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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI. CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 02/12/2021 passed by NFAC, Delhi for A.Y. 2015-16 on following grounds of appeal:
1. The order of the Assessing officer is against Law and Facts.
2. The Commissioner(Appeals) has merely reproduced what the Assessing Officer had mentioned in the assessment order and without giving any specific finding upheld the additions made as income from other source. The Commissioner(Appeals) has mentioned that the Assessing Officer has noticed that there was not a single credit in the bank account for the agricultural income earned. Consequently the estimated addition of 50% of agricultural income as income from other source was upheld. Your appellant would like to submit that the total agricultural income received during the year was Rs.13,94,662/- against which the agricultural expenses was Rs.4,25,000/-. The Assessing Officer has himself admitted that all the relevant bills for sales of cultivated products were produced before the Assessing Officer at the time of hearing. If at all the Assessing Officer had any doubt regarding the sale he should have persued the matter and called for further details or even examined the parties to whom the products were sold. However, the Assessing Officer chose to arbitrarily disallow 50% of agricultural income and added it as income from other sources which was purely based on suspicion and surmises. The AO should have appreciated that, there is no requirement under Income Tax provisions to collect the sale of agricultural products only through bank. He should have known that even u/s 40A(3) significant relaxations have been accorded to agricultural products which are sold by producers and exemption from the rigours of the section have been provided to the growers and producers. If at all the AO was of the opinion that the agricultural expenses actually incurred where not fully claimed or understated he could have at best reduced amount of agricultural income which is included in return for rate purposes. His action in simply treating 50% of the agricultural income as non-agricultural is against law especially when the sale bills for the entire amount where produced before him during the hearings. The addition from income from other source by the Assessing Officer without bringing any further document on record is wholly arbitrary and is not sustainable.
3. Without prejudice to the above, it is submitted that the AO has erred in reckoning the entire amount of agricultural income amounting to Rs13,94,662/-, in the total income for rate purposes . If he was of the opinion that only 50% of the amount as claimed by the AO was agricultural, he should have included only such amount in the total income for arriving at the rate of tax. His action in including the Page 3 of entire amount in the total income for rate purposes is a duplication and against law. PRAYER For these grounds and such other grounds that may be urged at the time of hearing, it is prayed that the addition made to other sources may kindly be deleted.”
Brief facts of the case are as under: 2.1 Assessee is an individual and filed its return of income for year under consideration on 30/09/2015 declaring total income of Rs.9,33,200/-. The case was selected for scrutiny for the reason of large investment in property as compared to the total income and notice u/s. 143(2) was issued along with notice u/s. 142(1). In response to the statutory notices, assessee appeared before the Ld.AO and filed requisite details. 2.2 The Ld.AO observed that during the year the assessee has shown gross agricultural income of Rs.13,94,662/-. The agricultural income is stated to be from rubber cultivated at Konny and cardamom at Pallivasal. However assessee claimed lesser expenditure of only Rs. 1,50,000/- for earning agricultural income of Rs.13,94,662/-. 2.3 The Ld.AO also observed that assessee is one of the partners in J&S Granite, Vallikode and that during the previous year relevant to the A.Y. under consideration, assessee had purchased 4.39 hectares of land at Pallivasal village, Idukki District, 2 are with building at Adoor Village, Pathanamthitta District and 29 sq.mtr. at Peringanad Village, Pathanamthitta District. 2.4 The Ld.AO observed that the main source of fund for purchase of the property was from the bank loan and withdrawal Page 4 of NRI account. The details of the wife’s account was verified by the Ld.AO. 2.5 Subsequently, the letter dated 27.11.2017 was issued to assessee calling for complete details of agriculture such as total area of cultivation, gross agricultural income, total expenses incurred and net agricultural income earned. 2.6 The assessee vide his letter dated 05.12.2017 has stated that there was a mistake in disclosing the agricultural expenses and he is not maintaining any register or books of accounts for the agricultural expenses and the expenses were included in his drawings account. It is also mentioned in his letter that the actual expenses is Rs.4,25,000/-. Copies of sale bills were also produced for establishing his agricultural income. However, the Ld.AO noted that there is not even a single corresponding credit entry in his bank account about the agricultural income he stated to have been earned. 2.7 The Ld.AO was of the opinion that it is also improbable and highly unlikely that a state like Kerala, where labour charges are very high compared to other states, he has earned agricultural income of Rs.13,94,662/- with this much of lesser expenses. Accordingly, the Ld.AO estimated 50% of the net agricultural income and treated it as income from other sources amounting to Rs.6,22,330/- Aggrieved by the assessment order, assessee filed appeal before the Ld.CIT(A). 2.8 The Ld.CIT(A) upheld the addition made by observing as under:
Page 5 of “3.1 I have gone through the assessment proceedings and the submissions of the appellant in the grounds of appeal
. It is observed from the Assessment Order that the AO made addition, duly after noticing that there was not even a single corresponding credit entry in his bank account about the agricultyral income that he stated to have been earned. 3.2 In view of the above the AO disallowed 50% of the net agricultural income shown by the appellant i.e. Rs.6,22,330/- and treated the same as income from other sources. The AO is justified in making the addition. The appellant has not come up with any sort of satisfactory evidence or case laws in support of his contentions and grounds of appeal. Therefore, it is opined that there is no valid reason to consider the appellant's grounds. Hence, the AO made an addition of Rs.6,22,330/- is confirmed. . All grounds raised by the assessee are dismissed. As a result of the above, the appeal of the appellant is dismissed.” 2.9 Aggrieved by the order of Ld.CIT(A), assessee is in appeal before this Tribunal. We have heard the arguments advanced by both sides.
3. It is noted that the Ld.AO doubts the labour charges paid by assessee amounting to Rs.4,25,000/- and that the agricultural income earned by assessee is not commensurating the area of land that is put to agricultural activities by assessee. On query being raised during the course of hearing, the Ld.AR quantified the land holding of the assessee which is put to agricultural activities at 3 acres 49 cents for rubber plantation and 18 hectares for cardamom. Under such circumstances, the agricultural income shown by assessee is not in line with the cultivation. However, we also agree with the Ld.AR that 50% estimation is at a very high. Assessee has not been able to justify the expenditure claimed against the income earned. No details of the expenditure claimed has been filed by the assessee.
Page 6 of Therefore though not agreeing with 50% estimated by Ld.AO, we restrict the estimation to the extent of 30%. The Ld.AO is directed to recompute the disallowance based on the above. Accordingly, the grounds raised by assessee stands partly allowed. In the result, the appeal filed by assessee stands partly allowed. Order pronounced in open court on 15th September, 2022.