|CORAM:||George George K (JM)|
|SECTION(S):||2(14), 45, 48, 68|
|CATCH WORDS:||agricultural land, exempt income, unexplained cash credit|
|COUNSEL:||K. P. Paulson|
|DATE:||April 26, 2017 (Date of pronouncement)|
|DATE:||May 1, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 68/ 2(14): "On Money" received by an assessee for sale of agricultural land has to be treated as "agricultural income" and exempted from tax if the facts show that the assessee has no other source for the receipt|
(i) The assessee is a retired person who is aged about 75 years. He had spent major part of his life in the Gulf countries and was unaware of the intricacies of tax laws in India. The admitted fact is that the assessee alongwith his wife had 7.01 acres of agricultural land which was cultivated with Rubber and was having Rubber Board registration. The sale proceeds of the said agricultural land is not a capital asset as per section 2(14) of the I.T. Act. This fact is also accepted by the Assessing Officer, by not taxing the sale consideration of Rs.30,59,500/- disclosed in the sale deed.
(ii) According to the assessee, the total sale consideration is Rs.70,79,500/- and because of insistence of the buyer to save stamp duty, the sale consideration was disclosed in the sale deed at Rs.30,59,500/-. It was stated that Rs.30,59,500/- was circle rate fixed by the Kerala Government. It was submitted that the entire sale consideration of Rs.70,79,500/- was deposited in Federal Bank on 16/04/2012 and 17/07/2012. On perusal of the bank accounts with Federal Bank, I notice 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. The Assessing Officer has not disputed the source of cash receipts. Her only contention is that balance value of the property not shown in the sale deed can only be considered as unaccounted money/on-money and the same has to be brought to tax as ‘income from other sources’.
(iii) Section 68 has application when no explanation is offered or the explanation offered is not satisfactory in the opinion of ld. Assessing Officer. Further, by using the words “may be charged”, instead of “shall be charged, it is clear that addition u/s. 68 is not mandatory. On the other hand the Assessing Officer has to apply his mind on facts of each case and decide whether the addition is warranted.
(iv) As mentioned earlier, 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. I also place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO vs. Dr. Koshy George (supra), wherein it I.T.A. No.30/Coch/2017 was held by the Tribunal that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself.
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