The Chennai Bench of Income Tax Appellate Tribunal (ITAT) stated that there is nothing on record which would show that any incriminating material was found during search operation which would show that the agricultural income belonged to the assessee instead of HUF (Hindu Undivided Family), thus held that the agricultural income is not to be considered in the hands of the assessee.
The assessee in this present case is Duraisamy Parameswarana. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of Danda Brahmanandam and Javvaji Ramanjaneyulu. During those proceedings, the assessee was also subjected to search proceedings and consequently, an assessment was framed under Section 143(3) read with Section 153C of the Income Tax Act.
During the course of search, certain incriminating materials were seized which contained details of alleged unexplained investment of Rs.2 Crores by the assessee for purchase of property during Financial Year 2015-16. Accordingly, notices under Section 153C of the Income Tax Act was issued to assessee for various years.
In response, the assessee offered income of Rs.2.51 Lacs and filed requisite details as called for by Assessing Officer (AO). It transpired that the assessee claimed agricultural income of Rs.10.25 Lacs in hands of HUF entity. The assessee, in his receipts and payments account, claimed agricultural income of Rs.5.25 Lacs and submitted that agricultural income belonged to HUF only.
AO held that there was no HUF. The claim of Rs.5.25 Lacs as made by the assessee in individual capacity was not acceptable. Accordingly, this income was treated as unaccounted income under Section 68 of Income Tax Act and added to the income of the assessee.
AO made similar addition under Section 68 of Income Tax Act for Rs.10.25 Lacs. The AO made another addition of Rs.2.65 Lacs which represent alleged unaccounted commission earned by the assessee. However, this addition is not subject matter of appeal before us. In AY 2015-16, AO made sole addition of agricultural income for Rs.15 Lacs in similar manner.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] which partly allowed the appeal, further aggrieved, the assessee filed an appeal before the Tribunal.
The Bench comprising of Mahavir Singh, Vice President and Manoj kumar Aggarwal, Accountant Member relied on the decision rendered in Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. where it was held that where no incriminating material was found in case of any of assessee either from assessee or from third party, High Court rightly set aside assessment order passed under Section 153C of the Income Tax Act.
In the present case, the facts are similar. There is nothing on record which would show that any incriminating material was found during search operation which would show that the agricultural income belonged to the assessee instead of HUF.
Therefore it was held that agricultural income is not to be considered taxable in the hands of the assessee and so the appeal of the assessee was allowed.
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