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2018 (1) TMI 1426 - AT - Income TaxDisallowance of the claim of earning agricultural income - AO decided the issue against the assessee on the primary reason that possession of agricultural land was not at all handed over to assessee on entering into agreement of sale on 17.01.2013 - Held that - In the present case, the assessee produces the agreement to sell wherein there is a clause of handing over possession of landed property to the assessee and this was confirmed by the seller that he has handed over the landed property on entering into sale agreement. There is evidence produced by the assessee before the AO in the form of estate books of account like expense bills, indent copies.The lower authorities opted not to comment on these documents and went on to hold that possession of property was not at all handed over to assessee vide agreement of sale dated 17.01.2013. In opinion thereof, the evidence brought on record by the revenue authorities was not sufficient to establish their stand that the assessee has not taken possession of land and cultivated the same and sale agreement is only paper transaction or bogus. The entire evidence has to be appreciated in a wholesome manner and even where there is documentary evidence, the same can be overlooked if there are surrounding circumstances to show that the claim of the assessee is opposed to normal course of human thinking and conduct or human probabilities. Even applying this principle to the instant case, there was some difficulty in rejecting the assessee s plea as opposed to the normal course of human conduct. The surrounding circumstances of the case were also not strong enough to justify the rejection of assessee s plea as outrageous or fabricated one. Taking possession of land vide sale agreement and also carrying out of agricultural activities in the said land has to be accepted. However, the quantum of agricultural income declared in the impugned land is very much on the higher side which cannot be accepted to that extent. AO considered the entire amount of ₹ 29,32,653 declared by the assessee as non-agricultural income. This view of the AO is very unreasonable and vindictive in nature. As already stated, the declaration of ₹ 29,32,653 as agricultural income out of the area of land measuring 26 acres 9 guntas is on the very higher side which cannot be reasonable. Hence make a reasonable estimate of 50% of ₹ 29,32,653 i.e., ₹ 14,66,327 as agricultural income and the balance amount as income from other sources at ₹ 14,66,326. Thus, assessee gets relief of ₹ 1,46,66,327. It is accordingly directed. - Decided partly in favour of assessee.
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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