2009 (11) TMI 923 - AT - Income Tax

Summary

Issues involved:
Assessment of credits under section 68 of the Income Tax Act and treatment of agricultural income under the head "income from other sources."

Assessment of credits under section 68:
The appeal was filed by the assessee, a resident individual, for the assessment year 2004-2005, challenging the addition of credits totaling Rs. 7,10,000 under section 68 of the Income Tax Act. The Assessing Officer (AO) raised concerns regarding the genuineness of the transactions and the capacity of the creditors. Despite confirmation letters and additional evidence provided by the assessee, the AO added the credits as the assessee failed to establish the three ingredients of section 68. The CIT(A) upheld the addition, emphasizing the need to prove the capacity of the creditors. In the appeal before the ITAT, additional evidence was submitted to support the genuineness of the credits. The ITAT decided to restore two credits for further examination by the AO, while deleting the addition of Rs. 3,00,000 based on the evidence presented for another credit. The addition of Rs. 1,00,000 was also deleted after considering the creditor's financial capacity.

Treatment of agricultural income:
The second ground of appeal concerned the addition of Rs. 2,05,430 as income from other sources, disputed by the assessee regarding the estimation of agricultural expenses. The AO treated the entire agricultural income as undisclosed income due to lack of proof for expenses. The CIT(A) estimated expenses at 40% of gross receipts, resulting in a lower net agricultural income. In the ITAT appeal, it was argued that details provided were sufficient, and defects in bills were not significant. The ITAT corrected the calculation error made by the CIT(A) and directed a revised net agricultural income of Rs. 2,90,100, with the difference treated as income from other sources.

In conclusion, the ITAT partly allowed the appeal, restoring some credits for further examination and adjusting the treatment of agricultural income based on corrected calculations.