2020 (12) TMI 978 - AT - Income Tax

Addition u/s 68 - unexplained cash deposits - agricultural income as not genuine - AR emphasized that the A.O and CIT(A) have erred in denying the sources of agricultural income generated out of the agriculture activities - HELD THAT - There is no doubt on the genuineness of purchase of agricultural lands but the only doubt the A.O has raised in the assessment proceedings that the assessee could not substantiate the agricultural activities with evidences. The Ld. AR reiterated the submissions made before the lower authorities and explained that the assessee has acquired the agricultural lands in April 2007 and constructed polyhouse by obtaining loan from Syndicate Bank. Information submitted by the assessee cannot be disbelieved. But the fact remains though the assessee has filed the details, there are no observations of the A.O nor the assessee could explain that the expenses and income allocated to the assessee share are not considered in the M/s Sankalp farm. Further, the assessment records of M/s Sankalp farms are not available with the A.O. Therefore, to meet the ends of justice, We provide one more opportunity to the assessee to establish and clarify the income generated in agricultural activities and the expenses incurred Accordingly, we set aside the order of the CIT(A) and remit the entire disputed issues to the file of assessing officer for limited purpose to verify and examine the claims. Appeal of the assessee for statistical purposes.

Summary

Issues:
1. Addition made by AO under section 68 for unexplained cash deposits
2. Treatment of agricultural income as exempt under section 10(1)

Issue 1: Addition made by AO under section 68 for unexplained cash deposits

The assessee, engaged in derivatives trading and agricultural activities, filed an appeal against the Commissioner of Income Tax (Appeals) order. The AO found cash deposits of ?18,50,000 in the assessee's ICICI bank account based on AIR information. The assessee claimed these deposits were from agricultural sale proceeds. However, the AO deemed the explanations unsatisfactory and added the amount under section 68. The AO also questioned the genuineness of agricultural income claimed as exempt under section 10(1). The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

Issue 2: Treatment of agricultural income as exempt under section 10(1)

During the appeal, the assessee argued that the agricultural income was genuine, generated from family-operated M/S Sankalp Farms. The AR presented bills and expenses in support, emphasizing the family's involvement in agricultural operations. The AR highlighted the partnership firm's role in managing income and expenses, with the brand name used for agricultural activities. The Tribunal noted the genuineness of land purchase but sought clarification on agricultural activity evidence. The Tribunal provided the assessee with a chance to substantiate income and expenses allocation, remitting the issues to the AO for further examination. The appeal was treated as allowed for statistical purposes.

This judgment addressed the challenges faced by the assessee regarding unexplained cash deposits and the treatment of agricultural income. The Tribunal's decision to provide an opportunity for the assessee to clarify and substantiate their agricultural activities showcases a fair approach to resolving the issues raised in the appeal.