2016 (6) TMI 591 - AT - Income Tax

Reopening of assessment - non filing of return - Unexplained investment - Source of income - agriculture income or not - Held that - The assessee has not been filing the return. In other words, he had never filed return. The AO got information that the assessee has made investment in LIC. The investment was of ₹ 15 lakhs. Once the assessee was not filing the return, then, there is no mechanism with the AO to verify the source of such investment. It can only be verified by inquiring from the assessee, and therefore, he has to issue notice under section 148 of the Income Tax Act. We do not see any error in the reopening of the assessment. - Decided against assessee. Unexplained investment - whether the agriculture land of roughly 16 acres could generate income, out of which, ₹ 15 lakhs can be spared for investment ? - Held that - The AO took guidance of income from the bills of sale of sugar cane. It is to be appreciated that bills came to the possession of the assessee, because, sugar cane was sold to cooperative sugar mill, where mandatory bills were raised. Otherwise, in rural background, hardly any bills were issued for sale of crop or sale of plants. Possibly, there cannot be any evidence in the possession of the assessee, because, he was not operating in a very large scale in an organized manner. He has produced bank statement for the last three years. In such situation, onus was upon the Revenue to demonstrate that assessee has some other source of income, out of which, he has generated ₹ 15 lakhs. The stand of the assessee is that he has no other source except agriculture income. He has saved this income from agriculture operation. Now, it is for the Revenue, who has alleged that the assessee has some other source of income. But, the ld.AO failed to bring any evidence on record to demonstrate generation of such income, apart from agriculture activity. If we go by circumstantial evidence, then, 16 acres of agriculture land along with running of a nursery, could generate ₹ 15 lakhs over a period of time. The AO ought to have not doubted the stand of the assessee.- Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment under section 148 of the Income Tax Act
2. Addition of ?15 lakhs on the ground of unexplained sources for investment in insurance policies

Issue 1: Reopening of assessment under section 148 of the Income Tax Act

The case involved the reassessment of the assessee's income tax return for the Asstt. Year 2012-13 due to the investment of ?15 lakhs in insurance policies without filing a return of income. The Assessing Officer (AO) issued a notice under section 148 based on information received from the Annual Information Wing. The assessee contested the reopening, claiming the AO lacked material to show income had escaped assessment. The tribunal upheld the reopening, stating that since the assessee had not filed a return, the source of the investment could only be verified through inquiry. Therefore, the tribunal rejected the appeal against the reopening of the assessment.

Issue 2: Addition of ?15 lakhs on the ground of unexplained sources for investment in insurance policies

The second ground of appeal challenged the addition of ?15 lakhs to the assessee's income due to the investment in insurance policies from unexplained sources. The assessee claimed the investment was made from agricultural income and gifts received from family members. The tribunal noted that the assessee, a farmer running a nursery, had substantial agricultural land and was caring for elderly family members. The tribunal found that the revenue authorities failed to consider the assessee's unique family situation and agricultural activities. It was observed that the income generated from agriculture was used for investments, and the lack of detailed evidence was due to the nature of rural operations. The tribunal concluded that the revenue failed to prove any other source of income for the assessee and allowed the appeal, deleting the addition of ?15 lakhs.

In conclusion, the tribunal upheld the reopening of the assessment under section 148 but allowed the appeal against the addition of ?15 lakhs to the assessee's income, emphasizing the unique circumstances of the assessee's agricultural operations and family situation.