Smita Vishweshwar, CHENNAI V. ITO, CHENNAI

ITA 1236/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7589 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURPIYO PAL
• Assessee Lawyers: M V SWAROOP
• Section: 143(3); 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1236/MDS/2016 / ASSESSMENT YEAR : 2010-11 SMT. SMITA VISHWESHWAR, 356, TTK ROAD, ALWARPET, CHENNAI 600 018 V. THE INCOME TAX OFFICER, NON COMPANY WARD 3(3), CHENNAI. PAN:AADPV2354F ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI M.V. SWAROOP, ADVOCATE /RESPONDENT BY : SHRI SURPIYO PAL, JCIT /DATE OF HEARING : 02.03.2017 /DATE OF PRONOUNCEMENT : 08.03.2017 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.137/2013-14/A.Y 2010-11/CIT(A)-4 DATED 15.02.201 6 PASSED U/S. 250(6) R.W.S. 143(3) OF THE ACT. 2 I.T.A. NO. 1236/MDS/2016 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HER A PPEAL, HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LD. CIT( A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO WHO HAD REJECTED THE CLAIM OF THE ASSESSEE FOR HAVING EARNED AGRICULTURAL INCOME OF R S.10,66,010/- BY TREATING IT AS INCOME FROM OTHER SOURCES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL EARNING INCOME FROM BUSINESS AND PROFESS ION FILED HER RETURN ON INCOME ON 03.02.2011 FOR THE RELEVANT ASS ESSMENT YEAR ADMITTING INCOME OF RS.13,65,979/- WHICH COMPRISED OF AGRICULTURAL INCOME RS.10,49,510/-. THE CASE WAS SELECTED FOR S CRUTINY AND FINALLY ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 20.03.2013, WHEREIN THE LD. AO MADE ADDITION OF RS. 10,92,215/- UNDER THE HEAD INCOME FROM OTHER SOURCE REJECTING T HE CLAIM OF THE ASSESSEE TO TREAT IT AS AGRICULTURAL INCOME. 4. DURING THE COURSE OF ASSESSMENT, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE DID NOT OWN ANY AGRICULTURAL L AND. HOWEVER, SHE ALONG WITH ANOTHER 11 PERSONS HAD OBTAINED 319. 5 ACRES OF AGRICULTURAL LAND ON LEASE FROM M/S. BARWOOD PLANTA TIONS PVT. LTD., 3 I.T.A. NO. 1236/MDS/2016 M/S. GUDALUR INDUSTRIAL AND AGRICULTURAL ENTERPRISE S PVT. LTD., AND M/S. SRI HARIPRASAD (HUF). IT WAS ALSO REVEALED TH AT THE ASSESSEE DID NOT HAVE ANY EXPERTISE WITH RESPECT TO THE AGRI CULTURAL ACTIVITIES CARRIED ON IN THE LEASE LAND. ON QUERY, IT WAS EXP LAINED THAT ONE MR. E. J. COELHO MANAGES THE AGRICULTURAL ACTIVITIE S ON BEHALF OF ALL THE 12 PERSONS. IT WAS FURTHER REVEALED THAT THE E NTIRE PRODUCE OF GREEN TEA LEAVES WERE SOLD TO M/S. SILVER CLOUD TEA FACTORY ON DAILY BASIS AND IN LIEU OF THE SALE PROCEEDS THEY DISBURS E EXPENDITURE TOWARDS CULTIVATION AND MAINTENANCE OF THE LAND AND THE BALANCE AMOUNT IS REMITTED TO ALL THE LEASES PROPORTIONATEL Y WITH RESPECT TO THE LAND OBTAINED BY THEM ON LEASE. FROM THE ABOVE FACTS IT WAS EVIDENT THAT THE ASSESSEE DID NOT TAKE PART IN ANY ACTIVITIES WITH RESPECT TO THE CULTIVATION OF THE LAND. THEREFORE THE LD. AO OPINED THAT THE ARRANGEMENT MADE BY THE ASSESSEE ALONG WIT H ALL 11 OTHER INDIVIDUALS IS NOTHING BUT DIVERSION OF THE PROFIT FROM THE LAND HOLDING COMPANIES TO THE ASSESSEE AND HER ASSOCIATES IN ORD ER TO AVOID DIVIDEND TAX. THE LD. AO ALSO CAME TO THE CONCLUSI ON THAT THE AMOUNT RECEIVED BY THE ASSESSEE ALONG WITH HER ASSO CIATES IS NOTHING BUT DIVIDEND RECEIVED FROM THE COMPANIES AN D THEREFORE BROUGHT THE AMOUNT OF RS.10,66,010/- TO TAX UNDER T HE HAD INCOME FROM OTHER SOURCE. 4 I.T.A. NO. 1236/MDS/2016 5. ON APPEAL, THE LD. CIT(A) AFTER EXAMINING THE IS SUE IN DETAIL CONFIRMED THE ORDER OF THE LD. AO BY OBSERVING AS U NDER: 15. I HAVE CONSIDERED THE REMAND REPORT FURNISHED BY THE AO AND THE COUNTER ARGUMENTS OF THE APPELLANT AGAINST THE FIND INGS OF THE PRESENT AO. AFTER ANALYZING ALL THE RELEVANT FACTS AND THE EVIDENCES ON RECORD, I HAVE ARRIVED AT A CONCLUSION THAT THE GENUINENESS A ND THE BONAFIDE CHARACTER OF THE ALLEGED AGRICULTURE INCOME IS HIGH LY QUESTIONABLE. IT IS IMMATERIAL WHETHER THE AGRICULTURAL LAND IS OWNED B Y THE ASSESSEE OR NOT SO LONG THE AGRICULTURAL OPERATIONS ARE CARRIED OUT BY THE ASSESSEE HERSELF OR THROUGH THE LABOUR OR THE MAN POWER UNDE R HER DIRECT SUPERVISION. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO PROVE THAT EITHER THE AGRICULTURE OPERATIONS WERE CARRIED OUT BY HERSELF OR THROUGH SOME OTHER PERSON UNDER HER DIRECT SUPERVISION. IN THE PRESENT CASE, THE ENTIRE AGRICULTURAL OPERATIONS ARE CARRIED OUT BY S OME THIRD PERSON WHO IS NOT AT ALL ACCOUNTABLE TO THE APPELLANT. THE AGR ICULTURE INCOME NEVER REACHES THE APPELLANT WHICH IS ENTIRELY POCKETED BY MR. E J COELHO WHO MANAGES THE AGRICULTURE OPERATIONS. IN FACT IT IS M R. E J COELHO IN WHOSE HANDS THE INCOME SHOULD BE TREATED AS AGRICULTURE I NCOME AND NOT THE APPELLANT. THE ASSESSEE HAS ACTUALLY FURTHER LEASED OUT THE LAND TO MR. E J COELHO WHO DOES CARRY OUT THE ACTUAL AGRICULTURE ACTIVITIES BY ENGAGING LABOUR AND ALL. DURING THE APPELLATE PROCE EDINGS, THE ASSESSEE FAILED TO FURNISH ANY DETAILS REGARDING THE EXPENSE S INCURRED TOWARDS THE AGRICULTURE OPERATIONS, INPUTS, SEEDS/SAPLINGS, IRR IGATION, ELECTRICITY, LABOUR COST ETC. ETC. IT WAS STATED BY THE APPELLAN T THAT ALL THESE EXPENSES WERE INCURRED BY MR. E J COELHO OUT OF THE SALE PRO CEEDS OF AGRICULTURAL PRODUCE WHICH ALWAYS REMAINED WITH HIM. IT IS INTER ESTING TO NOTE THAT THE SALE PROCEEDS OF AGRICULTURE PRODUCE FOR THE EA RLIER YEARS TOO HAVE NOT REACHED THE APPELLANT SO FAR. THE AGRICULTURE I NCOME WHICH THE ASSESSEE HAS REFLECTED IN HER RETURN OF INCOME IS T HE NOTIONAL INCOME ONLY. 16. HENCE, KEEPING IN VIEW THE ABOVE FACTS AND THE CIRCUMSTANCES OF THE CASE AND ALSO CONSIDERING THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER AND THE REMAND REPORT, I AM OF THE CONSIDERED OPINI ON THAT THE APPELLANT IS NEITHER THE OWNER OF THE AGRICULTURAL LAND NOR DID SHE CARRY OUT ANY AGRICULTURE OPERATIONS DIRECTLY OR DIRECTLY UNDER HER SUPERVISION WHICH COULD HAVE ENABLED HER TO CLAIM THE AMOUNT OF RS.10,49,510/- AS AGRICULTURE INCOME. AS A RESULT, THE ACTION OF THE AO IS CONFIRMED. 5 I.T.A. NO. 1236/MDS/2016 6. BEFORE US, THE LD. AR VEHEMENTLY ARGUED BY STATI NG AS FOLLOWS:- 1) THE ASSESSEE HAD LEGALLY OBTAINED LEASE OF THE A GRICULTURAL LAND FROM THE LAND HOLDING COMPANIES. 2) THE LEASE TRANSACTION ENTERED BETWEEN THE ASSES SEE AND THE LAND HOLDING COMPANIES DOES NOT VIOLATE ANY LAW . 3) THE ASSESSEE HAD ENGAGED MANAGERS TO MANAGE THE LAND OBTAINED ON LEASE FOR CONDUCTING AGRICULTURAL ACTIV ITIES WHICH CANNOT BE ALSO HELD AS ILLEGAL. 4) THE COMPANY WHICH PURCHASES THE AGRICULTURAL PRO DUCE FROM THE ASSESSEE HAD DISBURSED THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS AGRICULTURAL ACTIVITIES AND REMITT ED THE BALANCE AMOUNT TO THE ASSESSEE WHICH CANNOT BE ALSO HELD AS ILLEGAL. IT WAS THEREFORE ARGUED BY THE LD. AR THAT THE OR DERS OF THE REVENUE AUTHORITIES CANNOT BE APPRECIATED WHEN THE FACTS REVEAL THAT THE ASSESSEE HAD LEGALLY CULTIVATED THE AGRICU LTURAL LAND OBTAINED BY HER ON LEASE. HENCE IT WAS PLEADED THA T THE LD. AO MAY BE DIRECTED TO DELETE THE ADDITION MADE UNDER T HE HEAD INCOME FROM OTHER SOURCE BY TREATING IT AS DIVIDEND INCOME. 6 I.T.A. NO. 1236/MDS/2016 6. THE LD. DR STOUTLY ARGUED IN SUPPORT OF THE ORDE RS OF BOTH THE REVENUE AUTHORITIES BY REITERATING THE DISCUSSI ONS MADE THEREIN. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL AVAILABLE ON RECORD. THE TRANSACTION O F LEASE OF AGRICULTURAL LAND BETWEEN THE ASSESSEE AND THE LAND HOLDING COMPANIES CANNOT BE TERMED AS ILLEGAL, HOWEVER IT A PPEARS TO BE SHAM BECAUSE OF THE FOLLOWING REASONS:- 1) THE LEASE RENT PAID TO THE LAND HOLDING COMPANIE S/HUF BY THE ASSESSEE AND THE OTHER INDIVIDUALS WHO HAD TAKE N THE LAND ON LEASE IS ONLY RS.500/- PER ACRE, PER ANNUM, WHICH IS TOO LOW AND NOT IN PARITY WITH THE AGRICULTURAL INC OME EARNED BY THE LEASE HOLDERS. 2) ALL THE SHARE HOLDERS OF THE LAND HOLDING COMPAN IES ARE THE LEASE HOLDERS OF THE LAND OWNED BY THE COMPANIES WH ICH IS IN PROPORTION TO THE SHARES HELD BY THEM. 3) THE DECISION OF THE COMPANY TO LEASE THE LAND I S NOT IN THE INTEREST OF THE COMPANY WHICH IS A DISTINCT LEGAL E NTITY FOR PROFIT BUT A MODUS OPERANDI TO PASS ON THE INCOME D ERIVED 7 I.T.A. NO. 1236/MDS/2016 FROM AGRICULTURAL OPERATION FROM THE LAND OWNED BY THE COMPANIES TO THE SHARE HOLDERS OF THE COMPANY DIREC TLY. 4) THE ENTIRE TRANSACTION IS AIMED TO CIRCUMVENT TH E PROVISIONS OF THE ACT BECAUSE DIVIDEND INCOME IS TAXABLE IN TH E HANDS OF THE ASSESSEE. 5) THERE IS ALSO NO COGENT EVIDENCE TO PROVE THAT T HE ASSESSEE HAD CULTIVATED THE LAND AND EARNED AGRICULTURAL INC OME INDIVIDUALLY BECAUSE IT APPEARS THAT THE AGRICULTUR AL OPERATIONS WERE COLLECTIVELY PERFORMED BY ALL THE S HARE HOLDERS BY ENGAGING STAFF. THE DOCUMENTARY EVIDENCE S CREATED ARE IN CONNIVANCE WITH ALL THE PARTIES TO M AKE BELIEVE THE TRANSACTION ENTERED IN PAPERS TO BE GENUINE. 6) IT IS CRYSTAL CLEAR THAT ALL THE SHAREHOLDERS OF THE COMPANY HAD PERFORMED AGRICULTURAL ACTIVITIES UNDER THE NAM E OF BARWOOD ESTATE INSTEAD OF IN THE NAME OF THE COMPAN IES WHICH IS ONLY TO AVOID THE DISTRIBUTION OF PROFIT B Y THE COMPANIES AS DIVIDEND. BECAUSE OF THE ABOVE MENTIONED REASONS, WE ARE OF THE CONSIDERED VIEW THAT THE LD. AO AND THE LD. CIT(A) ARE RIGHT IN THEIR DECISIONS FOR HOLDING THE AMOUNT RECEIVED BY THE AS SESSEE TO BE 8 I.T.A. NO. 1236/MDS/2016 TREATED AS DIVIDEND INCOME DUE FROM THE COMPANY. HE NCE WE HEREBY REFRAIN FROM INTERFERING WITH THE ORDERS OF THE REVENUE AUTHORITIES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON 08 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 08 TH MARCH, 2017. JR. ! ' ! /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. #$% ( )/CIT(A) 4. #$% /CIT, 5. ! /DR 6. &' /GF.