2024 (7) TMI 653 - AT - Income Tax

Correct head of income - characterization of receipts - income derived from saplings or seedlings grown in a nursery - Agricultural income or income from other sources - HELD THAT - During the course of the Assessment proceedings the assessee has produced the details such as ownership of land deriving income from sale of nursery plants and tissues, ledger copy of sale register, water chargers, power and fuel, repair and maintenance, as well as bank statements for the period 01.04.2015 to 31.03.2017. Therefore, as per the explanation 3 to section 2(1A) of the Act which defines agriculture income clearly states that income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural Income and the same cannot be taxed as Income from Other Source. AO as well as ld.CIT(A) observed that on perusal of Sales register, the full details like complete address and date of order, date of supply, nature of order of sale of plant/tissue, when it is supplied, mode supply, mode of sale consideration received, etc. have not been furnished during the course of the Assessment proceedings amounting to Rs. 1,73,50,000/- from different parties therefore, for this limited purpose of examining the same, the matter should go back to the file of the AO. Appeal filed by the assessee is partly allowed for the statistical purposes.

Issues Involved:
1. Justification of assessing Rs. 87,39,282/- as income from other sources.
2. Validity of the claim for exemption under Section 10(1) of the Income Tax Act.
3. Assessment of interest charges under Sections 234A and 234B of the Income Tax Act.
4. Procedural fairness in the assessment process.

Detailed Analysis:

1. Justification of Assessing Rs. 87,39,282/- as Income from Other Sources:
The primary issue revolves around the assessment of Rs. 87,39,282/- as income from other sources by the Assessing Officer (AO). The AO completed the assessment under Section 143(3) of the Income Tax Act, citing that the assessee failed to furnish complete details such as the complete address, date of order, date of supply, and mode of sale consideration received. The CIT(A) upheld this assessment, noting that the assessee did not provide sufficient documentary evidence to support their claim. The Tribunal observed that the assessee did produce some details, including ownership of land and ledger copies, but the AO and CIT(A) found these insufficient for verifying the agricultural income claim.

2. Validity of the Claim for Exemption under Section 10(1) of the Income Tax Act:
The assessee contended that the income derived from agricultural operations should be exempt under Section 10(1) read with Explanation 3 to Section 2(1A) of the Act. The Tribunal acknowledged that the assessee's claim for agricultural income had been accepted in previous assessment years (2009-10 and 2016-17). The Tribunal noted that Explanation 3 to Section 2(1A) deems income from saplings or seedlings grown in a nursery as agricultural income, which should be exempt. The Tribunal emphasized that the charge of tax under Section 4(1) can only be on total income, excluding agricultural income.

3. Assessment of Interest Charges under Sections 234A and 234B of the Income Tax Act:
The assessee denied liability for interest charges under Sections 234A and 234B, arguing that these should be canceled given the circumstances of the case. However, this issue was not elaborately discussed in the judgment, as the primary focus was on the nature of the assessed income.

4. Procedural Fairness in the Assessment Process:
The Tribunal noted procedural issues, such as the difficulty in identifying details from the bank statements provided by the assessee and the timing of the submission of documents. The Tribunal found that the AO and CIT(A) did not fully consider the assessee's claim regarding the agricultural nature of the income. The Tribunal decided to set aside the orders of the lower authorities and remand the issue back to the AO for a fresh examination, emphasizing the need for a detailed review of the evidence provided by the assessee.

Conclusion:
The Tribunal concluded that the income derived from the sale of nursery plants and tissues should be considered agricultural income under Explanation 3 to Section 2(1A) and thus exempt from tax. However, due to the incomplete details provided during the assessment, the Tribunal remanded the case back to the AO for further verification. The AO is directed to re-examine the details and provide a reasonable opportunity for the assessee to support their claim. The appeal was thus partly allowed for statistical purposes.

Order Pronounced:
The order was pronounced in the open Court on 09th July, 2024.

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