BHALCHANDRA ASHOK MURKUTE,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2,, PUNE

आदेश / ORDER PER ANIL CHATURVEDI, AM :

Assessee is an individual stated to be engaged in the business of transportation and having agricultural income. Assessee filed his return of income for A.Y. 2013-14 on 29.07.2013 declaring total income at Rs.23,74,225/-. The case was selected for scrutiny and

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thereafter assessment was framed u/s 143(3) of the Act vide order

dated 14.03.2016 and the total income was determined at

Rs.25,66,970/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dt.15.05.2018 (in appeal

No.PN/CIT(A)-3/Cir-2,Pn/67/2016-17) dismissed the appeal of

assessee and enhanced the assessed income. Aggrieved by the order of

Ld.CIT(A), assessee is now in appeal before us and has raised the

following grounds :

“1. The Ld. CIT (A) erred in confirming the disallowance of agricultural income made by the Ld. Assessing Officer.

3.1. During the course of assessment proceedings, AO on perusing

the computation of income noticed that assessee had shown

agricultural income of Rs.2,50,210/-. Assessee was asked to submit

the documents in support of his agricultural income. Assessee stated

that it had sold flowers and he submitted some bills showing the sale

of flowers to Trimurti Pushp Bhandar. Assessee also submitted the

copy of 7/12 extract of agricultural land. AO noticed that the bills

submitted were photo copies. He further noticed that in 7/12 extract

the entry of crop cultivated was of rice and nowhere the cultivation of

flowers was mentioned. AO therefore did not accept the contention of

assessee. He thereafter disallowed Rs.50,000/- from agricultural

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income and added it to the total income. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who did not accept the

contention of assessee. He was also of the view that the entire amount

of Rs.2,50,210/- that was shown by the assessee as agricultural

income should be treated as income from non-agricultural sources. He

accordingly held the entire amount of Rs.2,50,210/- as income from

non-agricultural sources. Aggrieved by the order of Ld.CIT(A), assessee

is now before us.

and Ld.CIT(A) and further submitted that assessee owns 15 acres of

land and the details of which were reproduced by Ld.CIT(A) at pages 6

and 7 of the order. He also pointed to the copies of the bills which

showed sale of flowers and which were furnished before the AO and

which are also placed at page 53 of the Paper Book. He further

submitted that before the lower authorities the assessee submitted that

they can summon the authorized person of Trimurti Pushp Bhandar to

whom the assessee had sold flowers to ascertain the genuineness of

bills of agricultural income but the authorities did not summon them.

With respect to non-noting of cultivation of flowers in 7/12 extract, it

was the submission of assessee that the crop noting was done by

Tahsildar in the month of July / August every year and the flowers

were grown subsequently and therefore there was no noting of flowers

grown on the land. He further submitted that the flower bills were

issued by Trimurti Pushp Bhandar and the assessee cannot be made

responsible for having no entry in 7/12 extract on which there will be

no control of assessee and the assessee has discharged his duty of

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proving the genuineness of the transaction. He therefore submitted

that assessee has proved the genuineness of the transaction by

furnishing the bills of the purchaser and the disallowance made by the

AO is on the basis of presumption. He therefore submitted that the

addition made by the AO and enhanced by the Ld.CIT(A) be deleted.

Ld. D.R. on the other hand, supported the order of lower authorities.

record. The issue in the present ground is with respect to addition of

agricultural income on account of sale of flowers. It is an undisputed

fact that assessee owns 15 acres of land and on which he claimed that

he had grown flowers which has been sold by the assessee to Trimurti

Pushp Bhandar. In support of his claim of sales of flowers to Trimurti

Pushp Bhandar, the assessee had furnished sample copies of the bills

issued by the said Trimurti Pushp Bhandar, which are placed at Page

No.53 of the Paper Book. The perusal of the said bills placed at Page

53 of the Paper Book reveals that these bills contain pre-printed serial

number, the address, phone numbers and the bills are also dated.

These bills also reveals the seller of the flowers to be the assessee, the

quantity of flowers sold, the type of flowers, the rate and the total

amount. The copy of the sale of bills have not been found to be bogus

or the purchaser to be non-existent. Further, the submission of Ld.A.R.

that the entry in 7/12 extract are made by Tahsildar in the month of

July / August and the flowers are grown after August have not been

found to be incorrect. Considering the totality of the aforesaid facts, we

are of the view that the AO was not justified in discarding the claim of

assessee without he being in possession of any adverse material to

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prove the contrary. In such a situation, we are of the view that the

assessee having earned agricultural income needs to be accepted. We

therefore set aside the addition made by the AO and enhanced by

Ld.CIT(A). Thus, the ground Nos.1 and 2 of the assessee are

allowed.

14A of the Act.

6.1. AO on perusing the Balance-Sheet of the assessee noticed that

assessee had invested in different partnership firms and the share of

profits received by the assessee from these firms would have been

exempt u/s 10(2A) of the Act. The Assessee was therefore asked to

explain as to why disallowance u/s 14A r.w.r. 8D of Income Tax Rules

not be made. To the query of AO, assessee inter-alia stated that it had

not incurred any expenditure for earning exempt income. The

submissions of the assessee were not found acceptable to the AO. AO

thereafter concluded that the provisions of Sec.14A of the Act are

applicable to assessee. He thereafter, on the basis of method

prescribed under Rule 8D of I.T. Rules, worked out the disallowance at

Rs.1,42,741/- and made its addition. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who upheld the order of

AO. Aggrieved by the order of Ld.CIT(A), assessee is now before us.

and Ld.CIT(A) and further submitted that no disallowance is called for

as assessee has not earned any exempt income. Ld.A.R. further

pointing to the capital account which is placed at Page 4 of the Paper

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Book submitted that the drawings made by the assessee has not been

considered as expense in the Profit and Loss account. He further

pointing to the Profit and Loss account, which is placed at Page 3 of the

Paper Book submitted that the expenses are incurred for the purpose of

business which are approximately Rs.10 lakhs. He therefore submitted

that no disallowance u/s 14A of the Act is called for in the present case.

Ld. D.R. on the other hand supported the order of AO and Ld.CIT(A)

and submitted that no disallowance on account of interest under Rule

8D(2)(ii) of I.T. Rules has to be made but AO has made disallowance

only on account of administrative expenses under Rule 8D(2)(iii) of I.T.

Rules. He thus supported the order of lower authorities.

record. The issue in the present ground is with respect to disallowance

of Rs.1,42,741/- u/s 14A r.w.r. 8D(2)(iii) of I.T. Rules. We find that AO

had noted that assessee has exempt income from partnership firms.

He thereafter worked out the disallowance of expenses u/s 14A r.w.

Rule 8D(2)(iii) on account of administrative expenses as per formula

prescribed therein. The applicability of Sec.14A of the Act is not in

dispute. It is also a fact that AO has not made any disallowance on

account of interest under Rule 8D(2)(ii) r.w.s 14A of the Act and the

disallowance has only made on account of administrative expenses.

Before us, assessee has not pointed out as to why the provisions of

Sec.14A r.w. Rule 8D(2)(iii) are not applicable to the present facts. We

therefore find no error in the order of Ld.CIT(A). Thus, the ground

No.3 of assessee is dismissed.

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Order pronounced on7th day of June, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 7th June, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-3, Pune. 4. Pr. CIT – 2, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक सद�य” / DR, ITAT, “SMC” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER // True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.