2012 (9) TMI 49 - AT - Income Tax

Undisclosed agriculture income - Held that - In the absence of any material to support the claim of the assessee towards agricultural income, the assessing officer has taken the same as undisclosed income - when the assessee claims that the agricultural income was earned it is for the assessee to support that the income was earned during the year under consideration. Moreover, what was said to be acquired additionally was 8 acres of rubber estate and 10.28 acres of coconut, areca nut, pepper, plantain, etc. Out of this, the assessee could not have earned so much agricultural income as disclosed in the block return. But the fact remains is that the assessee has invested the money in the partnership firm, therefore, the same has to be necessarily added as undisclosed income - against assessee. Addition on undisclosed income - Held that - It is not in dispute that Pazheri Communication was a proprietory concern but the income from this proprietory concern was not disclosed to the department earlier which was admittedly unearthed during the course of search operation. During the course of search operation the profit and loss account and balance sheet for the period 01-04-2001 to 31-03-2002 was found relying on which AO computed the undisclosed income. It is not the case of the assessee that the balance-sheet and profit & loss account found during the course of search operation does not relate to the assessee - addition to income is thus confirmed - against assessee. Addition towards capital gain - Held that - CIT(A) conclusion that the assessee has admitted Rs.32,03,000 in addition to his share of capital gain already disclosed in the return of income and thus the addition made by the AO to the extent of Rs.35,78,857 is not correct is without application of mind. In fact, there was no discussion in the order. The CIT(A) has to discuss the matter on merit and record his reasoning either for accepting or not accepting the claim of the assessee - the issue with regard to capital gain is remitted back to the file of the CIT(A). Deficiency found in the cash flow statement filed by Smt. P Khadeeja has to be treated as undisclosed income of the assessee - Held that - The cash flow statement filed by Smt. P Khadeeja cannot be the basis for making addition in the hands of the present assessee. As rightly pointed out by the CIT(A) in the absence of any material found during the course of search operation, the deficiency found in the cash flow statement of Smt. P Khadeeja represents her own income - in favour of assessee.

Summary

Issues:
1. Estimation of agricultural income
2. Income from Pazheri Communications
3. Addition of capital gain
4. Deletion of deficiency in agricultural income

Estimation of Agricultural Income:
The Tribunal considered the appeal regarding the estimation of agricultural income for the block period. The assessee had voluntarily disclosed agricultural income in the block return, but the assessing officer treated it as undisclosed income due to lack of supporting material. The Tribunal upheld the assessing officer's decision, stating that the disclosed income was not supported by evidence, especially considering the significant amount disclosed compared to the acquired agricultural land. The Tribunal found no error in confirming the Commissioner of Income-tax(A)'s order.

Income from Pazheri Communications:
The dispute involved the income from a proprietary concern, Pazheri Communications. The assessing officer estimated the income based on a profit & loss account found during a search operation. The Tribunal noted that the income from this concern was not disclosed earlier and was unearthed during the search operation. As the assessing officer's computation was based on valid documents, the Tribunal upheld the Commissioner of Income-tax(A)'s decision to confirm the addition of income from Pazheri Communications.

Addition of Capital Gain:
The case concerned the addition of undisclosed capital gain arising from a property sale. Discrepancies were found between the sale consideration disclosed in the return and an agreement discovered during the search operation. The assessing officer computed the capital gain based on the agreement, leading to a higher amount than initially declared. The Commissioner of Income-tax(A) restricted the capital gain, but the Tribunal found fault with the lack of discussion and reasoning in the Commissioner's order. Consequently, the Tribunal set aside the order and remitted the issue back for reconsideration.

Deletion of Deficiency in Agricultural Income:
The final issue revolved around the deletion of a deficiency in agricultural income of an individual related to the assessee. The assessing officer treated the deficiency as undisclosed income, but the Commissioner of Income-tax(A) deleted the addition. The Tribunal agreed with the Commissioner, stating that the deficiency in the cash flow statement of the individual should not be added to the present assessee's income. As there was no material found during the search operation to support such addition, the Tribunal confirmed the deletion made by the Commissioner.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal based on the detailed analysis and considerations of each issue presented in the judgment.