JOYE EMBRAYIL MATHAI,KOZHIKODE vs. INCOME TAX OFFICER, WARD 2(1), KOZHIKODE

Assessee by : Shri. Joye E Mathai, CA Revenue by : Smt. J M Jamuna Devi, Sr. AR Date of hearing : 05.12.2022 Date of Pronouncement : 19.12.2022 O R D E R

Per Padmavathy S, Accountant Member

1. The learned Commissioner had not taken into account, that part of the report of the State Agricultural officer,Krishi Bhavan,Chakkittapara which states that "....but based on local enquiry, I could understand that there was a total No.of 350 Nos Coconut palms, 800 Nos Arecanut Palms, Ginger, Plantain, pepper and Diary Farm were there during 2016-17 Page 2 of 5 period. Thus the net income may come to Rs.9,75000/-during the financial year 2016-17.

2. The learned Assessing officer erred in treating disallowed portion of Agricultural Income as Income from other sources and taxing the same under the provision of Section 115BBE.

2. The assessee is an individual, filed his return of income for Assessment Year 2017-18 on 29.03.2018, declaring a total income of Rs.10,57,760/-. The case was selected for scrutiny under CASS and a notice under section 143(2) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was duly served on the assessee. The AO called for various details by issue of notice under section 142(1) of the Act. The assessment was completed by making an addition of Rs.9,75,000/- which the assessee had declared as agricultural income on the ground that the assessee failed to substantiate the evidence of agricultural activity and the AO treated the income as under section 69A of the Act and levied tax at special rates as per section 115BBE of the Act.

3. Aggrieved, assessee filed appeal before the CIT(A). The CIT(A) gave relief to the assessee to the extent of Rs.7,19,700/- on the basis of report of the Agricultural Officer. The relevant extract from CIT(A)’s order is given below:

5.1 Before me the appellant has submitted certificate of land holding of 9.64 Acres from village officer, Chakkittapara and also from a Agricultural officer, Krishi Bhawan, Chakkittapara as well as a statement of total income and expenditure from agriculture for the financial year 2016-17 (AY 201718) from the same Agricultural officer showing net agricultural income at Rs. 7,19,700/-. Since the AO in limited scrutiny for AY 2015-16 has found the agricultural activity and income in order in respect of Page 3 of 5 the appellant, it is a good presumption that the appellant is engaged in the agricultural activity and earning agricultural income. However, it is seen that the appellant has declared agricultural income at Rs. 9,75,000/- in his return of income while the Agricultural Officer has found his agricultural income to be at Rs.7,19,700/- for the relevant assessment year. Since a third party evidence shows agricultural income to the tune of Rs. 7,19,700/- the exemption in respect of agricultural income is allowable only to the extent of Rs. 7,19,700/-. I hold accordingly. The difference of income declared as agricultural income in the return and agricultural income stated by agricultural officer being Rs. 2,55,300/- (9,75,000 — 7,19,700) is liable to be taxed as income from other sources. Therefore, the AO is directed to bring Rs. 2,55,300/- to tax under the head income from other sources."

4. Aggrieved, the assessee is in appeal before the Tribunal. During the course of hearing, the assessee submitted that the CIT(A) while giving relief to the assessee has not considered entire report given by the Agricultural Officer. The assessee submitted that in the report, the Agricultural Officer had mentioned as follows:

Based on local enquiry I could understand that there was a total No. of 350 Nos of Coconut palms, 800 Nos of Arecanut palms, Ginger, Plantain, Pepper and Dairy Farm were there during the financial year 2016-17 (AY 2017-18) period. Thus the net income may come to Rs. 9,75,000/-during the financial year 2016-17.

5. Accordingly, the assessee submitted that the entire income is arising out of agricultural land and therefore the addition sustained to the extent of Rs.2,55,300/- by the CIT(A) should be deleted. The learned DR relied on the order of the CIT(A).

ITA No.280/Coch/2021 Page 4 of 5 6. We heard the rival submission and perused the material on record. It is an admitted fact that the assessee is owning 9.64 acres of agricultural land from where he is deriving the agricultural income. This fact has been verified by the Agricultural Officer, Krishi Bhawan, Chakkittapara, that is admitted by the CIT(A) in his order which extracted in the earlier part of this order. It is also noticed that the Agricultural Officer has given a report based on his inspection conducted on 10.01.2020 where he has seen Coconut 150 Nos, Rubber 910 Nos & Arecanut 100 Nos. Since the inspection happened in the year 2020, the Agricultural Officer has mentioned these crop counts could have been more during the Financial Year relevant to Assessment Year 2017-18 and accordingly has mentioned in the report that the crop count was 350 Nos. of coconut palms, 800 numbers of arecanut palms, ginger, plantain, pepper and dairy farm based on local enquiry. Based on this the Agricultural Officer has mentioned that the net income of the financial year 2016-17 may come to Rs.9,75,000/-. It is also noticed that as per the report of the Agricultural Officer is based on the inspection on 10.01.2020 when according to the learned AR the assessee has replanted the crops. We see merit in the argument that the income estimated at Rs.7,19,700 is based on status as on the date of inspection and that is the reason Agricultural Officer has added in the report the real income for financial year 2016-17 could be Rs.9,75,000 which is declared by the assessee in the return of income. It is also noticed that the AO while completing the assessment of AY 2015-16 has accepted the similar contentions of the assessee and has not made any addition. In view of these discussions and considering the facts and Page 5 of 5 materials on record we are of the considered view that the source for the amount of Rs.9,75,000/- is from agricultural land and accordingly the same cannot be brought to tax under the head “Income from Other Sources”. We therefore delete the addition made by the CIT(A) to the extent of Rs.2,55,300/- as income from other sources.