2021 (3) TMI 1264 - AT - Income Tax

Disallowance @20% of agriculture income by treating the same as unexplained cash credit - only objection of the AO is that the assessee is having a farmhouse and income was received from the natural activity which is not agricultural activity as per the provisions of the Act - HELD THAT - AO has merely acted on the basis of surmises and conjuncture in estimating 20% of the total receipt as unexplained cash credit without carrying out any further verification from the buyer/purchasers of these agricultural products/produce. Both of the authorities have failed to discharge their duties properly as none of the parties have brought any substantial material on record to prove that assessee has incurred expenses over and above what has been stated by the assessee. AO has made a ground that some income received by the assessee was in the nature of non-agriculture and substantial too in nature whereas ld. CIT(A) has gone on a different footing that assessee has incurred expenses to earn the said income which seems to be understated - we are not in a position to sustain the order of the ld. CIT(A) as the same appeared to be a guess work to sustain the addition made by the AO and therefore we are inclined to set aside the order of first appellate authority and direct the AO to delete the addition. - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of agriculture income as unexplained cash credit.

Analysis:
The assessee appealed against the order confirming the disallowance of ?10,30,694 as unexplained cash credit from agriculture income by treating it as unexplained cash credit. The AO found part of the land unsuitable for agriculture based on ISRO images, leading to reopening of the case. The AO disallowed 20% of the agricultural income as unexplained cash credit, totaling ?10,30,694. The CIT(A) upheld the AO's decision, emphasizing the lack of evidence to support the agricultural income's source. The CIT(A) highlighted the discrepancy between claimed expenses and income, suggesting potential inflation of income. The appellate tribunal noted the lack of substantial evidence to prove the expenditure and questioned the AO's basis for estimating unexplained cash credit. The tribunal found the AO's and CIT(A)'s decisions lacking in proper verification and material evidence, ultimately directing the AO to delete the addition.

The tribunal emphasized the need for substantial evidence to support the disallowance of agriculture income as unexplained cash credit. It noted the discrepancy between the claimed expenses and income, highlighting potential inconsistencies. The tribunal criticized the lack of proper verification and material evidence by both the AO and CIT(A), leading to the decision to delete the addition. The tribunal's decision was based on the lack of concrete proof to sustain the disallowance, ultimately favoring the assessee's appeal and directing the AO to remove the addition.