No disallowance simply because agricultural expenses were on lower side of general market trend: ITAT

The assessee had been engaged in manufacturing and trading in Khandsari sugar and jaggery and also in power generation. It continued to earn agricultural income in the year under consideration as well. The assessee declared gross agricultural receipts of Rs. 47,78,862 and agricultural expenses amounting to Rs. 12,52,631. He enhanced the number of agricultural expenses to Rs. 16,72,601 resulting in the disallowance of Rs. 4,19,970.

On appeal, the ld. CIT(A) sustained the disallowance, against which the assessee filed an appeal before the Tribunal.

The tribunal observed that the assessee declared gross agricultural receipts at Rs. 47,78,862 and agricultural expenses at Rs. 12,52,631, which accounts for more than 26% of the gross receipts. The assessee had furnished year-wise details of gross receipts and expenses on account of agricultural operations, that have been of the impugned order.

The tribunal held that the AO had simply rejected the assessee’s claim of agricultural expenses being on the lower side on the basis of a yardstick of 35% being the “trend of the current year”. It is not understandable as to where such a ‘trend’ came into vogue. If the expenses were inadequate or wanting in any respect, the AO ought to have rejected such expenses by giving some plausible reasons and should have given a rational decision. As the addition was done on the basis of some ‘trend’, the tribunal found no reason to sustain the disallowance. The authorities below were not justified in making and sustaining the addition in an ad hoc manner. The same was directed to be deleted. Therefore, the appeal by the assessee was allowed.