2019 (2) TMI 166 - AT - Income Tax

Addition u/s 69 as unexplained investments - non-declaration of agricultural income in the return of income - Held that - It is an admitted fact that the assessee is owner of 8.50 acres of land. In all probabilities, the assessee would have earned agricultural income. The assessee has produced agreement dated 02.04.2009 to support the claim of receipt of agricultural income. By virtue of this agreement, the assessee was in receipt of ₹ 11,00,000. The agreement dated 02.04.2009 was not accepted by the CIT(A) since the assessee had not made out a case for exception to Rule 46A of the I.T.Rules, 1963. However, taking into the totality of circumstances of the case and that the assessee is the owner of the land to the extent of 8.50 acres, which is having rubber, coconut, pineapple plantation, cardamom plantation etc., the receipt of agricultural income cannot be totally ruled out. Therefore, on a fair estimation of agricultural income out of 8.50 acres of land, there could be receipt of agricultural income to the tune of ₹ 2 lakh. Direct the AO to grant further reduction of ₹ 2 lakh out of ₹ 5,64,012 and balance ₹ 3,64,012 alone should be brought to tax as an unexplained deposit in the hands of the assessee. It is ordered accordingly.

Summary

Issues involved:
- Disallowance of agricultural income claim and addition to income returned
- Ignoring new evidence produced by the assessee
- Non-declaration of agricultural income in the return
- Treatment of unexplained investments under section 69
- Rejection of evidence under Rule 46A of the I.T. Rules, 1963

Issue 1: Disallowance of agricultural income claim and addition to income returned:
The appeal concerned the disallowance of the claim of agricultural income by the assessee and the subsequent addition of ?11,28,024 to the income returned. The Assessing Officer made this addition under section 69 due to unexplained investments in the assessee's South Indian bank account. The CIT(A) upheld this decision, leading to the appeal to the Tribunal.

Issue 2: Ignoring new evidence produced by the assessee:
The assessee filed an agreement showing the sale of trees to explain the deposits in the bank account. However, the CIT(A) did not accept this agreement as the assessee failed to provide reasons under Rule 46A of the I.T. Rules, 1963. This rejection of new evidence played a crucial role in the decision-making process.

Issue 3: Non-declaration of agricultural income in the return:
The assessee, a housewife with agricultural land, did not declare agricultural income in her return due to having income below the taxable limit. The Tribunal noted that non-declaration does not imply non-earning of agricultural income. The assessee's ownership of substantial land indicated the likelihood of agricultural income, leading to a fair estimation and adjustment in the final tax liability.

Issue 4: Treatment of unexplained investments under section 69:
The Assessing Officer treated a significant portion of the deposits in the bank account as unexplained investments under section 69. However, the Tribunal directed a partial inclusion of these amounts in the assessee's tax liability based on ownership details and shared income with her husband.

Issue 5: Rejection of evidence under Rule 46A of the I.T. Rules, 1963:
The rejection of the agreement as additional evidence under Rule 46A of the I.T. Rules, 1963 was a critical aspect of the case. The Tribunal considered exceptions under the rule and assessed the validity of the evidence presented by the assessee, ultimately influencing the final decision on the tax liability.

This detailed analysis of the judgment provides insights into the various legal issues addressed and the Tribunal's reasoning behind the final decision.