Vachhani Ketanbhai Mansukhlal (HUF) Vs ITO (ITAT Rajkot)
ITAT Rajkot: Agricultural Income Cannot Be Arbitrarily Estimated Without Considering Expenses
The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal of the assessee (HUF) for AY 2018-19, holding that agricultural income cannot be assessed by ignoring genuine agricultural expenses merely because such expenses were not claimed in the return due to an oversight.
The assessee had declared gross agricultural income of ₹32.61 lakh but failed to deduct agricultural expenses of ₹10.93 lakh in the return. The Assessing Officer restricted agricultural income to ₹6 lakh and treated the balance as taxable income, which was upheld by the CIT(A).
The Tribunal observed that agricultural income cannot be earned without incurring expenses and that the authorities erred in completely disregarding this fundamental fact. Since no new source of income was introduced and only a correct computation of net agricultural income was sought, the Tribunal accepted the claim of expenses. However, considering that some evidences were self-serving and not fully verifiable, the ITAT made an ad-hoc addition of 10% of the net agricultural income (₹21.68 lakh), amounting to ₹2.16 lakh, and directed the AO to tax only this amount.
Accordingly, the appeal was partly allowed, granting substantial relief to the assessee while sustaining a reasonable estimated addition to balance the interests of revenue
