THANGAVELU BALACHANDAR,PALLIPALAYAM vs. ITO, WARD-1(6), SALEM

The only ground of appeal in this appeal of assessee is against in confirming the addition of Rs.25,00,000/- made by CPC, Bengaluru in the intimation u/s. 143(1) of the Act.

The assessee is an individual and filed his return of income declaring total income of Rs.19,48,790/-. The CPC in the intimation u/s 143(1) of the Act has added a sum of Rs.26,43,440/-, which was stated to be amount not credited to the profit and loss account in Schedule OI, BP. Aggrieved, the assessee filed an appeal before Ld.

CIT(A). The Ld. CIT(A) confirmed the addition as CPC has made the adjustment on the basis of tax audit report.

Before us, the Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee in the return of income has shown following income in Schedule OI:

Source Amount in Rs. 1 Income from milk sales (declared 1,20,000 u/s. 44AD of the Act) 2 Consideration on sale from 25,00,000 Agricultural land (exempt) 3 Net agricultural income (exempt) 23,440 Total 26,43,440

The Ld. AR has submitted that above income do not find place in profit and loss account as the profit and loss account and audit report was only relating to the textile business, for which the books of accounts were maintained. The Ld A.R submitted that the income from sale of milk was not routed through the P&L account and the income has been offered to tax under presumptive taxation. Similarly the agricultural income of Rs.23,440/- has been duly declared as exempt income. As regard to the consideration on sale of agricultural income of Rs. 25 Lakhs, the Ld AR submitted that the capital gain from sale of agriculture land was exempt from tax, however assessee has inadvertently taken the same to be a capital asset and returned capital loss of Rs. 26,26,620/-.

The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities.

We have heard the rival submissions, and perused the materials available on record. The assessee in the return of income in Schedule OI in clause 5(d), has mentioned amount of Rs. 26,43,400/- as amount not credited to the profit and loss account. The assessee in Form- 3CD, under coloumn No.15, also has reported income not credited to P&L account, comprising of Rs.1,20,000/- from milk sales, Rs.25,00,000/- as consideration from sale of agricultural land, and Rs.23,440/- as net agricultural income. Based on the above information, the CPC has added Rs. 26,43,440/- to the computation of income. The assessee filled appeal against the addition of agriculture income of Rs.25,00,000/- and the same has been confirmed by the Ld CIT(A). We find that the Ld. CIT(A) has confirmed the addition for the reason that CPC has made adjustment on the basis of assessee’s report that profit on sale of agriculture land has not been credited in profit and loss account. The assessee has given reason for profit on sale of agriculture land not being credited in the P&L account reported in Form 3CD as the Form 3CD is only relating to textile business. The Ld.CIT(A) has not examined the accounts from the correct perspective and therefore, erroneously confirmed the addition. We accordingly reverse the order of Ld. CIT(A) and direct to delete the addition of Rs.25,00,000 made by the CPC.

In the result, the appeal filed by the assessee is allowed.