Shri Bhailalbhai N. Patel(HUF), Baroda V. The ACIT.,Circle-2(1), Baroda

ITA 1882/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6038 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: M K PATEL
• Keywords: Income from undisclosed sources
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D.AGRAWAL, V.P. & HONBLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 1882/AHD./2009 : ASSESSMENT YEAR : 2004-2005 SHRI BHAILALBHAI N. PATEL (HUF), BARODA -V S- ACIT, CIRCLE-2(1), BARODA (PAN : AACHP 6984J) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI M.K.PATEL, A.R. RESPONDENT BY : SHRI B.L.YADAV, D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 27-03-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, BAR ODA CONFIRMING THE ADDITION OF RS. 3,33,352/- MADE BY THE AO UNDER SECTION 68 OF T HE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2004-2005. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS AN HUF. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME DECLARI NG TOTAL INCOME AT RS.18,07,740/-. IN THIS RETURN OF INCOME, THE ASSESSEE HAS ALSO SHOWN AGRICULTURAL INCOME OF RS.6,33,482/-. THE ASSESSEE HAS SOLD CROPS OF WHEAT , DANGAR (RICE), TOBACCO AND DHARU (TOBACCOS SEEDLING PLANT). THE ASSESSEE HAS SHOWN SALE OF TOBACCOS SEEDLING PLANT (DHARU) IN CASH RS.4,68,352/-. BEFORE THE AO, IT WA S STATED THAT DHARU WAS SOLD ON SPOT TO FARMERS AND AMOUNT WAS RECEIVED IN CASH. TH E AO ASKED THE ASSESSEE TO EXPLAIN ABOUT THE GENUINENESS OF INCOME SHOWN FROM DHARU AS THIS INCOME OF RS.4,68,452/- WAS SHOWN FROM SALE OF DHARU FROM 4.5 BIGHAS LAND, WHICH, ACCORDING TO THE AO, WAS ABNORMAL DUE TO NORMAL AGRICULTURE O PERATION. BEFORE THE AO, THE ASSESSEE REPLIED AS UNDER: ' IN AN AREA OF 1 VIGHA, APPROXIMATELY 1,00,000 DHARUS OF T OBACCO ARE PLANTED INITIALLY. A SEASON OF DHARU IS NORMALLY OF 120 DAY S (JULY LO OCTOBER). AT EVERY 8 DAYS, 90,000 MORE DHARUS ARE GENERATED. THE ACTUA L PRODUCTION WILL BE APPROX. 14,50,000 DHARUS (120 DAYS / 8 X 90,000 + 1,00,000). IT IS ESTIMATED THAT 30% OF THESE DHARUS ARE DAMAGED AND ARE NOT SA LEABLE. THEREFORE DURING ITA NO.1882-AHD-09 2 ONE FULL SEASON APPROX. 10,00,000 DHARUS ARE GENERA TED, I HAVE GROWN DHARUS IN APPROX. 4.5 VIGHAS. THE TOTAL PRODUCTION OF DHAR US IS APPROX. 47 LAKHS. THE AVERAGE MARKET PRICE OF DHARU IS RS.100/- PER 1000 DHARUS. THEREFORE AGRICULTURAL SALE OF THESE DHARUS ARE RS. 4,68,352/ -, WHICH IS SHOWN IN MY RETURN OF INCOME. 2.1 THE AO EXAMINED THE BASIS OF SCIENTIFIC AND STA NDARD AGRICULTURAL PROCESS OF TOBACCO CROPS AND THEREAFTER HE TREATED THE AGRICUL TURAL INCOME TO THE EXTENT OF RS.3,00,130/- AS UNDISCLOSED INCOME FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER WHICH ARE EXTRACTED BELOW: AS SHOWN ABOVE NORMAL TOBACCO FARMING, SEEDLING PLA NTATION TAKES MINIMUM SIX WEEKS TO GROW AND TO SHIFT IN FARM; WHEREAS, AC CORDING TO ASSESSEE EVERY 8 DAYS, HE IS GROWING 90,000 DHARUS (SEEDLING PLANT), WHICH IS NOT POSSIBLE. AS PER ASSESSEE'S SUBMISSION, BETWEEN JULY TO OCTOBER, I.E. IN 120 DAYS HE IS GROWING 15 TIMES (8 DAYS X 15 = 120 DAYS) THE TOBAC CO SEEDLING PLANT IN SAME LAND. AS PER NORMAL FARMING, IT IS NOT POSSIBLE. AS PER NORMAL PRACTICE, ASSESSEE CAN GROW TOBACCO SEEDLING PLANT (DHARU) MA XIMUM THREE TIMES IN 120 DAYS. THE ASSESSEE HAS GROWN TOBACCO SEEDLING PLANT (DHARU) IN 4.5 BIGHAS OF LAND. IF, AS PER ASSESSEE'S OWN SUBMISSION 1 BIGHA OF LAND GROWS 1,00,000 DHARU, THEN AT A TIME IN 4.5 BIGHAS ASSESSEE CAN GR OW 4,50,000 DHARUS (TOBACCO SEEDLING PLANTS). WITHIN THREE MONTHS, THE ASSESSEE CAN GROW MAXIMUM 4,50,000 X 3 = 13,50,000 DHARUS. THE PRICE ADOPTED BY THE ASSESSEE IS RS.100/- PER 1000 DHARUS, IF APPLIED, THEN THE I NCOME OF ASSESSEE COMES TO RS. 1,35,000/-. THEREFORE, IN THE CASE OF ASSESSEE, ONLY RS.1,35,000/- IS TREATED AS INCOME FROM SALE OF DHARU (SEEDLING PLANT) AND R S.3,33,352/- IS TREATED INCOME FROM UNDISCLOSED SOURCES AND TREATED AS INCO ME FROM OTHER SOURCES. THEREFORE, TOTAL AGRICULTURE INCOME COMES TO RS.3,0 0,130/-. ON THE BASIS OF ABOVE FACTS AND CIRCUMSTANCES, AN A MOUNT OF RS.3,33,352/- IS TREATED AS UNDISCLOSED INCOME FROM OTHER SOURCES AND DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.3,33,352/- FOR THE DETAILED REASONS GIVEN IN PAR A 2.3, WHICH IS REPRODUCED HEREUNDER: 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTH ORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE ONLY ISSUE TO BE CONSIDERED IS WHETHER IT WAS POSSIBLE FOR THE APPELLANT TO HAVE EARNED RS.4, 68,352/- FROM GROWING DHARU IN 4.10 BIGHAS OF LAND. THE ASSESSING OFFICER HAS STATED THAT IT TAKES A MINIMUM OF 6 WEEKS FOR TOBACCO PLANTS TO BE READY F OR TRANSPLANTATION. THE CERTIFICATE FROM THE AGRICULTURE EXPERT MR. NILKANT H R. PATEL, ALSO SUBSCRIBES TO THE VIEW OF THE ASSESSING OFFICER. SHRI PATEL IN HI S CERTIFICATE STATES THAT AFTER ITA NO.1882-AHD-09 3 PREPARING LAND THE TOBACCO SEEDS ARE SOWN AND LIGHT LY COVERED AND LIGHTLY WATERED. SEEDLINGS GROW AFTER 7 TO 8 DAYS. THESE SE EDLINGS ARE WATERED REGULAR FOR ABOUT A MONTH TILL THEY GROW TO A HEIGHT OF 7-9 INCHES. THEY ARE THEN READY FOR TRANSPLANTATION. HENCE THE MINIMUM TIME AS PER MR. NILKANTH R. PATEL ALSO IS 4 TO 6 WEEKS. THE ASSESSEE ADMITS THAT THE TOBAC CO IS GROWN BETWEEN JULY TO OCTOBER ONLY I.E. 120 DAYS. IN THESE 120 DAYS THE A SSESSING OFFICER HAS RIGHTLY CALCULATED THAT THE ASSESSEE WOULD BE ABLE TO GROW A CROP OF DHARU MAXIMUM NUMBER OF 3 TIMES. THE APPELLANT HAS BEEN CONSTANTL Y STATING THAT SEEDLINGS GROW EVERY 7 TO 8 DAYS. THE ISSUE IS CAN THE SAPLIN G BE TRANSPLANTED? A READING OF LITERATURE ON PLANTING OF TOBACCO SEED STATES TH AT WHILE THE SEEDLING MAY EMERGE AFTER 7 TO 8 DAYS, THEY ARE READY FOR TRANSP LANTATION ONLY AFTER 6 WEEKS MINIMUM. HENCE THE ASSESSING OFFICER CALCULATED THE INCOME ON SALE OF DHARU PLANT CORRECTLY. IN THE ABSENCE OF ANY EVIDENCE IN THE FORM OF SALE BILLS ETC. FILED BY THE ASSESSEE, THE ASSESSING OFFICER'S CONCLUSION APPEARS CORRECT AND IS CONFIRMED. CONSEQUENTLY THE ASSESSING OFFICER'S ADD ITION OF RS.3,33,352/- BEING INCOME FROM OTHER SOURCES IS ALSO CONFIRMED. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E, SHRI M.K.PATEL, A.R. APPEARED AND POINTED OUT THAT IN THE ASSESSMENT YEA R UNDER APPEAL, THE ASSESSEE HAS SHOWN THE AGRICULTURAL INCOME OF RS.6,33,482/-. AS AGAINST THIS, AGRICULTURAL INCOME SHOWN IN THE EARLIER TWO AND SUBSEQUENT ASSESSMENT YEARS ARE AS UNDER: SR. NO. ASSESSMENT YEAR AGRICULTURE INCOME FOR RATE PURPOSE 1. 2002-03 RS.2,94,764/- 2. 2003-04 RS.5,02,089/- 3. 2004-05 RS.6,33,482/- 4. 2005-06 RS5,49,035/- 5. 2006-07 RS.4,86,362/- 6. 2007-08 RS.4,02,368/- 7. 2008-09 RS.3,93,473/- 5.1 ON THE BASIS OF ABOVE, THE COUNSEL OF THE ASSES SEE CONTENDED THAT THE AGRICULTURAL INCOME SHOWN IN THE ASSESSMENT YEAR UN DER APPEAL IS ALMOST IDENTICAL THAN ITA NO.1882-AHD-09 4 EARLIER AND SUBSEQUENT YEARS. THEREFORE, THE AO BE DIRECTED TO ACCEPT THE AGRICULTURAL INCOME AS DECLARED. WITH REGARD TO WORKING OF AGRIC ULTURAL INCOME OF RS.1,35,000/- FROM 4.5 BIGHAS OF LAND IN WHICH THE ASSESSEE CULTI VATED THE DHARU, HE POINTED OUT THAT THIS ESTIMATE IS ON THE LOWER SIDE. 6. ON THE OTHER HAND, SHRI B.L.YADAV, D.R., APPEARI NG ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDERS OF THE LD. CIT(A). THE LD. D.R. FURTHER POINTED OUT THAT THE ASSESSEE HAS NOT COMPARED THE DHARU AGRICU LTURAL INCOME IN THE ASSESSMENT YEAR UNDER APPEAL WITH THAT IN THE EARLIER TWO YEAR S AND SUBSEQUENT YEARS. HE HAS GIVEN THE FIGURE OF TOTAL AGRICULTURAL INCOME WHICH , INTER ALIA , INCLUDE INCOME OF SALE OF WHEAT, DANGAR (RICE), ETC. IN THE ASSESSMENT YEA R, NO EVIDENCE OF SALE OF DHARU WAS FILED EITHER BEFORE THE AO OR BEFORE THE CIT(A). IT WAS CLAIMED THAT THE ENTIRE DHARU (TOBACCO SEEDLING PLANT) WAS SOLD IN CASH. 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS SHOWN SALE OF TOBACCO (DHARU) IN CASH OF RS.4,68,352/-. BEFORE THE AO, TH E ASSESSEE EXPLAINED THAT IN AN AREA OF ONE BIGHA APPROXIMATELY 1,00,000 DHARU OF TOBACC O ARE PLANTED INITIALLY. A SEASON OF DHARU IS NORMALLY OF 120 DAYS. EVERY 8 DAYS 90,0 00 MORE DHARUS ARE GENERATED. THE ACTUAL PRODUCTION WOULD BE APPROXIMATELY 14,50, 000 DHARUS (120 DAYS / 8 X 90,000 + 1,00,000). IT WAS ESTIMATED THAT 30% OF TH ESE DHARU SEEDLINGS WERE DAMAGED AND ARE NOT SALEABLE. THEREFORE, DURING ONE FULL SE ASON APPROXIMATELY 10,00,000 DHARUS ARE GENERATED. DHARU IS GROWN IN APPROXIMATE LY 4.5 VIGHAS OF LAND. THE TOTAL PRODUCTION IS APPROXIMATELY 47 LAKHS. THE AVERAGE M ARKET PRICE OF DHARU IS RS.100 PER 1000 DHARUS. THEREFORE, ACCORDINGLY SALE OF DHARU E ARNED RS.4,68,352/- WHICH WAS REFLECTED IN THE RETURN OF INCOME. THE ASSESSING OF FICER LOOKED INTO THE SCIENTIFIC AND STANDARD AGRICULTURAL PRODUCTION OF TOBACCO WHICH S HOWED THAT THOUGH SEEDS GERMINATE IN 6-8 DAYS TRANSPLANTATION CAN TAKE PLACE ONLY AFT ER 6-12 WEEKS WHEN THE TOBACCO PLANTS REACH ABOUT 15-20 CENTIMETERS IN HEIGHT. SIN CE TRANSPLANTATION CAN TAKE PLACE ONLY AFTER THE MINIMUM PERIOD OF 6 WEEKS, AS PER NO RMAL PRACTICE THE ASSESSEE CAN GROW THE TOBACCO SEEDLING MAXIMUM THREE CYCLES IN 1 20 DAYS. IF THE ASSESSEE HAS USED 4.5 BIGHAS OF LAND TO CULTIVATE DHARU, WITHIN THREE MONTHS, A MAXIMUM OF 13.5 LAKHS ITA NO.1882-AHD-09 5 DHARU CAN BE GROWN. THE PRICE ADOPTED BY THE ASSESS EE OF RS.100/- PER 1000 DHARUS LEADING TO THE INCOME OF RS.1,35,000/-. THE ASSESSI NG OFFICER THEREFORE TREATED THIS INCOME OF RS.1,35,000/- FROM SALE OF DHARU AS AGRIC ULTURAL INCOME AND BALANCE OF RS.3,33,352/- WAS HELD TO BE INCOME FROM OTHER SOUR CES. THE CHART SHOWING THE AGRICULTURAL INCOME ALSO INCLUDES AGRICULTURAL INCO ME EARNED FROM OTHER PRODUCES, NAMELY, WHEAT AND DANGAR (RICE). ADMITTEDLY, THE AS SESSEE HAS NOT FURNISHED THE AGRICULTURAL INCOME DECLARED AND ACCEPTED FROM DHAR U ON 4.5 BIGHAS IN EARLIER TWO AND ALSO SUBSEQUENT YEARS. IN THESE CIRCUMSTANCES, IT I S NOT POSSIBLE TO ESTIMATE THE INCOME FROM DHARU ON THE BASIS OF CHART SUBMITTED. BE THAT IT MAY BE, EVEN ON THE BASIS OF ASSESSEES WORKING, THE SALE PROCEED OF THE DHARU W ORKS OUT TO RS.4,68,352/-. NO DETAILS OF EXPENSES FOR GROWING DHARU WERE FURNISHE D. AS AGAINST THIS, THE A.O. HAS RELIED ON CERTIFICATE OF AGRICULTURE EXPERTS WHO ST ATED THAT SEEDLING MAY EMERGE AFTER 7 TO 8 DAYS, BUT THEY ARE READY FOR TRANSPLANTATION O NLY AFTER 6 WEEKS MINIMUM. KEEPING IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE ARE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE, IN CASE THE NET INCOME FROM SALE OF DHARU (TOBACCO SEEDLING PLANT) IS ESTIMATED AT RS.2 LAKHS . WE ORDER ACCORDINGLY AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO RS.2,68,352/ - (RS.4,68,352/- - RS.2,00,000/-). RESULTANTLY, FOR STATISTICAL PURPOSES, THE APPEAL O F THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 28.07.2011 SD/- SD/- (G.D.AGRAWAL) (T.K. SHARMA) VICE PRESIDENT JUDICIAL MEMBER DATED : 28/07/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER TALUKDAR/ SR. P.S. DEPUTY REGISTRAR, ITAT, AHMEDABAD. ITA NO.1882-AHD-09 6