2019 (12) TMI 25 - AT - Income Tax

Appeal partially granted on agriculture income, additions upheld on property investments. Emphasizes evidence and logical estimations.

Shri P. Thangavel Versus The Income Tax Officer, Ward I (1), Kumbakonam.

The Tribunal partly allowed the appeal, granting partial relief on the disallowance of agricultural income while upholding additions on investment in ... Addition on investment in properties - HELD THAT:- With regard to the claim of the assessee that the sum of ₹.3,83,000/- would have been paid earlier in the assessment year 1998-99 for the purchase of the Crawford land property, the assessee has not brought on record any material evidence. Moreover, from the purchase deed, the AO noticed that the entire consideration was paid for the purchase of the Crawford land property on the day of registration on 09.05.2001, which is relevant to the assessment year 2002-03. In the absence of any material evidence, we find no infirmity in the order passed by the authorities below. Thus, the ground raised by the assessee stands dismissed. Addition made on account of investment in individual money lending and interest income from private financing - HELD THAT:- As in assessee’s partner’s case [2016 (10) TMI 882 - ITAT CHENNAI] Tribunal has deleted the addition by observing that estimation of interest made by the AO at 25% was highly arbitrary and without any supporting materials. The above case law has no application to the facts of the present, because, by considering the system of money lending business explained by the assessee as well as gist of computation of income filed in the return of income for the assessment year 1999-2000 is the only basis for quantifying the rate of interest in the assessment year under appeal by the AO. Assessee’s partner’s case, the basis for quantification of interest was not on record and nothing was available in the Tribunal’s order. Therefore, we are of the considered opinion that the above additions made by the Assessing Officer was validly confirmed by the CIT(A). Thus, the grounds raised by the assessee stand dismissed. Disallowance of agricultural income - HELD THAT:- What is possible to earn from the agricultural land is not the matter of dispute. In the absence of books of accounts for the agricultural operations in the dry land of 5.5 hectares, the Assessing Officer estimated the income at ₹.38,000/-, is admittedly very low, but the claim of the assessee of earning ₹.1,10,000/- (assessee’s share) from the dry land is also exorbitantly higher. Though the Tribunal is of the considered opinion that the agricultural sector continues to remain unorganized and the agricultural produces are sold in an unregulated market, considering the relevant financial year as well as lack of details of the crop cultivated in the dry land, we are of the considered opinion that 50% of the claim of assessee’s share of income would meet the ends of justice. Accordingly, we give relief to the extent of ₹.55,000/- and the balance disallowance of ₹.55,000/- stands confirmed. Thus, the ground raised by the assessee is partly allowed. Issues Involved:1. Addition on investment in properties.2. Addition on account of investment in individual money lending and interest income from private financing.3. Disallowance of agricultural income.Issue-wise Detailed Analysis:1. Addition on Investment in Properties:The assessee, along with his brother, purchased a property at Madurai Main Road, Trichy, on 09.05.2001, with a total cost of Rs. 6,91,800/-. The assessee's 50% share amounting to Rs. 3,45,900/- was not reflected in his balance sheet. The Assessing Officer (AO) observed that the property was purchased during the assessment year 2002-03, and the entire sale consideration was paid on the date of registration. The AO brought this amount to tax as unexplained investment. The assessee claimed that Rs. 3,83,000/- was paid in an earlier year (1998-99), but failed to provide evidence. The CIT(A) confirmed the AO's addition due to lack of material evidence from the assessee, and the Tribunal upheld this decision, dismissing the assessee's ground.2. Addition on Account of Investment in Individual Money Lending and Interest Income from Private Financing:During a survey, a register detailing loans outstanding as of 01.01.2004 was found. The AO extrapolated this data to estimate the outstanding loan as of 01.04.2002 at Rs. 5,84,884/-, treating the difference of Rs. 2,84,884/- from the balance sheet figure as unexplained investment. Interest income from private financing was similarly estimated at Rs. 1,56,398/-. The assessee argued that the assessment was based on backward working theory without supporting materials. The Tribunal noted inconsistencies in the assessee's statements and lack of evidence for the claimed outstanding loans and interest income. The AO's estimation was based on the assessee's admission of destroying monthly records and the high interest rate of 40.5% from the money lending business. The Tribunal upheld the CIT(A)'s confirmation of the additions due to the absence of contrary evidence from the assessee.3. Disallowance of Agricultural Income:The assessee claimed an agricultural income of Rs. 1,10,000/- from 5.5 hectares of dry land. The AO, finding no supporting evidence except for a patta, estimated the income at Rs. 38,000/-, attributing Rs. 19,000/- to the assessee's share, and disallowed Rs. 91,000/-. The CIT(A) confirmed this disallowance. The Tribunal acknowledged the unorganized nature of the agricultural sector and the lack of detailed records but found the assessee's claim of Rs. 1,10,000/- to be excessive. It partially allowed the assessee's claim, granting relief of Rs. 55,000/- and confirming the balance disallowance of Rs. 55,000/-.Conclusion:The appeal filed by the assessee was partly allowed, with the Tribunal providing partial relief on the disallowance of agricultural income while upholding the additions on investment in properties and money lending activities. The judgment maintained the importance of providing substantial evidence to support claims and highlighted the Tribunal's reliance on logical estimations in the absence of complete records.