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Facts
The assessee, Usha Rani, appealed against the CIT(A)'s order upholding additions made by the AO. The AO treated lease rent from agricultural land, sale of safeda trees and fruits, and sale of wheat and jawar as unexplained cash credits under Section 68 r/w Section 115BBE. The assessee claimed these were agricultural income and had previously reported similar income which was accepted.
Held
The Tribunal held that the AO's reasoning for making additions was flawed. The Tribunal noted that cash transactions are common in rural areas and that the assessee had provided Aadhar cards and confirmations from lessees/buyers, thus discharging the initial onus. The AO failed to conduct further inquiries to rebut the evidence.
Key Issues
Whether the lease rent from agricultural land and receipts from sale of agricultural produce were correctly treated as unexplained cash credit by the AO and sustained by the CIT(A)?
Sections Cited
68, 115BBE, 143(3)
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Order
PER VIKRAM SINGH YADAV, AM
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 20/12/2024 pertaining to Assessment Year 2018-19.
In the present appeal, the Assessee has raised the following grounds of appeal:
1. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the addition of Rs.9,75,000/- made by the Assessing officer treating lease rent from agricultural land to be alleged unexplained cash credit applying the provisions of Section 68 r/w Section 115BBE which is arbitrary and unjustified.
2. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the addition of Rs.5,75,000/- made by the assessing officer treating receipts from sale of safeda trees and fruit to be alleged unexplained cash credit applying the provisions of Section 68 r/w Section 115BBE which is arbitrary and unjustified. 3. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the addition of Rs.2,91,729/- made by the assessing officer treating sale of wheat and jawar to be alleged unexplained cash credit applying the provisions of Section 68 rw Section 115BBE which is arbitrary and unjustified. 4. That the Ld. Commissioner of Income Tax(Appeals) has erred in upholding the invocation of Sections 68 and 115BBE of the Act which are not attracted in the facts of the instant appellant and as such the order passed is arbitrary and unjustified. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
That the order of the Ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 3. Briefly, the facts of the case are that the assessee has filed her return of income which was selected for limited scrutiny to examine agriculture income so reported in the return of income and thereafter, after issuing notice and calling for the necessary information and documentation as well as the issue of the show cause, the assessment was completed under section 143(3) r.w.s 143(3A) and 143 (3B) of the Act vide order dt. 11/04/2021 wherein the AO brought to tax cash receipts from letting out the agriculture land amounting to Rs. 9,75,000/-, the cash receipt from sale of safeda and fruits amounting to Rs. 5,75,000/- and receipt of Rs. 2,91,729/- from sale of Wheat and Jawar as unexplained cash credit under section 68 of the Act.
The assessee thereafter carried the matter in appeal before the Ld CIT(A) who has since sustained the said findings of the AO. Against the said findings and the order of the Ld. CIT(A), the assessee is in appeal before us.
During the course of hearing, the Ld. AR submitted that the assessee is holding around 50.5 acres of agriculture land in her name and consistently over the years, she has reported agriculture income in her return of income. In this regard, our reference was drawn to the assessment order passed for A.Y 2017-18 wherein the gross agriculture income of Rs. 40,71,500/- reported by the assessee has been accepted by the AO in terms of order passed under section 143(3) dt. 18/11/2019. Further, our reference was drawn to the return of income filed for A.Y 2014-15, 2015-16 and 2016-17 wherein the assessee has disclosed agriculture income of Rs. 40,00,000/- in each of these assessment years. It was accordingly submitted that the assessee is consistently reporting her agriculture income and which has been accepted in the earlier years. Therefore, it is not for the first time that the assessee has reported agriculture income.
6. It was further submitted that for the year under consideration, the assessee has shown gross agriculture income of Rs. 41,00,000/- and after deducting expenses, net agriculture income of Rs 35,00,000/- has been reported in the return of income. In this regard, our reference was drawn to the details of the assessee’s land holding and the respective receipts from sale of agriculture produce/ lease out of the piece of land which have been undertaken during the year:
It was submitted that during the course of assessment proceedings, the assessee has furnished the aforesaid information and documentation in terms of her land holding, the nature of cultivation which has been carried out on the agriculture land and J forms in support of sale of the agriculture produce. It was further submitted that certain pieces of agriculture land were leased out to certain specified persons and necessary details were submitted to the AO and our reference was drawn to the written submission dt. 19/01/2021, 12/02/2021 and 04/04/2021 which are available as part of the assessee’s paper book. It was submitted that necessary confirmation from these persons to whom land has been leased out has been submitted alongwith their Aadhar Card. Similarly, the receipt from the persons to whom safeda and fruits were sold were also submitted alongwith their Aadhar Card to the AO. It was submitted that simply for the reason that the assessee has not submitted PAN of these persons and has earned the lease rental in cash which has not been deposited in the bank account, the AO has made the addition in the hands of the assessee to the extent of Rs 18,41,729/-. It was submitted that even the Ld. CIT(A) has sustained the order of the AO holding that the assessee has not furnished the PAN of these persons and therefore the transactions could not be verified. It was submitted that not every person is required to hold the PAN and the assessee therefore cannot be expected to provide the PAN number where the other person doesn’t hold the PAN number. It was submitted that what is essential is to identify the person to whom the land has been let out and in this regard, the assessee has duly submitted Aadhar Card which contain requisite particulars as well as address of these persons and their written confirmations were also submitted. It was submitted that the assessee has specifically requested to the AO that where required, the necessary verification and inquiries can be conducted directly from these persons, however, no such inquiries were conducted and the agriculture income so reported has been held to be unexplained and the addition have been made under section 68 of the Act.
The Ld. DR has been heard who has submitted that merely because the assessee has disclosed agriculture income in the earlier years and the same has been accepted by the AO, the same does not by default means that the agriculture income so reported in the impugned assessment year be accepted. It was submitted that the case of the assessee was selected for limited scrutiny to examine the agriculture income and therefore it was incumbent on the part of the AO to call for the necessary information and documentation and basis thereof, the AO has recorded specific finding disputing the claim of the agriculture income and which has rightly been affirmed by the Ld. CIT(A). She accordingly relied on the findings of the AO as well as of the Ld. CIT(A).
Heard the rival contentions and purused the material available on record. In the instant case, the return of income has been selected for limited scrutiny to examine the claim of the agriculture income. There is no dispute that the initial onus is on the assessee to provide the necessary explanation to substantiate the agriculture income so reported in her return of income. At the same time, the nature of explanation and documentation so submitted need to be examined keeping in mind the facts and circumstances of each case and the approach of the authorities should thus be guided accordingly. It is equally essential to bear in mind that it is a case of an individual and not a corporate body/entity who is engaged in agriculture activities and therefore, the level of documentation will vary especially where there is no legal requirements to maintain books of accounts.
Having said that, in the instant case, it is noted that the assessee has reported lease rental income from lease of agriculture land to the tune of Rs 14,25,000/- and has submitted necessary explanation in terms of her land holding, the pieces of land being leased out, the name and particulars of the persons to whom the land has been leased out, their written confirmations have been filed and their identity particulars in terms of adhaar number have been submitted. The AO has accepted the lease rent transaction entered into by the assessee with Mr. Jagir Singh to the tune of Rs 4,50,000/- for the reason that he has paid the lease rent through cheque and remaining transactions with other five persons totaling to Rs 9,75,000/- have not been accepted for the reason that they have paid lease rent in cash and their PAN numbers have not been submitted. To my mind, the reasoning so adopted by the AO is clearly on a wrong footing and cannot be accepted. The AO has failed to appreciate that cash is still the prime mode of transaction in the rural areas and so long as cash has been paid and received through the legal tender, the transaction cannot be disputed especially where the persons who have paid the lease rental have confirmed making the payment in cash. Secondly, I agree with the ld AR’s contention that where these persons doesn’t hold the PAN number, the assessee cannot be expected to obtain and submit their PAN number. In the instant case, the assessee has obtained and submitted their Aadhaar number which has their name and address particulars demonstrating their existence and identity. Therefore, as far as the assessee is concerned, she has discharged the initial onus cast on her. No further enquiry or verification has been conducted by the AO to rebut the explanation and documentation placed on record. The AO without bringing any adverse material on record and rebutting the evidence placed on record cannot shift the onus back on the assessee. Similarly, in respect of sale of safeda trees and fruits, the assessee has provided the necessary explanation and confirmations and identity proof of the persons to whom the sale has been effected, however, the AO following similar reasoning has rejected the claim of agriculture income without bringing any adverse material on record. In the result, I find that there is no justifiable basis to reject the claim of the agriculture income so reported by the assessee and the addition of Rs 18,41,729/- so made by the AO and sustained by the ld CIT(A) is hereby directed to be deleted.
In the result, the appeal of the assessee is allowed.