Sh. Vivek Rekhan, Yamunanagar V. ITO, Yamunanagar

ITA 1408/CHANDI/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1345 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Income from undisclosed sources; Earning of tax free income
• Section: 143(3); 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1408/CHD/2010 ASSESSMENT YEAR: 2007-08 SHRI VIVEK REKHAN, VS. THE ITO, WARD-3, C/O M/S POOJA DECORATIVE PLYWOOD, YAMUNANAGAR YAMUNANAGAR PAN NO. AAMPR1850K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 12.10.2010 RELATING TO ASSESSMENT Y EAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ESTIMATED ADDITION FOR S 6,75,152/- TO BE INCOME EARNED FROM OTHER SOURCES N OT DISCLOSED TO THE DEPARTMENT MADE TOWARDS ALLEGED EXPENSES INCURRED FOR EARNING AGRICULTURE INCOME OF RS. 30,80,609/- AND AS SUCH THE ADDITION UPHELD IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE ENTIRE ADDITION UPHELD IS BASED ONLY ON SUSPICION, CONJECTURES AND SURMISES WITHOUT APPRECIATING THE EXPLANATIONS RENDERED DURING THE COURSE OF ASSESSMENT AS WELL AS APPELLATE PROCEEDIN GS 2 AND AS SUCH THE ADDITION OF RS. 6,75,152/- MADE ON ADHOC BASIS MERITS DELETION. 3. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1,72,750/- MADE TOWARDS ALLEGED LOW HOUSEHOLD WITHDRAWALS IN UTTER DISREGARD OF THE EXPLANATIONS RENDERED WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED INCOME OF R S. 2,03,490/- AND AGRICULTURAL INCOME OF RS. 30 LACS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH DETAI LS OF AGRICULTURAL LAND OWNED BY HIM, CROPS SOWN, TO FILE COPIES OF FORM J AND INCOME AND EXPENDITURE ACCOUNT OF AGRICULTURE INCOME AND TO PR ODUCE VOUCHERS OF THE EXPENSES CONNECTED WITH AGRICULTURAL OPERATIONS. I N REPLY, THE ASSESSEE CLAIMS TO HAVE TAKEN ON LEASE A PIECE OF LAND MEASU RING 84 KANALS 13 MARLAS SITUATED AT VILLAGE LAL CHHAPAR, RADAUR ON 2 8.5.1999 FOR A PERIOD OF 12 YEARS VIDE REGISTERED LEASE AGREEMENT. AS PE R THE ASSESSEE, POPLAR TREES WERE PLANTED ON THE SAME. THE COPY OF THE LE ASE AGREEMENT AND MUTATION ENTERED IN THE NAME OF THE ASSESSEE WERE F ILED. THE ASSESSEE FURTHER CLAIMS TO HAVE SOLD THE AGRICULTURAL PRODUC E FOR RS. 30,80,000/- GROWN ON THE SAID LAND AND A SUM OF RS. 95,000/- WA S CLAIMED TO HAVE BEEN SPENT ON CUTTING OF THE SAID TREES AND AGRICUL TURAL INCOME OF RS. 30 LACS WAS DECLARED. THE ASSESSEE FURTHER EXPLAINED THAT THE LAND WAS BEING MAINTAINED BY THE MUJARAS KEPT FOR THE PURPOSE, WHO USED TO PAY THE LEASE MONEY PAYABLE BY THE ASSESSEE. THE ASSESSEE FURTH ER EXPLAINED THAT NO VOUCHERS FOR EXPENSES WERE MAINTAINED AND ALSO NO F ORM J WAS ISSUED FOR SALE OF POPLAR TREES. 4. THE ASSESSING OFFICER RECORDED THE STATEMENT OF THE ASSESSEE U/S 131 OF THE ACT ON 29.7.2009 AND IT TRANSPIRED THAT THE ASSESSEE WAS LIVING IN A 3 SELF OWNED PROPERTY IN NEW MUMBAI. AS PER THE ASSE SSING OFFICER THE ASSESSEE HAD NEVER VISITED THE ALLEGED AGRICULTURAL LAND TAKEN ON LEASE AND ABOUT OF PAYMENT OF LEASE MONEY, HE REPLIED THAT HE DOES NOT KNOW AND ONLY HIS FATHER KNOWS ABOUT IT. ABOUT THE PLANTATI ON OF POPLAR TRESS, HE DID NOT KNOW THE NUMBER OF POPLAR TREES PLANTED EXC EPT THE FACT OF HAVING PAID RS. 25,000/- FOR THE SAID PLANTATION. THE AS SESSEE WAS ALSO IGNORANT ABOUT THE CONTRACTOR WHO HAD CUT THE TREES AND ALSO ADMITTED THAT THERE WAS NO CONTRACT AGREEMENT. THE ASSESSEE ADMITTED THA T THE POPLAR TREES WERE SOLD TO M/S SANTOSH SAW MILLS, APPROXIMATE QUANTITY BEING 16000 QUINTALS. IT WAS FURTHER STATED THAT FOR CUTTING A ND TRANSPORTATION, PAYMENT OF RS. 95,000/- WAS MADE BY THE SAID FIRM ON BEHALF OF THE ASSESSEE. FURTHER, IT WAS STATED THAT M/S SANTOSH SAW MILLS W AS THE PROPRIETARY CONCERN OF THE FATHER OF THE ASSESSEE. STATEMENT O F SHRI SUBHASH CHAND, LESSOR WAS ALSO RECORDED BY THE ASSESSING OFFICER O N 3.9.2009, IN WHICH HE ADMITTED TO HAVE LEASED 12 ACRES OF LAND OUT OF TOTAL HOLDING OF 16 ACRES OF LAND, ON A LEASE RENT OF RS. 21,000/- PER ANNUM TO SHRI VIVEK REKHAN. HE ADMITTED TO HAVE GOT THE LEASE MONEY OF RS. 21,0 00/- PER ANNUM FROM THE CLOSE RELATIVE OF THE ASSESSEE. FURTHER, THERE WAS NO ELECTRICITY CONNECTION OR FITTING OF TUBE / BULBS AND THE POSSE SSION OF THE LAND WAS RECEIVED BACK IN THE YEAR 2007. THE ASSESSING OFF ICER WAS OF THE VIEW THAT THE AGREEMENT BETWEEN THE PARTIES WAS SHAM AGR EEMENT, ONLY ON PAPERS, IN VIEW OF THE FACT THAT THE ASSESSEE WAS EMPLOYED AND RESIDING IN MUMBAI AND HIS WIFE WAS CONDUCTING INDEPENDENT BUSI NESS IN MUMBAI; HE VISITED YAMUNANAGAR ONLY ONCE OR TWICE IN A YEAR; H E HAD NEVER MET SHRI SUBHASH CHAND, LESSOR; HE HAD NEVER VISITED THE SAI D LAND; HE HAD NO KNOWLEDGE OF THE LOCATION OF THE SAID LAND AND HE H AD NEVER PAID ANY LEASE MONEY TO THE LESSOR. THE ASSESSING OFFICER WAS OF THE VIEW THAT TO EARN INCOME FROM PLANTATION OF POPLAR TREES, CERTAIN EXP ENSES ON ACCOUNT OF 4 FIRST PLANTATION, THEN PRUNING AND IRRITATION OF WA TER IS MUST. THE ASSESSING OFFICER CONCLUDED THE INCOME SHOWN AT RS. 30 LACS IS NOTHING BUT AN ACCOMMODATION ENTRY. FURTHER, THE SALE WAS ALSO NOT EVIDENCED BY ANY DHARAM KANTA RECEIPTS AND ACCORDINGLY THE ASSES SING OFFICER WAS OF THE VIEW THAT THE SAID INCOME WAS ASSESSABLE AS INC OME FROM OTHER SOURCES. THE ASSESSEE MOVED AN APPLICATION UNDER SE CTION 144A OF THE INCOME TAX ACT AND THE JCIT, YAMUNANAGAR AS PER OFF ICE LETTER DATED 6.10.2009 DIRECTED THAT IN VIEW OF THE EXECUTION OF THE LEASE DEED DATED 28.5.1999, WHICH HAS BEEN CONFIRMED BY THE LESSOR V IDE HIS STATEMENT DATED 3.9.2009 AND AS THE COPY OF THE ASSESSEE WITH M/S SANTHOSH SAW MILLS HAD NOT BEEN DISPUTED, THE ASSESSEES CONTENT ION OF HAVING EARNED AGRICULTURAL INCOME WAS FOUND TO BE ACCEPTABLE. HO WEVER, THE CONTENTION OF NO EXPENDITURE HAVING BEEN INCURRED TO EARN THE SAID INCOME WAS FOUND TO BE NOT ACCEPTABLE. THE JCIT NOTED FROM THE PERU SAL OF THE NAKAL GIRDAVARI THAT THERE WAS NO OTHER PLANTS OTHER THAN POPLAR WHICH COULD HAVE SUPPORTED THE MUJHARA AS CONTENDED BY THE ASSE SSEE. THE ASSESSING OFFICER WAS THEREFORE DIRECTED TO EXAMINE THE ISSUE OF QUANTUM AND SOURCES OF EXPENDITURE INCURRED TO EARN THE AGRICUL TURAL INCOME OF RS. 30 LACS. THE ASSESSEE IN REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER IN THIS REGARD REITERATED ITS EARLIER SUBMISSIONS AND ALSO FURNISHED AN AFFIDAVIT DATED 19.10.2009 OF SHRI JAMSHED S/O SHRI AMDUL MAZAR. THE ASSESSING OFFICER REJECTING THE SAME OBSERVED THAT DURING THE COURSE OF RECORDING OF STATEMENT, THE ASSESSEE HAD STATED THE NAME OF THE CONTRACTOR AS SHRI PHOOL SINGH, BUT HE HAD FILED AN AFFIDAVIT OF SHRI JAMSHED. UNDER THESE CIRCUMSTANCES, WHERE THE ASSESSEE DID NOT INT IMATE THE SOURCES OF PAYMENT OF LEASE MONEY, DIESEL EXPENSES, EXPENSES O N PESTICIDES AND INSECTICIDES, PRUNING OF TREES, CUTTING OF POPLAR T REE, ITS TRANSPORTATION TO THE TRADERS, DHARAM KANTA RECEIPTS ETC., THE ASSESS ING OFFICER OBSERVED 5 THAT THERE WAS NO OTHER ALTERNATIVE EXCEPT TO ESTIM ATE THE AGRICULTURAL OPERATION EXPENSES AT 25% OF THE GROSS RECEIPTS. T HE SUBMISSIONS OF THE ASSESSEE TO HAVE SOLD ROOTS AND DANDI WAS DISMISSED AS BEING AFTER THOUGHT AND WITHOUT ANY EVIDENCE. THE ESTIMATED EXPENDITUR E WAS WORKED AT RS. 7,17,150/- AS AGAINST RS. 95,000/- SHOWN BY THE ASS ESSEE. THE ASSESSEE HAD DECLARED SALE OF TIMBER AT RS. 30,80,609/-. T HE ASSESSING OFFICER ADOPTED THE AGRICULTURAL INCOME AT RS. 23,25,847/- AND A SUM OF RS. 6,75,152/- WAS HELD TO BE INCOME FROM OTHER SOURCES , SOURCES NOT DISCLOSED TO THE DEPARTMENT AND SHOWN IN THE GARB OF AGRICULT URAL INCOME. THE ASSESSING OFFICER THUS MADE AN ADDITION OF RS. 6,75 ,152/- AS INCOME FROM OTHER SOURCES AND AGRICULTURAL INCOME FOR RATE PURP OSE WAS ADOPTED AT RS. 23,24,847/-. 5. THE CIT(A) TOOK NOTE OF THE ABOVE SUBMISSIONS O F THE LD. AR FOR THE ASSESSEE THAT THE TREES WERE SOLD DURING THE PE RIOD 4 TH APRIL, 2006 TO THE LAST WEEK OF JUNE, 2006 AND AS SUCH COULD NOT H AVE INCURRED ANY EXPENDITURE OTHER THAN ON CUTTING, LOADING AND UNLO ADING AND TRANSPORTATION OF TREES WHICH HAD ALREADY BEEN SHOW N AT RS. 95,000/- FURTHER, IT WAS POINTED THAT THE LEASE MONEY PAID A T RATE OF RS. 21,000/- PER ANNUM FOR ALL THE YEARS, WHEN THE TREES WERE GR OWN DID NOT RELATE TO THE CURRENT YEAR INCOME AND IN ANY CASE THE SAME WA S PAID BY THE MUJARAS KEPT BY THE ASSESSEE. THE CIT(A) WAS OF THE VIEW THAT UNDER THE PROVISIONS OF THE INCOME TAX ACT, THE NET INCOME AF TER ALLOWING THE EXPENDITURE INCURRED TO EARN THE SAME IS TO BE BROU GHT TO TAX. SIMILARLY, IN CASE OF INCOME, WHICH IS CLAIMED TO BE EXEMPT, T HE EXPENDITURE INCURRED FOR EARNING THAT EXEMPT INCOME, IS TO BE REDUCED FR OM THE GROSS RECEIPTS, TO WORK OUT THE EXEMPTED INCOME. THE CIT(A) FURTH ER OBSERVED THAT THE NATURE OF THE AGRICULTURAL PRODUCTS I.E. POPLAR TRE ES WAS SUCH THAT THE SAME 6 WOULD BE READY TO BE SOLD OVER A PERIOD OF TIME AND HENCE THE EXPENDITURE INCURRED FROM DATE OF PLANTING OF PLANTS TILL ITS S ALE IS TO BE MATCHED AGAINST THE INCOME. THE CIT(A) FURTHER OBSERVED TH AT THE EXPENDITURE AGAINST THESE TREES SHOULD BE BOOKED ON YEAR TO YEA R BASIS ON THE SAME PATTERN AS IN THE CASE OF PROJECTS. THE CIT(A) THU S HELD THAT THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE THAT ONLY CUR RENT YEAR EXPENDITURE IS TO BE REDUCED TO WORK OUT THE EXEMPT AGRICULTURAL I NCOME. THE CIT(A) UPHELD THE ACTION OF ASSESSING OFFICER IN ESTIMATIN G THE EXPENDITURE. IT WAS NOTED BY THE CIT(A) THAT THERE IS CONTRADICTION IN THE STATEMENT OF ASSESSEE WITH REGARD TO EXPENDITURE OF RS. 95,000/- INCURRED ON CUTTING, LOADING AND UNLOADING AND TRANSPORTATION, KEEPING I N VIEW THE STATEMENT OF THE ASSESSEE RECORDED ON 29.9.2009 UNDER WHICH THE CONTRACTOR NAME WAS GIVEN TO BE PHOOL CHAND AND LATER AFFIDAVIT OF SHRI JAMSHED WAS FILED. THE CIT(A) FURTHER OBSERVES AS UNDER:- 4.10 - FURTHER DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE APPELLANT, AT THE DIRECTION OF MY PREDECESSOR FILED DETAILS WITH REGARD TO THE EXPENDITURE INCURRED ON PLANTING OF TREES DURING 19 99 VIDE HIS LETTER DATED 6.6.2010. AS PER THE DETAILS FILED, THE APPELLANT INCURRED TOTAL EXPENDITURE OF RS. 1,50,000/- ON THIS LAND IN JUNE, JULY 2009. THESE DETAILS ARE UNSUBSTANTIATED BUT CORROBORATE THE ASSESSING OFFICERS ARGUMENT THAT CERTAIN EXPENDITU RE WOULD HAVE BEEN INCURRED BY THE APPELLANT FOR PLANT ING THE TREES. THEREFORE, THOUGH UNSUBSTANTIATED THIS AMOUNT CAN BE KEPT IN VIEW WHILE ESTIMATING THE TOT AL EXPENDITURE INCURRED TILL DATE ON GROWING OF THE TR EES FOR THE PURPOSES OF WORKING OUT THE EXEMPT AGRICULTURAL INCOME. THE 6. THE CIT(A) FURTHER NOTED THE ASSESSEE TO HAVE INCURRED THE LEASES EXPENSES OF RS. 21000/- PER ANNUM FOR A PERIOD OF 7 YEARS TOTALING RS. 1,47,000/- AND AS THE STAND OF THE ASSESSEE THAT TH E LEASE MONEY WAS PAID BY MUJARAS REMAINED UNSUBSTANTIATED, IN THE ABSENCE OF ANY DOCUMENTS AND THE ABSENCE OF ANY PLANTATION OF ANY OTHER CROP BEI NG MENTIONED IN NAKAL 7 GIRDAWARI, THE PLEA OF THE ASSESSEE THAT NO AMOUNT WAS SPENT FOR LEASE MONEY WAS REJECTED. FURTHER, THE CIT(A) UPHELD THE ESTIMATION OF LABOUR AND TRANSPORTATION EXPENSES AT THE RATE OF RS. 30/- PER QUINTAL AT RS. 4,81,268/-. THE CIT(A) THUS HELD THAT EVEN IF RELAT ED EXPENDITURE ARE EXCLUDED THE ESTIMATE OF EXPENDITURE IN GROWING THE TREES, CUTTING AND PRUNING COME TO RS. 7,78,268/- (RS. 1,50,000/- + RS . 1,47,000/- PLUS RS. 4,81,268/-) . ACCORDINGLY THE ESTIMATION BY THE ASSESSING OFFIC ER AT THE RATE OF 25% WAS HELD TO BE REASONABLE AND UPHELD. THE CIT(A) FURTHER CONCLUDED THAT THE SAID EXPENDITURE IS TO BE REDUCE D WHILE WORKING OUT THE AGRICULTURAL INCOME DERIVED FROM THE SALE OF TREES AND IN THE ABSENCE OF ANY SUPPORTING DETAILS OF THE EXPENSES INCURRED, TH E QUANTUM OF ESTIMATION BY THE ASSESSING OFFICER WAS UPHELD. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A) AND VIDE GROUND NO.1 HAS RAISED THE ISSUE IN RESPECT OF THE ADDITION OF RS. 6,75,152/-. THE LD. AR FOR THE ASSESSEE POINTED O UT THAT ONCE THE AGRICULTURAL INCOME HAD BEEN ACCEPTED UNDER SECTION 144A OF THE ACT, THERE WAS NO MERIT IN ESTIMATING THE EXPENSES AND D ISALLOWING THE SAME. IN THE ALTERNATIVE, THE PLEA WAS RAISED THAT WHERE EXPENDITURE IS ESTIMATED, ONLY THE AGRICULTURAL INCOME WOULD BE REDUCED AND T HERE IS NO MERIT IN THE PRESENT ADDITION. . THE LD. AR POINTED OUT THAT SUM OF RS. 40, 000/- WAS PAID TO SHRI SANTOSH SAW MILLS AGAINST THE COST OF PLANTATION AS EVIDENCED BY THE WITHDRAWALS FROM THE PARTNERSHIP CONCERN, CO PY OF WHICH IS PLACED AT PAGE 52 OF THE PAPER BOOK. 8. THE LD. DR PLACING RELIANCE ON THE ORDER OF CIT (A) POINTED OUT THAT STATEMENT OF THE ASSESSEE WAS RECORDED IN WHIC H HE ADMITTED THAT ONE OF THE CONTRACTOR WAS SHRI PHOOL SINGH, WHEREAS AS PER THE AFFIDAVIT PLACED 8 AT PAGE 41 OF THE PAPER BOOK, CONSIDERATION OF RS. 95,000/- WAS ADMITTED TO BE RECEIVED BY SHRI JAMSHED AND AS THE ASSESSEE ADMITS TO HAVE MADE THE PAYMENTS TO BOTH SHRI PHOOL SINGH AND SHRI JAMS HED, DEBITING OF RS. 95000/- WAS AN UNDER STATEMENT OF EXPENSES. FURTH ER, IT WAS POINTED OUT THAT THE CONFIRMATION OF EXPENDITURE OF RS. 35,000/ - BY SHEELA REKHAN, MOTHER OF THE ASSESSEE, WHICH IN TURN IS UTILIZED F OR INCURRING EXPENSES IS WITHOUT ANY BASIS 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE HAD TAKEN ON LEASE THE AGRICULTURAL LAND M EASURING OF 12 ACRES IN VILLAGE NAKUM RADAUR FOR A PERIOD OF 12 YEARS VIDE REGISTERED LEASE DEED DATED 28.5.1999 FROM ONE SHRI SUBHASH CHAND ON A RE NTAL OF RS. 21,000/- PER ANNUM. THE FACTUM OF THE LEASE BEING EXECUTED AND THE LAND BEING IN THE POSSESSION OF THE ASSESSEE STANDS ACCEPTED BOTH IN VIEW OF THE ADMISSION OF SHRI SUBHASH CHAND, WHOSE STATEMENT WA S RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO BECAU SE OF THE ACCEPTANCE OF AGRICULTURAL INCOME IN THE HANDS OF THE ASSESSEE . THE ASSESSEE DURING THE YEAR CLAIMS TO HAVE SOLD POPLAR TREES WEIGHING 160000 QUINTAL FOR A TOTAL CONSIDERATION OF RS. 30,80,609/-. THE ENTIRE YIELD OF TIMBER WAS SOLD TO M/S SANTOSH SAW MILLTS, YAMUNANAGAR, CONCERN OF THE FATHER OF THE ASSESSEE. THE EXPENDITURE ON CUTTING OF TREES AND ITS TRANSPORTATION CLAIMED TO BE RS. 95000/- WAS PAID OUT OF THE SAID ACCOUNT WITH M/S SANTOSH SAW MILLS. THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE ASSESSEE HAS UNDERSTATED THE EXPENDITURE IN RESPECT OF THE AGRICULTURAL INCOME EARNED BY IT. THE AUTHORITIES BELOW WERE FU RTHER OF THE VIEW THAT THE INCOME NET OF EXPENSES IS TO BE INCLUDED IN THE HANDS OF THE ASSESSEE AND AS ELABORATED UPON BY THE ASSESSING OFFICER AND THE CIT(A), THE ASSESSEE HAVING FAILED TO ESTABLISH THE EXTENT OF E XPENDITURE AND THE SOURCE 9 OF THE EXPENDITURE ON THE SAID AGRICULTURAL OPERATI ONS CARRIED ON BY HIM, AN ESTIMATE WAS MADE TO WORK OUT THE EXPENDITURE RE LATABLE TO THE EARNING OF THE AGRICULTURAL INCOME. THE AGRICULTURAL INCO ME NET OF THE SAID EXPENDITURE WAS INCLUDED FOR RATE PURPOSES IN THE H ANDS OF THE ASSESSEE. THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS. 3 0,80,609/- AND ESTIMATION OF EXPENSES AT THE RATE OF 25% WAS WORKE D OUT AT RS. 770152/- AGAINST WHICH CREDIT OF RS. 95,000/- SHOWN BY THE A SSESSEE WAS ALLOWED. THE ASSESSING OFFICER ADOPTED THE AGRICULTURAL INCO ME AT RS. 23,24,847/- AND SUM OF RS. 6,75,152/- WAS ADDED AS INCOME FROM OTHER SOURCES. 10 THE ESTIMATED EXPENDITURE WAS ON ACCOUNT OF BASI CALLY THREE FACTORS I.E. A) EXPENDITURE INCURRED ON PLANTATION OF TRE ES DURING THE YEAR 1999 B) EXPENDITURE ON LEASE MONEY OF RS. 21,000/- FOR SEVE N YEARS TOTALING RS. 1,47,000/- AND C) ESTIMATED LABOUR AND TRANSPORT EX PENSES AT THE RATE OF RS. 30/- PER QUINTAL AT RS. 4,81,268/- AS THE QUAN TITATIVE DETAILS OF 16,402 QUINTALS OF TIMBER SOLD BY THE ASSESSEE WERE AVAILA BLE. FROM THE PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THA T THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDING HAD AT THE DIRECTION OF THE CIT(A) FILED DETAILS WITH REGARD TO THE EXPENDITURE INCURRED ON PLANTATION OF TREES DURING THE YEAR 1999. AS PER THE DETAILS FILED TH E ASSESSEE VIDE LETTER DATED 6.6.2010, ASSESSEE ADMITS TO HAVE EXPANDED RS . 1,50,000/- ON ITS LAND IN JUNE / JULY 1999. THE SAID EXPENSES WERE UNDOUBTEDLY EXPANDED ON THE PLANTATION OF TREES DURING THE YEAR 1999. F URTHER, LEASE MONEY OF RS. 21,000/- PER ANNUM FOR A PERIOD OF SEVEN YEARS WAS THE OTHER EXPENDITURE TAKEN INTO CONSIDERATION WHILE ESTIMATI NG THE INCOME FROM UNDISCLOSED SOURCES IN THE HANDS OF THE ASSESSEE. THE THIRD EXPENDITURE ESTIMATED WAS ON ACCOUNT OF LABOUR AND TRANSPORTATI ON EXPENSES CONNECTED WITH THE SALE OF THE TIMBER. IN THE FACTS AND CIRC UMSTANCES OF THE CASE, 10 WHERE THE ASSESSEE HAS DECLARED THE AGRICULTURAL IN COME ON SALE OF POPLAR TREES, WE ARE IN CONFORMITY WITH THE ORDERS OF THE AUTHORITIES BELOW THAT ONLY THE NET INCOME AFTER DEDUCTING THE EXPENDITURE INCURRED FOR EARNING THE SAID INCOME IS TO BE INCLUDED IN THE HANDS OF T HE ASSESSEE. HOWEVER, WE FIND NO MERIT IN THE ORDER OF THE AUTHORITIES BE LOW IN TREATING THE EXPENDITURE INCURRED IN PLANTATION OF TREES ADMITTE DLY IN THE YEAR 1999 AS BEING TREATED AS INCOME FROM UNDISCLOSED SOURCES FO R THE YEAR UNDER APPEAL. THE EXPENDITURE ON PLANTATION OF TREES MAY BE UNSUBSTANTIATED BUT DO NOT RELATE TO THE YEAR UNDER CONSIDERATION AND W E FIND NO MERIT TAKING THE SAME AS ONE OF THE BASIS FOR WORKING OUT THE DI SALLOWANCE. SIMILARLY, THE LEASE MONEY RELATABLE TO THE EARLIER YEARS CANN OT BE THE OTHER BASIS FOR ESTIMATING THE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IT IS NOT THE CASE OF THE REVENUE T HAT THE WHOLE EXPENDITURE OF LEASE MONEY FOR SEVEN YEARS WAS INCURRED DURING THE YEAR AND IN THE ABSENCE OF THE SAME, WE FIND NO JUSTIFICATION IN TR EATING THE SAID EXPENDITURE AS INCOME FROM OTHER SOURCES IN THE HAN DS OF THE ASSESSEE FOR THE YEAR UNDER APPEAL. THE ADDITION IN THIS REGARD IS TO BE CONFINED TO THE LEASE MONEY RELATABLE TO THE YEAR UNDER APPEAL AND IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD THAT THE LEASE MON EY FOR 7 YEARS WAS PAID DURING THE YEAR ITSELF, THERE IS NO JUSTIFICAT ION OF ANY ADDITION ON THIS ACCOUNT. FURTHER, ESTIMATION HAS BEEN MADE ON ACC OUNT OF LABOUR AND TRANSPORTATION EXPENSES AT THE RATE OF RS. 30/- PER QUINTAL ON ACCOUNT OF 16,402 QUINTALS OF TIMBER SOLD. THE ASSESSEE IN HI S STATEMENT HAD ADMITTED TO HAVE INCURRED THE SAID EXPENDITURE BY WAY OF CON TRACTORS. ONE SUCH CONTRACTOR SHRI PHOOL CHAND WAS REFERRED TO BY THE ASSESSEE IN HIS STATEMENT AND THE CONFIRMATION FROM ANOTHER CONTRAC TOR SHRI JAMSHED OF HAVING RECEIVED RS. 95,000/- FROM THE ASSESSEE WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ENTIRETY OF THE SAID EVIDENCE AND THE 11 CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE STAND OF THE ASSESSEE THAT RS. 95,000/- ONLY WAS INCURRED FOR CUTTING AND TRANSPORTATION OF THE TIMBER. THE SUM OF RS. 95,000 WAS PAID TO SHRI JAM SHED, ONE OF THE CONTRACTOR AND THE QUANTUM OF PAYMENT TO SHRI PHOOL CHAND HAD NOT BEEN ESTABLISHED BY THE ASSESSEE THOUGH ADMITTEDLY HIS S ERVICES WERE UTILIZED DURING THE YEAR. THE ASSESSING OFFICER HAD ALLOWED THE CREDIT OF RS. 95,000/- SHOWN BY THE ASSESSEE. HOWEVER, ADDITION HAS BEEN MADE ON ACCOUNT OF THE BALANCE EXPENDITURE. THE ASSESSING OFFICER HAD IN THE FINAL ANALYSIS ESTIMATED 25% OF THE RECEIPTS AS THE ESTIM ATED EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR. WE ARE OF THE VIEW THAT THE ESTIMATION MADE BY THE ASSESSING OFFICER IS ON THE HIGHER SIDE AS THE EXPENDITURE ON PLANTATION AND THE LEASE MONEY PAID FOR THE EARLIER YEARS CANNOT BE HELD TO BE THE ESTIMATED EXPENDITURE OF T HE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE RESTRICT THE DISALL OWANCE TO 15% OF THE GROSS RECEIPTS WHICH IS TO BE INCLUDED AS INCOME FR OM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. THE BALANCE AGRICULTURAL IN COME IS TO BE ADOPTED FOR RATE PURPOSES. THE ASSESSING OFFICER IS DIRECT ED TO RE-COMPUTE THE INCOME IN ACCORDANCE WITH OUR DIRECTIONS. THE GROU ND NO.1 & 2 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 11. THE ISSUE IS GROUND NO.3 IS AGAINST THE ADDITIO N OF LOW HOUSEHOLD EXPENDITURE. THE ASSESSEE HAD SHOWN HOUSE HOLD EXP ENDITURE OF RS. 48,000/- AND HIS WIFES CONTRIBUTION WAS RS. 25,250 /- PLUS WITHDRAWAL OF RS. 6,000/- FROM IDBI BANK. THE ASSESSING OFFICER ESTIMATED THE HOUSE HOLD EXPENDITURE AT RS. 21,000/- PER MONTH AND MADE AN ADDITION OF RS. 1,72,750/-, WHICH WAS CONFIRMED BY THE CIT(A). THE ADDITION IN THE PRESENT CASE HAS BEEN MADE PURELY ON ESTIMATE BASIS , WITHOUT BRINGING ON RECORD ANY EVIDENCE TO PROVE THE CONTRARY. WE FIND NO JUSTIFICATION IN THE 12 SAID ESTIMATION IN THE ABSENCE OF ANY EVIDENCE BEIN G BROUGHT ON RECORD, THE ASSESSEE TO HAVE INCURRED ANY EXPENDITURE OVER AND ABOVE THE AMOUNT CLAIMED. ACCORDINGLY, WE DELETE THE ADDITION OF R S. 1,72,750/-. THE GROUND NO. 3 IS THUS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD MARCH, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR