2023 (9) TMI 104 - AT - Income Tax

Addition u/s 68 - assessee has received unsecured loan - as per AO lenders are not capable of providing such loan to assessee - HELD THAT - AO has not called any of the lenders for recording their statement nor bring any adverse material against the lenders. As during assessment proceedings, assessee has field complete details of lenders including identity of lenders and their creditworthiness and genuineness of such transaction. The loan was received through banking channel. CIT(A) has given a contradictory finding, where he held that addition u/s 68 is unsustainable and AO has not doubted the evidence relating to the loan and not rejected the books of assessee. CIT(A) again held that assessee failed to establish creditworthiness of creditors. Identity was not disputed by the AO. Considering the fact that assessee has discharged his primary onus in furnishing complete details to prove the genuineness of such transactions and AO has not examined the lenders nor brought any adverse material. The entire transactions took place through banking channel, therefore no justification for making such addition. In the result, ground No.1 of appeal raised by assessee is allowed. Characterization of income - addition by treating agricultural income as income from other sources - HELD THAT - AO has not brought any adverse material on record to substantiate his contention that he is not exclusively undertaking the agricultural activities in the agricultural land under joint ownership. Neither the assessee has fully discharged his onus by filing confirmation from other co-owners that the land jointly owned by them is fully occupied and cultivated for the purpose of agriculture activities by assessee only, nor the assessing officer has brought any adverse material to fully discard the contention of the assessee. Therefore, keeping in view the agriculture income of earlier year accepted by the department, in my view an estimated/ lump sum allowance of Rs. 3.00 lakh as agriculture income would be sufficient to meet the end of justice. Thereby, remaining disallowance of agriculture income of Rs. 146,100/- is upheld.Assessee gets part relief.

Summary

Issues Involved:
1. Addition of Rs. 14,00,000/- as unexplained cash credits under Section 68 of the Income Tax Act.
2. Addition of Rs. 3,56,880/- by treating agricultural income as income from other sources.

Summary:

Issue 1: Addition of Rs. 14,00,000/- as unexplained cash credits under Section 68 of the Income Tax Act

The assessee challenged the addition of Rs. 14,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, which was confirmed by the National Faceless Appeal Centre (NFAC). The AO noted discrepancies in the unsecured loans from three lenders, questioning their creditworthiness and the genuineness of the transactions. The assessee provided evidence including bank statements, Income Tax Returns (ITRs), and confirmations from the lenders, arguing that the loans were through proper banking channels and that the lenders had sufficient cash balances. The NFAC upheld the addition, citing doubts about the lenders' creditworthiness and the genuineness of the transactions.

The Tribunal found that the assessee had discharged his primary onus by providing complete details to prove the identity, creditworthiness, and genuineness of the transactions. The AO had not examined the lenders nor brought any adverse material against them. The Tribunal noted that the transactions took place through banking channels and that the NFAC had given contradictory findings. Consequently, the Tribunal allowed the appeal on this ground, deleting the addition of Rs. 14,00,000/-.

Issue 2: Addition of Rs. 3,56,880/- by treating agricultural income as income from other sources

The AO added Rs. 3,56,880/- to the assessee's income by treating it as income from other sources, based on the substantial increase in agricultural income compared to the previous year and the joint ownership of the agricultural land. The AO allowed only 1/5th of the declared agricultural income, corresponding to the assessee's share in the joint ownership. The NFAC upheld this addition, stating that the assessee failed to produce sufficient documentary evidence to support the higher agricultural income.

The Tribunal found that the AO should have examined the other co-owners of the agricultural land to determine if they had claimed similar agricultural income or if the assessee exclusively undertook the agricultural activities. The Tribunal concluded that neither the assessee nor the AO had fully substantiated their claims. Considering the agricultural income accepted in the previous year, the Tribunal estimated a lump sum allowance of Rs. 3,00,000/- as agricultural income, giving part relief to the assessee. The remaining disallowance of Rs. 1,46,100/- was upheld.

Conclusion:

In the result, the appeal of the assessee was partly allowed, with the Tribunal deleting the addition of Rs. 14,00,000/- under Section 68 and granting partial relief on the addition of Rs. 3,56,880/- by estimating Rs. 3,00,000/- as agricultural income.

Order pronounced in open court on 28/08/2023.