SARANG SHEPHERDS & FARMS,MUMBAI vs. DCIT CENT. CIR. - 36, MUMBAI

The only issue in this appeal is with respect to the action of the CIT(A) in holding that an amount of Rs.6,97,428/- was to be assessed as unexplained income as against the claim of the assessee that the same constituted agricultural income.

In brief, the relevant facts are that the assessee is a partnership firm and the only source of income declared is from agriculture. For the assessment year under consideration, it filed the return of income declaring ‘nil’ taxable income which, inter-alia, included an income of Rs.9,44,095/- from agriculture. In terms of the Trading, P&L Account annexed with the return of income, assessee had declared total agricultural proceeds of Rs.14,68,560/-, against which expenses of Rs.5,24,465/- were claimed and surplus was Rs.9,44,095/-. The Assessing Officer treated the entire receipt of Rs.14,68,560/- as unexplained cash credit under section 68 of the Act and determined the total income at Rs.14,68,565/-. The CIT(A) disagreed with invoking of the provisions of section 68 of the Act by the Assessing Officer, but at the same time did not accept the extent of agricultural income as declared by the assessee. The CIT(A) accepted the correctness of the claim of agricultural income only to the extent of Rs.7,71,132/- and accordingly, retained the balance addition of Rs.6,97,428/-.

Against the aforesaid decision, the Ld. Representative for the assessee pointed out that the CIT(A) has completely misdirected himself in rejecting the net agricultural income of Rs.9,44,095/- declared by the assessee. It is pointed out that the CIT(A) has not found fault with the expenses claimed by the assessee by way of debit in the P&L Account but has merely differed with the extent of sales declared by the assessee. It is pointed out that assessee is maintaining regular Books of account, which has not been rejected. It is pointed out that assessee firm owns approximately 26.53 acres of agricultural land on which the activity is carried out and in assessment years 2009-10 and 2012-13, vide orders passed under section 143(3) of the Act , the agricultural income as declared on the basis of Books of account have been accepted, copies of such orders have been placed at pages 50 to 52 and 87 to 88 of the Paper Book respectively. It is therefore, contended that CIT(A) ought to have deleted the entire addition.

On the other hand, Ld. Departmental Representative has relied upon the orders of the authorities below in support of the case of the revenue.

I have carefully considered the rival submissions. The facts of the instant case clearly point out that so far as the existence of agricultural income is concerned, there is no dispute. It is also not in dispute that the only source of income of the assessee firm is from agriculture. It is also emerging that the assessee is maintaining Books of account in connection with the agricultural activity. The agricultural income computed by the assessee has been tinkered by the lower authorities merely on estimate basis. There is no material to suggest that there has been any inflation of income by the assessee and rather the claim of the assessee has been rejected on guess work only. It is also undisputed that agricultural income returned by the assessee in other assessment years, namely, 2009-10 and 2012-13, in similar manner has been accepted by the Department, as can be seen from the respective orders passed under section 143(3) of the Act, copies of which are on record. Under these circumstances, in my considered opinion, the onus was on the Revenue to establish with requisite material and evidence that the agricultural income declared by the assessee is incorrect. In the absence of any such credible evidence, apart from a summary rejection of agricultural income, the action of the lower authorities is unacceptable and the addition is hereby directed to be deleted. 6.1 As a consequence, the order of the CIT(A) is set-aside and the Assessing Officer is directed to accept the income as declared by the assessee in its return of income. Thus, assessee succeeds on this aspect.

In the result, appeal of the assessee is allowed, as above. Order pronounced in the open court on 29/12/2016