AO classifies Agricultural Expenses as Undisclosed Income u/s 69(c): ITAT Deletes Addition [Read Order]

The Surat bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition made by the Assessing Officer (AO) against the assessee on agricultural expenses as undisclosed income under Section 69(c) of the Income Tax Act in the case of Ajay Ravjibhai Patel.

The assessee Ajay Ravijibhai Patel pursued an appeal against an order passed under section 250 of the Income Tax Act dated 28.01.24 by the Commissioner of Income Tax (Appeals) CIT(A), National Faceless Appeal Centre NFAC for the assessment year (AY) 2016-17.

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The assessee filed an income return on 19.07.2017, declaring a total income of ₹7,120 and an agricultural income of ₹ 22,37,209. The case of the assessee was selected for scrutiny through Computer Assister Security Selection ( CASS ), in which the AO raised concerns about the agricultural income the assessee held in his account even though sale bills supported such money.

The AO concluded that the assessee incurred agricultural income from other undisclosed income and ordered the assessee to add 7 lakhs. The assessee was aggrieved by this moved appeal in front of CIT(A), where the commissioner upheld the same observations made by the AO. CIT(A) cited the lack of a satisfactory explanation of such money.

The assessee's Authorised Representative ( AR ) held that the appellant was an agriculturist with a nominal amount of other income. The AR asserted that the AO erred in presuming that agricultural expenses were met out of either income when such incomes were met from receipts of agrarian activities without other income. The AR further contended that the CIT(A) did not consider the submission made by the assessee but instead upheld the addition routinely made by the AO.

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The Departmental Representative of the Revenue supported the orders of the lower authorities. Still, the assessee had not submitted relevant details or evidence to substantiate expenses incurred to earn the agricultural income.

After hearing both sides, the tribunal held that the assessee reported the entire sale price of agricultural products as income without dedicating any expenses, considering that it would not affect the tax payable by the assessee.

The Tribunal further observed that the assessee is not in a situation where all of the proceeds from the sale of agricultural goods are put to other uses, leaving no funds for agrarian expenditures. Thus, there is no justification for adding u/s 69C. The tribunal also held that the AO had not brought any material or evidence on record to show that the assessee earned income from sources other than agriculture.

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The ITAT bench, comprising Pawan Singh ( Judicial Member ) and Bijyananda Pruseth ( Accountant Member ), realised that the proper course of action would be to reduce the exempted agricultural income by Rs.10,28,410 —instead of adding the undisclosed income of Rs.7,83,093—estimated by the AO. Furthermore, the Tribunal ordered the addition made by the AO for undisclosed income to be deleted, and as a result, the appeal was allowed.

To Read the full text of the Order CLICK HERE

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