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"नधा"रती क" ओर से/Assessee by : Shri. Kartik Goyal, C.A राज"व क" ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई क" तार"ख/Date of Hearing : 27/10/2022 उदघोषणा क" तार"ख/Date of Pronouncement : 30/11/2022 आदेश/Order PER VIKRAM SINGH YADAV, A.M. :
Both the above appeals filed by the respective Assessees against the respective orders of Learned Commissioner of Income Tax(Appeals),Patiala [in short the ‘Ld. CIT(A)’] passed u/s 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) each dated 24/12/2018. Since the issues involved are similar and the appeals were heard together so these are being disposed off by this common order. With the consent of both the parties, the appeal in for the assessment year 2015-16 was taken as the lead case, wherein assessee raised the following grounds: 1. That the order of Learned C.I.T. (A) Patiala is against the facts & Law.
2. That the Ld. CIT (A) has wrongly upheld addition of RS 4,40,000/- by invoking stringent provisions of section 69A of income tax act 1961 under incorrect interpretation of provisions of the statues.
3. That the Ld. CIT [A) has wrongly enhanced the addition of Rs 2,45,000/- as labour expenses which the Ld. AO allowed credit, as labour attributable to the assessee's family members.
That the Ld. CIT (A) has erred in interpreting the true nature of income from agriculture and the intermediate process undertaken to earn such income, as there is no material on record to show any vested interest or motive with the assessee to declare agriculture income higher than actual amount. Thus constructing assessee as bona fide. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off.
2. Briefly the facts of the case are that the assessee, an agriculturist filed his return of income on 29/03/2017 declaring total income at NIL beside he has declared agriculture income at Rs. 20,41,917/-. The case of the assessee was selected for limited scrutiny under CASS to verify the genuineness of agricultural income shown in the return of income. Thereafter notices under section 143(2) and 142(1) were issued and information was called for from the assessee and examined by the AO. Thereafter the assessment was completed by AO determining the agricultural income at Rs. 15,72,246/- and making an addition of Rs. 4,69,671/- under section 69A of the Act.
2.1 During the assessment proceedings, the AO asked the assessee to produce evidence to substantiate the agricultural income shown in the return of income. In response, the assessee produced jamabandi of agricultural land, J Forms regarding sale of agricultural produce amounting to Rs. 20,41,917/-. Thereafter, the AO sought details of expenses for carrying out agricultural operations and in response, the assessee submitted that details of expenses amounting to Rs. 4,40,000/- towards Diesel, Labor, Fertilizers, Machine Rent . It was further submitted by the assessee that he alongwith his family members work on the agricultural land and carry out all agricultural operations like ploughing of fields, sowing of seeds, irrigation of land and harvesting. It was also submitted that seeds are self grown which are required for sowing and the manure is procured from the cattle/buffaloes owned by the family and which is used for agricultural operation. Further it was submitted that the agricultural equipments such as tractor, harrow, cultivator, trolley are owned by the assessee alongwith his family which are jointly used in the agricultural operations.
2.2 It was further observed by the AO that the assessee has obtained a loan of Rs. 5,34,000/- from Co-operative Society which the assessee claimed to have used partly for agricultural purpose and partly for household purpose. The AO also sought the details of fertilizer purchased by the assessee from Rattangarh CASS Limited. In response it was submitted that the assessee has purchased fertilizer worth Rs. 1,94,900/-.
2.3 Basis the information / submissions submitted by the assessee and information gathered during the course of assessment proceedings, the AO disbelieve the contention of the assessee regarding agricultural expenses and estimated agricultural expenses at Rs. 7,14,671/- applying expense ratio of 35% of the gross agricultural income of Rs. 20,41,917/- basis the expense ratio as shown by another assessee in the same region. Further giving credit of Rs. 2,45,000/- as labor attributable to the family members, the AO determined the expenses at Rs 4,69,671/- and net agriculture income at Rs 15,72,246/- as against gross agriculture income of Rs 20,41,917/- shown by the assessee. The AO further held that the source of income of Rs 4,69,671/- is best known to the assessee as no details was furbished and an addition of Rs. 4,69,671/- was made under section 69A of the Act.
Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The submissions made before the AO were reiterated. Further the detailed submissions were filed before the Ld. CIT(A) which find mention at pages 4 to 26 of the impugned order. Thereafter after considering the submissions so filed by the assessee, the Ld. CIT has given his findings as follows:
“I have carefully perused the written submissions of the Ld AR, the findings of the Ld AO and the case laws cited. The two issues to be determined are as to what is the agricultural income of the appellant for the relevant AY and secondly whether any addition u/s 69 A of the Act is possible. That the appellant has received agricultural receipts to the extent Rs. 20,41,917/- during the Previous year relevant to the impugned AY is matter of record and not in dispute. That the appellant along with joint family conducts agricultural operations has not been disputed by the Ld AO. That the seeds are self-grown by and that agricultural implements like tractor, harrow, cultivator, trolley are owned by the appellant along with his are also not disputed by the Ld AO. That the appellant has not claimed receiving any other agricultural income other than the Rs. 20,41,917- verifiable through the J forms is also matter of record and not in dispute. That the appellant had during assessment proceedings submitted that the expenses for earning agricultural income were Rs.4,40,000/- is matter of record and not in dispute. That the expenses so shown inter-alia included Rs. l,02,000/-in the form of expenses on fertilizers is also matter of record. That the appellant may have used natural manure along with the fertilizers is, in my considered opinion logical and as per normal agricultural practice. That part of the fertilizer purchased related to the earlier year 2013-14 is also demonstrated. Further there is considerable merit in the appellant's submission that the loan from the agricultural cooperative society was in preparation for the future yieids and not used as expenses for the income of the relevant previous year. That the estimates on gross percentage basis may not apply to all agricultural operations is in my considered opinion an acceptable view. Thus the Ld AO had, in my considered opinion no reason to disbelieve the expenses submitted by the Ld AR. The expenses of the appellant to earn agricultural income are to be taken as Rs. 4,40,000/- as shown by the appellant in the assessment proceedings ( not in the return of income) and the net agricultural income assessed for rate purposes is to be substituted at Rs. 16,01,917/- (20,41,917- 4,40,000).
Turning to whether the Rs. 4,40,000/- can be taxed as unexplained money under the rubric of section 69 A of the Act. The Ld. AO has not produced any evidence to suggest that the appellant has any source of income other than agriculture income infact the Ld. AO mentions that the source of the balance income is best known to the appellant. The appellant has relied on the decision of the Hon'ble The ITAT Delhi Bench A' in the case of Pradeep Batra v. Inspecting Assistant Commissioner, cited supra and that of the ITAT cochin bench in the case of Geroge Dominic v. Assistant Commissioner of Income-tax, Circle - 3(1) [2013 cited supra. These judgments do not come to the aid of the appellant as the appellant has shown agricultural incomes in excess of the agricultural income admittedly not excluding expenses of Rs. 4,40,000/-.
The judgment of the Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax, Chandigarh v.Jarnail Singh Karta [2008] 174 Taxman 57 (Punjab & Haryana) cited by the Ld AO also is distinguishable on facts as it pertains to estimation of yield and income and not exclusion of admitted expenses of as in the instant case. The addition u/s 69 A of the Act is confirmed to the extent of Rs. 4,40,000/-. Thus ordered. The appellant partly succeeds on this ground of appeal.”
4. 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 and his family jointly owned 32 acres of agricultural land and the assessee grows 2-3 crops every year and detailed submissions regarding the agricultural operations and income arising therefrom were submitted before the Ld. CIT(A). It was submitted that the assessee has no other income other than the agricultural income and therefore the source of the expenditure so incurred to earn the agricultural income is income received from agricultural operations in the previous years. It was submitted that the provision of Section 69A are not attracted in the instant case as no money, bullion, jewellery or other valuable articles has been found in possession of the assessee by the AO. It was accordingly submitted that there is no basis for making addition in the hands of the assessee where the fact that the assessee is an agriculturist carrying out agriculture operation all these years has not been disputed by the Revenue and he has no income other than from agricultural operations.
5.1 It was further submitted that the case of the assessee was selected for limited scrutiny to examine the agricultural income reported by the assessee. It was submitted that the agricultural income of Rs. 20,41,917/- has not been disputed by the AO. However the AO has gone ahead and making the addition under section 69A of the Act. It was submitted that it is therefore a case where the limited scrutiny assessment has been converted into complete scrutiny without seeking approval from the Competent authority which is in violation of expresss guidelines laid down by the CBDT. It was submitted that on this account as well as, the addition so made by the AO and sustained by the ld CIT(A) deserves to be deleted.
Per contra the Ld. Sr. DR relied on the findings of the lower authorities.
We have heard the rival contentions and purused the material available on record. The ld CIT(A) has returned a finding that the appellant has agricultural receipts to the tune of Rs. 20,41,917/- during the previous year relevant to the impugned assessment year is matter of record and not in dispute. It has been further held by the ld CIT(A) that in his considered opinion, the Ld AO had no reason to disbelieve the expenses submitted by the AR and the expenses of the appellant to earn agricultural income are to be taken as Rs. 4,40,000/- as shown by the appellant in the assessment proceedings (not in the return of income) and the net agricultural income assessed for rate purposes is to be substituted at Rs. 16,01,917/- (20,41,917- 4,40,000). Therefore, as far as agricultural income so disclosed by the assessee and which was subject matter of limited scrutiny, the same has been accepted after taking into consideration the submissions of the assessee regarding the income generated from sale of agriculture produce and expenses incurred in relation to the same and as against the gross agriculture income of Rs 20,41,917/-, the net agricultural income has been determined at Rs 16,01,917/- for rate purposes.
Further, we find that during the course of assessment and appellate proceedings, the assessee has given the details of his land holdings along with his family members, the nature of agriculture operations undertaken for last so many years and receipts arising therefrom, the details of the family members, etc, we find that the assessee has reasonably explained the source of incurrence of expenditure for carrying out his agricultural operations which is from past savings from agricultural operations. No adverse evidence has been brought on record to controvert the said facts on record. In the facts and circumstances of the present case, we are therefore of the considered view that there is no justifiable basis for the AO to make the additions invoking the provisions of section 69A of the Act or for that matter, section 69C of the Act which talks of exercising the discretion keeping in view the facts and circumstances of each case. In the result, the addition of Rs 4,40,000/- is hereby directed to be deleted and the matter is decided in favour of the assessee.
Admittedly, the facts and circumstances of the case in pertaining to Shri Gurpal Singh are similar to the facts and circumstances involved in ITA No. 223/Chd/2019 in case of Shri Bahadur Singh and both parties fairly submitted that similar contentions as raised therein may be considered. In light f the same and submissions so made by the parties, our findings and directions in ITA No. 223/Chd/2019 in case of of Shri. Bahadur Singh shall apply mutatis mutandis to this appeal and the same is decided in favour of the assessee.
In the result, both the appeals filed by the respective assessees are allowed.