Income Tax Department vindictively disallowed agricultural income claim of Jayalalithaa. Sasikala also gets relief from ITAT
ABCAUS Case Law Citation:
1033 (2016) (10) ITAT
Brief Facts of the Case(s):
In both the cases, among other thing, the claim of agricultural income was disallowed by the Assessing Officer (AO) for want of evidences that the assessees have earned agricultural income and treating the same as income from other source.
Case of Jayalalithaa
The disallowance related to the Assessment Year 1997-98 and 2000-01. In her Income Tax Return, the assessee had claimed to have earned agricultural income from the sale of grapes during the relevant assessment year(s). The AO disbelieved the claim of the assessee because of the following reasons:-
(i) The assessee’s representative had only filed certain sale receipts relating to sale of agricultural produce after two years of filing of the return of income.
(ii) The assessee did not produce any evidence relating to the commencement of basic agricultural operations such as vouchers for purchase of fertilizers, pesticides and details of wages paid etc.
(iii) No evidence was produced for agricultural operations such as tilling, sowing, planting.
(iv) No proof was produced to show where the agricultural income was deposited / deployed.
CIT(A) also confirmed the disallowance.
The ITAT observed that existence of grape vines, coconut trees, and other plantations which survives for number of years, standing in the agricultural land owned by the assessee was not in dispute and therefore it cannot be disputed that the assessee did not earn any agricultural income during the relevant assessment year.
The Tribunal further observed that when the assessee had claimed agricultural income and furnished some details regarding the same, the Revenue should have examined these facts and if could not accept to the quantum of income declared by the assessee at least they should have estimated the agricultural income of the assessee, considering the earlier decisions and facts during the relevant assessment year. It was evident from the order of the Revenue authorities that they had not made any attempt to do so, but has vindictively proceeded to treat the “agricultural income” declared by the assessee as” income from other source”.
With respect to another grievance related to addition of interest income on bank deposits frozen by the DVAC Wing of the Tamil Nadu Government, the ITAT observed that interest income of the assessee could be recognized only when there was no uncertainty and a significant scope to receive the same. Therefore, in the case of the assessee the accrued interest on the bank deposit frozen by the DVAC, wing of the Govt. of Tamilnadu cannot be treated as interest income of the assessee during the relevant assessment year
ITAT also quashed the order passed by the Commissioner of Income Tax u/s 25 of the Wealth Tax Act which was based on the findings by CIT u/s 263 of the Income Tax Act which was already annulled by the Tribunal.
Case of Sasikala
The assessee had for the AY 1998-99 claimed agricultural income of Rs.3,18,750/-. Pursuant to a notice issued under section 142(1) of the Income Tax Act, 1961. The case of the assessee was selected for scrutiny. During the course of the scrutiny proceedings, the assessee submitted that all the sales of agricultural produce namely, coconuts, Korean grass, vegetables, were made by cash. However, since no evidences were placed before the Assessing Officer for having earned agricultural income, the AO treated the same as income from other source and completed the assessment u/s 143(3).
On appeal, the Commissioner of Income Tax (Appeals) confirmed the order of the AO accepting his view.
Before the Tribunal, the assessee submitted that owning of 23.82 acres of land by the assessee had been accepted by the Tribunal for the AY 1997-98.It was also submitted that the appellant had furnished profit and loss account, copies of bills before the AO. It was submitted that from the vast land owning of the assessee she has declared only Rs.3,18,750/- as agricultural income which is quite reasonable and cannot be disbelieved.
ITAT observed that it was clearly established that the assessee owned approximately 23.82 acres of agricultural land and the same was not disputed. The assessee had also produced before the Revenue the details of her agricultural income and certain bills and the Income Tax Department had acknowledged the receipt of the same on the same date. For the assessment year 1997-98, Commissioner of Income Tax (Appeals) had estimated the assessee’s agricultural income at 50% of the amount claimed which was upheld by the Tribunal.
Considering these facts and the extent of land holding of the assessee, the ITAT opined that the amount of agricultural income declared by the assessee was quite reasonable. The Tribunal also noted that the Revenue had also not made any effort to prove that no agricultural activity was carried on in the assessee’s farm.
The ITAT further observed that the Revenue had rejected the claim of the assessee only on the basis that the assessee had not proved with documentary evidence that she had earned agricultural income. In normal circumstances for petty farming activity it is difficult or sometimes not practicable to maintain documentary evidence for carrying out agricultural activities. In such situation, though the onus is on the assessee to establish that agricultural activities were carried out, the Revenue should also give some leverage by verifying the facts stated by the assessee before simply disregarding their explanation. In the present case of the assessee, the Revenue had not made any efforts to verify the claim of the assessee.
Thus ITAT opined that since the agricultural income declared by the assessee was quite nominal considering the extent of land holding the addition made by the Revenue by treating the agricultural income as income from other source was not warranted.
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