2014 (11) TMI 648 - AT - Income Tax

Tax Tribunal Decision: Loans as Income, Registration Charges Considered, Agricultural Income Accepted

Mr. B. Purushotham Naidu, Hyderabad Versus The DCIT, Circle 3(3), Hyderabad

The Tribunal ruled in favor of the assessee regarding the addition of loans/cash credits as income under section 68, deleting one credit due to proven ... Various credits made – Held that:- Assessee has discharged his responsibility in proving ₹ 7,00,000 - assessee has received amount by way of cheques and the creditor Mr. V. Gopinath has confirmed that it was given out of his business income from M/s. Sify Broadband and Internet Connection Services - Assessee has demonstrated the identity, creditworthiness and genuineness of the transaction - What the AO and CIT(A) wanted is the source of the source which is not in the domain of assessee- Since identity of the creditor is established with PAN ADZPD2013Q, there is nothing to disbelieve this transaction – the credit is to be treated as explained credit and deleted. As per the confirmations given by assessee placed in paper book, the amounts have been received by way of cheque drawn on Syndicate Bank, Habsiguda Branch- It was explained that the source of funds are from the retirement benefits from her husband Mr. T.Venkata Sai Ramana Rao, retired Dy. Superintendent of Police, Intelligence Department, Hyderabad - assessee has discharged his duty of not only providing the bank account of the said creditor in Syndicate Bank but also his bank account in Axis Bank, Banjara Hills with reference to evidence of both receipt and payment of the amount on 09.03.2011 - not only the identity of the creditor but also genuineness of the transaction stands established – the order of the CIT(A) is modified and the credit is treated to be explained – Decided in favour of assessee. Cost of acquisition and improvement disallowed – Development of land resulted in STCG - Held that:- After seeing the documents and the amounts, there is evidence to the extent of ₹ 49,870 + ₹ 2725 being the registration charges and therefore, these amounts are to be allowed to assessee as cost of acquisition, apart from cost of purchase - AO is directed to consider these above two amounts also - there are already roads adjacent to the plots when assessee has purchased - All these plots are adjacent to each other and does not require any road internally - Since there is no evidence of any improvement other than the rough notings in a note book, the claim of assessee cannot be accepted - The entries in note book do not establish that expenditure was genuinely incurred - The cost of improvement claimed by assessee cannot be allowed while computing short term capital gain – Decided against assessee. Treatment of agricultural income as income from other sources – Held that:- Assessee contended that there was earning the incomes regularly in earlier years also and on record, placed the statements of income of earlier years admitting the agricultural incomes - assessee has disclosed income of ₹ 1,95,500 in A.Y. 2006-07 and ₹ 1,98,000 in A.Y. 2005-06 and ₹ 1,92,000 in A.Y. 2004-05 - Since assessee is disclosing consistently agricultural income in earlier years and also placed on record the lease deeds which are not controverted, the order of the CIT(A) is modified and the AO is directed to accept the income from agriculture as declared by the assessee – Decided partly in favour of assessee. Issues:1. Addition of loans/cash credits treated as income under section 68.2. Disallowance of part of the cost of acquisition and cost of improvement.3. Treatment of agricultural income as income from other sources.Issue 1: Addition of loans/cash credits treated as income under section 68:The assessee filed a return of income declaring total income and agricultural income for A.Y. 2008-09. The Assessing Officer (A.O.) made additions to the total income, including treating various loans/cash credits received by the assessee as income under section 68. The Ld. CIT(A) deleted some additions but confirmed two cash credits. The Tribunal found that the assessee had proven the creditworthiness and genuineness of the transaction for one credit, which was considered explained and deleted. However, the Tribunal upheld the addition for the other credit as the source of funds could not be substantiated.Issue 2: Disallowance of part of the cost of acquisition and cost of improvement:The A.O. disallowed part of the cost of acquisition and cost of improvement claimed by the assessee for the development of land resulting in short-term capital gain. The Ld. CIT(A) did not consider the registration charges while adjudicating the cost of improvement. The Tribunal directed the A.O. to consider the registration charges and other fees as part of the cost of acquisition. However, the Tribunal rejected the claim for cost of improvement as the evidence provided did not establish that the expenditure was genuinely incurred.Issue 3: Treatment of agricultural income as income from other sources:The A.O. treated the declared agricultural income as income from other sources despite evidence provided by the assessee of earning agricultural income from leased lands. The Ld. CIT(A) upheld this treatment. The Tribunal, after considering the consistent disclosure of agricultural income in earlier years and the lease deeds provided by the assessee, directed the A.O. to accept the income from agriculture as declared. Consequently, the Tribunal partly allowed the appeal of the assessee.In conclusion, the Tribunal addressed the issues of addition of loans/cash credits, disallowance of cost of acquisition and cost of improvement, and treatment of agricultural income. The Tribunal found in favor of the assessee in some aspects, highlighting the importance of providing sufficient evidence to substantiate claims and income sources in tax assessments.