2010 (10) TMI 1154 - HC - Income Tax

Income from agricultural land - unexplained investment u/s 069 - delete the addition - In present case AO did not accept the case that portion of the income representing agricultural income by way of lease and therefore he added the said income. Secondly the assessee ha constructed a residential house and she had shown a total investment of 1, 45, 32, 000/- including the land value. No accounts had been maintained. A reference was made to the Valuation Cell of the Income Tax Department to estimate the cost of construction of the said building. It was valued at 1, 64, 20, 839/- excluding the land value. The differential amount in a sum of 23, 20, 599/- was treated as an unexplained investment and bought to tax u/s 069. agricultural income was shown in the returns there was not specific mention about the income from agriculture by way of two of two sources. HELD THAT - In those circumstances this being purely a question of fact when there is a concurrent finding by three fact finding authorities based on legal evidence not case for interference is made out. In that view of the matter. He substantial question of law is answered against the assessee and in favour of the revenue. HELD THAT - the facts of this case when the assessee though has not maintained the books of accounts has declared the investment in residential house at 1, 45, 32, 000/- as on 31.3.2004 in place like Sainagar the Assessing authorities were not justified in relying on the District Valuation Officer s report which was based on CPWD rates at 1, 64, 20, 839/- and in adding 23, 20, 599/- as unexplained investment u/s 69 therefore the said portion of the order is set aside and we delete the said addition. Accordingly the question of law is answered in favor of the assessee and against the revenue. substantial question of law - HELD THAT - In this case it is not in dispute that the asessee withdrew sum of 5, 00, 000/- on 18.8.2003 and 2, 00, 000/- on 20.8.2003 from her savings account. She is an agriculturist and she had agricultural Income. Once she demonstrated that she was in possession of 7, 00, 000/- cash plus agricultural income on her hands if after 40 days a cash deposit is made to the extent of about 5, 20, 000/- towards loan account it cannot be said that the source of the said deposit is not properly explained. Merely because there is a delay of 40 days from the date of withdrawal of the money from the bank account to the date of deposit in the loan account. Once money is shown to be in the account and withdrawn what the asessee did with the money till it was actually deposited is not the concern of the Department. As long as the source is explained and established and when the money is withdrawn from a savings bank account and paid to discharge loan by deposit in to a loan account it is not possible to hold that the source is not explained. In that interregnum period if the very same money is utilized from other purpose and thereafter it is appropriated towards of a loan that cannot be held against the assessee. In that view of the matter the finding recorded by the Tribunal is erroneous and requires to be set aside. Therefore the said substantial question of law is also held against the revenue and in favor of the assessee.

Summary

Issues involved:
1. Challenge to Tribunal's order upholding additions made by Assessing Officer.
2. Assessment of agricultural income, unexplained investments, and loan account deposits.
3. Judicial review of Appellate Authority's decisions.
4. Interpretation of CPWD rates for property valuation.
5. Explanation of sources for deposited funds in loan accounts.

Issue 1 - Challenge to Tribunal's order:
The appellant, an individual assessed under the Income Tax Act, challenged the Tribunal's order affirming additions made by the Assessing Officer and Appellate Authority. The disputes involved agricultural income, unexplained investments, and deposits in loan accounts. The Tribunal upheld some additions but modified others based on the evidence presented.

Issue 2 - Assessment of agricultural income and investments:
Regarding agricultural income, the appellant claimed income from leased land after cultivation, but failed to provide substantial evidence of the lease agreement or detailed income breakdown. The authorities rightly rejected this claim due to lack of evidence. In terms of unexplained investments in property, the valuation based on CPWD rates was deemed unjustified, as the property was in a rural area where CPWD rates were not applicable. Thus, the addition as unexplained investment was set aside.

Issue 3 - Judicial review of Appellate Authority's decisions:
The Appellate Authority's decisions on agricultural income and loan account deposits were reviewed. The Tribunal modified the additions made by the Authority, emphasizing the need for proper evidence to support the appellant's claims. The Tribunal's decisions were based on a thorough examination of the evidence and legal provisions.

Issue 4 - Interpretation of CPWD rates for property valuation:
The appellant argued against the use of CPWD rates for property valuation in a rural area, citing a previous judgment that favored KPWD rates for such assessments. The Court agreed with this argument, highlighting that CPWD rates were not appropriate for the location in question. Therefore, the valuation based on CPWD rates was deemed incorrect.

Issue 5 - Explanation of sources for deposited funds in loan accounts:
The authorities questioned the source of funds deposited in loan accounts, considering the time gap between withdrawal and deposit. However, the appellant's explanations, supported by relevant case law, were found to be satisfactory. The Court ruled that as long as the source of funds was explained and established, delays in depositing the money did not invalidate the explanation. The Tribunal's findings on this matter were deemed erroneous and were set aside in favor of the appellant.

In conclusion, the appeal was partly allowed based on the above explanations and legal interpretations. The Tribunal's decisions were affirmed in all other respects.