TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 94
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 19.10.2020 declaring total income of Rs. 63,44,860 and showing exempt agricultural income of Rs. 1,16,77,688. The case was selected for complete scrutiny under CASS inter alia for verification of large agricultural income and substantial loans. Notice under section 143(2) was issued on 29.06.2021. Thereafter the Assessing Officer issued detailed notices under section 142(1) on 06.11.2021 and again on 06.09.2022 and 12.09.2022 calling for, among other things, computation of income, profit and loss account, balance sheet, capital account, ledger accounts of loans and confirmations, copies of bank statements, cash flow statement with evidence of inflow and outflow relatable to agricultural income and expenses, documentary evidence regarding the purchase of agricultural land in October 2016, details and mode of sale of agricultural produce with copies of contracts and sale bills, crop records as maintained by the State authorities, and reconciliation of loans and related party transactions. The assessee responded with written explanations and voluminous attachments, initially on 30.11.2021 and again on 15.09.2022, and also uploaded the documents as required. 3. On going through th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... per the arrangement with the cultivator the expenses were borne by the cultivator and that the assessee's share was 59 percent of the produce which was duly accounted and reflected in the return. 5. The PCIT, after considering the reply, passed the impugned order dated 27.03.2025 under section 263 holding that the assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue. In reaching this conclusion, the PCIT recorded, inter alia, that during the year the assessee had claimed exempt agricultural income of Rs. 1,16,77,893/- without showing any agricultural expenditure. Reference was made to a copy of an Agreement to Sale dated 02.04.2016 for purchase of agricultural land with standing crop at Sanchor, Rajasthan for a consideration of Rs. 66 lakhs stated to be paid in cash; the PCIT doubted the bonafides and genuineness of this document because it was neither registered nor notarised and only written on Rs. 20 stamp paper. It was further noticed that the assessee had claimed to have entered into an agreement dated 09.06.2017 with Shri Govindbhai Purshottambhai Patel for carrying out agricultural activities, packing and delivery, and that as pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment order passed u/s 143(3) on 23.09.2022 by AO as erroneous and prejudicial to the interest of Revenue in respect of agricultural expenses not accounted in the books, meaning it has been incurred out of undisclosed income by Id. PCIT is wholly illegal, unlawful and against the principles of natural justice. 2.1 The Id. Pr. CIT-3 Abad has grievously erred in law and or on facts in invoking the provisions of revision u/s 263 of the Act and holding that the order of original assessment passed u/s 143(3) on 23.09.2022 by AO was erroneous and prejudicial to the interest of Revenue in so far as the same related to incurring agricultural expenses. The Id. Pr. CIT-3 A'bad has grievously erred in law and or on facts in holding that the AO had not carried out examination in respect of location of land, type of crop produced, total quantity of crop produced, total turnover and in which agriculture market the produce was sold during the assessment proceedings. 2.2 That in the facts and circumstances of the case, Id. Pr. CIT-3 A'bad has grievously erred in law and or on facts in invoking the provisions of revision /s 263 and in holding that the AO had not carried o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the AO failed to examine the issue; rather, he applied his mind to the materials furnished, took a plausible view, and completed the assessment. 11. The AR further submitted that the ld. PCIT has misdirected himself in invoking section 263 on the ground that no agricultural expenses were shown and, therefore, such expenses were deemed to have been incurred out of undisclosed income. It was argued that there is a specific arrangement with a cultivator, duly explained before the AO, that the cultivator would bear 41% share of the produce in lieu of incurring all expenses. Thus, the AO having accepted this explanation after inquiry, the order cannot be branded as erroneous merely because the ld. PCIT entertains a different opinion. The AR contended that the ld. PCIT's reliance on the assessment of A.Y. 2017-18 is wholly misplaced. In that year, the facts were materially different, since the assessee had purchased agricultural land with standing crops ready for harvest and the AO had treated 40% of receipts as unexplained expenditure under section 69C pursuant to an earlier 263 directions. In the year under appeal, i.e. A.Y. 2020-21, the lands were cultivated afresh by a cult....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hottambhai Patel for cultivation, copies of sale bills of jeera, and replies dated 30.11.2021, 15.09.2022, and 19.09.2022. The AO also issued a show cause notice dated 16.09.2022 specifically questioning the yield of jeera, the decrease in landholding, and the increase in agricultural income. After considering these details, the AO completed assessment under section 143(3) accepting the returned income. 16. The contention of the ld. PCIT is that the AO had failed to make adequate enquiries in respect of (i) location of land, (ii) nature and type of crop produced, (iii) total quantity of crop produced, (iv) turnover, and (v) the agricultural market in which the produce was sold. On this premise, the ld. PCIT has invoked clause (a) of Explanation 2 to section 263 of the Act, treating the assessment order as deemed to be erroneous in so far as prejudicial to the interests of the Revenue, and set aside the order with direction to make de novo assessment. 17. The ld. AR, on the other hand, demonstrated from the record that specific enquiries were raised by the AO, replies were furnished on multiple occasions with supporting documents, and the AO applied his mind before accepting t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se documents clearly evidences that the Assessing Officer had specifically raised questions relating to the assessee's claim of agricultural income and expenditure, and the assessee had filed replies along with supporting documents which were part of the assessment record. This, in our view, establishes that the Assessing Officer had indeed conducted inquiries on the issue and applied his mind before completing the assessment. 20. In the present case, the assessment records unmistakably show that enquiries were in fact made by the AO. The notices under section 142(1) specifically raised queries relating to the assessee's claim of agricultural income, and the assessee filed replies along with documents. The AO also issued a show cause notice questioning the high yield of jeera and increase in agricultural income despite reduction in landholding. After considering the explanations and documents, the AO accepted the claim. Thus, this is not a case where the AO passed the assessment order without any enquiry at all. At best, it may be a case of inadequate enquiry or acceptance of explanation which, in the opinion of the ld. PCIT, was not sufficient. However, as per the ratio of the ....