ITAT removes the agricultural produce element of the addition while taking into account a suitable amount of sale earnings

Fact and issue of the case

This is an appeal by the assessee against order dated 14.09.2018 of learned Commissioner of Income-Tax (Appeals), Meerut for the assessment year 2010-11.

The dispute in the present appeal is confined to addition of Rs.20,63,695 under Section 68 of the Income-Tax Act,1961.

Of course, the assessee has raised some other grounds including additional grounds challenging the validity of assessment order passed under Section 147 read with section 144 of the Act.

At the time of hearing, the assessee did not press additional ground nos. 1 and 2. Accordingly, they are dismissed.

Be that as it may, briefly the facts are that the assessee is a resident individual. Upon receiving information that in the year under consideration, the assessee had made investment of Rs.85,00,000 in purchasing of immoveable property, the Assessing Officer reopened the assessment under Section 147 of the Act.

In course of assessment proceedings, the assessee was called upon to explain the source of such investment. From the details furnished by the assessee, the Assessing Officer found that in the year under consideration, the assessee had purchased an agricultural land jointly with another person and made investment of Rs.45,78,550. He, therefore, called upon the assessee to explain the source of such investment. In response, the assessee submitted that he received loan of Rs.4,00,000 from his mother, Rs.3,00,000 from his brother and he received an amount of Rs.24,00,000 from sale of potato crops.

After considering the submissions of the assessee, the Assessing Officer partly accepting assessee’s explanation accepted the source of investment to the extent of Rs.14,78,550. Whereas, he treated the balance amount of Rs.31,00,000 as unexplained cash credit under Section 68 of the Act and added to the income of the assessee. Assessee contested the aforesaid addition by filing appeal before learned Commissioner (Appeals).

In course of appellate proceedings, the assessee furnished further additional evidences, which were forwarded to the Assessing Officer for examination. On examining the additional evidences, the Assessing Officer reported that out of the claim of income from sale of agricultural produce amounting to Rs.24,00,000, an amount of Rs,10,36,305 appears to be genuine. Accordingly, out of the addition of Rs.31,00,000 made by the Assessing Officer, learned Commissioner (Appeals) deleted an amount of Rs.10,36,305 and confirmed the balance amount.

I have considered rival submissions and perused the material available on record.

As could be seen from the facts on record to explain the source of investment in purchase of land amounting to Rs.45,78,550, the assessee has submitted that Rs.21,70,000 were out of earlier withdrawals from various bank accounts in name of self, father and Whereas, the balance amount was from the sale of various agricultural produces like sugarcane, maize and potato etc. However, in course of assessment proceedings, while the Assessing Officer accepted the withdrawals from bank and past savings, he rejected the claim of loan from mother and brother as well as part of agricultural income, claimed to have been received from sale of potato. However, he accepted that the assessee received some amount from the sale of crops like sugarcane and maize.

In course of first appellate proceedings, learned Commissioner (Appeals) had directed the Assessing Officer to examine the evidences including sale invoices of agricultural produce and in the remand report, the Assessing Officer has partly accepted assessee’ s claim on sale of potato, to the extent of Rs.10,36,305 out of Rs.24,00,000. He has rejected balance amount only because sale invoices were not produced by the assessee.

The fact that the assessee has sold agricultural produce, cannot be disputed because, even, the departmental authorities have accepted a part of assessee’ s receipts from sale of agricultural produce. Only a part of amount claimed to have been received from sale of potato has been rejected due to alleged non-furnishing of evidence.

Observation of the court

In my view, when the assessee has established on record that it had receipts from sale of agricultural produce, only because some invoices relating to sale are not available, asses see’s claim cannot be More so, considering the reasonable quantum of sale proceeds.

Before me, the assessee has furnished the details of agricultural land holdings, which clearly supports assessee’s claim of receipts from sale of agricultural produce. Thus, assessee’ s claim that he received Rs.24,00,000 from sale of potato, can be accepted.

In such a scenario, the source of investment in purchase of land stands explained. That being the factual position emerging on record, the addition cannot be sustained.

Accordingly, I delete the addition sustained by learned Commissioner (Appeals).

In view of my decision on merits, legal grounds raised by the assessee having become academic, do not require adjudication.

In the result, the appeal is allowed, as indicated above.