RAJESH VASANJI PATEL, MUMBAI V. ITO 26(2)(2), MUMBAI

ITA 3683/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7228 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P P JAYRAMAN
• Keywords: Salary income; Capital Gains
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, SMC, MUMBAI BEFORE SHRI R.V.EASWAR, SENIOR VICE PRESIDENT ITA NO. 3683/MUM/2009 (ASSESSMENT YEAR: 2005-06) RAJESH VASANJI PATEL 301, LALIT KUNJ, TEJPAL SCHEME ROAD NO.3, VILE PARLE (E), MUMBAI 400057 APPELLANT (PAN: AJAPP6511E) VS INCOME TAX OFFICER WARD 26(2)(2) MUMBAI. RESPONDENT APPELLANT BY: SHRI P P JAYRAMAN RESPONDENT BY: SHRI MOHD.USMAN O R D E R THE ASSESSEE IN THIS APPEAL IS AN INDIVIDUAL DERIV ING SALARY INCOME. HE IS A SENIOR CITIZEN AND HIS FAMILY CONSISTS OF HIMS ELF AND HIS WIFE. HE HAS NO CHILDREN AND WAS STAYING WITH HIS PARENTS. 2. WHILE COMPLETING THE ASSESSMENT FOR THE YEAR UN DER APPEAL, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEC LARED AGRICULTURAL INCOME OF RS.53,500/- FOR TAX PURPOSE. ON VERIFICATION, HE F OUND THAT THE LAND WAS SITUATED IN KUTCH AND BELONGED TO THE ASSESSEES FATHER AN D NOT TO THE ASSESSEE. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE INCOME CANNOT BE TREATED AS AGRICULTURAL INCOME AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. 2 3. ON APPEAL, THE ASSESSEE RELIED ON THE JUDGMENT OF CALCUTTA HIGH COURT IN THE CASE OF CIT V/S ALL INDIA TEA AND TRADING CO. LTD (1979) 117 ITR 525. THE CIT(A) DID NOT GIVE EFFECT TO THE DECISION ON THE G ROUND THAT IT RELATED TO OWNERSHIP OF AGRICULTURAL LAND WITH REFERENCE TO CA PITAL GAINS AND NOT WITH REFERENCE TO AGRICULTURAL INCOME. HE THUS UPHELD T HE DECISION OF THE ASSESSING OFFICER. 4. THE ASSESSEE IS IN FURTHER APPEAL AND I HAVE CO NSIDERED THE RIVAL SUBMISSIONS AND HAVE ALSO RESPECTFULLY PERUSED THE JUDGMENT CITED ABOVE. IN THAT CASE, THE ASSESSEE WAS THE OWNER OF THE LAND B UT COULD NOT USE THE SAME AS THE LAND WAS NOT IN HIS POSSESSION BUT WAS REQUI SITIONED FOR BEING USED BY LAND-LESS AGRICULTURISTS. THE QUESTION AROSE AS TO WHETHER ON SALE OF THE LAND BY THE ASSESSEE THE CAPITAL GAINS CAN BE CONSIDERE D AS AGRICULTURAL INCOME, EXEMPT FROM TAX. IT WAS HELD BY THE CALCUTTA HIGH COURT THAT EVEN WHEN ANY PERSON OTHER THAN THE ASSESSEE USES THE AGRICULTURA L LAND BELONGING TO THE ASSESSEE FOR AGRICULTURAL PURPOSES WITH OR WITHOUT THE CONSENT OF THE ASSESSEE AND SUCH PERSON DERIVES AGRICULTURAL INCOME FROM T HE LAND, THE SURPLUS ARISING ON THE TRANSFER OF THE LAND BY THE ASSESSEE WAS NOT TAXABLE AS CAPITAL GAINS. IN MY HUMBLE OPINION, THIS DECISION IS OF NO USE TO T HE ASSESSEE BECAUSE IT DEALT WITH THE CHARACTER OF THE LAND AND IT WAS HELD THA T THE CHARACTER OF THE LAND DOES NOT CEASE TO BE AGRICULTURAL IN NATURE, MERELY BEC AUSE THE PERSONS WHO CARRIED OUT THE AGRICULTURAL OPERATIONS ON THE LAND WERE N OT THE OWNERS OF THE LAND. SECTION 2(1A) OF THE INCOME TAX ACT, 1961 EXEMPTS A GRICULTURAL INCOME FROM THE PURVIEW OF TAXATION. THOUGH IT DOES NOT EXPRESSLY STIPULATE THAT THE ASSESSEE SHOULD BE THE OWNER OF THE AGRICULTURAL LAND, BUT IN MY HUMBLE OPINION IT IS INBUILT IN THE SECTION. UNDER CLAUSE (A) OF THE SUB-SECTION, THREE CONDITIONS ARE TO BE FULFILLED AND THEY ARE (I) RENT OR REVENUE SHOULD BE DERIVED FROM LAND; (II) 3 THE LAND SHOULD BE SITUATED IN INDIA AND (III) THE LAND SHOULD BE USED FOR AGRICULTURAL PURPOSE. THE REVENUE FROM THE LAND CAN BE SAID TO BE DERIVED FROM THE LAND ONLY IF THE LAND IS THE IMMEDIATE AND EFFE CTIVE SOURCE OF THE SAME. THESE CONDITIONS SHOW THAT IT IS AN INBUILT REQUIR EMENT OF THE SUB-SECTION THAT THE LAND SHOULD BE OWNED BY THE ASSESSEE IN ORDER TO C LAIM EXEMPTION FROM THE TAX. IN THE PRESENT CASE, THE LAND IS NOT ADMITTEDLY OWN ED BY THE ASSESSEE. IT IS OWNED BY HIS FATHER. THEREFORE, I HAVE NO OPTION BUT TO UPHOLD THE ASSESSMENT OF THE AGRICULTURAL INCOME OF RS.53,500/- AS NON AG RICULTURAL INCOME. HOWEVER, I AM UNABLE TO UPHOLD THE ASSESSMENT OF THE AMOUNT AS INCOME FROM OTHER SOURCES BECAUSE, THE SOURCE OF INCOME AND THE NAT URE THEREOF IS CLEARLY ASCERTAINABLE FROM THE FACTS. THE MONEY CANNOT TH EREFORE BE TREATED AS UNEXPLAINED INCOME UNDER THE HEAD INCOME FROM OTH ER SOURCES AT BEST EXEMPTION CANNOT BE GIVEN AS AGRICULTURAL INCOME BU T THE ASSESSMENT OF THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES CAN NOT BE UPHELD. I, THEREFORE, DELETE THE AMOUNT FROM THE ASSESSMENT AN D ALLOW THE FIRST GROUND. 5. THE SECOND GROUND IS DIRECTED AGAINST THE ADDITI ON OF RS.2,13,500/- UNDER SECTION 68. THERE WERE NUMBER OF CASH DEPOSITS D URING THE RELEVANT ACCOUNTING YEAR IN THE ACCOUNT OF THE ASSESSEE WITH THE COSMO S CO-OP BANK LTD THEY WERE AGGREGATING TO RS.2,13,500/- AS PER THE DETA ILS FURNISHED IN PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT TH E DEPOSITS WERE OUT OF THE SALARY AND AGRICULTURAL INCOME. THE ASSESSING OFF ICER, HOWEVER, ESTIMATED THE HOUSEHOLD EXPENSES AND OTHER EXPENSES OF THE ASSESS EE AT RS.1,41,884/- WHICH HE REDUCED FROM THE SALARY AND AGRICULTURAL INCOME AGGREGATING TO RS.1,43,461/- AND ARRIVED AT THE BALANCE AVAILABLE FOR BEING DE POSITED INTO THE BANK AT RS.1577/-. HE, THEREFORE, HELD THAT THE DEPOSITS IN THE BANK WERE UNEXPLAINED AND ADDED THE SAME U/S 68 OF THE ACT. 4 6. BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT HE HAD KEPT HIS ACCUMULATED SALARY IN CASH WITH HIM OUT OF WHICH TH E DEPOSITS WERE MADE. THE CIT(A) WAS NOT CONVINCED BY THE CLAIM. HE, THER EFORE, UPHELD THE ADDITION. 7. I HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. THE HOUSEHOLD EXPENSES OF THE ASSESSEE WERE ESTIMATED AT RS.60, 000/- WHICH SEEMS TO BE HIGH CONSIDERING THAT HE AND HIS WIFE WERE STAYING WITH HIS PARENTS. FURTHER HIS FATHER HAS DRAWINGS OF RS.90,329/-, HIS WIFES D RAWINGS ARE RS.48,000/- AND THE ASSESSEES OWN DRAWINGS ARE RS.36000/-. IT IS ST ATED BEFORE ME THAT THE ASSESSEES WIFE IS ASSESSED ON INCOME FROM TUITION AND RUNNING BEAUTY PARLOR. CONSIDERING THE OVERALL DRAWINGS OF THE OTHER FAMI LY MEMBERS AND THE ASSESSEES OWN DRAWINGS OF RS.36,000/- I AM OF T HE VIEW THAT THE ESTIMATION OF THE ASSESSEES HOUSE-HOLD EXPENSES OF RS.60,000/- FOR CONSIDERING THE AVAILABILITY OF CASH WITH HIM FOR MAKING THE BANK D EPOSITS, IS ON THE HIGHER SIDE. SO FAR AS THE OTHER MAJOR EXPENSES ARE CONCERNED, T HE ASSESSING OFFICER HAS TAKEN THE AMOUNT OF LIC PREMIUM OF RS.63,184/- WHICH IS STATED TO BE BY CHEQUE. THE CHEQUE HAS BEEN ISSUED AFTER MAKING E QUIVALENT AMOUNT OF CASH DEPOSITS AND IF THE SAME IS CONSIDERED AGAIN WHILE ASCERTAINING THE AVAILABILITY OF CASH, IT WOULD AMOUNT TO DOUBLE ADDITION. I WOULD THEREFORE, RE-WORK THE HOUSE HOLD AND OTHER EXPENSES OF THE ASSESSEE AS UNDER : TOTAL EXPENSES ESTIMATED BY THE ASSESSING OFFICER AT RS.1,41,884/- (PAGE 2 OF THE ASSESSMENT ORDER.) LESS : EXCESS OVER RS.36,000/- SHOWN AS DRAWINGS BY THE ASSESSEE RS . 24,000/- LIC PREMIUM PAID BY CHEQUES RS. 63,184/- RS.87,184/-. BALANCE WILL BE RS. 54,700 /- 5 THE ABOVE WORKING WOULD SHOW THAT ONLY AN AMOUNT O F RS.54,700/- CAN BE CONSIDERED AS THE EXPENSES OF THE ASSESSEE WHICH LEAVES RS. 88,761/- (RS.143461-RS.54700) AS AN AMOUNT AVAILABLE FOR BE ING DEPOSIT IN THE BANK. IN ADDITION, SOME CREDIT CAN BE GIVEN FOR THE ASSESSE ES EXPLANATION THAT HE WAS HAVING SOME ACCUMULATED SAVINGS WITH HIM IN CASH. I ESTIMATE THE SAME AT RS.50,000/- CONSIDERING THE ASSESSEES INCOME BY WA Y OF SALARY AND INCOME FROM AGRICULTURAL OPERATIONS CARRIED OUT ON THE LA ND BELONGING TO THE FATHER. IF THIS IS ADDED TO RS.89,461/- THE TOTAL AVAILABILITY OF CASH COMES TO RS.1,39,461/-. DEDUCTING THE SAME FROM RS.2,13,500/- THE BALANCE C OMES TO RS.74,039/-. IT SEEMS IT WOULD BE REASONABLE TO TREAT THE SUM RS. 75000/- IN ROUND FIGURES AS UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT IN PLACE O F RS.2,13,500/- ADDED BY THE INCOME TAX AUTHORITIES. THE ASSESSING OFFICER IS D IRECTED TO MODIFY THE ASSESSMENT ACCORDINGLY. THUS GROUND NO.2 IS PARTL Y ALLOWED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED.. PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARIN G ON 23.03.2010. SD ( R V EASWAR ) SENIOR VICE PRESIDENT MUMBAI, DATED 23 RD MARCH 2010 SRL:22310 COPY TO: 1. G N MUSRY P.LTD CANADA BLDG, CHARANJIT RAI RD, MUMBAI 2. ITO, 1(1)4), MUMBAI 3. CIT- I 4. CIT(A)- I 5. DR SMC BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI