Drafting of response to ito.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 April 2012 Dear expert,
One of my client received a letter from ITO, on the basis of AIR furnished by bank, and asking him to submit response in respect of cash deposit of Rs. 2868000/- in FY 2008-09.
Actually my client (an agriculturist) was migrating from native village to another village by selling his agriculture land, tractor, animals etc. His main bank transactions for FY 2008-09 are as follows –

Deposits –
1. Rs. 3578/- Opening balance of bank a/c on 1st april 2008.
2. Rs. 1490000/- deposited in cash which were received as advance amount for the sale agreement of his agriculture land which is 20 KM far from municipality area.
3. Rs. 39422/- payment received from sugar mill for sugarcane crops.
4. Rs. 400000/- deposited in cash of sale consideration of old tractor which were purchased two years ago in Rs. 530000/-
5. Rs. 48000/- deposited in cash of sale of his two milk animals.
6. Rs. 887000/- deposited in cash which were received on the execution of final sale deed of agriculture land, tube-well boring and trees on that land mentioned in clause 2 of deposits.

Withdrawals –
1. Rs. 1200000/- for purchase of new agriculture land.
2. Rs. 70000/- for purchase of 2nd agriculture land from another landlord (this property was under charge of bank loan and subsequently purchaser had to pay the said loan on behalf of vendor).
3. Rs. 475000/- for payment of loan which was taken by the vendor of clause 2 of withdrawals.
4. Rs. 60000/- for purchase of milk animals
5. Rs. 110000/- for purchase of bricks for house construction.
6. Rs. 35000/- for purchase of cement etc.
7. Rs. 150000/- for purchase of a old tractor.
8. Rs. 70000/- for personal use.
9. Rs. 697078/- Closing balance on 31st March 2009.

Hereby, I have following queries-

1. Total sale consideration in clause 2 and 6 of deposit is Rs. 2377000/-, however, on sale deed, sale consideration is shown at Rs. 1750000/- and stamp duty is paid on Rs. 2049000/- as to circle rates. Therefore in response, which amount, I should take as sale consideration to avoid any tax liability.
2. Whether the sale of tractor and animals shall attract capital gain or not.
3. My client had purchased the new lands in the name of his wife, whether it can cause any problem.
4. If I takes the Rs. 1750000/- as sale consideration, then what excuse can be taken for Rs. 627000/- to avoid any tax liability.
5. Whether the closing balance of bank a/c of Rs. 697078/- can be use in personal expenses or it has to invest only in land purchase.

Please advise me.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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29 April 2012 When your client has sold agricultural land he must have the documents and the same is also the case of the tractor and other assets. So, you reply and establish the justification of depositing the cash with nexus of sale and deposit. You should also prove that your client had sufficient cash in hand.

For the balance amount just you narrate that your client is an agriculturist and also procure the documents to prove that he had enough agricultural income and it is out of that income only.