2013 (9) TMI 967 - HC - Income Tax

Addition u/s 68 of the Income Tax Act Lack of evidence to prove the case - proof of agricultural activities Held that - If in the previous years the agricultural income from the same land on which agricultural crops were produced by the appellant was accepted by A.O., then, the income could be treated as agricultural income for want of proof of records of fertilizer and chemicals and expenditures incurred on tube-well boring, construction of store house, levelling of field etc - Even if each assessment year is treated to be a separate unit, the findings in respect of previous years based on the record of title and possession of agricultural land, and the evidence led for proving that agricultural operations were carried out and crops were produced could not be disbelieved in the subsequent year, for want of primary evidence. The assessee was not required to submit proof of agricultural operations every year, in the absence of any material, which may suggest that the agricultural operations were stopped or was not carried out in the relevant period. There was no evidence to establish that the assessee has sold the agricultural land or that the assessee had stooped the agricultural operations. Further, assessee as a Private Company was maintaining regular books of accounts as required under the Companies Act, which were also audited and accepted in the AGM of the Company. The entries in the books were not proved to be bogus. There is nothing under the Income-tax Act debarring the assessee from selling agricultural produce in cash, and thus additions based only on suspicion could not be sustained Decided against the Revenue.

Summary

Issues:
1. Interpretation of Section 260-A of the Income Tax Act, 1961
2. Treatment of agricultural income and related evidence
3. Validity of additions under Section 68 of the Act
4. Maintenance of regular books of accounts by a Private Company

Analysis:
1. The case involved an Income Tax Appeal under Section 260-A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal related to the Assessment Year 2005-06. The primary issue raised was whether the ITAT was legally correct in confirming the deletion of an addition made under Section 68 of the Act, treating the income as agricultural income despite alleged lack of primary records to substantiate it.

2. The ITAT based its decision on the acceptance of agricultural income returned by the assessee in previous assessment years, indicating that the department had verified and accepted the agricultural activities carried out by the assessee. The tribunal emphasized that the assessee had produced relevant documents like khasra and khatauni, demonstrating cultivation on the land. The ITAT concluded that the revenue failed to provide evidence to differentiate the current assessment year from previous ones, thus upholding the deletion of additions for the AY 2005-06.

3. The Assessing Officer had added the declared agricultural income as income from other sources under Section 68 of the Act, citing lack of records for agricultural operations like purchase of fertilizers and chemicals. However, the CIT (A) and ITAT reasoned that the absence of detailed records for each year did not negate the validity of agricultural income, especially when previous years' assessments had accepted the same income. The courts emphasized the maintenance of regular books of accounts by the Private Company, which were audited and approved in the General Body meeting.

4. The courts further noted that the Income Tax Act does not prohibit cash transactions for agricultural produce sales and that suspicions alone could not justify additions. The findings of fact by the CIT (A) and ITAT were considered conclusive, with no substantial questions of law warranting court intervention. The appeal was ultimately dismissed, affirming the decisions of the lower authorities regarding the treatment of agricultural income and the validity of additions under Section 68 of the Act.