Addition for unexplained agricultural expenditure u/s 69C deleted. Agricultural expenses depend on so many factors which were ignored by Assessing Officer (AO) – ITAT
In a recent judgment, ITAT has deleted the addition made u/s 69C towards unexplained agricultural expenditure holding that expenses on agriculture depend on many factors which were ignored by lower authorities.
ABCAUS Case Law Citation:
ABCAUS 3930 (2024) (04) ITAT
Important Case Laws relied upon:
Dhirubhai L. Narola & Others
Life Insurance Corp. of India vs. CIT 219 ITR 410 (SC)
Northern Bengal Jute Co. Ltd Vs CIT 70 ITR 407 (Cal)
Shree Ram Jhawarmal Ltd us. CIT 64 ITR 314 (Cal.)
In the instant case, the assessee had challenged the order passed by the CIT(A)/NFAC in confirming the order of Assessing Officer in making addition u/s 69C towards unexplained agricultural expenses.
The assessee filed his return of income declaring only agricultural income from sugarcane farming. The case was selected for scrutiny through CASS and notice u/s 143(2) of the Act was issued and served on the assessee. The case was selected for limited scrutiny in CASS on the issue of agricultural income shown by the assessee in the return of income.
The Assessee had declared large increase in agricultural income in the ITR which as per assessing officer, was substantially higher than agricultural income shown in preceding return of income. The Assessing Officer issued notice to the assessee to explain the large increase in agricultural income.
In reply, the assessee provided computation of income, income and expenditure account, capital account, partly ledger, balance sheet, land document, agricultural income ledger, agricultural expense ledger.
After going through the reply of assessee, the Assessing Officer observed thatthough the agriculatural income has substantially increased, expenditure incurred shown in the return was Nil.
Further, as per the khatavahi (crop record) vide the assessee’s submission of land record, the expenditure incurred was only on fertilizers and purchase of few agriculture equipment. There are no details and documentary evidence for expenses of labour, irrigation and transportation.
The Assessing Officer noted that in the absence of details and documentary evidence of expenses of labour, irrigation and transportation, the genuineness of agricultural income was not established.
Hence, the agricultural expenses was proposed to be estimated by Assessing Officer at 40% of the gross receipts in view of the judgment of the Co-ordinate Bench. Accordingly, the estimated expenditure was treated by Assessing Officer as unexplained expenditure u/s 69C of the Act.
The Tribunal opined that it was wholly erroneous on the part of the authorities to make addition on account of proportionate agricultural expenses, whereas assessee had suo-motu declared agricultural income. As the agricultural income is clubbed in the computation of income of the assessee for rate purpose and hence assessee paid the tax thereon. There was no loss to the revenue in so far assessee had shown increased agricultural income.
The Tribunal observed that the Assessing Officer had not disputed agricultural income but disputed the fact only that why the assessee had not shown expenses on such agricultural income as The AO was of the view that without expenses, agricultural income cannot be earned.
The Tribunal further observed that the assessee has stated that in the preceding previous two years the assessee has made heavy expenditure, on account of purchase of agricultural equipment, tools and fertilizers therefore in the current assessment year, the assessee need not to incur so much expenses on account of increased agricultural income. The previous years’ fertilizers purchased by the assessee at cheap rate were utilized in the current assessment year, hence expenditure was nil on that account. In the current assessment year, the area in which the land was situated, the monsoon was good, hence very negligible irrigation expenses were incurred by the assessee. The assessee employed own family labours, such as bother, son, daughter, sister, wife etc, so expenses on labour was negligible, as the assessee need not to pay labour expenses to its own family members.
The Tribunal found merit in the submission that expenses on agricultural depends on so many factors and these factors have ignored by the lower authorities, hence addition made by the Assessing Officer on account of agricultural expenses needs to be deleted.
The Tribunal also noted that the assessee does not have any other income except agricultural income. Before the assessing officer, the assessee submitted, that he does not have other source of income, except agricultural income and Assessing Officer had not proved it otherwise, therefore such fictitious addition made by the assessing officer does not have any leg to stand.
The Tribunal also noted that during the assessment stage, the assessee submitted relevant documents and evidences and the Assessing Officer did not find and mistake in these documents and evidences, except to say that these documents were not acceptable.
The Tribunal stated that in holding a particular receipt as income from undisclosed sources, or expenses as undisclosed income, the faith of the assessee cannot be decided by the revenue on the basis of surmises, suspicious and probabilities. One has to keep in mind the legal maxim “lex non confit ad imposibilia” which means the law does not compel a man to do that which he cannot possibly perform.
The Tribunal noted that the assessee had submitted all possible evidences in support of his claim therefore Assessing Officer cannot arbitrarily rejects the assessee’s explanation and documents.
Considering the facts and circumstances, the Tribunal deleted the impugned addition.
Download Full Judgment ABCAUS 3930 (2024) (04) ITAT Click Here >>
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