Changela Mohanbhai R HUF Vs PCIT (ITAT Rajkot)
The assessee, a Hindu Undivided Family, filed its return for Assessment Year 2020–21 declaring a total income of Rs. 19,29,090 and agricultural income of Rs. 60,87,400. The case was selected for limited scrutiny on the issue of large agricultural income, and assessment was completed under section 143(3) read with 144B on 8 September 2022, accepting the returned income.
Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked section 263, holding that the assessment order was erroneous and prejudicial to the interests of the Revenue. The PCIT noted that the assessee declared gross agricultural income of Rs. 91,08,490 and agricultural expenses of Rs. 30,21,090. However, according to the PCIT, only bills and vouchers amounting to Rs. 42,531 were produced to substantiate the claimed expenses. The PCIT further observed that despite agricultural sales exceeding Rs. 91 lakh, the Assessing Officer had not issued any notice under section 133(6) to verify the genuineness of the sales. Based on these findings, the PCIT issued a notice under section 263 and later set aside the assessment order, directing a fresh assessment with specific enquiries on agricultural income.
In reply, the assessee stated that all vouchers and invoices were furnished before the Assessing Officer during faceless assessment proceedings. Due to technical limitations, such as the 5 MB upload cap, only a selection of supporting documents was uploaded, though full records were available. The assessee argued that agricultural income and expenses had consistently been accepted by the department in past and subsequent years, with agricultural expenses around 33–35% of gross agricultural income, which was within normal patterns. The assessee contended that agricultural income is exempt from tax; therefore, even if agricultural expenses were disallowed, it would not result in any loss of revenue.
