2025 (1) TMI 330 - HC - Income Tax

Addition u/s 69A - addition of amount returned by the assessee as an agricultural income - HELD THAT - The Inspector of Income Tax deputed by AO for spot enquiry has reported after visiting the land that the same has been marked into plots and is not used for cultivation. The material collected by AO during the course of the enquiry was forwarded to the assessee and his comments were sought for. However, the assessee did not offer any explanation. CIT(A) has taken into account the letters issued by Executive Officer, Hayathnagar Mandal, Ranga Reddy District and Deputy Collector and Mandal Revenue Officer, Hayathnagar Mandal, Ranga Reddy District respectively, in which it is stated that no crops were grown on the land and the same was shown as plots in the land revenue records. The Income Tax Appellate Tribunal has also found that the assessee has failed to establish that the land in question was under cultivation. Thus, the authorities under the Act, on the basis of meticulous appreciation of evidence on record have found that the land in question was already plotted and no agricultural operations were carried out by the assessee. Therefore, the claim of agricultural income is not tenable. It is well settled in law that this Court in exercise of powers u/s 260A of the Act cannot interfere with the finding of fact until and unless the same is demonstrated to be perverse. (see Syeda Rahimunnisa vs. Malan Bi by LRs 2016 (10) TMI 1233 - SUPREME COURT and Softbrands India Private Limited 2018 (6) TMI 1327 - KARNATAKA HIGH COURT - Decided against assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal question in this judgment is whether the Assessing Officer rightly invoked Section 69A of the Income Tax Act, 1961, to make an addition of Rs.2,25,000/- to the assessee's income, which was initially declared as agricultural income.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Applicability of Section 69A of the Income Tax Act

Relevant legal framework and precedents:

Section 69A of the Income Tax Act deals with unexplained money, requiring the taxpayer to satisfactorily explain the source of any money found in their possession. If the taxpayer fails to do so, the money is considered as income for the financial year in which it is found. The court referenced precedents, including Syeda Rahimunnisa vs. Malan Bi by LRs and Principal Commissioner of Income Tax, Bangalore vs. Softbrands India Private Limited, to establish that findings of fact cannot be interfered with unless demonstrated to be perverse.

Court's interpretation and reasoning:

The court reasoned that the applicability of Section 69A depends on whether the assessee could substantiate the claim of agricultural income. The court noted that the provision might not directly apply if the income was genuinely from agricultural operations. However, the failure to prove such operations led to the invocation of Section 69A.

Key evidence and findings:

The Assessing Officer's investigation, including a spot enquiry by the Income Tax Inspector, revealed that the land was marked into plots and not used for cultivation. Letters from the Executive Officer and Deputy Collector corroborated this, stating no crops were grown on the land, which appeared as plots in land records. The assessee failed to provide evidence countering these findings.

Application of law to facts:

The court applied Section 69A by evaluating whether the assessee's claim of agricultural income was substantiated. Given the evidence showing the land was plotted and not cultivated, the court found the assessee's claim untenable, justifying the addition under Section 69A.

Treatment of competing arguments:

The assessee argued that the land was used for agriculture and that the Mandal Revenue Officer's report for the subsequent financial year supported this claim. However, the court found these arguments unconvincing due to lack of evidence for the relevant assessment year. The Revenue's position, supported by factual findings, was favored.

Conclusions:

The court concluded that the findings of fact by the lower authorities were not perverse and were based on substantial evidence. Consequently, the invocation of Section 69A was justified, and the appeal was dismissed.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The authorities under the Act, on the basis of meticulous appreciation of evidence on record have found that the land in question was already plotted and no agricultural operations were carried out by the assessee. Therefore, the claim of agricultural income is not tenable."

Core principles established:

The judgment reinforces the principle that findings of fact by tax authorities are conclusive unless shown to be perverse. It also underscores the taxpayer's burden to substantiate claims of income sources, particularly under Section 69A.

Final determinations on each issue:

The court determined that Section 69A was correctly applied due to the lack of evidence supporting the assessee's claim of agricultural income. The substantial question of law was answered in favor of the Revenue, and the appeal was dismissed.

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