2016 (10) TMI 1255 - AT - Income Tax

Characterization of income - agricultural income treated as income from other sources - absence of books of accounts in respect of agricultural produce - HELD THAT;- We find that the assessee has shown agricultural income sales which includes being sales of wheat and soyabean shown at higher price as compared to Mandi sales. These sales are in the nature of on spot sales made effected outside Mandi to private parties. The assessee has agricultural land holding at 40 acres of irrigated agricultural land. The assessee has also filed confirmation of parties i.e. agriculturist, to whom sales was made. Therefore, considering the circumstances and in absence of books of accounts in respect of agricultural produce being not maintained and case laws as relied on by the Assessee, it would be reasonable to estimate 30% of the sales amounting to ₹ 6,00,000/- to private parties as non-explained agricultural income which would be worked out to ₹ 1,80,000/-. Accordingly, the addition of ₹ 1,80,000/- is confirmed and the balance addition of ₹ 3,11,590/- i.e. Rs.4,91,590- ₹ 1,80,000 is deleted. This ground of appeal is therefore, partly allowed.

Summary

Issues:
1. Disallowance under section 14A Read with Rule 8D
2. Reduction of agricultural income and treatment as income from other sources

Analysis:
1. The appeal involved a disallowance of ?2,258 under section 14A Read with Rule 8D, which was not pressed and treated as dismissed by the tribunal.

2. The issue of reduction of agricultural income and its treatment as income from other sources was extensively discussed. The assessee had shown agricultural income at ?15,60,000, but discrepancies were found by the AO regarding sales prices of wheat and soyabean compared to Mandi rates. The AO disallowed total sales amounting to ?7,15,560 and computed a disallowance of ?4,91,590 as income from other sources, reducing the agricultural income to ?10,68,410. The CIT (A) confirmed this disallowance, stating that the assessee did not contest the AO's findings.

3. The tribunal considered the submissions of both parties. The assessee argued that the agricultural income per acre was reasonable, citing the holding of irrigated agricultural land and previous case laws where agricultural income was accepted based on confirmations filed by the assessee. The assessee contended that despite the unavailability of Mandi bills, confirmations for sales made to agriculturists were provided. The Senior DR supported the lower authorities' order, emphasizing the lack of maintained accounts for agricultural produce.

4. After reviewing the submissions and available material, the tribunal found that the assessee had indeed made on-spot sales to private parties at higher prices compared to Mandi rates. Considering the circumstances, the tribunal estimated 30% of the sales amount to private parties as non-explained agricultural income, resulting in a confirmed addition of ?1,80,000. The remaining addition of ?3,11,590 was deleted. Consequently, the appeal was partly allowed.

5. In conclusion, the tribunal partially allowed the appeal, confirming an addition of ?1,80,000 as non-explained agricultural income while deleting the remaining addition of ?3,11,590. The judgment was pronounced on 19-10-2016.