Case Law Details
Ajay Ravjibhai Patel Vs ITO (ITAT Surat)
ITAT Surat held that addition under section 69C towards undisclosed income, alleging agricultural expense met from undisclosed income, not justified since the only source of income of the assessee is agricultural income. Accordingly, appeal allowed.
Facts- The assessee had filed his return of income on 19.07.2017, declaring total income of Rs.7,120/- and agricultural income at Rs.22,37,409/- and other exempt income of Rs.1,443/-. The case was selected for limited scrutiny through CASS. AO observed that the assessee had also from other sources and also from agricultural activities carried out during the year. The assessee furnished copies of sale bills of agricultural products amounting to Rs.22,37,409/-. The assessee had not debited any agricultural expenses for the year under consideration and therefore, genuineness of the same has not been proved. AO computed total agricultural income of Rs.22,37,409/- and 35% of agricultural receipts amounting to Rs.7,83,093/- was added as undisclosed income.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that AO has not brought any material or evidence on record to show that the assessee earned income from source different from agricultural. Therefore, if the income of the assessee is only agriculture in nature, merely by increasing the agricultural expenditure and reducing the agricultural income, which is exempt u/s 10(1) of the Act, will not automatically generate income from other sources. The decision in case of A. S. Srinath (HUF) is directly on the issue where the matter was decided in favour of assessee. Therefore, the proper course of action would be to reduce the exempted agricultural income by Rs.10,28,410/- in place of adding undisclosed income of Rs.7,83,093/- estimated by the AO. The AO is, accordingly, directed to accept agricultural income of Rs.12,08,639/- [Rs.22,37,049 (-) Rs.10,28,639] instead of Rs.22,37,049/- and delete addition of Rs.7,83,093/- towards undisclosed income.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 28.02.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2016-17.
2. The grounds of appeal raised by the assessee are as under:
“1. The learned Addl/JCIT(A) erred in confirming addition of Rs.7,83,093/-being agricultural expense alleged to be met from unaccounted income other than agricultural income.
Your appellant submits that he has no source other than agricultural income and the expenses are erroneously assumed to be met from unaccounted income.
Your appellant prays that the addition of Rs.7,83,093/- be deleted.”
3. The appeal filed by the assessee is barred by limitation by 71 days in terms of provisions of section 253(3) of the Act. The assessee has filed an affidavit giving reasons for delay in filing the appeal of appeal before the Tribunal. In the affidavit, the assessee stated that he received the order of CIT(A) on 28.02.2024. Being a farmer, he has no knowledge of internet and electronic mode of communication. He submitted that his representative communicated the order of CIT(A) on 14.06.2024 and thereafter he approached Chartered Accountant, Mr. Surendra Modiani who advised him to file appeal before the Tribunal. Therefore, he requested to condone the delay.
4. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the revenue submitted that assessee has failed to explain sufficient cause for the delay; hence, delay should not be condoned.
5. We have heard both the parties on this preliminary issue and note that there is short delay of 71 days. We note that assessee was not negligent but due to miscommunication with the Chartered Accountant, the delay has occurred in filing the present appeal before the Tribunal. The reasons given in the affidavit for condonation of delay would constitute sufficient cause for delay in filing this appeal. We, therefore, condone the delay and admit the appeal for hearing.
6. Brief facts of the case are that the assessee had filed his return of income on 19.07.2017, declaring total income of Rs.7,120/- and agricultural income at Rs.22,37,409/- and other exempt income of Rs.1,443/-. The case was selected for limited scrutiny through CASS. The Assessing Officer (in short, ‘AO’) observed that the assessee had also from other sources and also from agricultural activities carried out during the year. The assessee furnished copies of sale bills of agricultural products amounting to Rs.22,37,409/-, which is at para 4 of the assessment order. The assessee had not debited any agricultural expenses for the year under consideration and therefore, genuineness of the same has not been proved. As the assessee has shown agricultural income of Rs.22,37,409/- for AY.2016-17, he had incurred agricultural expenses out of his undisclosed income. The AO asked assessee as to why the expenses to the extent of 35% of the agricultural income Rs.22,37,409/- should not be treated as undisclosed income and added back to the total income. The assessee submitted that he is a farmer and is not engaged in any other business activities. He stated that the expenses are from out of the agricultural income. He contended that cash flow statement and supporting bills for expenses were filed during assessment proceedings. According to AO, the assessee had received gross agricultural receipt of Rs.5,06,787/- on which expenses of Rs.95,985/- was deposited and he received net agricultural income of Rs.4,10,802/-. But assessee has shown gross income of Rs.5,06,787/-. The assessee has neither filed any cash flow statement nor any documents relating to agricultural expenditure. The AO computed total agricultural income of Rs.22,37,409/- and 35% of agricultural receipts amounting to Rs.7,83,093/- was added as undisclosed income.
7. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The findings of the CIT(A) are at page 2 of the appellate order. The CIT(A) discussed the same observation made by AO. The CIT(A) observed that the appellant could not file any satisfactory explanation backed by any supporting evidence to explain the agricultural expenses and source during the appellate proceedings. The CIT(A) confirmed the addition made by AO and dismissed the appeal of assessee.
8. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee has filed a paper book of 16 pages including written submission before the CIT(A) and the AO. He submitted that the appellant is an agriculturist with nominal amount of other income. The AO wrongly presumed that agricultural expenses were met out of some undisclosed income. Such expenses were met from receipts from agricultural activities in absence of any other income. The Ld. AR submitted that the CIT(A) has not referred to any submission in his order. The CIT(A) has made the same observation as made by AO, stating that no evidence was filed to show that agricultural expenses were met from agricultural receipts. The Ld. AR submitted that an agriculturist is not required to maintain a cash flow or books of account. He further submitted that both AO and CIT(A) wrongly presumed unaccounted income because no evidence was filed to show that agricultural expenses were met from agricultural receipts and not from unaccounted income. The submission of the assessee has not considered by CIT(A) and he has sustained the addition made by AO in a routine manner. He has relied on the decision of ITAT, Bangalore in case of A. S. Srinath (HUF) in ITA No.228/Bang/2024, dated 10.07.2024.
9. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the Revenue supported the order of lower authorities. He submitted that no details or evidences were given to substantiate the expenses incurred to earn the agricultural income. He requested to upheld the order of CIT(A).
10. We have heard both the parties and perused the materials available on record. We have also carefully gone through the decision relied upon by the Ld. AR and the paper book filed by him. The assessee in his submission to the AO, vide letter dated 14.12.2018, admitted at para 7 that the agricultural income declared in the return of income is gross income and not the net agricultural income. He submitted that expenses incurred for sugar farm was Rs.6,19,080/- and the expenses incurred for banana farm was Rs.4,09,330/-. Thus, total expenses incurred was Rs.10,28,410/- in respect of the gross agricultural income of Rs.22,37,049/-. Before the CIT(A), the assessee has made written submission dated 28.04.2021 wherein it was submitted that “Assessee’s almost only source of income is agricultural income”. The person who prepared the return of income of assessee took into consideration only the bills of sale of agricultural products and not documents relating to expenses. Hence, he reported entire sale price of agricultural products as income without deduction of any expenses, considering that it would have no effect on tax payable by assessee. In the circumstances, there is no basis or reason that expenses were made from taxable income.
10.1 We have again considered the matter in the light of the submission discussed above. It is not case of assessee that whole of sale price of agricultural products is invested elsewhere leaving no money for agricultural expenses. Hence, addition u/s 69C is not justified. It is seen from the assessment order that submission of the assessee has also not been considered before adding Rs.7,83,093/- as undisclosed income of assessee. The AO has not brought any material or evidence on record to show that the assessee earned income from source different from agricultural. Therefore, if the income of the assessee is only agriculture in nature, merely by increasing the agricultural expenditure and reducing the agricultural income, which is exempt u/s 10(1) of the Act, will not automatically generate income from other sources. The decision in case of A. S. Srinath (HUF) (supra) is directly on the issue where the matter was decided in favour of assessee. Therefore, the proper course of action would be to reduce the exempted agricultural income by Rs.10,28,410/- in place of adding undisclosed income of Rs.7,83,093/- estimated by the AO. The AO is, accordingly, directed to accept agricultural income of Rs.12,08,639/- [Rs.22,37,049 (-) Rs.10,28,639] instead of Rs.22,37,049/- and delete addition of Rs.7,83,093/- towards undisclosed income. Ground is partly allowed.
11. In the result, the appeal of the assessee partly allowed.
Order is pronounced in the open court on 05/12/2024.
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