pri Mere holding of Agricultural land not proves earning of agriculture income Mere holding of Agricultural land not proves earning of agriculture income

Case Law Details

Case Name : Sharma Tyagi Vs. ITO (ITAT Delhi)
Appeal Number : ITA Nos. 347 to 349/Del/2015
Date of Judgement/Order : 22/08/2017
Related Assessment Year : 2008-2009, 2007-2008 & 2009-2010

Sharma Tyagi Vs. ITO (ITAT Delhi)

Assessee did not submit any evidence of earning of any agriculture income by the assessee in assessment year under appeal. No agriculture income was shown in the return of income filed on issue of notice under section 142(1) of the Act. The assessee did not have any evidence of accumulation of past agriculture income. Merely because assessee was holding agricultural land holdings of 20 bigas would not prove that assessee earned any agricultural income or has any past savings so that to make any investment in the property. In the absence of any evidence on record, no further interference is called for in the matter.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

All the appeals by assessee are directed against the different orders of learned Commissioner (Appeals), Muzaffarnagar dated 21-10-2014 for assessment years 2008-09, 2007-08 and 2009-2010.

2. I have heard the learned Representatives of both the parties and perused the material on record. The issues are common in all these appeals. Therefore, all the appeals are heard together and I dispose of the same through this common consolidated order. The appeals are decided as under.

ITA.No. 348/Del./2015 (A.Y. 2008-2009) :–

3. The facts of the case are that in this case an inquiry was conducted on 29-5-2009 and it was gathered that assessee was running a newly constructed banquet hall namely, M/s. Tirupati Palace at Indira Colony, G.T. Road, Muzaffarnagar. Since assessee was not assessed to tax, therefore, the assessing officer issued notice under section 142(1) of the Income Tax Act, requiring the assessee to furnish return of income. However, no compliance was made. Subsequently, the assessing officer issued notice under section 148 of the Act. In response there to, assessee submitted that original return filed on 29-1-2010 be treated as return filed in compliance to notice under section 148 of the Income Tax Act. Thus, the assessing officer issued detailed questionnaire seeking explanation of the assessee. The assessee contended that the construction of banquet hall started from April, 2006 and completed on 31-10-2008 at land measuring 116.99 Sq. Mts. Which was purchased on 18th November, 2005 for a consideration of Rs. 15,48,000. Further, adjoining land measuring 89.405 sq. was purchased on 28-3-2006 for Rs. 2,55,000. The assessee in her written submissions admitted tax liability of Rs. 53,470 for assessment year 2006-07. It was further submitted that investment in construction of banquet hall was at Rs. 28 lakhs and source of investment was explained as under :

(i) Out of saving from agriculture income Rs. 3,00,000
(ii) Out of sale deed dated 18.11.2005 to Ramesho Devi Rs. 1,99,450
(iii) Withdrawal from saving bank account Rs. 2,62,000
(iv) Loan from bank Rs. 6,50,000
(v) Gift received from relatives Rs. 13,00,000

3.1. The assessee did not make any response with regard to maintenance of the books of account for construction of banquet hall. According to the assessing officer the assessee has made investment in the land at Rs. 18,03,000 and the investment in construction of banquet hall was claimed at Rs. 28 lakhs. Thus, the total investment on purchase of land and construction of banquet hall aggregated to Rs. 46,03,000. The assessee had neither disclosed the investment of Rs. 46,03,000 to the department nor any return of income was filed till the date of issue of notice under section 142(1) of the Act.

3.2. Regarding claim of source of investment from agricultural income at Rs. 3 lakhs, it was gathered by the assessing officer that assessee had shown only agricultural holdings of 20 bighas. In the absence of any documentary evidence, the assessing officer required the assessee to file copy of khatauni. Further, the assessing officer also confronted the assessee of the fact that in the return of income filed on 29-1-2010, agriculture income was no declared. Further, no details and evidences were furnished by the assessee in respect of past savings from agriculture income. Thus the assessee was required to explain as to why the investment shown from agriculture at Rs. 3 lakhs be not added under section 69 of the Income Tax Act.

3.3. The assessee explained that due to mistake, agriculture income was left out to be declared in the return of income filed on 29-1-2010 but requested the assessing officer to consider the same at Rs. 55,000. It was further submitted that the agricultural land was acquired on inheritance after the death of her husband on 19-12-1999. As per the assessee, agricultural land was 20 big as and as such, past savings from agriculture income stood explained and hence, could not be treated as unexplained investment in construction of banquet hall.

4. The assessing officer however, noted that assessee has not filed return of income voluntarily but filed after issue of notice under section 142(1) of the Act. Further, the agriculture income was not declared in the return of income filed under section 142(1) of the Act on 29-1-2010. The Explanation of assessee was found as an afterthought. Further, in the absence of any evidence of earning of agriculture income or past savings, assessing officer added Rs. 3 lakhs under section 69 of the Act.

5. Regarding claim of investment out of gifts received of Rs. 13 lakhs, it was gathered by the assessing officer that assessee had claimed to have received gifts from the following persons :

(i) Shri Yashvir Singh Tyagi, Rs. 3,00,000
(ii) Shri Mukesh Tyagi Rs. 1,00,000
(iii) Smt. Shashi Rs. 3,00,000
(iv) Shri Karam Singh Tyagi Rs. 6,00,000

5.1. The assessing officer recorded the statement on oath of the donors. From the statements recorded on oath, it was gathered by the assessing officer that donors failed to specify the date-wise amount paid to the assessee. Further, the aforesaid donors have never gifted any amounts previously. The assessee had never disclosed to the department receipt of huge gifts. The return of income is filed after notice issued under section 142(1) of the Act. Therefore, genuineness of the gifts was not found genuine by the assessing officer The assessing officer asked the assessee to explain why the gifts of Rs. 13 lakhs may not be treated as unexplained and added to the income of assessee.

5.2. It was contended by the assessee that gifts were received from the aforesaid persons who were real brother and sons of real another brothers. Copies of their land holdings and along with affidavits were furnished before the assessing officer It was submitted that the donors in their statements on oath confirmed giving gifts to the assessee. The assessing officer however, rejected the contention of assessee because investment in property was not disclosed to the department. Gifts were not voluntarily disclosed to the department. The assessee admitted investment in property only after issue of notice under section 142(1) of the Act. Th assessing officer made addition of Rs. 13 lakhs under section 69 of the Income Tax Act.

5.3. As regards addition of Rs. 3 lakhs, assessee contended before the learned Commissioner (Appeals) the same facts as were explained before the assessing officer on which remand report was called for from the assessing officer in which assessing officer explained that assessee failed to disclose agriculture income in the return of income. The assessee has no evidence of earning of agriculture income or past savings. No evidence of earning any agriculture income was filed. The learned Commissioner (Appeals) in principle accepted the findings of the assessing officer that no evidence has been produced for earning of agriculture income or past savings, but given a benefit of Rs. 55,000 to the assessee. Therefore, out of the addition of Rs. 3 lakhs, he has confirmed addition of Rs. 2,45,000.

5.4. As regards gifts, assessee reiterated the same submissions before the learned Commissioner (Appeals). The assessing officer in the remand report submitted that assessee failed to prove the creditworthiness of the donor and genuineness of the transaction in the matter. The assessee also explained that the entire gift was received in different years and in assessment year 2008-09, the total gifts were received at Rs. 6,75,000 out of Rs. 13 lakhs. The learned Commissioner (Appeals) accepted the some of the gifts as genuine. However, in the case of Shri Karan Singh Tyagi, the assessee was not able to furnish any details of withdrawals of Rs. 1,50,000. Therefore, to that extent, the addition was confirmed considering it to be unexplained gift of Rs. 1,50,000. Similarly, in the case of Shri Mukesh Tyagi the donor did not make any withdrawals for making gift to the assessee. Therefore, in the absence of the same, addition of Rs. 72,000 was confirmed.

5.5. During the course of appellate proceedings, it was gathered that the difference between the figures of investment in construction of banquet hall as per report of DVO and as per approved valuer’s report was worked out to Rs. 3,24,467 (Rs. 12,18,467 (-) Rs. 8,94,000). Therefore, assessee was asked to show cause as to why the income to that extent be not enhanced. The assessee submitted that she belongs to District Muzaffarnagar. Hence, for the purpose of ascertaining the value of construction, the rates of U.P. PWD may be applied. However, the learned Commissioner (Appeals), rejected the contention of assessee and enhanced the income to Rs. 3,24,467.

6. The assessee in the appeal has raised several grounds. Ground No. 1 is general and need no adjudication. On ground No. 2, assessee challenged the addition of Rs. 2,45,000 out of addition of Rs. 3 lakhs made by the assessing officer as unexplained investment from accumulated savings of agriculture income. Learned Counsel for the assessee did not submit any evidence of earning of any agriculture income by the assessee in assessment year under appeal. No agriculture income was shown in the return of income filed on issue of notice under section 142(1) of the Act. The assessee did not have any evidence of accumulation of past agriculture income. Merely because assessee was holding agricultural land holdings of 20 big as would not prove that assessee earned any agricultural income or has any past savings so that to make any investment in the property. In the absence of any evidence on record, no further interference is called for in the matter. The learned Commissioner (Appeals) has already given sufficient benefit of Rs. 55,000 to the assessee. This ground No. 2 of appeal of assessee is dismissed.

7. On ground No. 3, the assessee challenged the addition of Rs. 1,50,000 and Rs. 72,000 on account of gifts received from Shri Karan Singh Tyagi and Shri Mukesh Tyagi. The assessee submitted that affidavits of the donors along with their bank accounts have been filed and their statements have been recorded by the assessing officer in which they have confirmed giving of gifts to the assessee. However, both the donors have failed to specify the date-wise amount paid during the examination/recording of the statements. Therefore, genuineness of the transactions could not be verified. Mere filing of affidavit or land holding documents would not prove creditworthiness of the donors. The assessee filed copies of the affidavits of the donors, their statements and proof of ownership of the land in the paper book in which they have vaguely stated that various gifts have been given from April, 2006 to 31-10-2008. No specific date of gifts have been pointed in their bank accounts. There are small withdrawals made by the donors and in their statements donors have stated that they have agriculture income out of which they are maintaining their family. Therefore, assessee failed to prove their creditworthiness and genuineness of the transaction in the matter. No source of gifts have been filed. Even no gift deed have been executed for giving any gift. No occasion of the gifts date-wise has been explained. Thus, there is nothing on record to show as to what was the financial capacity of the donors and the creditworthiness of the donors, what kind of relationship the donors had with the assessee, what were the source of funds gifted to the assessee and whether they had any capacity of giving such huge amount of gift to the assessee. Thus, the assessee failed to prove the basic ingredients of genuineness of gifts in the matter. It, therefore, appears that the assessee when cornered by the Revenue Department came up with an afterthought story to explain investment in property through the gifts from the relatives. Therefore, it is clear that gifts in the matter are not genuine. Gifts are arranged affairs of the assessee. The assessee failed to prove the creditworthiness of the donors and genuineness of the gifts in the matter. The additions were rightly made by the authorities below. I rely upon the decision of Hon’ble Delhi High Court in the case of CIT v. Anil Kumar 292 ITR 552, decision of Hon’ble Supreme Court in the case of CIT v. P. Mohan Kala 291 ITR 278, decision of Punjab & Haryana High Court in the case of Yashpal Goel v. CIT 310 ITR 75. Considering the above decisions, I am of the view that the assessee failed to establish the creditworthiness of the donors and genuineness of the gifts in the matter. Therefore, no interference is called for. This ground No. 3 of appeal of assessee is dismissed.

8. On ground No. 4 assessee challenged the addition of Rs. 3,24,467 being difference on account of investment in cost of construction of banquet hall as per DVO report. The assessee pleaded before the learned Commissioner (Appeals) that for the purpose of ascertaining the value of construction, rates of UP PWD may be applied, which authorities below have failed to apply in the matter. Learned Counsel for the assessee relied upon the decision of Hon’ble Allahabad High Court in the case of CIT v. Raj Kumar182 ITR 436 in which the Tribunal while fixing the cost of construction, has taken into consideration various factors i.e. the rates to be applied for the purpose of estimation of cost of construction and applied UP PWD rate and not the Centre PWD rates. The Hon’ble High Court dismissed the Reference Application. Learned Counsel for the assessee submitted that the matter may be remanded to the assessing officer for applying the UP PWD rates.

8.1. Considering the facts of the case in the light of decision of Hon’ble Allahabad High Court in the case of CIT v. Raj Kumar (supra), I set aside the orders of the authorities below and restore this issue to the file of assessing officer with a direction to apply UP PWD rates for the purpose of ascertaining the cost of construction of investment in construction of banquet hall. The assessing officer shall re-decide this issue after giving reasonable, sufficient opportunity of being heard to the assessee. Ground No. 4 of appeal of assessee is treated as allowed for statistical purposes.

9. Ground No. 5 is challenging the reopening of assessment under section 148 of the Income Tax Act, which is not pressed by the Learned Counsel for the assessee. Therefore, ground No. 5 of appeal of assessee is dismissed.

10. In the result, appeal of assessee is partly allowed as indicated above.

ITA.No. 347/Del./2015 – (A.Y. 2007-2008) :–

11. Ground No. 1 is general, need no adjudication. On ground No. 2, assessee challenged the addition of Rs. 2,15,000 being unexplained deposit in the bank account, considering them as income from undisclosed source and also disallowing the source of investment of Rs. 2 lakhs. The assessing officer has made addition of Rs. 2,15,000 being unexplained deposits in the bank account on the ground that assessee could not furnish any details and evidence to establish the genuineness of such cash deposits. The assessee submitted that some of them were gifts from his brother and nephews which have not been accepted. Therefore, the learned Commissioner (Appeals) confirmed the addition. During the course of hearing, Learned Counsel for the assessee, could not explain the source of deposit of Rs. 2,15,000. Therefore, no interference is called for. Ground No. 2 of appeal of assessee is accordingly dismissed.

12. On ground No. 3, assessee challenged the addition of Rs. 4,11,000 holding them as unexplained gifts out of the addition of Rs. 5,11,000. In this year, assessee claimed to have received gifts aggregating to Rs. 5,11,000 from Shri Karan Singh (brother), Rs. 1,66,000, Shri Yashveer Singh (nephew) Rs. 1,00,000, Smt. Shashi Tyagi (niece) Rs. 2,17,000 and Shri Mukesh Tyagi (nephew) Rs. 28,000. The assessee furnished the evidence in respect of gifts received from Shri Yashveer Singh (nephew) of Rs. 1 lakhs, to that extent, the addition was deleted. In the absence of any other evidence, gifts of Rs. 4,11,000 was confirmed.

12.1. Learned Counsel for the assessee submitted that the issue is same as has been considered in assessment year 2008-09. Following the reasons for decision for assessment year 2008-09, I dismiss this ground No. 3 of appeal of assessee.

13. On ground No. 4, assessee challenged the addition of Rs. 80,100 out of addition of Rs. 2,34,000. Regarding addition of Rs. 2,34,000, assessee has contended that in the year under reference, she had cash accumulation of Rs. 2,03,900 out of dairy business, bank interest, family pension, agriculture income and past savings, out of which Rs. 50,000 was spent for house hold purpose. Therefore, balance amount of Rs. 1,53,900 remained in the hands of the assessee. The learned Commissioner (Appeals) gave benefit to assessee at Rs. 1,53,900 and made the addition of Rs. 80,100.

13.1. The Learned Counsel for the assessee did not produce any evidence of source to explain the addition of Rs. 80,100. Even assessee did not explain this addition before learned Commissioner (Appeals). Therefore, in the absence of any evidence, the addition of Rs. 80,100 is confirmed. This ground No. 4 of appeal of assessee is dismissed.

14. On ground No. 5, the assessee challenged the addition of Rs. 4,63,906 being difference on account of investment in cost of construction of banquet hall as per DVO report.

14.1. In assessment year 2008-2009, it is directed that UP PWD rate may be applied for ascertaining the cost of construction. Following the order for assessment year 2008-09, I set aside the orders of the authorities below and restore this issue to the file of assessing officer with a direction to apply UP PWD rate for estimating the cost of investment in construction of banquet hall. Ground No. 5 of appeal of assessee is allowed for statistical purposes.

15. Ground No. 6 is regarding reopening of the assessment is not pressed and hence, the same is dismissed.

16. In the result, ITA.No. 347/Del./2015 of the assessee partly allowed as indicated above.

ITA.No. 349/Del./2015 – assessment year 2009-2010 :–

17. This appeal was earlier dismissed for default. However, exparte order was set aside and appeal was re fixed for hearing on merit.

18. Ground No. 1 is general in nature and need no adjudication. Ground Nos. 3 and 5 with regard to addition of Rs. 2,72,575 and reopening of the assessment under section 148 are not pressed. Therefore, these ground Nos. 3 and 5 are dismissed.

19. On ground No. 2, assessee challenged the addition of Rs. 1,54,000 on account of unexplained gift from Shri Karan Singh Tyagi. Learned Counsel for the assessee submitted that this issue is same as having considered in assessment year 2008-2009 in which the addition on account of income of the gift has been confirmed. Following the reasons for the decision for assessment year 2008-2009, I dismiss ground No. 2 of appeal of assessee.

20. On ground No. 4, assessee challenged the addition of Rs. 1,73,227 on account of difference in investment in cost of construction from DVO report. In assessment year 2008-2009 it is directed that UP PWD rate may be applied for the purpose of ascertaining the cost of construction. The orders of the authorities below are set aside and assessing officer is directed to follow the order for assessment year 2008-09 by applying the UP PWD rates for ascertaining the cost of construction and re-decide this issue by giving reasonable, sufficient opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

21. In the result, ITA. No. 349/Del./2015 of the assessee is partly allowed as indicated above.

22. In the result, all the appeals of the assessee are partly allowed as indicated above.

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