2024 (3) TMI 302 - AT - Income Tax

Income from undisclosed sources - addition of agricultural income - HELD THAT - Undoubtedly, the assessee has 1/7th share in agricultural land situated at village Rajdev Tehsil Dungargarh, District Bikaner, Rajasthan. The total land holding pertaining to the assessee is ₹33.24 acres. This land holding is undisputed. In the land records there are certain agricultural produce mentioned with respect to each of the year for past six years. The assessee has shown agricultural income in the range of ₹1.68 lacs to ₹1.98 lacs. With respect to the proof of sale of agricultural produce the assessee has also submitted the agricultural produce marketing committees receipts on sample basis. Undisputedly, assessee has not submitted complete details of the agricultural produce for all these years. On looking at the holding of the agricultural records of land holding, the agricultural produce mentioned there in and some of the bills of APMC produced before us clearly show that assessee is engaged in agricultural activities. Now the only issue remains is whether in absence of complete details of sale of agricultural produce the income shown by the assessee is acceptable or not. We find that on the basis of land holding, the assessee has shown annual agricultural income of ₹6000/- per acre. Thus we find that such income cannot be excessive and cannot be considered as income from undisclosed sources. Therefore, the addition made by AO of agricultural income shown by the assessee as undisclosed income for A.Y. 2013-14 to 2018-19, is unsustainable and deserves to be deleted. Coming to the A.Y. 2019-20, where the additions of ₹14 lacs is made, the source is explained by the assessee being ₹ 12 lacs out of past savings - On looking at the income offered by the assessee for A.Y. 2013-14 till 2019-20, it is apparent that assessee has disclosed total income of commission and bank interest for all these years of approximately ₹10 lacs. Even after accounting for all expenditure out of this sum, the savings of only ₹1,60,000/- being 5% of his other income cannot be disbelieved. Therefore, the additions to the extent of ₹12 lacs in the hands of the assessee out of ₹14 lacs are explained. Remaining sum which assessee has stated to be belonging to her sisters is supported by an affidavit. AO hough issued notice u/s 133(6) of the act to her which were not replied to. But that does not go against the assessee. Therefore, looking at the smallness of the amount and the affidavit of her sisters stating her Permanent Account Number the addition of ₹ 2 lakhs comprising in total addition of Rs 14 lacs in the hands of the assessee is not sustainable. The reason of the AO that the above sum was found in the locker in the denomination of new notes of ₹2000/-. However, there is no evidence available with the Revenue authorities that new notes were placed in the locker. Therefore, solely on that basis, in view of the explanation supported with the evidence which is provided by the assessee, addition cannot be made. Further, it is apparent that for A.Y. 2013-14 till A.Y. 2018-19, no incriminating evidence is found during the course of search. On that basis also, there cannot be any addition in the hands of the assessee for those years where the addition is made, considering agricultural income as undisclosed income. Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 14 lacs for A.Y. 2019-20 under Section 69A of the Income-tax Act.
2. Addition of agricultural income as undisclosed income for A.Y. 2013-14 to 2018-19.
3. Validity of assessment orders due to non-issue of notice under Section 143(2) of the Act.
4. Consideration of incriminating material found during the search.

Summary:

1. Addition of Rs. 14 lacs for A.Y. 2019-20:
The assessee was found with Rs. 14 lacs in a locker during a search under Section 132 of the Income-tax Act. The assessee claimed Rs. 12 lacs belonged to him from savings and agricultural income, and Rs. 2 lacs belonged to his sister. The Assessing Officer disbelieved this explanation, adding Rs. 14 lacs to the total income under Section 69A. The Tribunal found the assessee's explanation for Rs. 12 lacs credible based on his agricultural income and brokerage earnings, thus deleting this addition. Regarding the Rs. 2 lacs claimed to belong to the sister, supported by an affidavit and her Permanent Account Number, the Tribunal also deleted this addition, finding no substantial evidence to disprove the claim.

2. Addition of Agricultural Income as Undisclosed Income:
For A.Y. 2013-14 to 2018-19, the Assessing Officer added the agricultural income shown by the assessee as income from undisclosed sources due to insufficient evidence. The Tribunal noted the assessee's ownership of agricultural land and partial evidence of agricultural produce sales. It concluded that the agricultural income shown was reasonable and could not be considered excessive or undisclosed, thus deleting these additions.

3. Validity of Assessment Orders:
The assessee argued that no notice under Section 143(2) was issued for A.Y. 2013-14 to 2018-19, rendering the assessment orders invalid. The Tribunal noted this but did not address it further as the additions were deleted on merits.

4. Consideration of Incriminating Material:
The Tribunal observed that no incriminating material was found during the search for A.Y. 2013-14 to 2018-19, supporting the deletion of additions for these years.

Conclusion:
The Tribunal allowed all seven appeals filed by the assessee, deleting the additions made by the Assessing Officer for both the Rs. 14 lacs found in the locker and the agricultural income treated as undisclosed income. The Tribunal did not need to address the legal grounds regarding the non-issue of notice under Section 143(2) and the lack of incriminating material due to the deletions on merits.

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