SARVODAYA SPECIALTIES LIMITED,CHANDIGARH vs. ITO WARD 2(1), CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 1176 /Chd/2025 िनधा�रण वष� / Assessment Year : 2018-19 Sarvodaya Specialties Limited बनाम The ITO SCF 393, 1st Floor, Motor Market, Ward-2(1), Manimajra, Chandigarh Chandigarh �ायी लेखा सं./PAN NO: AAQCS3908L अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Vibhor Garg, C.A राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) सुनवाई की तारीख/Date of Hearing : 22/06/2026 उदघोषणा की तारीख/Date of Pronouncement : 23/06/2026 आदेश/Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld CIT(A)/ NFAC, Delhi dt. 17/07/2025 pertaining to Assessment Year 2018-19. 2. In the present appeal Assessee has raised the following grounds: 1. That the impugned order is bad both on facts and law. 2. That the Ld. Appellate Authority has wrongly and illegally upheld the addition of 17,92,837/- on account of excess agricultural income declared by assessee after ignoring the written pleadings and relying purely on guess, surmises and conjectures of AO. 3. That the Ld. Appellate Authority has wrongly and illegally upheld the invoking of section 115BBE in mechanical manner after ignoring all the evidences and written submissions. 4. The appellant craves for permission to add, alter amend any ground of appeal before the appeal is heard OR finally disposed off.

receipts from sale of agricultural produce at approximately Rs.49,56,971/- and disclosed net agricultural income of about Rs.46,45,971/- after claiming agricultural expenditure of Rs.3,11,000/- lakhs, which included lease rent of agricultural land and other cultivation expenses. 3.1 During the course of assessment proceedings, the Assessing Officer observed that the expenditure claimed by the assessee for earning agricultural income was disproportionately low. The Assessing Officer was of the view that for cultivation of crops such as wheat, chana, sarson, bajra, moth and groundnut on such a large area of land, substantial expenditure towards land preparation, seeds, fertilizers, labour, transportation, harvesting and other incidental activities would necessarily have been incurred. 3.2 The Assessing Officer, without rejecting the agricultural receipts disclosed by the assessee, estimated the likely expenditure on cultivation at Rs.21,03,837/- and after reducing the expenditure of Rs.3,11,000/- already disclosed by the assessee, treated the difference of Rs.17,92,837/- as unexplained expenditure under section 69C of the Income Tax Act, 1961 and added the same to the income of the assessee. 4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). 5. The Ld. CIT(A) upheld the action of the Assessing Officer observing that the assessee had failed to furnish complete documentary evidence in support of the agricultural expenditure claimed and that the expenditure disclosed appeared unreasonably low considering the extent of agricultural operations undertaken by the assessee. The addition made under section 69C was accordingly sustained. 6. Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal. 7. During the course of hearing the Ld. Counsel for the assessee submitted that:

(i) the agricultural activity carried on by the assessee was never doubted by the Revenue; (ii) the ownership/possession of agricultural land and cultivation thereon stood accepted; (iii) the sale of agricultural produce through Mandi receipts had been accepted by the Assessing Officer; (iv) no defect whatsoever had been pointed out in the books of account; (v) the Assessing Officer had not brought any material on record to establish that any expenditure over and above the amount disclosed by the assessee had actually been incurred; (vi) the addition under section 69C was made merely on hypothetical estimates and generalized assumptions regarding agricultural operations; (vii) section 69C can be invoked only when there is evidence of actual expenditure incurred and the source thereof remains unexplained. In the present case, there was no evidence whatsoever of any undisclosed expenditure. 7.1 The Ld. AR therefore prayed for deletion of the entire addition. 8. The Ld. DR supported the orders of the lower authorities. It was submitted that cultivation of multiple crops over a substantial area could not reasonably be carried out with expenditure of merely about Rs. 3,11,000/-. The assessee had failed to maintain proper supporting evidence regarding labour charges, irrigation expenses, transportation expenses and other cultivation costs. Therefore, the Assessing Officer was justified in estimating the expenditure likely to have been incurred in carrying out such agricultural activities. 9. I have heard the rival submissions and perused the material available on record.

9.1 The undisputed facts emerging from the record are that the agricultural land held by the assessee has not been disputed by the Revenue. The agricultural operations carried out by the assessee have also not been doubted. Significantly, the sale proceeds arising from agricultural produce amounting to approximately Rs.49,56,971/- have been accepted by the Assessing Officer. Thus, the existence of agricultural activity and the generation of agricultural receipts stand accepted. 9.2 The controversy before me is therefore confined to a narrow issue, namely, whether the expenditure declared by the assessee at approximately Rs.3,11,000/- can be accepted or whether the Assessing Officer was justified in estimating the expenditure at Rs.21,03,837/- and consequently invoking section 69C of the Act. 9.3 In my considered view, the provisions of section 69C can be invoked only where the Revenue establishes that an assessee has actually incurred expenditure and has failed to explain the source thereof. Mere suspicion, however strong, cannot substitute evidence. In the present case, the Assessing Officer has proceeded entirely on estimated norms of cultivation expenditure and on generalized literature relating to agricultural practices. No independent inquiry has been conducted. No statement of any cultivator, labour contractor, commission agent or agricultural expert has been brought on record. No material has been gathered to establish that the assessee had in fact incurred expenditure to the extent estimated by the Assessing Officer. 9.4 At the same time, I am unable to completely accept the claim of the assessee that agricultural operations over 22.5 hectares resulting in agricultural receipts of nearly Rs.49,56,971/- could be carried out with expenditure of only about Rs. 3,11,000/- . The assessee has also not maintained complete documentary evidence supporting the entire expenditure claimed.

9.5 Thus, the claims made by both sides appear to be at extreme ends. While the estimate made by the Assessing Officer is excessive and unsupported by tangible evidence, the expenditure disclosed by the assessee also does not inspire complete confidence having regard to the scale of agricultural operations undertaken. 9.6 Considering the entirety of facts and circumstances, and in order to meet the ends of justice, I deem it appropriate to sustain a reasonable disallowance of Rs. 4,00,000/- in place of the addition of Rs.17,92,837/- made by the Assessing Officer. Accordingly, the balance addition of Rs.13,92,837/- is directed to be deleted. 9.7 It is clarified that the aforesaid determination is based upon the peculiar facts of the present case where agricultural activity as well as agricultural receipts have been accepted by the Revenue and the dispute is confined only to estimation of agricultural expenditure. 10. In the result, the appeal of the assessee is partly allowed. Order pronounced on 23/06/2026 Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकर आयु�/ CIT 3. आयकर आयु� (अपील)/ The CIT(A) 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH