ABID RAZA,BUDAUN vs. PCIT, BAREILLY

The brief facts are that the original assessment was completed by the Assessing Officer of National e-Assessment Centre, Delhi under section 143 (3) of the Act and this case was selected for scrutiny on Limited Scrutiny Assessment Scheme, 2019 and the issue for verification was Large agricultural income in comparison to total income (non-business ). The PCIT issued show cause notice for revising the assessment as, according to him, the assessment order is prejudicial to the interests of the Revenue and also erroneous for the following reasons: “i. The case was selected in scrutiny for the reason "Large agricultural income in comparison to total income (non- business)". On perusal of record, it is seen that the assessee has shown agricultural Income of Rs.19,40,976/- from the agricultural land taken on lease. During the course of scrutiny assessment, the Assessing Officer has accepted the agricultural income of Rs.19,40,976/- without considering the following facts : (a)The lease deed in respect of land taken on lease was made on plain paper, it was not examined by the AO whether the lessor owns the land or not. (b)This information is not available on record that when and on what date the lease rent was paid. (c) 9R and 6R receipts in support of sale of agricultural produce are not available on record, nor the details of agricultural expenses have been examined. (d) Proper inquiry to verify genuineness of the income has not been made by the AO.”

The PCIT, in his revision order, noted that the case was selected for limited scrutiny, on the following: “i. "Large agricultural income in comparison to total income (non business)" Assessee has shown agricultural income of Rs.19,40,976/- from the agricultural land taken on lease. Assessing Officer did not examine the following facts with regard to this :- (a) The lease deed in respect of land taken on lease was made on plain paper. It was not examined by the Assessing Officer whether the leaser owns the land or not. (b)This information is not available on record that when and on what date the lease rent was paid.

Finally, the PCIT simpliciter, without giving any finding, held that the assessment order passed under section 143(3) of the I.T. Act is erroneous insofar as prejudicial to the interests of the Revenue in view of explanation 2(a) to section 263 of the I.T. Act, as the Assessing Officer has not examined or inquired into the details. The PCIT, in his final finding, observed as under: “6. In view of the facts of the case discussed and judicial pronouncements relied upon, I am of the opinion that the AO has not examined/enquired into the details of the facts of the case and the assessment order passed u/s 143(3) of the Act is erroneous in so far as prejudicial to the interest of revenue as per explanation 2(a) to section 263 of the Income Tax Act, 1961. Therefore, the assessment framed by AO is hereby set aside to be framed denovo as per law by the AO. keeping In view the observations made after giving reasonable opportunity to the assessee of being heard.”

Aggrieved, the assessee is in appeal before the Tribunal. Now before us, the ld. Counsel for the assessee, Shri Rakesh Garg, Advocate argued that the entire details were produced before the Assessing Officer during the course of assessment proceedings and this fact is duly noted by the Assessing Officer in his assessment order. He stated that the assessee owned agricultural land admeasuring approximately 11.1375 acres near Badaun City and cultivates vegetables and earned agricultural income of Rs.3,23,496/- from sale of these vegetables. The assessee also earned gross agricultural income from cash crops i.e. sale of Massor, Wheat, Dhan, Watermelon, Lahi, Potato, Urad, Bajra, etc., which he produced from the leased agricultural land of 19.25 acres. This gross agricultural income of Rs.27,50,173/- is declared by the assessee. The assessee has declared net agricultural income of Rs.35,20,450/-. The ld. Counsel for the assessee stated that the Assessing Officer has noted all the details in his assessment order and he drew our attention to paras 3 & 4 of the assessment order, which read as under: “3. Notices under section 143(2) followed by under section 142 (1) was issued to the assesses to furnish the details as mentioned therein. The assessee stated in his reply as under: (i) he owned agricultural land measuring approx. 11.1375 acre near Badaun city and cultivate vegetables on it through labourer. He provides seeds, fertilizers and pesticides to these persons. They collect these vegetables and sell it in the Market. In addition he has taken 19.25 acre of agricultural land on lease and performed agricultural activity on it. (ii) He earned Gross agricultural income amounting to Rs.3,23,496/- from sale of vegetable from his owned 11.00 acre land and Gross agricultural income of Rs.27,50,173/- from sale of Massor, Wheat, Dhan, water melon, Lahi ,potato, urd, bajra etc, from 19.25 acre of leased agricultural land. (iii ) He paid 40% of the amount of gross agricultural income from vegetable grown on his owned land and 30% of the amount of gross agricultural income from Massor, wheat, Dhan, water melon, Lahi ,potato, urd, bajra etc. grown on leased agricultural land to the labour who worked there. Thus he paid Rs.12,93,983/- and Rs.8,25,051/- to the labor. He incurred other expenditure of Rs.3,45,647/- for growing these vegetable and other crops, thus arriving at net agricultural income of Rs.35,20,450/-. All the transactions were made in cash.

According to the ld. Counsel for the assessee, in view of the above, the Assessing Officer has made complete enquiry in regard to the agricultural income, which is subject matter in THE limited scrutiny assessment. According to him, the revision order passed by the PCIT is without any basis and he has also not gone into the details of agricultural income, which was filed before him. He has not pointed out what is the error in the order of the Assessing Officer and what verification he has not carried out. According to him, a complete verification was carried out by the Assessing Officer in the scrutiny assessment and passed the order under section 143(3) of the I.T. Act, as is evident from the facts narrated in the assessment order.

On the other hand, the CIT (DR) relied on the revision order. 8. We have heard the parties and gone through the facts and circumstances of the case. We have gone through the notice issued by the Assessing Officer under section 142(1) of the I.T. Act, dated 6.1.2021, which is enclosed in the assessee’s paper book at pages 9 to 11, wherein the Assessing Officer has required various details i.e. the landholding, details of agricultural activities, crop grown during the financial year 2017– 18 relevant to the assessment year 2018–19 and gross agricultural receipts, etc. The same was replied by the assessee, vide letter dated 19.12.2020 and a detailed reply, consisting of 72 pages, which are enclosed in the assessee’s paper book at pages 12 to 84, were filed before the Assessing Officer as well as the PCIT. We have gone through the details and noted that the complete details in regard to this agricultural income was filed before the Assessing Officer and even before the PCIT during the revision proceedings. From the above, it is clear that the Assessing Officer has carried out complete enquiry in regard to the agricultural income earned, crops grown, details of landholding, crops sold and the quantum of income earned. In view of these details, we find no fault in the assessment order and the Assessing Officer has carried out complete verification of the facts and made a detailed enquiry in regard to the issue before him i.e. verification of agricultural income. We find no error in the assessment order, whereas, in the order of the PCIT, there is no finding as to how the assessment order is erroneous and what type of enquiry the Assessing Officer should have done, which he has failed to do. In the absence of these findings, we reverse the order of the PCIT and allow this appeal of the assessee. 9. In the result, the appeal of the assessee is allowed Order pronounced in the open Court on 01/12/2022.