2023 (4) TMI 1161 - AT - Income Tax

Characterization of income - addition made towards agricultural income treating the same as income from other sources - HELD THAT - Respectfully following the order of the Tribunal in assessee s own case for the preceding 3 A.Ys, 2022 (7) TMI 493 - ITAT HYDERABAD we are of the considered opinion that an amount of Rs.40,000/- may reasonably be estimated as agricultural income for the impugned A.Y. We accordingly modify the order of the CIT (A) and direct the Assessing Officer to give benefit as agricultural income and the balance amount is to be treated as income from other sources . Ground of appeal No.2 by the assessee is accordingly partly allowed. Correct head of income - Cash received as rental income - Income from house property or house property - addition by treating the same as income from other sources as against rental income shown by the assessee on the ground that the assessee could not prove the existence of the persons against whom he has shown the cash receipt as rental income as those persons were not in existence and were not traceable - HELD THAT - We do not find any force in the above argument of the learned Counsel for the assessee. It is an admitted fact that the assessee was giving loan against mortgage of the property and such interest income received towards loan extended against mortgage of properties cannot partake the character of rental income. We find the learned CIT (A) while upholding the addition has also given a finding that since the assessee has already offered the rental income under the head income from house property as per remand report, the addition should be limited to the disallowance u/s 24(b) of the Act only which in our opinion is just and proper and needs no interference. Accordingly, ground of appeal No.3 by the assessee is dismissed.

Summary

Issues Involved:
1. Treatment of agricultural income.
2. Treatment of rental income received in cash.

Summary:

Issue 1: Treatment of Agricultural Income
The assessee challenged the addition of Rs.9,28,856/- made by the Assessing Officer (AO) towards agricultural income, which was treated as income from other sources. The AO disbelieved the agricultural income due to lack of evidence for carrying out agricultural activities, despite the possession of agricultural land. The Tribunal, referencing its previous decisions in the assessee's own case, granted partial relief by estimating Rs.40,000/- as agricultural income for the assessment year (A.Y.) 2009-10 and treating the balance as income from other sources. The Tribunal modified the order of the CIT (A) accordingly.

Issue 2: Treatment of Rental Income Received in Cash
The assessee also contested the addition of Rs.34,14,900/- made by the AO, treating the cash received as rental income as income from other sources. The AO noted discrepancies and lack of evidence regarding the existence of tenants and treated the cash portion as income from other sources. The CIT (A) upheld this treatment, noting that the assessee failed to prove ownership of the properties for which rent was claimed. The Tribunal agreed with the CIT (A), concluding that the interest received on loans against mortgaged properties could not be considered rental income. The Tribunal dismissed the assessee's appeal on this ground, affirming the addition made by the AO.

Conclusion:
The appeal by the assessee was partly allowed with respect to the agricultural income, granting partial relief by estimating a reasonable amount as agricultural income. The appeal regarding the rental income received in cash was dismissed, upholding the treatment of such income as income from other sources. The final order was pronounced on 27th March 2023.