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Income Tax Appellate Tribunal, JAIPUR BENCH ’SMC’, JAIPUR
Before: SHRI SHRI VIJAY PAL RAOvk;dj vihy la-@ITA No. 868/JP/2019
This appeal by the assessee is directed against the order dated 22.05.2019 of ld. CIT (Appeals)-2, Jaipur for the assessment year 2015-16. The assessee has raised the following grounds of appeal :-
“ 1. Under the facts and circumstances of the case the learned CT (A) has erred in sustaining the addition of Rs. 2,80,830/- out of Rs. 8,37,900/- made by the learned AO on account of alleged undisclosed income introduced in the form of agricultural income.
2. Under the facts and circumstances of the case the learned Assessing Officer has erred in reducing the agricultural income by Rs. 2,80,830/- without any basis or without considering the submission and credible evidences submitted by the assessee.
The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”
The only issue arises in this appeal of the assessee is regarding agricultural income to the extent of Rs. 2,80,830/- was treated as undisclosed income by the ld. CIT (A).
The assessee is a private limited company and is stated to have engaged in agricultural activity. The assessee filed its return of income on 15.09.2015 declaring total income at Nil and agricultural income of Rs. 27,92,999/-. The AO while completing the scrutiny assessment under section 143(3) of the IT Act on 30th December, 2017 held that the assessee has shown an expenditure of Rs. 1,38,120/- for earning the gross agricultural income of Rs. 32,72,999/- which is unrealistic and unreasonably low. The AO accordingly estimated the expenditure @ 30% of the gross agricultural income and computed the total agricultural income of the assessee at Rs. 24,35,099/-. The difference amount of Rs. 8,37,900/- was treated as undisclosed income of the assessee. The assessee challenged the action of the AO before the ld. CIT (A) who has granted part relief to the assessee by estimating the expenditure at 15% as against 30% estimated by the AO.
3. Before the Tribunal, the ld. A/R of the assessee has submitted that the assessee is a private limited company and is engaged in agricultural activity. Return of income was filed on 15.09.2015 declaring total income of Rs. Nil and agricultural income of Rs. 27,92,999/-. The learned Assessing Officer has completed the assessment u/s 143(3) of the Income Tax Act, 1961 on 23.12.2017 determining total income at Rs. 8,37,900/- inter alia making the addition of Rs. 8,37,900/- by treating the agricultural income as non-agricultural. The ld. A/R submitted that the addition made by the AO of Rs. 8,37,099/- is on account of miscalculation. The net agricultural income after deduction of 30% expenditure comes to Rs. 19,55,099/- whereas the assessee had disclosed net agricultural income of Rs. 26,54,879/- (3272999-480000 = 2792999-138120=2654879). It is submitted that against gross agricultural income of Rs. 27,92,999/-, the assessee had claimed expenditure of Rs. 1,38,120/- and thus net agricultural income as per assessee was of Rs. 26,54,879/- against which AO worked out net agricultural income of Rs. 19,55,099/-. The addition accordingly even as per Assessing Officer’s working works out to Rs. 6,99,780/- (2654879-1955099). Thus the AO has made excessive addition by Rs. 1,38,120/- even by his own working. This deserves to be deleted outright. The ld. A/R further submitted that the entire agricultural produce obtained by way of crops is fully vouched and has been sold through Krishi Upaj Mandi. The sale is beyond doubt. The AO has not brought any material on record to disprove the sale vouchers, no enquiry has been conducted from the parties through whom the agricultural produce was sold. Any enquiry made from these parties would have disclosed the truth but this was not done by the AO. He has preferred to act on estimate and guess work. At first the AO estimated the gross agricultural produce on the basis of a report from the Tehsildar but when the same was agitated by the assessee claiming that the land owned by the assessee was more fertile and capable of yielding 50% more crops in comparison an average land as reported by the Tehsildar. But he did not accept the contention of the assessee. This shows the variation on working of agricultural income on estimate basis. The ld. A/R relied upon the following decisions :-
Uma Charan Shaw & Brothers 37 ITR 271 (SC) CIT vs. Anupam Kapoor 299 ITR 179 (P&H) CIT vs. Dhiraj Lal Girdhari Lal 26 OTR 736 Dhakeshwari Cotton Mills 26 ITR 775 (SC) State vs. Gulzari Lal Tondon 1979 AIR 1382 (SC) J.A. Naidu vs. State of Maharastra 1979 AIR 1537 (SC)
On the other hand, the ld. D/R has submitted that it is well known fact that the agricultural sector is facing the problem of low income and, therefore, showing negligible expenditure in earning income of more than Rs. 30 lacs by the assessee is unrealistic and beyond the ground realities. He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as the relevant material on record. Though the AO while computing the agricultural income has taken incorrect figures and thereby made the addition of Rs. 8,37,900/-, however, the ld. CIT (A) while allowing the part relief has taken the correct amount of agricultural income and expenditure. Therefore, the said grievance of the assessee is already redressed by the ld. CIT (A). As regards the addition sustained by the ld. CIT (A) by taking the expenditure at 15% which comes to Rs. 4,18,950/- as against the assessee’s claimed expenditure of Rs. 1,38,000/-, it is pertinent to note that the assessee has shown gross agricultural income of Rs. 32,72,999/- which includes Rs. 4,80,000/- as sale of trees. Therefore, the gross agricultural income shown by the assessee from the agricultural operation is Rs. 27,92,999/- against which the assessee has claimed expenditure of Rs. 1,38,120/-. Thus the expenditure claimed by the assessee is around 4.9% which is beyond the imagination of percentage of expenditure for earning the agricultural income. Therefore, the claim of the assessee is found to be unrealistic and the ld. CIT (Appeals) has considered this issue in para 2.3 to 2.3.3 as under :-
“ 2.3. I have perused the facts of the case, the assessment order and the submissions of the appellant. Ground No. 01 and 02 are being taken up together which are interrelated. During the year under consideration, assessee declared gross agricultural income of Rs. 32,72,999/- and after claiming expenses of Rs. 1,38,120/- declared net agricultural income of Rs. 31,34,879/- including Rs. 4,80,000/- as sale of trees being other sources. Assessing Officer concluded that assessee has claimed less expenses and looking to short rainfall the total production of agriculture crops could not fetch the price as declared by the assessee. Accordingly, Assessing Officer estimated agricultural income at Rs. 24,35,099/- and made addition of remaining amount of Rs. 8,37,900/- as undisclosed income. 2.3.1. Before me, Authorized Representative stated that sales bills were submitted and not doubted by Assessing Officer. Sales of other sources should be accepted. 2.3.2. Regarding expenses, Authorized Representative said deduction of 30% based on decision of Shri Durga Prasad Yadav is misplaced. Assessee has given land for cultivation on sharing basis. 2.3.3. On perusal of overall facts, it is seen that the Assessing Officer has not doubted the sales bills submitted with regard to sales of agriculture produce nor enquiry made. Thus the sales declared by assessee is accepted. Further assessee claimed expenses against agricultural receipt. Looking to overall facts and fallowing the decision of Hon’ble Bench in Durga Prasad Yadav case, seeing the better location of land etc. it is reasonable to restrict the expenses to 15% against 30% taken by the Assessing Officer. Assessee claimed agricultural expenses at Rs. 1,38,120/- against which 15% expenses are held as reasonable. Accordingly income from agricultural produce is worked out at Rs. 23,74,049/- (Rs.27,92,999 x 85%). Thus total agricultural income comes to Rs. 28,54,049/- (2374049+480000) against Rs. 31,34,879/- declared by the assessee. Addition of Rs. 280830/- is upheld. This ground of appeal is partly allowed.”
Thus it is clear that the ld. CIT (A) has taken a reasonable percentage of 15% expenditure of the gross agricultural income and that too the agricultural income from agricultural operations excluding the income from sale of trees. Hence, in the facts and circumstances of the case as well as the prevailing conditions in the agricultural sector, the claim of the assessee cannot be accepted. The ld. CIT (A) has taken a reasonable view in estimating the expenditure at 15%.
In the result, the appeal of the assessee is dismissed. Order is pronounced in the open court on 01/11/2019.