PRALHADGOUDA K.PATIL ,GADAG vs. INCOME TAX OFFICER WARD-2 , GADAG

This is an appeal filed by the assessee against the order dated 28/9/2018 of CIT(A), Huballi relating to asst. year 2015-16.

The assessee is an individual and he filed return of income for asst. year 2015-16 declaring income from business of dealing in cement and agricultural income. The agricultural income declared by the assessee was sum of Rs.21 lakhs. The gross agricultural income earned by the assessee was 22,00,810/-. Considering the gross agricultural income, the AO wanted the details of agricultural expenses and evidence in support of agricultural expenses. Since the same was not filed, the AO added Rs.2,50,000/- as income from other sources. It appears that the assessee’s representative also accepted the addition before the AO. Nevertheless, the assessee filed an appeal before the CIT(A) challenging the aforesaid addition and the appeal of the assessee was dismissed for non prosecution as none appeared on the various dates of hearing before the CIT(A).

Aggrieved by the order of the CIT(A), the assessee has filed present appeal before the Tribunal.

We have heard the rival submissions. From a perusal of order of assessment, it is clear that the AO has accepted agricultural income declared by the assessee. The details of expenses incurred in carrying out agricultural activities was disbelieved to the tune of Rs.2,50,000/-. In such circumstances, the AO cannot treat the expenses which were not substantiated by the assessee as income from other sources. Such an addition if at all can be made only u/s 69 or 69C of the Act. Unless Agricultural income declared by an Assessee is explained as source for any investment or otherwise, when agricultural income is not believed to have been earned by the Assessee, no addition under deeming provisions of the Act can be made. In the present case, the Assessee has not sought to explain Agricultural income as source for any investment or otherwise. Since agricultural income was outside the purview of taxation under Chapter III of the Act, the absence of evidence regarding expenditure can only lead to conclusion that the agricultural income declared by the assessee at Rs.21 lakhs should be decreased to the extent of Rs.2,50,000/-. It cannot be by any stretch of imagination be treated as income from other sources. The addition made is without any basis and, therefore the same deserves to be deleted and is hereby deleted.

In the result, appeal by the assessee is allowed.