Naresh Patel, Navsari V. Officer-In Charge,NFAC ,DCIT, Navsari, Navsari

ITA 873/SRT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8351 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 17-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Income from undisclosed sources
• Section: 69C; 143(3); 133(6); 143(2); 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.873/SRT/2023 (Ǔनधा[रणवष[ / Assessment Year: (2020-21) (Physical Court Hearing) Naresh Patel Bhoot Faliyu, Jalalpore, Dhaman, Navsari-396415 Vs. Officer-In-Charge/NFAC,DCIT, Navsari èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ATJPP 3492 P (अपीलाथŎ /Appellant) (ŮȑथŎ/Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Mehul Shah, CA राजèव कȧ ओर से /Respondent by: Shri Vinod Kumar, Sr-D.R सुनवाई की तारीख/ Date of Hearing : 28/02/2024 घोषणा की तारीख/Date of Pronouncement : 07/03/2024 आदेश / ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee pertaining to assessment year 2020-21 is directed against the order passed by the National Faceless Appeal Centre, Delhi (in short “NFAC/Ld CIT(A)”) dated 29.11.2023, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) r.w.s 144B of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act') dated 05.09.2022. 2. Grounds of appeal raised by the assesse are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs.14,77,442/- treating the same as unexplained expenditure u/s 69C of the Act. 2. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Office has erred in taxing the addition by taking the rate @ 77.25% by attracting S.115BBE instead of normal tax rate. 3. It is therefore prayed that the assessment order passed u/s 143(3) may please be quashed. Page | 2 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. Brief facts qua the issue are that assessee filed his return of income for the assessment year 2020-21 on 17.12.2020 declaring income of Rs.6,07,150/-. The case was selected for scrutiny through CASS and notice u/s 143(2) of the Act dated 29.06.2021 was issued and served on the assessee. The assessee is stated to be engaged in borewell work and agriculture. The case was selected for limited scrutiny in CASS on the issue of agricultural income shown by the assessee in the return of income for assessment year 2020-21. The Assessee has declared large increase in agricultural income in the ITR for AY 2020-21, 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. 4. In reply to the notice dated 16.11.2021, the assessee has uploaded submissions viz., computation of income, income and expenditure account, capital account, partly ledger, balance sheet, land document, agricultural income ledger, agricultural expense ledger wherein a total expenditure of Rs.2,07,889/- is reflected. 5. After going through the reply of assessee, the Assessing Officer observed that| the assessee has declared agricultural income of Rs.36,93,606/- in ITR for A.Y 2020-21 which is substantially higher than agricultural income shown in preceding returns, and expenditure incurred shown in the return is Nil. In the khatavahi (crop record) vide the assessee’s submission of land record, the expenditure incurred is only on fertilizers and purchased few agriculture equipment. There are no details and documentary evidence for expenses of labour, irrigation and transportation. Page | 3 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel 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 of Rs.36,93,606/- was not established. Further, notice u/s 133(6) dated 04.08.2022 was issued to the Sahakari Khand Udyog Mandal Ltd., Dist. Navsari, Gujarat for confirmation of the agricultural income the details of the type of crop sold, quantity, date-wise and payment made to the assessee for the entire year from 01.04.2019 to 31.03.2020, the price at which the sugarcane was purchased by the society from the assessee during the period 01.04.2019 to 31.03.2020 vide the reply dated 09.08.2022 for the 133(6) the Sahakari Khand Udyog Mandal, submitted the details of the quantity and price of the sugarcane purchased from the assesse which is verified and the genuineness of agricultural income is established. 6. The agricultural expenses vide the ledger submitted is showing a total expense of Rs.2,07,889/- which is substantially less as compared to the income earned by the assessee during the year. Also, it is seen that the assessee has declared agricultural income of Rs.36,93,606/- in ITR for assessment year (A.Y.) 2020-21 but the expenditure incurred shown in the return is Nil. Hence, the agricultural expenses was proposed to be estimated by Assessing Officer at 40% of the gross receipts in view of the judgment in the case of Dhirubhai L. Narola & Others. ITA No.2190 and 2922/Ahd/2004 dated 17.04.2004. Thus, in view of the decision in the case of Dhirubhai L Narola & Others (supra), the expenditure of Rs.14,77,442/- was treated by Assessing Officer as unexplained expenditure u/s 69C of the Act in the case of the assessee. 7. Aggrieved by the order of Assessing Officer the assessee carried the matter in appeal before NFAC/Ld.CIT(A) who has confirmed the action of Page | 4 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel the Assessing Officer. The ld CIT(A) noted that assessing officer estimated the agricultural expenses at 40% of gross receipts, which should be reasonable expenditure bound to be incurred to carry out agricultural activity in Gujarat. This way, ld CIT(A) confirmed the action of the Assessing Officer. 8. Aggrieved by the order of NFAC/Ld.CIT(A) the assessee is in further appeal before us. 9. Shri Mehul Shah, Ld. Counsel for the assessee, pleaded that assessee has explained agricultural income with documentary evidences before assessing officer. However, issue before the assessing officer was that assessee has not shown the proportionate agricultural expenses. That is, the plea of the Assessing Officer was that if the assessee has shown increased agricultural income in the current year as compared to previous year, then to earn higher agricultural income, the proportionate agricultural expenses, should have been increased. The ld Counsel, in this regard stated that in the year 2019 and 2020 (preceding previous years) the assessee has made heavy expenditure on account of purchase of agricultural equipment, tools and fertilizers therefore in the current assessment year 2020-21, 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 very low. In the assessment year 2020-21, the area in which the land was situated, the monsoon was good, hence less 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 is negligible, as the assessee need not to pay labor expenses to its Page | 5 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel own family members. Therefore, expenses on agricultural depends on so many factors and these factors have ignored by the lower authorities. 10. The Ld Counsel stated that assessee submitted before the Assessing Office, the following documents and evidences, viz:(i) Written submission filed before AO/ NFAC (page 5 to 12 of paper book), (ii) Sample expense bills for agricultural produce (page 13-18 of paper book), (iii) confirmation from Sahakari Khand Udhyog Mandal Ltd, (iv) other agreements for assessment year (AY) 2020-21 (pages 19-32 of paper book), (v) Agriculture land detailed summary (page 33 of paper book), (vi) Form 7/12 and 8-A of agricultural land of assessee (page 34-63 of paper book).Therefore, ld Counsel argued that assessee has explained the agricultural income by way of submitting above documents and evidences and also explained the agricultural expenses. The Ld. Counsel also submitted that assessee does not have any other income except agricultural income. Therefore, addition made by the Assessing Officer, may be deleted. 11. On the other hand, ld DR for the Revenue, vehemently argued that during the assessment proceedings, the assessee was asked to provide details and evidences for expenses relating to labor, irrigation, transportation but failed to do so. In the absence of such details, the genuineness of agricultural income claimed by the assessee was not established. Therefore, ld DR contended that addition made by the Assessing Officer may be sustained. 12. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In our considered view, it was wholly erroneous on the part of the authorities to make addition on account of proportionate agricultural Page | 6 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel expenses, whereas assessee has suo-motu declared agricultural income of Rs.36,93,606/-. 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 is no loss to the revenue in so far assessee has shown increased agricultural income. Hence, we note that Assessing Officer has not disputed agricultural income. We note that Assessing Officer disputed the fact only that why the assessee has not shown expenses on such agricultural income. 13. Therefore, we note that Assessing Officer was of the view that without expenses, agricultural income cannot be earned. But this statement of the Assessing Officer is not always true. The ld Counsel, in this regard rightly pointed out that in the year 2019 and 2020 (preceding previous years) the assessee has made heavy expenditure, on account of purchase of agricultural equipment, tools and fertilizers therefore in the current assessment year 2020-21, 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 assessment year 2020-21, 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 is negligible, as the assessee need not to pay labor expenses to its own family members. Therefore, we find merit in the submission of ld Counsel 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. Page | 7 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel 14. We note that 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 has not proved it otherwise, therefore such fictitious addition made by the assessing officer does not have any leg to stand. We also note that during the assessment stage, the assessee submitted relevant documents and evidences viz: (i) Sample expense bills for agricultural produce (page 13-18 of paper book), (ii) confirmation from Sahakari Khand Udhyog Mandal Ltd, (iii) other agreements for assessment year (AY) 2020- 21 (pages 19-32 of paper book), (iv) Agriculture land detailed summary (page 33 of paper book), (v) Form 7/12 and 8-A of agricultural land of assessee (page 34-63 of paper book). The Assessing Officer did not find and mistake in these documents and evidences, except to say that these documents are not acceptable. We note that in reply to the notice of Assessing Officer, dated 16.11.2021, the assessee has uploaded submissions before Assessing Officer, viz., computation of income, income and expenditure account, capital account, partly ledger, balance sheet, land document, agricultural income ledger, agricultural expense ledger wherein a total expenditure of Rs.2,07,889/- is reflected. In the khatavahi (crop record) vide the assessee’s submission of land record, the expenditure incurred is only on fertilizers and purchased few agriculture equipment, which was accepted by the Assessing Officer. 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. (Northern Bengal Jute Co. Ltd Vs CIT 70 ITR 407 (Cal). 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. (Life Insurance Corp. of India vs. CIT 219 ITR 410 (SC). We note that assessee has submitted all possible Page | 8 ITA No. 873/SRT/2023 A.Y.20-21 Naresh Patel evidences in support of his claim therefore Assessing Officer cannot arbitrarily rejects the assessee's explanation and documents. (Shree Ram Jhawarmal Ltd us. CIT 64 ITR 314 (Cal.). Considering the facts and circumstances, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. 15. In ground No.2, the ld Counsel argued that Assessing Officer has erred in taxing the addition by taking the rate @ 77.25% by attracting section 115BBE of the Act instead of normal tax rate. Since we have deleted the entire addition, hence no any question arises to levy the tax u/s 115BBE of the Act. 16. In the result, appeal of the assessee is allowed. Order is pronounced on 07/03/2023 by placing record on notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत /Surat Ǒदनांक/ Date: 07/03/2024 Dkp Outsourcing Sr.P.S Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat