2018 (7) TMI 1720 - AT - Income Tax

Revision u/s 263 - income from growing of mushroom is an agricultural income - Held that - If a point is debatable and the two views are prevalent on a particular point and the Assessing Officer adopts one view, whereas the CIT considers the other view to be more plausible, it cannot be said that the assessment order is erroneous so as to clothe the CIT with the power to revise the assessment order. Since there was a cleavage of judicial opinion on the point as to whether or not income from growing of mushoroom is agricultural, which issue has now been settled in favour of the assessee by virtue of the Hyderabad Special bench of the tribunal, we hold, in principle, that the ld. CIT was not justified in not approving the stand of the Assessing Officer that income from growing of mushroom was agricultural income. Impugned order is set aside pro tanto. Adverting to the facts of the instant case, as is also palpable from the impugned order, that it is not the case of the assessee that the CIT did not give opportunity of hearing in this regard. Thus, no fault can be found with the CIT in directing the AO to verify the quantum of the income from the growing of mushroom. We, therefore, approve the view of the ld. CIT in so far as the second aspect is concerned, namely, the Assessing Officer failed to make proper verification of the quantum of income arising from growing of mushroom, etc., claimed by the assessee as exempt agricultural income. The impugned order is upheld to this extent. We hold that the ld. CIT was not justified in invoking section 263 in holding that income from growing of mushroom is an agricultural income. However, no fault can be found with the order of the ld. CIT in directing the Assessing Officer to verify the quantum of income from growing of mushroom. - Decided partly in favour of assessee

Summary

Issues:
1. Whether income from growing mushroom can be considered agricultural income.
2. Whether the Assessing Officer failed to verify the quantum of income from growing mushroom.

Analysis:

Issue 1:
The appeal arose from an order by the CIT deeming the assessment order as erroneous and prejudicial to the interest of the Revenue due to the acceptance of exempt income from growing mushrooms as agricultural income. The ITAT Delhi noted that the Hyderabad Special Bench had ruled that income from the production and sale of mushrooms could be considered agricultural income. As there was a divergence of opinion on this issue at the time of the CIT's order, the ITAT held that the CIT was not justified in rejecting the Assessing Officer's stand on the matter. The ITAT set aside the CIT's order on this aspect.

Issue 2:
Regarding the verification of the quantum of income from growing mushrooms, the ITAT found that the assessment order lacked any discussion or inquiry on this aspect. The CIT highlighted various points related to the quantification of income from mushrooms that were not considered by the Assessing Officer. The ITAT referred to Explanation 2 to section 263, which states that an order is erroneous if inquiries or verifications were not made. As the Assessing Officer did not examine the quantification of the income claimed as exempt, the ITAT upheld the CIT's direction to verify the quantum of income from growing mushrooms. The ITAT concluded that while the CIT was not justified in invoking section 263 on the agricultural income aspect, the direction to verify the income quantum was appropriate.

In summary, the ITAT partially allowed the appeal, holding that the income from growing mushrooms should be considered agricultural income but upheld the CIT's direction to verify the quantum of income from growing mushrooms. The decision was pronounced on 26th July 2018.