2025 (9) TMI 356 - AT - Income Tax

Appeal allowed against reassessment under Section 147; family agricultural income held genuine, addition to Other Sources deleted

Smt. Janakba Maheshdan Gadhvi Versus Income Tax Officer, Ward – 2, Gandhinagar.

Smt. Janakba Maheshdan Gadhvi Versus Income Tax Officer, Ward – 2, Gandhinagar. - TMI 1. ISSUES PRESENTED AND CONSIDERED Whether the reopening of assessment under Section 147/148 was validly invoked where the Assessing Officer treated reported agricultural receipts as accommodation of undisclosed income? Whether amounts shown as agricultural income (including joint family agricultural receipts) could be treated as income from undisclosed sources in the absence of adequate corroborative reasoning and notwithstanding production of bank records, market receipts and verification under Section 133(6)? What is the effect of the assessee filing a revised return and producing contemporaneous documentary evidence (bank statements, APMC receipts, affidavits, bank loan disbursement records) on the legality of additions treating agricultural receipts as undisclosed income? 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of reopening assessment under Section 147/148 Legal framework: Reopening under Section 147/148 requires recorded reasons forming belief that income chargeable to tax has escaped assessment; procedural safeguards include supply of reasons and opportunity to object; reopening must be justified on material evidence. Precedent treatment: No prior case law was relied upon in the text; the Tribunal applied statutory standards of sufficiency of reasons and consideration of evidence. Interpretation and reasoning: The Tribunal examined whether the Assessing Officer's basis for reopening - suspecting that agricultural income was used to accommodate undisclosed funds - was supported by objective material. The record showed the assessee furnished explanations, filed a revised return after notice, and produced documentary evidence (bank statements, APMC sale receipts, affidavit, bank certificate of home-loan disbursement) explaining the origin and nature of deposits. The Assessing Officer's reliance on CASS selection reason 'Large Agricultural Income' and subsequent treatment as undisclosed income did not, in the Tribunal's view, substitute for affirmative proof that reported agricultural receipts were untrue or that funds were accommodated unaccounted income. Ratio vs. Obiter: Ratio - reopening cannot stand where the reopening and subsequent additions are premised on conjecture without negating or displacing the documentary evidence produced by the assessee; mere selection by CASS or suspicion of 'modus operandi' is insufficient. Conclusions: The Tribunal found the reopening and consequent addition to be unsustainable to the extent the AO ignored evidence; the reopening did not justify treating the receipts as undisclosed income once corroborative evidence and verification under Section 133(6) were on record. Issue 2: Whether agricultural receipts could be reclassified as income from undisclosed sources Legal framework: Income derived from agriculture is exempt for tax purposes but relevant for rate calculation; classification depends on the true nature and source of receipts. The revenue must establish that purported agricultural receipts are actually unaccounted/undisclosed income or accommodation entries. Precedent treatment: No specific precedent was cited or distinguished; the Tribunal applied standard evidentiary and classification principles. Interpretation and reasoning: The Tribunal considered the nature and sufficiency of evidence tendered - bank statements showing deposits, APMC receipts evidencing sale of agricultural produce, an affidavit corroborating transactions, and bank records showing home-loan disbursement explaining large inflows. The assessee initially filed a return reflecting higher joint family agricultural income and later filed a revised return reflecting individual share; the Tribunal accepted that original returns were filed in the context of joint family income and that the revised return and supporting documents adequately explained individual shares. The Assessing Officer's treatment of the entire amount as accommodated undisclosed income rested on presumption and on non-compliance with a specific notice, but the Tribunal held that non-compliance with one administrative request did not justify disregarding available documentary proof and verified material under Section 133(6). Ratio vs. Obiter: Ratio - where the assessee produces contemporaneous and credible documentary evidence establishing agricultural origin (market receipts, bank credits consistent with sales, and third-party verification) and where revised returns clarify the individual share, the revenue cannot arbitrarily reclassify such amounts as undisclosed income without demonstrating why the documents are sham or insufficient. Conclusions: The Tribunal accepted the assessee's evidence of joint family agricultural receipts and the reduced individual share shown in the revised return; it held the AO and CIT(A) erred in treating the amounts as income from undisclosed sources and therefore deleted the additions by allowing the appeals. Issue 3: Evidentiary burden and effect of verification under Section 133(6) Legal framework: Section 133(6) permits verification by authorities; corroborative third-party verification strengthens the assessee's claim. The burden to prove that reported receipts are not genuine lies on the revenue. Precedent treatment: Not addressed by prior rulings in the text; Tribunal relied on statutory evidentiary principles. Interpretation and reasoning: The Tribunal treated the verification under Section 133(6), bank records and APMC receipts as material that shifts the evidentiary burden back to the Revenue to demonstrate that those documents are fabricated or fail to explain the deposits. The AO's reliance on alleged non-compliance with a procedural notice and on general suspicion did not amount to positive proof of accommodation of unaccounted income. The Tribunal noted that the assessee provided a plausible and documented explanation for large receipts (home-loan disbursement supported by bank certificates) and that these explanations were not rebutted by cogent material. Ratio vs. Obiter: Ratio - verified documentary evidence and third-party verification under Section 133(6) are potent to substantiate the claimed agricultural origin and individual share; absent persuasive contrary material, additions for undisclosed income cannot be sustained. Conclusions: The Tribunal accepted the documentary and verification evidence and held that the Revenue failed to discharge its burden; consequently, the additions were deleted and the appeals allowed. Cross-references Issues 1-3 are interlinked: the invalidity of reopening (Issue 1) and the improper reclassification of agricultural receipts as undisclosed income (Issue 2) were both grounded in the Tribunal's assessment of the sufficiency and probative value of the documentary and verified evidence (Issue 3). The Tribunal's conclusions on each issue collectively led to allowing the appeals.