ITAT says “Payment of on-money is an unfortunate practice and none can deny this factual situation” – therefore, contention of the assessee cannot be totally brushed aside.
In ITO v. Abraham Varghese Cheruvil, the Cochin bench of ITAT held that On-Money/Unaccounted Money received on account of sale of agricultural land is not taxable under the Income Tax Act since the amount is a part of sale consideration received on agricultural land which is exempted under the Act.
Assessee was an NRI, who settled in India after his retirement. Assessee sold his agricultural land for a consideration of about 70 lakhs out which, only 35 lakh were shown in the sale deed. The whole amount was deposited in the bank. On verification of return, the AO asked the assessee to show the source of income. Subsequently, the entire amount of 35 lakh was treted as the on money/unaccounted money of the assessee and proceedings under section 68 of the Income Tax Act was initiated.
On appeal, the assessee contended that the actual amount of sale consideration was not disclosed in the sale deed because of insistence of the buyer to save stamp duty.
The bench observed that there is not much of transaction in the bank account of the assessee either before or after the sale transaction of agricultural land. “The assessee is not having any other source of income so as to generate undisclosed income of Rs.39 lakhs. The assessee was an NRI and on his retirement, he was doing agricultural activities. Most importantly, I notice that there is no concealment, because in the income tax return filed before the IT authorities, the assessee and his wife had disclosed the entire value of sale transaction amounting to Rs.70,79,000/- (including the on-money). A copy of the income tax return filed by the assessee and his wife alongwith computation statement for the assessment year 2013-14 are enclosed at pages 7 to 19 of the paper book filed by the assessee. In the peculiar facts and circumstances of the case, I have no hesitation to hold that the receipt of on-money was in no way different from the receipt amount shown in the sale deed.”
Considering the fact that the Assessing Officer has not disputed the source of cash receipts, the bench held that there cannot be any addition under section 68 of the Income Tax Act.
“The assessee is an aged person, who had settled down in his native place. He was engaged in agricultural activities on his retirement and there is nothing on record to suggest that the assessee alongwith his wife were in a position to generate unaccounted income of Rs.39 lakhs other than on-money on account of sale of agricultural land. The payment of on-money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside.” The bench said.
Relying on the decision of the Cochin bench of ITAT in ITO vs. Dr. Koshy George, the bench held that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself.
Read the full text of the Order below.
