ACIT, Agra V. M/s Shasya Manglam Krishi Farms, Agra

ITA 258/AGR/2009

• Counselvise Citation: 25820314 RSA 2009
• Duration Of Justice: 3 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Earning of tax free income; Benefit of exemption
• Section: 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.258/AGR/2009 ASSESSMENT YEAR: 2005-06 A.C.I.T. 4(1), VS. M/S. SHASYA MANGALAM KRISHI FARMS, AGRA. 79/D-4, VIBHAV APARTMENTS, NEW AGRA. (PAN: ABCFS 0087 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : NONE DATE OF HEARING : 27.09.2012 DATE OF PRONOUNCEMENT OF ORDER : 19.10.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 06.03.2009 PASSED BY THE LD. CIT(A)-II, AGRA FOR THE A.Y. 2005 -06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LD. CIT(A)-I, AGRA HAS ERRED IN LAW & ON FACTS IN HOLDING THAT THE AO HAS NOT BEEN ABLE TO MAKE OUT A CASE TO TREAT THE SALE PROCEEDS OF AGRICULTURE OF RS.64,36,315/- AS I NCOME FROM OTHER SOURCES INCLUDIBLE U/S 68 OF THE I.T. ACT, 1961, IG NORING THE FACTS OF THE ITA NO.258/AGR/2009 A.Y.2005-06. 2 CASE AND OBSERVATIONS & FINDINGS OF THE AO AS DISCU SSED IN THE ASSESSMENT ORDER. 2. THAT THE LD. CIT(A)-I, AGRA HAS ERRED IN LAW & O N FACTS IN DELETING THE ENTIRE ADDITION MADE UNDER SECTION 68 AT RS.64,36,315/- WITHOUT PROPERLY APPRECIATING FACTS OF THE CASE AS DISCUSSED IN THE ASSESSMENT ORDER AND REMAND REPORT SUBMITTED BY THE AO. 3. THE LD. CIT(A)-I, AGRA HAS ERRED IN LAW & ON FAC TS IN DIRECTING THE AO TO ACCEPT THE INCOME DISCLOSED BY THE ASSESS EE AT RS.40,44,220/- REPRESENTING INCOME FROM AGRICULTURE , IGNORING THE FACTS OF THE CASE AND OBSERVATIONS & FINDINGS OF TH E AO AS DISCUSSED IN THE ASSESSMENT ORDER. 4. THE ORDER OF THE LEARNED CIT(A) DESERVES TO BE V ACATED AND THAT OF THE AOS BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER ANY OR MORE GROUND OR GROUNDS OF APPEAL AS MAY BE DEEMED FIT AT THE TIME OF HEARING OF APPEAL. 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE DESPI TE SERVICE OF NOTICE BY THE DEPARTMENT. IN EARLIER YEAR ALSO THE ASSESSEE DID NOT APPEAR ON THE DATES OF HEARINGS. HOWEVER, THE NOTICE OF HEARING FOR 27.09 .2012 HAS BEEN SERVED BY THE DEPARTMENT. THEREFORE, WE PROCEED TO DECIDE THE AP PEAL AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE, CONSIDERING THE MATERI AL AVAILABLE ON RECORD. 4. THE ASSESSEE IS ENGAGED IN AGRICULTURAL ACTIVITI ES. IT IS A PARTNERSHIP FIRM. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN NET AGRICULTURAL INCOME OF RS.64,36,315/- AGAINST W HICH THE ASSESSEE CLAIMED FOLLOWING EXPENSES:- (PAGE NO.2) ITA NO.258/AGR/2009 A.Y.2005-06. 3 COST OF CULTIVATION RS.38,44,510.00 BANK CHARGES RS. 25.00 FINANCE EXPENSES RS. 1,000.00 LEGAL EXPENSES RS. 300.00 PRINTING & STATIONERY RS. 80.00 AUDIT FEES RS. 4,000.00 PROCESSING FEES RS. 5,030.00 5. THE ASSESSEE HAS SHOWN A STOCK OF AGRICULTURAL I NPUTS AT RS.14,62,850/- AS ON 31.03.2005. THUS, A NET PROFIT (N.P.) OF RS.40,44, 220/- HAS BEEN SHOWN. THE A.O. FURTHER NOTICED THAT THE PARTNER SHRI SATISH C HAHAR INTRODUCED HIS CAPITAL IN THE FORM OF CASH OF RS.20,00,000/- AND THROUGH LAND LEVELING RS.5,26,330/-, CIVIL CONSTRUCTION RS.5,14,900/- AND WATER SOURCE OF RS.5 ,00,000/-. AGAINST THIS, THE ASSESSEE WITHDREW FROM THE PARTNERSHIP FIRM RS.33,8 4,220/- IN CASH. SIMILARLY, IN THE CASE OF SMT. VINITA SINGH, SHE HAS INTRODUCED C APITAL IN THE FORM OF CASH RS.2,50,000/- AND THROUGH LAND LEVELING RS.5,18,670 /- AND CIVIL CONSTRUCTION RS.5,00,000/-. AGAINST THIS, SHE WITHDREW DURING THE YEAR RS.17,00,000/-. THE A.O. NOTICED THAT THERE IS NO EVIDENCE TO PROVE THA T ANY AGRICULTURE RELATED ACTIVITY, LAND LEVELING, WATER SOURCES, CREATION ETC. IS ACTU ALLY TAKING PLACE. THE A.O. FOUND THAT THE PARTNERS WERE INTRODUCING CAPITAL WHICH WA S BY WAY OF AN INFLATED BOOK ENTRY AGAINST WHICH THEY ARE APPARENTLY WITHDRAWING CASH FROM THE FIRM. IT HAS ALSO BEEN NOTICED BY THE A.O. THAT RS.2.09 CRORES W ORTH OF AGRICULTURAL SALES HAD BEEN SHOWN BY THE ASSESSEES 7 CONCERNS DURING THE A.Y. 2005-06. THE ENTIRE SALES WERE MADE IN CASH. THE A.O. FURTHER NOTICED THAT MOST OF ITS SALES WERE MADE ITA NO.258/AGR/2009 A.Y.2005-06. 4 DURING DECEMBER TO MARCH I.E. IN 4 MONTHS. IT WAS SUBMITTED BEFORE THE A.O. THAT THE BUYERS BROUGHT THEIR OWN LABOURERS WHO PLUCKED FRUIT FROM THE TREES, PACKED IT IN THEIR OWN PACKING CRATES AND PAID IN CASH AND TR ANSPORTED THE GOODS AT THEIR OWN COST. THE A.O. NOTICED THAT SOME KUCHA ACCOUNTS WE RE MAINTAINED, BUT THE SAME COULD NOT BE PRODUCED AS THE ASSESSEE DID NOT RETAI N THE SAME. ONLY COMPUTERIZED BOOKS OF ACCOUNT HAS BEEN MAINTAINED AND THE SAME H AS BEEN SHOWN TO THE A.O. NO OTHER RECORD WAS AVAILABLE WITH THE ASSESSEE. O N ENQUIRY, THE A.O. FOUND THAT THE CHEMICALS AND FERTILIZERS FOR RS.5,30,000/- PUR CHASED FROM M/S MANGAL KHAD BEEJ BHANDAR, SHIVPURI WAS NOT GENUINE AS THE A.O. FOUND THAT THE SAID CONCERN M/S MANGAL KHAD BEEJ BHANDAR IS A KIRANA SHOP AND HAS GIVEN ACCOMMODATION ENTRY TO SHRI SATISH CHAHAR. IT HAS ALSO BEEN NOT ED BY THE A.O. THAT DRIP IRRIGATION SYSTEM PURCHASED BY THE ASSESSEE FOR RS.16,20,000/- FROM M/S BHINGE BROTHERS, NASIK. ON ENQUIRY, IT WAS FOUND THAT THE BILL WAS NOT ISSUED IN FAVOUR OF THE ASSESSEE. SIMILAR WAS THE POSITION IN RESPECT OF R S.8,20,000/- BEING THE AMOUNT PAID TO M/S. BHINGE BROTHERS, NASIK. THE A.O. NOTI CED THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENSES ON THE BASIS OF BOGUS BILLS. THE A.O. NOTED THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENSES IN RESPECT OF A GRICULTURAL ACTIVITIES LIKE CONSTRUCTION OF GREEN HOUSE, LAND LEVELING, AGRICUL TURAL IMPLEMENTS TOOLS, TROLLEY, PURCHASE OF FERTILIZER AND CHEMICALS ETC. THE A.O. WHILE MENTIONING THE REASON IN SUPPORT OF THE FACT THAT THE ENTIRE AGRICULTURAL AC TIVITIES WERE NOT GENUINE. THE A.O. NOTICED THAT THE ASSESSEE DID NOT FURNISH THE RELEV ANT KHATAUNI FROM LAND REVENUE ITA NO.258/AGR/2009 A.Y.2005-06. 5 AUTHORITIES TO SUPPORT HIS CLAIM THAT AGRICULTURAL ACTIVITIES WERE BEING CARRIED OUT. CONTRARY TO THAT, SHRI SATISH CHAHAR HAS DENIED FOR SUCH KHATAUNI IN HIS STATEMENT. THE A.O. OBSERVED THAT IT IS DIFFICULT TO BELIEVE T HAT THE ASSESSEE WAS CARRYING OUT SALES OF TENS OF LACS OF RUPEES EVERY MONTH DIRECTL Y WITHOUT ANY INTERMEDIARY AND WITH NO CONTACT WITH THE MANDIS OR TRADERS OR COMMI SSION AGENTS. AFTER A DETAILED DISCUSSION, THE A.O. FINALLY CAME TO THE CONCLUSION THAT NO AGRICULTURAL ACTIVITIES WAS BEING CARRIED OUT BY THE ASSESSEE AS NO EVIDENC E HAS BEEN FURNISHED IN THIS REGARD. THE A.O. TREATED THE ENTIRE RECEIPT OF RS. 64,36,315/- AS INCOME FROM OTHER SOURCES INVOKING SECTION 68 OF THE ACT. THE A.O. M ADE ADDITION OF RS.64,36,315/- UNDER SECTION 68 OF THE ACT. 6. THE CIT(A) DELETED THE SAID ADDITION. THE CIT(A ) ON SUBMISSION OF THE ASSESSEE CALLED THE REMAND REPORT FROM THE A.O. IT WAS SUBMISSION BEFORE THE CIT(A) THAT THE ASSESSEE FIRM OWNS 19.10 HECTARES O F AGRICULTURAL LAND SITUATED AT MUDHERI DISTRICT SHIVPURI (M.P.). IT WAS SUBMITTED BEFORE THE CIT(A) THAT CROP OF PAPAYA AND GARLIC WAS GROWN. PAPAYA PLANTATION WAS MADE ON 17.90 HECTARES (43.86 ACRES) OF AGRICULTURE LAND ON WHICH SAPLINGS WERE PLANTED. THE APPROXIMATE NUMBER OF 750 PLANTS WERE PLANTED PER ACRE OF THE A GRICULTURE LAND. THE TOTAL PRODUCTION OF 1117822 KGS. OF PAPAYA WAS DERIVED A RESULT OF HARVESTING OF PAPAYA PLANTS. IN SUPPORT OF HAVING GROWN PAPAYA AND BANA NA, PHOTOGRAPHS OF THE ORCHARD WERE PRODUCED BEFORE THE A.O. SUPPORTED BY CD NO.1 & 2 EVIDENCING THE VISIT OF ITA NO.258/AGR/2009 A.Y.2005-06. 6 THE FARM HOUSE UNDERTAKEN BY THE A.O. ALONG WITH HI S TEAM INSPECTORS. HARD COPIES OF PHOTOGRAPHS AT PAPER BOOK PAGE NO. A TO F WAS PRODUCED BEFORE THE A.O. WAS ALSO FILED. IT WAS SUBMISSION OF THE ASSE SSEE THAT INSPITE OF THESE EVIDENCES, THE A.O. IS NOT CORRECT IN MENTIONING IN PARAGRAPH NO.39 THAT THE ASSESSEE HAS NOT BEEN ABLE TO EVIDENCE AGRICULTURAL ACTIVITY AND THAT THE INCOME SHOWN WAS NOT FROM AGRICULTURE IS INCORRECT AND AN OUTCOME OF MERE CONJECTURES AND SURMISES. IN ORDER TO PROVE THE AGRO FARMING O N THE FARM OF ASSESSEE FIRM THE A.O. WAS ALSO REQUESTED TO MAKE THE VISIT AT ASSESS EE FIRMS AGRICULTURE FARM WHICH WAS UNDER TAKEN BY THE A.O. ALONG WITH TEAM OF HIS INSPECTOR. THE CD OF THE FARMHOUSE VISIT BY THE OFFICERS OF THE DEPARTMENT W AS PRODUCED BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE RE PLY DATED 27.12.2007. IN RESPECT OF AGRICULTURAL ACTIVITIES AND RELATED ACTI VITIES OF LAND LEVELING, WATER SOURCES CREATION ETC. IT WAS SUBMITTED THAT SHRI SA TISH CHAHAR HAS DISCLOSED AGRICULTURAL INCOME IN HIS INDIVIDUAL HANDS PRIOR T O BECOMING THE PARTNER IN THE FIRM. THE AGRICULTURAL INCOME AT RS.8,62,650/- WAS DISCLOSED IN THE RETURN FILED IN A.Y. 2003-04. SIMILARLY SMT. VINITA SINGH PRIOR TO BECOMING PARTNER IN THE FIRM DISCLOSED INCOME FROM AGRICULTURE AT RS.1,52,562/- IN A.Y. 2004-05. THE AFORESAID TWO PARTNERS HAVE CONSTITUTED THE FIRM AND ENTERED INTO IN AGRO FARMING BY TRANSFERRING THEIR LAND AS CAPITAL BESIDES FARM MAC HINERY ALREADY AVAILABLE WITH THEM WITH COST OF IMPROVEMENT AND CIVIL CONSTRUCTIO N, WATER RESOURCES ALREADY CARRIED OUT BY THEM AS PART OF CAPITAL. IT WAS SUB MITTED THAT THE A.O. HAS FAILED TO ITA NO.258/AGR/2009 A.Y.2005-06. 7 APPRECIATE THE FACTS OF THE CASE. THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS SUPPORTED BY BILLS AND VOUCHERS. THE ELECTRICITY E XPENSES FOR RUNNING OF TUBE WELL ETC AT RS.17,802/- HAVE BEEN INCURRED AND ARE INCL UDED IN THE COST OF CULTIVATION MENTIONED IN PARAGRAPH NO.5 OF ASSESSMENT ORDER. T HE CROP PROTECTION EXPENSES OF RS.1,78,017/- WERE INCURRED ON THE SECURITY GUARDS PROVIDED AT THE FARM HOUSE AND A SEPARATE ACCOUNT WAS MAINTAINED FROM THE. IRRIGA TION EXPENSES OF RS.1,23,338/- WAS INCURRED AS PER COPY OF LEDGER ACCOUNT PRODUCED BEFORE A.O. FOR PURCHASE OF DIESEL SUPPORTED BY BILL. OTHER CLAIMS ARE ALSO SU PPORTED BY BILLS. LABOUR EXPENSES AT RS.6,21,510/- WAS ALSO SUPPORTED BY BIL LS AND MUSTER ROLLS. PURCHASE OF SEEDS AND SEEDLINGS AT RS.9,32,850/- HAS BEEN SH OWN AS SUCH IN CLOSING STOCK. IN RESPECT OF M/S DELTA CONSTRUCTION, THE SUBMISSION O F THE ASSESSEE REPRODUCED IN THE ORDER OF CIT(A) AT PAGE NO.8 ARE AS UNDER :- THE ASSESSEE HAS RUN THE CONTRACT BUSINESS IN THE NAME OF M/S DELTA CONSTRUCTION IN HIS INDIVIDUAL CAPACITY. CAS H AVAILABLE IN THE INDIVIDUAL BUSINESS AS ON 01.07.2004 WAS OF RS.13,1 0,000/-. OUT OF THIS THE SUMS BETWEEN 02.07.2004 TO 18.09.2004 AS M ENTIONED ON PAGE 3 OF THE ASSESSMENT ORDER TOTALING TO RS.12,50,000/ - HAVE BEEN TRANSFERRED TO THE FIRM AS HIS SHARE CAPITAL. FURT HER IN THE BOOKS OF THE INDIVIDUAL CONTRACT BUSINESS THE SUM OF RS.13,5 0,000/- WAS CREDITED MAKING THE TOTAL AVAILABILITY OF THE CASH AT RS.14,21,000/- OUT OF WHICH BALANCE RS.2,50,000/- HAVE BEEN TRANSFERRE D. THUS THERE IS NO INFLATION OF CAPITAL TRANSFERRED OR REMAINING AN Y AMOUNT UNEXPLAINED. THE BOOKS OF ACCOUNTS MAINTAINED IN I NDIVIDUAL CAPACITY WERE ALSO PRODUCED BEFORE THE AO AND EXAMINED BY HI M. THE OPENING BALANCE IN THE ACCOUNTS OF THE ASSESSEE MAINTAINED IN INDIVIDUAL CAPACITY AND AS ALREADY REFLECTED IN THE BALANCE SHEET MAINTAINED SHRI SATISH CHAHAR BEFORE BECOMING PARTN ER IN THE FIRM HAD AN OPENING BALANCE OF RS.13,43,360/- UNDER THE HEAD LAND ITA NO.258/AGR/2009 A.Y.2005-06. 8 INCLUSIVE OF LAND, LAND LEVELING AND FARM DEVELOPME NT OUT OF WHICH THE AMOUNT OF RS.5,26,330/- UNDER THE HEAD COST OF LAND AND LAND LEVELING AND WATER SOURCES OF RS.5 LACS HAVE BEEN TRANSFERRE D TO THE FIRM AS PART OF SHARE CAPITAL. THUS THERE IS NO INFLATED B OOK ENTRY AND THE PRESUMPTION OF THE AO THAT CAPITAL HAS BEEN INTRODU CED BY WAY OF INFLATED BOOK ENTRY IS WITHOUT BASIS, INCORRECT. SMT. VINITA SINGH WHO HAS MADE CONTRIBUTION BY WAY OF ASSETS UNDER THE HEAD FARM MACHINERY AT RS.1.00 LAC AND CO ST OF LAND AND LAND LEVELING AT RS.5,18,670/- ON BOOK VALUE OUT OF THE FUNDS AS AVAILABLE IN HER BOOKS. AS ON 01.07.2004 SHE HAD F AR MACHINERY AT RS.10.. LAKH AND LAND AND LAND LEVELING AT RS.5,18, 670/- WHICH HAVE BEEN TRANSFERRED ON BOOK VALUE AND THUS THERE WAS N O CAPITAL INTRODUCTION BY WAY OF INFLATED BOOK ENTRY. THE CO ST OF CIVIL CONSTRUCTION SHOWN ON 18.2.2005 AT RS.500,000/- IS OUT OF THE WITHDRAWALS MADE BY HER FROM THE ASSESSEE FIRM AS O N 5.2.2005. THUS THERE IS NO INFLATION OF BOOK ENTRY AS ALLEGED BY T HE AO IN PARA 8 OF HIS ASSESSMENT ORDER. THE CHART OF CAPITAL INTRODU CED BY THE PARTNERS IS PLACED AS PER PAGE 3 & 4 OF THE ASSESSMENT ORDER WHICH IS SELF EXPLANATORY. THUS, THE AOS OBSERVATION AS GIVEN I N PARA 8 IS THEREFORE UNFOUNDED, A MERE GUESS WORK WITHOUT ANY COGENT MATERIAL. THE MENTION THAT PARTNERS ARE INTRODUCING CAPITAL B Y WAY OF INFLATED BOOK ENTRY IS JUST TO DEFEND THE ARBITRARY ACTION O F THE AO IN TREATING THE INCOME FROM AGRICULTURE, AS A NON AGRICULTURE I NCOME. 7. IN RESPECT OF DRIP IRRIGATION SYSTEM, THE EXPLAN ATION SUBMITTED BY THE ASSESSEE REPRODUCED IN THE ORDER OF CIT(A) AT PAGE NO.9 IS AS UNDER :- THE DRIP IRRIGATION SYSTEM WHICH IS INSTALLED AT T HE FARM HOUSE WAS PURCHASED FROM M/S BHINGE BROTHERS, NASIK AND T HE PAYMENT WAS MADE TO HIM THROUGH DEMAND DRAFTS DRAWN ON OBC, SHI VPURI THROUGH DD NO.113896 DT. 19.3.2005 FOR RS.8 LACS AN D DD NO.114101 DT. 28.3.2005 FOR RS.8.20 LACS FROM THE A FORESAID TERM LOAN A/C NO.0316751100039 STANDING IN THE NAME OF T HE ASSESSEE FIRM. AS FAR AS THE PAYMENT OF RS.530,000/- FOR PURCHASE OF CHEMICALS AND FERTILIZERS IS CONCERNED, M/S MANGAL KHAD BEEJA BHANDAR HAS BEEN PAID THE AMOUNT FOR THE PURCHASES MADE FROM HI M AND THE ITA NO.258/AGR/2009 A.Y.2005-06. 9 EXPENDITURE HAS BEEN INCURRED THROUGH DD NO.834730 DT. 9.3.2005 RS.5 LACS AND DD NO.834758 DT. 23.3.2005 RS.30000/- . SIMILARLY PAYMENT OF RS.3 LACS HAS BEEN MADE TO KSHATRIYA ENG INEERS FOR TROLLEY, CULTIVATOR, DISC HARROW AND TOOL KIT WHICH COMPRISES OF 250,000/- FOR PURCHASE OF GENERATOR, RS.30,000/- FO R CRATES AND RS.20,000/- FOR PLOUGH. THEREFORE THERE IS NO UNEX PLAINED INVESTMENT MADE BY THE ASSESSEE FIRM WHICH COULD BE TREATED AS UNEXPLAINED FOR THE PURPOSE OF ADDITION U/S 68 AS ALLEGEDLY HELD BY THE AO. 8. THE ASSESSEE FURNISHED EXPENSE IN RESPECT OF EAC H AND EVERY PARAGRAPH OF A.O.S ORDER WHICH HAS BEEN NOTED BY THE CIT(A) ON PAGE NOS.5 TO 19. THOUGH THE CIT(A) HAS MENTIONED THAT THE A.O. HAS FURNISHED RE MAND REPORT BUT THE DETAILED CONTENTION OF THE REMAND REPORT HAS NOT BEEN INCORP ORATED BY THE CIT(A) IN HIS ORDER, PARTICULARLY UNDER THE CIRCUMSTANCES WHERE C IT(A) REPRODUCED THE ASSESSEES SUBMISSION AS IT IS IN HIS ORDER INCLUDI NG THE SUBMISSION IN REJOINDER ON REMAND REPORT OF THE A.O. WHICH IS NOT FAIR AND JUS T ON THE PART OF THE CIT(A). AFTER REPRODUCING THE REJOINDER OF THE ASSESSEE ON A.O.S REMAND REPORT, THE CIT(A) HELD THAT THE RELEVANT EVIDENCE PRODUCED BY THE ASSESSEE GOES TO ESTABLISH THAT THE ASSESSEE COMPANY WAS FOUND TO HAVE POSSESS ED 19.10 HECTARES OF AGRICULTURAL LAND. COPIES OF SALE DEEDS OF AGRICUL TURAL LAND AND KHASRA KHATAUNI IN ORDER TO PROVE THE AGRICULTURAL CROPS SUPPORTED BY THE PHOTOGRAPHS OF THE CROP WERE ALSO PRODUCED. THE ASSESSEE COMPANY WAS FOUND TO HAVE PLACED FAIRLY ADEQUATE EVIDENCE BEFORE THE A.O. TO APPROVE THAT I T WAS ENGAGED IN FIELD CULTIVATION IN THE SENSE OF TILLING OF THE LAND, PL ANTING AND SIMILAR BASIC OPERATIONS WHICH ARE SUPPORTED BY THE EVIDENCE OF EXPENDITURE INCURRED ON HUMAN LABOUR AND ITA NO.258/AGR/2009 A.Y.2005-06. 10 SKILL UPON THE LAND ITSELF TO MAKE THE CROP SPROUT OUT OF THE LAND. ONE OF THE EXPLANATION ACCEPTED BY THE CIT(A) IN RESPECT OF LA BOUR PAYMENT AND AGRICULTURAL ACTIVITIES IS REPRODUCED FROM THE ORDER OF CIT(A) F ROM PARAGRAPH NO. 4.3 AS UNDER AS FOR THE CASH SALES OF AGRICULTURE PRODUCE SHRI SATISH CHAHAR HAS IN SPECIFIC QUERY HAS STATED THAT THE BU YERS BROUGHT THEIR OWN LABOURERS WHO PLUCKED FRUIT FROM THE TREES PACK ED IN THEIR OWN PACKING, CRATES AND PAID IN CASH AND TRANSPORTED TH E GOODS AT THEIR OWN COST WHICH WERE DULY REFLECTED IN THE BOOKS MAI NTAINED BY HIM. THUS NO ADVERSE INFERENCE CAN BE DRAWN ON THIS SCOR E THAT ONCE THE AGRICULTURE CROP GROWN IS EVIDENCED BY THE SUPPORTI NG MATERIAL AND EVEN THE OFFICERS OF THE DEPARTMENT HAVE FOUND EXIS TENCE OF AGRO FARMING WHICH TOO IS SUPPORTED BY THE COPY OF PHOTO GRAPHS AND CD PLACED BEFORE THE AO AND THE EXPECTED QUANTITY OF A GRO FARM PRODUCE IS ALSO SUPPORTED BY THE RELEVANT MATERIAL PLACED O N RECORD, ONCE THE PRODUCTION IS THERE THE SALE THEREOF IS BOUND TO BE THERE. THE AOS CASE IS NOT HAT WHETHER QUANTITY OF CROP GROWN WAS REASONABLE OR NOT. THE AO IN HIS REMAND REPORT HAS STATED THAT THE VI SIT WAS UNDER TAKEN BY THE DEPARTMENT OFFICERS AFTER TWO AN D A HALF YEARS OF THE AGRICULTURE OPERATIONS HAVE WITNESS THE EXISTEN CE OF AGRICULTURE OPERATIONS BEING CARRIED OUT ON EXTENSIVE SCALE AND THIS GOES IN FAVOUR OF ASSESSEE SUPPORTING HIS CASE THAT THE AGR O-FARMING WAS BEING CARRIED OUT NOT ONLY IN THE YEAR UNDER APPEAL BUT IT IS FOUND TO BE IN CONTINUITY EVEN IN SUCCESSIVE ASSESSMENT YEAR S AND THE INCOME THERE FROM SO DERIVED. IT IS COMMON KNOWLEDGE THAT A TREE CANNOT BE GROWN OVERNIGHT NOR ANY FARMHOUSE CAN BE DEVELOPED OVERNIGHT. HENCE THE AOS FINDING THAT APPELLANT DID NOT CARRY OUT ANY AGRICULTURE ACTIVITY AND DERIVE AGRICULTURE INCOME AS A RESULT THEREFROM IS DEVOID OF FACTS AND CANNOT BE UPHELD. ONCE AGRICULTURE ACTIVITY ADMITTEDLY EXISTED, THERE IS BOUND TO BE A GRICULTURE PRODUCE AND INCOME THEREFROM. IN AGRICULTURE SECTOR SALE O F AGRICULTURE PRODUCE IN CASH IS A NORMAL FACT AND IT ACT DOES NO T IMPOSE ANY RESTRICTION ON PURCHASE OR SALE OF AGRICULTURE PROD UCE IN CASH. THEREFORE ALSO NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF THE FACT THAT SALES WERE AFFECTED IN CASH. THE APPELLA NT HAS ALSO GIVEN JUSTIFICATION OF EXTENT OF AGRICULTURE PRODUCE DERI VED BY HIM AT THE FARM HOUSE BY BRINGING RELEVANT MATERIAL ON RECORD WHICH THE AO HAS ITA NO.258/AGR/2009 A.Y.2005-06. 11 NOT DISPUTED EXCEPT SAYING THAT THE ASSESSEE HAS DE RIVED RECEIPTS FROM AGRICULTURE PRODUCE SALE IN CASH. THIS IS NO GROUN D TO DISCARD THE WHOLE AFFAIR WHICH IS SUPPORTED BY RELEVANT EVIDENC E RIGHT FROM SOWING TO TILLING AND SALE THEREOF WITH RELEVANT IN CIDENTAL ACTIVITIES CARRIED OUT DURING THE COURSE. THE DETAILED SUBMIS SIONS MADE BY THE ASSESSEE ALONG WITH RELEVANT DOCUMENTS RUNNING IN 2 03 PAGES WHICH ARE PART OF AOS RECORD ALSO WERE SENT TO AO AND IN THE REMAND REPORT HE HAS NOT BROUGHT ANY MATERIAL AGAINST THE ASSESSEE OR THE ASSESSEE HAS NOT BEEN CONFRONTED WITH ANY ADVERSE M ATERIAL EVEN IN THE REMAND PROCEEDINGS SO AS TO SUPPORT THE STAND T AKEN BY THE AO IN THE ASSESSMENT ORDER 9. HOWEVER, THE CIT(A) FINALLY CAME TO THE CONCLUSI ON AS UNDER :- (PAGE NO.26) AS FOR AOS ACTION FOR MAKING THE ADDITIONAL U/S 6 8 PRESUMING THAT SALE PROCEEDS OF AGRICULTURE PRODUCE REPRESENT ED ASSESSEES INCOME FROM UNDISCLOSED SOURCES AND IT IS LIABLE TO BE ADDED U/S 68, IT IS RELEVANT TO MENTION THAT SECTION 68 OF IT ACT, 1 961 IS IN RELATION TO CREDIT ENTRIES FOUND IN THE BOOKS OF THE ASSESSEE I N THE RELEVANT ASSESSMENT YEAR. IT ORDAINS THAT WHERE THE ASSESSE E OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF, TH E SUM SO CREDITED MAY BE CHARGED U/S 68 OF IT ACT. HOWEVER IN THE IN STANT CASE THE ASSESSEE HAS BROUGHT ON RECORD OF AO SUBSTANTIAL EV IDENCE TO SUPPORT HIS CLAIM OF HAVING DERIVED AGRICULTURE INCOME DURI NG THE YEAR AND ALSO IN THE PAST. THE AO HAS NOT BEEN ABLE TO BRIN G ON RECORD ANY RELEVANT MATERIAL OR EVIDENCE TO SUPPORT HIS CASE T HAT THE SALE PROCEEDS OF AGRICULTURE PRODUCE AS CREDITED IN ASSE SSEES BOOKS REPRESENTED THE INCOME FROM UNDISCLOSED SOURCES. T HE AO HAS ALSO FAILED TO CORRELATE THE CREDITS OF SALE PROCEEDS FR OM ANY OTHER SOURCE OTHER THAN AGRICULTURE BY COLLECTING ANY RELEVANT M ATERIAL. THERE IS NO DISPUTE ABOUT THE EXTENT AND REASONABLENESS OF Q UANTITY OF AGRICULTURE CROP DERIVED AND SHOWN. IT IS ALSO REL EVANT TO POINT OUT THAT THE INCOME DISCLOSED BY THE DIRECTORS IN THEIR INDIVIDUAL RETURNS HAD BEEN SHOWN AND ACCEPTED IN THE PAST AS MENTIONE D ABOVE. IN THE CASE OF ACIT VS. SHRI BABA RUPA DAS ITA NO.1543/DEL/1998 DT. 31.1.2002, C BENCH TRIBUNAL NE W DELHI AFTER HAVING CONSIDERED THE SUPREME COURT DECISION IN THE CASE OF CIT VS. ITA NO.258/AGR/2009 A.Y.2005-06. 12 SMT. P.K. NOORJAHAN [1999] 237 ITR 570 HAS HELD AL THOUGH AS A LEGAL PROPOSITION THE RESULTS OF SECTION 68 DO APPL Y TO EACH AND EVERY CREDIT ENTRY IN THE BOOKS OF ACCOUNT TO BE MAINTAIN ED BUT THE EXPLANATION OF THE ASSESSEE HAS TO BE CONSIDERED DE PENDING UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE IN THEIR ENTIR ETY. WHERE SOURCES FOR THE CREDITS HAVE BEEN IDENTIFIED BY THE ASSESSE E, THE ADDITION CANNOT BE MADE BY EXERCISING THE DISCRETION OF MAKI NG AN ADDITION IN TERMS OF SECTION 68. AFTER CONSIDERING THE ELABOR ATE SUBMISSIONS MADE BY THE APPELLANT, THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE SUPPORTED BY THE MATERIAL EVIDENCE BROUGHT ON RECORD OF THE AO AS ALSO PLACED IN APPEAL AS PER PA PER BOOK MENTIONED ABOVE, AS ALSO THE PARAMETERS AND PRINCIP LES LAID DOWN BY THE HONORABLE COURT AS DISCUSSED ABOVE, THE AO HAS FAILED TO MAKE OUT A CASE TO TREAT THE SALE PROCEEDS OF AGRICULTURE PR ODUCE OF RS.64,36,315/- AS INCOME FROM OTHER SOURCES INCLUDI BLE U/S 68 OF IT ACT, 1961. ACCORDINGLY ON THE FACTS OF THE CASE AS DISCUSSED ABOVE THE FINDING OF THE AO THAT NO AGRICULTURE ACTIVITY WAS CARRIED OUT BY THE ASSESSEE IS NOT UPHELD AND THE ADDITION MADE BY THE AO U/S 68 AT RS.64,36,315/- IS DIRECTED TO BE DELETED AND THE IN COME DISCLOSED BY THE ASSESSEE AT RS.40,44,220/- REPRESENTED BY INCOM E FROM AGRICULTURE, IS DIRECTED TO BE ACCEPTED. 10. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) ALLOWED RELIEF WITHOUT APPRECIATING THE FACTS OF THE CASE AND VARI OUS POINTS SUBMITTED BEFORE THE CIT(A) THROUGH REMAND REPORT DATED 14.01.2009. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO EXPENSES WHATSOEVE R RELATING TO HARVESTING OF PRODUCE, PACKING, SELLING MARKETING ETC. WERE SHOWN . TRANSPORTING OF GOODS TO AND FRO TO FARM REQUIRES LARGE EXPENDITURE WHICH HA S NOT BEEN DEBITED BY THE ASSESSEE. THE PRIMARY RECORD SUCH AS RECORD OF DAY TO DAY EXPENSES, SALES, PURCHASES, COPIES OF CONTRACT FOR WORKS OR RECORD, PAYMENT MADE TO DAILY WAGES, SALARIES PAID TO STAFF, RECORD OF AGRICULTURE PRODU CE WERE NOT MAINTAINED. THE ITA NO.258/AGR/2009 A.Y.2005-06. 13 ASSESSEE IS CARRYING OUT SALES EVERY MONTH DIRECTLY WITHOUT ANY INTERMEDIARY AND WITH NO CONTRACT WITH MANDIES, TRADERS OR COMMISSIO N AGENT. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CONTENTION OF THE ASSESSEE THAT EVERY PROCESS OF AGRICULTURAL PRODUCE WERE DIRECTLY DONE BY THE BUYE RS, BUT IN THIS REGARD THE ASSESSEE HAS FAILED TO PRODUCE ANY SUPPORTING EVIDE NCE. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) HAS DELETE D THE ADDITION ON THE BASIS OF PHOTOGRAPHS ON A VISIT TO ASSESSEES FARM HOUSE BY THE A.O. WHICH WAS MADE AFTER PASSING OF TWO AND HALF YEARS OF THE PREVIOUS YEAR OF WHICH AGRICULTURAL OPERATION WERE UNDER CONSIDERATION. LD. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT SUCH PHOTO CANNOT BE SAID TO BE EVIDENCE OF AGRICULTURAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. LD. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE CIT(A) HAS DECIDED THE ISSUE WITHOUT VERIFYING THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION AND THE FACTS OF THE SUBSEQUENT YEAR. LD. DEPARTMENTAL REPRESENTATIVE ON ASKING A QUERY THAT WHAT IS THE A GRICULTURAL INCOME SHOWN BY THE ASSESSEE IN SUBSEQUENT YEARS, THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT IN A.Y. 2007-08 & 2008-09 THE ASSESSEE HAS SHOWN NI L AGRICULTURAL INCOME. 11. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATI VES, WE NOTICE THAT THE CIT(A) FIRST REPRODUCED THE GROUNDS OF APPEAL RAISE D BY THE ASSESSEE, THEN REPRODUCED THE ASSESSEES SUBMISSION FROM PAGE NOS. 3 TO 19, THEN REPRODUCED THE SUBMISSIONS OF THE ASSESSEE IN REJOINDER ON REMAND REPORT GIVEN BY THE A.O. FROM ITA NO.258/AGR/2009 A.Y.2005-06. 14 PAGE NOS.19 TO 22 OF THE CIT(A) ORDER. THE CIT(A) WHILE GIVING HIS FINDING ONLY REITERATED SOME OF THE ISSUES OF THE SUBMISSION OF THE ASSESSEE. THE ORDER OF CIT(A) IS NOT IN ACCORDANCE WITH SECTION 250(6) OF THE ACT. THE CIT(A) WHILE DELETING THE ADDITION REPEATEDLY STATED THAT THE A. O. FAILED TO BRING ON RECORD ANY MATERIAL. WHEREAS, THE CASE OF THE A.O. THAT WHATE VER THE EVIDENCE PRODUCED DID NOT ESTABLISH THAT THE ASSESSEE WAS DOING AGRICULTU RAL ACTIVITIES AGAINST THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE. THE AGR ICULTURAL INCOME IS EXEMPT INCOME UNDER SECTION 10(1) OF THE ACT. THE LAW IS WELL SETTLED THAT THE PERSON WHO CLAIM THE BENEFIT OF EXEMPTION HAS TO ESTABLISH IT (CIT VS. RAMAKRISHNA DEO, 35 ITR 312 (SC) WHEREAS THE CIT(A) SHIFTED THE BURDEN ON THE ASSESSEE. TO PROVE THAT THE ASSESSEE DID NOT DERIVE INCOME FROM AGRICU LTURE IS THE ENTIRE DISCUSSION OF THE CIT(A) WHICH IS A THEORETICAL DISCUSSION WITHOU T CONSIDERING THE FACTS OF THE CASE UNDER CONSIDERATION. THE TERMS AGRICULTURE AN D AGRICULTURAL PURPOSE NOT HAVING BEEN DEFINED IN THE INCOME TAX ACT. WE MUST NECESSARILY CALL UPON THE GENERAL SENSE IN WHICH THEY HAVE BEEN UNDERSTOOD IN COMMON PARLANCE AGRICULTURE IN ITS ROOT SENSE OF AGER = FIELD AND CULTURA = CULTIVATION. CULTIVATION OF FIELD WHICH OF COURSE EMPLOY EXPENDI TURE OF HUMAN SKILL AND LABOUR UPON THEM. THE DECIDED CASE DISCLOSED .. OF OPTIO N IN REGARD TO THE CONDONATION OF TERMS AGRICULTURAL AND AGRICULTURAL PURPOSES. I N AGRICULTURAL OPERATION THERE IS SOME KIND OF CULTIVATION OR PRODDING OF SOIL AT THE INCEPTION OF THE PLANTING DONE AND SUBSEQUENTLY ALSO AT INTERVALS. THESE AGRICULT URAL OPERATIONS ARE DIFFERENT FOR ITA NO.258/AGR/2009 A.Y.2005-06. 15 DIFFERENT TYPE OF AGRICULTURE PRODUCES. DIFFERENT AGRICULTURAL OPERATIONS ARE LIKE A BUSINESS ACTIVITIES AND IN CASE OF SOME BIG AGRICUL TURAL FARM IT IS NECESSARY TO MAINTAIN A RECORD. THERE IS NO DIFFERENT STAGES OF AGRICULTURAL OPERATION CONSIDERING THE NATURE OF PARTICULAR PRODUCE AND CR OPS. FROM THE STATEMENT OF FACTS FURNISHED BEFORE THE CIT(A) BY THE ASSESSEE, WE NOT ICE THAT THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DULY COMPLIED WITH THE PROVIS IONS RELATING TO MAINTENANCE OF BOOKS OF ACCOUNT AND AUDIT OF SUCH BOOKS OF ACCOUNT UNDER SECTION 44AB OF THE ACT. ONE OF THE GROUND NO.3 RAISED BEFORE THE CIT( A) BY THE ASSESSEE THAT THE A.O. ERRED ON FACTS AND LAW IN ASSESSING THE AGRICULTURE SALE PROCEEDS IN ENTIRETY AT RS.64,36,315/- WITHOUT REJECTING THE BOOKS OF ACCOU NT OR INVOKING PROVISIONS OF SECTION 145 OF THE ACT. WHILE DELETING THE ADDITIO N THERE IS NO FINDING OF CIT(A) IN RESPECT OF THE CASE OF THE A.O. THAT THE PARTNER HA S INTRODUCED CAPITAL IN THE FORM OF CASH THROUGH LAND LEVELING, CIVIL CONSTRUCTION AND WATER SOURCE BY CREDITING CAPITAL ACCOUNT OF THESE ITEMS AND ALLOWING CASH WITHDRAWAL FROM THE FIRM. THE A.O. ON ENQUIRY FOUND THAT THESE WERE ACCOMMODATING ENTRIES . THE CIT(A) HAS DELETED THE ADDITION WITHOUT POINTING OUT OR WHISPERING ABOUT T HE TYPE OF AGRICULTURAL PRODUCES. BEFORE THE A.O. AND BEFORE THE CIT(A) TH E ASSESSEE HAS EXPLAINED THE CASH SALE OF AGRICULTURAL PRODUCE. IT HAS BEEN EXP LAINED THAT LABOURERS PLUCKED FRUITS FROM TREES IN THEIR OWN AND PAID THEIR OWN C OST BUT THERE IS NO MATERIAL ON RECORD NOR THERE IS DISCUSSION NEITHER BY THE A.O. NOR BY THE CIT(A) THAT WHICH TYPE OF FRUITS WERE CULTIVATED BY THE ASSESSEE. I N THE CD AND PHOTOGRAPHS OF ITA NO.258/AGR/2009 A.Y.2005-06. 16 PAPAYA AND BANANA WERE STATED TO BE THE CROPS BUT T HERE ARE NO DISCUSSION BY THE CIT(A) REGARDING NUMBER OF PAPAYA AND BANANA TREES, THEIR STATUS REGARDING AGE, EXPENDITURE PERTAINING TO CULTIVATION OF TREES OF P APAYA AND BANANA. EXCEPT GENERAL DISCUSSIONS, THERE IS NO SPECIFIC DISCUSSIO N BY THE CIT(A) ON ISSUES RAISED BY A.O. IN FACT, WHAT WAS THE NATURE OF AGRICULTUR AL PRODUCE OF THE ASSESSEE. THE ASSESSEE BEFORE THE CIT(A) HAS REPRODUCED IN PARAGR APH NO.4, PAGE 4 OF CIT(A) ORDER THAT IT WAS SUBMITTED BEFORE THE A.O. VIDE R EPLY DATED 7 TH SEPTEMBER, 2007 THAT THE CROP OF PAPAYA, GARLIC WAS GROWN. PAPAYA PLANTATION WAS MADE ON 17.90 HECTORS. IT IS PERTINENT TO MENTION THAT WHEN THE ASSESSEE WAS HAVING 19.10 HECTARES OF AGRICULTURAL LAND, OUT OF WHICH 17.90 H ECTARES STATED TO BE HAVING PAPAYA CROPS. THE CIT(A) DID NOT WHISPER OR DISCUS S ABOUT WHAT IS THE NATURE OF CROPS GROWN BY THE ASSESSEE, WHETHER IT WAS BANANA OR PAPAYA OR OTHERS. THE FINDING OF THE CIT(A) IS BASED ON INCORRECT AND INC OMPLETE FACT OF THE CASE. AS STATED ABOVE THAT THE ORDER OF THE CIT(A) IS NOT IN ACCORDANCE WITH SECTION 250(6). UNDER THE CIRCUMSTANCES, WE FIND IT PROPER TO SEND THIS MATTER TO THE FILE OF CIT(A) WITH THE DIRECTION TO DECIDE THE SAME AFRESH IN ACC ORDANCE WITH LAW BY A SPEAKING ORDER, STATING COMPLETE FACTS REGARDING AGRICULTURA L OPERATION, CROPS, SALE OF AGRICULTURAL PRODUCE IN QUANTITY AND AMOUNT. VERIF Y THE REVENUE RECORD TO SATISFY WHAT TYPE OF CROPS WERE CULTIVATED DURING THE RELEV ANT PERIOD AS THE LAND REVENUE DEPARTMENT HAVE A PROCEDURE TO RECORD THE NATURE OF CROPS IN EACH KHASRA OR AGRICULTURAL LAND IN EACH SEASON RAVI AND KHARIF AN D OTHERWISE ALSO. THE ASSESSEE ITA NO.258/AGR/2009 A.Y.2005-06. 17 HAS MAINTAINED BOOKS OF ACCOUNTS WHICH IS ALSO REQU IRED TO BE EXAMINED IN THE LIGHT OF RELEVANT PROVISIONS OF THE ACT, QUANTITY D ETAILS OF AGRICULTURAL PRODUCE, THEIR SALES AND STOCK IN HAND. IN OTHER WORDS, THE BOOKS OF ACCOUNT EVEN IN CASE OF AGRICULTURAL INCOME IS REQUIRED TO BE EXAMINED JUST LIKE IN CASE OF BUSINESSMAN. THE CIT(A) IS DIRECTED TO DECIDE THE ISSUE AFRESH I N ACCORDANCE WITH ABOVE DISCUSSIONS AND AFTER PROVIDING REASONABLE OPPORTUN ITY OF BEING HEARD TO BOTH THE SIDES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY