INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO after due enquiry took a plausible view -

Pr. CIT noticed that assessee had shown gross agricultural income of Rs. 40.43 lakhs and agricultural expenses of Rs. 11.77 lakhs and thereby net agricultural income was declared at Rs. 28.65 lakhs. Assessee had shown that entire agricultural income was out of cotton sales, however, on examination of revenue records it was noticed that assessee had only sold groundnut crop. Accordingly, there was mismatch between what was declared by the assessee in the return of income and what was coming from the revenue records. AO also noticed the above discrepancy at the time of assessment proceedings and in the assessment order, AO held that 50% of the agricultural income was liable to be treated as income from unaccounted sources, which was brought in the guise of agricultural income. In the assessment order, AO treated 50% of the agricultural income as unaccounted income brought in the guise of exempt agricultural income and added the same to the total income of the assessee under section 68 read with section 115BBE, being unexplained cash credits. According to Pr. CIT, AO erred in adding only 50% of the agricultural income as unexplained/unaccounted income, whereas on a proper consideration of facts, AO should have treated entire agricultural income of Rs. 28.65 Lakhs as unexplained income under section 68. Further, AO should have disallowed entire agricultural expenses of Rs. 11.77 lakhs on the ground that since cotton had not been grown, therefore, agricultural expenses were also not incurred by the assessee. Therefore, as per Pr. CIT entire gross receipts of agricultural produce should have been considered as undisclosed income and entire agricultural expenses should have been AO having failed to examine the above facts, assessment order was erroneous and prejudicial to the interests of revenue.Held: Issue under consideration was already examined by AO during assessment proceedings. AO called for the relevant records, also issued notices to the persons to whom alleged cotton sales were made and after due consideration of material on hand, treated 50% of the agricultural income as unaccounted income taxable under section 68 read with section 115BBE. Therefore, it was not a case where AO had not made due enquiries and there was a clear omission on the part of AO during the course of assessment proceedings and AO failed to apply his mind to the issue. Further, it was not a case where AO had taken a view which was clearly implausible under law. Therefore, order passed under section 263 was not sustainable.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2017-18

INCOME TAX ACT, 1961

Section 263

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