2018 (4) TMI 85 - AT - Income Tax

Nature of income - agricultural income - deposits in the bank account - Held that - It is absolutely clear that income derived are in the nature of agricultural income. CIT(A) have analysed the fact that Department had some point or the other either prior to the block assessment period or even after in the succeeding assessment year have taken a view that assessee is having agricultural income and, therefore, findings of CIT(A) is correct that all deposits in the bank account are from agricultural income. This moment on the remand report of the Assessing Officer wherein he has denied the fact that assessee has produced all the documents as proof of agricultural income whereas in the contrary, the records itself speak that all the evidences regarding agricultural income were produce before the Department. It is also pertinent to note that the same Assessing Officer, who has refused the claim of the assessee as agricultural income in the remand report, has accepted assessee s claim of agricultural income in the later year. - Decided in favour of assessee Addition on account of unexplained investment - Held that - As it was explained before the Assessing Officer as well as the ld. CIT(A) that all deposits in FDRs were out of agricultural income. Once agricultural income has been accepted, question of making addition on account of unexplained investment does not arise. CIT(A) has dealt with the deposits in FDRs and interest accrued separately. Out of total addition made, the amount to the extent of ₹ 1,29,52,434/- has been found to be unexplained to the satisfaction of the CIT(A) and that too under different heads. We do not find any infirmity with the findings given by the ld. CIT(A), therefore, ground No.4 of the appeal of the Revenue is dismissed. Addition made appearing in the name of Shri Raghuraj Pratap Singh - Held that - The addition referred to in this ground of appeal has been made on protective basis in the hands of the assessee. Since the same addition has been made on substantive basis in the hands of Raghuraj Pratap Singh and the order in his case has become final, question of making separate addition again in the hands of the assessee does not arise. We, therefore, dismiss these grounds of appeal. Income from The Bazari and rent of HUF - Held that - From the order of the ld. CIT(A) it is absolutely clear that this addition of ₹ 7,03,846/- belongs to HUF and it has to be assessed in the hands of HUF and therefore the same should not have been assessed in individual assessment. We, therefore, direct deletion of this amount. Unexplained deposit - as vehemently argued by the ld. A.R. of the assessee that they were excessive in nature - Held that - We are not convinced with the contentions of the ld. A.R. of the assessee and therefore, we dismiss these grounds.

Issues Involved:

1. Deletion of additions made by the Assessing Officer (AO) regarding investments in Fixed Deposit Receipts (FDRs).
2. Verification of the source of agricultural income claimed by the assessee.
3. Validity of the search warrant issued.
4. Protective additions made in the name of another individual.
5. General grounds of appeal.

Detailed Analysis:

1. Deletion of Additions Regarding Investments in FDRs:

The Revenue's appeal contested the deletion of additions amounting to ?24,70,000, ?45,00,000, ?99,22,950, and ?1,63,16,892, which were claimed as investments in FDRs sourced from agricultural income. The AO argued that the assessee failed to provide detailed proof of land holdings. However, the CIT(A) provided detailed findings, supported by bank statements and assessment orders, confirming the source of these investments as agricultural income and other legitimate sources like Teh Bazari and house rent.

For the ?24,70,000, the CIT(A) identified specific bank withdrawals that matched the investments in FDRs, concluding that the source was adequately explained. Similarly, for the ?45,00,000, the CIT(A) traced the withdrawals from the assessee's bank account and confirmed the source as agricultural income and other legitimate earnings. The ?99,22,950 addition was initially deleted due to the absence of a valid search warrant, but the CIT(A) later confirmed the source as agricultural income after verifying the warrant's validity. For the ?1,63,16,892, the CIT(A) again confirmed the source as agricultural income, supported by detailed bank records and remand reports.

2. Verification of Agricultural Income:

The CIT(A) and the ITAT reviewed extensive documentation provided by the assessee, including assessment orders, writ petitions, and Khasra Khatauni records, which substantiated the assessee's claims of agricultural income. The CIT(A) noted that the Department had previously accepted the assessee's agricultural income in various assessment years, reinforcing the legitimacy of the income sources claimed.

3. Validity of Search Warrant:

The CIT(A) initially deleted the addition of ?99,22,950 due to the absence of a valid search warrant for the Bank of Baroda account. However, upon retrospective amendment to Section 132 of the IT Act, the warrant issued by the Additional Director was deemed valid, and the search was upheld. Consequently, the CIT(A) confirmed the addition related to the interest income from the Bank of Baroda account, while the principal amount was attributed to agricultural income.

4. Protective Additions in Another Individual's Name:

The Revenue's appeal included protective additions made in the name of another individual. The CIT(A) and ITAT dismissed these grounds, noting that the substantive addition had already been finalized in the individual's case, and thus, no separate addition was warranted in the assessee's case.

5. General Grounds of Appeal:

The ITAT found no merit in the general grounds raised by the Revenue, affirming the CIT(A)'s comprehensive analysis and findings. The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to reduce the total undisclosed income from ?14,97,51,700 to ?1,29,52,434, based on the verified sources of agricultural income and other legitimate earnings.

Assessee's Cross-Appeal:

The assessee's appeal contested the addition of ?7,03,846 related to income from Teh Bazari and rent, arguing it belonged to the HUF and should not be assessed in the individual's capacity. The ITAT agreed, directing the deletion of this amount. However, the ITAT upheld the additions of ?30,11,892, ?3,00,000, and ?50,000 as unexplained deposits, dismissing the assessee's contentions.

Conclusion:

The ITAT dismissed the Revenue's appeal and partly allowed the assessee's appeal, affirming the CIT(A)'s findings and the legitimacy of the agricultural income and other sources claimed by the assessee. The final order was pronounced on 23/03/2018.

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