Appeal partially allowed, disallowed agricultural income taxable under appropriate head.

The Tribunal partly allowed the appeal, modifying the quantum of addition from Rs. 4 lakhs to Rs. 2 lakhs. It emphasized that disallowed agricultural income must be treated as taxable income under the appropriate head if no specific head of income is attributable.

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Issues:
1. Disallowance of agricultural income by Assessing Officer
2. Treatment of disallowed agricultural income as income from other sources
3. Quantum of addition sustained by Commissioner of Income-tax(Appeals)

Issue 1: Disallowance of agricultural income by Assessing Officer

The appellant offered an agricultural income of Rs. 15 lakhs for the assessment year 2006-07. The Assessing Officer disallowed Rs. 8 lakhs from the claim and treated the balance of Rs. 7 lakhs as agricultural income. In the first appeal, the Commissioner of Income-tax(Appeals) reduced the disallowed amount to Rs. 4 lakhs taxable under the head 'income from other sources'.

Issue 2: Treatment of disallowed agricultural income as income from other sources

The appellant contended that the disallowed agricultural income should not be treated as taxable income under 'income from other sources' if no corresponding investment was made. However, the Tribunal rejected this argument, stating that the Assessing Officer cannot determine the tax liability less than what was returned by the assessee. Even if a portion of agricultural income is disallowed, the remaining amount must be treated as taxable income under an appropriate head, such as 'income from other sources'.

Issue 3: Quantum of addition sustained by Commissioner of Income-tax(Appeals)

The Tribunal found that a modification was necessary in the quantum of addition sustained by the Commissioner of Income-tax(Appeals). Considering the appellant's substantial agricultural holdings and activities, a disallowance of Rs. 2 lakhs was deemed appropriate, reducing the addition from Rs. 4 lakhs to Rs. 2 lakhs. As a result, the appeal was partly successful on the quantum side.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, modifying the quantum of addition and emphasizing that disallowed agricultural income must be treated as taxable income under the appropriate head if no specific head of income is attributable.

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