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Talshibhai B. Narola, Baroda vs.The Income Tax Officer - (Income Tax Appellate Tribunal) (25 Aug 2023)

Nursery activities of growing various types of lawns, flower plants and vegetable plants cannot be considered as commercial activity for treating the same as business income


Direct Taxation

The assessee filed return of income for the Assessment Year (A.Y.) 2013-14 showing total income at Rs.1,97,520 alongwith agricultural income at Rs.75,42,750. The case of the assessee was selected under scrutiny. Various notices under Sections 143(2) and 142(1) were issued from time to time and served upon the assessee.

During the assessment proceedings, the assessee claimed that the agricultural income of Rs.85,42,750 which was declared in return of income inadvertently as Rs.75,42,750 due to oversight. The Assessing Officer made addition of Rs.2,60,305 in respect of income from other sources alongwith addition of Rs.18,625 under the same head and also made addition of Rs.8,90,040 in respect of business income. The Assessing Officer also taken into account agricultural income of Rs.85,42,750 out of this agricultural income of Rs.11,68,970 and treated the same as business income/income from other sources and assessed the agricultural income at Rs.73,73,780.Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The assessee in respect of addition of Rs.2,60,305 has given all the copies of ledger of the said party as well as sales bills and the said transaction was duly reflected in books of account as well as Balance Sheet and, therefore, after taking cognisance of the evidences including the supporting documents and invoice, the transaction appears to be genuine and, therefore, This addition does not sustain. As regards to addition of Rs.18,625, it is clear case that the assessee is carrying out the agricultural activities and sale of plant to the particular party and this ledger shows the transaction to the extent of Rs.67,080 and the difference of Rs.18,625 was due to booking of assessee's bills lately which is reflected from the documents produced before the Assessing Officer as well as before the CIT(A).

As regards other grounds, it is clearly the activity of agricultural in nature in respect of engaging in nursery activities of growing various types of lawns, flower plants and vegetable plants and they cannot be considered as commercial activity for treating the same as business income. The assessee has produced relevant copies of the sales bills as well as the transaction details from Bank Account as well as books of account including Ledger and Invoices. In respect of agricultural expenses, the assessee has shown the sales bills of all the parties and at no point of time the Assessing Officer has disputed that the said agricultural income was in fact of commercial activities related to business income. Appeal of the assessee is allowed.


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