2025 (12) TMI 352 - AT - Income Tax

Unexplained agricultural expenditure addition deleted; section 69C inapplicable where source and banking trail fully proved

Shri Prakash Chand Versus ITO, Shimla

ITAT Chandigarh allowed the assessee's appeal, deleting the addition made as unexplained expenditure u/s 69C in respect of agricultural expenses on apple ... Addition of agricultural expenditure u/s 69C - assessee earns agricultural income from apple orchards. It claims that approx. 40% to 45% of sales from agricultural produce is expended towards this activity - as per DR assessee could not furnish requisite documents and relevant bills to substantiate the same - HELD THAT:- The transaction-wise detail along with source of payment has also been furnished. In its reply to Ld. CIT(A) on 04-09-2024, the assessee had furnished details of agricultural expenditure along with Bank statements through which such expenditure was incurred. It was demonstrated that entire expenditure was routed through bank account of the assessee. It was further pointed out that the case of the assessee for AY 2020-21 was scrutinized on identical facts and the returned income was accepted by Ld. AO. However, these details have not, at all, been considered by CIT(A). Nevertheless, when all the expenditure has been routed through known sources of income, the same could not be held to be unexplained expenditure. The provisions of Sec.69C have no applicability to the facts of the present case since the only allegation of Ld. AO was that the expenditure was not genuine. The source of expenditure was never doubted. On these facts, the impugned addition could not be sustained on facts and hence, deleted. The Ld. AO is directed to re-compute the income of the assessee. Assessee's appeal for AY 2018-19 concerned confirmation of addition of Rs. 38.70 lakhs as 'unexplained expenditure' under section 69C in respect of agricultural expenditure from apple orchards. The assessee claimed that about 40-45% of agricultural sales were spent on labour, salary, packing, fertilizers and chemicals. The Assessing Officer treated the expenditure as non-genuine due to non-production of bills and added it under section 69C; CIT(A) confirmed. Before the Tribunal, the assessee produced computation showing gross agricultural income of Rs. 86.01 lakhs and net agricultural income of Rs. 47.30 lakhs, with transaction-wise details and bank statements evidencing that 'entire expenditure was routed through bank account of the assessee.' It was also shown that in AY 2020-21, on identical facts, the scrutiny assessment accepted the returned income. The Tribunal held that where the source of expenditure is from known banked funds, section 69C has no applicability as 'the source of expenditure was never doubted.' The impugned addition was deleted and AO directed to recompute income.