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2025 (2) TMI 826 - AT - Income TaxAddition u/s 68 - treating agricultural income as unexplained income of the assessee - During the course of assessment proceedings details of agricultural income were not filed - HELD THAT - CIT(A) while confirming the additions has observed that the assessee has not been able to clarify as to how the agricultural operations were claimed to have been carried out on commercial land. Before us also the assessee could not be able to justify whether the agricultural income earned were from the agricultural land and no commercial land was used for the same. Moreover Form J submitted contained the name of the Director of the assessee company. All these facts need proper verification. Therefore in the interest of justice this issue is set aside to the file of the AO for making proper verification of the fact whether agricultural income is declared from the agricultural purposes carried out by the assessee on agricultural land or any commercial land is involved. The AO is further directed to verify whether Form J issued in the name of Director are related to the sale of agriculture produce by the assessee or not. The AO is also directed to allow proper opportunity and assessee is directed to make proper compliance of the notice issued by the AO. Addition on account of gain from the compulsory acquisition of land by holding the same as unexplained income of the assessee - assessee is not entitled for exemption on the compensation received of the said land acquired by NHAI. He further observed that the assessee is not entitled for exemption u/s 10(37) of the Act as the same is not available to companies as well as in case of non-agricultural land - HELD THAT - As per amended sub-section 3 of section 105 the provisions of the RFCTLARR Act 2013 relating to the determination of compensation in accordance with First schedule shall apply to all cases of land acquisition under the enactments specified in Fourth schedule of the said Act. Since NHAI Act is already included in Fourth schedule of the RFCTLARR Act 2013 thus exemption as provided in section 96 of the said act is available in cases where land is compulsory acquired by under NHAI Act for public purposes and the precondition of issue of notification to this effect has already been withdrawn through amendment in sub-section (3) of section 105 of the said Act. CBDT vide circular No. 36 of 2016 dated 25.10.2016 after considering the exemption provided u/s 96 of the RFCTLARR Act 2013 towards the compensation award under this Act as tax free under the Income Tax Act 1961 clarified that award granted under the RFCTLARR Act 2013 both for agricultural and non-agricultural land is tax free. Therefore the compensation received by the assessee on compulsory acquisition of its land both commercial and agricultural land by NHAI is eligible for exemption from income tax as per the provisions of section 96 of the RFCTLARR Act 2013 which is a special Act and prevail over the Income Tax Act 1961. This view gets support from the judgement of V.S. Promotors Ltd. 2023 (2) TMI 1388 - ITAT LUCKNOW Since the land owned by the assessee were acquired by NHAI as compulsory acquisition u/s 3A of NHAI Act 1956 and compensation was awarded by the competent authorities. The entire amount compensation so awarded was received by the assessee during the FY 2015-16 relevant to the assessment year under appeal which is after the amendment made in section 105(3) w.e.f. 01.01.2015. Therefore for claiming the exemption of the compensation under the RFCTLARR Act 2013 awarded by NHAI there is no requirement of issue of any notification. Moreover we have already expressed the view that exemption from the income tax on the compensation received upon compulsory acquisition of land by NHAI is available as per section 96 of the RFCTLARR Act 2013 therefore addition made by disallowing the exemptions available to assessee is directed to be deleted. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The judgment primarily addresses two main issues: 1. The addition of INR 20,01,529/- as unexplained income under Section 68 of the Income Tax Act, 1961, concerning agricultural income. 2. The addition of INR 31,31,903/- as unexplained income concerning compensation received from the compulsory acquisition of land by the National Highway Authority of India (NHAI), and its exemption status under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act, 2013). ISSUE-WISE DETAILED ANALYSIS 1. Addition of INR 20,01,529/- under Section 68 of the Income Tax Act, 1961: Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act, 1961, deals with unexplained cash credits. The burden of proof lies on the assessee to substantiate the source of income claimed as agricultural. Court's Interpretation and Reasoning: The Tribunal noted that the assessee claimed agricultural income but failed to provide sufficient evidence to substantiate the claim. The CIT(A) observed discrepancies regarding the location of the cultivator and the nature of the land. Key Evidence and Findings: The assessee provided Form J, purchase vouchers, and a sharing agreement with the cultivator. However, these were not in the name of the assessee but in the name of its Director. Application of Law to Facts: The Tribunal found that the evidence provided needed further verification to establish whether the income was genuinely agricultural and not from commercial land. Treatment of Competing Arguments: The assessee argued for the genuineness of the income, while the Revenue highlighted the lack of proper documentation and the impracticality of the cultivator's involvement. Conclusions: The Tribunal remanded the matter to the Assessing Officer for a detailed verification of the facts, including the nature of the land and the authenticity of the documents provided. 2. Addition of INR 31,31,903/- concerning compensation from land acquisition: Relevant Legal Framework and Precedents: The RFCTLARR Act, 2013, particularly Section 96, exempts compensation from income tax. The amendment to Section 105(3) removed the requirement for a notification for exemptions under the Fourth Schedule, which includes the NHAI Act. Court's Interpretation and Reasoning: The Tribunal recognized the amendment to Section 105(3) and the broader scope of Section 96, which exempts all compensation under the RFCTLARR Act, including for non-agricultural land. Key Evidence and Findings: The assessee received compensation post-amendment, and the Tribunal noted the applicability of the RFCTLARR Act, 2013, to the case. Application of Law to Facts: The Tribunal applied the amended Section 105(3) and Section 96, concluding that the compensation received was exempt from income tax. Treatment of Competing Arguments: The Revenue argued against the exemption, relying on outdated provisions. The Tribunal dismissed these arguments based on the legislative amendments and CBDT Circular No. 36 of 2016. Conclusions: The Tribunal deleted the addition of INR 31,31,903/- and recognized the compensation as exempt under the RFCTLARR Act, 2013. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal noted, "The provisions of the RFCTLARR Act, 2013, relating to the determination of compensation in accordance with the First Schedule shall apply to the enactments relating to land acquisition specified in the Fourth Schedule with effect from 1st January, 2015." Core Principles Established: The judgment reinforced that amendments to Section 105(3) of the RFCTLARR Act, 2013, eliminate the need for notifications for exemptions, and the scope of Section 96 is comprehensive, covering both agricultural and non-agricultural land. Final Determinations on Each Issue: The Tribunal remanded the issue of agricultural income for further verification, while it allowed the appeal regarding compensation, affirming its exemption from income tax.
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