ANIL KUMAR GUPTA,BHOPAL vs. ITO, 4(3), BHOPAL, OFFICE OF ITO BHOPAL

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.

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)

The assessee/revenue has raised following grounds:

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.

The Ld. CIT(A) was not justified in confirming the disallowance of Interest Rs. 6,92,650/- u/s 24(b).

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).

The Ld. CIT(A) was not justified in confirming the addition of Rs. 17,45,421/- considering it as income from undisclosed sources.

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:

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.

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.

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.

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.”

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.

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.

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.

During first-appeal, the CIT(A) upheld AO’s order.

Before us, Ld. AR for assessee made following submissions in Written- Synopsis:

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.

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.

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.

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:

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/-.

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:

Before us, Ld. AR for assessee made following submissions:

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)

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.

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:

The deposits in bank account were added by the Ld. AO. Assessee submitted that there are certain loans taken from various relatives and friends.

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:

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

Resultantly, this appeal is allowed for statistical purpose.