2023 (1) TMI 268 - AT - Income Tax

Estimation of the agricultural income - when books of accounts are not maintained for a source of income, a reasonable estimate is made and the income is subjected to tax - AO treated part of the agricultural income as Income from Other Sources for the current year - Assessee argued by the ld AR that the estimated agricultural income is very well supported and accordingly there is no reason for the AO reject the estimate - HELD THAT - No adverse finding has been reported by the inspector. During the course of hearing our attention was drawn to the statement of yield for various years by the Rubber Board of Kerala where it is mentioned that the average yield of rubber per hectare of Palakkad District is stated to be 2011-12 1940 kgs/ ha and 2012-13 1913 kgs/ha. The same report also has details of price per kg of rubber. It is therefore Assessee has estimated the income from rubber based on the average yield for different geographical locations as per Rubber Board data and the prices of rubber are collected by the Rubber Board - As noticed that the yield of coconut has been estimated, again on the average yield rate and the prices of coconut has been taken on the average rate for the year. We see merit in the contention that the estimation of the agricultural income is done on valid basis and not estimated on adhoc basis. It is also noticed that the assessee has been declaring the agricultural income on estimated basis in earlier years which has not been disputed by the revenue. AO has estimated the agricultural income of the assessee to Rs.36,00,000 and the basis on which this estimate is made is not coming out clearly in the order of the AO and this contention of the assessee has not been looked into by the CIT(A) except for stating that the said estimate is reasonable. When the assessee has submitted the possible evidence for estimating the income, the same cannot be brushed aside without recording any adverse finding. Revenue has not brought anything on record to show that the income estimated and the percentage of expense claimed by the assessee is not correct. AO has also not recorded any supporting to show how the agricultural income is estimated at Rs.36,00,000. Addition made by the AO is purely based on surmise without recording any contrary finding and therefore should be deleted. Accordingly we hold that the addition done both AY 2012-13 and 2013-14 to be deleted and the appeals are allowed in favour of the assessee.

Summary

Issues Involved:
1. Extent and type of agricultural holdings.
2. Exemption of agricultural income from personal tax.
3. Estimation of income from rubber and coconut.
4. Maintenance and verification of accounts for agricultural income.
5. Disallowance of agricultural income by the Assessing Officer.
6. Consistency in assessment of agricultural income over the years.

Detailed Analysis:

1. Extent and Type of Agricultural Holdings:
The assessee's agricultural holdings, consisting of rubber plantations and coconut gardens, were undisputed by the Assessing Officer (AO) as confirmed by field visits and reports from Department Inspectors. The properties are managed collectively by the assessee's family.

2. Exemption of Agricultural Income from Personal Tax:
The assessee argued that agricultural income is exempt from personal tax in Kerala. The properties are managed by the assessee's father along with those of other family members, and detailed accounts were not maintained. The absence of adverse findings by the AO should not lead to disbelief in the income estimated by the assessee.

3. Estimation of Income from Rubber and Coconut:
The income from rubber was estimated based on average yield data from the Rubber Board, not the highest yield, and prices were collected from Rubber Board statistics. Similarly, the yield and prices for coconut were estimated based on average rates. Maintenance expenses were estimated at 20% of the yield, considering the long-term nature of the crops.

4. Maintenance and Verification of Accounts for Agricultural Income:
The AO noted the lack of detailed accounts for agricultural income, relying on estimates. However, the AO's field inspection confirmed the extent of crops and nature of rubber trees. The assessee argued that the estimation method is recognized in law when books of accounts are not maintained.

5. Disallowance of Agricultural Income by the Assessing Officer:
The AO disallowed a portion of the agricultural income, estimating it at Rs.36,00,000 and adding Rs.9,00,000 to the income. This was upheld by the CIT(A) on the grounds of reasonableness, despite the lack of specific adverse findings or discrepancies in the assessee's estimates.

6. Consistency in Assessment of Agricultural Income Over the Years:
The assessee had consistently shown agricultural income in the same range from AY 2008-09 to 2017-18, which had been accepted by the revenue without additions. The AO's deviation in the current assessment years lacked specific reasons or evidence to disbelieve the assessee's estimates. The Tribunal observed that the revenue had not brought any material to show that the income estimated by the assessee was incorrect or inflated.

Conclusion:
The Tribunal found merit in the assessee's contention that the agricultural income estimation was based on valid data and consistent with previous years. The AO's estimation lacked clear basis and supporting evidence. The addition of Rs.9,00,000 for both AY 2012-13 and 2013-14 was deemed to be based on surmise without contrary findings, and thus, should be deleted. The appeals were allowed in favor of the assessee.

Result:
Appeals allowed.