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2018 (1) TMI 1426 - AT - Income Tax


Issues Involved:
1. Rejection of agricultural income declared by the appellant.
2. Nature of crops cultivated.
3. Comparison of sale consideration of the property with the claimed agricultural income.
4. Use of departmental enquiry reports without providing an opportunity for rebuttal.
5. Levy of penalty under sections 234A and 234B of the Income Tax Act.

Detailed Analysis:

1. Rejection of Agricultural Income Declared by the Appellant:
The appellant claimed agricultural income of ?29,32,653 for the assessment year 2014-15, which was rejected by the Assessing Officer (AO) on the grounds that the land was purchased in the financial year 2014-15, whereas the income was shown for 2013-14. The appellant argued that he entered into an agreement of sale and took possession of the land in January 2013, starting cultivation immediately. However, the AO found discrepancies in the payment timeline and possession details, concluding that the claim of possession in FY 2013-14 was an afterthought.

2. Nature of Crops Cultivated:
The AO noted that the RTCs (Record of Rights, Tenancy, and Crops) indicated the cultivation of Ragi and Jowar, while the appellant claimed to have grown Banana and Ginger. Enquiries and spot inspections conducted by the Income-tax Inspector corroborated the RTCs, showing minimal cultivation and only Jowar being grown. This discrepancy led the AO to doubt the authenticity of the appellant's claim of high-value crop cultivation.

3. Comparison of Sale Consideration with Claimed Agricultural Income:
The AO questioned the plausibility of the land yielding agricultural receipts worth ?29 lakhs being sold for ?27 lakhs. The appellant argued that the seller, an ordinary agriculturist, sold the land without significant capital investment, whereas the appellant employed substantial capital to cultivate high-value crops. The AO, however, found no substantial evidence of improvements or high-tech agricultural practices that could justify such high income from the land.

4. Use of Departmental Enquiry Reports:
The AO relied on local enquiries and spot inspections conducted without the appellant's knowledge, which reported minimal cultivation. The appellant contended that these reports were not shared with him for rebuttal, making their use against him untenable in law. The Tribunal agreed, stating that any evidence collected behind the appellant's back must be put forth for comments, otherwise it is not legally tenable.

5. Levy of Penalty under Sections 234A and 234B:
The appellant contested the penalties levied under sections 234A and 234B of the Income Tax Act, amounting to ?4,35,888. The Tribunal did not specifically address the penalties in detail, focusing instead on the primary issue of agricultural income.

Tribunal's Conclusion:
The Tribunal found that the AO did not sufficiently prove that the sale agreement was fabricated or that the possession was not given in January 2013. However, it also found the declared agricultural income to be excessively high. The Tribunal accepted that the appellant took possession of the land and carried out agricultural activities but estimated a reasonable agricultural income at 50% of the declared amount, i.e., ?14,66,327, treating the balance as income from other sources.

Final Judgment:
The appeal was partly allowed, with the Tribunal directing that ?14,66,327 be treated as agricultural income and the remaining ?14,66,326 as income from other sources. The penalties under sections 234A and 234B were not explicitly addressed in the final judgment.

 

 

 

 

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