2023 (5) TMI 873 - AT - Income Tax

Addition u/s 69 - agricultural income by the assessee from sale consideration of potato - HELD THAT - CIT(A) has merely suspected the size of land holding used for cultivation of potato on the basis of joint ownership without rebuttal to the additional evidence admitted on record or contentions raised by the appellant. CIT(A) ought to have brought on record corroborative documentary evidence by way of examining the issue of share of family member s in the income from the potato cultivation from the agricultural land held in joint ownership. CIT (A) has failed to disprove the claim of the cash flow and agricultural income of the appellant. Thus, CIT(A) has not appreciated the documentary evidences regarding, potato cultivation, computation of agriculture Income and cash flow filed by the appellant in the appellate proceedings before him. In our view, the amount of Rs.34,00,000/- shown as agricultural income by the assessee from sale consideration of potato is quite reasonable considering the size of land holding, calculation sheet, certificate from Horticulture Department etc., as above. Order passed by the Ld. CIT(A) is perverse to the facts on record. Accordingly, the amount u/s 69 confirmed by the CIT(A) is deleted. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Sections 147/148 of the Income Tax Act.
2. Addition of Rs. 40,06,360/- under Section 69 of the Income Tax Act.
3. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated under Sections 147/148:
The assessee contended that the proceedings initiated by the Assessing Officer (AO) under Sections 147/148 were void ab-initio because the reasons recorded by the AO were reasons to suspect and not reasons to believe. Additionally, the assessee argued that no satisfaction was recorded by the prescribed authority under Section 151, and the cash deposited in the bank amounting to Rs. 58,74,210/- was treated as escaped income without proper justification. However, since the assessee received relief on merits, the legal issue became academic and was not adjudicated.

2. Addition of Rs. 40,06,360/- under Section 69:
The AO noticed that the assessee deposited Rs. 58,74,210/- in his savings bank account and treated this amount as income from undisclosed sources under Section 69, completing the assessment ex-parte. On appeal, the CIT(A) granted partial relief, treating Rs. 18,67,850/- as explained and the balance as unexplained. The CIT(A) doubted the entire sale proceeds of the family's agricultural land being in the possession of the assessee, who owned only 4.5 acres out of the total 40.5 acres. The CIT(A) also questioned the sale of potatoes worth Rs. 34,00,000/-, citing a lack of convincing evidence and the improbability of such large sales without institutional selling.

The assessee argued that the CIT(A) did not appreciate the facts and ignored additional evidence, including land holding details, girdawari records, certificates from horticulture authorities, and evidence of potato storage. The Delhi bench of the ITAT in a similar case held that agricultural income claims cannot be denied solely due to the absence of sale invoices if other evidence supports the claim. The Tribunal found the CIT(A)'s rejection of the assessee's explanation to be based on presumption without rebutting the additional evidence. The Tribunal held that the amount of Rs. 34,00,000/- shown as agricultural income from potato sales was reasonable, considering the size of land holding and supporting documents. Consequently, the addition of Rs. 40,06,360/- under Section 69 was deleted.

3. Imposition of Penalty under Section 271(1)(c):
The CIT(A) dismissed the appeal against the penalty imposed under Section 271(1)(c) for concealment of income, citing procedural issues and lack of proper opportunity for hearing due to COVID-19 lockdown and technical glitches in the new e-filing portal. The assessee argued that the penalty proceedings are independent of assessment proceedings and that the CIT(A) did not consider the documentary evidence submitted during the assessment proceedings. Since the quantum appeal was decided in favor of the assessee, deleting the entire addition of Rs. 40,06,360/-, the consequential penalty was also deleted as non-maintainable.

Conclusion:
The Tribunal allowed both appeals of the assessee, deleting the addition of Rs. 40,06,360/- under Section 69 and the penalty under Section 271(1)(c). The order pronounced in the open court on 20.02.2023 concluded that the CIT(A)'s findings were perverse to the facts on record and did not appreciate the documentary evidence provided by the assessee.