Anupama Chandrakandath Vs ACIT (ITAT Cochin)
ITAT Cochin held that agricultural income recorded on estimated basis needs to accepted as it was supported by all the possible evidence for estimating income. Revenue has not brought anything on record to show the income estimated and the percentage of expense claimed is not correct.
Facts- The case of the assessee was selected for scrutiny under CASS and the notice u/s.143(2) was duly served on the assessee. During the course of assessment proceedings, AO noticed that the assessee has only estimated the agricultural income and accordingly called for further details.
AO, proposed to disallow a portion of the agricultural income returned as the assessee had only estimated the income and not based on books of accounts. The AO directed for an inspection to conduct the agricultural activities wherein the actual extent of crops cultivated, nature of rubber trees etc., were obtained by the inspector attached to the AO, who inspected the agricultural holdings and submitted their report. The inspector had also verified the katcha book maintained with regard to the rubber tapping, wages etc. However, the AO was of the opinion that these are not enough to justify the huge agricultural income. The AO held that the assessee had not maintained any books of accounts with regard to the agricultural activities giving actual details of agricultural income. Accordingly the AO estimated the agricultural income of the assessee at Rs.36,00,000 and made addition towards the difference amount of Rs.9,00,000. On further appeal the CIT(A) held that the estimation of agricultural income by the AO is reasonable since the assessee has not maintained any books of accounts and accordingly upheld the order of the AO. Aggrieved the assessee is in appeal before the Tribunal.
Conclusion- In our considered view when the assessee has submitted the possible evidence for estimating the income, the same cannot be brushed aside without recording any adverse finding. The revenue has not brought anything on record to show that the income estimated and the percentage of expense claimed by the assessee is not correct. The AO has also not recorded any supporting to show how the agricultural income is estimated at Rs.36,00,000. In view of these discussions and considering the facts of the case we are of the view that the addition made by the AO is purely based on surmise without recording any contrary finding and therefore should be deleted. Accordingly we hold that the addition of Rs.9,00,000 done both AY 2012-13 and 2013-14 to be deleted and the appeals are allowed in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT COCHIN
These two appeals are against the order of CIT(A), National Faceless Appeal Centre (NFAC), dated 18.11.2021, for Assessment Year 2012-13 and 2013-14. These two appeals are heard together and disposed of by this common order for the sake of convenience and brevity. The assessee raised the following common grounds in both these appeals:
1. The extend of agricultural holdings of the assessee and the fact that they are rubber plantation and coconut garden has not been disputed by the Assessing officer as the Department Inspectors have conducted a field visit and submitted reports.
2. As agricultural income is exempt from personal tax at Kerala, and as the properties are managed by the assessee’s father along with the agricultural properties of the assessee’s parents and brother, detailed accounts are not maintained. That cannot be a reason to disbelieve the income estimated by the assessee in the absence of any adverse findings by the Assessing Officer.
3. The assessee has estimated the income from rubber based on the yield for different geographical locations as per Rubber Board data and the yield is not the highest yield but the average yield for each area. The prices of rubber are collected by the Rubber Board and the statistics published.
4. The yield of coconut has been estimated, again on the average yield rate and not the highest yield rate. The prices of coconut has been taken on the average rate for the year.
5. Both rubber and coconut are long term crops and tilling, cost of seeds etc., are not required every year. The maintenance expenditure on fertilizer, irrigation in summer etc., labour charges for tapping of rubber, plucking of coconut etc.. are estimated at 20% of the yield. Besides this, the coconut husk, coconut leaves etc., are also sold and yield on income which has not
6. The Assessing Officer has not pointed out any discrepancy or inflation in the yield estimated or the market price at which the income was estimated. Without pointing out any adverse factor, the Assessing Officer cannot simply reject the estimate.
The Hon. ITAT Mumbai in 2021 (3) TMI 264 in the case of NITTA JATIYA (ACIAS & NITAJATIA) Vs. DCIT, Central Charge Range 7(1) Mumbai, at para 5 observed
“In this case, we note that both of the authorities have failed to discharge their duties properly as none of the parties have brought any substantial material on records to prove that the assesse has incurred expenses over and above what has been stated by the assesse “.
In our case, no material has been gathered or produced to show that the income estimated by the assessee is inflated or from the land holding and crops cultivated the said income cannot be generated.
Again, the Hon. ITAT Surat in 2022(1) TMI 52 Shri Rajeshbhai Gijubhai patel, Shri Pankajbhai Gijubhai Patel Vs. CIT Surat at para 22 observed as follows:-
“We must hasten to add here that in this case, there is no finding that any of the details supporting the assesse in its return were found to be in correct or erroneous or false “.
In our case also, nether the Assessing Officer nor the CIT (A) has held that any of the details submitted by us are incorrect, erroneous or false. Based on surmises and conjectures, the details furnished by the assessee has been rejected and a 20% disallowance has been made by the Assessing Officer and sustained by the CIT(A).
7. Having rejected the income estimated by the assessee, the Assessing Officer has again proceeded to estimate the income at 80% of the income returned by the assessee. For this also, there is no justification or basis. The disallowance was an adhoc disallowance for the only reason the assessee had not maintained books of accounts.
8. The assessee is having income from business for which proper accounts have been maintained and audited and audit report in Form 3CB and 3CD submitted. The Assessing Officer has not found any defects in the said accounts, which has been accepted.
Therefore, when the assesse has only one source of income i.e. income from business which has been accepted, in the absence of any evidence to the contrary, the agricultural income estimated and offered by the assesse has to be accepted.
We rely on the decision of the Hon. Gujarat High Court in — Income Tax Officer Vs. Ashwin.D.Metha (HUF) (2014)(12) TMI 1391.
The Hon Gujarat High Court at para 6 held as follows:-
“ The Commissioner of income Tax (Appeals) has held that since the agricultural income has been accepted by the revenue and the Assessing Officer has not been able to prove any other source of income out of which the assesse could have earned this income, and the income declared by the assesse has to be accepted “.
2. The assessee is the proprietrix of a retail medical stores operating in a hospital. The assessee has maintained proper books of accounts for the said business and has got the books of account audited under section 44AB of the Income Tax Act. The assessee also has agricultural income from 26.62 acres of yielding rubber trees at Desamangalam and from 15.25 acres of yielding coconut garden at Muthalamada, Palakkad. The assessee lives in a joint family and the assessee’s father, mother and brother also has similar agricultural holdings. The agricultural holdings of all the members are contiguous and assessee’s father Dr.M.Ramakrishnan manages these properties. With respect to the agricultural income, the assessee has not maintained any books of accounts other than the statutory registers required for wage payment to the rubber tappers. For years under consideration the assessee had estimated the agricultural income as per below details –
