Partners' unreported agricultural income leads to tax assessment increase and expense disallowance

M/s Jagdambe Stone Company Versus Deputy Commissioner of Income Tax

M/s Jagdambe Stone Company Versus Deputy Commissioner of Income Tax - TMI Issues:
1. Addition of Rs. 3,90,137 in total income under section 68.
2. Disallowance of telephone and traveling expenses.

Analysis:
1. The appeal challenged the addition of Rs. 3,90,137 in total income under section 68. The assessee firm's four partners contributed Rs. 12 lakhs each as capital, claiming it was from the sale of agricultural produce. The AO rejected the claim due to no agricultural income declared in partners' tax returns. The CIT(A) found no dispute regarding the partners' agricultural land ownership and considered evidence like confirmations, Jamabandi, and agricultural produce sale proof. The CIT(A) held that partners failing to report agricultural income in their returns should face consequences individually, but the firm, as a separate entity, provided necessary details on capital received. It was found that one partner had sufficient agricultural income, but for the other three, there was a shortfall of Rs. 3,90,137, unexplained. The CIT(A) upheld the addition under section 68, as the partners' capital investment was explained partially. The Tribunal confirmed the CIT(A)'s order, dismissing the appeal's first two grounds.

2. The appeal also contested the disallowance of Rs. 12,330 out of Rs. 40,660 for various expenses. The CIT(A) sustained this disallowance, stating that telephone and traveling expenses could include personal elements. The Tribunal found no issue with the CIT(A)'s decision and affirmed it. Consequently, the appeal was dismissed, and the order was pronounced on 27/03/2018.