. ITO, Budaun V. M/s New Jain Godowns, Budaun

CO 162/DEL/2009

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9248 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN P RASAD
• Assessee Lawyers: C S AGGARWAL
• Keywords: Business income; Depreciation
• Section: 244A; 6; 263

Judgement Text

ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.1632/DEL/2009 ASSESSMENT YEAR : 2006-07 NEW JAIN GODOWNS, VILLAGE CHHATTIYA, MATHURA ROAD, UJHANI, BUDAUN. PAN : AAFFN0315H VS. ITO, BUDAUN. C.O. NO. 162 /DEL/20 09 ASSESSMENT YEAR : 2006-07 ITO, BUDAUN. VS. NEW JAIN GODOWNS, VILLAGE CHHATTIYA, MATHURA ROAD, UJHANI, BUDAUN. PAN : AAFFN0315H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI C.S. AGGARWAL, SR. ADVOCATE & SHRI RAVI PRATAP MALL, ADVOCATE DEPARTMENT BY : S HRI GUNJAN PRASAD, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: ITA NO.1632/DEL/2009 THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 24.03.2009, PASSED BY THE LD. CIT, MORADA BAD, ENHANCING THE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 2 INCOME OF THE ASSESSEE, AS ASSESSED BY THE ASSESSING OFFICER AT ` 86,460/-, TO ` 8,14,253/-. 2. THE ASSESSEE PARTNERSHIP FIRM CAME INTO EXISTENCE ON 0 1.01.2005, VIDE PARTNERSHIP DEED EXECUTED ON 20.11.2005. IT COM PRISED OF THREE PARTNERS, SMT. CHHAMA JAIN, SMT. MANKA JAIN AND SHRI JAIDEEP JAIN, HAVING 1/3 SHARE EACH. AS PER THE PARTNERSHIP DEED, THE SAID PARTI ES HAD AGREED TO CARRY ON BUSINESS OF CONSTRUCTING GODOWNS AND RENTING TH EM TO THE GOVERNMENT AND OTHER PARTIES AND EARN RENTAL INCOME AND ANY OTHER BUSINESS DEEMED SUITABLE FOR THE FIRM. IN THE RETURN OF INCOME FILED BY THE FIRM, A LOSS OF ` 3,804/- WAS DECLARED. VIDE ORDER DAT ED 08.05.2007, PASSED U/S 143 (3) OF THE IT ACT, THE ASSESSMENT OF THE ASSESSEE WA S COMPLETED AT AN INCOME OF ` 86,460/- BY THE ASSESSING OFFICER, ON SAT ISFYING HIMSELF REGARDING THE INCOME DERIVED BY THE ASSESSEE FROM ITS GO DOWN LET OUT FOR STORAGE OF AGRICULTURAL PRODUCE. 3. BY VIRTUE OF THE IMPUGNED ORDER DATED 24.03.2009 , THE LD. CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THAT THE INCOME OF THE ASSESSEE FROM THE L ETTING OUT OF GODOWN WAS AN INCOME ASSESSABLE AS INCOME FROM HOUSE PROPERTY. SU CH INCOME WAS COMPUTED AT ` 7,27,793/-. 4. AGGRIEVED, THE ASSESSEE HAS FILED THE PRESENT APPEAL. 5. CHALLENGING THE IMPUGNED ORDER, THE LD. COUNSEL F OR THE ASSESSEE HAS MADE ORAL ARGUMENTS AND HAS ALSO FILED WRITTEN SUBMISSIO NS. IT HAS BEEN CONTENDED THAT THE LD. CIT ACTED WITHOUT JURISDICTIO N IN INITIATING PROCEEDINGS U/S 263 (1) OF THE IT ACT, FAILING TO APPRECIATE THA T THE TWIN CONDITIONS ENVISAGED IN THE SAID SECTION, I.E., THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, DID NOT EXIST, DUE TO WHICH REASON, THE PROVISIONS OF SECTION 263 (1) OF THE ACT C OULD NOT HAVE BEEN INVOKED; THAT IN DOING SO, THE LD. CIT FAILED TO APP RECIATE THAT THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, DULY EXAMINE D THE CLAIM OF THE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 3 ASSESSEE THAT THE INCOME WAS DERIVED BY THE ASSESSEE FIRM AS AN INCOME FROM AGRICULTURE WITHIN THE MEANING OF SECTION 2 (1 A) (C) OF THE ACT; THAT THE LD. CIT FURTHER FAILED TO COMPREHEND THAT THERE WAS NO MATERIAL BROUGHT ON RECORD TO SHOW THAT THE GODOWN WAS NOT PUT TO USE FOR AGRICULTURAL PURPOSES, BUT WAS USED FOR OTHER PURPOSES; THAT IN THE ASSESSMENT PRO CEEDINGS, VIDE QUESTIONNAIRE DATED 22.03.2007, THE ASSESSING OFFICER H AD RAISED A SPECIFIC QUERY IN THIS REGARD AND THE ASSESSEE, VIDE ITS REPLY DAT ED 31.03.2007, HAD FURNISHED A DETAILED EXPLANATION, AND IT WAS AFTER CO NSIDERING SUCH EXPLANATION FILED BY THE ASSESSEE ONLY, THAT THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE; THAT THE VIEW ADOPTED BY TH E ASSESSING OFFICER IS A PLAUSIBLE VIEW, I.E., A VIEW PERMISSIBLE IN LAW AND TH EREFORE, THE CIT ERRONEOUSLY EXERCISED HIS POWER U/S 263 OF THE ACT TO D IFFER WITH THE VIEW TAKEN BY THE ASSESSING OFFICER; THAT ALTERNATIVELY, TH E CIT FAILED TO APPRECIATE THAT THE PARTNERS OF THE ASSESSEE FIRM HAD, BEFORE THE A SSESSING OFFICER, AGREED TO INCLUDE THE INCOME OF THE GODOWN IN THE H ANDS OF THE FIRM AND THEREFORE, NO INCOME COULD BE ASSESSED TO TAX IN THE HA NDS OF THE ASSESSEE, DUE TO WHICH ALSO, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS BEING PREJUDICIAL TO THE INTERESTS OF THE REVENUE; TH AT AGAIN, WITHOUT PREJUDICE, THE LD. CIT FAILED TO APPRECIATE THAT TH E ASSESSEE CANNOT BE SAID TO HAVE EARNED AN INCOME ASSESSABLE AS INCOME FROM HOUSE PRO PERTY AND IF THE INCOME IS HELD TO BE NOT INCOME FROM AGRICULTURE, IT ONLY REPRESENTS BUSINESS INCOME; THAT SO, THE LD. CIT COULD ONLY HAVE DIRECTE D THE ASSESSING OFFICER TO EXAMINE THE HEAD UNDER WHICH THE SAID INCOME WAS ASSESSAB LE, FOR COMPUTATION THEREOF IN ACCORDANCE WITH LAW; THAT OT HERWISE TOO, THE AGRICULTURAL LAND UNDER THE GODOWN WAS NOT OWNED BY THE ASSESSEE FIRM AND THE LETTING OF THE GODOWN WAS NOT SEPARABLE FROM THE LAND, DUE TO WHICH FACT IT WAS, THAT THE INCOME COULD NOT BE ASSESSED AS INCOME F ROM HOUSE PROPERTY, AS FOR SUCH ASSESSMENT, IN ACCORDANCE WITH THE PROVISIONS OF SECTION 22 OF THE ACT, THE ASSESSEE MUST BE THE OWNER; T HAT THEN, AGAIN ALTERNATIVELY, THE EXPENDITURE DEBITED BY THE ASSESSEE, AMOUNTING TO ` 16,39,506/-, INCLUDING DEPRECIATION OF ` 5,68,486/- AND INTEREST ON UNSECURED ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 4 LOAN, OF ` 4,17,199/-, NEEDS TO BE ALLOWED AS A DEDUC TION AND IN ANY CASE, WITHOUT PREJUDICE, THE CLAIM OF THE ENTIRE INTEREST EXPENDITURE OF ` 10,20,740/- NEEDS TO BE DIRECTED TO BE ALLOWED, AS A GAINST THAT OF ` 9,07,909/- ALLOWED BY THE CIT AND DEPRECIATION ON T HE GODOWN BUILDING ALSO NEEDS TO BE DIRECTED TO BE ALLOWED; AND THAT LASTLY, THE CIT HIMSELF HAVING HELD THAT THERE WAS NO BUSINESS CARRIED ON BY THE ASSESSEE FIRM, THERE WAS NO LEGAL EXISTENCE OF THE FIRM DURING THE YEAR AND A S SUCH, NO ASSESSMENT AT ALL COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE FI RM. 6. THE LD. DR, ON THE OTHER HAND, HAS SOUGHT TO PLAC E STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT AS RIG HTLY HELD BY THE LD. CIT, WHEREAS THE BUILDING OF THE GODOWN IS OWNED BY THE ASSE SSEE FIRM, THE LAND UNDERNEATH IS OWNED BY THE THREE PARTNERS OF THE ASSESSEE FIRM; THAT THEREFORE, THE OWNERSHIP OF THE GODOWN BUILDING VESTS IN THE FIRM AND THAT OF THE LAND VESTS IN THE PARTNERS OF THE FIRM; THAT THE A SSESSING OFFICER WRONGLY TREATED THE RENTAL INCOME EARNED BY THE ASSESSEE FIRM F ROM THE LETTING OUT OF THE GODOWN AS AGRICULTURAL INCOME; THAT THE AGRICUL TURAL LAND WAS NOT OWNED BY THE FIRM AND THE ASSESSEE FIRM, DURING THE YEAR, DID NOT CARRY OUT ANY AGRICULTURAL ACTIVITY THEREAT IN ACCORDANCE WITH SE CTION 2 (1A) OF THE ACT; THAT THEN, THE TENANTS WERE USING THE GODOWN FOR BUSINESS PUR POSES; THAT SINCE THE LAND WAS OWNED BY THE PARTNERS OF THE ASSESSEE FIRM, RATHER THAN THE ASSESSEE FIRM ITSELF AND THE FIRM, WHICH OWNED THE BUILD ING, WAS NOT A CULTIVATOR, IN ACCORDANCE WITH THE PROVISIONS OF SECT ION 2 (1A) (C) OF THE ACT, THE RENTAL INCOME CANNOT BE TERMED AS AGRICULTURAL I NCOME; THAT SINCE THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, THE LD. CIT RIGHTLY INVOKED THE PROVISIONS O F SECTION 263 OF THE ACT; THAT SINCE DURING THE YEAR, THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS ACTIVITY, INTEREST TO PARTNERS WAS RIGHTLY DISALLOWED BY THE LD. CIT; AND THAT IN THESE FACTS, THERE BEING NO MERIT IN THE APPEAL FILE D BY THE ASSESSEE, THE SAME BE DISMISSED AND THE WELL REASONED ORDER PASSED BY TH E LD. CIT BE CONFIRMED. ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 5 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. THE ASSESSEE PARTNERSHIP FIRM CAME INTO EXISTENCE W.E.F. 01.01.2005 AS PER AGREEMENT OF PARTNERSHIP DATED 20.11.2005. UNDER THE DEED, THE PARTNERS OF THE ASSESSEE FIRM AGREED TO CARRY ON THE BUSINESS OF CONST RUCTING GODOWNS AND RENTING THE SAME TO GOVERNMENT AND OTHER PARTIES AND TO EARN RENTAL INCOME. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM DECLARED A LOSS OF ` 3804/- AND SHOWED NIL INCOME. THE ASSESSMENT WAS TAKEN UP UNDER SCRUTINY AND NOTICES UNDER SECTIONS 143 (2) AND 142 (1) OF THE IT ACT WERE ISSUED. IN RESPONSE, THE ASSESSEE FILED REPLY DATED 23.11.2006 (COPY AT APB 6-11). IN THIS REPLY, IT WAS SUBMITTED AS FOLLOWS:- IT IS ALSO CLARIFIED THAT M/S NEW JAIN GODOWN IS A PA RTNERSHIP FIRM AND ITS OFFICE IS LOCATION AT VILLAGE-CHHATAIYA, MATHURA ROA D, UJHANI, DISTT. BUDAUN. ITS PRINCIPAL WORK IS TO CONSTRUCT THE RURAL G ODOWN AND EARNED RENT BY STORAGE OF AGRICULTURE PRODUCE ONLY. AS PER IN COME TAX ACT U/S 2 (41) SUB CLAUSE (C). ANY INCOME IS AGRICULTURAL IN COME DERIVED FROM ANY BUILDING PROVIDED. (A) THE BUILDING IS OWNED AND OCCUPIED BY RECEIVER OF R ENT OR AS REVENUE OF ANY SUCH LAND BUILDING OR BUILDING IS OCCUPIED BY THE CULTIVATOR OR RECOVER OF RENT IN KIND. (B) THE BUILDING IS SITUATED ON OR IN THE IMMEDIATE VICINI TY OF A LAND SITUATED IN INDIA AND USED FOR AGRICULTURE PURP OSE. (C) THE BUILDING IS REQUIRED AS A DWELLING HOUSE, STOREH OUSE AS OTHER OUT BUILDING BY THE CULTIVATOR AS RECEIVER. (D) BECAUSE OUR FIRM FULFILL ALL THE CONDITION OF AGRICUL TURAL INCOME HENCE ITS INCOME ARE ASSESSED AS AGRICULTURAL INCOME. IT IS ALS O CLARIFIED THAT AS PER AGREEMENT OF PARTNERSHIP DATED 1.4.05 AND PARTNERSH IP DEED DATED 25.11.05. FOLLOWING POINTS ARE ALSO CONSIDERABLE. POINT NO.-1 THAT THE PARTNERSHIP IS IN EFFECT FROM 1 ST DAY OF JANUARY 2005. POINT NO.-8 THAT THE PARTNERS AGREE THAT THE INCOME OF EXISTING GODOWN OWNED BY THE PARTNERS WILL ALSO BE INCLUDED IN THE INCOME FROM THIS FIRM. ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 6 SO INCOME OF THE EXISTING GODOWN IS ALSO INCLUDED IN THE INCOME OF THE FIRM AND ALL ASSETS AND LIABILITIES OF THE EXISTING GOD OWN ALSO INCLUDED IN THE ASSETS AND LIABILITIES OF THE FIRM. 8. THUS, IN ITS REPLY DATED 23.11.2006 (SUPRA), THE ASSE SSEE FIRM SUBMITTED BEFORE THE ASSESSING OFFICER, INTER ALIA, THAT AS PER THE PARTNERSHIP DEED, THE PARTNERS OF THE ASSESSEE FIRM HAD AGREED THAT THE INCOME OF THE EXISTING GODOWN OWNED BY THE PARTNERS WOULD ALSO BE I NCLUDED IN THE INCOME OF THE FIRM AND THAT THE ASSETS AND LIABILITIES OF THE EXISTING GODOWN WOULD BE INCLUDED IN THE ASSETS AND LIABILITIES OF THE FIRM; AND THAT THE EXISTING GODOWN HAD BEEN LET OUT FOR STORAGE OF AGRICULTURAL PRODUCE ONLY AND SO, THE INCOME DERIVED BY THE ASSESSEE FIRM FROM THE RENTING OUT OF T HE GODOWN WAS AGRICULTURAL INCOME WITHIN THE MEANING OF SECTION 2 (1A) (C) OF THE ACT. 9. THE ASSESSEE FILED ANOTHER REPLY DATED 08.02.2007 (A PB 12-14) BEFORE THE ASSESSING OFFICER, GIVING THEREIN, LEGAL PROVISIONS C ONCERNING THE INCOME IN QUESTION AS AGRICULTURAL INCOME AND IT WAS CONTENDE D THAT THE INCOME IN QUESTION SHOULD BE TREATED AS AGRICULTURAL INCOME. 10. THE ASSESSING OFFICER ISSUED ANOTHER NOTICE U/S 142 ( 1) OF THE ACT (APB 15-16) DATED 22.03.2007 TO THE ASSESSEE. A QUESTIONNAIR E (APB 17-18) WAS ATTACHED THEREWITH. THE ASSESSEE WAS ASKED TO COMPLY WITH THE NOTICE BY 09.04.2007. THE SAID QUESTIONNAIRE (RELEVANT PORTION) READS AS FOLLOWS:- I) YOU HAVE DISCLOSED A NET AGRICULTURAL LOSS OF RS. 3,804/- IN YOUR RETURN OF INCOME. SINCE THE INCOME DERIVED BY YOU IS TOTALLY NON AGRICULTURAL AND IS IN THE NATURE OF INCOME FROM HOUSE PROPERTY BECAUSE ONLY RENT OF GODOWNS HAS BEEN DISCLOSED, PLE ASE EXPLAIN AS TO WHY IT SHOULD NOT BE ASSESSED UNDER THE HEAD INCOME F ROM HOUSE PROPERTY AS PER PROVISIONS OF THE INCOME-TAX ACT, 196 1. 11. THUS, VIDE THE ABOVE QUESTIONNAIRE DATED 22.03.20 07, THE ASSESSING OFFICER SPECIFICALLY ASKED THE ASSESSEE AS TO WHY THE INCO ME EARNED BY THE ASSESSEE BE NOT ASSESSED AS INCOME FROM HOUSE PROPERTY, THE SAME, ACCORDING TO THE ASSESSING OFFICER, BEING NON-AGRICULT URAL INCOME AND BEING ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 7 INCOME OF THE NATURE OF INCOME FROM HOUSE PROPERTY, THE ASSESSEE HAVING DISCLOSED ONLY RENT OF GODOWN. 12. THE ASSESSEE FILED REPLY DATED 31.03.2007 (APB 19-2 1) TO THE ABOVE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER. THE RELEVAN T PORTION OF THIS REPLY IS AS FOLLOWS:- REPLY FOR POINT NO. (I) AS PER NATURE AND JOB OF M/S NEW JAIN GODOWN IS A FI RM WHOSE JOB ONLY CONSTRUCTS THE STOREHOUSE GODOWNS FOR THE PURPOSE OF STOR AGE OF AGRICULTURE PRODUCTS AND EARNED RENT FROM THIS JOB. IT IS A CLEARLY A AGRICULTURE ACTIVITY AS PER U/S 2 (1A) (C) OF INCOME TAX ACT, 1961 WHICH IS AS FOLLOWS. AS PER INCOME TAX ACT 1961, UNDER SECTION 2 (1A) (C) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCU PIED BY THE RECEIVER OF THE RENT OF REVENUE OF ANY SUCH LAND, OF OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF RENT-IN-KIND, OF ANY LA ND WITH RESPECT TO WHICH, OR THE PRODUCE OF WHICH, ANY PROCESS MENTIONE D IN PARAGRAPHS (II) AND (III) OF SUB CLAUSE (B) IS CARRIED ON: PROVIDED THAT (I) THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF THE LAND, AND IS A BUILDING, WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CULTIVATOR, OR THE RECEIVER OF THE RENT- IN- KIND, BY REASON OF HIS CONNECTION WITH THE LAND, REQUI RES AS A DWELLING HOUSE, OR AS A STOREHOUSE, OR OTHER OUT - BUILDING. SUB-CLAUSE (C) ANY INCOME DERIVED FROM ANY BUILDI NG PROVIDED - (A) THE BUILDING OWNED OR OCCUPIED IN THE FOLLOWING MANN ER: (I) BUILDING IS OWNED AND OCCUPIED BY AT THE RECEIVER OF RENT OR REVENUE OF ANY SUCH LAND; OR (II) BUILDING IS OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF RENT-IN-KIND; (B) THE BUILDING IS SITUATED ON OR IN THE IMMEDIATE VICINI TY OF LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPO SES. ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 8 (C) THE BUILDING IS REQUIRED AS A DWELLING HOUSE, STORE HOUSE OR OTHER OUT-BUILDING BY THE CULTIVATOR OR RECEIVER OF RENT OR RENT-IN-KIND [SUCH REQUIREMENT BEING DUE TO HIS CONNECTION WITH THE LAND], AND (D) LAND IS EITHER ASSESSED TO LAND REVENUE IN INDIA, OR IS SUBJECT TO A LOCAL RATE. IF THIS IS NOT THE CASE, THEN THE LAND IS SITUATED IN AN URBAN AREA, I.E., (I) IN ANY AREA COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY, OR A CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN 10,000 AS PER THE LAST PRECEDING CENSUS PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (II) IN ANY AREA WITHIN A SPECIFIED DISTANCE [NOT BEING MORE THAN 8 KM] FROM THE LOCAL LIMITS OF SUCH MUNICIPALITY/CANTONMENT BOARD. FROM THE ASSESSMENT YEAR 2001-02, INCOME DERIVED FR OM SUCH BUILDING OR LAND FROM ANY NON-AGRICULTURAL PURPOSE I S NOT TREATED AS AGRICULTURE INCOME (EXPLANATION 2 TO THE CLAUSE). 13. IT WAS ON THE ABOVE POINTED ENQUIRY CARRIED OUT BY THE ASSESSING OFFICER, THAT HE, BEING SATISFIED WITH THE EXPLANATIO N OFFERED BY THE ASSESSEE, ACCEPTED THE ASSESSEES CLAIM, OBSERVING AS FOLLOWS IN THE ASSESSMENT ORDER (RELEVANT PORTION):- .SINCE IT WAS NOTICED THAT THE INCOME DERIVED BY THE A SSESSEE WAS FROM (SIC) LETTING OUT OF GODOWNS, IT WAS REQUIRED TO E XPLAIN AS TO WHY ITS INCOME SHOULD NOT BE ASSESSED AS INCOME FROM HOU SE PROPERTY. THE ASSESSEE HAS FILED A DETAILED WRITTEN REPLY IN THIS BEHALF WHEREIN THE ASSESSEE HAS RELIED UPON THE PROVISIONS OF SECTIO N 2 (1A) (C) (SIC) OF THE INCOME-TAX ACT, 1961. HAVING CONSIDERED THE ASSE SSEES REPLY, THE ASSESSEES CLAIM OF AGRICULTURAL INCOME IS ACCEPT ED. .. 14. THE LD. CIT, HOWEVER, WHILE NOT DISPUTING THE FA CT THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO AGRICULTURAL INCOME HAD BEEN AL LOWED BY THE ASSESSING OFFICER AFTER DUE DETAILED ENQUIRY, DID NOT A GREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. IN PARA 3 OF THE IMPUG NED ORDER, THE CIT HAS OBSERVED AS FOLLOWS:- 3. ON GOING THROUGH THE RECORDS I FIND THAT, ON FACTS O F THE CASE THE CONCLUSION DRAWN BY THE ASSESSING OFFICER REGARDING TREATMENT OF RENTAL INCOME AS AGRICULTURAL INCOME IS NOT IN ACCORDA NCE WITH THE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 9 CORRECT LEGAL PROVISIONS AS PROVIDED IN SECTION 2 (1 A) (C) OF THE INCOME- TAX ACT, 1961 AND, THEREFORE, THE SAME IS ERRONEOUS IN LAW IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE AND HENCE THE PR OCEEDINGS U/S 263 WERE INITIATED AS DISCUSSED IN THE OPENING PARA O F THIS ORDER. 15. FURTHER, IN THE LAST PORTION OF PARA 8.2 OF THE IMPUGNED ORDER, IT HAS BEEN OBSERVED AS FOLLOWS:- A PLAIN READING OF SECTION 263 (1) WOULD SUGGEST THA T FOR ASSUMING JURISDICTION UNDER THIS SECTION, THERE ARE TWO PREREQU ISITES. THESE ARE, (I) THE ORDER SHOULD BE ERRONEOUS, AND (II) IT SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE. THERE CANNOT BE TWO VIEWS ON THE FA CT THAT AN ORDER WHICH IS PASSED NOT IN ACCORDANCE WITH BUT PASSE D IN CONTRADICTION OF THE PROVISIONS OF LAW IS IN ALL RESPE CTS AN ERRONEOUS ORDER. THIS IS A SIMPLE RULE THAT AN ERROR IS ERROR W HETHER COMMITTED AFTER APPLICATION OF MIND OR OTHERWISE; WHETHER COMMITTE D AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMENTS PUT FORTH BEFORE THE AUTHORITY OR WITHOUT CONSIDERING THE SAME. 16. FROM THE ABOVE EXTRACTED PORTIONS OF THE ORDER U NDER APPEAL, IT IS EVIDENT THAT JURISDICTION U/S 263 OF THE ACT WAS IN VOKED BY THE LD. CIT FOR THE REASON THAT IN HIS OPINION, THE VIEW ENTERTAINED BY T HE ASSESSING OFFICER REGARDING THE TREATMENT OF THE RENTAL INCOME EARNED BY THE ASSESSEE FIRM AS AGRICULTURAL INCOME, WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2 (1A) (C) OF THE ACT. 17. NOW, IT STANDS WELL SETTLED THAT IT IS ONLY IF THE ASSESSING OFFICER HAS TAKEN A VIEW PATENTLY UNSUSTAINABLE IN LAW, THAT POWE R U/S 263 CAN BE EXERCISED, WHERE THE TAKING OF SUCH AN ERRONEOUS VIEW RESULTS IN LOSS OF REVENUE, THEREBY SATISFYING THE TWIN REQUISITE CONDITI ONS OF ERRONEOUS ASSESSMENT ORDER AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR INVOCATION OF SECTION 263 OF THE ACT. ON THE OTHER HAND, IF THE VIEW TAKEN BY THE ASSESSING OFFICER IS A VIEW POSSIBLE IN LAW, POWER U/ S 263 OF THE ACT CANNOT BE EXERCISED. THE FOLLOWING DECISIONS SUPPORT TH IS PROPOSITION:- I) MALABAR INDUSTRIAL COMPANY VS. CIT, 243 ITR 83 (SC) ; II) CIT VS. MAX INDIA LTD., 295 ITR 282 (SC); ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 10 III) CIT VS. HONDA SIEL POWER PRODUCTS LTD., 333 ITR 547 (DEL); IV) CIT VS. SALUJA EXIM LTD., 329 ITR 603 (P&H); V) GRASIM INDUSTRIES VS. CIT, 321 ITR 92 (BOM); & VI) CIT VS. SUNBEAM AUTO LTD., 227 CTR 133 (DEL). 18. IT GOES WITHOUT SAYING THAT IF THE VIEW TAKEN BY THE ASSESSING OFFICER IS A POSSIBLE VIEW AND THE CIT DOES NOT AGREE WITH SUCH A VIEW, THE ASSESSMENT ORDER CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. IN THE FOLLOWING CASES, IT HAS BEEN HELD THAT UNLESS THE ASSESSMENT ORDER IS ERRONEOUS, SUBSTITUTION OF THE JUDGEMEN T OF THE COMMISSIONER FOR THAT OF THE ASSESSING OFFICER DOES NOT STA ND VISUALIZED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT:- I) CIT VS. MUNJAL CASTINGS, 303 ITR 23 (P&H); II) PRADEEP BANDHU VS. CIT, 32 TAXMAN.COM 24 (JODHPUR -TRIB); III) GENERAL ELECTRIC INTERNATIONAL VS. ACIT, 287 ITR 4 3 (MUM); IV) ANTALA SANJAYKUMAR RAVJIBHAI VS. CIT 135 ITD 506 ( RAJKOT) (TRIB); V) MANISH KUMAR VS. CIT, 134 ITD 27 (INDORE) (TRIB); & VI) V.B. CONSTRUCTION (P) LTD. VS. DCIT, 28 DTR 84 (KOL ) (TRIB). 19. IN THE PRESENT CASE, WHAT IS TO BE SEEN IS AS TO WHET HER THE VIEW ARRIVED AT BY THE ASSESSING OFFICER IS A VIEW WHICH IS PO SSIBLE IN LAW. 20. SECTION 2 (1A) OF THE ACT, WHICH IS THE PROVISION RELEVANT FOR OUR PRESENT PURPOSES, STATES AS FOLLOWS:- 2(1A): 'AGRICULTURAL INCOME' MEANS (A) ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURPOSES; (B) ANY INCOME DERIVED FROM SUCH LAND BY (I) AGRICULTURE; OR (II) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIV ER OF RENT-IN-KIND ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 11 TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET; OR (III) THE SALE BY A CULTIVATOR OR RECEIVER OF RENT-IN -KIND OF THE PRODUCE RAISED OR RECEIVED BY HIM, IN RESPECT OF WHICH NO PR OCESS HAS BEEN PERFORMED OTHER THAN A PROCESS OF THE NATURE DESCRIBED IN PARAGRAPH (II) OF THIS SUB-CLAUSE ; (C) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY SUCH LAND, OR OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF RENT-IN-KIND, OF ANY LA ND WITH RESPECT TO WHICH, OR THE PRODUCE OF WHICH, ANY PROCESS MENTIONE D IN PARAGRAPHS (II) AND (III) OF SUB-CLAUSE (B) IS CARRIED ON : PROVIDED PROVIDED PROVIDED PROVIDED THAT (I) THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF THE LAND, AND IS A BUILDING WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CULTIVATOR, OR THE RECEIVER OF RENT-IN-KIND, BY REASON OF HIS CONNE CTION WITH THE LAND, REQUIRES AS A DWELLING HOUSE, OR AS A STORE-HOUSE, O R OTHER OUT-BUILDING, AND (II) THE LAND IS EITHER ASSESSED TO LAND REVENUE IN I NDIA OR IS SUBJECT TO A LOCAL RATE ASSESSED AND COLLECTED BY OFFICERS OF THE GOVERNMENT AS SUCH OR WHERE THE LAND IS NOT SO ASSESSED TO LAND REV ENUE OR SUBJECT TO A LOCAL RATE, IT IS NOT SITUATED (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISD ICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIP AL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITT EE OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDIN G CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNME NT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE EXPLANATION 1. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT REVENUE DERIVED FROM LAND SHALL NOT INCLUDE AND SHAL L BE DEEMED NEVER TO HAVE INCLUDED ANY INCOME ARISING FROM THE TRANSFER OF ANY LAND REFERRED TO IN ITEM (A) OR ITEM (B) OF SUB-CLAUSE (II I) OF CLAUSE (14) OF THIS SECTION. ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 12 EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT INCOME DERIVED FROM ANY BUILDING OR LAND REFERRED TO IN SUB-CLAUSE (C) ARISING FROM THE USE OF SUCH BUILDING OR LAND FOR AN Y PURPOSE (INCLUDING LETTING FOR RESIDENTIAL PURPOSE OR FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION) OTHER THAN AGRICULTURE FALLING UNDER SUB-C LAUSE (A) OR SUB- CLAUSE (B) SHALL NOT BE AGRICULTURAL INCOME. EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, ANY IN COME DERIVED FROM SAPLINGS OR SEEDLINGS GROWN IN A NURSERY SHALL BE DEEMED TO BE AGRICULTURAL INCOME; 21. SECTIONS 2 (1A) (A) AND (B) DEAL WITH INCOME DER IVED FROM LAND. THE INCOME IN THE PRESENT CASE, HOWEVER, NEEDS TO BE CONSI DERED U/S 2 (1A)(C), SINCE IT IS INCOME BY WAY OF RENT FROM LETTING OUT OF GODOWN. AS PER SECTION 2 (1A) (C), INCOME DERIVED FROM ANY BUILDING OWNED AN D OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES, OR OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF THE RENT-IN-KIND OF ANY LAND WITH RESPECT TO WHICH, OR W ITH RESPECT TO THE PRODUCE OF WHICH, ANY PROCESS ORDINARILY EMPLOYED BY A CULTIV ATOR OR RECEIVER OF RENT- IN-KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MARKET, IS CARRIED ON, SUBJECT TO THE CONDITIONS THAT THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF THE LAND AND IS A BUILDING WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CULTIVATOR, OR THE RECEIVER OF THE RENT-IN-KIND, BY REASON OF HIS CONNECTION WITH THE LAND, REQUIRES AS A D WELLING HOUSE, OR AS A STORE-HOUSE OR OTHER OUT- BUILDING AND THE LAND IS EIT HER ASSESSED TO LAND REVENUE IN INDIA OR IS SUBJECT TO A LOCAL RATE ASSESSED A ND COLLECTED AS OFFICERS OF THE GOVERNMENT AS SUCH, OR WHERE THE LAND IS NOT SO ASSESSED, IT IS NOT SITUATED WITHIN ANY AREA DEFINED IN CLAUSES (A) AN D (B) TO PROVISO (II) TO SECTION 2 (1A) (C), I.E., ANY URBAN AREA. 22. THE FIRST REQUIREMENT OF THE SECTION IS ANY INC OME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF SUCH LAND. THEREFORE, ANY INCOME DERIVED FROM ANY BUILD ING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES MEANS AGRICULTURAL INCOME WITHIN THE MEANING OF ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 13 FIRST PHRASE OF SECTION 2 (1A) (C). NOW, ADMITTEDLY, THE ASSESSEE FIRM IS NOT THE RECEIVER OF THE RENT OR REVENUE OF THE LAND BEN EATH THE GODOWN BUILDING. AS NOTED BY THE LD. CIT IN PARA 2.4 OF THE ORDER UND ER APPEAL, IN THE ASSESSEES LETTER DATED 21.10.2008, THE ASSESSEE STATED THAT IT FULFILLED ALL THE CONDITIONS OF AGRICULTURAL INCOME (SEE APB 28, F IRST PARA). BUT AS TO HOW THIS IS SO, HAS NEVER BEEN BROUGHT OUT. IN THIS REGA RD, THE LD. CIT HAS NOTED (PAGE 5, SECOND PARA, SECOND SENTENCE OF THE IMPUGNED ORDER), SINCE THE FIRM DOES NOT OWN THE LAND, IT IS PROVED NOT TO BE TH E RECEIVER OF THE RENT OR REVENUE OF SUCH LAND. THEN, THE REQUIREMENT OF THE PHRASE IS THAT THE INCOME SHOULD BE DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF THE LAND. NOW, T HE RELEVANT WORD HERE IS AND. THE BUILDING SHOULD BE OWNED AS WELL AS OCCUPIE D BY THE RECEIVER OF THE RENT OR REVENUE OF THE LAND. HERE, NEITHER IS TH E ASSESSEE RECEIVER OF THE RENT OR REVENUE OF THE LAND, NOR IS THE BUILDING OCC UPIED BY IT. THUS, THE LD. CIT IS FOUND TO HAVE CORRECTLY HELD THAT THE ASSESSEE IS NOT COVERED UNDER THE FIRST LIMB OF SECTION 2 (1A) (C). 23. THE SECOND PHRASE EMPLOYED IN SECTION 2 (1A) (C) STATES: OR OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF THE R ENT-IN-KIND OF ANY LAND WITH RESPECT TO WHICH, OR THE PRODUCE OF WHICH, ANY PROCE SS MENTIONED IN PARAGRAPHS (II) AND (III) OF SUB-CLAUSE (B) IS CARRIED ON. THUS, THE REQUIREMENT OF THIS LIMB OF THE SECTION IS THAT THE B UILDING MUST BE OCCUPIED BY THE CULTIVATOR OR THE RECEIVER OF RENT-IN-KIND O F ANY LAND WITH RESPECT TO WHICH OR WITH RESPECT TO THE PRODUCE OF WHICH, ANY P ROCESS WHICH IS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT IN KIND, SO AS TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKE N TO THE MARKET, IS PERFORMED. HERE ALSO, THE ASSESSEE FAILS. FIRSTLY, AS NOTED BY THE LD. CIT IN PARA 5.3, FIFTH SENTENCE OF THE IMPUGNED ORDER, THE GODOWN BUILDING WAS OCCUPIED BY KARGILL INDIA (P) LTD., UP STATE WAREHO USING CORPORATION AND ITC LTD., WHO WERE THE ASSESSEES TENANTS DURING THE YEAR UND ER CONSIDERATION AND WERE NOT EITHER CULTIVATORS, OR RECEIVERS OF RENT IN KIND OF ANY LAND. THE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 14 FACT OF THESE PARTIES BEING THE ASSESSEES TENANTS WAS ALSO STATED BY THE ASSESSEE IN ITS REPLY DATED 15.12.2008 BEFORE THE LD. CI T, RELEVANT PORTION AT APB 30, LAST PARA. FURTHER, IT HAS ALSO NOT BEEN SHOW N BY THE ASSESSEE THAT EITHER THE LAND BENEATH THE GODOWN BUILDING, OR THE PRODUCE THEREOF WAS SUBJECTED TO ANY PROCESS ORDINARILY EMPLOYED BY A CULT IVATOR OR RECEIVER OF RENT IN KIND TO RENDER THE PRODUCE RAISED OR RECEIVE D BY HIM FIT TO BE TAKEN TO THE MARKET [THE REQUIREMENT OF SECTION 2 (1A) (B) ( II), AS ENVISAGED BY SECTION 2 (1A) (C)]. FURTHER STILL, IT HAS ALSO NOT BE EN SHOWN BY THE ASSESSEE THAT IT SOLD, AS A CULTIVATOR OR RECEIVER OF RENT IN KIND, THE PRODUCE RAISED OR RECEIVED BY IT, WITH RESPECT TO WHICH, NO PROCESS OTHE R THAN ONE ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT IN KIN D TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MAR KET, WAS PERFORMED [THE REQUIREMENT OF SECTION 2 (1A) (B) (III), AS ENVISAGED BY SECTION 2 (1A) (C)]. 24. AS SUCH, THE LD. CIT HAS ALSO CORRECTLY OBSERVED IN THIS REGARD (IMPUGNED ORDER PAGE 5, PARA 5.3, EIGHTH TO NINTH SE NTENCES), THAT HENCE THE FIRST PART OF SECOND LIMB IS NOT SATISFIED. NEITHER FIRM NOR TENANT IS RECEIVER OF RENT IN KIND OF ANY LAND ALSO AND HENCE THE SECOND PART OF SECOND LIMB IS ALSO NOT SATISFIED. AGAINST THIS FINDING OF TH E LD. CIT ALSO, NO CHALLENGE HAS BEEN RAISED BY THE ASSESSEE. 25. SECTION 2 (1A) (C) IS FOLLOWED BY TWO PROVISOS. TH ESE PROVISOS ARE :- PROVIDED PROVIDED PROVIDED PROVIDED THAT (I) THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF THE LAND, AND IS A BUILDING WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CULTIVATOR, OR THE RECEIVER OF RENT-IN-KIND, BY REASON OF HIS CONNE CTION WITH THE LAND, REQUIRES AS A DWELLING HOUSE, OR AS A STORE-HOUSE, O R OTHER OUT-BUILDING, AND (II) THE LAND IS EITHER ASSESSED TO LAND REVENUE IN I NDIA OR IS SUBJECT TO A LOCAL RATE ASSESSED AND COLLECTED BY OFFICERS OF THE GOVERNMENT AS SUCH OR WHERE THE LAND IS NOT SO ASSESSED TO LAND REV ENUE OR SUBJECT TO A LOCAL RATE, IT IS NOT SITUATED ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 15 (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISD ICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIP AL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITT EE OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDIN G CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNME NT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE. 26. THUS, THE MAIN SECTION 2 (1A)(C) IS SUBJECT TO THE ABOVE-SAID TWO PROVISOS. THAT IS TO SAY, THAT THE INCOME DESCRIBED IN T HE MAIN PROVISION OF SECTION 2 (1A) (C) SHALL BE AGRICULTURAL INCOME SUBJE CT TO THE TWO PROVISOS APPENDED TO THE SECTION. THIS MEANS THAT THE REQUIREM ENTS OF ONLY THE MAIN PROVISION OF SECTION 2 (1A)(C) ARE NOT SUFFICIENT TO BE MET SO AS TO ENABLE THE INCOME TO BE TERMED AS AGRICULTURAL INCOME. EVEN THE REQUIREMENTS OF THE TWO PROVISOS NEED TO BE FULFILLED AND THIS IS NOT AN EI THER/OR SITUATION. ALL THE REQUIREMENTS OF THE COMPOSITE SECTION 2 (1A) (C), I.E ., THE MAIN PROVISION AND BOTH THE PROVISOS, NEED MUST BE FULFILLED. 27. IT CANNOT BE DISPUTED THAT A PROVISO IS SUBSERVIENT TO THE MAIN PROVISION OF A SECTION. THAT BEING SO, ONCE THE ASSESSEE DOES NOT FALL WITHIN THE MAIN PROVISION OF SECTION 2 (1A) (C), IT WOULD A LSO, CONSEQUENTLY, NOT FALL UNDER EITHER OF THE PROVISOS TO THAT SECTION. HOWEVER , SINCE THE ASSESSEE HAS, IN ITS SUBMISSIONS ALL THROUGH, SOUGHT TO PLACE REL IANCE ON THE FIRST PROVISO, THIS ARGUMENT NEEDS TO BE MET. 28. AS PER PROVISO (I) TO SECTION 2 (1A) (C), THE BUI LDING HAS TO BE AT OR IN THE IMMEDIATE VICINITY OF LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES AND IT HAS TO BE A BUILDING WHICH IS REQUIRED BY THE RECEIVER OF THE RENT OR REVENUE, OR THE CULTIVATOR, OR THE RECEIVER OF RENT IN KIND, AS A DWELLING HOUSE OR AS A STORE-HOUSE, OR EITHER OUT-BUILD ING, BY REASON OF HIS ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 16 CONNECTION WITH THE LAND. BOTH THE REQUIREMENTS ARE ESSENTIAL TO BE MET, SINCE THE OPERATIVE WORD IS AND AND NOT OR. 29. THE ASSESSEE DID NOT STATE ANYTHING IN THIS REGARD BE FORE THE ASSESSING OFFICER IN ANY OF ITS REPLIES DATED 23.11.2006, 08.0 2.2007 AND 31.03.2007, OTHER THAN GIVING THE LEGAL PROVISIONS. EVEN IN ITS RE PLY DATED 21.10.2008 BEFORE THE LD. CIT IN RESPONSE TO THE NOTICE ISSUED U/S 263 OF THE ACT, THE ASSESSEE MERELY STATED (APB 28, FIRST PARA, FIRST SENTENCE) THAT BECAUSE OUR FIRM FULFILL ALL THE CONDITION OF AGRICULTURAL INCO ME HENCE ITS INCOME ARE ASSESSED AS AGRICULTURAL INCOME. IT WAS IN ITS FURTHER RE PLY DATED 15.12.2008 (APB 30-33) BEFORE THE LD. CIT, THAT THE ASSESSEE SUBMIT TED (APB 32) THAT:- AS REGARDS LOCATION OF GODOWNS.IT IS SUBMITTED THAT W E ARE ENCLOSING MAP OF GODOWNS WITH LOCATION WHICH IS EXIST ING ADJACENT TO AGRICULTURAL FIELDS AS SURROUNDED BY AGRICULTURAL LA NDS. 30. THE LD. CIT HAS NOT DEALT WITH THIS ASPECT OF THE MATTER IN THE IMPUGNED ORDER. HOWEVER, WE ARE GOING INTO IT SINCE IT IS REQU IRED FOR DETERMINING AS TO WHETHER THE VIEW TAKEN BY THE ASSESSING OFFICER WAS A VI EW TAKEN IN ACCORDANCE WITH LAW, I.E., THE PROVISIONS OF SECTION 2 (1A) (C) OF THE ACT. 31. BEFORE US, IT HAS BEEN CONTENDED ON BEHALF OF THE ASSESSEE (PAGE 5, PARA 2, EIGHTH LINE OF THE ASSESSEES WRITTEN SUBMISSIONS/BR IEF SYNOPSIS) THAT AND THAT SUCH GODOWN WERE IN THE VICINITY OF THE AGRICULTURAL LAND. . IT HAS FURTHER BEEN SUBMITTED (PAGE 7, PARA 5, SECOND SENT ENCE, OF THE ASSESSEES WRITTEN SUBMISSIONS) THAT IN THE INSTANT, IT I S SUBMITTED THAT THE SUPER STRUCTURE IS CONSTRUCTED BY THE ASSESSEE ON THE AGRIC ULTURAL LAND BELONGING TO THE PARTNERS OF THE FIRM, AND GODOWN WA S IN THE IMMEDIATE VICINITY OF THE AGRICULTURAL LAND, AND HAD BEEN CON STRUCTED FOR THE PURPOSE OF THE STORAGE OF THE AGRICULTURAL PRODUCE ONLY AND AS SU CH, INCOME DERIVED THEREFROM IS AGRICULTURAL INCOME. 32. IN ITS WRITTEN SUBMISSIONS, IN PARA 5 THEREOF, THE A SSESSEE HAS FURTHER SUBMITTED THAT IT HAD FILED DETAILED SUBMISSIONS BEFORE THE LD. CIT, COPY ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 17 WHEREOF IS STATED TO BE AT APB 37-39. THESE SUBMISSIONS B EFORE THE LD. CIT (RELEVANT PORTION AT APB 37-38) HAVE BEEN REPRODUCE D. HOWEVER, AT PAGE 4 OF THE WRITTEN SUBMISSIONS BEFORE US, AT ITEM NO.12, IT HAS BEEN STATED 12 - 5.03.2009 ASESSEE PREPARED A DETAILED REPLY REGAR DING THE INITIATION OF PROCEEDINGS U/S 263 OF THE ACT, HOWEVER, SAME WAS NOT T AKEN ON RECORD. 33. THE ASSESSEES CONTENTION IN THIS REGARD REMAINS THAT THE GODOWN BUILDING STANDS CONSTRUCTED ON AGRICULTURAL LAND BELON GING TO THE PARTNERS OF THE ASSESSEE FIRM. THIS, HOWEVER, DOES NOT HELP THE CASE O F THE ASSESSEE, SINCE THE FULL REQUIREMENT OF PROVISO (I) TO SECTION 2 (1A) (C) IS NOT ONLY OF THE BUILDING BEING IN THE IMMEDIATE VICINITY OF THE LAN D, BUT ALSO THAT THE BUILDING IS REQUIRED BY THE RECEIVER OF THE RENT OR THE REVEN UE, OR THE CULTIVATOR, OR THE RECEIVER OF THE RENT-IN-KIND, BY REASON OF HIS CONN ECTION WITH THE LAND, AS A DWELLING HOUSE, OR AS A STORE-HOUSE, OR OTHER OUT-BUILD ING. NOW, AS NOTED, NEITHER IS THE ASSESSEE THE RECEIVER OF THE RENT OR REV ENUE, OR THE RECEIVER OF RENT-IN-KIND, OR THE CULTIVATOR OF THE LAND, NOR DO ES THE ASSESSEE REQUIRE THE BUILDING EITHER AS A DWELLING HOUSE, OR AS A STORE-HOUS E, OR AS OTHER OUT- BUILDING. FURTHER, AS DISCUSSED ABOVE, PROVISO (I) IS SU BSERVIENT TO THE MAIN PROVISION OF SECTION 2 (1A) (C) AND SINCE THE ASSESSEE DO ES NOT FULFILL THE CONDITIONS OF THE MAIN PROVISION OF SECTION 2(1A) (C ), THE FACTUM OF THE BUILDING BEING IN THE IMMEDIATE VICINITY OF THE LAN D, BY VIRTUE OF BEING CONSTRUCTED THEREON, DOES NOT BRING THE INCOME EARNED BY THE ASSESSEE WITHIN THE KEN OF AGRICULTURAL INCOME AS DEFINED I N SECTION 2 (1A) (C). 34. NOW, COMING TO PROVISO (II) TO SECTION 2 (1A) (C ). AS PER THIS PROVISO, THE LAND SHOULD EITHER BE ASSESSED TO LAND REVENUE IN INDIA OR IT SHOULD BE SUBJECT TO A LOCAL RATE AND WHERE IT IS NOT SO ASSESSED, IT SHOULD NOT BE LOCATED WITHIN ANY URBAN AREA, AS DEFINED IN CLAUSES ( A) AND (B) OF PROVISO (II). 35. IN THIS REGARD, VIDE REPLY DATED 15.12.2008 (APB 30-33), FILED BY THE ASSESSEE BEFORE THE LD. CIT, THE ASSESSEE STATED (APB 32): AS REGARDS ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 18 LOCATION OF GODOWNS AND SITUATION FROM MUNICIPAL LIMI TS. IT IS SITUATED AWAY FROM THE CITY AS ALSO MENTIONED IN THE M AP ENCLOSED FOR YOUR KIND CONSIDERATION. 36. BEFORE EITHER OF THE AUTHORITIES BELOW, NO SUBMISSI ON WAS MADE BY THE ASSESSEE IN ANY OF ITS REPLIES. THE LD. CIT HAS ALSO NOT GO NE INTO THIS ISSUE. 37. FROM THE ASSESSEES REPLY DATED 15.12.2008 (RELEVANT PORTION EXTRACTED ABOVE), IT COMES OUT THAT THE STAND OF THE ASSESSEE IN THIS REGARD IS THAT THE LAND IN QUESTION IS SITUATED AWAY FROM THE CITY. HOWEVER, THIS IS INSUFFICIENT TO SHOW EITHER THAT THE LAND IS NOT SITUAT ED IN AN URBAN AREA WITHIN THE JURISDICTION OF A MUNICIPALITY, ETC., AS E NVISAGED BY CLAUSE (A) TO PROVISO (II), OR THAT IT IS NOT SITUATED WITHIN A DISTA NCE OF EIGHT KMS. FROM THE LOCAL LIMITS OF ANY MUNICIPALITY, ETC., AS GIVEN IN C LAUSE (B) TO PROVISO (II). 38. THUS, BESIDES NOT BEING COVERED UNDER THE MAIN PRO VISION OF SECTION 2(1A) (C), THE ASSESSEE HAS ALSO NOT BEEN ABLE TO MAKE O UT THE FULFILLMENT OF THE TWO PROVISOS THERETO. 39. THE ASSESSEE HAS ALSO SOUGHT TO TAKE RECOURSE TO EXPLAN ATION 2 TO SECTION 2 (1A). THIS EXPLANATION READS AS FOLLOWS:- EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT INCOME DERIVED FROM ANY BUILDING OR LAND REFERRED TO IN SUB-CLAUSE (C) ARISING FROM THE USE OF SUCH BUILDING OR LAND FOR AN Y PURPOSE (INCLUDING LETTING FOR RESIDENTIAL PURPOSE OR FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION) OTHER THAN AGRICULTURE FALLING UNDER SUB-C LAUSE (A) OR SUB- CLAUSE (B) SHALL NOT BE AGRICULTURAL INCOME. 40. THUS, AS PER EXPLANATION 2 TO SECTION 2 (1A), INC OME DERIVED FROM ANY BUILDING REFERRED TO IN SECTION 2 (1A) (C) ARISING F ROM THE USE OF SUCH BUILDING FOR ANY PURPOSE OTHER THAN AGRICULTURE FALLING UNDER SECTION 2 (1A) (A) OR SECTION 2 (1A) (B) SHALL NOT BE AGRICULTURAL INCOME. 41. IN ITS REPLY DATED 21.10.2008 (APB 26-29) FILED IN RESPONSE TO THE NOTICE U/S 263 OF THE ACT, THE ASSESSEE STATED (APB 29) A S FOLLOWS:- ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 19 EXPLANATION 2 CLEARLY SAYS THAT INCOME DERIVED FROM ANY BUILDING OR LAND REFERRED IN SUB CLAUSE (C) ARISING FROM THE USE OF SUCH BUILDING OR LAND FOR ANY PURPOSE (INCLUDING LETTING FOR RESIDENTI AL PURPOSE OR FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION) OTHER THAN AGR ICULTURE FALLING UNDER SUB CLAUSE (A) OR SUB-CLAUSE (B) SHALL NOT BE AGRICULTURAL INCOME. IN OUR CASE THE BUILDING FROM WHICH INCOME HAS BEEN DERIVED BY WAY OF RENT HAS BEEN USED FOR THE AGRICULTURE FALLING UNDER S UB-CLAUSE (A) OR SUB-CLAUSE (B) IN AS MUCH AS THAT AGRICULTURE PRODUCE HAS BEEN KEPT IN THE GODOWN SO AS TO MAKE IT FIT TO BE TAKEN TO MARKET AND FURTHER IT IS USED FOR AGRICULTURAL PURPOSES THAT IS AGRICULTURE PRO DUCE HAS BEEN KEPT IN. IN SUCH CIRCUMSTANCES THE INCOME SHOWN BY THE ASSESSEE FIRM IS TOTALLY COVERED BY EXPLANATION (2) OF SECTION 2 (1A) (C). 42. IN ITS WRITTEN SUBMISSIONS DATED 05.03.2009 (APB 34- 36) FILED BY THE ASSESSEE BEFORE THE LD. CIT, BUT NOT TAKEN ON RECORD BY HIM, THE ASSESSEE HAS STATED AS FOLLOWS:- EXPLANATION 2 WAS INSERTED WITH EFFECT FROM 01.04.20 01. ITS SCOPE AND AMBIT HAS BEEN EXPLAINED BY CBDT CIRCULAR NO.794 DATED 9 TH AUGUST 2000. THE EXPLANATION ONLY CLARIFIED THAT ANY INCOME ARISING FROM THE USE OF SUCH BUILDING FOR ANY PURPOSE OTHER THAN AGRIC ULTURE SHALL NOT BE INCLUDED IN THE DEFINITION OF AGRICULTURAL INCOME. FOR EXAMPLE IF A PERSON HAS INCOME FROM USING SUCH BUILDING FOR RESI DENTIAL PURPOSE OR ANY OTHER SIMILAR PURPOSE, THEN SUCH INCOME CANNOT BE TREATED AS AGRICULTURAL INCOME. IN OTHER WORDS IN LIGHT OF THE SCOPE AMBIT AND INTENT OF THE EXPLANATION AS DESCRIBED IN THE EXPLANATORY CIRCULAR TH E PROVISION AS CONTAINED IN THE EXPLANATION-2 TO SECTION 2 (1A) IS PER USED, IT WOULD BE SEEN THAT THE EXPLANATION-2 CLARIFIES THAT THE BUILDING AS IS SITUATED ON AND IN THE VICINITY OF AGRICULTURAL LAND SHOULD BE USE D FOR THE PURPOSES OF AGRICULTURE FALLING IN ITEM (A) OR ITEM (B) IN (1A ) OF THIS SECTION. A PERUSAL OF THE ABOVE WOULD SHOW THAT TO CLAIM THE INCO ME OF ANY BUILDING OF THE AGRICULTURAL LAND AND IN THE VICIN ITY THEREOF, AN ACTIVITY AS IS STATED EITHER IN CLAUSE (A) OR CLAUSE (B) SHOULD BE CONDUCTED BY THE ASSESSEE. IN THE PRESENT CASE THE ASSESSEE CONDUCTS WHAT IS STATE D AND CONTEMPLATED IN CLAUSES (B) WHICH IS BEING SUBMITTED B ELOW FOR FAVOURABLE CONSIDERATION. ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 20 CLAUSE (B) (II) TO SECTION 2 (1A) STATES AS UNDER:- THE PERFORMANCE BY A CULTIVATOROF ANY PROCESS ORDIN ARILY EMPLOYED BY A CULTIVATOR..TO RENDER THE PRODUCE SO RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET. THE ASSESSEE IN THE PRESENT CASE PERFORMS THE SAME FUN CTION AS IT HELPS IN THE STORAGE OF AGRICULTURAL PRODUCE SO THAT I T REMAIN FIT TO BE TAKEN TO THE MARKET. IN OTHER WORD THE ASSESSEE PERFORMS THE SAME FUNCTIONS AS IS CONTEMPLATED TO BE PERFORMED BY A CULT IVATOR TO RENDER THE PRODUCE MARKETABLE. AN INDEPENDENT PERUSAL OF THE EXPLANATION 2 WILL SHO W THAT IT ONLY RESTRICTS THE USAGE OF THE BUILDING OR SUCH BUILDI NG FOR A SPECIFIC PURPOSE, WITHOUT ANY RESTRICTION AS TO THE RECIPIENT. THE EXEMPTION IS CONFERRED AND CONFERRED INDELIBLY ON A PARTICULAR KI ND OF INCOME AND DOES NOT DEPEND ON THE CHARACTER OF THE RECIPIENT. 43. THUS, ACCORDING TO THE ASSESSEE, EXPLANATION 2 TO SE CTION 2 (1A) IS ATTRACTED SINCE THE GODOWN BUILDING HAS BEEN USED BY T HE ASSESSEE FOR AGRICULTURAL PURPOSE, FALLING UNDER SECTION 2 (1A) (B). AS PER SECTION 2 (1A) (B) (II), AGRICULTURAL INCOME MEANS ANY INCOME DER IVED FROM LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES, BY THE PER FORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND TO RENDER THE PRODUCE R AISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MARKET. ACCORDING TO THE ASSESSEE, IT PERFORMS THE SAME FUNCTION THAT ORDINARILY EMPLOYED BY A CULTIVATOR O R RECEIVER OF RENT-IN-KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MARKET, SINCE IT HELPS IN THE STORAGE OF AGRICULTURAL PRODUCE SO THAT IT REMAINS FIT TO BE TAKEN TO THE MARKET. 44. THE RELEVANT OBSERVATIONS OF THE LD. CIT IN THIS R EGARD (IMPUGNED ORDER, PAGE 6, FIRST PARA) ARE: THE ABOVE SUBMISSION OF THE COUNSEL HAS BEEN CONSID ERED. EXPLANATION 2 WAS INSERTED TO CLARIFY THE USAGE OF BUI LDING REFERRED IN SECTION 2 (1A) (C). FOR AN INCOME EARNED FROM A BUI LDING TO THE AGRICULTURE INCOME UNDER THE PROVISION OF SECTION 2 ( 1A) (C), USAGE OF BUILDING IS AS IMPORTANT AS DETERMINING THE QUALIFICATI ON OF ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 21 OWNER/OCCUPIER OF BUILDING. I HAVE ALREADY DISCUSSE D IN PARA 5.1 QUOTING FROM THE SAMPATH AYENGARS LAW OF INCOME TAX TH AT FOR AN INCOME TO BE EXEMPT UNDER THIS PROVISION, THREE QUALIFI CATIONS, I.E., ONE FOR OWNER OR OCCUPIER, THE SECOND FOR THE BUILDING AN D THIRD FOR THE LAND ARE TO BE SATISFIED. THEREFORE CONTENTION OF THE COUNSE L AS REPRODUCED IN THE PARA ABOVE THAT INCOME FALLING WITHIN DEFINITIO N UNDER CLAUSE 2 (1A) WOULD BE AGRICULTURE INCOME AND EXEMPT FROM TAX AS SUCH, HOW SO EVER AND BY WHOM SO EVER IT MAY RECEIVED, IS NOT CORR ECT. 45. IN THE WRITTEN SUBMISSIONS BEFORE US, THE ASSESSEE CONTE NDS (PAGE 5, PARA 2) THAT AND FURTHER EXPLANATION-2 DOES NOT H IT THE SUBMISSIONS OF THE ASSESSEE., AND (PARA 6, PAGE 8) THAT: IT IS FURTHER MOST HUMBLY SUBMITTED THAT IF THE RECEIPT OF RENT IS ON PERFORMANCE OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT, WILL ALSO BE AN INCOME FROM AGRICU LTURE, IT IS SUBMITTED THAT SUCH AN INCOME, IS IN THE NATURE OF SUB CLAUSE (I I) & (III) OF CLAUSE (B) OF SECTION 2 (1A) OF THE ACT. EXPLANATION 2 OF THE SECTION CANNOT BE INVOKED. IT IS MOST HUMBLY SUBMITTED THAT THE AFORESAID E XPLANATION WOULD COME INTO OPERATION ONLY WHEN, IT DOES NOT PASS TH E AFORESAID TEST. THEREFORE, IT IS MOST HUMBLY SUBMITTED THAT THE TEST TO DETERMINE THE NATURE OF RECEIPT IS WHETHER THE SAME PASSES THE TEST AS IS PROVIDED IN SUB CLAUSE (II) & (III) OF CLAUSE (B) O F SECTION 2 (1A) OF THE ACT, AND IF THE USER OF THE GODOWN, IS FOR THE PURPOSE OF AFORESAID SUB- CLAUSE, THE RECEIPT WOULD BE AGRICULTURAL INCOME. 46. THEREFORE, IT IS SEEN THAT THE ASSESSEE HAS TAKEN TWO MUTUALLY DIVERGENT STANDS. BEFORE THE LD. CIT, IT STATED THAT I T STOOD COVERED UNDER EXPLANATION 2 TO SECTION 2 (1A). ON THE OTHER HAND, BEFORE US, IT STATES THAT EXPLANATION 2 CANNOT BE INVOKED, SINCE IT (THE ASSESSEE) PASSES THE TEST OF SECTION 2 (1A) (B) (II) AND (III). 47. WE, IN THE PRECEDING PORTION OF THIS ORDER, HAVE HELD THAT THE ASSESSEE DOES NOT PASS THE TEST OF SECTION 2 (1A) (II) (III). NO W, AS TO THE APPLICABILITY OR OTHERWISE OF EXPLANATION 2 TO SECTION 2 (1A), IT IS SE EN THAT THIS EXPLANATION IS WITH REGARD TO INCOME DERIVED FROM ANY BUILDING R EFERRED TO IN SECTION 2 (1A) (C). BUILDING AS REFERRED TO IN SECTION 2 (1A ) (C) IS ANY BUILDING OWNED OR OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSES, OR OCCUPIED BY THE CULTIVATOR OR THE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 22 RECEIVER OF RENT-IN-KIND, OF ANY LAND WITH RESPECT T O WHICH, OR THE PRODUCE OF WHICH, ANY PROCESS MENTIONED IN SECTIONS 2 (1A) (B) ( II) AND (III) IS CARRIED ON. THIS DEFINITION OF BUILDING AS SEEN ABOVE, DOES NOT G ET ATTRACTED TO THE PRESENT CASE. THUS, SINCE THE GODOWN BUILDING IN QUESTIO N DOES NOT COME WITHIN THE DEFINITION OF BUILDING AS CONTAINED IN SECTION 2 (1A) (C), THE INCOME THEREFROM CANNOT BE HELD TO BE AGRICULTURAL INCOME WITH THE HELP OF EXPLANATION 2 TO SECTION 2 (1A). 48. THEN, THE ASSESSEES CONTENTION THAT THE ASSESSEE PERFO RMS THE SAME FUNCTION AS THAT PERFORMED BY A CULTIVATOR, AS IT HEL PS IN THE STORAGE OF AGRICULTURAL PRODUCE SO AS TO KEEP IT FIT TO BE TAKE N TO THE MARKET, AND SO, THE INCOME DERIVED IS AGRICULTURAL INCOME, IS ALSO OF NO A ID TO THE ASSESSEE. SECTION 2 (1A) (C) ALSO STATES . ANY PROCESS MENTION ED IN PARAGRAPH (II) AND . OF SUB-CLAUSE (B). . AS PER SECTION 2 (1A) (B) (II), THE PERFORMANCE OF THE PROCESS HAS TO BE BY A CULTIVATOR OR RECEIVER O F RENT-IN-KIND AND THE ASSESSEE, AS HELD HEREINABOVE, IS NEITHER A CULTIVATOR, N OR RECEIVER OF RENT-IN- KIND OF THE LAND. IT IS TRITE THAT EACH AND EVERY PH RASE, DOWN TO ITS VERY LAST WORD, OF A RELEVANT PROVISION NEEDS NECESSARILY BE CARE FULLY COMPLIED WITH TO ENSURE A JUST, FAIR AND PROPER CONCLUSION ON A GIVEN F ACT-SITUATION. SANS THAT, WHAT WOULD COME ABOUT IS A STARK VIOLATION OF THE PRO VISION. AND THAT IS JUST WHAT HAS HAPPENED HERE. THE UNEQUIVOCAL REQUIREMENT OF SECTION 2 (1A) (B) (II) IS THAT THE PERFORMANCE OF ANY PROCESS ORDINARIL Y EMPLOYED BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND TO RENDER TH E PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MARKET MUST BE BY A C ULTIVATOR OR RECEIVER OF RENT-IN-KIND . IN FACT, THE CLAUSE OPENS WITH THESE EMPHASIZED WORDS. TO REITERATE: 2(1A): 'AGRICULTURAL INCOME' MEANS (B) ANY INCOME DERIVED FROM SUCH LAND BY . ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 23 (II) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIV ER OF RENT-IN-KIND TO RENDER THE PRODUCE RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO THE MARKET; 49. NOW, THE SPECIFIC SELF-AVOWED STAND OF THE ASSESSEE I N THIS REGARD AS EVIDENT FROM ITS WRITTEN SUBMISSIONS DATED 05.03.2009 ( APB 34-36) FILED BY IT BEFORE THE CIT, WHICH WRITTEN SUBMISSIONS, AS PER TH E ASSESSEE ITSELF, AS NOTED HEREINABOVE, WERE NOT TAKEN ON RECORD BY THE CIT, IS THIS: IN THE PRESENT CASE THE ASSESSEE CONDUCTS WHAT IS STATED AND CONTEMPLATED IN CLAUSES (B) WHICH IS BEING SUBMITTED B ELOW FOR FAVOURABLE CONSIDERATION. CLAUSE (B) (II) TO SECTION 2 (1A) STATES AS UNDER:- THE PERFORMANCE BY A CULTIVATOROF ANY PROCESS ORDIN ARILY EMPLOYED BY A CULTIVATOR..TO RENDER THE PRODUCE SO RAISED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET. THE ASSESSEE IN THE PRESENT CASE PERFORMS THE SAME FUN CTION AS IT HELPS IN THE STORAGE OF AGRICULTURAL PRODUCE SO THAT I T REMAIN FIT TO BE TAKEN TO THE MARKET. IN OTHER WORD THE ASSESSEE PERFORMS THE SAME FUNCTIONS AS IS CONTEMPLATED TO BE PERFORMED BY A CULT IVATOR TO RENDER THE PRODUCE MARKETABLE. 50. THUS, CLEARLY, IN THE INTERPRETATION OF SECTION 2 (1A) (B) (II) IN ITS FAVOUR BY THE ASSESSEE, THE OPERATIVE PORTION THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN-KIND HAS GONE LEFT OUT, RENDERI NG SUCH INTERPRETATION VITIATED IN LAW. THAT WHICH CANNOT BE DONE DIRECTLY BECAUSE OF THE SPECIFIC MANDATORY PROHIBITION IMPOSED BY A PROVISION OF LAW C ANNOT BE ALLOWED TO BE DONE INDIRECTLY BY PERMITTING THE NON-CONSIDERATION OF A RELEVANT AND APPLICABLE PORTION OF SUCH PROVISION. 51. THE ASSESSEE HAS FURTHER CONTENDED (PAGE 9, PARA 7 O F THE WRITTEN SUBMISSIONS) THAT IT IS NOT THE REQUIREMENT OF LAW THAT THE OWNER OF THE GODOWN MUST USE THE GODOWN, AS THE SAME IS NEITHER THEI R INTENT, NOR THE OBJECT OF SECTION 2 (1A) (C), AS AN OWNER CANNOT REC EIVE RENT FROM HIMSELF. EVEN THIS ARGUMENT IS NOT WELL FOUNDED. SECTION 2 (1A ) (C) ENVISAGES THE BUILDING TO BE OWNED AND OCCUPIED BY THE RECEIVER O F THE RENT OR REVENUE OF ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 24 LAND SITUATED IN INDIA AND USED FOR AGRICULTURAL PURP OSES. THE BUILDING IN QUESTION IS OWNED BY THE ASSESSEE FIRM, BUT THE ASSESSEE IS NO T THE RECEIVER OF THE RENT OR THE REVENUE OF THE LAND BENEATH IT, EVEN THOUGH THE LAND WAS BROUGHT TO THE FIRM AS CAPITAL BY ITS PARTNERS. SO, T HIS ARGUMENT OF THE ASSESSEE IS ALSO REJECTED. 52. FROM THE ABOVE DISCUSSION, IT IS SEEN THAT THE EXPL ANATION OFFERED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS ACCEPTED BY TH E ASSESSING OFFICER WITHOUT DEALING WITH AS TO HOW SUCH EXPLANATI ON WAS ACCEPTABLE. THE ASSESSMENT ORDER STATES ONLY AS FOLLOWS:- . SINCE IT WAS NOTICED THAT THE INCOME DERIVED BY THE ASSESSEE WAS LETTING OUT OF GODOWNS, IT WAS REQUIRED TO EXPLAIN AS TO WHY ITS INCOME SHOULD NOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS FILED A DETAILED WRITTEN REPLY IN THIS BEH ALF WHEREIN THE ASSESSEE HAS RELIED UPON THE PROVISIONS OF SECTION 2 (1A) (C) OF THE INCOME-TAX ACT, 1961. HAVING CONSIDERED ASSESSEES RE PLY, THE ASSESSEES CLAIM OF AGRICULTURAL INCOME IS ACCEPTED. 53. THUS, THE ASSESSMENT ORDER IS A NON-SPEAKING ORDER. T HE CITS ORDER, PER CONTRA, IS A DETAILED ORDER, EVINCING HOW THE VI EW TAKEN BY HIM IS A VIEW WHICH IS IN ACCORDANCE WITH LAW, AS AGAINST THE ASSESSING OFFICERS VIEW, WHICH IS NOT A POSSIBLE VIEW IN LAW, MUCH LESS A PLAUSIBL E ONE. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS REJECTED AND THE ACTION OF THE LD. CIT IN HOLDING THE ASSESSMENT ORDER TO BE AN ERRONEOUS O RDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS CONFIRMED. 54. NOW, COMING TO THE VARIOUS ALTERNATIVE CONTENTIO NS RAISED BY THE ASSESSEE, WE HAVE HEARD BOTH THE PARTIES. IN OUR CONSIDER ED VIEW, THE ISSUE OF ASSESSABILITY OF INCOME UNDER A PARTICULAR HEAD PRESC RIBED BY THE IT ACT IS AN ISSUE BASICALLY CONCERNED WITH ASSESSMENT. THE LD. CIT, AFTER FINDING THE ORDER PASSED BY THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, OUGHT TO HAVE SET ASIDE THE M ATTER TO THE ASSESSING OFFICER TO DECIDE THE HEAD OF INCOME. SUCH A COURSE WOULD HAVE MET THE REQUIREMENT OF LAW. SINCE THIS HAS NOT BEEN DONE, WE REMIT THE ALTERNATIVE ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 25 CONTENTIONS OF THE ASSESSEE TO THE FILE OF THE ASSESSING OFF ICER FOR DECISION. THE ASSESSEE WILL BE AT LIBERTY TO RAISE BEFORE THE ASSESSIN G OFFICER ALL SUCH ALTERNATIVE CONTENTIONS AS AVAILABLE TO IT UNDER THE LAW. THE ASSESSING OFFICER SHALL DECIDE THESE ALTERNATIVE CONTENTIONS ON AFFORDIN G ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. ORDERED ACCORDINGLY. 55. GROUND NO.11 STATES THAT THE LD. CIT HAS WRONGLY I NITIATED PROCEEDINGS U/S 271 (1)(C) OF THE ACT AND HAS ERRED IN LEVYING IN TEREST UNDER SECTIONS 234A AND 234B. 56. AS PER GROUND NO.12, INTEREST OF ` 23,288, LEVIED U/S 234D OF THE ACT IS NOT IN ACCORDANCE WITH THE DIRECTIONS AND THAT INTER EST OF ` 13,247/-, WITHDRAWN U/S 244A OF THE ACT IS ALSO IN EXCESS OF THE D IRECTION OF THE CIT AND, THEREFORE, THE NOTICE OF DEMAND ISSUED IN PURSUAN CE OF THE ORDER BE HELD AS NOT VALID. 57. BOTH THESE ISSUES ARE CONSEQUENTIAL. C.O. NO.162/DEL/2009 58. A PERUSAL OF THE CROSS OBJECTIONS RAISED BY THE DE PARTMENT RUNNING INTO SIX PAGES, SHOWS THAT THESE CROSS OBJECTIONS ARE NOT O BJECTIONS AGAINST THE CITS ORDER. RATHER, THEY ARE ARGUMENTS ATTEMPTIN G TO JUSTIFY THE CITS ORDER, AS CORRECTLY STATED BY THE ASSESSEE IN PARA 12, A T PAGE 12 OF THE ASSESSEES WRITTEN SUBMISSIONS. THE ASSESSEE HAS ALSO STATED THAT H OWEVER, IN THE CROSS OBJECTIONS, IT HAS NOWHERE BEEN STATED THAT THE OPINION OF THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW. 59. WHILE DEALING WITH THE APPEAL FILED BY THE ASSESSEE , FOR THE REASONS RECORDED THEREIN, WE HAVE UPHELD THE ORDER PASSED BY THE LD. CIT. ON THE BASIS OF THOSE VERY REASONS, THE CROSS OBJECTIONS RAISED BY THE DEPARTMENT ARE ACCEPTED. 60. TO SUM UP, THE ASSESSEES GRIEVANCE THAT THE LD. CIT (A) HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT, SEE KING TO SUBSTITUTE HIS ITA NO.1632/DEL/2009 C.O. NO.162/DEL/2009 26 OWN OPINION FOR THE OPINION OF THE ASSESSING OFFICER, I GNORING THAT THE OPINION OF THE ASSESSING OFFICER IS A POSSIBLE OPINION AN D IS ONE OF THE COURSES PERMISSIBLE IN LAW AND CANNOT BE SAID TO BE AN O PINION WHICH IS UNSUSTAINABLE IN LAW (WRITTEN SUBMISSIONS FILED BEFOR E US, PAGE 5, PARA 2, LAST SENTENCE), IS REJECTED AND THE ORDER PASSED BY THE LD. CIT (A) IS CONFIRMED. THE CROSS OBJECTIONS OF THE DEPARTMENT IN T HIS REGARD ARE ACCEPTED AS BEING IN JUSTIFICATION OF THE CIT (A)S OR DER. HOWEVER, ALL OF THE ALTERNATIVE SUBMISSIONS TAKEN BY THE ASSESSEE ARE REMITTED TO THE FILE OF THE ASSESSING OFFICER, SINCE THERE WAS NO OCCASION FOR THESE SUB MISSIONS TO ARISE BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDI NGS AND SUCH REMITTANCE WILL ENSURE THE AVAILABILITY OF THE JUDIC IAL HIERARCHY OF APPEALS AS MADE AVAILABLE BY THE ACT. 61. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AS INDICATED, WHEREAS THE CROSS OBJECTIONS RAISED BY THE DEPARTMENT AR E ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.20 14. SD/- SD/- [ G.D. AGRAWAL ] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 31 ST JANUARY, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.