2023 (7) TMI 277 - AT - Income Tax

Agricultural income or Income from other sources - sale of timber of the trees that were grown on the border of his land - AO did not agree with the contention of the assessee on the ground that the land of the assessee is situated in urban area; assessee is, therefore, an urban land holder and accordingly there cannot be any agricultural income nor any exemption u/s 10(1) - HELD THAT - When once the assessee produced the commercial crops like chilies and cotton, it is too much to expect that all the chilies and cotton grown on 11 acres of land would be kept by the assessee for his own consumption or that he has given all such produce for charity, without deriving any income what-so-ever. Assessee is an agriculturist, eking out livelihood from agricultural operations, which would be culminated by realization of the amount by sale of the harvested agricultural produce. Agriculturists are not regular business men, who would keep the books of accounts or the vouchers and bills on a professional basis. ITO clearly observed that when he visited land, he found around 30 stems of the cut trees and remaining stems he could not observe for the reasons that since three years elapsed, due to irrigation for growing the further crops same stems must have buried, or being covered by bushes and forest trees which he found actually existing on the spot. This fact establishes that there were trees and those were cut. Assessee produced the tree cutting permission issued by the Tahsildar, Khammam, which shows that there were 120 teak wood trees and 21 bamboo trees planted about 15 years back in the land of assessee and the assessee sought the permission to cut and to sell the same. There is no reason to suspect the sale of wood, because the assessee obtained permission from the Tahsildar and the ITO observed that there was evidence of cutting of trees. The assessee satisfactorily explained the agricultural income of Rs. 4 lakhs and no addition is warranted - Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the determination of agricultural income and other income for the assessment year 2017-18.

Agricultural Income Issue:
The assessee claimed Rs. 4 lakhs as agricultural income, derived from the sale of timber from trees grown on his land. The Assessing Officer disagreed, stating the land was in an urban area, thus no agricultural income was possible. The CIT(A) dismissed the plea, citing lack of evidence of timber sale to support the claimed agricultural income.

Other Income Issue:
Regarding an additional amount of Rs. 18,702 shown as exempt income from a partnership firm, the CIT(A) allowed the appeal and deleted the addition made by the Assessing Officer.

The CIT(A) acknowledged the assessee's consistent reporting of agricultural income in previous years and accepted that teak wood trees were planted on the land. The CIT(A) noted the absence of evidence for the sale of teak wood trees or other agricultural produce. However, considering the practicality of an agriculturist selling harvested crops to earn a living, the CIT(A) found it reasonable to believe the assessee's claim of agricultural income.

The ITO confirmed the presence of cut trees on the land, and the assessee provided permission from the Tahsildar for cutting the trees, along with evidence of the sale. The Tribunal concluded that the assessee adequately explained the agricultural income, thus no addition was necessary.

In conclusion, the appeal of the assessee was allowed, and the judgment was pronounced on June 27, 2023.