R.Lakshminarayanamoorthy, CHENNAI V. ACIT, Coimbatore

ITA 1348/CHNY/2011

• Counselvise Citation: 134821714 RSA 2011
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: R K V SUNDAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A. NO. 1348/MDS/2011 ASSESSMENT YEAR : 2006-07 R. LAKSHMINARAYANAMOORTHY C/O SRI T.N.SEETHARAMAN, ADVOCATE, #384 (OLD NO.196), LLOYDS ROAD, CHENNAI-86. PAN AATPL 4105 E (APPELLANT) VV VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI R.K.V.S UNDAR, ADVOCATE RESPONDENT BY : SHRI K.E.B. R ENGARAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 26 TH JUNE, 2012 DATE OF PRONOUNCEMENT : 26 TH JUNE, 2012 O R D E R PER DR. O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I AT COIMBATORE DATED 23.5.2011. THE APPEAL ARIS ES OUT OF THE ITA 1348/11 :- 2 -: ASSESSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME -TAX ACT, 1961. 2. IN THE RETURN FILED FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS OFFERED FOR RATE PURPOSES AN AGRICULTU RAL INCOME OF ` 15 LAKHS. THE ASSESSING OFFICER DISALLOWED ` 8 LAKHS FROM THE CLAIM OF THE ASSESSEE AND TREATED THE BALANCE OF ` 7 LAKHS ALONE AS AGRICULTURAL INCOME. HE ADDED THE DISALLOWED AG RICULTURAL INCOME OF ` 8 LAKHS AS INCOME FROM OTHER SOURCES TAXABLE IN TH E HANDS OF THE ASSESSEE. IN FIRST APPEAL, THE COMMIS SIONER OF INCOME-TAX(APPEALS) REDUCED THE ADDITION OF ` 8 LAKHS TO ` 4 LAKHS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. THE ASSESSEE IS AGGRIEVED ON THE ADDITION OF ` 4 LAKHS SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS ) AND, THEREFORE, THE SECOND APPEAL BEFORE THE TRIBUNAL. 4. WE HEARD BOTH SIDES IN DETAIL. 5. THE FIRST CONTENTION OF THE ASSESSEE IS AGAINST THE QUANTUM OF ADDITION SUSTAINED BY THE COMMISSIONER OF INCOME - TAX(APPEALS) UNDER THE HEAD INCOME FROM OTHER SOUR CES. THE ALTERNATE CONTENTION OF THE ASSESSEE IS THAT THE AS SESSEE HAS NOT ITA 1348/11 :- 3 -: MADE ANY CORRESPONDING INVESTMENT AGAINST THE ADDIT ION SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS ) AND, THEREFORE, EVEN IF AN AMOUNT OF ` 4 LAKHS IS DISALLOWED FROM THE AGRICULTURAL INCOME, THE SAME AMOUNT CANNOT BE TREA TED AS INCOME FROM OTHER SOURCES. 6. THE ALTERNATE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE IN LAW. THE CASE OF THE ASSESSEE IS THAT A PORTION OF THE AGRICULTURAL INCOME DISALLOWED BY THE ASSESSING AUT HORITY SHOULD BE IGNORED THEREAFTER AND SUCH DISALLOWANCE SHOULD NOT BE TREATED AS TAXABLE INCOME UNDER THE HEAD INCOME FR OM OTHER SOURCES. IT IS THE CASE OF THE ASSESSEE THAT WHER EVER AGRICULTURAL INCOME IS DISALLOWED AND NOT ACCEPTED BY THE DEPART MENT, THE MATTER ENDS THERE AND THAT PORTION OF THE AGRICULTU RAL INCOME NOT ACCEPTED BY THE DEPARTMENT SHOULD NOT BE TREATED AS NON AGRICULTURAL INCOME FOR THE PURPOSE OF TAXATION. 7. THE FIRST REASON BY WHICH WE CANNOT ACCEPT THE A BOVE CONTENTION IS THE RULE THAT THE ASSESSING OFFICER C ANNOT DETERMINE THE TAX LIABILITY OF THE ASSESSEE LESS THAN WHAT HA S BEEN RETURNED BY THE ASSESSEE IN THE RETURN OF INCOME. IN THE PR ESENT CASE, THE ITA 1348/11 :- 4 -: ASSESSEE HAS OFFERED ` 15 LAKHS AS AGRICULTURAL INCOME. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ACCEPTED ` 11 LAKHS AS AGRICULTURAL INCOME AND TREATED ` 4 LAKHS AS NON AGRICULTURAL INCOME. IF THIS AMOUNT OF ` 4 LAKHS NOT ACCEPTED AS AGRICULTURAL INCOME IS IGNORED, AS ARGUED BY THE ASSESSEE, WHAT WILL HAPPEN? THE ASSESSING OFFICER WILL ACCEPT THE TAXABLE INCOM E AND ANOTHER ` 11 LAKHS AS AGRICULTURAL INCOME FOR RATE PURPOSES. AS THE QUANTUM OF AGRICULTURAL INCOME HAS BEEN REDUCED FRO M ` 15 LAKHS TO ` 11 LAKHS, ADDITIONAL TAX ARISING OUT OF RATE DIFFE RENCE WILL BE LESS THAN WHAT HAS BEEN DISCLOSED BY THE ASSESSEE I N HIS RETURN. THIS IS BECAUSE THAT PART OF AGRICULTURAL INCOME NO T ACCEPTED BY THE DEPARTMENT IS IGNORED AND NOT TREATED AS PART O F TAXABLE INCOME. THE QUANTUM OF AGRICULTURAL INCOME IS REDU CED AND TO THAT EXTENT, EVEN THE TAX ADMITTED BY THE ASSESSEE IS REDUCED MARGINALLY. THIS WILL BE AGAINST THE RULE OF ASSE SSMENT. 8. THE SECOND REASON IS THAT THE ASSESSEE HIMSELF H AS DISCLOSED AN AMOUNT OF ` 15 LAKHS AS INCOME. THE ASSESSEE HAS CLAIMED IT AS AGRICULTURAL INCOME. THE ASSESSING O FFICER MAY ACCEPT OR MAY NOT ACCEPT THAT THE ENTIRE AMOUNT IS AGRICULTURAL INCOME BUT THE FACT IS THAT THE ASSESSEE HAS DISCLO SED ` 15 LAKHS AS HIS INCOME. THAT FACTUM IS ACCEPTED BY THE DEPA RTMENT. NOW, ITA 1348/11 :- 5 -: WHETHER THE ENTIRE INCOME IS TREATED AS AGRICULTURA L OR NOT, THAT DOES NOT GO TO BLACK OUT THE FACT THAT THE ASSESSEE HAS EARNED ` 15 LAKHS. THEREFORE, WHEN THE COMMISSIONER OF INCO ME- TAX(APPEALS) HAS ACCEPTED AGRICULTURAL INCOME ONLY TO THE EXTENT OF ` 11 LAKHS, THE BALANCE OF ` 4 LAKHS HAS TO BE STILL ACCOUNTED BY THE ASSESSING AUTHORITY, WHICH CAN BE ACCOUNTED IN THE ASSESSMENT ONLY BY TREATING THAT AMOUNT AS TAXABLE INCOME UNDER ANY HEAD OF INCOME. THE ASSESSING OFFICER HAS TO T REAT THAT AMOUNT OF ` 4 LAKHS AS NON-AGRICULTURAL INCOME AND THE SAME HA S TO BE BROUGHT TO TAX. THE PROPER HEAD IS INCOME F ROM OTHER SOURCES. 9. THEREFORE, IT IS TO BE SEEN THAT THE DISALLOWED PORTION OF AGRICULTURAL INCOME HAS ALWAYS TO BE TREATED AS TAX ABLE INCOME IN THE HANDS OF AN ASSESSEE UNDER AN APPROPRIATE HEAD. IF NO SPECIFIC HEAD OF INCOME IS ATTRIBUTABLE FROM THE FA CTS OF THE CASE, THE SAME SHOULD BE TAXED UNDER THE HEAD INCOME FRO M OTHER SOURCES. 10. THEREFORE, THIS LEGAL ARGUMENT OF THE ASSESSEE CANNOT BE ACCEPTED. ITA 1348/11 :- 6 -: 11. REGARDING THE QUANTUM OF ADDITION SUSTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS), WE FIND THAT S OME MODIFICATION IS CALLED FOR. THE AGRICULTURAL INCOM E OFFERED BY THE ASSESSEE FOR THE SUBSEQUENT ASSESSMENT YEAR WAS ` 13.5 LAKHS. THE ASSESSEE IS HAVING SUBSTANTIAL AGRICULTURAL HOL DINGS AND HE IS CARRYING ON AGRICULTURAL ACTIVITIES. IN THESE CIRC UMSTANCES, WE HOLD THAT A DISALLOWANCE OF ` 2 LAKHS WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE ADDITION OF ` 4 LAKHS MADE BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IS REDUCED TO AN ADDITION OF ` 2 LAKHS. IN THAT WAY, THE APPEAL IS PARTLY SUCCESSFUL ON THE QU ANTUM SIDE. 12. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 26 TH OF JUNE, 2012 AT CHENNAI. SD/- SD/- (SATBEER SINGH GODARA) JUDICIAL MEMBER (DR. O.K.NARAYANAN) VICE-PRESIDENT CHENNAI, DATED THE 26 TH JUNE, 2012 MPO* ITA 1348/11 :- 7 -: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR