Jaydeep J. Patel (HUF) Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad Bench in an identical case where revisionary powers were exercised for directing detailed inquiry on agricultural expenses incurred, held that where the AO had accepted agricultural income after conducting due inquiries no revision u/s 263 can be done and that it tantamount to mere change of opinion for which revisionary powers cannot be exercised.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax,Vadodara-2, (in short referred to as Pr. CIT), dated 03-03-2020, in exercise of his revisionary powers u/s. 263 of the Income Tax Act, 1961(hereinafter referred to as the “Act”).
The Registry has marked the appeal as delayed by 31 days. But it is noted that the appeal was filed on 10/06/2020 When, due to the pandemic of Covid-19, the limitation prescribed for filing appeals was extended till further orders’ by the Hon’ble Supreme Court vide its order dated 23/03/2020. Therefore, there is no delay as such in the filing of the appeal.
2. The brief facts relating to the case are that the assessee had filed return of income for the impugned assessment year, i.e. 2015-16 ,declaring total income of Rs. 18,98,080/- and agricultural income of Rs. 54,41,480/-which was accepted in scrutiny assessment made u/s. 143(3) of the Act vide order dated 22-11-2017. Thereafter on going through the assessment records, the ld. Pr. CIT noted the following errors in the order of the AO
1) that the Assessing Officer had failed to verify whether the claim of agricultural expenses was commensurate with the agricultural income.
As per the Ld.Pr.CIT the reasonable expenses should have been to the tune of 40% of the income , as per a decision of the ITAT Ahmedabad bench referred to by him,while it was very meager in the present case. He noted that while the total agricultural receipts were Rs.62,30, 167/- ,40% of the same came to Rs.24,92,067/- while the assessee had shown only Rs.7,88,687/- He noted from the records that the assessee had incurred neither irrigation expenses nor electricity expenses and labor expenses claimed were also to the extent only 6.5% of the receipts, while as per the Ld.Pr.CIT the normal labor expenses was to the tune of 25% of the receipts.
He therefore was of the view that the failure of the Assessing Officer to examine the claim of expenses incurred by the assessee had led to the order passed by him being erroneous so as to cause prejudice to the revenue.
b) He further noted that the AO had merely accepted the claim of the assessee HUF of having received rent for utilization of agricultural land, Saanth, from Shri Rai Jaydeep Patel and Shri Tapan Jaideep Patel ,both specified persons u/s 40A(2)(b) of the Act, of Rs. 1,12,500/- each without any verification with documentary evidences
. For this reason also, he was of the view that the order passed by the Assessing Officer was erroneous causing prejudice to the revenue.
3. Accordingly, he assumed jurisdiction for revision of the order u/s. 263 of the Act and show cause notice was issued to the assessee. Due reply was filed by the assessee in response contending that both the issues,i.e of claim of agricultural expenses, agricultural income earned by the assessee and even the issue of Saanth received from the aforesaid two persons had been duly inquired into and examined by the Assessing Officer, who, on being satisfied with the replies filed by the assessee had accordingly accepted the claims so made by the assessee.
4. The ld. Pr. CIT however rejected the contention of the assessee and stated that both the issues ought to have been properly examined by the AO and outlined the manner in which the inquiries needed to be conducted by the Assessing Officer. He held that the failure of Assessing Officer to do so had rendered the assessment order erroneous so as to cause prejudice to the Revenue. Accordingly, he set aside the order of the Assessing Officer with directions to frame assessment afresh after making proper inquiries/verifications and examining the accounts and records of the assessee. The relevant findings of the ld. Pr. CIT in this regard is at para 6 to 6.9 of the order is as under:-
“6. The submission of the assessee has been, carefully considered. The assessee has mainly contended incurred by the assessee are justifiable for the reason the by the AO at the time of proceedings Crop of Tobacco expenses to be incurred in to other the of 40% cannot be applied in the case of the assessee. The submitted that as it is following method of accounting, some of the pertaining to Agricultural Produce in A.Y. 2015-16, incurred booked in earlier year i.e. A.Y. 2014-15. However, the assessee did not provide any bifurcation of the expenses pertaining to different assessment years booked in another assessment year.
6.1 The officer was required to properly examine the following points to do so:-
i. The land holding in of the HUF members as per 8A certificate the crops cultivated as per 7/12 extracts for the above agricultural holding for the year under consideration i.e. F.Y. 2014-15.
ii. The detail of each crop cultivated on the above agricultural land in season.
iii. The yield of particular crop during the year under consideration i.e. FY. 2014-15 for that specific (area wise), alongwith some corroboratory by govt. or concerned authority of that respective area.
iv. The total quantity of produce of each crop in the case of assessee.
v. Verification of claim of sale of agricultural produce made by the assessee. The A.O. should have enquired u/s. 133(6)/131 from the parties to whom the sales have been made by the assessee.
vi. Considering huge claim of agricultural income, the AO should have asked the inspector to conduct spot enquiry on the field of the assessee to get the actual condition and genuineness of the claim made by the assessee.
6.2 On perusal of the case records it is seen that the assessee had itself submitted a chart showing year wise agricultural income and agricultural expenses. The chart is reproduced hereunder:-
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