Same issue examined by ITAT in earlier years, whether disallowance for subsequent years can be done by the AO?

Here was an interesting before ITAT, Mumbai as under:

Short overview of the case: 

In the Assessment proceedings, the AO observed that the assessee had claimed to have earned net agriculture income of Rs. 1,03,02,193 from sale of mangoes (kaichi kairi) and various other vegetables.

However, it was observed by the AO that a perusal of the 7/12 extracts revealed that most of the land was categorized under the head “not fit for agriculture”.

On basis of the details, the AO called upon the assessee to explain as to why her claim of agriculture income may not be treated as bogus.

However, the claim of the assessee did not find favor with the AO. The A.O was of the view that the assessee had not raised a genuine claim of having earned the agriculture income under consideration.

The AO concluded that the asessee had disguised her income from “Other sources” of Rs. 1,03,02,193/- as agriculture income earned by her during year under consideration.

After re-characterizing the agriculture income as the income earned by the assessee from ‘Other sources’, the AO passed order u/s 143(3) and disallowed the claim of the assessee. The CIT (A) allowed claim of agriculture income of the assessee to the extent of 80% and disallowed the balance 20% amount.

On appeal, the issue before Tribunal was whether if in earlier AY, disallowance of 20% of agriculture income had been vacated by the Tribunal, therefore, there would be no justification to make similar disallowance for the year under consideration without change of situation.

ITAT decided the issue in favor of assessee with following observation:

the Tribunal has heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record.

Admittedly, it is a matter of fact borne from the record that the genesis for disallowing of the assessee’s claim of agriculture income to the extent of 20% by the CIT (A) during the current year A.Y 2015-16, was the order that was passed by his predecessor while disposing off the assessee’s appeals for A.Y 2011-12 and A.Y 2012-13. As is discernible from the records, the evidence that were gathered by the AO for the year under consideration had formed the basis for reopening of the assessee’s case for A.Y 2011-12 and A.Y 2012-13.

Also, it is a matter of fact borne from the record, that in the course of the reassessment proceedings for the relevant years no new evidence was referred to by the AO, which was not there before him during the course of the proceedings for the year under consideration. As stated by the AR, and rightly so, now when the disallowance of 20% of the agriculture income that was sustained by the CIT(A) while disposing off the appeals of the assessee for A.Y 2011-12 and A.Y 2012-13 had already been vacated by the Tribunal in A.Y 2011-12, therefore, there would be no justification much the less any basis to uphold the disallowance of 20% of the assessee’s claim of agriculture income for the year under consideration.

As the facts and the issue involved in the appeal of the assessee for the year under consideration remains the same as were there in her case for A.Y 2011-12 and 2012-13, therefore, the Tribunal vacates the disallowance of 20% of the assessee’s claim of agriculture income as was sustained by the CIT (A).