No Income Tax Addition can be made u/s 68 of Income Tax Act if AO Assessed the Agricultural Income Excluding Leased Land, and not in Accordance with Previous AY: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT), held that no income tax addition can be made under section 68 of Income Tax Act if Assessing Officer (AO) excluded leased land while assessing the agricultural income and also did not relied on assessment orders in previous Assesment Year (AY).

The assessee in this case is Late Madan Mohan Sharma, the return filed by the assessee was selected for limited scrutiny through Computer Aided Scrutiny Selection (CASS). The reason for scrutiny selection was to examine large agricultural income. The assessee has reported agricultural income of Rs.20 lakhs in the income-tax return.

The assessee was asked to furnish landholding ownership details, details of crops cultivated, purchase bills of seeds, fertilizers and other expenses with evidences, Khasra and Khatauni copy, agricultural produce sale evidence with name and address of purchasers, copy of bank statement in which sale proceeds were deposited and books of accounts maintained for the agricultural operations by the assessee.

The assessee furnished the details by stating that he was engaged in the activity of purchase and sale of agricultural produce and also carries on agricultural operations on the agricultural land of four hectares owned by him. The assessee also submitted that he was holding 150-200 Bighas of land. The assessee also submitted that he had cultivated rice, dhan, wheat, petha and other vegetables. The assessee furnished sales bills of agricultural produce of Krishi Utpadan Mandi Samiti, Meerut and the purchaser was Shri Sanjay Kumar, proprietor of M/s Guru Kripa Traders, Naveen Sabji Mandi, Meerut.

The Assessing Officer (AO) estimated the agricultural income to be Rs.8000 per bigha. He held that the assessee is holding 77.305 bighas and estimated the agricultural income at Rs.6,18,444/- (77.305 x 8000).

Since the assessee had shown agricultural income of Rs.20 lakhs in the return, the AO added the remaining sum of Rs.13,81,556 (Rs.20,00,000 (-) Rs. 6,18,444) as unexplained income under Section 68 of the Income Tax Act and sought to be taxed at the rate prescribed in section 115BBE of the Income Tax Act.

Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which considering the fact of lands taken on lease by the assessee, estimated the agricultural income at Rs.10 lakhs and restricted the addition made by the AO to Rs.10 lakhs as against Rs.13,81,556.

Further aggrieved the assessee filed an appeal before the Tribunal. The Authorised Representative of the assessee (AR) submitted that the assessee was actually holding 14 acres in his control (both owned as well as leased) whereas the lower authorities had ultimately taken only 12 acres while estimating the agricultural income. And further drew the Tribunal’s attention to reassessments framed in AYs 2012-13 and 2013-14 to examine the very same issue of agricultural income.

The Bench comprising of observed that the AO, after due inquiries thereof in AYs 2012-13 and 201314, had accepted the agricultural income at Rs.15 lakhs per annum. The  AO has been consistently taking the holding of land by the assessee (both owned as well as leased) only at 12 acres even in AYs 2012-13 and 2013-14.

 But, the assessee’s claim was that it had 14 acres in his control and hence, correspondingly, the agricultural income figure for 14 acres should be Rs.17.5 lakhs. As against this, the assessee had reported Rs.20 lakhs in his return. It is a fact that even in AY 2015-16, pursuant to the Tribunal order, agricultural income was accepted by the AO only at Rs.15 lakhs.

Therefore the Tribunal held that the lower authorities had been considering the agricultural holdings of the assessee including the leased lands only for 12 acres and accordingly had estimated the agricultural income at Rs.15 lakhs in AYs 2012-13, 2013-14 and 2015-16. Hence,  the agricultural income was estimated at Rs.15 lakhs for AY 2014-15 also. The AO was directed accordingly.

Hence the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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