CLASSIC BIO-TECH EXPORTS LIMITED,BANGALORE V. ITO., WARD-1(1), HYDERABAD

ITA 1362/HYD/2024

AI Insights

The case involves Classic Bio-Tech Exports Limited, a domestic company engaged in agricultural activities, which filed an appeal against the order of the CIT(A) pertaining to the assessment year 2018-19. The A.O. had rejected the assessee's claim of agricultural income, categorizing it as unexplained expenditure under Section 69C, due to insufficient evidence of land ownership and agricultural operations. The CIT(A) upheld the A.O.'s decision. The Tribunal found that the CIT(A) had not adequately addressed the assessee's arguments and evidence, particularly the lack of a formal lease agreement and the reliance on handmade vouchers, which were deemed unreliable. The Tribunal directed a re-examination of the evidence, emphasizing that the absence of a lease agreement does not preclude the possibility of agricultural income if the land is used for such purposes.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791924 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2018-2019
• Appeal Filed On: 24-12-2024
• Other Referred Cases: ITO Vs. Gajanan Agro Farms (2013) taxmann.com 24
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Unexplained expenditure
• Section: 69C

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.1362/Hyd/2024 (निर्धारण वर्ा/ Assessment Year: 2018-19) Classic Bio-Tech Exports Limited, Bangalore. PAN : AAACC8167D Vs. The Income Tax Officer, Ward -1(1), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Avinash Maliya, Advocate and Shri Joseph Varghese, Advocates. राजस्व का प्रतततितित्व/ Department Represented by : Ms. G. Saratha, Sr. A.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 26.11.2025 घोर्णध की तधरीख/ Date of Pronouncement : 10.12.2025 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Printed from counselvise.com 2 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited Faceless Appeal Centre [in short “NFAC”], Delhi, dated 01.10.2024, pertaining to the assessment year 2018-19. 2. The brief facts of the case are that, the assessee is a domestic company engaged in agricultural activities, filed its return of income for A.Y. 2018-19 on 28.03.2019, declaring total income nil and net agricultural income of Rs. 39,42,060/-. The case was selected for scrutiny and during the course of assessment proceedings, the A.O. noticed that, the assessee has reported gross agricultural receipts of Rs. 72,84,186/- and whereas the expenditure incurred on agricultural activities was at Rs. 33,42,126/- before reporting net agricultural income of Rs. 39,42,060/-. The A.O. called upon the assessee to file relevant evidences, including landholding details, details of agricultural operations carried out in land, crops grown, details of sale of agricultural produce and expenditure incurred for agricultural operations, etc. In response, the assessee submitted that, the company was into the business of agricultural activities and growing vegetables like capsicum, green chilli, carrot etc., in a Poly House. The assessee has also furnished the details of land held by the director of the assessee company Shri N.S. Rama Raju and N. Printed from counselvise.com 3 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited Rama Sita, P. Shri Lakshmi, N. Jhansi Rani and others and claimed that, the company had taken lands on lease from the directors and carrying out agricultural operations. The assessee has also furnished bills and vouchers in respect of expenditure incurred for agricultural operations. 3. The A.O. after considering relevant submissions of the assessee observed that, the land claimed to have been owned by the assessee company are held in the name of different persons. Further, the assessee has failed to file any evidences to prove that, the land was taken on lease by the assessee company. The A.O. further noted that, although the assessee claims to have employed fixed assets for carrying out agricultural operations and also spent amount for constructing Poly House, but as per the financial statements of the year, there were no fixed assets in the books of account of the assessee. The assessee had also furnished hand made vouchers of agricultural expenses, however, failed to furnish any bills for sale of agricultural produce except filing electricity bills pertaining to Smt. N. Rama Sitha. Therefore, the A.O. observed that, the assessee has failed to substantiate the carrying out of agricultural operations and the agricultural income of Rs. Printed from counselvise.com 4 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited 39,42,060/- claimed by the assessee. Therefore, rejected the explanation of the assessee and assessed the amount claimed as agricultural income under Section 69C of the Income-tax Act, 1961 as unexplained expenditure. 4. Aggrieved by the order of assessment, the assessee preferred the appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has reiterated the submissions made before the A.O. and claimed that, the assessee company was engaged in the activity of agricultural operations and carrying out agricultural operations by cultivating vegetables in a Poly House for which necessary evidence including the land held in the name of the director of the assessee company, relevant electricity bills, bills for sale of agricultural produce and bills for agricultural operations were furnished to the A.O. The A.O. disbelieved the evidence furnished by the assessee and assessed the amount claimed as agricultural income as unexplained expenditure under Section 69C of the Income Tax Act. The Ld. CIT(A) after considering submissions of the assessee and also taking note of various reasons given by the A.O. to treat the amount claimed as agricultural income as unexplained expenditure observed that, although the assessee has Printed from counselvise.com 5 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited contested the additions made by the A.O. by treating the said amount as unexplained expenditure but failed to substantiate the same. Therefore, the Ld. CIT(A) observed that, there is no merit in the arguments of the assessee and accordingly sustained the additions made by the A.O. under Section 69C of the Act, as unexplained expenditure. 5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 6. The learned counsel for the assessee, Shri Avinash Maliya, and Shri Joseph Varghese, Advocates, referring to the paper book filed by the assessee, submitted that, the assessee is carrying out agricultural operations and cultivating crops like vegetables and flowers, in a Poly House for which the assessee has furnished landholding details along with RTC for the relevant assessment year, indicating carrying out agricultural operations. However, the A.O. disbelieved the evidence filed by the assessee only on the ground that, there is no lease agreement between the assessee and the landholders. The learned counsel for the assessee, further referring to certain judicial precedents, including the decision of Pune Bench of the Tribunal in the case of ITO Vs. Gajanan Agro Printed from counselvise.com 6 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited Farms (2013) taxmann.com 24, submitted that, ownership of land is not a pre-requisite for having agricultural income and it would suffice if revenue is derived from agricultural activities carried out on an agricultural land situated in India. Therefore, he submitted that, once the assessee has produced relevant details of landholding, whether it is in the name of the assessee or in the name of the director of the assessee company, it is sufficient, and therefore the A.O. ought not to have made addition u/s 69C of the Income Tax Act, 1961. The learned counsel for the assessee, further referring to RTC for the relevant assessment year, submitted that, there is enough proof for carrying out agricultural operations from the RTC furnished by the assessee. Further, the assessee has also furnished sales bills for sale of agricultural produce and also expenses incurred towards agricultural operations. Although the assessee has furnished all these evidences to support its claim, but the A.O., without appreciating the relevant facts, assessed the amount under Section 69C of the Income Tax Act as unexplained expenditure. Therefore, he submitted that, the additions made by the A.O. should be deleted. Printed from counselvise.com 7 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited 7. The learned Senior A.R. for the Revenue, Ms. G. Saratha, supporting the order of the Ld. CIT(A), submitted that, the assessee being a company, claimed to have been carried out agricultural operations in an organized manner, and thus, it is for the assessee to file relevant evidences to the satisfaction of the A.O. to prove the claim of agricultural income. However, in the present case, going by the reasons given by the A.O., it is very clear that, the assessee does not possess any land in its name, and further, there is no proof with the assessee to have land on lease from the directors of the assessee company. Further, the assessee failed to file relevant evidence to prove sale of agricultural produce and expenditure incurred for agricultural operations, which is evident from the hand made vouchers submitted by the assessee, which are not reliable. The A.O., after considering the relevant facts, has rightly assessed the income although under different heads, however, fact remains that, reference to incorrect section does not invalidate the addition made by the A.O. towards agricultural income. Therefore, she submitted that, the additions made by the A.O. should be sustained. Printed from counselvise.com 8 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited 8. We have heard both parties, perused the material on record and had gone through the orders of the authorities below. We have also carefully considered relevant Memorandum of Association of the assessee company, which is available in the paper book filed by the assessee, and other evidence like sale deed copies of agricultural land held in the name of the directors of the assessee company, corresponding RTC of the land. Admittedly, the assessee does not directly own any land and claimed that, the land was held in the name of the director of the assessee company, for which the assessee has furnished the Master Data of the company taken from ROC and as per which the land owners are the directors of the assessee company. Therefore, the reasons given by the A.O. to disbelieve the landholding records on the basis of the land held in the name of the director of the assessee company to treat the amount claimed as agricultural income as unexplained expenditure cannot be accepted, because it is not necessary to have a formal lease agreement to prove the possession of land for carrying out agricultural operations. As long as the assessee establishes a relationship between the landowner and the company, it is sufficient to hold that, the assessee was in Printed from counselvise.com 9 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited possession of land for carrying out agricultural operations. Therefore, we reject the reasons given by the A.O. to disbelieve the claim on this ground. 9. Having said so, let us come back to the other reasons given by the A.O. The A.O. had disbelieved various evidences filed by the assessee, including hand made vouchers and bills submitted for carrying out agricultural operations and incurring various expenses for carrying out agricultural operations. Admittedly, as per the main objects of the assessee company, the assessee company main object provides for carrying out the activity of trade, import and export of all varieties of flowers, including dry and fresh flowers, seeds, tissue culture, mushroom products, herbal and medical plants. In fact, the assessee claimed before the A.O. that the company is engaged in floriculture and agricultural activities which involve growing flowers, vegetables and other related agricultural produce since 1996. Although the assessee claims to have engaged in the activity of tissue culture and hi-tech agricultural activity of growing vegetables in Poly House, but on perusal of relevant evidence filed by the assessee, including the RTC copies, we find that, the RTC shows the crop details as Printed from counselvise.com 10 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited eucalyptus trees, maize, ragi, etc. The assessee claims to have carried out tissue culture and hi-tech agricultural activity of growing vegetables in a Poly House, whereas the RTC furnished by the assessee shows different crops, for which there was no proper explanation from the assessee. Further, the RTC filed by the assessee does not relate to the assessment year under consideration and further, it relates to the other crop or crop years. Therefore, from the RTC filed by the assessee, we cannot assume that, the assessee has carried out cultivation of flowers, vegetables, etc. In so far as the bills submitted by the assessee towards sale of agricultural produce and expenditure incurred for agricultural operations, the A.O. has made observation that the assessee has submitted certain hand made vouchers which are not reliable and there is no proper details of sale of agricultural produce, etc. Even before us, the assessee has not furnished any details to prove the sale of agricultural produce and also expenditure incurred for carrying out agricultural operations. Since assessee is company and claimed to have carried out agricultural operations in an organized manner, but not like a farmer who carried out agricultural operations in a traditional Printed from counselvise.com 11 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited manner, in our considered view, it is for the assessee to furnish relevant details including bills for sale of agricultural produce and bills for expenditure incurred for agricultural operations. Since there is no proper evidence with the assessee, and the assessee has not furnished any details before us to verify the claim of the assessee, we cannot express any opinion on the correctness of bills and vouchers submitted by the assessee. 10. Coming back to the order passed by the Ld. CIT(A), although the A.O. has discussed the issue at length in light of landholding details, fixed assets employed for carrying out agricultural operations, bills produced for incurring agricultural expenditure, and also sale of agricultural produce in light of various evidences furnished by the assessee, and further, the assessee has reiterated the same submissions before the Ld. CIT(A), but the Ld. CIT(A) has rejected the explanation of the assessee in a cryptic one-line order that too without having any reasons as to why the claim of the assessee cannot be accepted. Therefore, on this ground itself, the order of the Ld. CIT(A) cannot be upheld and which needs re-look at the end of the A.O. Since the A.O. has mainly focused on the landholding details of the assessee, and Printed from counselvise.com 12 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited disbelieved the claim of the agricultural income on the basis of the land held in the director of the assessee company, and in our considered view, it is not a relevant criterion for denying the deriving agricultural income, and further the assessee has also not satisfactorily explained the carrying out of agricultural operations by filing necessary evidence, and further, the Ld. CIT(A) has rejected the claim of the assessee in a one-line finding without any reasons, in our considered view, the issue needs to be set aside to the file of the A.O. to give one more opportunity of hearing to the assessee to explain its case. Thus, we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to verify the claim of the assessee in light of our discussions given hereinabove and decide the issue of agricultural income after considering relevant evidences, if any, that may be filed by the assessee to prove its case. Printed from counselvise.com 13 ITA No.1362/Hyd/2024 Classic Bio-Tech Exports Limited 11. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 10th December, 2025. Sd/- श्री विजय पाल राि (VIJAY PAL RAO) उपाध्यक्ष /VICE PRESIDENT Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 10.12.2025. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Classic Bio-Tech Exports Limited, Gate No.03, Lumbini Gardens, Nagawara Lake, Ring Road, Hebbal, Bangalore. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward-1(1), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "