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2016 (2) TMI 739 - ITAT HYDERABAD

2016 (2) TMI 739 - ITAT HYDERABAD - TMI - Agricultural Income - CIT(A) confirmed the treatment of agricultural income as ‘income from other sources’ - Held that:- There is no dispute with reference to the fact that assessee owns agricultural land and also purchased 4.71 guntas of land in September, 2004. Considering the value of the land purchased and the extent of agricultural income offered, the AO’s contentions seems to be partially correct. Since assessee is not in a position to furnish any .....

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able income earned on the said lands. Accordingly, AO is directed to accept income at ₹ 10,000/- per acre for AY. 2005-06, 2006-07, 2007-08. The balance of the income in each year is confirmed as ‘income from other sources’ as was done by the AO. - Decided partly in favour of assessee

Disallowance u/s. 80C - CIT(A) while allowing the payment to LIC in AYs. 2006-07 & 2007-08, did not allow the repayment of principal amount on the housing loan obtained - Held that:- . Before us, L .....

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tained for chit fund business. AO did not make any enquiry, the fact of which is also noted by the Ld. CIT(A). In view of this, since assessee’s modus oparandi was accepted by the CIT(A), we are of the opinion that the additions cannot be made simply on the basis of agreement of sale found with the assessee, when they are not intended for purchase of property. However, since AO has not enquired properly, we hereby set aside the issue to the file of AO to examine the concerned parties from whom a .....

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r proper enquiry. - Decided in favour of assessee for statistical purposes.

Addition based on Promissory Notes - Held that:- Since the promissory notes are available with the department (by this time, they would have been time barred), it is necessary that AO makes necessary enquiries with the persons who executed the promissory notes to ascertain whether assessee has advanced cash or obtained them towards security for the chit availed by them. Unless proper enquiry is made, it would .....

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(A) on this issue and restore the matter to the file of AO for fresh enquiry.- Decided in favour of assessee for statistical purposes.

Claim of interest on the bank OD - Held that:- The assessee contention cannot be rejected simply because AO did not comment on the issue. There is evidence that assessee has obtained Over Draft from the bank. If the amount was utilized for the purpose of business, the interest paid thereon should be allowed as a deduction while computing income from ‘p .....

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P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri A.V. Raghu Ram, AR For The Revenue : Shri M. Sitaram, DR ORDER PER BENCH : These are seven appeals by assessee from AYs. 2006-07 to 2011-12 against the orders of the Commissioner of Income Tax (Appeals)-XI, Hyderabad dated 12-03-2015 and for AY. 2005-06 dated 23-03-15. There are various issues but commonly arising in all the years. Hence, these appeals are decided issue-wise: 2. We have heard Ld. .....

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and returns filed by the assessee. Agricultural Income: 4. Assessee had offered agricultural income of ₹ 1,89,919/- in AY. 2005-06; ₹ 1,01,880/- in AY. 2006-07; and ₹ 1,04,270/- in AY. 2007-08. AO, on the reason that assessee has not substantiated the incomes, has treated the agricultural income as income from other sources and brought to tax. Before the Ld.CIT(A), assessee furnished Pattadar Pass Book as additional evidence which was sent to AO for verification and report. Ho .....

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icultural income as income from other sources . 5. Ld. Counsel submitted that assessee owns 1 acre 27 guntas in Survey No. 93 situated at Raviryal Village, Maheshwaram Mandal, Ranga Reddy Dist., and this land is used for agricultural purposes, since so many years and has submitted, referring to the letter filed before the AO, that assessee has grown Grapes, Paddy and Vegetables. Since no books of account were maintained, the income was estimated. It is submitted that in addition to the 1.27 gunt .....

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ntentions. There is no dispute with reference to the fact that assessee owns agricultural land and also purchased 4.71 guntas of land in September, 2004. Considering the value of the land purchased and the extent of agricultural income offered, the AO s contentions seems to be partially correct. Since assessee is not in a position to furnish any evidence to substantiate the incomes earned and returned, we have no option than to estimate the agricultural income at a reasonable basis. Assessee s s .....

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alance of the income in each year is confirmed as income from other sources as was done by the AO. Assessee s grounds are partly allowed. Disallowance u/s. 80C of the Act: 7. Assessee claims certain investments and repayments u/s. 80C which the AO disallowed. Ld.CIT(A) while allowing the payment to LIC in AYs. 2006-07 & 2007-08, did not allow the repayment of principal amount on the housing loan obtained, claimed at ₹ 1 Lakh and ₹ 68,042/- respectively in the above years. Before .....

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es, certain promissory notes and agreements of sale were also seized. Based on the value as mentioned in the agreement of sale, AO has made additions in the impugned assessment years towards un-accounted investment in purchase of property. It was submitted that these properties were not intended to be purchased by assessee, but were obtained as a security for the amount disbursed in the chit business. Assessee explained that whenever a successful bidder takes the money, in order to secure the re .....

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the Property at 18-1-436/28, Phoolbagh, Chandrayangutta, Hyderabad was only taken as a measure of security against the prize money for the chit business run by his father Sri A. Narasimha Reddy. He has given an affidavit from Shri Mohd. Saleem son of Smt. Aisha Bee who was the party to the agreement. On perusal of the same it is seen that Shri Mohd. Saleem had subscribed for chit amounting to ₹ 5,00,000/-, and for that the property was given as security by his mother. The Agreement of sal .....

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actions have not been summoned or examined, nor any third party enquiry was conducted. As already mentioned, taking of property as security is a norm in this kind of business. Further, no finding has been given by the Assessing Officer in Contradiction to the claim made by the appellant that the transaction entered into and affidavits submitted were not genuine. It is, therefore, held that the agreements are documents constituting security collected by the assessee/his father in normal course of .....

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ces in support of the contentions. Like-wise in AY. 2007-08, AO has added an amount of ₹ 2,60,000/- on a property at Troop Bazar, Hyderabad, which was also confirmed by the Ld. CIT(A). In AY. 2010-11, Ld. CIT(A) deleted the addition of ₹ 4,49,000/- and confirmed the addition of ₹ 1,01,500/- in that year. Assessee is aggrieved of the confirmation of the above amounts in respective assessment years. 10. Ld. Counsel referring to the submissions made before the authorities includin .....

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of the CIT(A) to submit that assessee has discharged his primary onus and since this so called agreement of sale are securities obtained in the course of chit fund business, the income of which were already offered, no further addition can be made on the failure of the AO to examine the above transactions. Ld. DR supported the orders of the CIT(A). 11. We have considered the issue and examined the rival contentions and orders of the CIT(A). Substantial addition was made in AY. 2006-07, wherein A .....

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y taken as a measure of security against the prize money for the chit business run by his father Sri A. Narasimha Reddy. He has given an affidavit from Ms. Salma Bee D/o. Md. Chand who was the party to the agreement. On perusal of the same it is seen that Shri Mustaq had subscribed for chit amounting to ₹ 5,00,000/-, and for that the property was given as security by his mother. The Agreement of sale for the said property was for of total consideration of ₹ 6 lakhs against which S .....

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advance. According to the affidavit there was no movement of money. Regarding the third document of Agreement of Sale for property at H.No. 16-11/677 at Yasrabnagar, for a consideration of ₹ 16 lakhs, no affidavit, etc. has been filed by the appellant. Though the affidavits and encumbrance certificates which were filed as additional evidence were sent to the Assessing Officer, he has not made any inquiry with respect to the claim made by the appellant and has merely stated that no addition .....

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enuine. It is, therefore, held that the agreements are documents constituting security collected by the assessee/ his father in normal course of the chit business; they do not represent any investment. Hence, there is no occasion to treat is as unexplained investment and deem the same to be the assessee's income. But as already mentioned the appellant has not given any confirmation with regard to property at H.No. 16-11/677 at Vasrabnagar, for a consideration of ₹ 16 lakhs. In this con .....

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n respect of the property in question. In view of this out of the total addition ₹ 38 lakhs on account of Agreements of Sale, addition of ₹ 22,00,000/- is deleted and ₹ 16 lakhs is confirmed. 12. As can be seen from the above, assessee not only submitted various evidence, but also affidavits in support of the contentions that the document of agreement of sale is only a security obtained for chit fund business. AO did not make any enquiry, the fact of which is also noted by the .....

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rity for chit fund business and grant necessary relief after due enquiry. Assessee should be given due opportunity to substantiate the claim and assessee is free to furnish necessary documents/evidences/confirmations/affidavits in support of his contentions. With these observations, balance of addition as raised by assessee for AYs. 2006-07, 2007-08 and 2010-11 are restored to the file of AO for proper enquiry and adjudication. Grounds are accordingly allowed for statistical purposes. Addition b .....

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greements of sale seized by the department, assessee contended that promissory notes were also obtained for securing the chit business. On the reason that assessee has not substantiated with any documentary evidence, Ld. CIT(A) confirmed above amounts. 14. Before us, Ld. Counsel submitted that in the un-organised chit business conducted by the assessee and his family members, sometimes security was taken in the form of agreement of sale if the bidders are having properties and some times, by way .....

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ale found during the course of search, the modus oparandi has been accepted. In view of that, assessee s contentions cannot be brushed aside without proper enquiry. Since the promissory notes are available with the department (by this time, they would have been time barred), it is necessary that AO makes necessary enquiries with the persons who executed the promissory notes to ascertain whether assessee has advanced cash or obtained them towards security for the chit availed by them. Unless prop .....

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