2017 (12) TMI 586 - HC - Income Tax

Disallowance of agricultural income - Held that - We find that in the facts of the present case the assessment has been made for the Assessment Year 1998-99 purely on the basis guess work and is not supported by any evidence and material on record. The evidence relied upon by the learned counsel for the revenue in the shape of reply as filed by the assessee cannot constitute an admission on the part of the assessee having indulged in private practice for the Assessment Year 1998-99 inasmuch as he specifically stated that in that year the assessee had only indulged in charitable work. Thus, we find that the assessment made against the assessee for the Assessment Year 1998-99 is not based on any material or evidence but on pure guess work unsupported with evidence. Then it is noted, the assessing officer himself allowed agricultural income ₹ 36,000/-. That head of income having been found present in the present case, and there being absence of any proof of assessee having engaged in private practice, disallowance of agricultural income also could not have been made in absence of any cogent material or evidence in that regard.- Decided in favour of the assessee and against the revenue.

Summary

Issues involved:
1. Assessment of undisclosed income from private practice for the assessment year 1998-99.
2. Disallowance of agricultural income and investment in movable properties.

Analysis:
1. The appellant filed an appeal under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal for the assessment year 1998-99. The appellant disclosed income from salary and agricultural income. The Income Tax Inspector's report indicated that the appellant was engaged in private practice at a medical establishment. The Assessing Officer made additions to the undisclosed income from private practice and disallowed agricultural income, adding it to the undisclosed income. The Tribunal partly allowed the appeal, reducing the undisclosed income from private practice. The Tribunal found evidence supporting private practice, considering various factors like patient consultations and financial transactions. The Tribunal confirmed an addition to the income from private practice based on evidence and circumstances. The appellant argued that the evidence relied upon was from a later period and not relevant to the assessment year in question. The High Court found that the assessment was based on guesswork without proper evidence for the relevant assessment year. The Court held in favor of the appellant, deleting the addition to the income from private practice for the assessment year 1998-99.

2. The Assessing Officer disallowed agricultural income and made additions to the undisclosed income based on private practice. The High Court found that since there was no evidence of private practice for the relevant assessment year, disallowance of agricultural income was not justified. The Court noted that the assessing officer himself allowed agricultural income, and without proof of private practice, disallowance of agricultural income could not be justified. The Court answered the questions of law in favor of the assessee and against the revenue, deleting the addition made to the income for the assessment year 1998-99. The appeal was allowed in favor of the assessee.