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Facts
The assessee declared agricultural income of Rs. 1,22,25,758/- while claiming exemption. The AO made additions of Rs. 1,22,25,758/- under section 69A for unexplained credits and Rs. 3,52,40,706/- under section 69C for unexplained expenditure. The CIT(A) confirmed these additions.
Held
The Tribunal held that the assessee's land holding and agricultural activity were previously accepted. The AO's observations that no agricultural activities were carried out and that undisclosed income was ploughed back were found baseless. The invocation of Section 69A and 69C was deemed incorrect as the nature and source of agricultural income were established. Minor discrepancies in bills were not fatal.
Key Issues
Whether the additions made by the AO under Section 69A and 69C for unexplained credits and expenditures are justified when the assessee has declared agricultural income supported by previous years' acceptance and other documentary evidence?
Sections Cited
69A, 69C, 10(1), 143(2), 142(1), 143(3), 156, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 12/02/2025 Date of Order – 21/03/2025
O R D E R PER K.M. ROY, A.M.
This appeal preferred by the assessee is emanating from impugned order dated 22/05/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2020–21.
2. The assessee has raised following grounds:
–
1. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A) grossly erred in confirming the addition of Rs. 1,22,25,758 under section 69A of the Income Tax Act, 1961 (hereinafter referred to as "Act") representing net agriculture income declared during the year. The addition of Rs. 1,22,25,758 under section 69A of the Act is grossly illegal and deserves to be deleted as per law and in the interest of justice.
2. On the facts and circumstances of the case and in law, the net agricultural income of Rs. 1,22,25,758 cannot constitute unexplained money under section 2 Lalita Dheeraj Junghare ITA no.360/Nag./2024 69A of the Act and the addition so made is thus grossly illegal and which deserves to be deleted as per law and in the interest of justice.
3. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A) grossly erred in confirming the addition of Rs. 3,52,40,706 under section 69C of the Act representing agricultural expenses incurred during the year. The addition of Rs. 3,52,40,706 under section 69C of the Act is grossly illegal and which deserves to be deleted as per law and in the interest of justice.
4. On the facts and circumstances of the case and in law, the agricultural expenses of Rs 3,52,40,706 cannot constitute unexplained expenditure under section 69C of the Act and the addition so made is thus grossly illegal and which deserves to be deleted as per law and in the interest of justice.
5. On the facts and circumstances of the case and in law, the gross agriculture income, agricultural expenses and net agricultural income declared by the Appellant deserves to be accepted as per law and in the interest of justice.
6. On the facts and circumstances of the case and in law, the AO grossly erred in holding that no agricultural activity has been done by the Appellant ignoring the fact that the Appellant has declared agricultural income in the past and which have been accepted by the department.
7. The Appellant craves leave to add, amend, alter vary and or withdraw any or all the above grounds of appeal.”
3. Facts in Brief:– The assessee is an Individual. For the year under consideration, the assessee, on 13/02/2021, filed her return of income disclosing total income of ` Nil and agricultural income of ` 1,22,25,758, while claiming exemption under section 10(1). The appellant's case was selected for scrutiny under CASS for the reasons (i) Agricultural Income (ii) Large agricultural income per acre shown in comparison to average agricultural income for the territory. Thereafter, notice under section 143(2) was issued, but the assessee did not file her reply. Subsequently, notice under section 142(1) was issued through e-proceedings from time to time i.e., 14/11/2021, 15/03/2022 and 06/09/2022, but the assessee sought for adjournments. Further, the Assessing Officer also issued show cause notices on 13/09/2022, in response to which, the assessee submitted certain bills towards expenses
3 Lalita Dheeraj Junghare ITA no.360/Nag./2024 incurred on agricultural purposes. Based on the submission, the Assessing Officer completed the assessment under section 143(3) of the Act by making the following additions: i) Addition of ` 1,22,25,758, on variation in respect of unexplained credits under section 69A of the Act. ii) Addition of ` 3,52,40/706, on variation in respect of unexplained expenditure under section 69C of the Act.
Aggrieved, the assessee preferred the appeal before the first appellate authority.
Before the learned CIT(A), the submissions made by the assessee are as under:– “Junghare Family: Which consists of 4 individuals; Mr. Dhiraj Junghare, Mrs. Lalita Junghare, Mr. Akhil Junghare and Mr. Nikhil Junghare, is a largest producer of Nagpur Mandarin oranges in 210 acres. With the new technology, modern equipment's and efficient techniques, they have emerged as a leader in the agriculture industry. Agriculture and Infrastructure 1. Current landholding of Junghare Family is around 200 Acres. Current orange plantation is in 180 acres. Current orange production is around 5000 tonnes in 180 acres.
Junghare Family has nursery in 10 acres. They sell nursery plants in the range of 8 lac- 10 lac per year. Selling price ranges from 80-90 Rs. Per plant.
To overcome water shortages, 4 water ponds have constructed: a. Water tank of capacity 1 Crore Litre, which is used for lifting water from Govt Lake to 6 Crore Litre pond. This is an intermediate pond to settle mud. b. Water tank of capacity 6 Crore Litre, which is used for daily irrigation c. Water tank of capacity 30 Crore litre, which is used for storage purpose and water from this is used during summer time from March till May d. Water tank of 60 Crore Litre, which is used for storage purpose and water from this is used during summer time from March till May
4 Lalita Dheeraj Junghare ITA no.360/Nag./2024 The water source for these 4 ponds is Jam Dam, which is situated 3 KM from main site. The water is lifted from Jam Dam using 22 HP submersible motor and then 60 HP Grundfos motors with 280 mm pipeline. Directors have all the necessary permission for this lift. This capacity is sufficient for 12 months. Water requirement for 250 Acre project is 7 Lac Litre/hour 4. Before irrigation, the water from these pond is filtered in 3 stage filtration process: a. Water is filtered through 200 micron filter from Amiad, with discharge capacity of 7 Lac litre/hour b. Water is filtered through 10 sand filters of 150 micron filter from Netafim, with discharge capacity of 10 Lac litre/hour c. Water is filtered through 2 sand filters of 100 micron filter from Amiad, with discharge capacity of 7.5 Lac litre/hour This ensures no waste material passes through drip line and decreases maintenance cost.
Centalise fertigation plant is used for soluble fertilizers. With a click of a button, these fertilizers reach to plant in 250 acres at the same time, with the same quantity.
We have our own electric transformers for electricity. As group has motors of capacity 60 HP, 50 HP and so on, it is necessary to avoid voltage fluctuation and load issues. So group has our own 4 transformers of 100 KVA 7. Group use motors from Grundfos, a german company. These motors are approximately three times costlier than Indian equivalents. But, with minimum service requirement, these are suitable for the project. Similarly group use, Grundfos motors for fertilizer dosing.
Group use Amiad filters, a company from Israel and a market leader in filtration.
9. Netafim, an Israel firm, is the supplier of drip line. Group use double dripline with discharge of 600 ml.
10. An electric fencing is in place to ensure safety.
Fertilizer supplier includes: Yara, Syngenta, UPL, Sumitomo and others.
Group use Tractor Mounted Sprayers from Caffini, Italy. High Density Faming Junghare family is using high density farming, where the plants spacing is 6 Metre X 3 Metre rather than traditional 6 Metre X 6 Metre used by other farmers in the region. So no of plants per Acre by traditional farmers is 105, however the no of plants per acre by junghare family is 207. Junghare family uses modern techniques. Moreover, there are 2 orange seasons per year in Nagpur: Ambia and Mrug. Junghare family, with healthy Trees, manage to get
Lalita Dheeraj Junghare ITA no.360/Nag./2024 both the seasons. That is the reason the production in the farm is minimum 30 Tons per acre. The Junghare family farm is visited by Israel Delegation, Spain delegation, and Brazil Delegation previously and praised for techniques used and high yield. The farm is also visited by various dignitaries and ministers from Sate and India. Lalita Junghare Landholding:
Property Area Area Name Address Crop Classification Number (HA) (Acre) Lalita Hatla, Katol, Dhiraj 117/2 Orange 1.25 3.09 Agricultural Nagpur Junghare Hatla, Katol Teak / 160 1.96 4.84 Agricultural , Nagpur Orange Hatla, Katol, 167 Orange 1.82 4.50 Agricultural Nagpur Hatla, Katol, 169/1 Orange 1.14 2.82 Agricultural Nagpur Hatla, Katol, 170 Orange 1.68 4.15 Agricultural Nagpur Kondhasaoli, 142 Katol, Nursery 1.33 3.29 Agricultural Nagpur Kondhasaoli, 143 Katol, Nursery 1.43 3.53 Agricultural Nagpur Total 10.61 26.21 Lalita Junghare - Income Orange Income Total Land - 27 acres Total land with oranges- 18 acres Total Production per acre 30 Ton Total Production Around 550 Tons Total Selling Price - Rs. 65 Per Kg - (65000 Per Ton) Total Income Rs. 3, 50,00,000 Nursery Income Total Land - 27 acres Total land with oranges 7 acres Total Plants per year 2 Lac Plants Total Production 2 Lac Plants Total Selling Price - Rs. 60-65 Per plant - Total Income - Rs. 1,23,00,000
6 Lalita Dheeraj Junghare ITA no.360/Nag./2024 Junghare Family has received following awards from various institutions for agriculture, innovation, post harvest management Etc. Vande Kisan Krushi Samman 2021 Given by - Hn'bl e Governor, Maharashtra Shri. Bhagat Singh Koshyari Krushi Vikas Pratishthan - Vidarbh Gaurav Puraskar Given By - Ex. MLA and Chairman - Arvind Sahakari Bank Vasantrao Naik Foundation and Vanrai Foundation Innovative Farmer Award 2021 Given by Renowned cotton scientist and President of SABC and VP of NAAS Dr. C D Mayee.”
5. As regards the first addition, the same was confirmed by the learned CIT(A) by holding as under:– “7. Decision: 7.1 Ground No. 1 is relates to variation in respect of unexplained credits u/s. 69A of 7.1 the Act of Rs. 1,22,25,758/-. The appellant filed in her return of income declaring agricultural income of Rs. 1,22,25,758/- and claimed as exemption u/s. 10(1). During the assessment proceedings, the AO was asked to details of land ownership and land type. In response, the appellant upload the following documents: (1) Copy of land holdings and their list (2) Copies of bank account (3) Purchase bill (4) ICICI bank account statement (5) Saving bank account statement of BOM (6) Saving bank statement of SBI. 7.2 During the assessment proceedings, the AO scrutinized the submission and found that the property information was not in accordance with the requirement details. The appellant in her ITR had shown net agricultural income of Rs. 1,22,25,768/- afte: deducting expenditures of Rs. 3,52,40,706/- from sale proceeds of agricultural produce Rs. 4,74,66,474/-. However, the appellant did not produce any supporting documents of agricultural income. 7.3 During the appellant proceedings, the appellant submitted her reply. It is seen that the appellant did not submit the full details of land i.e. Daga No., Khatyana No., Mouza, Tashil, details address of Panchayet or corporation, Block and land. 7.4 It is also seen that the appellant has not produce copies of purchase invoice, payment vouchers and sales bills. The appellant has not provided the complete details ie postal address, ernail ID and PAN of the persons to whom agricultural produce were sold.
7 Lalita Dheeraj Junghare ITA no.360/Nag./2024 7.5 The appellant did not produce the sales proceeds received on selling of agricultural products and documentary evidence in form of Sale bill, land revenue receipts and certificate from Land Revenue Department specifying the agricultural produce grown in the land. Therefore, it is found that the appellant has failed to prove the genuineness of the agricultural activities and the nature and source of acquisition of money remains unexplained. Section 69A reads thus: Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 7.6 In respect of section 69A, where the burden of proof lies has been laid down by the Honourable Apex court in case of Chuharmul vs Commissioner of Income Tax [1988] 38 Taxman 190 (SC)/[1988] 172 ITR 250 (SC), wherein it was stated that once a person is in possession of the stated money, the burden of proof is on him to show he is not the owner. The Honourable Court laid down as under:- "6..... There a contention was raised that the provision in section 110 where a person was found in possession of anything, the onus of proving that he was not the owner was on the person who affirmed that he was not the owner, was incorrect and inapplicable to taxation proceedings. This contention was rejected. The Bombay High Court held that what was meant by saying that the Evidence Act did not apply to the proceedings under the Act was that the rigour of the rules of evidence contained in the Evidence Act, was not applicable but that did not mean that the taxing authorities were desirous of invoking the principles of the Act in proceedings before them, they were prevented from doing so. Secondly, all that section 110 does is that it embodies a salutary principle of common law jurisprudence which could be attracted to a get of circumstances that satisfy its condition." 7.7 Considering the facts and circumstances of the case, and following the decision of Hon'ble Supreme Court, Rs. 1,22,25,758/- as agricultural income reported in ITR is considered as unexplained money and added u/s. 69A of the Act. Thus, the addition made by the AO is upheld and Ground is dismissed.”
6. The learned CIT(A) also confirmed the second addition by observing as under:–
Lalita Dheeraj Junghare ITA no.360/Nag./2024 “8. Further, the AO made an addition of Rs. 3,52,40,706/- on variation in respect of Unexplained expenditure u/s. 69C of the Act. During the assessment proceedings, the appellant submitted certain bills towards expenses incurred on agricultural purposes as under:
Sl. Date of Name of the Party Amount (`) Remarks No. the Bill 1. 17/08/2019 Shri Nikhil Dhanraj Junghare 46,840 Electric Bill 2. 31/07/2019 Shri Nikhil Dhanraj Junghare 3,470 Electric Bill 3. 31/07/2019 Shri Nikhil Dhanraj Junghare 7,650 Electric Bill Tax Invoice 4. 30/09/2019 Shri Dhiraj Junghare 65,632 Del. Challan Tax Invoice 5. 04/08/2019 Shri Dhiraj Junghare 37,520 Del. Challan 6. 28/09/2019 Shri Tirupati Agro Agench 5,57,840 Tax Invoice 7. 10/10/2019 Dhiraj Junghare Halta (P) 84,518 Tax Invoice 8. 09/10/2019 Dhiraj Junghare Halta (P) 1,46,931 Tax Invoice 9. 21/08/2019 Dhiraj Junghare Halta (P) 1,20,501 Tax Invoice 10. 18/11/2019 Dhiraj Junghare Halta (P) 1,49,060 Tax Invoice 11. 16/03/2020 Dhiraj Shyamrao Junghare 1,53,328 Tax Invoice 12. 15/02/2020 Dhiraj Shyamrao Junghare 6,07,142 Tax Invoice 13. 10/02/2020 Dhiraj Junghare 2,800 Tax Invoice 06/10/2019 Shri Akhil Junghare Shri 14. 91,570 Tax Invoice Hattla 15. 26/02/2020 Dhiraj Junghare 1,14,759 Tax Invoice 8.1 It is seen that the claim of expenses (bills/vouchers) are that none of them in the name of the appellant. During the appellant proceedings, the appellant has not submitted any reply regarding this issue. The appellant has not filed any evidence wherefrom it could be ascertained that the appellant was engaged in agricultural activities. Thus, the appellant has failed to explain the said expenditure. Hence, the AO was right in treating the same as unexplained expenditure u/s 69C. In such a scenario, the burden rests on the appellant to proof the nature and source of such expenditure. 8.2 Considering the facts and circumstances of the case, Rs. 3,52,40,706/- as reported in ITR is considered as unexplained expenditure and added u/s. 69C of the Act. Thus, the addition made by the AO is upheld and Ground is dismissed.”
The learned Counsel for the assessee reiterating the submissions made before the authorities below, vehemently assailed the impugned order passed
9 Lalita Dheeraj Junghare ITA no.360/Nag./2024 by the learned CIT(A). He furnished a Paper Book containing following documents:– Copy of the order passed by CIT (A) under section 250 dt 22.05.2024. Copy of the acknowledgement of submission filed before CIT (A) dt 02.05.2024 in response to notice issued under section 250. Copy of written submission made before CIT(A) dt. 02.05.2024 to notice dt. 30.04.2024. Copy of the Assessment Order issued under section 143(3) read with section 144B dt. 26.09.2022. Copy of the evidence for holding agriculture land in the form of 7/12 extracts. Copy of Bank sanction letter for agriculture activities. Copy of newspaper articles. Copy of the note on agricultural activities & statement showing the agriculture land held by the petitioner. Copy of the acknowledgement of submission filed before CIT (A) dt 17.10.2023 in response to the notice issued under section 250. Copy of written submission made before CIT(A). Copy of Form 35 dt. 27.10.2022. Copy of Lalita Junghare landholding details. Copy of evidence for holding agriculture land in the form of 7/12 extracts. Copy of Bank sanction letter for agriculture activities. Copy of newspaper articles. Copy of demand notice issued under section 156 dt. 26.09.2022. Copy of the Assessment Order issued under section 143(3) read with section 144B dt. 26.09.2022. Form No. 35 dt. 27.10.2022. Copy of the Assessment Order issued under section 143(3) read with section 144B of the Income Tax Act dt. 26.09.2022. Copy of the acknowledgement of submission filed before AO dt 17.03.2022 in response to the notice issued under section 142(1).
10 Lalita Dheeraj Junghare ITA no.360/Nag./2024 Copy of SBI Saving Bank Statement. Copies of Invoices. Copy of ICICI Bank Statement. Copy of Corporation Bank Statement. Copy of Bank of Maharashtra Statement. Copy of the notice passed under section 142(1) dt. 15.03.2022. Copy of the acknowledgement of submission filed before AO dt. 22.11.2021 in response to the notice issued under section 142(1). Copy of Award Invitation. Copy of the notice issued under section 142(1) dt 14.11.2021. Copy of the acknowledgement of submission filed before AO dt 23.08.2021 & 31.07.2021 in response to notice issued under section 143(2). Copy of Reply of notice issued under section 143(2). Copy of land holding details Copy of agriculture income computation statement for Α.Υ 2020-21. Copy of SBI bank statement. Copy of Assessment Order issued under section 143(3) dt. 23.12.2020. for A.Y 2018-19. Copy of Death Certificate of Shamraoji Junghare. Copy of the notice issued under section 143(2) dt 29.06.2021. Copy of Acknowledgement of ITR along with Computation of Income of Lalita Dheeraj Junghare for AY 2020-21 dt. 13.02.2021.”
8. On the other hand, the learned Departmental Representative supported the impugned order passed by the learned CIT(A).
We have meticulously analysed the submissions and evidences on record. It is a matter on record that orders under section 143(3) for the assessment year 2016–17 and 2017–18 were passed by the of the Act,
11 Lalita Dheeraj Junghare ITA no.360/Nag./2024 Ward–3(4), Nagpur, accepting the agricultural income in entirety and no additions were perpetrated. The land holding and agricultural activity was completely examined. Thus, the Assessing Officer’s observation that no agricultural activities were carried out and undisclosed income in the guise of agricultural activities have been ploughed back and baseless and unsustainable. There is no merit in invocation of provisions of section 69A of the Act once the nature and source of agricultural income is established beyond doubt. We fail to comprehend that how provisions of section 69C can be invoked for unexplained income when the same is telescoped within the agricultural income. Even if income is unexplained the expenditure can be defrayed out of the same. There is no merit in addition the gross agricultural income without abatement of expenses. Moreover, the Department has itself accepted the agricultural activity in earlier years. There are no compelling circumstances to subscribe to a divergent view in the current year. Minor discrepancies in the bills are not fatal to deny the claim. Consequently, we set aside the impugned order passed by the learned CIT(A) and allow all the grounds raised by the assessee. and direct the Assessing Officer to accept the returned income.
In the result, assessee’s appeal stands allowed. Order pronounced in the open Court on 21/03/2025