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2017 (7) TMI 422 - AT - Income TaxAgriculture income treated as income from other sources - Held that - The assessee furnished copy of the notices issued by Assessing Officer, details of agriculture income, copy of the details of agriculture income earned on selling safed musli supported by copies of the sale bills. The sale consideration of three bills were received through cheque and sale consideration of two bills were received through cash. The amount have been deposited in the bank account of the assessee. These evidences on record in the light of the remand report submitted by the Assessing Officer and finding of the ld. CIT(Appeals) while remanding the matter to the Assessing Officer accepting the agriculture income of the assessee clearly proved that assessee earned agriculture income on account of cultivating safed musli. When Assessing Officer accepted claim of the assessee and ld. CIT(Appeals) found claim of the assessee to be prima facie correct, there should not be any reason to reject the claim of the assessee. CIT(Appeals) merely going into the details of khasra girdawari and also the report of Punjab Agriculture University that safed musli is not recommended for cultivating in region of Ludhiana, rejected claim of the assessee would not have much relevance as against the evidences brought on record, particularly when Assessing Officer and Ld. CIT(Appeals) himself have accepted the claim of the assessee of earning agriculture income on account of cultivation of safed musli. Authorities below were unjustified in taking the agriculture income as income from other sources . - Decided in favour of assessee.
Issues Involved:
1. Whether the agricultural income declared by the assessee could be treated as 'income from other sources'. Issue-wise Detailed Analysis: 1. Treatment of Agricultural Income as 'Income from Other Sources': Facts and Initial Findings: The assessee declared ?12,49,420 as agricultural income for the assessment year 2007-08. The Assessing Officer (AO) questioned the veracity of this claim, requiring details such as land location, ownership proof, and cultivation specifics. The assessee claimed to have cultivated 'Musli Seeds' on 3.5 acres, incurring expenses of ?2,25,000. However, the 'Khasra Girdawari' from revenue authorities indicated the cultivation of Potato, Rice, and Wheat instead. The AO confronted the assessee, who then claimed cultivation of 'Musli Seeds' on additional land in village Jainpur. The AO noted inconsistencies and lack of evidence, concluding the income was unaccounted and treating it as 'income from other sources', adding ?14,75,000 to the taxable income. Additional Evidence and Remand Proceedings: The assessee submitted additional evidence to the Commissioner of Income Tax (Appeals) [CIT(A)], including an affidavit and bank certificates. The CIT(A) admitted these and directed the AO to examine them. The AO's remand report confirmed the cultivation of 'Safed Musli' on the assessee's land, supported by a statement from Shri Amrik Singh and bank loan documents. However, the AO questioned the quantum of agricultural income, suggesting a profit of ?4 lakhs per acre based on internet research. CIT(A)'s Findings: Despite the remand report, the CIT(A) dismissed the appeal, citing discrepancies such as the revenue records not showing 'Safed Musli' cultivation, the land being unsuitable for such cultivation as per Punjab Agriculture University, and the lack of labor expenditure. The CIT(A) concluded that the assessee introduced personal funds under the guise of agricultural income. Tribunal's Analysis and Decision: The Tribunal found the addition unjustified. It noted that the AO, in principle, accepted the cultivation of 'Safed Musli' based on the remand report and supporting evidence, including bank loans and statements. The Tribunal emphasized that both the AO and CIT(A) had initially accepted the cultivation claim, making the assessee's claim prima facie correct. The Tribunal criticized the CIT(A) for relying on the 'Khasra Girdawari' and the university report over substantial evidence. It highlighted the assessee's history of earning agricultural income in previous and subsequent years. Consequently, the Tribunal set aside the orders of the lower authorities, holding that the assessee earned agricultural income from cultivating and selling 'Safed Musli', and deleted the addition of ?14,75,000. Conclusion: The Tribunal allowed the appeal, concluding that the agricultural income declared by the assessee should not be treated as 'income from other sources'. The addition made by the AO was deemed uncalled for and was accordingly deleted.
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