2024 (12) TMI 33 - AT - Income Tax

Estimation of gross agricultural income - calculating the net agriculture income @ 30% of gross income and thus making the addition of the balance amount as unexplained income - HELD THAT - AO computed the income from paddy at Rs. 9,600/- per acre whereas income from wheat at Rs. 3,600/- per acre. After applying the rate of 30% the net income was estimated at 3,960/- in FY 1999-2000. In our opinion, the said calculation of AO was not based on any scientific formula or facts on record. Therefore, in our opinion, it would be reasonable and fair estimation of net agricultural income if both net profit rate of 45% is applied and 55% is treated as agricultural expenses. The total agricultural income in respect of 33.75 acre of land would be 5940 x 33.75 2,00,475/-. Considering the above facts and circumstances, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to make delete the addition to the extent of Rs. 66,825/- and addition to the tune of Rs. 15,525/- is sustained. The appeal is partly allowed. Addition in respect of income in the name of Smt. Veena Mishra/wife of assessee - protective addition made in the assessee s hand - as observed that she was a house wife and did not have any independent sources of income and investment and therefore in his opinion, the income of Smt. Veena Mishra was belonging to Dr. Jagannath Mishra so the income was assessed in the hands of assessee whereas the same was added protectively in the hands of Smt. Veena Mishra - HELD THAT - Smt. Veena Mishra is an independently assessed to income tax and wealth tax. Besides we also note that the assessee Smt. Veena Mishra is also co-owner of the land and land measuring 4.72 acres belonged to Smt. Veena Mishra out of total family holding of 60 acres. AO has made the addition in the hands of the assessee only on the basis of presumptions and assumptions without any substantive basis and also without bringing any evidences on record to the contrary to justify the inclusion of the assessee s income in the husband s hand. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) as the same is based upon in correction assumption and appreciation of facts and accordingly can not be sustained. We would like to mention that this income is to be assessed in the hands of Smt. Veena Mishra. Therefore the addition made, is accordingly, directed to be deleted by setting aside the order of CIT(A). The ground is allowed.

Issues Involved:

1. Estimation of agricultural income and unexplained income.
2. Treatment of income in the name of Smt. Veena Mishra.
3. Deduction under Section 80L of the Income Tax Act.
4. Protective and substantive addition of income.
5. General grounds not requiring specific adjudication.

Detailed Analysis:

1. Estimation of Agricultural Income and Unexplained Income:

The primary issue involved the assessment of agricultural income declared by the assessee, an HUF with its karta being a former Chief Minister of Bihar. The assessee reported a net agricultural income of Rs. 2,16,000/- but failed to provide evidence for sales of wheat or incurred agricultural expenses. The Assessing Officer (AO) estimated the agricultural income by allowing 70% for expenses and treating 30% as net income, resulting in an addition of Rs. 82,350/- as unexplained income. The appellate tribunal found the AO's calculation unscientific and revised it, applying a net profit rate of 45% and expenses at 55%, reducing the addition to Rs. 15,525/- and directing the deletion of Rs. 66,825/-.

2. Treatment of Income in the Name of Smt. Veena Mishra:

The AO assessed the income of Smt. Veena Mishra, a housewife, in the hands of her husband, Dr. Jagannath Mishra, as she was deemed not to have independent income sources. The appellate tribunal, however, found that Smt. Veena Mishra was independently assessed for income tax and wealth tax, owning 4.72 acres of land. The tribunal concluded that the addition was based on presumptions without substantive evidence and directed the deletion of the addition from Dr. Jagannath Mishra's income, maintaining it in the hands of Smt. Veena Mishra.

3. Deduction Under Section 80L of the Income Tax Act:

The issue of deduction under Section 80L, amounting to Rs. 12,000/-, was raised by the assessee. The appellate tribunal restored this issue to the AO for examination, directing that it be decided based on available facts and in accordance with the law.

4. Protective and Substantive Addition of Income:

The tribunal addressed the protective addition of Rs. 1,81,930/- in the assessee's hands, with a substantive addition made in the husband's hands. The tribunal found that the assessee had independently owned income and assets, substantiated by Wealth Tax returns and earlier assessments. The tribunal held that the income should be assessed in the assessee's hands, sustaining the protective addition of Rs. 1,13,040/-.

5. General Grounds Not Requiring Specific Adjudication:

Several grounds raised in the appeals were deemed general in nature and did not require specific adjudication. These were noted and dismissed without detailed examination.

Conclusion:

The appeals were partly allowed, with adjustments made to the assessment of agricultural income, treatment of income in the name of Smt. Veena Mishra, and the deduction under Section 80L. The tribunal emphasized the need for evidence-based assessments and corrected the AO's findings where they were based on assumptions. The decision reflects adherence to fair estimation practices and the proper allocation of income based on ownership and evidence.

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