2015 (6) TMI 127 - AT - Income Tax

Agricultural income - income received from undisclosed sources - Held that - It is alleged that the assessee could not produce before the AO any details and evidences to substantiate that the expenses such as seeds, khad and water etc. were incurred for cultivation. The assessee also did not furnish the details of the crops grown and the details of sales. She simply stated that an agreement was entered with Shri Jai Prakash wherein it was mentioned that he will grow vegetables and will incur all the expenses. In the present case, no doubt the assessee furnished a certificate dated 20.08.2010 from the tehsilpatwari wherein it is stated that on the agricultural land vegetables were grown for the last few years. However, neither the details of crops were given nor it is mentioned that who is the owner of the land and in which year which type of vegetables/crops were grown by whom. The assessee also did not furnish copy of the Jamabandi. However, the ld. CIT(A) accepted the claim of the assessee. It is well settled that the powers of the ld. CIT(A) and the AO are co-terminus but in the present case, it appears that the ld. CIT(A) failed to discharge the duty to perform those function which ought to have been but not done by the AO, and simply on this basis that the AO did not examine the cultivator or the tehsilpatwari, he directed the AO to treat the impugned income as agricultural income. Thus set aside this issue back to the file of the AO to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the assesse - Decided in favour of revenue for statistical purposes. Share trading - Short term capital gain v/s income from other sources - Held that - In the present case, it appears that the ld. CIT(A) had not given cogent reason while accepting the claim of the assessee. He simply stated that the AO did not ask the assessee to bring the broker and that the assessee had furnished documents relating to transaction of shares. On the contrary, the AO categorically stated that the assessee was asked to furnish copy of D-mat account, details of share holding, details of Short Term Capital Gains with confirmed ledger account from brokers in respect of share trading. The AO clearly mentioned at page no. 6 of the assessment order that the assessee failed to furnish contract note, delivery/transfer of shares in D-mat account or any supporting evidence which could prove that shares were transferred in D-mat account of the assessee and that simply filing of ledger account/bills of broker did not prove that delivery of shares was made. On the said observations of the AO, the ld. CIT(A) is silent and had not discussed how the assessee overcome those shortcoming which were specifically pointed out by the AO. Thus remand this issue back to the file of the AO to be adjudicated afresh - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition made by the AO on account of agricultural income.
2. Treatment of Short Term Capital Gains as income from other sources.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by the AO on Account of Agricultural Income:

The first issue pertains to the deletion of the addition made by the Assessing Officer (AO) on account of agricultural income. A search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted, leading to a notice under section 153A. The assessee declared agricultural income of Rs. 1,04,600. During assessment, the AO requested detailed information regarding the agricultural activities but found the provided agreement and documents insufficient to substantiate the claim. The AO noted the absence of details on expenses, crops grown, and sales evidence, leading to the treatment of the agricultural income as income from undisclosed sources under section 68 of the Act.

The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the AO did not verify the agreement with the cultivator or the certificate from the tehsilpatwari. The CIT(A) noted the absence of incriminating materials from the search suggesting the agricultural income was not genuine and thus held the AO's rejection of the claim untenable.

On appeal, the Tribunal found that the CIT(A) failed to perform the necessary verification that the AO had omitted. The Tribunal set aside the issue back to the AO for fresh adjudication, emphasizing the need for a thorough investigation and providing the assessee with an opportunity to support her claim.

2. Treatment of Short Term Capital Gains as Income from Other Sources:

The second issue concerns the treatment of Short Term Capital Gains (STCG) amounting to Rs. 13,49,105 as income from other sources. The AO questioned the genuineness of the share transactions, noting delayed payments and the absence of contract notes, delivery evidence in the D-mat account, and broker verification. The AO concluded that the transactions were not genuine and treated the STCG as income from undisclosed sources.

The CIT(A) accepted the assessee's claim, stating that the AO did not prove the allegation of accommodation entries and did not conduct necessary inquiries from the brokers. The CIT(A) held that the transactions resulted in STCG and should not be treated as income from other sources.

On appeal, the Tribunal noted that the CIT(A) did not address the specific shortcomings pointed out by the AO. The Tribunal highlighted that the assessment order was passed hastily without providing due and reasonable opportunity to the assessee. Consequently, the Tribunal remanded the issue back to the AO for fresh adjudication, ensuring due process and opportunity for the assessee to present evidence.

Conclusion:

In conclusion, the Tribunal remanded both issues back to the AO for fresh adjudication, emphasizing the need for thorough verification and due process. The Tribunal's decision applies mutatis mutandis to all related cases under consideration, involving different assessees but similar facts and issues. The appeals of the Department were allowed for statistical purposes.