2015 (7) TMI 527 - AT - Income Tax

Treatment to agricultural income as income from undisclosed sources - Held that - The AO has not accepted the assessee s claim of having earned any agricultural income contrary to his claim of earning of ₹ 1,90,500/-; and following suit, CIT (A) also had the same view of AO; and accordingly the Ld CIT(A) upheld the action of AO and treated ₹ 1,90,500/- claimed by assessee as agricultural income as income from undisclosed sources. The assessee is aggrieved by the said impugned order of the CIT (A). Now, as it has been held by the Tribunal in the preceding years to the instant assessment year and subsequent years that the assessee has earned agricultural income in those years and assessee s agricultural income has to be calculated for his own land at ₹ 10,000/- per bigha and ₹ 5,000/- per bigha on land taken on lease by the assessee. The ld DR, could not bring to our notice any change in facts during the year under consideration, so in the light of the said finding and direction, following suit, we direct the AO that after verifying the exact holding of land by assessee and the land taken on lease/rent basis, rework out the agricultural income of assessee. Accordingly, AO is directed to treat agricultural income as having been earned by the assessee, to the extent computed in terms of above direction. - Decided in favour of assessee for statistical purposes. Addition on account of low household withdrawals - Held that - Direct the AO to accept ₹ 72,000/- as house hold expenses for the year under consideration and do the recomputation accordingly as decided by Tribunal in the preceding years. Addition on deficiency in the fund required for making investment - Held that - Tribunal s order in assessee s own case for assessment years 2000-01, 2002-03, 2004-05 and 2005-06 stating that a perusal of the records reveals that the said addition was in fact the amount reflected by the assessee as its opening balance for the year under consideration (Rs 564260 opening balance shown by assessee ₹ 82470 salary of assessee ₹ 560117), which the AO as well as the Ld CIT(A) has treated as made on account of capital introduced from undisclosed source. Since it is the opening balance of the year as claimed by the assessee before the AO and CIT(A), which both did not accept and addition confirmed, we find this issue of amount reflected as opening balance needs to be recomputed since the Tribunal has accepted that the assessee is earning agricultural income, therefore, the accumulated cash balance which it reflects in the opening balance needs to be recomputed. - Decided in favour of assessee for statistical purposes. Undisclosed Investment on property purchased - CIT(A) deleted addition accepting the source of ₹ 5,05,000/- from his own past saving in bank account and cash with him (assessee)- Held that - What the ld CIT(A) has done was that out of the addition of ₹ 18,05,000/- made by AO in respect to purchase of properties, only ₹ 7 lakhs has been found to be explained by the assessee to the satisfaction of the ld. CIT (A). The other claims of the assessee as to his source for purchasing the land costing ₹ 17.73 stamp duty i.e. ₹ 18,05,000/- lakhs have been arrived by the Ld CIT(A) by bringing the amount added by the AO, which in turn has been confirmed by the Ld CIT(A) for the preceding and this assessment year to justify the source for purchase of land.CIT(A) says that since this amount which is confirmed as income from undisclosed source is in the hands of the assessee, so he had the source to buy the properties. However, we take note that now because of the order passed by the Tribunal on 30.04.2010, the amounts confirmed by the Ld CIT(A) also has taken transformation, e.g. the amount confirmed by the Ld CIT(A) includes the amount claimed by the assessee as agriculture income and also the amount reflected as opening balance, so in that scenario, once the AO has recasted the cash flow statement where credit for agricultural income and opening balance are taken, if there is sufficient cash to justify ₹ 11,05,000/-, then the AO is directed to delete the addition and in case there is any deficiency or difference, then that amount be confirmed as income from undisclosed source. Therefore the deletion of addition of ₹ 11, 05,000/- is set-aside, and the issues limited to this addition is remanded back to the file of AO, to re-compute as directed above - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Addition of opening balance of Rs. 5,60,117/-.
2. Addition of agricultural income of Rs. 1,90,500/-.
3. Addition of Rs. 40,000/- on account of household drawings.
4. Deletion of addition of Rs. 1,50,000/- on account of unsecured loan from assessee's wife.
5. Deletion of addition of Rs. 5,05,000/- on account of bank withdrawal for investment in agricultural land.
6. Deletion of addition of Rs. 2,00,000/- on account of friendly loan from Attar Singh.
7. Deletion of addition of Rs. 2,50,000/- on account of friendly loan from Ganga Ram.

Detailed Analysis:

1. Addition of Opening Balance of Rs. 5,60,117/-:
The Tribunal noted that the assessee had shown an opening balance of Rs. 5,60,117/- in the balance sheet, which was treated by the AO and CIT(A) as income from undisclosed sources. The Tribunal directed the AO to recast the cash flow statement and give credit for agricultural income as per the Tribunal's earlier order. The issue was remanded back to the AO for recomputation.

2. Addition of Agricultural Income of Rs. 1,90,500/-:
The assessee claimed agricultural income of Rs. 1,90,500/-, which was treated by the AO and CIT(A) as income from other sources. The Tribunal, following its earlier order, directed the AO to verify the exact holding of land by the assessee and the land taken on lease/rent basis and to rework the agricultural income accordingly. The AO was instructed to treat the agricultural income as earned by the assessee to the extent computed as per the Tribunal's directions.

3. Addition of Rs. 40,000/- on Account of Household Drawings:
The AO made an addition of Rs. 1,27,981/- on account of low household withdrawals, which was confirmed by the CIT(A). The Tribunal, referring to its earlier order, directed the AO to accept Rs. 72,000/- as reasonable household expenses for the year under consideration and to recompute the income accordingly.

4. Deletion of Addition of Rs. 1,50,000/- on Account of Unsecured Loan from Assessee's Wife:
The AO had added Rs. 1,50,000/- as income from undisclosed sources, questioning the genuineness of the loan from the assessee's wife. The CIT(A) deleted this addition, accepting the assessee's explanation. The Tribunal upheld the CIT(A)'s decision, noting that the revenue did not challenge this deletion.

5. Deletion of Addition of Rs. 5,05,000/- on Account of Bank Withdrawal for Investment in Agricultural Land:
The AO disbelieved the assessee's explanation regarding the source of Rs. 5,05,000/- for purchasing agricultural land and treated it as income from undisclosed sources. The CIT(A), however, accepted the assessee's explanation and deleted the addition. The Tribunal noted that the CIT(A) had confirmed other additions made by the AO, which provided sufficient funds for the purchase. The Tribunal remanded the issue back to the AO to re-compute the cash flow statement, taking into account the Tribunal's directions regarding agricultural income and opening balance.

6. Deletion of Addition of Rs. 2,00,000/- on Account of Friendly Loan from Attar Singh:
The AO added Rs. 2,00,000/- as income from undisclosed sources, questioning the genuineness of the loan from Attar Singh. The CIT(A) deleted this addition, accepting the assessee's explanation. However, the Tribunal noted that the CIT(A) had confirmed other additions, providing sufficient funds for the purchase, and remanded the issue back to the AO for recomputation as per the Tribunal's directions.

7. Deletion of Addition of Rs. 2,50,000/- on Account of Friendly Loan from Ganga Ram:
The AO added Rs. 2,50,000/- as income from undisclosed sources, questioning the genuineness of the loan from Ganga Ram. The CIT(A) deleted this addition, accepting the assessee's explanation. The Tribunal noted that the CIT(A) had confirmed other additions, providing sufficient funds for the purchase, and remanded the issue back to the AO for recomputation as per the Tribunal's directions.

Conclusion:
The Tribunal partly allowed the assessee's appeal and remanded several issues back to the AO for recomputation, directing the AO to follow the Tribunal's earlier orders regarding agricultural income and opening balance. The revenue's appeal was allowed for statistical purposes, with directions for recomputation based on the Tribunal's findings.