Karnataka Ginger Trading Company Vs ITO (ITAT Bangalore)
The assessee, a partnership firm engaged in ginger trading and cultivation, filed appeals for Assessment Years 2018-19 and 2020-21 against orders of the CIT(A)/NFAC confirming additions made by the Assessing Officer by re-characterizing part of the exempt agricultural income as income from other sources.
For AY 2018-19, the assessee declared total income of Rs. 8,36,910 and claimed exempt agricultural income of Rs. 57,03,047. The case was selected for limited scrutiny on agricultural income. During assessment, the Assessing Officer observed a substantial increase in agricultural income and noted that the assessee had not furnished transport bills or crop records issued by the land revenue authority. Holding that the assessee had diverted regular income as exempt agricultural income, the Assessing Officer restricted agricultural income to 20% of total ginger sales of Rs. 1,38,55,365, determined agricultural income at Rs. 27,71,073, and treated Rs. 29,31,974 as income from other sources.
For AY 2020-21, the assessee declared total income of Rs. 14,03,050 and claimed exempt agricultural income of Rs. 1,75,11,241. The case was selected for complete scrutiny. The Assessing Officer similarly restricted agricultural income to 20% of total ginger sales of Rs. 2,96,10,800, assessed agricultural income at Rs. 59,22,160, and treated Rs. 1,15,89,081 as income from other sources under Section 56. The Assessing Officer also disallowed Rs. 1,18,200 under Section 40(a)(ia) for non-deduction of tax on rent and Rs. 60,000 under Section 40A(3) for cash payment of rent.
