M/s Namdhari Seeds Pvt. Ltd., Bangalore V. Deputy Commissioner of Income-tax, Circle-5(1)(1), Bangalore

ITA 1949/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4206 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2020
• Assessment Year: 2001-2002
• Appeal Filed On: 05-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: H N KHINCHA
• Keywords: Business income; Question of law
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO. 1949 /BANG/201 8 ASSESSMENT YEAR : 20 01 - 02 NAMDHARI SEEDS PVT. LTD., SRI SAI ARCADE, NO.18, 12 TH CROSS, 1 ST PHASE, RAJARAJESHWARINAGAR, BENGALURU-560 098. PAN AAACN 6725 E. VS. THE DY. COMMISSIONER INCOME-TAX, CIRCLE-5(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N KHINCHA, C.A RESPONDENT BY : SHRI PRIYADARSHI MISHRA, JCIT (DR ) DATE OF HEARING : 13.10.2020 DATE OF PRONOUNCEMENT : 28.10.2020 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL OF THE ASSESSEE ARISES OUT OF ORDER DATED 31/03/2018 PASSED BY LD.CIT(A)-5, BANGALORE FOR ASS ESSMENT YEAR 2001-02 ON FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASS ING THE ORDER IN THE MANNER PASSED BY HIM ITA NO.1949/BANG/2018 PAGE 2 OF 10 AND THE CIT(A) HAS ALSO ERRED IN NOT ONLY CONFIRMIN G BUT ALSO ENHANCING THE ASSESSMENT. THE ORDERS PASSED BY AUTHORITIES BELOW ARE BAD IN LAW AND ARE LIABLE TO BE QUASHED. 2. IN ANY CASE, THE LEARNED CIT(A) HAS ERRED IN ASS UMING JURISDICTION U/S 251(1)(C) OF THE ACT AND ERRED IN E NHANCING THE IMPUGNED ORDER WHICH WAS PASSED FOR EFFECT TO T HE ORDER OF THE HONOURABLE HIGH COURT BY TREATING THE ENTIRE AGRICULTURAL INCOME IN DISPUTE AS BUSINESS INCOME. THE ACTION OF CIT(A) IN ENHANCING THE INCOME BEING WHOL LY ERRONEOUS BOTH ON FACTS AND LAW APPLICABLE IS TO BE DISREGARDED AND THE ENHANCEMENT AS DONE IS TO BE DE LETED. 3. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSING OFFICER HIMSEL F HAS ALLOWED AGRICULTURAL INCOME TO THE EXTENT OF RS. 3,43,11,842/- AND THAT THIS MATTER WAS NOT IN DISPU TE. THEREFORE, THE ACTION OF CIT(A) IN TAKING THE ENTIR E AGRICULTURAL INCOME INCLUDING WHICH WAS ALLOWED BY THE ASSESSING OFFICER (AND WHICH WAS NOT IN DISPUTE) ON BUSINESS INCOME IS BAD IN LAW AND ON FACT. 4. WITHOUT PREJUDICE, THE LEARNED ASSESSING OFFICER HAD ERRED IN ASSESSING THE INCOME AT RS. 4.08,02,789/- B Y ALLOWING DEDUCTION IN RESPECT OF RESPECT OF AGRICUL TURAL INCOME OF ONLY RS. 3.43,11,842/-. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMPUTATION OF INCOM E IS ERRONEOUS. THE CORRECT COMPUTATION IS TO BE ADOPTED . 5. WITHOUT PREJUDICE, THE AUTHORITIES BELOW HAVE ER RED IN NOT APPRECIATING THE FACT THAT BUSINESS INCOME OF T HE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 8011B OF T HE I.T. ACT AND ALSO ERRED IN HOLDING THAT IN THE ABSENCE OF SP ECIFIC DIRECTION FROM THE HIGH COURT AND ALSO NOT CLAIMING THE DEDUCTION IN RETURN OF INCOME, THE CLAIM OF THE APP ELLANT IS NOT ACCEPTABLE. THE CONCLUSION DRAWN IS CONTRARY TO LAW APPLICABLE AND FACTS TO BE REJECTED AND SUITABLE RE LIEF IN ACCORDANCE WITH LAW IS TO BE GRANTED. ITA NO.1949/BANG/2018 PAGE 3 OF 10 6. THE APPELLANT DENIES TO PAY THE INTEREST U/S. 23 4B, 234D AND 220(2) OF THE I.T. ACT, 1961. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. . IN ANY CASE AND WITHOUT PREJUDICE THE CALCULATION OF INTEREST IS EX CESSIVE. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THA T THE ORDER PASSED BE QUASHED OR IN THE ALTERNATIVE A) THE ENHANCEMENT AS DONE BY THE CIT(A) BE DELETED . B) THE INCOME AS CLAIMED EXEMPT U/S 10(1) OF THE ACT BY THE APPELLANT BE ACCEPTED. C) IF THE AGRICULTURAL INCOME IS ASSESSED AS BUSINE SS INCOME THEN ELIGIBLE DEDUCTION U/S. 801B BE GRANTED AND D) INTEREST LEVIED BE DELETED. BRIEF FACTS OF THE PRESENT APPEAL ARE AS UNDER: 2. AT THE OUTSET, IT IS NECESSARY TO RECORD THE BRI EF HISTORY OF THE PRESENT APPEAL WHICH IS AS UNDER: 1. LD.AO PASSED THE ORIGINAL ASSESSMENT ORDER UNDER SE CTION 143(3) ON 29/03/2004 MAKING ADDITION OF RS.3,84,13,288/- BY DENYING EXEMPTION UNDER SECTION 10 (1) OF THE ACT IN RESPEC T OF AGRICULTURAL INCOME FROM CONTRACT FARMING. LD.AO AL SO DISALLOWED PROVISION FOR GUARANTEE AMOUNTING TO RS.16,21,841/- . RELEVANT ORDER PLACED AT PAGE 21-36 OF APPEAL MEMO 2. AGAINST ORDER PASSED BY LD.AO, ASSESSEE PREFERRED A PPEAL BEFORE LD.CIT(A) AND DISPUTED THE DISALLOWANCE MADE BY LD. AO IN RESPECT OF ALLEGED AGRICULTURAL INCOME OF RS.3,84,1 3,288/-. LD.CIT(A) ALLOWED THE CLAIM OF ASSESSEE. RELEVANT O RDER IS PLACED AT PAGE 92-96 OF PAPER BOOK FILED ON 10/07/2019. 3. REVENUE PREFERRED APPEAL BEFORE THIS TRIBUNAL AGAINST THE ORDER OF LD.CIT(A). THIS TRIBUNAL WHILE CONSIDERING THE CLAIM OF ASSESSEE, ITA NO.1949/BANG/2018 PAGE 4 OF 10 OBSERVED THAT 10% OF THE SAID INCOME IS ONLY ATTRIB UTABLE TO THE BUSINESS OF ASSESSEE AND THE BALANCE 90% AMOUNTS TO AGRICULTURAL INCOME. THIS TRIBUNAL THUS RESTRICTED THE DISALLOWANCE TO 10% OF RS.3,84,13,288/- IN ITS ORDE R DATED 14/07/2006. RELEVANT ORDER IS PLACED AT PAGE 99 TO 133 OF PAPER BOOK FILED ON 10/07/2019. 4. REVENUE AND ASSESSEE FURTHER CARRIED THE ISSUE BEFO RE HONBLE HIGH COURT R EVENUE ALLEGED TREATMENT 90% OF RS.3,84,13,288/- AS APPORTIONED INCOME BY THIS TRIBUNAL . THE QUESTION RAISED BEFORE HONBLE HIGH COURT BY REVENUE WAS AS UNDER: WHETHER THE APPELLATE AUTHORITIES WERE CORRECT IN HOLDING THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE BY TRADING IN I MPORTED SEEDS AGRICULTURAL ACTIVITY ON LAND TAKEN ON LEASE AND CO NTRACT FARMING CONSIDERED AGRICULTURAL INCOME WHICH WAS EXEMPT UND ER SECTION 10 (1) OF THE ACT 5. HONBLE HIGH COURT IN ITA NO. 75/2007 (BEING REVENUES APPEAL) FOR ASSESSMENT YEAR 2001-02 HAS SUMMED UP THE ISSUE ALL EGED IN PARA 3-6 OF ITS ORDER AT PAGE 198 OF PAPER BOOK. HO NBLE HIGH COURT FRAMED THE QUESTION OF LAW TO BE ANSWERED AS UNDER: 1. WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT INCOME DERIVED BY THE ASSESSEE FROM MANUFACTURING OF SEEDS AND SAL E OF THE SAME WOULD AMOUNT TO AGRICULTURAL INCOME WHICH WOULD BE EXEMPT UNDER SECTION 10 (1) OF THE ACT? ITA NO.1949/BANG/2018 PAGE 5 OF 10 2. WHETHER THE TRIBUNAL WAS RIGHT IN NOT TAKING INT O CONSIDERATION THE FACT THAT ASSESSEE COULD NOT HAVE HAD AGRICULTU RAL LAND IN VIEW OF THE PROVISION OF SECTION 79-A OF KARNATAKA LAND RE FORMS ACT? 6. IN APPEAL FILED BY ASSESSEE BEING ITA NO. 284/20 07, FOLLOWING QUESTION OF LAW WAS ADMITTED BY HONBLE HIGH COURT: WHETHER THE TRIBUNAL HAVING HELD THAT HYBRID SEEDS PRODUCED BY THE APPELLANT WAS AGRICULTURAL PRODUCE AND INCOME T HEREFROM IS AGRICULTURAL INCOME, WAS RIGHT IN LAW IN HOLDING TH E PROCESS OF CERTIFICATION OF HYBRID SEEDS PRODUCED BY THE APPEL LANT TO MAKE IT MARKETABLE COULD NOT BE HELD TO BE A PROCESS ORDINA RILY EMPLOYED BY THE CULTIVATOR AND TO THAT EXTENT THE INCOME DER IVED COULD NOT BE TREATED AS AGRICULTURAL INCOME AS DEFINED UNDER SEC TION 2 (1A) OF THE ACT? 7. HONBLE HIGH COURT WHILE CONSIDERING THE 1 ST QUESTION IN REVENUES APPEAL AND THE QUESTION ADMITTED IN ASSES SEES APPEAL OPINED THAT, ENTIRE AMOUNT EARNED BY ASSESSEE IS TO BE TREATED AS BUSINESS INCOME AND ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE SAID SUM AS INCOME UNDER THE HEAD BUSINESS INCOME. CATEGORICAL OBSERVATION BY HONBLE HIGH COURT IS IN PARA 58 AT PAGE 280 OF PAPER BOOK. 3. LD.AO ACCORDINGLY, PASSED ORDER GIVING EFFECT TO ORDER DATED 24/10/2011 HONBLE HIGH COURT ORDER ON 21/03/2012 WHICH IS PLACED AT PAGE 19 OF APPEAL MEMO. ITA NO.1949/BANG/2018 PAGE 6 OF 10 4. ASSESSEE ON ONE HAND, PREFERRED APPEAL BEFORE HONBLE SUPREME COURT AGAINST ORDER PASSED BY HONBLE HIGH COURT . ON THE OTHER HAND, AGAINST DISALLOWANCE OF RS.3,84,18, 913/- COMPUTED BY LD.AO, WHILE GIVING ORDER GIVING EFFECT TO HONBLE HIGH COURTS ORDER, BEFORE LD.CIT(A). 5. LD.CIT(A) WHILE CONSIDERING THIS ISSUE ENHANCED ADDITION BY INTERPRETING ORDER OF HONBLE HIGH COURT IN SUCH A WAY THAT THE AMOUNT ALLOWED BY LD.AO IN THE ORIGINAL ASSESSMENT ORDER (AMOUNTING TO RS.3,43,11,842/- UNDER SECTION 10 (1) ), TO BE CONSIDERED FOR DISALLOWANCE IN THE HANDS OF ASSESSE E. 6. AGAINST ENHANCEMENT MADE BY LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 7. IT HAS BEEN SUBMITTED BY LD.AR THAT, AGRICULTURA L INCOME AMOUNTING TO RS.3,43,11,842/- WAS EXEMPTED BY LD.AO HIMSELF IN ORIGINAL ASSESSMENT ORDER DATED 29/03/2004. HE S UBMITTED THAT, THIS ISSUE WAS NOT DISPUTED BY ASSESSEE BEFOR E ANY OF AUTHORITIES IN THE 1 ST ROUND OF APPEAL, AND THAT, THIS ISSUE DOES NOT ARISE OUT OF ORDER 14/07/2006 PASSED BY TRIBUNAL AGAINST WHICH REVENUE AND ASSESSEE PREFERRED APPEAL BEFORE HONBLE HIGH COURT . HE SUBMITTED THAT, ISSUE ALLEGED BY BOTH ASSESSEE AS WELL AS REVENUE BEFORE HONBLE HIGH COURT WAS IN RESPECT OF INCOME AMOUNTING TO RS.3,84,18,913/- THAT AROSE FROM ACTIV ITIES CARRIED ON IN CONTRACT LAND. HE PLACED RELIANCE ON COMPUTAT ION BY LD.AO IN ORIGINAL ASSESSMENT ORDER, GROUNDS RAISED BEFORE LD.CIT(A) AND ITA NO.1949/BANG/2018 PAGE 7 OF 10 BEFORE THIS T RIBUNAL IN SUPPORT OF THIS CONTENTION IN FIRST ROUND OF APPEAL. 8. SUCCINCTLY, LD.AR ADMITTED THAT, OGE PASSED BY L D.AO OF ORDER PASSED BY HONBLE HIGH COURT WAS CORRECT, AND THAT TO KEEP THE ISSUE ALIVE, ASSESSEE PREFERRED APPEAL BEFORE L D.CIT(A) AGAINST THE OGE. 9. ON THE CONTRARY, LD.SR.DR PLACED RELIANCE ON ORD ER PASSED BY LD.CIT(A). 10. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 11. WE AGREE WITH LD.AR THAT, ONLY ISSUE RAISED BY REVENUE BEFORE HONBLE HIGH COURT WAS IN RESPECT OF 90% DEDUCTION GRANTED BY THIS TRIBUNAL AS AGRICULTURAL INCOME EARNED BY ASSESSEE FROM CONTRACT LAND AND ISSUE RAISED BY ASS ESSEE BEFORE HONBLE HIGH COURT WAS IN RESPECT OF DISALLOWANCE O F 10% OF SUCH INCOME EARNED FROM CONTRACE LAND AS BUSINESS INCOME . 12. WE ALSO NOTE THAT REVENUE COULD NOT HAVE RAISED ANY OTHER ISSUE BEFORE HONBLE HIGH COURT AS THEY DO NOT ARISE OUT OF ORDER PASSED BY THIS TRIBUNAL DATED 14/07/2006. WE ALSO NOTE THAT THERE WAS NO ADDITIONAL GROUND RAISED BY REVENUE BE FORE HONBLE HIGH COURT . HONBLE HIGH COURT PASSED ORDER REVERSING DECISION OF THIS TRIBUNAL AND HOLDING THAT ENTIRE INCOME EARNED FROM CONTRACT LAND IS BUSINESS INCOME. UNDER SUCH CIRCUMSTANCES, LD.CIT(A) DID NOT HAVE JURISDICTION TO ISSUE ENHANCEMENT NOTI CE TO ASSESSEE ITA NO.1949/BANG/2018 PAGE 8 OF 10 TO CONSIDER CLAIM WHICH WAS ALLOWED BY LD.AO IN ORI GINAL ASSESSMENT ORDER PASSED DATED 29/03/2004 AND WAS NO T ALLEGED BY ASSESSEE BEFORE LD.CIT(A). 13. ON A QUERY BEING RAISED BY THE BENCH REGARDING ANY FURTHER APPEAL PREFERRED BY ASSESSEE, LD.AR SUBMITTED THAT, ASSESSEE HAS FILED SLP BEFORE HONBLE SUPREME COURT, AGAINST ORDER PASSED BY HONBLE HIGH COURT, WHICH WAS ADMITTED ON 08/01/2015 AND HAS BEEN CONVERTED INTO CIVIL APPEAL NO.000356/2015 . LD.AR HAS FILED CASE STATUS BEFORE HONBLE SUPREME COURT, ACCORDING TO WHICH THE APPEAL IS PENDING FINAL HEARING. 14. WE NOTE THAT, THE ISSUE CONSIDERED BY LD.CIT(A) FOR INVOKING SECTION 151 WAS NEVER ALLEGED BY ASSESSEE IN FIRST ROUND OF APPEAL, BEFORE LD.CIT(A) OR BY REVENUE BEFORE THIS TRIBUNAL. ADMITEDLY, ASSESSEE SHOULD NOT HAVE FILED APPEAL BEFORE LD.CIT (A) AGAINST LD.AOS OGE TO ORDER PASSED BY HONBLE HIGH COURT . ENTIRE CONFUSION AROSE ONLY BECAUSE OF THE APPEAL FILED BY ASSESSEE, BEFORE LD.CIT(A), AGAINST OGE PASSED BY LD.AO TO OR DER PASSED BY HONBLE HIGH COURT . IN OUR OPINION, ASSESSEE SUFFERED FOR ITS OWN FAULT. 15. FURTHER, ASSESSEE IN APPEAL FILED BEFORE US AGA INST THE IMPUGNED ORDER, HAS NOT RESTRICTED ITS ISSUE THAT A RISES OUT OF THE IMPUGNED ORDER. WE RECORD OUR STRONG DISMAY TO SUCH RECOURSE TAKEN BY ASSESSEE. IN OUR VIEW, LD.CIT(A) AND ASSES SEE ERRED BY ITA NO.1949/BANG/2018 PAGE 9 OF 10 INITIATING PROTRACTED LITIGATION WHICH IS NOT IN AC CORDANCE WITH THE PROCEDURE LAID DOWN BY THE ACT. 16. WITH ABOVE OBSERVATION, WE DO NOT FIND ANY INFI RMITY IN TAXABLE INCOME COMPUTED BY LD.AO IN OGE TO HONBLE HIGH COURT ON 21/03/2012. WE ALSO HOLD THAT ENHANCEMENT BY LD. CIT(A) IS INVALID AS IT IS ON AN ISSUE THAT DOES NOT ARISE OU T OF ORDER PASSED BY HONBLE HIGH COURT. ACCORDINGLY GROUND2-3 STANDS ALLOWED. THE REMAINING ISSUE ALLEGED BY ASSESSEE STANDS REJE CTED. IN THE RESULT, APPEAL FILED BY ASSESSEE STANDS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCT, 2020. SD/- SD/- (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH OCT, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE. ITA NO.1949/BANG/2018 PAGE 10 OF 10 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -10-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -10-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -10-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -10-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -10-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -10-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -10-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS