2003 (9) TMI 703 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of disallowance of agricultural income.
2. Treatment of 50% of agricultural income as income from undisclosed sources.
3. Charging of interest under sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Agricultural Income:

The Revenue appealed against the CIT(A)'s order deleting the disallowance of Rs. 3,02,475 (Rs. 2,68,224 for AY 1998-99) made out of the claim of agricultural income. The assessee declared agricultural income of Rs. 6,04,950 for AY 1997-98 and Rs. 5,36,448 for AY 1998-99, supported by lease deeds and confirmations from landowners. The Assessing Officer (AO) doubted the quantum of receipt from the sale of agricultural produce, suspecting the sale bills were fictitious. The AO's investigation revealed that the assessee did not sell any produce through the Mandi, and there was no licensee firm named Binni Enterprises. The assessee explained that sales were made through intermediaries, but the AO was not convinced and disallowed 50% of the claimed agricultural income, adding it to the total income.

The CIT(A) concluded that the evidence provided by the assessee for carrying out agricultural operations was not proven false or fabricated and that the AO's conclusion was based on suspicion. The CIT(A) found no evidence on record to show that the intermediary's deposition was false and noted that the AO relied on the Income-tax Inspector's report obtained without giving the assessee an opportunity for cross-examination, thus having no evidentiary value. Consequently, the CIT(A) directed the AO to delete the additions and accept the agricultural incomes as returned by the assessee.

2. Treatment of 50% of Agricultural Income as Income from Undisclosed Sources:

The AO disallowed 50% of the agricultural income, treating it as income from undisclosed sources, based on the discrepancy between the agricultural income declared by the lessors before leasing the land and the income declared by the assessee. The AO noted that the lessors earned significantly less income from the same lands, and the assessee could not produce reliable accounts relating to agricultural income. The CIT(A) disagreed, stating that the yield of agricultural produce depends on various factors, and the AO did not provide any evidence to support the disallowance. The CIT(A) emphasized that the AO's action was based on suspicion without concrete evidence.

The Tribunal upheld the CIT(A)'s decision, noting that the AO did not dispute the fact that the assessee had taken on lease about 100 acres of land and produced 2,000 bags of paddy. The intermediary's deposition and the Patwari's certificate supported the assessee's claim. The Tribunal highlighted that the AO did not provide any material evidence to disbelieve 50% of the agricultural income and relied on judicial precedents to assert that assessments should not be based on pure guesswork or suspicion.

3. Charging of Interest under Sections 234A, 234B, and 234C:

The assessee's counsel argued that there was no order to charge interest under sections 234A, 234B, and 234C in the assessment orders and cited the Supreme Court's decision in CIT v. Ranchi Club Ltd. to support the non-charging of interest. The Tribunal, however, noted that the issue of interest was not challenged by the assessee through an appeal or cross-objection and could not be raised merely through argument at the hearing. The Tribunal distinguished the present case from the Jodhpur Bench decision in ITO v. Madan Lal, where the issue involved the levy of penalty. Consequently, the Tribunal rejected the assessee's request to raise the question of interest charging.

Conclusion:

The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s order to delete the additions and accept the agricultural incomes as returned by the assessee. The Tribunal also rejected the assessee's request to challenge the charging of interest under sections 234A, 234B, and 234C.