2023 (2) TMI 689 - AT - Income Tax

Income from other sources - treating the agricultural income declared by the assessee as income from other sources - HELD THAT - Since there is no material brought on record by the AO to suggest that the amount deposited into assessee s bank account has been sourced by any inflated income we are not in a position to uphold the findings of lower authorities in treating the agricultural income declared by the assessee as income from other sources as there is no major changes in the agricultural income declared by the assessee in these this assessment year as compared to assessment years 2015-16 and 2016-17 or in subsequent years 2018-19 and 2019-20 as tabulated in earlier part of this order. No justification to sustain the addition and the addition made by the AO and sustained by the learned CIT(A) is deleted. Decided in favour of assessee.

Issues:
1. Disallowance of agricultural income by lower authorities.
2. Additional grounds raised by the assessee regarding the disallowance.
3. Admission of additional grounds by the Tribunal.
4. Treatment of agricultural income as income from other sources.
5. Justification of disallowance by lower authorities.
6. Evidence provided by the assessee regarding agricultural income.
7. Source of funds deposited during demonetization.
8. Assessment of agricultural income compared to previous years.
9. Lack of material to support disallowance of agricultural income.
10. Decision on the appeal filed by the assessee.

Analysis:

1. Disallowance of Agricultural Income:
The appeal by the assessee was against the order of the CIT(A) regarding the disallowance of agricultural income to the extent of Rs.3,88,360. The lower authorities had treated a portion of the declared agricultural income as income from other sources, leading to the appeal before the Tribunal.

2. Additional Grounds Raised:
The assessee filed additional grounds challenging the invocation of section 69A of the Income Tax Act and the disallowance of agricultural income without sufficient proof. These additional grounds were argued to be pure questions of law and did not require further investigation of facts.

3. Admission of Additional Grounds:
The Tribunal admitted the additional grounds for adjudication, considering that they stemmed from the orders of the lower authorities and did not necessitate the discovery of new facts.

4. Treatment of Agricultural Income:
The main issue revolved around the treatment of Rs.3,88,360 as income from other sources instead of agricultural income by the assessing officer and the CIT(A). The assessee had consistently declared agricultural income in previous and subsequent years, which was accepted without additions.

5. Justification of Disallowance:
The assessing officer contended that the disallowance was warranted due to the lack of evidence provided by the assessee regarding cultivation, crop details, and expenses incurred. However, the AO did not present material suggesting income from other sources.

6. Evidence Provided by the Assessee:
The assessee presented evidence of agricultural income declaration in previous years, land records, and bank statements to support the declared income. The AO's doubts were primarily based on a deposit made during demonetization, which the assessee explained satisfactorily.

7. Source of Funds Deposited:
The AO questioned the agricultural income based on a deposit during demonetization, but the assessee clarified the source of funds, which was withdrawn and redeposited into the bank account.

8. Assessment of Agricultural Income:
The Tribunal compared the declared agricultural income for the assessment year in question with previous and subsequent years, noting consistency in declarations. The lack of substantial changes led to the deletion of the disallowed amount.

9. Lack of Material for Disallowance:
Given the absence of evidence indicating inflated income or other sources, the Tribunal found no justification for sustaining the disallowance made by the lower authorities. Consequently, the addition was deleted.

10. Decision on the Appeal:
Ultimately, the Tribunal allowed the appeal filed by the assessee, overturning the disallowance of agricultural income and dismissing the additional grounds as academic due to the main issue's resolution.

This comprehensive analysis covers the key issues, arguments, evidences, and the final decision made by the Tribunal in the legal judgment.

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