2015 (9) TMI 1174 - AT - Income Tax

Disallowance of expenses claimed with respect to Sarvoday Hospital - Held that - The rent figures of the agreement entered by the Assessee with Smt. Ramilaben Patel, his wife, did not match with the rent receipts as shown in the Profit and Loss account of Sarvoday Hospitals. Before us, ld. A.R. has not placed any material on record to controvert the findings of ld. CIT(A) nor has placed any material on record to demonstrate as to whether the business was carried in subsequent years. In view of these facts, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Assessee is dismissed - Decided against assessee. Treating the rental income as income from house property - Held that - While changing the head of income from business to income from house property , Ld. CIT(A) has noted that Assessee was asked to justify as to how the activity of letting out of premises constituted business of the Assessee to which Assessee could not satisfactorily furnish any explanation. Before us, it is Assessee s submission that the business was let out on account of temporary lull however no evidence has been placed on record to substantiate the claim of temporariness of the stopping of business. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Assessee is dismissed - Decided against assessee. Treating agriculture income as income from other sources - Held that - A.O while making addition has noted that Assessee did not furnish any evidence of carrying out agriculture operations. Before us, ld. A.R. has placed on record the copy of certificate of land holding of the Assessee and family members upport of carrying of agriculture operations. We find that the aforesaid certificates are in vernacular language and Assessee has not filed its English Translation. We further find that the aforesaid documents were not made available by the Assessee before A.O. and ld. CIT(A) and the same have been placed before us for the first time. In view of the aforesaid facts, we are of the view that the issue of agricultural income vis- -vis the land holding of the Assessee needs to be re-examined at the end of A.O. We therefore remit the issue to the file of A.O to decide the issue afresh - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated under Section 147.
2. Disallowance of expenses claimed for Sarvoday Hospital.
3. Treatment of rental income as income from house property instead of business income.
4. Treatment of agricultural income as income from other sources.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated Under Section 147:
The first ground regarding the validity of reassessment proceedings under Section 147 was not pressed by the Assessee and was therefore dismissed as not pressed.

2. Disallowance of Expenses Claimed for Sarvoday Hospital:
The Assessee claimed expenses of Rs. 64,365/- related to Sarvoday Hospital against interest income, rent income, and dividend income totaling Rs. 2,09,305/-. The Assessing Officer (A.O.) disallowed these expenses on the grounds that no business activity was carried out in Sarvoday Hospital. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the disallowance, noting that the Assessee could not provide evidence of carrying on medical profession in future years or the validity of the rent agreement with his wife. The Tribunal agreed with the CIT(A), stating that the Assessee failed to provide material evidence to demonstrate the continuation of business activities in subsequent years. Thus, the disallowance of expenses was confirmed.

3. Treatment of Rental Income as Income from House Property Instead of Business Income:
The A.O. observed that the Assessee had claimed a loss after deducting expenses, including depreciation, from rental income. Since no export business was conducted by Patel Export Company, the A.O. treated the rental income as income from house property and disallowed the expenses. The CIT(A) upheld this decision, stating that the Assessee could not justify how the letting out of premises constituted a business activity. The Tribunal agreed with the CIT(A) and found no evidence to support the Assessee's claim that the business was temporarily halted. Therefore, the rental income was correctly treated as income from house property, and the disallowance of expenses was upheld.

4. Treatment of Agricultural Income as Income from Other Sources:
The A.O. treated a significant portion of the declared agricultural income from the sale of Kismis as income from undisclosed sources, accepting only Rs. 2,50,000/- as agricultural income based on past assessments. The CIT(A) upheld this view, noting that the Assessee failed to substantiate the genuineness of the agricultural income. The Tribunal remitted the issue back to the A.O. for re-examination, directing the A.O. to consider the Assessee's landholding evidence and provide adequate opportunity for the Assessee to furnish required details. The Tribunal emphasized that failure to provide necessary details would result in the A.O. deciding the issue based on available records. Consequently, this ground was allowed for statistical purposes.

Appeal for A.Y. 2004-05:
The Assessee's appeal for A.Y. 2004-05 raised similar grounds, particularly regarding the treatment of agricultural income. Both parties agreed that the arguments and reasoning applied to the previous year's appeal would also apply here. Therefore, the Tribunal allowed the ground related to agricultural income for statistical purposes and dismissed the other grounds as not pressed.

Conclusion:
The appeals were partly allowed for statistical purposes, with specific issues remitted for further examination by the A.O. The Tribunal upheld the disallowance of expenses and the treatment of rental income as income from house property. The treatment of agricultural income was remitted back for re-examination based on additional evidence.