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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
1. Feeling aggrieved by order of first appeal dated 26.08.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 27.12.2019 passed by learned ITO-4(3), Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.
2. The background facts leading to present appeal are such that the assessee-individual filed return of AY 2017-18 declaring a total income of Rs. 1,76,640/-. The case was selected for scrutiny-assessment and notices u/s Page 1 of 22 – AY 2017-18 143(2)/142(1) were issued. Finally, the AO completed assessment u/s 143(3) vide order dated 27.12.2019 after making certain disallowances/additions and thereby determining total income at Rs. 2,12,18,680/-. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before us.
3. The assessee/revenue has raised following grounds:
“1. The Ld. AO was not justified in passing the order, which is bad-in-law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
2. The Ld. CIT(A) was not justified in confirming the order, which is bad-in- law, void ab initio, barred by limitation, illegal, contrary to the facts and circumstances of the case, liable to be annulled.
3. The Ld. CIT(A) was not justified in confirming the disallowance of Interest Rs. 6,92,650/- u/s 24(b).
4. The Ld. CIT(A) was not justified in confirming the disallowance of Interest on the housing loan Rs. 15,08,951/- u/s 24(b).
5. The Ld. CIT(A) was not justified in confirming the addition of Rs. 17,45,421/- considering it as income from undisclosed sources.
6. The Ld. CIT(A) was not justified in confirming the addition of Rs. 1,70,85,940/- u/s 69A as undisclosed investment.” Ground No. 1 & 2:
4. These are legal grounds challenging the validity of assessment-order passed by AO on several counts and CIT(A)’s action confirming such assessment-order. Ld. AR for assessee, however, submitted that the assessee is not pressing these grounds. Hence, these grounds are dismissed as non-pressed.
Page 2 of 22 – AY 2017-18 Ground No. 3:
5. In this ground, the assessee claims that the CIT(A) was not justified in confirming the disallowance of interest of Rs. 6,92,650/- u/s 24(b) made by AO.
6. The AO has made impugned disallowance vide Para 5(1)(a) of assessment-order by mentioning that the assessee declared annual rent of Rs. 54,000/- from a house property situated at ‘1, Shyamla Hills, Bhopal’ and claimed deduction of interest on housing loan at Rs. 6,92,650/- against rental income but the assessee neither filed interest certificate nor furnished any evidence in respect of nexus of borrowed loan with the house property.
7. The CIT(A) has upheld disallowance vide Para 7.1 of impugned order by stating thus “Apparently, the appellant has not produced any interest certificate either before the Assessing Officer or during the course of appellate proceedings in support of this claim. Therefore, this ground of appeal is dismissed for want of supporting certificate.”
8. Before us, Ld. AR for assessee referred an acknowledgement downloaded from web portal of Income-tax Department, copy at Page 15 of Written-Synopsis, to show that the assessee actually filed interest-certificate to AO through e-filing mode on designated portal vide file No. 2022.pdf on 06.12.2019. Then, he referred a letter filed by assessee to CIT(A) during first-appellate proceedings, copy of letter at Pages 24-40 of Paper-Book and relevant Page is 28, to show that the assessee not only informed the CIT(A)
Page 3 of 22 – AY 2017-18 about submission of interest-certificate to AO but also re-filed the very same interest-certificate as well as copy of sanction-letter of loan to CIT(A). The assessee also made a specific request to CIT(A) in these words “As the interest-certificate has already been annexed at the time of submission, hence it is requested not to treat it as an additional evidence within the meaning of Rule No. 46A.” Thus, Ld. AR made a strong contention that the documentary evidences were available before both of the lower-authorities and the lower-authorities have given a wrong finding about non-furnishing of documents by assessee. Having said thus, Ld. AR also drew us to the copies of interest-certificate and sanction-letter of loan placed at Pages 41- 46, 51 of Paper-Book. These are the documents issued by M/s Cholamandalam Investment and Finance Company Ltd. [“M/s Chola”] from which the loan was taken by assessee. The interest-certificate shows a total interest of Rs. 10,16,209/- charged by M/s Chola from assessee. Ld. AR narrated that the assessee claimed deduction of 2/3rd portion of total interest. With these submissions, Ld. AR requested that the assessee’s claim of deduction is very much proved by documents on record and the same must be allowed.
Replying to this, Ld. DR for revenue submitted that there is a strong necessity to examine/verify the impugned documents of assessee for giving deduction u/s 24(b), therefore he would have no objection if this issue is remanded to the file of AO.
Page 4 of 22 – AY 2017-18
We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The issue here is the interest deduction of Rs. 6,92,650/- claimed by assessee u/s 24(b) but disallowed by lower- authorities. The AO has made disallowance for twin reasons, namely (i) the assessee did not file interest-certificate, and (ii) the assessee did not file evidence to establish nexus of borrowed loan with house property. In so far as filing of documents are concerned, the assessee has filed evidence to show that the interest-certificate was e-filed to AO during assessment- proceeding and the same was also re-filed to CIT(A) during first-appellate proceedings alongwith sanction-letter of loan. The assessee has also filed copies of interest-certificate and sanction-letter in Paper-Book. However, there is another significant point raised by Ld. AO that the assessee did not file any evidence to show the nexus of borrowed loan with the house property. During hearing, when we questioned the Ld. AR to show such nexus from documents. In response, the Ld. AR tried to find from interest- certificate and sanction-letter but could not find mention of property “1, Shyamla Hills, Bhopal” anywhere in these documents. The Ld. AR, however, kept on insisting that the impugned loan was taken for the said property only. That apart, the interest-certificate shows total interest of Rs. 10,16,209/- and if the Ld. AR’s stand is accepted that the assessee has claimed 2/3rd of total interest as deduction, we find that 2/3rd of Rs. 10,16,209/- comes to Rs. 6,77,473/- only whereas the deduction claimed by Page 5 of 22 – AY 2017-18 assessee is Rs. 6,92,650/-. Therefore, in such a situation, it has become absolutely necessary to verify the complete facts as well as the documents filed by assessee with regard to deduction u/s 24(b). Hence, we feel it more appropriate to remand this issue to the file of AO for a fresh adjudication after considering submissions of assessee. The assessee shall be at liberty to explain the deduction claimed by him with reference to the documents already on record as well as any other evidence which he may like to adduce.
The AO shall give full opportunity to assessee and decide issue judiciously without being influenced by his earlier order in any manner.
Ground No. 4:
In this ground, the assessee claims that the CIT(A) was not justified in confirming the disallowance of interest of Rs. 15,08,951/- u/s 24(b) made by AO.
The AO has made impugned disallowance vide Para 5(1)(b) of assessment-order by mentioning that the assessee declared annual rent of Rs. 32,000/- from a house property situated at ‘2, Professors Colony, Bhopal’ and claimed deduction of interest on housing loan at Rs. 17,13,693/- against such rental income. The AO further observed, from perusal of rent-agreement furnished by assessee, that the let out property was a vacant plot of 1,000 square feet. Further, from perusal of purchase- deed of property, the AO observed that the total plot area was 8,370 square feet. From these observations, the AO modified the taxability head from Page 6 of 22 – AY 2017-18 “Income from House Property” to “Income from Other Sources” and accordingly disallowed the standard deduction of Rs. 9,076/- claimed by assessee u/s 24(a). Further, the AO allowed proportionate interest deduction of Rs. 2,04,742/- on the basis of 17,13,693/- X 1,000/8,370 square feet area and disallowed extra interest of Rs. 15,08,951/-.
During first-appeal, the CIT(A) upheld AO’s order.
Before us, Ld. AR for assessee made following submissions in Written- Synopsis:
“1. At the outset it is submitted that the total land area was 4500 sq ft. (PB 101), Ld. AO erroneously based on a total area of 8370 Sq ft and overlooked the fact that the total area is 4500 Sq ft.
The registry dt. 04.02.2014 mentioned that the same is a land and plinth is filled. PB 101.
The assessee thereafter got the construction done on a part of land. The rent agreement dt. 05.04.2016 mentions the same as a house with one room, bathroom, open area with tin shade. The tenant took it for his staff and car. PB 93.
Property tax details are given. PB 120-123. Approved map is submitted. PB 119.
On perusal of the interest-certificate letter from India Bulls, there were two loan accounts, one was the Housing Loan of Rs. 1,82,62,790/- (PB 76) and another Home equity of Rs. 1,09,14,563/- (PB 77). The Interest component of first loan being Rs. 18,89,965/- and second being Rs. 12,07,761. Thus, the total being 30,97,726/- The assessee has claimed only 17,13,693/-, considering that only a part was let-out. The Nature of Loan itself shows that it is a housing loan, and thus the construction of house cannot be denied.
6. It was also submitted before the Ld. CIT(A) that no examination was done by the Ld. AO. In the interest of justice, if the Ld. AO disbelieve that the house was constructed, he should have examined the property himself or deputed an Inspector to visit the said property. He, merely with a biased mind, disregarded the claim of the assessee.
Page 7 of 22 – AY 2017-18
Additional Evidences:- a. The conveyance Deed, Rent Agreement, and interest Certificate all clinching evidence to justify that the let-out property is House Property were all placed on record. b. In order to further prove the original contention that the said Property at Professor’s colony is a constructed unit and not vacant plot, the following documents are submitted:- a. Transfer of name in Professor Colony Property (PB 95) b. Registry Professor colony (PB 96-118) c. Approved Map (PB 119) d. Property Tax receipts for A.Y. 2015-16, 2016-17, 2017-18 and 2018-19 (PB 120-123) c. An application in this regard is pressed before your honours. It is therefore prayed that the additional evidences which are clinching evidences; and supporting the stand of the assessee that a residential house was let out may kindly be taken on record, in the interest of justice. CIT vs Kum Satya Sethia 143 ITR 486 (M.P.). The appellant therefore prays that the addition may kindly be deleted.” 15. Ld. AR reiterated the above submissions orally and finally asserted that in the light of additional evidences, this issue may go to the AO for adjudication afresh.
Replying to above, Ld. DR for revenue too agreed that the assessee has filed additional evidences, therefore he would have no objection if this issue is remanded to the file of AO.
We have considered submissions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. Since the assessee has filed ‘additional evidences’ as mentioned at Point No. 7 of Written-Submission re-produced above and Page 8 of 22 – AY 2017-18 those evidences need a deep examination by AO, we accept the proposal of parties for remanding this issue back to the file of AO for a fresh adjudication after hearing assessee. The assessee shall be at liberty to make all submissions qua this issue before AO. The AO shall give full opportunity to assessee and decide issue judiciously without being influenced by his earlier order in any manner.
Ground No. 5:
In this ground, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 17,45,421/- made by AO on account of income from undisclosed sources.
The precise facts apropos to this ground are such that assessee declared ‘gross agricultural receipts’ at Rs. 30,06,106/- yielding ‘net agricultural income’ of Rs. 25,64,921/- from a total of 76.65 acres of land [37.25 acres of land owned by assessee (+) 39.40 acres of land claimed to have been taken on ‘batai’ from other persons]. However, the AO accepted part of the agricultural income at Rs. 8,19,500/- on the basis of estimated income of Rs. 22,000/- per acre for 37.25 acres of land owned by assessee and rejected extra agricultural income of Rs. 17,45,421/- while treating the same as undisclosed income. The order passed by AO in this regard is re- produced below for an immediate reference:
“6. The assessee had shown agricultural income of Rs. 25,64,921/- in his return of income. Notices u/s 142(1) was issued requesting the assessee to substantiate the above by documentary evidences.
Page 9 of 22 – AY 2017-18
It is seen that the assessee had shown 'gross agricultural receipts' of Rs. 30,06,106/- On the basis of land holding documents furnished by the assessee, total land holding in the name of the assessee and his proprietary concern namely M/s Swastik Builders is 37.25 acres. The assessee had claimed that the land taken by him on 'batai’ is 39.40 acres. The 'batai agreements' furnished by the assessee are on plain papers. Further, on perusal of P-II [Khasra] of lands claimed to have been taken on 'batai', there is no entry of assessee in the column of 'sikmi pattedar'. Further, having regard to totality of facts of the case, all 'battia agreements' are considered as afterthought with a view to substantiate huge agricultural income shown by the assessee to the tune of Rs. 25,64,921/-.
2. As per decision of hon'ble ITAT, Indore in the case of Smt. Smita Binod & another vs. ITO [ITA No. 88/Ind/2010 dated 28/03/2011], admissible agricultural income per acre is Rs. 22,000/-. Thus, considering the land holding of the assessee i.e. 37.25 acres, admissible agricultural income comes to Rs. 8,19,500/- Remaining sum of Rs. 17,45,421/- [Rs. 25,64,921 minus Rs. 8,19,500/-] is treated as 'income from undisclosed sources' and accordingly added to the total income of the assessee.” 20. The CIT(A) upheld AO’s order by observing and holding thus:
“9. Ground Nos. 4, 5 and 6 are assailing the addition made by the Assessing Officer to the tune of Rs. 17,45,421/-. In this connection, the appellant has submitted few documents in support of this claim which were already furnished before the Assessing Officer also. 9.1. It is noticed that the Assessing Officer has allowed an agricultural income of Rs. 8,19,500/- as against the appellant's claim of Rs. 25,64,921/- and treated the balance amount of Rs. 17,45,421/- as income from undisclosed sources. In this regard, the appellant has failed to adduce any documentary evidence supporting the claim of him earning the agricultural income of Rs. 25,64,921/-. 9.2. It is an established dictum that before claiming exemptions for agricultural income, it is contingent upon the assessee to produce certain documentary evidence so that the assessing officer can verify them for correctness of allowance of exemption. The documentary evidences can be all or most of the following which are:- 1. Land records- Ownership/rights over the agricultural land, 2. Land Usage, 3. Cost of cultivation, 4. Purchase of seeds, fertilizers 5. Labour / Machinery use in agricultural activity/
Page 10 of 22 – AY 2017-18
Cash book and / or Bank Statements of the assessee 7. Transaction details of agricultural produce 8. Details of receipts and expenditure claimed (i.e. proof of agricultural receipts and expenses) 9. Proof of having sold the agricultural produce in the open market or in one's own retail shop. 10. Proof of having sold the agricultural produce directly from any land used for agricultural purposes. 11. Proof of having derived the agricultural income from direct connection with the agricultural land showing cultivation of the ground, tilling of the land, sowing of the seed, planting and similar operations on the land, expenditure on human labour and skill, weeding, digging the soil around the growth, removal of undesirable growth, preservation of the crops from insects and pests, protection from depredations by cattle, tending, pruning, cutting, etc. 12. Proof of performance of any process ordinarily employed by a cultivator or receiver of rent in kind. 13. Proof of having rendered the produce raised or received by him in a fit condition for being taken to the market without applying any process other than ordinarily employed by a cultivator or receiver of rent in kind 14. Proof / evidence of the market value of the agricultural produce sold, evidence of the rate, quality and kind of the produce sold. 15. Proof of having granted rights to the user of the land where it was given to some share cropper of cultivation. 16. Proof of having derived the agricultural Income from direct connection with the agricultural land showing cultivation of the ground, tilling of the land, sowing of the seed, planting and similar operations on the land, expenditure on human labour and skill, weeding, digging the soil around the growth, etc. 9.3. In the instant case, the agricultural income claimed to have been earned by the appellant is on a higher side. However, irrespective of the size of amount of agricultural income declared huge or small, the tests through which the said agricultural income have to pass through are rigorous and fool proof. Lapse in verifying the documents in the above check list along with any other details that are furnished by the appellant will result not only in inaccurate allowance of exemption but also under-assessment of income. 9.4. It is also imperative to place respectful reliance on the judgement of Hon'ble Apex Court in the case of CIT v. R. Venkataswamy Naidu (1956) 29
Page 11 of 22 – AY 2017-18 ITR 529 (SC) wherein it has been categorically held that the onus lies on the assessee to establish the agricultural income to claim exemption on it. In the instant case, though the appellant has furnished some documents substantiating his claim, the documentary evidence for the claim of such huge agricultural income at Rs. 25,64,921/- are substantive and therefore not satisfactory. Under the circumstances, these grounds of the appellant, numbering from 4 to 6, are not sustainable, for want of evidence and hence, these three grounds are dismissed.”
Before us, Ld. AR for assessee made following submissions:
(i) A chart has been filed at Pages 6-7 of his Written-Submission giving details under columns S.No., Receipt No./Paper-Book Page No., Crop,
Amount, RTGS, Bank in which payment was received, Date. Referring to same, Ld. AR submitted that the assessee has received entire proceeds of agriculture of Rs. 30,06,106/- through banking channel except one receipt of Rs. 77,688/- appearing at S.No. 19 in cash. Ld.
AR also showed that the receipts/invoices of crop sales issued by parties to/though whom the agricultural crops were sold, are also filed at Pages 130-151 of Paper-Book. By means of these details and documents, Ld. AR submitted that all receipts of agriculture were through banking channel and also they are well supported by cross receipts/invoices issued by parties.
(ii) That the copies of “Batai Agreements” for 39.40 acres of land taken by assessee on ‘batai’ are filed at Pages 153-157 of Paper-Book. Therefore, the AO is wrong in rejecting the lands taken on ‘batai’.
(iii) That the AO has estimated agriculture income at Rs. 22,000/- per acre on the basis of ITAT, Indore’s decision in Smita Binod & Others
Page 12 of 22 – AY 2017-18
Vs. ITO (supra) but that decision relates to AY 2001-02. Thus, the AO has completely ignored the inflation from AY 2001-02 to AY 2017-18 under consideration. He submitted that the assessee has declared net agricultural income of Rs. 25,64,921/- from 76.75 acres of land giving income of approx. Rs. 33,419/- per acre which is quite reasonable considering the inflation during AY 2001-02 to 2017-18.
(iv) That the earlier AYs 2014-15 and 2013-14 of this very assessee were subjected to scrutiny assessments wherein the agricultural income of Rs. 23,24,894/- and Rs. 20,32,145/- respectively for those years declared by assessee were accepted by department. Copy of assessment-orders dated 25.10.2016 and 04.03.2016 u/s 143(3) are filed at Pages 16-21 of Written-Synopsis. Thus, the agricultural income of Rs. 25,64,921/- shown in current year is quite reasonable and must be accepted by department.
Per contra, Ld. DR for revenue referred the “Batai Agreements” filed at Pages 153 to 157 of Paper-Book being relied by Ld. AR and submitted that (i) those ‘Batai Agreements’ which are 5 in number, are on plain white papers and do not demonstrate any authenticity, (ii) that the assessee has not filed any detail/evidence to show that the parties entering into those ‘Batai Agreements’ were ‘owners’ of the concerned lands or not. Ld. DR submitted, in this situation this issue should also be remanded to AO for an in-depth verification and adjudication.
Page 13 of 22 – AY 2017-18
We have considered rival submissions of both sides and perused the case record including the orders of lower-authorities. The controversy in this ground relates to the agricultural income. While the assessee has declared agricultural income of Rs. 25,64,921/- from total land of 76.65 acres (consisting of 37.25 acres self-owned + 30.40 acres taken on ‘batai’), the AO has accepted agricultural income of Rs. 8,19,500/- from 37.25 acres of self- owned land. Thus, the first part of controversy relates to the total area of land held by assessee for deriving agricultural income. There is no dispute qua 37.25 acres of self-owned land but the AO has rejected 30.40 acres of land claimed by assessee to have been taken on ‘batai’. The AO has mentioned that the ‘Batai Agreements’ are on white paper and accordingly rejected the same. However, the AO has not made full enquiry qua those ‘batai agreements’. So far as past scrutiny-assessments of assessee for AY 2014-15 & 2013-14 being relied by Ld. AR are concerned, we find that the ‘batai agreements’ filed at Pages 153-157 of Paper-Book, have been made from 01.04.2015/01.06.2015/01.03.2016/15.01.2016 which shows that those agreements were not in existence in AY 2014-15 & 2013-14. Therefore, the scrutiny assessment-orders of AY 2014-15 & 2013-14 cannot help the assessee. Thus, we find a strong merit in the claim of Ld. DR that there is a necessity of full verification by AO. The second part of controversy relates to the quantum of income estimated by AO. The AO has estimated income @ Rs. 22,000/- per acre by adopting a benchmark from ITAT’s order in Smita Binod & Others Vs. ITO (supra) but here we find a strong merit in the Page 14 of 22 – AY 2017-18 submission of Ld. AR that the said decision relates to AY 2001-02 and presently we are concerned with AY 2017-18, therefore the AO needs to give inflation benefit. Thus, for resolution of both parts of entire controversy before us, we find that it would be most appropriate to remand this issue also to the file of AO for a fresh adjudication. The assessee shall be at liberty to make all submissions qua this issue before AO. The AO shall give full opportunity to assessee and decide issue judiciously without being influenced by his earlier order in any manner.
Ground No. 6:
In this ground, the assessee claims that the CIT(A) was not justified in confirming the addition of Rs. 1,70,85,940/- made by AO on account of undisclosed investment u/s 69A.
For this ground, the assessee has filed an application under Rule 29 of Income-tax Appellate Tribunal Rules, 1963 as under:
“Name: Anil Kumar Gupta, Bhopal A.Y.: 2017-18 Subject: Application under rule 29 of the Income-tax Appellate Tribunal Rules, 1963 Appeal No.: ITA 367/Ind/2023 May it please your Honours, In the present case, in respect of Ground No. 6: The Ld. CIT(A) was not justified in confirming the addition of Rs. 1,70,85,940/- u/s 69A as undisclosed investment.
Page 15 of 22 – AY 2017-18
1. The deposits in bank account were added by the Ld. AO. Assessee submitted that there are certain loans taken from various relatives and friends.
2. The confirmation and other evidences were never called for by the Ld. AO or the Ld. CIT(A). However, the same are being submitted before your honours, to establish the source of the deposits in form of credit entries in the bank.
3. These are all clinching evidence to justify the source of the deposits in the bank. It is most humbly prayed that the above documents may be admitted in the interest of justice. These documents would be clinching evidences and will provide the correct facts before your honours. Humble reliance is placed on the judgment of the jurisdictional High Court in CIT vs Kum Satya Sethia 143 ITR 486 (Μ.Ρ.). The appellant prays and shall ever remain obliged for this act of kindness. Submitted. Ashish Goyal, Advocate” 26. Further, the Ld. AR also made following submissions in Written- Synopsis, reiterated the same submissions orally and finally asserted that in the light of additional evidences, this issue should go to the AO for adjudication afresh:
Page 16 of 22 – AY 2017-18 Page 17 of 22 – AY 2017-18 Page 18 of 22 – AY 2017-18 Page 19 of 22 – AY 2017-18 Page 20 of 22 – AY 2017-18
Replying to above, Ld. DR for revenue too agreed that the assessee has filed additional evidences, therefore he would have no objection if this issue is remanded to the file of AO.
We have considered submissions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. Since the assessee has filed ‘additional evidences’ by way of application under Rule 29 of ITAT Rules, 1963, we accept the proposal of parties for remanding this issue back to the file of AO for a fresh adjudication after hearing assessee. The assessee shall be at liberty to make all submissions qua this issue before AO. The AO shall give full opportunity
Page 21 of 22 – AY 2017-18 to assessee and decide issue judiciously without being influenced by his earlier order in any manner.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 02/04/2025