₹40.8 Lakh Property Investment from Agricultural Savings, No Unexplained Income: ITAT orders Fresh Adjudication, Imposes Rs. 5k cost on Farmer [Read Order]

The assessment was reopened on in the case of the assessee based on information received through AIR/CIB that the assessee Chandrakant Atmaram Acharya, along with co-owners, had purchased an immovable property for ₹40,80,000/-, of which the assessee's share was ₹10,20,000/- and the total investment made by the assessee was for a sum of ₹10,80,230/-.

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Since the assessee had not filed his return of income for AY 2011-12 and had failed to respond to multiple notices as well as a show-cause notice, the AO proceeded to complete the assessment ex parte.

The AO noted that since the assessee did not furnish any explanation or documentary evidence regarding the source of investment in the said property, he treated the investment as unexplained under Section 69 of the Act and added a sum of ₹10,80,230/- to the total income of the assessee, and also initiated penalty proceedings.

In the appeal, the CIT(A) noted that despite multiple opportunities and service of hearing notices through email, the assessee failed to file any submissions or appear for the hearings. The CIT(A) observed that there was complete non-compliance by the assessee, both during the assessment and appellate proceedings. Accordingly, the CIT(A) upheld the AO’s addition of ₹10,80,230/- as an unexplained investment and dismissed the appeal.

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The assessee submitted that the assessee was a small farmer by occupation and earned his livelihood solely from the sale of agricultural produce. The assessee submitted that they were illiterate and had no understanding of the complexities of tax compliance. The assessee pointed out that the notices issued by the Department were sent through digital means, of which the assessee was completely unaware of.

The assessee submitted that the investment in the property, which had been treated as unexplained by the Department, was made out of his life savings from agricultural income. Since agricultural produce is usually sold for cash, the funds used for the investment were also received and retained in cash.

The Tribunal observed that the assessee did not comply with the statutory notices issued by the AO and also failed to respond to the show-cause notice. Likewise, during the course of appellate proceedings before the CIT(A), the assessee remained non-compliant despite multiple opportunities.

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The Tribunal further observed that the assessee had explained that he was a small farmer with limited literacy and no understanding of tax procedures, and that the property investment was made from cash savings generated through agricultural income.

The two-member bench of Narendra P. Sinha(accountant member) and Siddhartha Nautiyal (judicial member) held that the file be restored to the AO for fresh consideration. Since there was a complete failure on the part of the assessee to respond during both the assessment and appellate proceedings, a cost of ₹5,000/- was imposed on the assessee.

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