ACIT, Coimbatore V. M/s. R. Mahendran (HUF), Pollachi

ITA 2562/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4058 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MURALI MOHAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3)

Judgement Text

3 , , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDD Y, JUDICIAL MEMBER ./ I T.A. NO. 2562 /MDS/201 6 / ASSESSMENT YEAR :20 1 2 - 1 3 THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 4 , C OIMBATORE . VS. R. MAHENDRAN (HUF), NO. 15, KAMARAJ ROAD, MAHALINGAPURAM, POLLACHI 642 0 02. [PAN: AA GHR3032P ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI MURALI MOHAN , ADDL. CIT / RESPONDENT BY : SHRI T. BANUSEKAR, C.A. / DATE OF HEARING : 3 0 . 0 5 .201 7 / DATE OF P RONOUNCEMENT : 28 . 0 7 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , C OIMBATORE DATED 27 . 05 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 2 - 1 3 . THE REVENUE HAS RAISED TWO GROUNDS IN ITS APPEAL VIZ., (I) THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF AGRICULTURAL INCOME AND (II) THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF 10% R ECEIPTS IN THE ABSENCE OF PROPER EVIDENCE AND BOOKS OF ACCOUNT . I.T.A. NO . 2562 /M/ 1 6 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF .6,98,350/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS SERVED ON THE ASSESSEE ON 21.09.2014. IN RESPONSE THERETO, THE ASSESSEE FILED DETAILS OF LAND HOLDINGS , CROP, INCOME THERE FROM, ETC. COPIES FEW MANURE PURCHASE BILLS AND COPIES OF CHITTA, ADANGAL AND PATTA PASS BOOK, ETC, WERE ALSO PRODUCED BY THE ASSESSEE. A SURVEY WAS ALSO CONDUCTED ON 22.01.2015 AND RECORDED SWORN STATEMENT. AFTER CONSIDERING THE ENTIR E DETAILS FILED BY THE ASSESSEE AND SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .61,58,600/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND AGITATED BOTH THE DISALLOWANCES MADE BY THE ASSESSING OFFICER . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED BOTH THE DISALLOWANCES BY OBSERVING AS UNDER: 6.0 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE MATERIALS AVAILABLE ON RECORD. 6.1 DISALLOWANCE OF RS. 48,40,000/ THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS. 48,40,000/ W HICH IS CLAIMED BY THE APPELLANT AS INCOME FROM VANILLA TRADING AS AGRICULTURAL INCOME. IN THE GROUNDS OF APPEAL THE APPELLANT HAS OBJECTED TO THIS DISALLOWANCE. THE ASSESSING OFFICER RELIED ON THE TELEPHONIC CONVERSATION WITH CERTAIN BROKERS. THE PRINCIPL E OF NATURAL JUSTICE IS THAT IF AN EVIDENCE IS COLLECTED BEHIND THE BACK OF THE ASSESSEE IT HAS TO BE PUT TO HIM BEFORE I.T.A. NO . 2562 /M/ 1 6 3 MAKING AN ADDITION. WHEN THE ASSESSING OFFICER STATES THAT TELEPHONIC CONVERSATION WITH BROKERS THEY HAVE DENIED HAVING PURCHASED VANILL A FROM THE ASSESSEE THIS PRINCIPLE IS VIOLATED. THE NEXT ASPECT IS RELYING ON THE REPORT OF THE INSPECTOR THAT THERE IS NO INTER CROP CULTIVATION OF VANILLA. THE APPELLANT HAS CLAIMED THAT AFTER 12 YEARS VANILLA BUSHES HAS TO BE REPLACED. THE APPELLANT STA TED THAT HE IS A PIONEER IN THE FIELD OF VANILLA CULTIVATION. THE ASSESSING OFFICER HAS NOT SUPPORTED HIS FINDINGS WITH ANY COGENT EVIDENCE. THE APPELLANT HAS ALSO PRODUCED PHOTOCOPIES OF VANILLA SAPLINGS. THE ASSESSING OFFICER HAS ALSO NOT DENIED THAT VAN ILLA SAPLINGS HAVE NOT BEEN FOUND IN BAGS. THE ASSESSING OFFICER ON THE GROUND TREATING THAT THERE IS NO VANILLA CULTIVATION IS NOT BASED ON ANY CONCRETE EVIDENCE AND HENCE THE DISALLOWANCE IS NOT SUSTAINABLE AND IS DELETED. 6.2 ADDITION ULS 68 OF THE I NCOME TAX ACT - RS. 6,20,250/ - THE AD HOC DISALLOWANCE OF RECEIPTS FROM COCONUT AND NUTMEG AND PROPOSED TO ADD THE SAME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 IS OUTSIDE THE SCOPE OF THE SAID SECTION WHICH FOR ADDITION ON ACCOUNT OF CASH CREDIT. TH EREFORE, THIS ADDITION IS DELETED. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE DISALLOWANCE OF AGRICULTURAL INCOME, THE LD. DR HAS SUBMITTED THAT PRIMARILY, THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE FOR SAL E OF VANILLA. DURING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE HAS AGREED TO PRODUCE BOUGHT NOTES OF ASSESSEE S OWN COMPANY. IF THE ASSESSEE HAS CULTIVATED AND SOLD VANILLA, HE SHOULD HAVE PRODUCED THE SAME EITHER DURING THE COURSE OF ASSESSMENT PRO CEEDINGS OR DURING THE COURSE OF APPELLATE PROCEEDINGS. BUT, THE ASSESSEE HAS FAILED TO PRODUCE THE SAME EVEN BEFORE THE TRIBUNAL. SINCE, THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE OF HAVING CULTIVATED VANILLA CROP OR SALES RECORD FOR VERIFICATION, TH E LD. CIT(A) HAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . I.T.A. NO . 2562 /M/ 1 6 4 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE APPELLATE ORDER PASSED BY THE LD. CIT(A) DELETING THE DISALLOWANCE WAS NOT BASED ON ANY EVIDENCE AND APPEARS TO BE BASELESS IN PRINCIPLE BECAUSE THE VANILLA SAPLINGS AVAILABLE IN TH E ASSESSEE S PREMISES AND FOUND BY THE SURVEY TEAM ON 22.01.2015 HAS NO RELEVANCE TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND MOREOVER, NO DETAILS OF SALES OF VANILLA WAS PRODUCED BEFORE THE LD. CIT(A). 7. IN THIS CASE, T HE ASSESSEE HAS CLAIMED . 48, 40,000/ - AS INCOME FROM CULTIVATION OF VANILLA. THE A SSESSEE HAS NOT PRODUCED ANY RELEVANT DETAILS FOR CULTIVATION AND SALE OF VANILLA. THE ASSESSEE HAS ADMITTED AGRICULTURAL INCOME OF .96,79,300/ - . HE HAS 32 ACRES OF AGRICULTURAL LAND AND THE CROPS CULTI VATED WERE, ACCORDING TO HIM, COCONUT, NUTMEG AND VANILLA. THE EXPENDITURE INCURRED IN CONNECTION WITH AGRICULTURAL OPERATION WAS .13,63,200/ - . THE NET INCOME FROM AGRICULTURE WAS WORKED OUT BY THE ASSESSEE AT .96,79,300/ - . THE ASSESSEE HAS ADMITTED AGRI CULTURAL INCOME OF .3,02,478/ - PER ACRE. WHEN THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS BEEN CLAIMING HUGE AGRICULTURAL INCOME, THEN IT SHOULD HAVE BEEN DONE IN THE RELEVANT FINANCIAL YEARS. ADMITTEDLY, T HE SURVEY WAS I.T.A. NO . 2562 /M/ 1 6 5 CONDUCTED BY THE DEPARTMENT ON 22.01.2015, PERTAINS TO THE FINANCIAL YEAR 2014 - 15 RELEVANT TO THE ASSESSMENT YEAR 2015 - 16. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2012 - 13 AND THE RELEVANT PREVIOUS YEAR IS 2011 - 12. ADMITTEDLY, THERE WAS NO SURVEY OR SEARCH CONDUCTED DUR ING THE FINANCIAL YEAR 2011 - 12 AND A NY SURVEY PROCEEDINGS INITIATED IN THE FINANCIAL YEAR 201 4 - 1 5 CANNOT BE TAKEN COGNIZAN CE FOR DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2012 - 13. IN THE RELEVANT FINANCIAL YEAR 2011 - 12, THE ADMISSION OF AGRICULTURAL INCO ME TOWARDS CULTIVATION OF VANILLA CROP IS THE SUBJECT MATTER IN APPEAL. NO DOUBT, THE V ANILLA PLANTS START THE FIRST YIELD AFTER 3 YEARS OF PLANTING AND CONTINUE TO GIVE THE YIELD UP TO 12 TO 14 YEARS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ADMITTEDL Y, THE ASSESSEE HAS NOT FURNISHED ANY CONCRETE EVIDENCE TOWARD SALE OF VANILLA CROP EXCEPT DETAILS OF ASSESSEE S AGRICULTURAL LAND HOLDINGS . FROM THE REPORT OF THE INSPECTOR OF IT DATED 16.12.2011 SHOWS THAT VANILLA PLANT WAS NOT FOUND DURING HIS VISIT , BU T ON WHAT BASIS HE HAS GIVEN A REPORT THAT DURING THE YEAR 2008 - 09 CORRESPONDING TO ASSESSMENT YEAR 2009 - 10 THERE WAS ALSO VANILLA CULTIVATION IN THE ABOVE LANDS AS INTERCROP IS NOT KNOWN SINCE THE INSPECTOR WOULD HAVE VISITED IN DECEMBER, 2011 AND GAVE A REPORT THAT THERE WAS VANILLA CROP IN 2008 - 09 . THE ASSESSEE S EXPLANATION THAT THE LIFE SPAN OF A VANILLA PLANT IS 12 YEARS AND AFTER THAT RE - PLANTATION IS REQUIRED, WAS FOUND TO BE CORRECT. IT WAS A SUBMISSION OF THE ASSESSEE DURING THE COURSE OF SURVEY THAT THE ASSESSEE HAS MAINTAINED BOOKS, BUT IT WAS NOT KEPT SAFE. IF IT IS SO, FOR THE I.T.A. NO . 2562 /M/ 1 6 6 EARLIER ASSESSMENT YEARS, I.E., AY 2011 - 12, AY 2010 - 11 WHETHER THE ASSESSEE HAS ADMITTED ANY AGRICULTURAL INCOME TOWARDS CULTIVATION OF VANILLA PLANT AND ITS ADMISSION/ REJECTION ARE NOT AVAILABLE ON RECORD. THOUGH, THE VANILLA CROP IS NOT A PERENNIAL CROP, BUT STARTS YIELDING FROM 3 RD YEAR OF ITS CULTIVATION TO 12 TH YEAR. I N FACT, WHEN THE ASSESSEE HAS CLAIMED TO HAVE CULTIVATED VANILLA PLANT AND THE AGRICULTURAL INCOME IS OUT OF SALE OF VANILLA, THE ASSESSING OFFICER SHOULD HAVE VERIFIED THE DETAILS OF AGRICULTURAL INCOME FOR THE LAST ELEVEN YEARS AND WOULD HAVE GIVEN A FINDING ON THAT . THE ASSESSING OFFICER HAS NOT REFERRED AS TO WHETHER ANY AGRICULTURAL INCOME TOWARDS CULTIVATION OF VANILLA CROP WAS CLAIMED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2008 - 09 OR ITS PRECEDING YEARS AND SUBSEQUENT YEARS, EXCEPT ASSESSMENT YEAR 2009 - 10 IS UNDER SCRUTINY . IF IN THE ASSESSMENT YEAR S 2008 - 09 , 2010 - 11, 2011 - 12 OR PRIOR TO 2008 - 09 THE ASSESSEE HAS NOT CLAIMED ANY AGRICULTURAL INCOME TOWARDS CULTIVATION OF VANILLA CROP, THEN THE ASSESSEE S CLAIM OF AGRICULTURAL INCOME TOWARDS CULTIVATION OF VANILLA CROP IN THE ASSESSMENT YEAR UNDER CONSIDERATION CANNOT BE ACCEPTED. IN CASE, IF THE DE PARTMENT HAS ACCEPTED THE AGRICULTURAL INCOME OF THE ASSESSEE TOWARDS CULTIVATION OF VANILLA CROP IN THE PRECEDING ASSESSMENT YEARS TO 2008 - 09 AS WELL AS ASSESSMENT YEARS 2010 - 11 & 2011 - 12 , THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEAR 2012 - 13 CANNOT BE REJECTED , IF THE DEPARTMENT HAS ACCEPTED THE AGRICULTURAL INCOME ON THE VERY SAME FACT THAT THE SALES WERE DONE IN CASH BASIS AND CASH RECEIPT S W ERE NOT FURNISHED FOR THE SALE. UNDER I.T.A. NO . 2562 /M/ 1 6 7 THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO VE RIFY THE AGRICULTURAL INCOME OF THE ASSESSEE PRECEDING TEN YEARS TO THE ASSESSMENT YEAR 2011 - 12 AND DECIDE THE ISSUE IN THE ASSESSMENT YEAR UNDER CONSIDERATION IN ACCORDANCE WITH LAW AFTER ALLOWING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. THE NE XT GROUND RAISED IN THE APPEAL OF THE REVENUE IS WITH REGARD TO DISALLOWANCE OF .6,20,250/ - MADE UNDER SECTION 68 OF THE ACT. THE ASSESSING OFFICER MADE THE DISALLOWANCE ON AD - HOC BASIS WITHOUT SPECIFYING THE PARTICULAR CREDIT. HENCE, IT IS NOT PROPER ON THE PART OF THE ASSESSING OFFICER TO MAKE ADDITION UNDER SECTION 68 OF THE ACT. THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE SAID DISALLOWANCE IS OUTSIDE THE SCOPE OF THE PROVISIONS OF SECTION 68 OF THE ACT WHILE DELETING THE ADDITION. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 28 TH JULY , 201 7 AT CHENNAI. SD / - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 7 .201 7 VM/ - I.T.A. NO . 2562 /M/ 1 6 8 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.