Addition u/s 69A & u/s 274 with 270A & 271AAC(1).

This query is : Resolved

BRIGHT COMPUTERS (Querist)
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13 November 2019 QUERY:

Assessee (Senior Citizen) had filed his ITR showing rental income below taxable limits for AY 2K172K18. In addition to this, he had agricultural income which was not shown in ITR even for rate purpose, as his rental income was below taxable limits. No books of accounts were maintained by the assessee. He was maintaining bank account also and had obtained agricultural crop loan from bank. During demonetization period, he had deposited roughly Rs.12 lakhs cash into bank to square off agricultural loan. He had deposited similar amount in cash in earlier & later years also. Sales of agricultural produce was through cash and cheque.

Notice from the A.O. was received u/s 143(2) and 142(1) and replied through e-proceeding portal. Assessment Order u/s 143(3) was issued by the A.O. and he made the addition of the entire amount of Rs. 12 lakhs u/s 69A read with section 115 BBE. He had also assumed the agricultural income of Rs. 6 lakhs on the basis of commission agent statement given to him and allowed Rs. 1.50 lakhs for expenses. He has wrongly assumed a profit of 75% on sale of agricultural products. It was clearly mentioned in the reply that most of the agricultural products are sold in cash directly to buyers, and not through commission agent, and the deposit of Rs. 12 lakhs was through that sales, and out of past savings kept with the assessee, as the Indian Agricultural Economy is mostly on cash basis.

The A.O. has computed a demand of Rs. 10 lakhs on cash deposit of Rs. 12 lakhs. He has also issued a notice u/s 274 read with section 270A for under reporting of income, and also another notice u/s 274 read with section 271AAC(1), and also covered under section 115BBE.

We are planning to file an appeal to CIT (A). He has also given an opportunity to show cause, why a penalty u/s 270A and 271AAC(1), be not imposed on the assessee.

It is hereby earnestly requested to suggest some case laws for non addition of Rs. 12 lakhs u/s 69A, and Rs. 4.50 lakhs under Agricultural Income. Also suggest a suitable reply for Show Cause Notices.

Thanks in advance.

CA Y K SATIJA / DELHI / 9818722221 / 9873777335.

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CA Sumiit B Nagpal

CA Sumiit B Nagpal (Expert)
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16 November 2019 Sir though it is a professional assignment I would like to ask to kindly not seek such help from such formus.
As regard to you case , you have to file an appeal with CIT(A) and after filing write a letter to AO to keep the penalty proceedings in abeyance till the disposal of appeal by the first appellate authority.
Also , attach form 35 with the letter. The said letter and attachment can be uploaded online on efiling portal of the assessee.
During the course of appellate submission your major ground would be that bank pass book or bank statement can’t be treated as books of account firstly and the addition so made u/s 69A is wrong rws 115BBE.
There are too many case laws on the subject which can be searched online easily.

CA Sumiit B Nagpal

CA Sumiit B Nagpal (Expert)
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16 November 2019 Also kindly check Whether a show cause notice was issued prior to addition or not, it not this ground can be raised during the appellate proceedings as well. Also, whether the statement recorded by the AO at the back of the assessee should not be used without confrontation and you can litigate on this issue as well. You will have to substantiate the agricultural income and cash deposit To a large extent by referring to cash deposits in earlier years also and by submitting proof of land holding and some evidence about direct cash sales please bear in mind that department is taking a strict view in demonetisation cases and mere arguments would not suffice.

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