SHRI RAKESH AGARWAL,KOLKATA vs. ITO, WARD-36(1), KOLKATA, KOLKATA

BEFORE SHRI P.M. JAGTAP, V.P & SHRI S. S. GODARA, JM आयकर अपीलसं./ ("नधा"रण वष" / Assessment Year: 2013-14) Shri Rakesh Agarwal Vs. ITO, Ward-36(1), Kolkata C/o V.N. Purohit & Co., Diamond Chambers, Unit-III, 4th Floor, Suit No.4G, Kolkata – 700 016. "थायीलेखासं./जीआइआरसं./PAN/GIR No.: ADLPA6462E (Appellant) .. (Respondent) Appellant by : Shri V.N. Purohit & H.V. Bhartwaj, FCA Respondent by : Smt. Ranu Biswas, Sr. DR सुनवाईक"तार"ख/ Date of Hearing : 24/09/2019 घोषणाक"तार"ख/Date of Pronouncement : 27/11/2019 आदेश / O R D E R Per Shri S. S. Godara: This assessee’s appeal for assessment year 2013-14 arises against the Commissioner of Income Tax (A) - 10, Kolkata dated 14.06.2017 passed in Case No.83/CIT(A)-10/Ward-36(1)/2016-17/Kol involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

1.

1. The action of the Ld. AO in making the impugned addition of Rs.2,15,000/- on account of the claim of agricultural income not being allowed has been examined carefully. I have also examined the submissions made by the Ld. A.R for the appellant during the course of the scrutiny proceedings. During appeal, it was the contention of the appellant that after submission of explanation of assessee, as has been recorded by the Ld. AO, the Ld. AO did not ask any further documents or proof of ownership of Agricultural land though details of the same are part of assessee's Balance sheet. The appellant submitted certain details in support of his contention during appeal such as the details of Agricultural Land in which assessee has undivided share is enclosed, and contended that from such details it could be appreciated that the assessee owned as joint-holder of agricultural land in 2 plots at Kalthavalasa which was given on lease to one Sri Midatala Venkat Ramana Krishra Murthi vide lease deed dated 18.03.2011. It was further contended that twelve other plots of land in Yalamanchili were given on lease to one Sri G. Srinivasa Rao. The appellant also enclosed the assessee's Bank Statement with city Union Bank which, it was claimed was also filed before the Ld. AO. It was contended that in the statement, the relevant details of all deposits and withdrawals are available, and it was contended that it can be appreciated that on 14.05.2012, 17.09.2012 and 28.03.2013, the assessee has received respectively through banking channels totalling to Rs.202,100/- and balance Rs.12,900/- was received in cash.

2. The contentions as well as the documents submitted were forwarded to the ld. A.O seeking a remand report in the matter. In the remand report, on this issue, the ld. A.O has submitted as under: Issue No.2) Agricultural Income: The assessee was directed to furnish, inter alia, documents in support of agricultural activities carried out in the leased out lands. In response, the assessee only filed two copies of lease deeds of agricultural land. As per clause (a) of sub-section 1A of section 2 of the I.T. Act, 1961 "Agricultural income" means - [(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;] Since, the assessee cold not produce any documents or evidences from which it can be inferred that the lands were used for agricultural purpose, rent of Rs.2,15,000/- received towards lease rent cannot be treated as agricultural income. Further, the submission of the assessee that lands are situated beyond specified limits of municipal boards has no relevance because all lands situated beyond the jurisdiction of a municipality are not agricultural lands. Rather, as per clause (ii) of section 2(14) of the I.T. Act, 1961 land situated within the jurisdiction of a municipality and used for agricultural purpose may not be treated as agricultural land.

3. The said remand report was also offered to the appellant / Ld. A.R for rebuttal and in the rebuttal, the appellant-assessee / Ld. A.R has submitted as under: Issue No. 2- Agricultural Income Lands were given on lease for agricultural purpose to two lessees and lease deed and extension letter thereof were furnished (also enclosed) with letter dated 05-05-2017. When rent was received and there is no denial that land was only for agriculture purpose and land revenue was also paid it is fully covered by definition quoted by I.T.O. in his report. Lease deeds are at pages 45 to 50 of submission and details are again enclosed for your kind perusal. In preceding year assessee disclosed agricultural income which was accepted.

4. I have carefully considered the issues raised before the Ld. AO as well as in appeal. I have also carefully considered the Remand report of the Ld. AO as well as the rebuttal placed on record by the appellant-firm. It is the contention of the Ld. AO that it appears that the matter is not clear whether the land qualifies as agricultural income. No doubt the lease deeds have been submitted, and these support the contentions of the appellant that he does possess agricultural land. However, after considering all the documents submitted and the arguments, in my considered view of the matter, the mere owning of certain agricultural land is not co- terminus with generating agricultural income from the same. It is seen that the appellant has made no attempt to bring on record as to what crops were grown and the yield per unit of such impugned agricultural land. In my considered view of the matter by the very nature of the claim, when a certain receipt is claimed to be exempt, the rules of examination have to apply very strictly, and it is for the appellant-taxpayer to bring on record irrefutable evidence in the matter. In this matter certificates from the local tehsil office certifying that the land was agricultural and the patta pass books which certify so have not been produced. The contention of the appellant that in an earlier year the matter was not raised by the Ld. AO is also not acceptable, as it is well Shri Rakesh Agarwal established that res judicata does not apply to the Income Tax proceedings, which are independent from each other for different years. Nor has it brought on record by the appellant that rules of consistency have been violated by the Ld. AO in bring the matter of the agricultural income to tax. Also, I am not inclined to accept that merely because major portion of the impugned receipts were channelized through the bank, it partakes the nature of agricultural income. In the emergent situation, I am of the considered view that the claim of the assessee has not been adequately substantiated with irrefutable proof, and find that the documents submitted do not fully serve for providing such proof. Hon'ble Courts have held that when an assessee claims exemption as agricultural income, it is the bounder duty of the assessee to fully substantiate it, and if this is not done, the impugned receipt can be taxed as income from "Other Sources". Such ratio emanates from the decision of the Hon'ble High Court of Rajasthan in the case of Gopi Chand Lila Vs CIT( Raj) 225 ITR 320 as well as the decision of the Hon'ble High Court of Madhya Pradesh in the case of Ridhkarandas Poonamchand Bhura Vs CIT(MP) 231 ITR 604. With such view in consideration, I am not inclined to accept the contentions of the appellant- assessee, and therefore confirm the action of the Ld. AO. The ground of appeal accordingly stands dismissed.”

4. Learned counsel representing assessee vehemently contends during the course of hearing that both the lower authorities have erred in adding assessee’s agricultural income claim of Rs.2,15,000/-. He invites our attention to the assessee’s detailed paper book regarding the agricultural income received from lease agreement with Shri Midatala Venkat Ramana Krishra Murthi and G. Srinivasa Rao, income and expenditure accounts for the years ending on 31.03.12 and 31.03.13, chart showing agricultural income derived in assessment years 2012-13 and 2013-14 as well as lease agreement entered with the foregoing two payers; respectively. We thus find no force in Revenue’s arguments supporting the lower authorities’ stands in view of the above stated supportive evidence. It is thus an instance of the assessee deriving agricultural income by leasing his land to the extent of 5 acre 46 cents in Vizianagaram District, Andhra Pradesh. It has come on record that his similar agricultural income claim stands accepted in preceding assessment year 2012-13 as well. The assessee had purchased the land in question way back on 23.11.10. He thereafter executed lease agreements with the two farmers who all in cultivating possession thereof. We hold in this factual backdrop that the assessee’s agricultural income amount of Rs.2,15,000/- under challenge deserves to be accepted. We accordingly direct the Assessing Officer to delete the impugned disallowance. This first substantive ground is accepted in assessee’s favour. Shri Rakesh Agarwal 5. Next comes the latter issue of interest expenditure disallowance amounting to Rs.7,85,425/- made in the course of assessment and restricted to the tune of Rs.3,00,000/- in the CIT(A)’s order as under:

“12. DECISION:

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2. The said remand report was also offered to the appellant Ld. A.R for rebuttal and in the rebuttal, the appellant-assessee / Ld. A.R has submitted as under: Issue No. 3- Interest on loan Naturally utilization of loan received during the year is to be furnished. From page 6 of enclosures with submission your Ld. self can see that major items were taken in 2010 to 2012. More than 5 years has passed. In all earlier year interest was claimed and allowed. To link each loan received to utilization all past record will have to be gone through. He has income from House Property Rs.8,97,700/- (page 3 of annexure) received remuneration and interest from three firm Rs.60,000/- and Rs.35,572/- (Page-3 of annexure). His own capital is Rs.38,94,343/- on 01-04-2012. All these points have been ignored by I.T.O. particularly income from House Property. Confirmations of two squared up loan a/c for interest payment are enclosed - K.C. Agarwal (HUF) & V. Lakshmi.

3. I have carefully examined the matter of the disallowance of the claim of interest, an amount of Rs.7,85,425/- . I have adjudicated the matter of the loans in the earlier paragraphs and held the same to be genuine in the facts of the case. The question to be addressed in this ground is whether the appellant would be eligible for the claims of expenditure made against those loans. There can be no doubt that the assessee has received income from House property, a matter which appears to have been overlooked by the Ld. AO. I find that the Ld. AO has accepted a small portion of the claim of expenditure, being Rs.34,617/-. The Ld. AO has observed that as the investment in M/s Kailash Steel Enterprises generated interest income of Rs.34,617/-, in the hands of the assessee adjustment to that extent with total interest claim of Rs.7,71,892/- can be allowed. For the balance interest amount, the Ld. AO has not found the claims of the appellant to be acceptable. There can be no gainsaying that when the loans have been found to be acceptable, the interest component also ought to be held as allowable. However, in the present case, the loans relate to earlier years and the appellant terms of the figures which relate to interest of earlier years and interest of the current year of assessment. It was for the appellant to justify the claim fully with facts and figures. Considering the overall facts of the case, and the capital which has been explained in the hands of the appellant, however, it appears in my as, by his own admission been unable to offer a clear picture in terms of the figures which relate to interest of earlier years Shri Rakesh Agarwal and interest of the current year of assessment. It was for the appellant to justify the claim fully with facts and figures. Considering the overall facts of the case, and the capital which has been explained in the hands of the appellant, however, it appears in my considered mind that there has to be an allowance for the interest component. In my view of the matter, it would meet the ends of justice if the disallowance is restricted to Rs.3,00,000/-, and the assessee-appellant is relieved of the balance disallowance. I am aware that there is an element of subjectivity in the matter; however given the dearth of figures, I am of the considered view that this is one option available for adjudicating the issue. This ground of appeal is accordingly party allowed.”

6. Both the learned representatives reiterate their respective stands against and in support of the impugned interest expenditure disallowance to the tune of Rs.3,00,000/- affirmed in the lower appellate proceedings than that made in assessment of Rs.7,85,425/-. It further emerges that the CIT(A)’s above extracted findings nowhere dispute that the assessee had availed loans in question in earlier assessment years. The CIT(A)’s order under challenge has made the impugned interest disallowance on estimation basis only to the tune of Rs.3,00,000/-. There is no clear-cut finding in his lower appellate discussion that there has been any diversion of interest bearing loans or it is a case of non-genuine loans. It rather emerges during the course of hearing with the submissions of learned authorized representative that only an amount of Rs.5,11,700/- come from the eponymous HUF involving corresponding interest amount of Rs.51,683/-only. All other loans have been carried forward from earlier assessment years. We conclude in this factual backdrop that the CIT(A) has erred in making impugned estimated interest disallowance of Rs.3,00,000/- under challenge. The same is directed to be deleted.

Order is pronounced in the open court on 27.11.2019. (P. M. Jagtap) (S. S. Godara) VICE-PRESIDENT JUDICIAL MEMBER कोलकाता /Kolkata; "दनांक/ Date:27/11/2019 (RS, Sr.PS) Shri Rakesh Agarwal