2016 (10) TMI 1306 - AT - Income Tax

Agricultural income - CIT(A) restricting 50% of the agricultural income computed by AO - Since the assessee has not carried out any agricultural operation the AO treated the above income as income from unexplained sources and brought to tax - main dispute of the Department is with regard the income from the lands at Kolli Hills and Ulagankathan village - HELD THAT - Location of the land holdings are not situated in metro city so that the lease-holder can execute agreement or of any kind and the assessee can produce the same before the authorities below. When the agricultural land held by the assessee was not disputed it cannot be held that there was no income from the above said agricultural land holdings. Since the ld. CIT(A) restricted the disallowance on estimated basis in the absence of material evidence for the income earned by the assessee we are of the considered opinion that the disallowance sustained by the ld. CIT(A) is on higher side and it has to be reasonably reduce the disallowance sustained by the ld. CIT(A). Accordingly we allow 75% of the income as income derived from the said land holdings and the Assessing Officer is directed to disallow the balance 25%. Thus the ground raised by the assessee is partly allowed. Addition of cash deposit with UTI Bank - HELD THAT - If it is the withdrawal from bank account as claimed by the assessee then the assessee should have made entry in the cash book. In the absence of suitable explanation offered by the assessee we are inclined to accept the mere submission of assessee that it was a technical mistake. As contended by the ld. DR on perusal of the assessment order we find that the AO has made similar addition when the assessee has given same reply with regard to the amount deposited in the Axis Bank account and not shown in the cash book. In view of the above facts and circumstances we sustain the addition made by the Assessing Officer and the ground raised by the assessee is dismissed. Addition of differential amount of cash deposit - HELD THAT - On appeal the assessee has failed to give any convincing explanation with regard to the source for .66, 520/-. Therefore the ld. CIT(A) confirmed the addition made by the Assessing Officer. Even before us assessee has not given any details with regard to the source for .66, 520/- except reiterating the submissions as was made before the Assessing Officer. Hence we find no reason to interfere with the order of the ld. CIT(A) on this issue and thus the ground raised by the assessee is dismissed. Disallowance of the claim of interest payments - whether payment of interest on loans taken for payment of tax cannot be considered as expenditure incurred for the purpose of business? - HELD THAT - CIT(A) has observed that as the payment of interest on loans taken for payment of tax cannot be considered as expenditure incurred for the purpose of business he sustained the addition made by the AO. On further appeal before the Tribunal the ld. Counsel for the assessee relied on the grounds of appeal and has not filed any explanation with regard to the claim of the assessee - no reason to interfere with the order of the ld. CIT(A) on this issue. Thus the ground raised by the assessee is dismissed.

Summary

Issues Involved:
1. Restriction of agricultural income claim
2. Addition of cash deposit of ?10 lakhs
3. Addition of differential cash deposit of ?66,520
4. Disallowance of interest payments aggregating to ?10,42,947

Analysis:

Issue 1: Restriction of Agricultural Income Claim
The appellant contested the restriction of agricultural income to 50% of the claimed amount by the Assessing Officer. The CIT(A) partially allowed the appeal, considering the appellant's submissions. The Tribunal analyzed the case, noting that the appellant held agricultural lands and had claimed income from lease rent receipts. Referring to previous Tribunal decisions, the Tribunal found the CIT(A)'s restriction excessive. Consequently, the Tribunal allowed 75% of the claimed income as derived from the land holdings, directing a reduced disallowance by the Assessing Officer.

Issue 2: Addition of Cash Deposit of ?10 lakhs
The Assessing Officer added a cash deposit of ?10 lakhs as unaccounted income due to the absence of corresponding entries in the cash book. The CIT(A) upheld the addition, as the appellant failed to provide a satisfactory explanation. The Tribunal considered the appellant's argument of a technical error but observed a similar instance with another bank deposit. Consequently, the Tribunal sustained the addition, dismissing the appellant's ground.

Issue 3: Addition of Differential Cash Deposit of ?66,520
The Assessing Officer questioned a cash deposit of ?3,00,000, with the appellant explaining a portion as lease income. The differential amount of ?66,520 remained unexplained and was added to the appellant's income. The CIT(A) affirmed this addition due to the lack of convincing explanations. The Tribunal found no new details provided by the appellant, upholding the CIT(A)'s decision and dismissing the appellant's ground.

Issue 4: Disallowance of Interest Payments
The Assessing Officer disallowed interest payments of ?10,42,947, considering loans taken for tax payments as non-business expenditure. The CIT(A) upheld the disallowance, as interest on such loans was not considered business-related expenditure. The Tribunal noted the absence of additional explanations from the appellant and upheld the CIT(A)'s decision. Consequently, the Tribunal dismissed the appellant's ground on this issue.

In conclusion, the Tribunal partly allowed the appellant's appeal, making adjustments to the disallowances and additions made by the Assessing Officer and CIT(A) in the assessment for the relevant year.