ACIT, Cir.33, Kolkata, Kolkata V. M/s Bisseswar Lal Mannalal & Sons, Kolkata

ITA 2296/KOL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2093 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 05-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Assessee Lawyers: CITA KOLKATA AY FILED REVI
• Keywords: Business income; Earning of tax free income; Additional evidence; Rule 8D
• Section: 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 30.09.2016 PASSED BY CIT(A)-10, KOLKATA FOR AY 2012-13. 2. THE REVENUE FILED REVISED GROUNDS OF APPEAL ON 01.10.2018 AND THE LD.AR SUBMITTED NO OBJECTION TO TAKE ON RECORD FOR ADJUDICATION. ACCORDINGLY, REVISED GROUNDS OF APPEAL FILED BY THE REVENUE TAKEN ON FILE. 3. GROUND NOS.1 & 2 RAISED BY THE REVENUE QUESTIONING THE ACTION OF CIT(A) IN VIOLATING RULE 46A. ACCORDING TO LD. DR THAT THE ASSESSEE COULD NOT FILE ALL THE DOCUMENTS WHICH WERE PRODUCED BEFORE THE CIT(A) IN THE ASSESSMENT PROCEEDINGS AND THE CIT(A) WITHOUT GIVING AN OPPORTUNITY TO THE AO FOR VERIFICATION OF THE ADDITIONAL EVIDENCE FILED, DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE AND CONTENDED THE CIT(A) VIOLATED UNDER RULE 46A AND THE ORDER MADE THEREON IS BAD IN LAW. ACCORDING TO LD.AR, ALL ACIT, CIRCLE-33, KOLKATA. VS M/S. BISSESWAR LAL MANNALAL & SONS, 12, PRETORIA STREET, 5 TH FLOOR, KOLKATA-700001. PAN-AACFB7736L (APPELLANT) (RESPONDENT) APPELLANT BY SH. C.J.SINGH, JCIT, SR. DR RESPONDENT BY SH. P.J.BHIDE, FCA DATE OF HEARING 27.03.2019 DATE OF PRONOUNCEMENT 19 .0 6 .2019 ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 2 THE DOCUMENTS WHATEVER PRODUCED BEFORE THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS WERE FILED BEFORE THE AO BUT NO COMMENTS WHATSOEVER MADE BY THE AO AND THERE IS NO ADDITIONAL EVIDENCE FILED BEFORE THE CIT(A) AND THE RULE 46A DOES NOT APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. UPON HEARING BOTH THE PARTIES, IT IS APPARENT FROM THE RECORD THAT THE AO NOTED THAT IN RESPONSE TO NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT), THE ASSESSEE FILED ALL THE DETAILS IN RESPECT OF THE ISSUES THEREON. WE FIND THE SUBMISSIONS MADE BY THE LD.AR ARE BONAFIDE AND GROUND NOS. 1 & 2 RAISED BY THE REVENUE ARE DISMISSED. 5. GROUND NO.3 IS RELATING TO QUESTIONING THE ACTION OF CIT(A), THE ADDITION MADE BY THE AO U/S 10(31) OF THE ACT. 6. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORD THAT THE ASSESSEE CLAIMED EXEMPTION U/S 10(31) OF THE ACT RELATING TO SUBSIDY RECEIVED FROM RUBBER BOARD. ACCORDING TO AO, THE ASSESSEE WAS NOT ENGAGED IN CULTIVATION AND MANUFACTURING OF RUBBER AND ASKED THE ASSESSEE TO EXPLAIN HOW IT IS ENTITLED TO CLAIM EXEMPTION U/S 10(31) OF THE ACT RELATING TO THE SUBSIDY RECEIVED FROM THE RUBBER BOARD. THE ASSESSEE REPLIED A SUNDER:- 'IT MAY KINDLY BE NOTED THAT TEA BOARD/RUBBER BOARD GRANTS CERTAIN TYPES OF SUBSIDIES TO TEA PLANTERS & RUBBER PLANTERS TO ENCOURAGE REJUVENATION/REPLANTATIONS/REPLACEMENT PLANTATION OF OLD TEA BUSHES AND THEREBY, TO RAISE MORE TEA CROPS. SUBSIDIES WERE EARLIER GRANTED ON HECTARAGE/NUMBER OF TEA BUSHES PLANTED. DURING THE ASSESSMENT YEAR UNDER SCRUTINY, THE ASSESSEE FIRM RECEIVED THE AMOUNT OF SUBSIDY FROM TEA BOARD AND RUBBER BOARD IN TERMS OF APPLICATION SUBMITTED DURING THE YEAR 2009-10. THE COST OF BUSHES SO REPLACED BEING CAPITAL IN NATURE AND ENSURES LONG TERM ENDOWING BENEFITS (OVER 50 TO 75 YEARS) HAS ALWAYS BEEN CAPITALIZED BY THE ASSESSEE FIRM. THE ASSESSEE FIRM INCURRED THE FOLLOWING COST AND CAPITALIZED UNDER THE HEAD 'ESTATE & DEVELOPMENTS' DURING THE FOLLOWING FINANCIAL YEAR FOR NEW PLANTATION OF RUBBER TREES AND OTHERS. ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 3 FINANCIAL YEAR COST (RS.) 2009-10 18,15,318/- FROM THE ABOVE FACTS, MAY WE HUMBLY SUBMIT THAT NO EXPENSES WERE INCURRED DURING THE ASSESSMENT YEAR UNDER SCRUTINY TO EARN SUCH INCOME. FURTHER, THE EXPENSE BEING CAPITALIZED, THE QUESTION OF CLAIMING THE SAME UNDER ANY OF THE HEADS DOES NOT ARISE. IN VIEW OF ABOVE STATEMENT IF FACTS, WE WOULD REQUEST YOUR GOOD SELF TO KINDLY DO NOT DISALLOW ANY FURTHER EXPENDITURE UNDER CLAUSE (II) AND (III) TO RULE (2) TO RULE 8D.' 7. THE AO DID NOT ACCEPT THE SUBMISSIONS MADE BY THE ASSESSEE AND HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION ON SUBSIDY RECEIVED FROM RUBBER BOARD AS IT IS NOT ENGAGED IN THE BUSINESS OF PLANTATION AND MANUFACTURING OF RUBBER. 8. THE CIT(A) CONSIDERING THE SUBMISSIONS MADE BY THE AO AND ON EXAMINING THE LETTER S DATED 06.09.2010 & 09.09.2010 ISSUED BY THE RUBBER BOARD OFFICE, SILCHAR ABOUT THE OUTLINING THE RUBBER PLANTING/REPLANTING OF RUBBER PLANTS CARRIED OUT SATISFACTORILY BY THE ASSESSEE AND THE AMOUNTS WERE BEING GIVEN AS AN INPUT SUBSIDY AND DELETED THE ADDITION MADE BY THE AO. FURTHER, PLACING RELIANCE IN THE VIEW OF THE REVENUE TAKEN DURING THE ASSESSMENT YEAR 2009-10, 2010-11 & 2011-12. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREUNDER FOR READY-REFERENCE:- 5. I HAVE CAREFULLY EXAMINED THE REASONING RECORDED BY THE LD. AO, AS WELL AS THE SUBMISSIONS OF THE LD. A.R ON BEHALF OF THE APPELLANT, AS SUBMITTED DURING THE SCRUTINY PROCEEDINGS AS WELL AS DURING THE APPELLATE PROCEEDINGS. IN FINE, IT APPEARS THAT THE LD AO WAS NOT CONVINCED ON FACTS ABOUT THE ACTIVITY RELATING TO RUBBER PLANTATION AS HAS BEEN CLAIMED BY THE APPELLANT, AND THE LD AO HAS CONCLUDED THAT THE ASSESSEE-FIRM WAS NOT ENGAGED IN THE BUSINESS OF RUBBER PLANTATION AND MANUFACTURE. THE REASONING RECORDED BY THE LD.AO IS THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF GROWTH AND MANUFACTURE OF TEA FOR WHICH IT GOT SUBSIDY FROM TEA BOARD, AND THE ASSESSEE HAD CLAIMED INCOME BY WAY OF SUBSIDY FROM TEA BOARD EXEMPT U/S 10(30) OF THE LT. ACT, 1961 WHICH IS NOT BEING DISTURBED. THE LD. AO RECKONED THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION ON SUBSIDY RECEIVED FROM RUBBER BOARD BECAUSE IT WAS NOT ENGAGED IN THE BUSINESS OF PLANTATION OF GROWTH AND MANUFACTURE OF RUBBER, AND THEREFORE THE LD AO DISALLOWED THE EXEMPTION CLAIMED IN THIS REGARD, AND ADDED BACK THE CLAIM OF SUBSIDY OF RS.1,03,454/- TO THE INCOME DECLARED BY THE ASSESSEE. HOWEVER, SUCH A CONCLUSION AS ARRIVED BY THE LD AO HAS BEEN MADE WITHOUT APPRECIATING ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 4 THAT THE RUBBER BOARD, REGIONAL OFFICE, SILCHAR HAS RELEASED SUBSIDY IN FAVOUR OF THE ASSESSEE BY THEIR LETTERS DATED 06.09.2010 & 09.09.2010, CLEARLY OUTLINING THAT THE WORK (IF PLANTING / REPLANTING OF RUBBER PLANTS HAS BEEN CARRIED OUT SATISFACTORILY BY THE ASSESSEE IN THE SPECIFIED HECTORAGE, AND THE AMOUNTS WERE BEING GIVEN AS AN INPUT SUBSIDY. THIS IS APPARENT FROM THE LETTERS ISSUED TO THE ASSESSEE-APPELLANT FROM THE RUBBER BOARD. IT IS TO BE STATED THAT THE RUBBER BOARD FUNCTIONS UNDER THE MINISTRY OF COMMERCE, GOVERNMENT OF INDIA. IT IS ALSO ESTABLISHED THAT THE RUBBER PLANT HAS AN INITIAL GESTATION OF 7 TO 10 YEARS BEFORE IT BEARS THE NECESSARY RAW LATER, AND IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE TEES HAVE NOT YET COME TO BEARING. THE OBSERVATION OF THE LD AO THAT THERE WAS NO RUBBER PLANTATION AND / OR MANUFACTURING APPEARS TO HAVE BEEN MADE WITHOUT CONSIDERING THESE VERY RELEVANT FACTORS. ON FACTS, IT IS SEEN THAT THE RUBBER BOARD HAS GRATED THE SUBSIDY AFTER CERTIFYING THE NECESSARY HECTORAGE FOR PLANTING AND REPLANTING. THEREFORE IN THE FACTS OF THE CASE, I AM UNABLE TO SUPPORT THE LD AO IN HIS ACTION IN DENYING THE CLAIM OF EXEMPTION WHICH APPEARS TO BE ALLOWABLE TO THE ASSESSEE-FIRM. FROM THE ORDERS OF THE OTHER ASSESSMENT YEARS 2009-10, 2010-11 AND 2012-12 SUBMITTED BY THE APPELLANT ALSO, IT IS SEEN THAT THE MATTER HAS NOT BEEN DISTURBED BY THE LD AOS IN ANY OF THE YEARS UNDER CONSIDERATION, AND THE CLAIMS OF SUBSIDY HAVE BEEN ALLOWED. WITH SUCH OBSERVATION AND VIEW OF THE MATTER, I FIND THAT THE DISALLOWANCE MADE BY THE LD.AO OF AN AMOUNT OF RS.1,03,454/- IS NOT SUSTAINABLE AND IS THEREFORE ORDERED TO BE DELETED. 9. ON PERUSAL OF THE ABOVE REASONS, SPECIFICALLY, WE FIND NO ADDITIONAL DOCUMENTS WERE FILED BY THE ASSESSEE IN THE FIRST APPELLATE PROCEEDINGS WHEREBY IT IS SEEN NO REFERENCE WHATSOEVER WERE MADE TO THE NEW DOCUMENTS BY THE CIT(A). THEREFORE, THE CONTENTION OF THE LD.DR RELATING TO GROUND NOS. 1 & 2 ARE MISCONCEIVED AND REJECTED. ACCORDING TO CIT(A), THE RUBBER BOARD ISSUED LETTERS ON ITS SATISFACTION THAT THE ASSESSEE CARRIED PLANTING AND RE-PLANT OF RUBBER PLANTS. THE RUBBER BOARD GRANTED THE SUBSIDY AFTER CERTIFYING THE NECESSARY HECTORAGE FOR PLANTING AND REPLANTING. FURTHER, IT IS SEEN THAT THE APPELLANT-REVENUE HAS ALLOWED RE-PLANTING EXEMPTION IN PREVIOUS ASSESSMENT YEARS I.E 2009-10, 2010-11 & 2011-12. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND ACCORDINGLY, IT IS JUSTIFIED. THUS, GROUND NO.3 FILED BY THE REVENUE FAILS AND IT IS DISMISSED. 10. GROUND NO.4 IS RELATING TO QUESTIONING THE ACTION OF CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S 14A OF THE ACT. ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 5 11. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.3,57,000/- AND THE AO MADE ADDITION BY ADOPTING THE METHOD PROVIDED UNDER RULE 8D(II) FOR THE PURPOSE OF SECTION 14A OF THE ACT. THE CIT(A) CONSIDERING VARIOUS CASE LAWS DELETED THE SAID ADDITION MADE BY THE AO. IT IS WELL SETTLED, THE DISALLOWANCE U/S 14A SHOULD NOT EXCEED THE DIVIDEND INCOME EARNED AND IN OUR OPINION, THE DISALLOWANCE SHOULD BE RESTRICTED TO INVESTMENTS THAT YIELDED THE EXEMPT INCOME IN TERMS OF DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF REI AGRO LTD. THUS, WE REMAND THE MATTER TO THE FILE OF AO FOR COMPUTATION OF EXPENDITURE THAT HAVE BEEN INCURRED BY THE ASSESSEE IN EARNING THE ABOVE SAID DIVIDEND INCOME. TH AO SHALL EXAMINE THE ACCOUNTS OF THE ASSESSEE AND PASS AN ORDER IN ACCORDANCE WITH LAW. THEREFORE, GROUND NO.4 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.5 IS RELATING TO ADDITION MADE ON ACCOUNT OF INTEREST EXPENSE FOR USES OF RELATED FUNDS FOR NON-BUSINESS PURPOSES. 13. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO FOUND THAT THE ASSESSEE HAD LOANS AND ADVANCES GIVEN TO OTHER PARTIES AS ON 31.03.2012 AMOUNTING TO RS.1,12,12,571/-. THE ASSESSEE WAS ASKED TO FILE COMPLETE DETAILS. IN RESPECT TO WHICH, THE ASSESSEE FILED A LIST OF PERSONS AND AUTHORITIES TO WHICH SAID LOANS AND ADVANCES WERE GIVEN. ACCORDING TO AO, THE ASSESSEE FAILED TO GIVE SOME DETAILS AS ON 31.03.2012 THE MAXIMUM AMOUNTING OUTSTANDING DURING THE YEAR AND PURPOSE OF LOAN. BASED UPON THE INFORMATION GIVEN BY THE ASSESSEE, THE AO FOUND FOLLOWING LOANS AND ADVANCES UTILISED FOR NON-BUSINESS PURPOSES ON WHICH NO INTEREST WERE CHARGED WHICH ARE AS FOLLOWS:- [I] SHARE APPLICATION MONEY RS.1,75,00,000/- [II] SAHIL INDUSTRY LTD. RS.2,50,000/- [III] STELLAR CARPETS RS.1,00,000/- ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 6 [IV] TECHNOCRAFTS RS.1,50,000/- TOTAL RS.1,80,00,000/- 14. ACCORDING TO AO, THE SAID LOANS AND ADVANCES WERE FOR NON- BUSINESS PURPOSE OUT OF A COMMON POOL OF FUNDS WHICH INCLUSIVE OF BOTH INTEREST BEARING AND INTEREST FREE FUNDS AND CORRESPONDING INTEREST EXPENSE INCURRED BY THE ASSESSEE HAS TO BE DISALLOWED AND ACCORDINGLY, THE INTEREST EXPENSE OF RS.4,07,773/- WAS DISALLOWED FOR THE USING OF RELATED FUNDS FOR NON-BUSINESS PURPOSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO CIT(A), THE TOTAL INTEREST PAID BY THE ASSESSEE FOR THE UNSECURED LOANS IS AMOUNTING TO RS.18,43,708/- AND THE DETAILS OF INTEREST RECEIVED BY THE ASSESSEE IS RS.22,93,941/-. HE HELD THAT THERE WAS A POSITIVE FIGURE OF INTEREST RECEIVED WHICH REFLECTED IN THE P&L A/C AND DID NOT AGREE WITH THE VIEWS OF AO IN ADDING THE INTEREST EXPENSE TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER, IT IS NOTED THAT THE APPELLANT- REVENUE ALLOWED IN FULL THE CLAIM OF INTEREST IN THE EARLIER ASSESSMENT YEAR. WE AGREE WITH THE FINDING OF CIT(A) THAT THE AO ADOPTED A VERY PRESUMPTIVE APPROACH AND THE DISALLOWANCE MADE WITHOUT PROPER EXAMINATION OF THE RELEVANT FACTS AND UTILIZATION OF BORROWED FUNDS AND OWN FUNDS. THE RELEVANT PORTION OF ORDER OF CIT(A) WHICH IS REPRODUCED HEREIN BELOW:- 4. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD. AO IN DISALLOWING A PORTION OF THE INTEREST EXPENDITURE. I HAVE ALSO CAREFULLY EXAMINED THE SUBMISSIONS OF THE LD.A.R FOR THE APPELLANT ALONG WITH THE DOCUMENTS SUBMITTED. THERE ARE INACCURACIES IN THE FIGURE TAKEN BY THE LD. AO, AND IT IS SEEN THAT THE TOTAL INTEREST PAID BY THE ASSESSEE FOR THE UNSECURED LOANS TOTALS RS.18,43,708/- AND NOT THE FIGURE OF RS.22,93,941/-, AS TAKEN BY THE LD.AO. FROM THE DETAILS OF INTEREST PAID AS AVAILABLE IN ANNEXURE -E FILED BY THE ASSESSEE-APPELLANT, IT IS SEEN THAT THE TOTAL INTEREST AID FOR UNSECURED LOANS WAS RS.L8,43,708/-, AND THE TOTAL INTEREST PAID TO OTHERS WAS RS.2,28,580.46. IT IS ALSO SEEN THAT THE DETAILS OF INTEREST RECEIVED TOTALS RS.22,93,941/- DURING THE COURSE OF THE YEAR, MOSTLY FROM TWO PARTIES. THEREFORE, I FIND MERIT IN THE CLAIM OF THE ASSESSEE THAT OVERALL THERE WAS A POSITIVE FIGURE OF INTEREST RECEIVED WHICH HAD BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT, AND THIS FIGURE WAS RS.4,5O,233/-. THAT BEING THE SITUATION, I AM UNABLE TO AGREE WITH THE LD AO'S CONCLUSIONS THAT CERTAIN ADVANCES MADE BY THE ASSESSEE TOWARDS SHARE APPLICATION MONEY ETC WERE FROM ANY PORTION OF THE INTEREST-BEARING FUNDS. IN ANY CASE, THE LD AO HAS NOT DISCUSSED AS TO HOW THESE ADVANCES WERE ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 7 FOR NON-BUSINESS PURPOSES OR FOR PURPOSES WHICH WOULD NOT YIELD ANY INCOME. IT IS SEEN THAT THE LD. AO HAS INVOKED THE SAME PRINCIPLES OF INTEREST DISALLOWANCE AS FOR SEC 14A AND RULE 8D WITHOUT ANY SPECIFIC JUSTIFICATION AT ALL. AS HAS BEEN ARGUED BY THE ASSESSEE-APPELLANT, FROM THE PROFIT & LOSS A/C. OF THE APPELLANT, IT IS SEEN THAT AN AMOUNT OF RS.2,28,580/- BY WAY OF INTEREST HAS BEEN PAID TO THE TEA BOARD BY THE APPELLANT FOR MACHINERY PURCHASE ON HIRE PURCHASE BASIS AND TO M/S TATA CAPITAL AND THE HDFC BANK FOR CAR LOAN. SIMILARLY ON THE CREDIT SIDE OF THE PROFIT & LOSS A/C., THE APPELLANT HAS SHOWN NET INTEREST INCOME OF RS.4,50,233/-, WHICH IS THE DIFFERENCE OF INTEREST EXPENDED AND THE INTEREST EARNED. FROM THE-ANNEXURE-'F', RELATING TO DETAILS OF INTEREST RECEIVED, IT IS ALSO SEEN THAT INTEREST HAS BEEN RECEIVED FROM TWO PARTIES, VIZ. M/5 ACCORDION PROPERTIES PVT. LTD. AND SHRI SUSHIL KUMAR BHUWALKA. ALSO, AS ALREADY DISCUSSED INTEREST OF RS.18,43,708/- HAS BEEN PAID TO SIX PARTIES SPECIFIED IN SCHEDULE-D OF THE BALANCE SHEET. IT IS ALSO SEEN THAT THE OPENING BALANCE TO THE CREDIT OF THESE PARTIES, WAS RS.2,28,98,970/-, AND AFTER MAKING ADJUSTMENT FOR ADDITIONS AND REPAYMENTS MADE DURING THE YEAR AS WELL AS CREDITING THE INTEREST OF RS.18,43,708/- TO THEIR ACCOUNT, THE CLOSING CREDIT BALANCE STOOD REDUCED TO RS.L,79,36,943/-. THE APPELLANT HAS ALSO POINTED OUT THAT THERE WAS SOME REDUCTION IN THE AMOUNT OF UNSECURED LOAN ON WHICH THE SAID INTEREST HAS BEEN PAID WHEREAS AMOUNTS OF THE LOANS & ADVANCES ON WHICH THE INTEREST INCOME ACCRUED, STOOD AT RS.1,56,81,090/-. THEREFORE I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT THAT THE BALANCE OF THE LOANS WAS OBVIOUSLY UTILIZED FOR THE APPELLANT'S BUSINESS PURPOSE. THERE IS ALSO SOME MERIT IN THE CLAIM OF THE APPELLANT THAT IN THE EARLIER ASSESSMENT YEAR, THE APPELLANT'S CLAIM FOR INTEREST WAS ALLOWED IN FULL, AND THAT THEREFORE THE ASSESSING OFFICER HAS ACCEPTED IN THE EARLIER YEAR THAT THE LOANS, ON WHICH INTEREST HAS BEEN PAID, HAVE BEEN UTILIZED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. I FIND THAT AS HAS BEEN CONTENDED BY THE LD AO, THE ACTION OF THE LD AO IS BASED ON SURMISES AND ASSUMPTIONS AS HE HAS NOT BROUGHT ON RECORD ANY MATERIALS TO SUGGEST THAT THE LOAN FUND TO THE EXTENT OF RS.1.80 CRORE, WERE UTILIZED FOR PAYMENT OF SHARE APPLICATION MONEY AND ADVANCE TO OTHER PARTIES. THE APPELLANT- FIRM HAS ALSO SUBMITTED A COPY OF ITS BANK STATEMENT FOR THE MONTH OF OCTOBER 2011, MARKED AS 'ANNEXURE-'G', TO EXPLAIN THAT THAT THE PAYMENTS HAVE BEEN MADE BY THE APPELLANT OUT OF ITS OWN RESOURCES I.E. INCOME OF THE YEAR OR REFUND OF ADVANCES MADE EARLIER. OVERALL, I FIND THAT THE LD AO HAS ADOPTED A VERY PRESUMPTIVE APPROACH TO THE MATTER, AND THAT THE DISALLOWANCE HAS BEEN MADE WITHOUT PROPER EXAMINATION OF THE RELEVANT FACTS AND THE UTILIZATION OF BORROWED FUND AND OWN FUND BY THE BUSINESSMAN WHICH HAS TO BE ITS PREROGATIVE, AND CANNOT BE DICTATED BY THE LD ASSESSING OFFICER. IN THE CIRCUMSTANCES DISCUSSED, I FIND THAT THE DISALLOWANCE OF RS. RS.4,07.773/-, MADE BY THE LD AO CANNOT BE SUSTAINED, AND THEREFORE THE SAME IS ORDERED TO BE DELETED. THE GROUND IS ACCORDINGLY ADJUDICATED IN FAVOUR OF THE APPELLANT- ASSESSEE. 15. ON AN EXAMINATION OF FINDING REFERRED BY THE CIT(A) ON THE ISSUE ON HAND, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 8 16. GROUND NO.6 IS RELATING TO QUESTION OF ACTION OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF EXCESS CULTIVATION EXPENSES AND PACKAGING EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 17. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO AO, THE ASSESSEE CLAIMED CULTIVATION EXPENSES OF RS.2,38,55,232/- AND PACKING AND FORWARDING EXPENSES OF RS.1,39,91,132/- IN ITS P&L A/C. HE ASKED THE DETAILS OF MONTH-WISE BIFURCATION OF THESE EXPENSES. ON PERUSAL OF THE SAID DETAILS AS FILED BY THE ASSESSEE, THE AO FOUND EXCESS CULTIVATION EXPENSES OF RS.1,69,51,636/- [RS.2,38,55,232/- -69,03,596/-] AND EXCESS PACKING AND FORWARDING EXPENSES OF RS.50,41,518/- [RS.1,39,91,132/- - RS.89,49,614/-] WERE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 18. ACCORDING TO CIT(A), THE ASSESSEE FILED ALL DOCUMENTS RELATING TO THE ISSUES ON HAND I.E. SCHEDULE [M] AND SCHEDULE [O] OF THE P&L A/C BEFORE THE AO AND THE AO DID NOT CONSIDER THE SAID DETAILS FULLY. BASED ON FIRST PAGE INVOLVING ON 29 ACTIVITIES, THE AO COME TO A WRONG CONCLUSION THAT THE ASSESSEE CLAIMED EXCESS ON CULTIVATION EXPENSES. THE CIT(A) FOUND SATISFIED BY EXAMINING ALL THE DETAILS WHICH ARE PROVIDED IN SCHEDULE [M] AND SCHEDULE [O] RELATING TO THE ISSUES ON HAND. FURTHER, REGARDING PACKING AND FORWARDING EXPENSES, THE CIT(A) FOUND THAT THE AO COULD NOT EXAMINE THE HEAD OFFICE EXPENSES RELATING TO PACKING AND FORWARDING AND THEREBY THE AO MISCONCEIVED NOTIONS AND BY INACCURATE AND INCOMPLETE OBSERVATIONS OF THE DETAILS FILED BY THE ASSESSEE KEPT A WRONG CONCLUSION. FOR BETTER UNDERSTANDING, THE RELEVANT PORTION OF CIT(A) IS REPRODUCED HEREIN BELOW:- 3. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD.AO IN MAKING THE IMPUGNED DISALLOWANCES OF RS.L,69,51,636/- AS DUE OF CLAIM OF EXCESSIVE 'CULTIVATION EXPENSES' AND RS.50,41,518/- ON ACCOUNT OF EXCESS 'PACKAGING AND FORWARDING CHARGES.' IT IS RELEVANT TO OBSERVED THAT THE LD. AO HAS ARRIVED AT THE IMPUGNED FIGURES FROM THE DOCUMENTS AND INFORMATION SUBMITTED BY THE APPELLANT- ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 9 FIRM ITSELF. IT IS ALSO SEEN THAT THE LD. AO HAS NOT CHOSEN TO SHOW-CAUSE AND GIVE AN OPPORTUNITY TO THE ASSESSEE-APPELLANT, AND THE MATTER HAS REMAINED UNEXPLAINED AT THE STAGE OF ASSESSMENT. I HAVE THEREFORE CAREFULLY EXAMINED THE SCHEDULE-M AND SCHEDULE-O OF THE PROFIT & LOSS A/C. FOR THE YEAR ENDED 31.03.2012, AS FILED BY THE APPELLANT- ASSESSEE DURING THE APPEAL. THESE WERE ALSO FILED BEFORE THE LD. AO AND APPEAR TO THE BASIS OF MAKING THE IMPUGNED ADDITIONS. FROM THESE ANNEXURES,' [ LISTED AS I-1 TO I-4] IT IS SEEN THAT THE APPELLANT- ASSESSEE HAS DURING THE YEAR, INCURRED EXPENDITURE OF RS.2,38,55,232/- AND RS.1,39,91,132/- BY WAY OF CULTIVATION EXPENSES AND PACKING & FORWARDING EXPENSES RESPECTIVELY. THE SAID EXPENSES HAVE BEEN LISTED OUT MONTH WISE AS HAD BEEN DESIRED BY THE LD AO. AND HAS BEEN CONTENDED BY THE LD A.R FOR THE ASSESSEE-FIRM THE SAME COMPRISE EXPENSES MAINLY COMPRISE OF WAGES TO LABOUR AND STORES CONSUMPTION FOR CULTIVATION OF PLANTATION CROP I.E. TEA. THERE SEEMS TO BE NO APPARENT REASON FOR THE LD.AO TO DISALLOW A PORTION OF THE CLAIMS. HOWEVER, AS HAS BEEN EXPLAINED BY THE LD A.R FOR THE APPELLANT, IT IS OBSERVED THAT ON THE FIRST PAGE OF THE CULTIVATION EXPENSES SHOW TOTAL EXPENDITURE ON THE 29 ACTIVITIES SPECIFIED THEREIN, AT RS.69,03,596.22, AND IT DOES APPEAR THAT THE LD AO HAS TAKEN COGNIZANCE OF ONLY THIS DOCUMENT WHILE ARRIVING AT THE FINDINGS GIVEN BY HIM. THEREFORE I FIND IT CORRECT THAT THE LD AO HAS ONLY OBSERVED THIS PAGE AND NOT THE REMAINING -PAGES. SIMILARLY, I HAVE CAREFULLY EXAMINED THE DETAILS AVAILABLE IN THE LIST OF THE PACKING & FORWARDING EXPENSES DETAILS WHICH HAVE ALSO BEEN SUBMITTED BY THE LD. A. R AND ANNEXED AT DOCUMENT 'I-4'. I FIND THE CONTENTION OF THE APPELLANT TO BE CORRECT THAT IN THESE DOCUMENTS IT IS APPARENT THAT AT THE GARDEN, THE APPELLANT INCURRED EXPENDITURE OF RS.89,49,614.52 AND AT THE HEAD OFFICE, THE EXPENDITURE INCURRED AMOUNTED TO RS.50,41,517.47, MAKING AGGREGATE EXPENDITURE OF PACKING & FORWARDING EXPENSES AT RS.1,39,91,131.99, GROSSED UPTO RS.1,39,91,132/-, WHICH WAS CHARGED TO THE PROFIT & LOSS A/C. THEREFORE, IT IS QUITE APPARENT THAT THE LD.AO HAS SIMPLY OVERLOOKED THE EXPENDITURE OF RS.50,41,517/- SO INCURRED BY THE APPELLANT THROUGH ITS HEAD OFFICE, WHILE HE HAS CONSIDERED THE EXPENDITURE ON PACKING & FORWARDING INCURRED AT THE TEA ESTATE OF THE APPELLANT ON ACCOUNT OF PACKING & FORWARDING EXPENSES. IN THE CIRCUMSTANCES BROUGHT FORTH, AND AS DISCUSSED, IT IS QUITE CLEAR THAT THE ADDITIONS HAVE BEEN MADE ON MISCONCEIVED NOTIONS AND BY INACCURATE AND INCOMPLETE OBSERVATIONS OF THE DETAILS FILED BY THE ASSESSEE-APPELLANT BY THE LD. AO. THE MATTER COULD EASILY HAVE BEEN ADDRESSED HAD THE LD. AO GIVEN AT LEAST ONE OPPORTUNITY TO THE APPELLANT TO EXPLAIN THE FIGURES. ON THE BASIS OF THE FACTS EMANATING FROM THE DOCUMENTS SUBMITTED BY THE APPELLANT BEFORE BOTH THE LD. AO AND IN THIS FORUM, I FIND THAT THE ADDITIONS / DISALLOWANCES HAVE BEEN MADE DUE TO IMPROPER APPRECIATION OF THE DOCUMENTS, AND ARE THEREFORE NOT JUSTIFIED. THEY ARE THEREFORE DIRECTED TO BE DELETED, AND THE GROUNDS 5 AND 6 DECIDED IN FAVOUR OF THE APPELLANT-ASSESSEE. 19. IN VIEW OF THE REASONS RECORDED BY THE CIT(A) AND THE DISCUSSION HEREIN ABOVE IN PARAS 17 & 18, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND ACCORDINGLY, IT IS JUSTIFIED. THUS, GROUND NO.6 RAISED BY THE REVENUE IS DISMISSED. 20. GROUND NO.7 IS RELATING TO THE DELETION OF ADDITION MADE ON ACCOUNT OF EXCESS CLAIM U/S 80IC OF THE ACT. ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 10 21. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO AO, THE ASSESSEE EARNED INTEREST OF RS.22,93,941/- ON UNSECURED LOANS GIVEN TO OTHER PARTIES. THE ASSESSEE PAID INTEREST OF RS.18,43,708/- TO OTHER PARTIES FOR LOANS TAKEN BY IT. THE ASSESSEE DECLARED AN AMOUNT OF RS.4,50,233/- [RS.22,93,941/- - RS.18,43,708/-] AS NET INTEREST INCOME IN ITS P&L A/C. ACCORDING TO AO, THE SAID AMOUNT IS INCLUSIVE OF AMOUNT OF RS.1,72,35,293/- CLAIMED AS DEDUCTION U/S 80IC OF THE ACT AND HELD THE NET INTEREST INCOME AS DECLARED IN THE P&L A/C IS NOT A BUSINESS INCOME AND NOT ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE ACT BY ADDING THE SAME UNDER THE HEAD EXCESS CLAIM AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDING TO CIT(A), NO CLAIM WAS MADE BEFORE THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS THAT THE SAID AMOUNT IS EXEMPT INCOME U/S 80IC OF THE ACT. THE RELEVANT PORTION IS REPRODUCED HEREIN BELOW FOR READY-REFERENCE:- 2. QUITE ON THE OTHER HAND, THE LD. A.R FOR THE APPELLANT HAS OPPOSED SUCH ACTION BY THE LD. AO, AND PLEADED THAT THE INTEREST INCOME WAS NOT TAKEN IN ANY PART OF THE EXEMPTED INCOME UNDER SEC 80-IC, AND THE LD. AO HAS PROCEEDED ON A MISCONCEIVED NOTION WHILE DIRECTING THAT THE INTEREST INCOME BE TAKEN FROM OTHER SOURCES. IT WAS SUBMITTED BY THE LD. A.R. FOR THE APPELLANT THAT THE GROUND IS RELATED TO THE EARLIER GROUND NO.4. IT WAS SUBMITTED THAT THE INTEREST EXPENSES OF RS.18,43,708/- WAS INCURRED BY THE APPELLANT ON MONEYS BORROWED AND UTILIZED FOR THE PURPOSE OF ITS BUSINESS INCLUDING ITS BUSINESS OF ADVANCING MONEY TO OTHERS, AND THAT THE DISALLOWANCE WAS OF RS.1843,708/- WAS NOT JUSTIFIED. 3. IT IS SEEN THAT THE LD.AO HAS MADE THIS DISALLOWANCE IN CONTINUATION OF THE DISALLOWANCE DEALT WITH AT GROUND 4 (SUPRA). I FIND THAT THE LD AO HAS CONCLUDED THAT THE ENTIRE INTEREST INCOME OF RS.22,93,941/- WAS ITS NON-BUSINESS INCOME AND THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION U/S 80-LC ON THIS ENTIRE AMOUNT. HOWEVER, IT IS TO BE SAID THAT THE APPELLANT-ASSESSEE HAS NOT MADE ANY CLAIM THAT SUCH INCOME WOULD BE EXEMPT INCOME U/S 80-IC. THEREFORE, I DO NOT SEE THE LOGIC OF THE LD. AO IN MAKING ANY PRESUMPTIONS IN THE MATTER. I FIND THE SAME TO BE WITHOUT ANY LEGAL BASIS. BE THAT THE CASE, THE MATTER OF DISALLOWANCE OF THE INTEREST INCOME AS MADE BY THE LD. AO HAS BEEN ADJUDICATED IN FAVOUR OF THE APPELLANT AT GROUND NO.4 SUPRA. ON FACTS AND IN LAW, I FIND THE ACTION OF THE LD.AO TO BE UNSUSTAINABLE, AND THEREFORE SUCH ACTION IS DIRECTED TO BE DELETED. 22. IN OUR OPINION, ON PERUSAL OF THE ABOVE REASONS STATED BY THE CIT(A) WHEN THERE IS NO CLAIM FOR DEDUCTION, THERE CANNOT BE ANY ADDITION MADE THEREON. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 11 ACCORDINGLY, IT IS JUSTIFIED. THUS, GROUND NO.7 RAISED BY THE REVENUE FAILS AND IT IS DISMISSED. 23. GROUND NO.8 IS RELATING TO QUESTIONING OF ACTION OF CIT(A) AND DELETED THE ADDITION MADE BY THE AO UNDER THE HEAD PROFIT FROM SALES OF GREEN LEAVES. 24. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO AO, THE TOTAL SALES DECLARED BY THE ASSESSEE IS RS.17,84,38,874/- OUT OF WHICH THE ASSESSEE HAS SHOWN SALES ON GREEN LEAVES IS OF RS.5,47,726/-. ACCORDING TO AO, THE ASSESSEE CANNOT CLAIM 100% PROFIT ON SALE OF GREEN LEAF IN TERMS OF RULE 8 OF INCOME TAX RULES, 1962. KEEPING IN VIEW THE NORMAL PROFITS OF BUSINESS, THE AO ESTIMATED THE PROFIT ON SALE OF GREEN LEAVES @ 5% TO AN EXTENT OF RS.27,386/- (5% OF RS.5,47,726/-) AND ALLOWED THE SAME AS DEDUCTION UNDER THE HEAD AGRICULTURAL INCOME. 25. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT THE ASSESSEE CLAIMED SUCH SALE PROCEEDS OF GREEN LEAF WAS PURELY AGRICULTURAL INCOME AND DOES NOT ASSESSABLE UNDER INCOME TAX ACT. THE AO ESTIMATED THE NET PROFIT @ 5% ON PRESUMPTIVE BASIS AND ITS ACTION IS NOT JUSTIFIED. THE GREEN LEAF PLUCKED OUT OF THE ASSESSEES OWN CULTIVATION AND SALE WAS OUT OF PURVIEW OF RULE 8 INASMUCH AS THE SAME WAS ENTIRELY AGRICULTURAL INCOME. THE CIT(A) CONSIDERING THE SUBMISSIONS AS MADE BEFORE HIM, OBSERVED THAT THE ASSESSEE SOLD GREEN LEAF WITHOUT SUBJECTING THE SAME IN ANY PROCESS. SUCH ACTIVITY NOT BEEN DISPUTED BY THE AO AND THE CLAIM OF SUCH ACTIVITY HAS NOT BEEN DISPUTED TO BE AGRICULTURAL INCOME. FURTHER, ON EXAMINATION OF RETURN OF INCOME TOGETHER WITH THE SUPPORTING DOCUMENTS FILED THEREON, THE CIT(A) HELD THAT SUCH SALE PROCEEDS OF GREEN LEAF IS PURELY AGRICULTURAL INCOME NOT ASSESSABLE UNDER INCOME TAX ACT. FOR READY-REFERENCE, THE RELEVANT PORTION IS REPRODUCED HEREUNDER:- ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 12 3. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD. AO IN MAKING THE IMPUGNED DISALLOWANCE, AS ALSO CONSIDERED THE SUBMISSIONS OF THE APPELLANT- ASSESSEE. FROM THE FACTS AVAILABLE, IT APPEAR THAT THE ASSESSEE-APPELLANT SOLD GREEN LEAF DIRECTLY, WITHOUT SUBJECTING THE SAME TO ANY PROCESSING. SUCH ACTIVITY, IT APPEARS HAS NOT BEEN DISPUTED BY THE LD.AO, AND THE CLAIM OF THE RETURNS FROM SUCH ACTIVITY HAVE NOT BEEN DISPUTED TO BE AGRICULTURAL INCOME. IT IS THE APPELLANT'S CONTENTION THAT DURING THE RELEVANT PREVIOUS YEAR, OUT OF ITS OWN TEA PLANTATION, THE APPELLANT PLUCKED 64,29,403 KGS. OF GREEN LEAF, AND OF THAT QUANTUM 46,615 KGS. WERE SOLD BY THE APPELLANT FOR RS.5,47,726/-. THE APPELLANT, IN ITS COMPUTATION OF INCOME, CLAIMED THAT SUCH SALE PROCEEDS OF GREEN LEAF WAS PURELY AGRICULTURAL INCOME AND NOT ASSESSABLE TO CENTRAL INCOME TAX. I DO NOT SEE ANY REASON AS TO WHY THE LD.AO SHOULD TRY TO ASCERTAIN ANY COMPONENT OF THE SALES AS 'NET INCOME', WHEN THE GREEN LEAF WAS PLUCKED FROM THE GARDENS OWNED BY THE APPELLANT-ASSESSEE. I FIND THAT THE ACTION OF THE LD.AO IS BASED PURELY ON PRESUMPTIONS AND SURMISES AND AN ESTIMATE OF THE NET PROFIT @ 5% OF THE TOTAL SALES HAS BEEN MADE. SUCH ACTION APPEARS TO BE UNJUSTIFIED, AND WITHOUT ANY BASIS. THE SAME CANNOT BE SUSTAINED IN THE FACTS' OF THE CASE, AND IS LIABLE TO BE DELETED. AS SUCH, THE ENTIRE SALE PROCEEDS ARE HELD TO BE AGRICULTURAL INCOME AND OUTSIDE THE PURVIEW OF TAXATION. THIS GROUND IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE-APPELLANT. 26. ON PERUSAL OF THE REASONS RECORDED BY THE CIT(A), WE AGREE WITH THE FINDING THEREON. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NO.8 RAISED BY THE REVENUE IS DISMISSED. 27. GROUND NO.9 IS RELATING TO THE QUESTIONING OF ACTION OF CIT(A) IN RESTRICTING THE CLAIM U/S 80IC OF THE ACT. 28. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ACCORDING TO AO, THE ASSESSEE DECLARED NET PROFIT OF RS.4,73,19,096/- BEFORE TAXES ON TURNOVER OF RS.17,84,38,874/-. THE AO REDUCED THE OTHER INCOMES UNDER THE HEAD INTEREST INCOME, HOUSE RENT, DIVIDEND INCOME AND MISCELLANEOUS INCOME COMPUTED THE OPERATIONAL INCOME OF THE ASSESSEE OF RS.4,44,55,571/-. ACCORDING TO AO, THE SAID OPERATIONAL INCOME IS OF 24.91% WHICH IS MUCH HIGHER THAN THE NORMAL BUSINESS STANDARDS AND THE CLAIM OF BUSINESS PROFIT AT RS.1,72,35,293/- (40% OF RS.4,30,88,233/-) IS NOT IN ACCORDANCE WITH LAW. THE AO ASKED THE ASSESSEE TO FILE EVIDENCE. HE HELD THE ASSESSEE FAILED TO FILE BOTH THE ABOVE SAID DETAILS AND FURTHER NO ENQUIRY WAS MADE IN THAT REGARD. A ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 13 PRESUMPTION U/S 114 OF THE INDIAN FINANCE ACT, 1872, THE AO WORKED OUT THE RESULTANT DEDUCTION U/S 80IC OF THE ACT AS UNDER:- BUSINESS INCOME=5% OF TURNOVER OF THE ASSESSEE (RS.17,84,38,874)= RS.89,21,944/- BUSINESS INCOME TAXABLE UNDER THE I.T.ACT, 1961 FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IC = 40% OF TOTAL BUSINESS INCOME (RS.89,21,944) AS PER SECTION 295(2)(B)(I) OF THE I.T.ACT, 1961 READ WITH RULE 8 OF I.T.RULES, 1962=RS.35,68,777/- DEDUCTION ALLOWABLE UNDER SECTION 80-IC=100% OF BUSINESS INCOME AS COMPUTED ABOVE=RS.35,68,777/-. 29. IT IS NOTED THAT THE AO RESTRICTED THE CLAIM OF DEDUCTION AT RS.35,68,777/- AS AGAINST THE CLAIM OF ASSESSEE AT RS.1,72,35,293/-. 30. IN THE FIRST APPELLANT PROCEEDINGS, THE CIT(A) HELD THAT THERE WAS NO COMPARABLE CASE WAS GIVEN BY THE AO WHILE STATING THE OPERATING PROFIT WAS ABNORMALLY HIGH AND THE STANDARD PROFIT SHOULD BE IN THE RANGE OF 5% AS BENCHMARKED BY THE AO. FURTHER, HE FOUND THAT THE DEDUCTION AS GIVEN BY THE ASSESSEE U/S 80IC OF THE ACT, WAS DERIVED FROM ITS CULTIVATION ACTIVITY AND THE SAME WAS INCLUDED IN ITS GROSS TOTAL INCOME AND THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON SUCH AMOUNT U/S 80IC OF THE ACT FOR THE REASONS STATED HEREIN BELOW:- 7. I HAVE CAREFULLY ANALYZED THE ACTION OF THE LD.AO, AND THE REASONS RECORDED FOR THE SAME. I HAVE ALSO PERUSED THE SUBMISSIONS OF THE APPELLANT- ASSESSEE, AND THE DETAILS' OFFERED BY IT DURING APPEAL. IT IS SEEN THAT THE APPELLANT HAD OFFERED THE COMPARATIVE CHART OF CULTIVATION, LEAF PLUCKING AND PACKAGING AND FORWARDING EXPENSES OF GREEN LEAF PRODUCED DURING THE YEARS ENDED 31.03.2008 TO 31.03.2012. THE SAME, SUBMITTED AS ANNEXURE J IS AS UNDER: YEAR ENDED GREEN LEAF PLUCKING EXPENSES (RS.) CULTIVATION EXPENSES (RS.) PACKAGING AND FORWARDING EXPENSES (RS.) GREEN LEAF PLUCKED IN KG QUANTITY OF TEA (MANUFACTURED/ DISPATCHED) 31.03.2008 1,15,58,228 2,54,12,070 91,70,616 60,18,629 16,51,061 31.03.2009, 1,30,79,876 1,85,44,006 1,08,91,319 68,08,283 18,15,900 31.03.2010 1,45,70,440 2,26,80,254 1,08,90,551 69,36,324 18,72,294 31.03.2011 1,38,86,994 2,41,66,747 1,21,26,949 63,27,063 15,83,504 31.03.2012 1,51,70,867 2,38,55,232 1,39,91,132 64,29,403 15,39,203 8. IT IS NOTICED THAT THE LD. AO AS SUCH HAS NOT QUESTIONED THE CLAIM OF THE ASSESSEE- APPELLANT TO BE ELIGIBLE FOR A CLAIM OF SEC 80-IC, AND HAD ACCEPTED THE CLAIM AS SUCH. HOWEVER, THE LD. AO APPEARS TO HAVE DISPUTED THE CLAIM, AND ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 14 QUESTIONED THE OPERATING PROFIT TO BE VERY HIGH AND THEREFORE SUBJECT TO SUSPICION. THE LD AO HAS RECKONED THAT THE OPERATIONAL INCOME OF RS.4,44,55,571/- ON TURNOVER OF RS.17,84,38,874/- GIVES OPERATIONAL PROFIT RATIO OF 24.91% WHICH IS MUCH HIGHER THAN THE NORMAL BUSINESS STANDARDS. THE LD. AO HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80-IC OF THE I.T. ACT 1961, AFTER MAKING ADJUSTMENTS TO THE FIGURE OF NET PROFIT AS PER PROFIT AND LOSS ACCOUNT AS PER THE REQUIREMENTS OF THE I.T. ACT 1961, AND THEN TAKING 40% OF BUSINESS INCOME AS ASSESSABLE UNDER THE I.T. ACT AS PER THE PROVISIONS OF SECTION 295(2)(B)(I) OF THE I.T. ACT READ WITH RULE 8 OF THE I.T. RULES, 1962 (WHICH PROVIDE MANNER OF COMPUTING INCOME LIABLE TO INCOME TAX IN THE CASE OF ASSESSES ENGAGED IN THE BUSINESS OF GROWING AND MANUFACTURING TEA). AFTER MAKING ADJUSTMENTS TO ITS FIGURE OF NET PROFIT AS PER THE I.T. ACT 1961 (RESULTING IN BUSINESS PROFIT OF RS.4,30,88,233) AND AFTER TAKING 40% OF THE SAME AS BUSINESS INCOME CHARGEABLE TO TAX, THE ASSESSEE COMPUTED ITS BUSINESS PROFIT TO BE RS.L,72,35,293/- (40% OF RS.4,30,88,233). THE LD AO HAS THEREAFTER OBSERVED THAT THE ASSESSEE THEN CLAIMED DEDUCTION U/S 80- IC FOR HAVING ITS BUSINESS UNDERTAKING IN NORTH EASTERN STATE AT 100% OF BUSINESS PROFIT, THUS, CLAIM OF DEDUCTION OF RS.1,72,35,293/.- U/S 80-IC OF THE I.T. ACT 1961. ON CAREFUL CONSIDERATION OF THE MATTER, I FIND THAT THE LD AO HAS NOT GIVEN ANY COMPARABLE CASE WHILE STATING THAT THE OPERATING PROFIT WAS ABNORMALLY HIGH AND THAT THE STANDARD OPERATING PROFIT SHOULD BE IN THE RANGE OF 5%, AS BENCHMARKED BY THE LD .AO. THEREFORE, IN MY CONSIDERED VIEW OF THE MATTER, THE APPELLANT HAS BEEN RIGHTLY AGGRIEVED AS THE LD AO EVEN IF HE WERE TO INVOKE A CERTAIN BENCHMARK OUGHT TO HAVE GIVEN THE APPELLANT AN OPPORTUNITY TO EXPLAIN THE BUSINESS AS ALSO TO EXPLAIN AS TO WHY THE OPERATING PROFIT WAS AT THE LEVELS WHERE IT WAS. I FIND MERIT AND STRENGTH IN THE ARGUMENT OF THE LD A.R THAT THE APPELLANT OUGHT NOT TO BE PENALIZED FOR ITS APPARENT OPERATIONAL EFFICIENCY IN THE CONDUCT OF THE BUSINESS, AND IN THE ATTEMPT TO MAXIMIZE THE PROFITABILITY. IT IS ALSO TO BE SAID THAT AS CLAIMED BY THE APPELLANT, WHILE COMPUTING ITS INCOME, THE APPELLANT CLAIMED THAT THE INCOME OF RS.L,72,35,293/- WAS DERIVED FROM ITS CULTIVATION ACTIVITY AND THE SAME WAS INCLUDED IN ITS GROSS TOTAL INCOME AND HENCE, DEDUCTION U/S 80IC OF THE ACT WAS MADE TO THAT EXTENT. IT IS SEEN THAT THE LD.AO HAS MADE AN ESTIMATE ON HIS OWN REASONING, WHEN THE BOOKS WERE AVAILABLE FOR VERIFICATION AND EXAMINATION. I FIND MERIT IN THE PLEA OF THE APPELLANT THAT ANY ESTIMATION WAS HIGHLY UNJUSTIFIED WHEN THE LD. AO DID NOT REJECT THE BOOKS OF ACCOUNTS OF THE APPELLANT, AND INVOKE THE PROVISION OF SECTION 145 OF THE ACT. THE ASSESSING OFFICER HAS MADE A MENTION OF THE SALES BEING TO ANY RELATED PARTIES, BUT THERE APPEARS TO HAVE BEEN NO EFFORT MADE BY THE LD. AO TO GATHER SUCH EVIDENCE OF SALE BELONGING TO ANY TO RELATED PARTIES, EVEN IN A SITUATION WHERE INCOMPLETE DETAILS WERE FILED WITH THE LD AO AS ALLEGED BY HIM. THE DISCUSSION ABOUT THE PRESUMPTIONS LAID DOWN IN THE INDIAN EVIDENCE ACT, IN MY CONSIDERED VIEW ARE QUITE OUT OF PLACE AND THE LD. AO COULD NOT HAVE RESORTED TO THE RULES OF CIRCUMSTANTIAL EVIDENCE WHEN HE COULD HAVE CALLED FOR OR GATHERED ALL THE DIRECT EVIDENCES RELATED TO SALES OF THE APPELLANT-FIRM. IN THE EMERGENT CIRCUMSTANCES, THE LD A.R HAS ARGUED THAT IN ANY OF THE EARLIER YEARS WHERE THE ASSESSMENTS WERE COMPLETED, THERE WAS NEVER ANY APPROACH OF ANY ESTIMATION OF PROFITS. IT WAS SUBMITTED THAT IN NONE OF THE EARLIER YEARS AFTER ENQUIRY WERE ANY OF THE CLAIMS OF THE ASSESSEE-FIRM FOUND TO BE PERVERSE, AND NO MATERIALS HAD BEEN GATHERED AGAINST THE ASSESSEE-FIRM. IN VIEW OF THE FACTS EMERGING IN THE ABOVE SITUATION, I FIND NO JUSTIFICATION OF THE LD. AO IN ESTIMATING THE INCOME U/S 80IC, AND DELETE SUCH ESTIMATION, THE CLAIM MADE BY THE APPELLANT-ASSESSEE IS THEREFORE RESTORED, AND THE GROUNDS 10 - 13 ARE ADJUDICATED IN FAVOUR OF THE ASSESSEE-APPELLANT. ITA NO.2296/KOL/2016 (ASSESSMENT YEAR-2012-13) PAGE | 15 31. IN VIEW OF THE REASONS RECORDED BY THE CIT(A) AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NO.9 RAISED BY THE REVENUE IS DISMISSED. 32. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2019. - SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:- 19.06.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- ACIT, CIRCLE-33, KOLKATA. 2. RESPONDENT- M/S. BISSESWAR LAL MANNALAL & SONS, 12, PRETORIA STREET, 5 TH FLOOR, KOLKATA-700001. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA