Onus is on assessee to substantiate agricultural income, Exemption to be strictly construed – ITAT

Onus is on assessee to substantiate agricultural income and exemption provisions are to be strictly construed – ITAT

ABCAUS Neutral Case Law Citation:
ABCAUS 3690 (2023) (03) ITAT

Important Case Laws relied upon by parties:
CIT v Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC)
Mustafa Ali Khan v. CIT [1948 16 ITR 330 (PC)
Commissioner of Customs (Import) Mumbai vs. Dilip Kumar & Company (2018) 95 taxmann.com 327(SC).
CIT vs Sri Ramakrishna Deo (1959) 35 ITR 312, 316, 317 (SC)
Avdhesh Kumar Jain vs. Commissioner of Income-Tax (1989) 178 ITR 443 (All)
Union of India Vs Belgachi Tea Company Ltd (2008) 170 Taxman 209/304 ITR (SC)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the Assessing Officer (AO) in making an addition u/s 68 of the Income Tax Act, 1961 (the Act) towards accepting agriculture Income claimed as exempt u/s 10(1) read with Section 2(1A) of the Act.

The assessee’s assessment was reopened by Revenue by invoking provisions of Section 147/148 of the Act. The assessee filed return of income in response to notice issued by the AO u/s 148 of the Act.

On perusal of Return of income filed by the assessee in response to notice, it was observed by AO that apart from the interest income, the assessee had declared large amount of agricultural income which was claimed as exempt.

The assessee was asked by AO to substantiate the claim of agricultural income earned and also  agricultural operations carried on by the assessee , by submitting details/evidence of agricultural account, sale bills of agricultural produce , purchase bills of seeds and fertilizers, evidence of harvest of agricultural produce, sowing of agricultural crops , evidences for work done to improve agricultural operations, and other evidences to prove that agricultural operations were in-fact carried on by the assessee.

However, the assessee only produced Profit and Loss of agricultural activities and could not produce any evidence/documents before the AO to substantiate/prove that agricultural operations were in-fact carried on by the assessee.

The AO held that no agricultural operations were carried on by the assessee and added the agricultural income claimed exempt as un-disclosed income under Section 68 of the Act.

Before the CIT(A), the assessee submitted that the assessee for ten years did agricultural work on lease land by producing aroma grasses and also grew grains and vegetables. Due to ill health, the assessee closed the work of Aroma Grasses. It was submitted that the assessee for the persons who were interested in aroma oil, extracted oil from flowers and grass on job work basis. 

The CIT(A) rejected the appeal on the ground that apart from the lease agreement on a letter pad showing the land ownership there was no other evidence showing any human intervention in the planting of these flowers, grass, vegetables and grains etc.

The Tribunal observed that as per the unregistered lease agreement, the lease was required to be renewed for further period of 3 years after expiry of every 3 years with stipulated hike in lease rent, for a maximum period of 10 years.

However, there was no evidence produced by the assessee that this lease deed was ever registered, there was no evidences that the said lease was infact ever extended /renewed   after alleged completion of three years.

Further, there was absolutely no evidence whatsoever on the record to substantiate that the assessee in fact carried out agricultural operations during the year under consideration.

The Tribunal observed that the assessee had not filed any evidences as to labour employed such as name, address, ID, details of payments made/receipt etc. There were no evidences as to sale of crop, and the persons who bought the crops.  There were no evidences by way of land revenue records and other village/government records to substantiates the details of crops sown, harvested.

The Tribunal opined that when the assessee is claiming exemption  for agricultural income under the provisions of Section 2(1A) read with Section 10(1) of the Act, and the onus is entirely on the assessee to prove that the assessee earned agricultural income as defined u/s 2(1A) of the Act. It is well settled that exemption provisions are to be strictly construed and the onus is strictly on the assessee to prove that his case falls within four corners of the exemption provision.

Accordingly, the ITAT upheld the order of the CIT(A) and dismisied the ground of appeal.

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