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2022 (5) TMI 499 - AT - Income TaxRevision u/s 263 - As per CIT AO had failed to verify whether the claim of agricultural expenses was commensurate with the agricultural income - HELD THAT - As the assessee had pointed out that the absence of irrigation expenses/electricity expenses had been explained during assessment proceedings itself being on account of the fact that the assessee was cultivating Raw tobacco which required very little quantity of water and also hardly any pesticide ,the crop itself being a pesticide and further that since the members of the assessee HUF were engaged in agricultural activities the labor cost also was low. The assessee also explained to the Ld.Pr.CIT that the expenses for crops sold in the year were mainly incurred in the preceding year since the crop, i.e tobacco, grown by the assessee took a particularly long time to grow and the assessee accounted for the expenses on cash basis, therefore, the expenses reflected against its income for a year did not necessarily relate entirely to the income earned in that year and the income of a year was to be compared with the expenses incurred in the preceding year to arrive at a proper comparison. To this effect, he had pointed out also that there was no discrepancy in the percentage of expenditure incurred in the preceding year as compared to the income earned in the impugned year, being approximately 30 to 40% of the same, which was in accordance with the comparative figures of the preceding year and succeeding years also. All the above finds mention in the letter addressed to the Ld.Pr.CIT We find that in relation to the SAANTH earned by the assessee as stated above admittedly the Assessing Officer had conducted inquiries and asked for confirmation also from the members of the HUF who had paid the agricultural rent to the assessee HUF. Now, without pointing out any infirmity in the inquiry conducted by the Assessing Officer or any fact which the inquiry conducted revealed raising suspicion with regard to the transaction, the ld. Pr. CIT has merely stated that the issue needed to be further investigated in depth. AO therefore having examined the specific aspects of agricultural income/SAANTH pointed out by the Ld.Pr.CIT and the assessee also having addressed every discrepancy /anamoly pointed out by the Ld.Pr.CIT vis a vis the inadequacy of inquiry, there could not possibly have been any finding of error in the order of the AO without the Ld.Pr.CIT addressing/dealing and controverting the explanation of the assessee vis a vis the discrepancies noted. It is clear therefore that the Ld.Pr.CIT has failed to make out a case of inadequate inquiry by the AO in the present case and the exercise of revisionary powers is simply based on the Ld.Pr. CIT taking a different view on the facts relating to the issues in question, as opposed to the Assessing Officer, without pointing out any infirmity in the view taken by the Assessing Officer. This is clearly beyond the our view of section 263 of the Act. ITAT Ahmedabad Bench in an identical case where revisionary powers were exercised for directing detailed inquiry on agricultural expenses incurred ,held that where the AO had accepted agricultural income after conducting due inquiries no revision u/s 263 can be done and that it tantamounted to mere change of opinion for which revisionary powers cannot be exercised. Copy of the said order in the case of M/s Sitaram J Gavli ,Silvasa 2009 (12) TMI 1047 - ITAT AHMEDABAD Appeal of assessee allowed.
Issues Involved:
1. Delay in filing the appeal. 2. Verification of agricultural expenses claimed by the assessee. 3. Verification of agricultural income and Saanth (rent for utilization of agricultural land) received by the assessee. 4. Exercise of revisionary powers under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (Pr. CIT). Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was marked as delayed by 31 days. However, due to the COVID-19 pandemic, the Hon’ble Supreme Court extended the limitation period for filing appeals. Consequently, the appeal was deemed timely filed, and there was no delay. 2. Verification of Agricultural Expenses: The Pr. CIT noted discrepancies in the agricultural expenses claimed by the assessee. Specifically, the Pr. CIT observed that the expenses were significantly lower than expected, with no irrigation or electricity expenses and minimal labor expenses. The Pr. CIT referenced a decision of the ITAT Ahmedabad bench, suggesting that reasonable agricultural expenses should be around 40% of the income, whereas the assessee had shown only about 12.6%. The Pr. CIT concluded that the Assessing Officer (AO) failed to verify the expenses adequately, rendering the assessment order erroneous and prejudicial to the revenue. 3. Verification of Agricultural Income and Saanth: The Pr. CIT also noted that the AO accepted the assessee's claim of receiving rent (Saanth) from specified persons under Section 40A(2)(b) without proper verification. The Pr. CIT emphasized that the AO should have verified the ownership of the land, the crops cultivated, the yield, and the sale of the produce. Additionally, the AO should have conducted spot inquiries and cross-checked the claims with local authorities. The failure to conduct these verifications led the Pr. CIT to find the assessment order erroneous and prejudicial to the revenue. 4. Exercise of Revisionary Powers under Section 263: The Pr. CIT exercised revisionary powers under Section 263, directing the AO to re-examine the issues and conduct proper inquiries. The Pr. CIT cited several case laws supporting the exercise of revisionary powers when the AO fails to make necessary inquiries. The assessee contended that all relevant inquiries were made during the assessment proceedings, and the AO had accepted the claims after thorough verification. The assessee provided detailed responses to the AO's queries, including proof of agricultural land, sale bills, crop details, and supporting documents for expenses and Saanth. The Tribunal found that the AO had indeed conducted necessary inquiries and that the Pr. CIT's concerns were addressed during the assessment proceedings. The Tribunal noted that the Pr. CIT failed to address the explanations provided by the assessee and proceeded to hold the assessment order erroneous without pointing out specific infirmities. The Tribunal emphasized that the exercise of revisionary powers based on a different view of the facts, without identifying errors in the AO's assessment, is beyond the scope of Section 263. The Tribunal cited several case laws, including decisions by the Hon’ble jurisdictional High Court, reiterating that revisionary powers cannot be exercised merely on a change of opinion. The Tribunal also referenced an identical case where the ITAT Ahmedabad Bench held that revisionary powers could not be exercised when the AO had conducted due inquiries. Conclusion: The Tribunal concluded that the Pr. CIT failed to establish any error in the AO's assessment order. The order passed under Section 263 was set aside, and the appeal of the assessee was allowed. The Tribunal emphasized that the AO had conducted necessary inquiries, and the Pr. CIT's exercise of revisionary powers was unwarranted. The order was pronounced in the open court on 17-01-2022.
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