GOPAL HARIDAS RAUT HUF,HANWATKHED , MALEGAON vs. ITO, WARD 1, AKOLA, AKOLA

PER KHETTRA MOHAN ROY, AM: This appeal filed by assessee is directed against the order of Principal Commissioner of Income Tax (for short, “PCIT”), Nagpur, passed u/s. 263 of the Income Tax Act, 1961 (for short, “Act”), dated 28.03.2025 for Assessment Year (A.Y.) 2021–22. 2. There is a delay of 14 days in filing the present appeal. After considering the reasons explained by the assessee for the

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) delay, and being satisfied that the delay was neither deliberate nor intentional and by following the principles laid down by the Hon’ble Apex Court in Collector, Land Acquisition vs. Mst. Katiji [(1987) 2 SCC 107] and Inder Singh vs. State of Madhya Pradesh [2025 INSC 382], we condone the minimal delay of 14 days in filing the present appeal and admit the appeal for adjudication. 3. Assessee has raised the following grounds of appeal: 1. Whether the Ld PCIT is correct in law and on facts in invoking section 263 by holding that the assessment order being erroneous and prejudicial to the interest of revenue more particularly when the assessee is purely an agriculturist having no other source of income other than agriculture income and the Ld AO has also not observed that assessee having been engaged in any other activity in his assessment order from the bank statement and other documents submitted before him during the course of assessment. 2. Whether the Ld PCIT is correct in law and on facts in passing the revisionary order u/s. 263 inspite of all the sale bills of agricultural receipts, bills of agricultural expenses and explanations submitted before him. 3. Whether the Ld PCIT is correct in law and on facts in passing the revision order u/s. 263 on the basis of mere assumptions and presumptions and bypassing the evidences of agricultural income and affidavit of Karta available on record more particularly when no defect is found/observed by him in the evidences submitted by assessee before him. 4. Whether the Ld PCIT is correct in law and on facts in passing revision order u/s. 263 when the basic ingredients of section 2

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) 69A are altogether missing in the case and more particularly when the assessee is not found to be owner of any money, bullion, jewellery or other valuable article so as to attract section 69A of the income tax act. 5. The appellant craves leave to add, amend, alter or modify or delete any of the grounds of appeal at the time of hearing.

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) “Assessee has declared large agricultural income in ITR. Further, assessee has not filed return of income for last two assessment years. There is a possibility that assessee has declared large agricultural income which is not correct given it is exempt from tax. Therefore, the genuineness of the agriculture income related transactions may be verified in view of agriculture land holding and other relevant factors.

Accordingly, statutory notices u/s. 143(2) & 142(1) were issued and served upon the assessee. In response to the notice issued u/s.142(1) dated 14.10.2022, assessee partially made compliance but not submitted all the required documentary evidence. On perusal of the record and as per information available, Ld. AO found that assessee has shown gross receipts from agriculture products amounting to Rs. 38,85,410/-. Vide notice u/s. 142(1) dated 16.11.2022 assessee was asked to produce the details of agricultural receipts, expenses incurred from agriculture etc. as income of Rs. 25,10,140/- is claimed as agriculture income which is exempt from taxation. Since no response received from the assessee, the gross receipts are treated as income from unknown sources and the exemption u/s. 10(1) was withdrawn and the amount of Rs. 25,10,140/-

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) has been treated as unexplained money u/s. 69A of the Act and added the same to the total income of the assessee. 6. On examination of assessment order, Ld.PCIT found that despite there being no documentary evidence for agricultural operations has been produced by the assessee, Faceless Assessing Officer (FAO) failed to verify/enquire about gross agricultural income and the agricultural expenditure claimed by the assessee. He was considered that prima facie there was a case of the assessment in this case being erroneous insofar as it is prejudicial to the interests of the Revenue. Accordingly, notice u/s. 263 of the Act dated 28.10.2024 was issued to show-cause as to why the provisions of section 263 should not be invoked to revise the order dated 19.12.2022 passed u/s. 143(3) r.w.s. 144B of the Act. In response to the notice issued u/s. 263, assessee submitted that “assessee is purely agriculturist. He is not supposed to maintain the regular books of accounts, vouchers, bills etc. he is also not liable to file return of income. All these things happens due to bonafidely acting on the wrong advise of newly practicing accountant that assessee has to file return of income even though having agricultural income. 5

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) The assessee has submitted the maximum possible documents, bills available with him”. The documents furnished by the assessee are as follows:- 1. Notice of Revision Proceeding u/s. 263 2. Band Statement of The Akola Janta comm. bank 3. 7/12 Extract of Agriculture land holding 4. Details of Agriculture produce sold 5. Bills of agriculture sales 6. Submission before Hon. CIT 7. Details of Labour Charges, Tractor rent, Sales, Fertilizers & Seeds 8. Ledger account of Shri Vitthal Krushi Sewa Kendra and its seed, fertilizer & pesticide bills 9. Ledger confirmation account of Mauli agro center and its seed, fertilizer & pesticide bills 10. Income Tax return and computation of income 11. Affidavit 7. After considering the assessee’s submissions, Ld.PCIT concluded as follows: 8.1.1 All factors have been considered while determining the agricultural gross receipts and agricultural net income of 6.01 Ha. The agricultural net income arrived at, after verification and inquiries into the agricultural income, during the course of proceedings u/s 263 is Rs 3,99,913/-. The agricultural gross receipts declared as per the return of income is Rs 38,85,410/-. This income which the assessee claims to have generated in the AY 21-22 (FY 20-21) is substantiated only to the extent of is Rs 3,99,913/-. 8.1.2 All receipts over and above the net agricultural income of Rs 3,99,913/-, are not substantiated. As the agricultural income has not been established commensurate to the quantum declared by the assessee in the ITR and also claimed as exempt 6

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) income, the same is to be taxed as income from other sources and at the rate prescribed in Section 115BBE of the Act. 8.1.3 The onus of such receipt as exempt agricultural income has not been discharged by the assessee. Consequently, such receipts declared by the assessee in his ITR are to be assessed as income from other sources and at the rate prescribed in Section 115BBE of the Act.

8.1.4 Therefore, Rs 38,85,410/- less Rs 3,99,913/-, being Rs. 34,85,497/- is the unexplained income of the assessee and as the assessee failed to explain the source of the money. This is to be taxed as income from other sourcesat the rates prescribed in the provisions u/s 115BBE of the Act.

Finally, Ld. PCIT held that the assessment order passed u/s 143(3) r.w.s. 144B dated 29.12.2022 was erroneous insofar as it was prejudicial to the interests of the Revenue within the meaning of Explanation 2 to section 263 of the Act. Accordingly, he set aside the assessment order for the limited purpose of verification of agricultural income and directed the Jurisdictional Assessing Officer (JAO) to pass a fresh order in accordance with law. 8. Aggrieved by the order of Ld. PCIT, assessee is in appeal before this Tribunal. Learned counsel for the assessee submitted that the order passed by the Ld. PCIT u/s 263 is bad

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) in law and liable to be quashed since the assessment order passed u/s 143(3) r.w.s. 144B dated 19.12.2022 is neither erroneous nor prejudicial to the interests of the Revenue. The case of the assessee was specifically selected for scrutiny for verification of genuineness of agricultural income. During the course of assessment proceedings, assessee furnished details from time to time. Thus, the issue of agricultural income was consciously examined by the Ld. AO and after due consideration addition was made by withdrawing exemption u/s 10(1) and treating the agricultural income as unexplained money u/s 69A. Therefore, it cannot be said that there was complete lack of enquiry so as to invoke Explanation 2 to section 263. The jurisdiction u/s 263 can be exercised only when the twin conditions namely (i) the order is erroneous, and (ii) prejudicial to the interests of the Revenue are cumulatively satisfied. Merely because the Ld. PCIT is of the opinion that further enquiry ought to have been conducted, the assessment order cannot be revised. The Ld. PCIT exceeded the scope of jurisdiction u/s 263 in estimating net agricultural income of Rs.3,99,913/- and balance receipts to be unexplained. He 8

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) further submitted that assessee is purely an agriculturist owning agricultural land admeasuring 6.01 hectares supported by 7/12 extracts. The assessee had furnished details of agricultural produce sold, agricultural sale bills, bank statement, details of labour charges, tractor rent, fertilizer and seed purchases, ledger confirmations from agricultural input suppliers and affidavit explaining the agricultural activities. These documents substantiate that the assessee was carrying on agricultural operations. Assessee is not maintaining regular books of accounts as he is an agriculturist and not otherwise liable to maintain books under the Act. Non-maintenance of formal books cannot by itself lead to inference that the agricultural receipts are bogus. The Ld. PCIT committed grave error in directing taxation of agricultural receipts as “income from other sources” taxable u/s 115BBE without bringing any material on record to establish that the impugned receipts represented unexplained money, bullion, jewellery or valuable article contemplated u/s 69A. Section 69A can be invoked only when the assessee is found to be owner of unexplained money or valuable article not recorded in the books and the assessee 9

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) either offers no explanation or explanation offered is unsatisfactory. In the present case, there is no finding regarding discovery of any unexplained money or valuable article belonging to the assessee. The agricultural receipts were disclosed in the return itself and routed through bank account. Once the source is disclosed as agricultural operations supported by land holding and agricultural sale bills, the provisions of section 69A are wholly inapplicable. The Ld. PCIT proceeded merely on assumptions and presumptions that the agricultural income declared was excessive. Even assuming without admitting that the agricultural income claimed was on higher side, at best an estimation or partial disallowance could have been considered. Entire agricultural receipts cannot be converted into unexplained income taxable u/s 115BBE. Therefore, he prayed that revisional order passed by the Ld. PCIT deserves to be quashed and the assessment order passed by the AO be restored. 9. Ld. Departmental Representative (DR) submitted that the assessment order passed by the FAO is erroneous insofar as it is prejudicial to the interests of the Revenue because no 10

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) meaningful enquiry was conducted regarding genuineness of huge agricultural income of Rs.25,10,140/- claimed exempt u/s 10(1). Despite issuance of notices, assessee failed to furnish complete documentary evidence before the AO regarding agricultural operations, crop details, expenditure incurred, sale proceeds and yield. The AO without conducting proper verification mechanically accepted part claim and made addition u/s 69A without examining whether the agricultural receipts were commensurate with land holding and agricultural capacity of the assessee. Explanation 2 to section 263 clearly provides that an order passed without making enquiries or verification which should have been made shall be deemed to be erroneous insofar as prejudicial to the interests of Revenue. During revision proceedings, the assessee furnished certain additional documents which were never produced before the AO. On verification of land holding, crop pattern, probable yield and expenditure, the Ld. PCIT found that only agricultural income of Rs.3,99,913/- could reasonably be substantiated. The assessee failed to discharge the burden cast upon him to prove that the entire receipts claimed were genuine agricultural 11

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) income exempt from tax. Mere ownership of agricultural land does not automatically establish huge agricultural income. Since the assessee could not satisfactorily explain source of excess receipts over substantiated agricultural income, the same was rightly held liable to tax as unexplained income taxable u/s 115BBE. The Ld. PCIT has only restored the issue to the AO for proper verification and has not caused any prejudice to the assessee. Therefore, the order passed u/s 263 deserves to be upheld. 10. We have heard rival submissions and perused the material available on record. The effective dispute involved in the present appeal is whether the Ld. PCIT was justified in invoking revisional jurisdiction u/s 263 of the Act in respect of assessment completed u/s 143(3) r.w.s. 144B dated 19.12.2022. The undisputed facts emerging from record are that the assessee filed return of income declaring NIL taxable income and agricultural income of Rs.25,10,140/-. The case was selected for scrutiny specifically for verification of genuineness of agricultural income. It is evident from the assessment order that the AO examined the issue of 12

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) agricultural income and being dissatisfied with evidences furnished by the assessee, withdrew exemption claimed u/s 10(1) and treated the agricultural income as unexplained money u/s 69A of the Act. Thus, it is not a case where the AO failed to examine the issue altogether. The Ld. PCIT invoked provisions of section 263 primarily on the ground that adequate enquiries were not conducted regarding agricultural operations and further proceeded to estimate substantiated agricultural income at Rs.3,99,913/- and treated balance receipts as unexplained income taxable u/s 115BBE. In our considered opinion, the assumption of jurisdiction u/s 263 in the facts of the present case is unsustainable. The prerequisite for invoking section 263 is that the assessment order should be both erroneous and prejudicial to the interests of Revenue. Mere inadequacy of enquiry or difference of opinion cannot confer revisional jurisdiction upon the Ld. PCIT. Once the AO has examined the issue during scrutiny proceedings and taken a conscious view, which is maintainable and legally plausible, the Ld. PCIT cannot invoke section 263 merely because according to him further or deeper enquiry ought to have been conducted. 13

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) We further find merit in the contention of the assessee that provisions of section 69A were not at all applicable in the facts of the case. For invoking section 69A, there must be finding that the assessee was found to be owner of unexplained money, bullion, jewellery or valuable article not recorded in the books of account. In the present case, there is no such finding either by the AO or by the Ld. PCIT. The agricultural receipts were duly disclosed in the return of income and the assessee had furnished 7/12 extracts, agricultural sale bills, bank statements, details of agricultural expenditure and confirmations from suppliers of seeds, fertilizers and pesticides. Though the authorities below doubted quantum of agricultural income, the material brought on record does establish that the assessee was carrying on agricultural operations. The Ld. PCIT proceeded predominantly on estimations, assumptions and probabilities for arriving at agricultural income of Rs.3,99,913/- Such estimation may perhaps give rise to a different possible view, however the same by itself does not render the assessment order erroneous within the meaning of section 263.

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) We also find that the Ld. PCIT travelled beyond the scope of revisional jurisdiction by virtually conducting fresh assessment and directing taxation of agricultural receipts u/s 115BBE without any cogent material establishing existence of unexplained money or investment. The Hon'ble Supreme Court in the case of PCIT vs. M/s. V-Con Integrated Solutions Pvt. Ltd. in SLP (Civil) Diary No. 13205/2025, dated 04.04.2025 has considered the issue of revision u/s. 263 and dismissed the Revenue’s petition holding as under:- “The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of investigation and a wrong decision/conclusion. A wrong decision/conclusion corrected by the Commissioner of Income Tax with a decision on merits and by making an addition or disallowance. There may be cases where the Assessing Officer undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax must record the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue.

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) Recording the aforesaid, the special leave petition is dismissed.”

Order pronounced on 19/05/2026 under Rule 34 of Income Tax (Appellate Tribunal) Rules–1963.

sd/- sd/- PAWAN SINGH KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER Nagpur: Dated: 19/05/2026 KRK/vr

ITA 392/Nag/2025 (Gopal Haridas Raut HUF) Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file.

By order Vukkem Digitally signed by Vukkem Rambabu Rambabu Date: 2026.05.19 17:05:22 +05'30' Senior Private Secretary ITAT, Nagpur