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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE & SHRI LAXMI PRASAD SAHU
O R D E R Per Laxmi Prasad Sahu, Accountant Member :-
The assessee appeal filed by the assessee is against the order passed by the NFAC, Delhi dated 05/06/2023 vide DIN No.ITBA/NFAC/S/250/2023-24/105354137(1) u/s 250 of the Act on the following grounds of appeal:-
Page 2 of 6 “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A] is not justified in sustaining the addition made u/s. 69C of the Act towards estimated expenditure for agricultural expenditure and thus holding that a sum of Rs.25,05,173/- being 30% of the gross agricultural receipts has to be added as against the original addition made on estimate basis at 40% of the gross agricultural income by the learned A.O., which addition is totally opposed to law and facts of the appellant's case. 2.1 The learned CIT[A] ought to have appreciated that the sources for agricultural expenditure incurred by the appellant cannot be regarded as unexplained in as much as the gross agricultural receipts of the appellant have been accepted and therefore, the addition made deserves to be deleted. 2.2 The learned CIT[A] failed to appreciate that the expenditure determined on an estimate basis could not be treated as unexplained expenditure u/s 69C of the Act, under the facts and in the circumstances of the appellant's case.
Without prejudice to the above the unexplained expenditure estimated and sustained is excessive and requires to be reduced substantially.
Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A, 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
The brief facts of the case are that the assessee is having income from business and profession, capital gains and other sources. The assessee filed hts return of income on 23/07/2018 declaring at a total income of Rs.25,17,050/-. The case was selected for scrutiny and statutory notices were issued to the assessee and accordingly, the assessee replied.
Page 3 of 6 3. During the course of assessment proceedings, the AO noted that the assessee has declared income from sale of agricultural produce at Rs.83,50,578/-. During the assessment proceedings, the assessee was asked to produce the details of expenditure incurred on the earning of agricultural income. The assessee field letter on 26/10/2020 and submitted that he has not claimed any expenditure and the assessee has not furnished any evidence, as he is not keeping any record for agricultural expenses. This was not accepted by the AO. The AO estimated the expenses @40% of the gross total income of Rs.83,50,578/-, which comes to Rs.33,40,231/-. The AO estimated it as unexplained expenditure u/s 69C of the Act and proposed to add into the total income of the assessee and in this regard, the draft assessment order was served on the assessee on 25/03/2021. Against the show cause notice, the assessee furnished reply on 31/03/2021, in which he stated that the assessee has incurred expenditure of Rs.15,58,935/- during the year towards farm laborer temporarily appointed for plucking of coffee, sprinkling of fertilizers etc. and details of statement were furnished and accepted that during the filing of return of income, the gross receipt was shown as agricultural income and after deducting the said expenses, he arrived at the net agricultural income and the same expenses had been incurred out of the agricultural receipts earned. Therefore, the same expenditure cannot be treated as unexplained expenditure. The AO did not accept the contention of the assessee and added into the total
Page 4 of 6 income of the assessee and treated it as unexplained expenditure u/s 69C of the Act. The AO also made addition as per Rule 7B of the Act as discussed in paragraph No.7 to 7.2 of his order. Accordantly assessed the total income at Rs.75,80,049/-.
4. Aggrieved from the above order, the assessee filed detailed written synopsis before the CIT(A). . The assessee has submitted that the assessee has incurred expenditure of Rs.15,58,935/- towards earning the agricultural income. The CIT(A) after considering the written submissions, re-estimated the expenditure and restricted it to 30%. Accordingly, the addition was confirmed by the CIT(A) u/s 69 of the Act to the extent of Rs.25,05,173/-. Furtherthe CIT(A) accepted the addition of Rs.17,22,768/- in the written synopsis, accordingly he partly allowed the appeal of the assessee.
Aggrieved from the above order, the assessee filed appeal before the ITAT.
The ld.AR reiterated the submissions made before the lower authorities and he further submitted that once the AO has accepted the entire gross receipts as agricultural receipts and out of which, he has estimated the expenditure on adhoc basis @40% and to which, the CIT(A) has restricted to 30% is not sustainable because the entire gross receipts have been accepted by both the Page 5 of 6 authorities below. Therefore, there was a definite source of incurring the expenditure by the assessee towards earning agricultural income, hence, the section 69C will not apply. He further submitted that the agriculture income was not shown as a source for any other investment or outgoing in the financials & sufficient drawings of Rs. 75,99,175/- The agricultural receipts were shown only for the computation of rate purposes for computing the Income-tax of the assessee.
On the other hand, the ld.DR relied on the orders of the lower authorizes and submitted that the necessary expenditure should be deducted from the gross agricultural income as reported by the assessee in his return of income.
We have considered the rival submissions and noted that the AO has observed from the return of income that the assessee has shown agricultural income of Rs.83,50,578/- and there in no dispute on the gross receipts. He has estimated the expenditure on adhoc basis @40% of the gross sales receipts and has treated it as unexplained expenditure u/s 69C of the Act, to which the CIT(A) has restricted to 30%. After considering the submissions of both sides, we found substance on the submission of ld.AR that once source of the expenditure has been accepted by the AO, which is out of gross sales receipts then no addition can be made u/s 69C of the Act. In the case on hand, the gross receipts from agricultural activities have been accepted
Page 6 of 6 by the AO and out of which he has disallowed, therefore, as per our considered view, the source of the expenditure is not in dispute, therefore, the addition should not be made u/s 69C of the Act, accordingly, the issue raised by the assessee on this grounds are allowed.
Ground No.4 is consequential in nature and ground No.5 is general in nature.