2006 (4) TMI 209 - AT - Income Tax

Income From Undisclosed Sources - addition on account of investment done in the construction of shops - sale proceeds of agricultural land - disallowance on agricultural income - HELD THAT - We are of the considered opinion that even though the claim of use of sale proceeds was taken at a later point of time yet this has a great evidentiary value. The factum of sale stand established and there is no evidence that this amount was used somewhere else therefore this explanation has to be considered in the correct perspective without simply ignoring it to be an afterthought. Hence we accept this ground of appeal taken by the assessee and delete the impugned addition by holding that the assessee has properly explained the investment in the shops out of disclosed income. Investment in the construction of property at Dakota Ka Bas - Since the learned CIT(A) has accepted the sale of the property for an amount of Rs. 3, 10, 000 and the assessee had himself declared this expenditure in this property and there being no other evidence to the contrary in the possession of the Department in view of our above findings where we have accepted an expenditure of Rs. 2, 31, 000 out of Rs. 3, 10, 000 towards the shops we have to accept this claim of the assessee as well. Therefore we order to delete the amount of Rs. 80, 000 from the hands of the assessee. Disallowance on agricultural income - We are of the considered opinion that the AO was not justified in making additions by rejecting a part of the agricultural income simply on the basis of non-availability of sale vouchers because an agriculturist is not required to maintain any books of account. Copies of Girdawari are on record which prove that crops were grown on the land belonging to the assessee. The statement of the assessee that he provided irrigation facility to his neighbours on cash payment also in a way supports the case of the assessee as from this fact it is proved that the assessee had enough irrigation facility to grow crops. The assessee has also filed a certificate of Assistant Agricultural Officer wherein the average production of particular crop in the area in which agricultural land of the assessee are situated have been given. These facts also support the version of the assessee. The sum total of the above discussion is that the assessee has been able to establish his case and the Department has not been able to rebut the same. Therefore this ad hoc addition cannot survive and hence we order to delete the addition of Rs. 1, 00, 000. In the result the appeal of the assessee is partly allowed. Addition u/s. 69B - Understated investment - The AO has not gathered any evidence to establish that the assessee had actually understated the investment and the burden is on the Revenue to prove that real investment as shown by the assessee is understated and he cannot rely merely on the fair market value. No addition u/s 69B of the Act for this reason only can be thus made. Moreover this is a settled law that on the basis of stamp duty valuation no addition can be made as this has not been held to be good parameter to determine the real cost of a particular property which was the subject-matter of a sale deed for registration purposes. Therefore we do not find infirmity in the findings of the learned CIT(A) and hence the same stands confirmed. Thus this ground of appeal cannot be allowed. In the result the appeal of the assessee is allowed and that of the Department is dismissed.

Issues:
1. Addition of investment in the construction of shops at village Khinvsar
2. Addition of investment in the construction of property at Dakota Ka Bas, Village Khinvsar
3. Disallowance of part of the claim for agricultural income
4. Deletion of addition of understated purchase consideration for a house at Jodhpur
5. Deletion of addition of agricultural income from undisclosed sources

Analysis:

Issue 1: Addition of investment in the construction of shops at village Khinvsar
The appeal related to the confirmation of an addition of Rs. 2,39,609 made on account of investment in the construction of shops. The assessee claimed that the investment was made from the sale proceeds of agricultural land. The Tribunal accepted the assessee's explanation, stating that the sale proceeds were utilized for the construction of the shops. The Tribunal noted that the assessee had made a surrender and retracted it, but the claim regarding the utilization of sale proceeds was supported by evidence. The Tribunal emphasized that in the absence of contrary proof, the version favoring the assessee must be accepted. Therefore, the impugned addition was deleted.

Issue 2: Addition of investment in the construction of property at Dakota Ka Bas, Village Khinvsar
The Tribunal considered the addition of Rs. 80,000 made in respect of investment in the construction of property at Dakota Ka Bas. The assessee declared that this amount was spent from the sale proceeds of agricultural land. Since there was no evidence to contradict the assessee's claim and considering the acceptance of another expenditure related to the shops, the Tribunal accepted this claim as well and ordered the deletion of the amount from the assessee's hands.

Issue 3: Disallowance of part of the claim for agricultural income
The issue involved the disallowance of Rs. 1,00,000 out of the claim of Rs. 3,30,000 for agricultural income. The Tribunal found that the assessee had provided detailed evidence and supporting documents for the agricultural income claimed. The Tribunal observed that the Revenue had accepted the agricultural income without concrete evidence to reduce it. Considering the documentary evidence provided by the assessee, including revenue records and certificates, the Tribunal held that the ad hoc addition could not be sustained and ordered the deletion of the disallowed amount.

Issue 4: Deletion of addition of understated purchase consideration for a house at Jodhpur
The Tribunal addressed the deletion of an addition made on account of understatement of purchase consideration for a house in Jodhpur. The AO had relied on stamp duty valuation, but the Tribunal noted that no evidence was presented to establish that the investment was understated. The Tribunal emphasized that stamp duty valuation alone cannot determine the real cost of a property. Therefore, the addition was deleted in line with the findings of the CIT(A).

Issue 5: Deletion of addition of agricultural income from undisclosed sources
The Tribunal considered the deletion of Rs. 50,000 out of an addition made on account of treating agricultural income from undisclosed sources. Since the Tribunal had already decided on a similar issue while addressing the appeal of the assessee, it dismissed this ground of appeal as well.

In conclusion, the Tribunal partly allowed the appeal of the assessee, deleting the impugned additions and confirming the findings in favor of the assessee. The appeal of the Department was dismissed in this case.

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