2009 (6) TMI 121 - AT - Income Tax

Receipt of on Money - Valuation of Property sold - nature of land sold - difference in the cost of construction declared by the assessee and determined by the Departmental Valuation Officer - AO accepted the sale price mentioned in the conveyance deed whereas the Commissioner of Income-tax (Appeals) accepted the sale price mentioned in the agreement to sell - contention of the assessee that the actual consideration is as per the agreement and he has received the said amount by cheques/demand drafts and paid compounding fee for understated consideration - Commissioner of Income-tax (Appeals) has accepted the contentions raised by the assessee and deleted the additions - AO himself has characterised without any contradiction of facts that the additional amount received by the assessees on sale of coffee estates in Wayanad over and above the registered sale deed were on money . The question is whether the said on money is still taxable in the present case. The property sold by the assessee was agricultural property situated beyond 8 k.m. of any Municipality. HELD THAT - The property was not notified either. In such circumstances any surplus of money arising to an assessee on sale of agricultural land always partakes the character of agricultural income itself. The consideration stated in the registered sale deed is very much agricultural income. Likewise the on money also should be treated as agricultural income even though that surplus consideration is tainted with the expression on money . The genesis of the on money is definitely the sale of agricultural land. The hon ble Supreme Court in the case of CIT v. All India Tea and Trading Co. Ltd. 1996 (3) TMI 4 - SUPREME COURT has held that compensation received on requisition of agricultural land amounted to agricultural income. The Supreme Court again in the case of Singhai Rakesh Kumar 2000 (11) TMI 2 - SUPREME COURT has held that income arising out of the transfer of such agricultural lands are not exigible to capital gains as they are in the nature of agricultural income. Therefore it is to be held that the receipts/profits arising to an assessee on transfer of agricultural land amounts to agricultural income as provided under section 2(1A) of the Act. Therefore even if the consideration in excess of the apparent consideration is deemed as on money still it cannot be taxed as the true colour of that on money is agricultural income . Appeal of the Revenue is dismissed. Difference in the cost of construction declared by the assessee and determined by the Departmental Valuation Officer which was directed to be included in the total income - We restore the matter back to the file of the Assessing Officer with a direction to reconsider the issue afresh in the light of the retrospective amendment to the Act and after affording adequate opportunity of hearing to the assessee. Unexplained deposits in bank account - We find that Dr. Koshy George has not deposited any amount by way of agricultural income. So for the remaining amount of Rs. 45, 000 the Commissioner of Income-tax (Appeals) has directed the Assessing Officer to include the same in the total income and issue notice of concealment. From the facts as narrated above and the assessee has failed to explain satisfactorily either before the Commissioner of Income-tax (Appeals) or even before the Tribunal with regard to the source of Rs. 45, 000 we uphold the findings of the Commissioner of Income-tax (Appeals) on this issue. We do not express any view on the question of concealment . Unexplained credit/bank deposits - CIT(Appeals) rejected the contention of the assessee on the ground that the assessee could not produce any confirmation letter from the party from whom this cheque was received - HELD THAT - As the fresh evidence produced by the assessee before the Commissioner of Income-tax (Appeals) was not produced before the Assessing Officer and no application under rule 46A was filed. Hence the Commissioner of Income-tax (Appeals) sustained the addition made by the Assessing Officer correctly. Even at the time of hearing learned counsel for the assessee was unable to produce any confirmation letter from the party from whom the assessee has received the cheque. Hence we uphold the order of the Commissioner of Income-tax (Appeals).

Summary

Issues Involved:
1. Difference in the cost of construction declared by the assessee and determined by the Departmental Valuation Officer.
2. Addition of "on money" and bank deposits as taxable income.
3. Enhancement of total income by way of unexplained deposits.
4. Acceptance of sale price mentioned in the agreement versus the conveyance deed.
5. Treatment of agricultural income and its taxability.

Issue-wise Detailed Analysis:

1. Difference in the Cost of Construction:
The Assessing Officer (AO) noted a discrepancy between the cost of construction declared by Dr. Koshy George and the amount determined by the Departmental Valuation Officer. The declared cost was Rs. 18,38,395, while the Valuation Officer determined it to be Rs. 20,05,000. The Commissioner of Income-tax (Appeals) (CIT(A)) agreed to assess the difference of Rs. 1.22 lakhs. The Tribunal restored the matter to the AO for fresh consideration in light of retrospective amendments to the Act, directing that adequate opportunity for hearing be provided to the assessee.

2. Addition of "On Money" and Bank Deposits as Taxable Income:
The AO added the difference between the sale price mentioned in the conveyance deed (Rs. 2.65 lakhs) and the amount received (Rs. 15 lakhs) as "on money." The CIT(A) found that the entire transaction was through banking channels and accepted the sale price mentioned in the agreement to sell. The Tribunal upheld this finding, noting that the "on money" should be treated as agricultural income and hence not taxable.

3. Enhancement of Total Income by Way of Unexplained Deposits:
The CIT(A) directed the AO to include a sum of Rs. 45,000 in the total income of Smt. Annamma Koshy alias Latha Koshy, as she could not substantiate the source of this deposit. The Tribunal upheld this finding, noting that the assessee failed to provide satisfactory explanations for the source of the deposit.

4. Acceptance of Sale Price Mentioned in the Agreement Versus the Conveyance Deed:
The CIT(A) accepted the sale price of Rs. 15 lakhs mentioned in the agreement to sell, rather than the Rs. 2.65 lakhs stated in the conveyance deed. This decision was based on the fact that the transaction was conducted through banking channels and the assessee had paid a compounding fee for undervaluation. The Tribunal upheld this finding, noting that the actual consideration was received by cheques/demand drafts and the "on money" was agricultural income.

5. Treatment of Agricultural Income and Its Taxability:
The Tribunal noted that the property sold was agricultural land situated beyond 8 km of any municipality and was not notified. Therefore, any surplus from the sale of such land is considered agricultural income and not taxable. The Tribunal cited the Supreme Court's decisions in CIT v. All India Tea and Trading Co. Ltd. and Singhai Rakesh Kumar v. Union of India to support this view.

Separate Judgments:
The Tribunal delivered separate judgments for different appeals:
- I.T.A. Nos. 955 and 1981/Coch/2005: Revenue's appeal dismissed; assessee's appeal allowed for statistical purposes.
- I.T.A. No. 717/Coch/2006: Revenue's appeal dismissed.
- I.T.A. No. 683/Coch/2006: Assessee's appeal partly allowed for statistical purposes.
- I.T.A. No. 361/Coch/2007: Assessee's appeal dismissed.

Conclusion:
The Tribunal upheld the CIT(A)'s findings regarding the sale price and "on money," treating it as agricultural income and thus not taxable. The matter of the construction cost difference was remitted back to the AO for fresh consideration. The unexplained deposit of Rs. 45,000 was included in the assessee's total income, and the appeal regarding the deposit of Rs. 1,25,000 was dismissed due to lack of confirmation from the party.