ITAT Remands Rs 44.08 Lakh Creditor Addition and Rs 17.91 Lakh Agricultural Income Claim for Fresh Review:

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has remanded the case of Prafulldan Motising Gadhvi to the Assessing Officer (AO) for fresh examination of an addition of Rs 44.08 lakh relating to an outstanding sundry creditor and the rejection of agricultural income of Rs 17.91 lakh. The Tribunal allowed the assessee’s appeal for statistical purposes, directing the AO to reconsider both issues after providing an adequate opportunity of being heard.

The assessee, Prafulldan Motising Gadhvi, had filed his income tax return (ITR) for Assessment Year 2024-25, declaring an aggregate income of Rs 1.71 crore. During assessment of the return, the AO treated the outstanding balance of Rs 44.08 lakh in the account of M/s D & G Enterprise/Vijay Jain as unexplained under Section 68 of the Income Tax Act, 1961, after the creditor failed to respond to a notice issued under Section 133(6). Further, the AO rejected the declared agricultural income of Rs 17.91 lakh, stating that the assessee had not established that agricultural activities were carried out. The assessment was completed at a total income of Rs 2.33 crore, and when an appeal was filed before the first appellate authority, i.e., the Commissioner of Income Tax (Appeals) [CIT(A)], it was dismissed.

Before the ITAT, the assessee submitted that the creditor’s opening balance as of April 1, 2023, was Rs 82.93 lakh, which was substantially higher than the closing balance. He also produced a confirmation from the creditor and supporting documents. The Tribunal observed that the entire closing balance could not be treated as a credit arising during the year without examining the opening balance and transactions. It directed the AO to verify the confirmation, account entries and supporting documents before determining any addition.

Regarding agricultural income, the Tribunal observed that "the assessee has claimed to have furnished before the Ld. CIT(A) documents relating to his agricultural land holdings. However, mere ownership or holding of agricultural land may not, by itself, establish the actual carrying on of agricultural operations or the quantum of agricultural income earned therefrom. The claim, therefore, requires examination with reference to the relevant documentary evidence and the actual agricultural activity carried out by the assessee."

Accordingly, both issues were remanded to the AO for fresh adjudication in accordance with law. The appeal was allowed for statistical purposes.