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Income Tax Appellate Tribunal, PUNE BENCHES, PUNE
Before: SHRI PARTHA SARATHI CHAUDHURY
This appeal preferred by the assessee emanates from order of the National Faceless Appeal Centre (NFAC), Delhi dated 02-05-2022 for A.Y. 2015-16 as per the following grounds of appeal.
The ld. A.O erred in and CIT(A) erred in confirming in making addition of Rs. 4,22,545/- on account of disallowance of agricultural expenses.
2. The ld. A.LO failed to appreciate that the agriculture expenses vary depending upon monsoon, weather condition as well as life cycle of produce. 3. The ld. A.O failed to appreciate the fact that slale price of produce can vary from time to time and therefore comparing % of gross receipts is an incorrect proposition. 4. The appellant craves its right to add to or alter the grounds of appeal at any time before or during the course of hearing of the case.
At the very outset, the ld. A.R submitted that there was a defect in the appeal memo as the appeal fee was not shown in column 12 of the appeal memo. This defect has been rectified and the assessee had submitted a copy of evidence regarding the details of tax paid. Furthermore, this appeal is time- barred by three days and to this effect the assessee has filed a condonation
2 ITA 511 of 2022 Shrikrishna Khandsari Sugar Mills A.Y. 2015-16 petition along with an Affidavit and has submitted that within the due date itself, they had come to the Tribunal to file an appeal. However, the Registry noted that digital signature would not be accepted and the relevant papers need to be physically signed. The relevant papers of the appeal were sent to the assessee at Nandurbar and got physically signed. The said papers were sent through Speed Post on 01-07-2022 which was delivered on 04-07-2022 resulting in delay of three days.
3. Therefore, I am of the considered view that delay cannot be attributed to any deliberate conduct or intention of the assessee and it was purely circumstantial that also as on date since there is no clarity on the issue as to whether the signature has to be only physical or digital and as of now only physical signatures on the relevant papers are accepted. The ld. D.R also conceded and submitted that he has no objection for condonation of delay. In view thereof, the said delay of three days is condoned and the case is heard on merits.
The only issue in this case is the addition of agricultural expenses of Rs. 4,22,545/-. The A.O has discussed this issue at para 6 of his order, which is as follows: “6. Addition out of Agriculture income: In the Agriculture Income Account, the assessee has shown gross agriculture receipts/income at Rs. 43,58,581/-, against which income the assessee claimed expenses of Rs. 11,02,958/- which is @ 25.30% and shown net agriculture income at Rs. 32,36,125/-. Considering the general market trend for agricultural expenses being incurred, the expenses @ 25.30% is found on lower side. Therefore, the expenses ratio is applied at 35% against 25.30% applied by the assessee. Applying this ratio, the agriculture expenses work out to Rs. 15,25,503/- as against Rs. 11,02,958/-. Hence the difference of R. 4,22,545/- is added to the total income of the assessee, being met out of regular income. The agriculture income is restricted to Rs. 28,13,580/- (3236125-422445).”
The A.O has therefore, held the agricultural expenses @ 35% as against the agricultural expenses shown by the assessee @ 25.30%. According to the A.O the agricultural expenses of 25.30% was on lower side and why he has 3 ITA 511 of 2022 Shrikrishna Khandsari Sugar Mills A.Y. 2015-16 applied the rate of 35% is not clearly evident from his findings. The NFAC, Delhi at para 4.5 of its order confirmed the addition made by the A.O.
I have heard the parties, considered the facts and circumstances and the materials placed on record. It is an undisputed fact that the assessee is holding agricultural land and engaged in agricultural activities. The only dispute is about the expenses in agricultural activities. The A.O is of the opinion that as per the general market trend of agricultural expenses it should be @ 35% of the gross agricultural receipts and accordingly estimated the agricultural expenses. During the appellate proceedings before the NFAC, Delhi, the assessee furnished complete ledgers regarding agricultural activities such as agriculture sales a/c, agricultural bijwai purchase, agricultural expenses, agricultural depreciation and agricultural wages. These ledgers show day to day transactions with detailed narration. Apart from these documents, the assessee had also furnished comparative figures of four years which is on record. In respect of these details, the NFAC did not give any independent finding on the nature of agricultural expenses but simply upheld the order of the A.O. holding the agricultural expenses @ 35% to be correct. I find that none of the authorities in their respective orders have given any justification or practical analyses as to the estimated application of 35% to the agricultural expenses. On the other hand, the assessee has mentioned before the department that for A.Y. 2015-16, the percentage of expenses was 25.75%, for A.Y. 2014-15 it was 29.64%, for A.Y. 2013-14 the agricultural expenses were at 33.04%, for A.Y. 2012-13 the said expenses were 21.38% and for A.Y. 2011-12 the agricultural expenses were at 15.44%. When these figures have been furnished by the assessee, it was incumbent on the part of the department to verify if they were not agreeing to these figures submitted by the assessee. However, the revenue has not conducted this exercise and has simply relied on the same “trend” and arrived at 4 ITA 511 of 2022 Shrikrishna Khandsari Sugar Mills A.Y. 2015-16 the conclusion that the agricultural expenses should be @ 35% of the gross receipts. From where the trend is arising or whether that trend has been applied to any other similar facts situation nothing has been brought out by the orders of the subordinate authorities. In this factual background of this case, I am of the considered view that the revenue has clearly erred in law as well as in fact in applying the agricultural expenses @ 35% of the gross receipts and not accepting the actual expenses incurred on agricultural activities as declared by the assessee. The Pune Bench of the Tribunal in assessee’s own case in for A.Y. 2014-15, order dated 20-06-2022 on identical facts and circumstances have held has follows: “4. We have heard the rival submissions and gone through the relevant material on record. It is seen that the assessee declared gross agricultural receipts at Rs.47,78,862/- and agricultural expenses at Rs.12,52,631/-, which account for more than 26% of the gross receipts. The assessee has furnished year-wise details of gross receipts and expenses on account of agricultural operations, that has been captured at pages 25 and 26 of the impugned order. For the immediately preceding assessment year, the expenses stood at 33.04%, whereas for the A.Y. 2012- 13 the expenses were at 21.38% and for the A.Y. 2011-12 at 15.44%. The AO has simply rejected the assessee’s claim of agricultural expenses being on the lower side on the basis of a yardstick of 35% being “trend of current year”. It is not understandable as to where from such ‘trend’ came into vogue. If the percentage of agricultural expenses shown by the assessee for the year under consideration is lower than that of the immediately preceding year, it is better than that for the two years immediately prior thereto. Here is a case in which the assessee maintained complete details of agricultural expenses, which have not been faulted with by the AO. If the expenses were inadequate or wanting in any respect, the AO ought to have rejected such expenses by giving some plausible reasons, whereafter, he could have gone ahead with making a best judgment on some rational basis. Having not done so and simply making the addition on the basis of some ‘trend’, we find no reason to sustain the disallowance. For the foregoing reason, we are satisfied that the authorities below were not justified in making and sustaining the addition in such an ad hoc manner. The same is directed to be deleted.”
That on examination of the facts and circumstances in this case and also with regard to the aforesaid judicial pronouncement in assessee’s own case, I am satisfied that this is not a fit case for making and sustaining the said addition made on ad-hoc basis. I therefore, set aside the order of the NFAC, Delhi and direct the A.O to delete the addition made in the hands of the assessee.
5 ITA 511 of 2022 Shrikrishna Khandsari Sugar Mills A.Y. 2015-16
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on this 21st October 2022.