonable sufficient opportunity of being heard to assessee. In result, ground No.2 of appeal of assessee is allowed for statistical purposes. 10. No other point is argued or pressed. ITA No.3534/Ahd/2002 10 Sonal D. Sadarangani Vs DCIT, Central Cir- (1), Baroda 11. In result, appeal of assessee is partly allowed for statistical purposes. Order pronounced in open Court Sd/- Sd/- (A. MOHAN ALANKAMONY) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Lakshmikant Deka/- Deka/- Copy of order forwarded to: 1. Appellant 2. Respondent 3. CIT concerned 4. CIT(A) concerned 5. DR, ITAT, Ahmedabad 6. Guard File BY ORDER Dy. Registrar, ITAT, Ahmedabad Smt Sonal D Sadarangani v. Dy CIT Cir-1
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