ITO, Agra V. M/s Landmark Innovation (P) Ltd., Aligarh

ITA 26/AGR/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0383 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 02-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMPOORNANAND
• Assessee Lawyers: R C TOMAR I T P
• Keywords: Income from undisclosed sources; Principle of natural justice
• Section: 40A(3); 143(3); 133(6); 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.26/AGR/2009 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER-4(2), VS. M/S. LANDMARK INNOV ATION (P) LTD., AGRA. 79/D4 VIBHAV APARTMENTS, NEW AGRA, AGRA. (PAN: AAACL 6744 R). ITA NO.659/AGR/2008 ASSESSMENT YEAR: 2005-06 A.C.I.T. 4(1), AGRA. VS. M/S. HIMALAYAN GREEN F ARMS P.LTD., 79/D4 VIBHAV APARTMENTS, NEW AGRA, AGRA. (PAN: AABCH 3538 C). ITA NO.43/AGR/2009 ASSESSMENT YEAR: 2005-06 A.C.I.T. 4(1), AGRA. VS. M/S. NEEL GIRI KRISHI FARMS P. LTD., 79/D4 VIBHAV APARTMENTS, NEW AGRA, AGRA. (PAN: AABCN 8314 L). ITA NO.44/AGR/2009 ASSESSMENT YEAR: 2005-06 A.C.I.T. 4(1), AGRA. VS. M/S. SHIVALIK KRISHI & DAIRY FARMS PVT. LTD., 79/D4 VIBHAV APARTMENTS, NEW AGRA, AGRA. (PAN: AAHCS 6619 K). ITA NO.45/AGR/2009 ASSESSMENT YEAR: 2005-06 A.C.I.T. 4(1), AGRA. VS. M/S. ARAVALI AGRO FARM S P. LTD., 79/D4 VIBHAV APARTMENTS, NEW AGRA, AGRA. (PAN: AAECA 4754 C). (APPELLANT) (RESPONDENTS) 2 APPELLANT BY : SHRI SAMPOORNANAND, JR. D.R. RESPONDENTS BY : SHRI R.C. TOMAR, I.T.P. ORDER PER P.K. BANSAL, A.M.: ALL THESE APPEALS HAVE BEEN FILED BY THE REVENUE AG AINST THE SEPARATE ORDERS OF THE CIT(A). SINCE THE ISSUES INVOLVED IN ALL THESE APP EALS ARE COMMON, THEREFORE, ALL THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. BOTH THE LD. A.R. AND THE LD. D.R. AGREED THAT T HE FACTS INVOLVED IN ALL THESE APPEALS ARE SAME AND IF THE APPEAL IN ITA NO.26/AGR/2009 IS DIS POSED OF, THE SAME VIEW MAY BE TAKEN IN ALL THE APPEALS. THE ISSUES INVOLVED ARE COMMON EXCEPT CHANGE IN FIGURES. WE ARE, THEREFORE, DISPOSING OF ALL THESE APPEALS ON THE BASIS OF FACT S INVOLVED IN ITA NO.26/AGR/2009. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT IN THIS CASE WAS COMPLETED AT AN INCOME OF RS.41,11,290/- AS AGAINST THE RETURNED INCOME OF RS .20,57,385/- SHOWN BY THE ASSESSEE AS AGRICULTURAL INCOME. THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEES AGRICULTURE INCOME PRIMARILY ON THE BASIS THAT THE ASSESSEE HAS INCURR ED ALL THE EXPENSES IN CASH. THE SALES HAVE ALSO BEEN CARRIED OUT IN CASH. THE BOOKS OF ACCOUNTS AN D THE VOUCHERS MAINTAINED BY THE ASSESSEE ARE SELF-GENERATED. EVEN IT WAS ALSO OBSERVED THAT PUR CHASES CARRIED OUT BY THE ASSESSEE ARE NOT VERIFIABLE. THE A.O. DID NOT DENY THE HOLDING OF T HE LAND BY ASSESSEE AS WELL AS THE CULTIVATION BEING CARRIED OUT THEREIN ON THE BASIS OF COPY OF K HASRA & KHATONIES FILED BY THE ASSESSEE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) ALLOW ED THE APPEAL OF THE ASSESSEE, DELETING THE 3 ADDITION OF RS.41,11,287/- AND DIRECTED THE A.O. TO ACCEPT THE INCOME SHOWN BY THE ASSESSEE FROM AGRICULTURE INCLUDING THE PROFIT ON SALE OF AG RICULTURAL LAND BY HOLDING AS UNDER :- 4.2 THE SUBMISSIONS MADE BY THE APPELLANT AND THE EVIDENCE ADDUCED BEFORE THE AO AND ALSO PRODUCED BEFORE ME FOLLOWED BY REJO INDER ON THE REMAND REPORT HAVE BEEN CONSIDERED. THE AO HAS REFERRED IN HIS RE MAND REPORT THAT M/S MANGAL KHAD BEEJ BHANDAR WAS A KIRANA SHOP AS PER INFORMAT ION COLLECTED BY THE ADDITIONAL CIT RANGE-4, AGRA WHEREAS AS PER REPORT RECEIVED FROM ACIT-4, AGRA IN THE CASE OF ARAVALI AGRO FARMS P LTD. HE HAS MEN TIONED IN THE REMAND REPORT THAT NO INFORMATION U/S 133(6) COULD BE COLLECTED A S ON THE DATE OF PASSING THE ASSESSMENT ORDER. I T IS FOUND FROM THE REMAND REPORT THAT THE APPELLANT HAS NOT BEEN CONFRONTED WITH ANY SUCH EVIDENCE AT THE TIME OF ASSESSMENT OR IN THE REMAND PROCEEDINGS. THE APPELLANT COMPANY IS FOUND TO BE ENGAGED IN DOING THE AGRICULTURE FARMING AND WAS INCORPORATED UNDER THE COMPANIES ACT, 1956. THE AGRICULTURE FARMING IS BEING DONE RIGHT FROM A.Y. 2 003-04 FOR WHICH IT HAS FILED THE RETURN AS MENTIONED IN THE WRITTEN SUBMISSIONS AND THE SAME IS NOT IN DISPUTE. 4.3 THE BASIC CONCEPT AS TO WHAT IS AGRICULTURE, W HETHER THE ASSESSEE COMPANY WAS ENGAGED IN DERIVING OUT RECEIPTS FROM AGRICULTU RE AND WHETHER THE SAME COULD BE ACCEPTED AS INCOME DERIVED UNDER THE HEAD AGRICULTURE, THE SUBMISSIONS MADE BY THE AR ON THE STRENGTH OF FOLLOWING DECISIO NS HAVE BEEN CONSIDERED :- (I) CIT VS. RAJA BENOY KUMAR SAHAS ROY [1957] 32 ITR 466 (SC) (II) KAMESHWAR SINGH (MAHARAJADHIRAJ SIR) VS. CIT [1957] 32 ITR 587 (SC) (III) CIT VS JYOTIKANA CHOWDHURANI [1957] 32 ITR 705 (SC) (IV) CIT VS RAMAKRISHNA DEO [1959] 35 ITR 312 (SC) (32IT R 705 FOLLOWED) THE HONORABLE SUPREME COURT IN THE AFORESAID DECISI ONS HAS ENUNCIATED THE PRINCIPLE AND HAS PRONOUNCED THAT :- THE PRIMARY SENSE IN WHICH THE TERM AGRICULTURE S HOULD BE UNDERSTOOD, IS ITS ROOT MEANING AGER = FIELD + CULTURA = CULTI VATION; THAT IS TO SAY, FIELD CULTIVATION OR CULTIVATION OF THE GROUND , IN THE SENSE OF TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR OPE RATIONS ON THE LAND. THESE ARE BASIC OPERATIONS AND DEMAND THE EXPENDITURE OF HUMAN LABOUR AND SKILL UPON THE LAND ITSELF AND FURTHER THEY ARE ALL DIREC TED TO MAKE THE CROP SPROUT OUT OF THE LAND. AFTER THE CROP SPROUTS FROM THE LAND THERE ARE SUBS EQUENT OPERATIONS WHICH HAVE TO BE RESORTED TO BY THE AGRICULTURIST FOR THE EFFICIENT PRODUCTION OF THE CROP SUCH AS WEEDING , DIGGING THE SOIL AROUND THE GROWTH, REMOVAL OF UNDESIRABLE GROWTH, PRESERVATION OF THE CROP FROM I NSECTS AND PESTS AND FROM DEPREDATION BY CATTLE , TENDING, PRUNING , CUTTING ETC. BOTH THE BASIC AND THE 4 SUBSEQUENT OPERATIONS TOGETHER FORM THE INTEGRATED ACTIVITY OF THE AGRICULTURIST. THE PERFORMANCE OF THE SUBSEQUENT OPERATIONS ON THE PRODUCTS OF THE LAND WOULD NOT BE ENOUGH TO INVEST THE SUBSEQUENT OPERAT IONS WITH AGRICULTURAL CHARACTER. THEY SHOULD BE IN CONJUNCTION WITH, AND IN CONTINUATION OF, THE BASIC OPERATION WHICH IS THE SINE QUA NON OF AN AGR ICULTURAL OPERATION. WITHOUT IT THE SUBSEQUENT OPERATION DO NOT ACQUIRE THE CHARACTER OF AGRICULTURAL OPERATIONS. IT MAY BE MENTIONED THAT THE NATURE OF THE PRODUCE RAISED HAS NO RELEVANCE TO THE CHARACTER OF AGRICULTURAL OPERATIONS. ACCORDINGLY, AGRICULTURE WOULD INCLUDE HORTICULTURE, FLORICULTURE, ARBORICULTURE AND SYLVICULTURE VIDE PAVADAI PATHAN VS RAMASWAMI CHETTY, AIR 1922 MAD 351. IT WOULD INCLUDE THE RAISING OF G ROVES, PLANTATIONS , GRASS OR PASTURE . IT WOULD EXTEND TO CULTIVATION O F ALL COMMODITIES OF (I) FOOD VALUE, SUCH AS SUGARCANE VIDE CIT VS. RAVALGOAN SUG AR FARM LIMITED [1947] 15 ITR 297 BOMBAY , MURUGESA CHETTY VS. CHIN NATHAMVI GOUNDAN [1901] ILR 24 MAD 421( A COCONUT GARDEN IS A FRUIT GARDEN)AIR 1937 MADRAS 254, MANGOES VIDE SAROJINI DEVI VS. SHRI KRI SHNA AIR 1944 MAD 401, [1947] 15 ITR 235 (ALL) ORANGE, JACK FRUIT , T AMARIND AND PLANTAINS VIDE CIT VS. KE SUNDARA MUDALIAR [1950] 18 ITR 259. THE RELEVANT EVIDENCE PRODUCED BY APPELLANT GOES TO ESTABLISH THAT APPELLANT COMPANY IS FOUND TO HAVE POSSESSED 18.85 HECTARES O F AGRICULTURAL LAND SITUATED AT MUDHERI, DISTT. SHIVPURI M.P. THE COPIES OF SALE DEEDS OF AGRICULTURE LAND AND KHASRA KHATONI IN ORDER TO PROVE THE AGRICULTURAL C ROP SUPPORTED BY THE PHOTOGRAPHS OF THE CROP WERE ALSO PRODUCED AS PER P B NO. L1 TO L 48 FILED BEFORE AO UNDER REPLY DT. 02-08-2007 WHICH IS FOUND TO BE PART OF AOS RECORD. THE ASSESSEE COMPANY IS FOUND TO HAVE PLACED SUFFIC IENT EVIDENCE BEFORE THE AO TO PROVE THAT IT WAS ENGAGED IN FIELD CULTIVATION I N THE SENSE OF TILLING OF THE LAND, PLANTING AND SIMILAR BASIC OPERATIONS WHICH ARE SUP PORTED BY THE EVIDENCE OF EXPENDITURE INCURRED ON HUMAN LABOUR AND SKILL UPON THE LAND ITSELF TO MAKE THE CROP SPROUT OUT OF THE LAND. AFTER THE SPROUTING OU T OF THE CROP FROM THE LAND THE SUBSEQUENT OPERATIONS WHICH HAVE TO BE RESORTED TO BY THE AGRICULTURIST FOR THE EFFICIENT PRODUCTION OF THE CROP, SUCH AS WEEDING, DIGGING THE SOIL, REMOVAL OF UNDESIRABLE GROWTHS, PRESERVATION OF THE CROP FROM INSECTS AND PESTS AND PUTTING THE FENCING FROM DEPREDATION BY CATTLE, TENDING, PR UNING, CUTTING, MAKING OF CULVERTS AND PROVIDING EXCESS INSIDE THE FARM HOUSE BY MAKING PAVEMENTS HAVE ALL BEEN CARRIED OUT. BOTH THE BASIC AND THE SUBSEQUENT OPERATIONS TOGETHER FORM THE INTEGRATED ACTIVITY OF THE ASSESSEE COMPANY AS THAT OF AGRICULTURIST. THE AFORESAID FACTS ARE FOUND SUPPORTED BY THE BILLS, VOUCHERS OT HER RELEVANT EVIDENCES PLACED BEFORE THE AO AS PER PAPER BOOK FILED FROM PAGE NO. 1 TO 150 ALONG WITH PHOTOGRAPHS, ARTICLES AND CDS SUPPORTED BY REPLY D T. 27-12-2007 MADE TO AO. THE COPIES OF AFORESAID EVIDENCES FILED BEFORE THE AO WERE ALSO PRODUCED BEFORE 5 ME. THE VISIT OF AGRICULTURE FARM OF THE APPELLANT COMPANY MADE BY THE AO ON THE STRENGTH OF THE CD AND PHOTOGRAPH IN WHICH THE AO A ND HIS TEAM IS FOUND STANDING AT THE FARM HOUSE AND THE TREES OF PAPAYA AND BANANA STANDING IN FULL BLOOM AT THE FARM HOUSE FOUND AT THE TIME OF VISIT CANNOT BE DENIED. THEREFORE THE ASSESSEE COMPANY HAVING BEEN ENGAGED IN AGRICULTURE FARMING IS PROVED BEYOND DOUBT AND THE AO HAS NOT BROUGHT ANY ADVERSE MATERI AL AGAINST THE CLAIM OF THE APPELLANT AND AGAINST THE EVIDENCES ADDUCED. THE AOS FINDING THAT EXPENDITURE INCURRED ON ACTIV ITY OF LAND LEVELLING, AGRICULTURAL IMPLEMENTS, TOOLS, TROLLEY, PURCHASE O F FERTILIZERS AND CHEMICALS IS BOGUS CANNOT BE UPHELD FOR THE VERY REASON OF ASSES SEE HAVING PLACED ON RECORD OF THE AO THE RELEVANT EVIDENCES RUNNING IN PAGE 51 TO 156 OF THE PAPERBOOK WHICH ADMITTEDLY EXISTED ON AOS RECORD ALSO AND AO HAS NOT BROUGHT ANY EVIDENCE TO DISPUTE THE CLAIM OF THE APPELLANT. ALS O IT IS A FACT THAT ASSESSEE HAS NOT BEEN CONFRONTED WITH ANY ADVERSE MATERIAL IN PO SSESSION OF AO OR BROUGHT ON RECORD BY THE AO AS ON THE DATE OF PASSING THE ASSE SSMENT ORDER . THE SUBMISSION MADE BY THE ASSESSEE THAT THE MATERIAL COLLECTED BY THE AO BEHIND THE BACK OF THE ASSESSEE WITHOUT DISCLOSING THE MATERIAL OR GIVING AN OPPORTUNITY TO CROSS EXAMINE THE PERSON MAKING THE STATEMENT CAN NOT BE USED AGAINST THE ASSESSEE. THERE WAS VIOLATION OF PRINCIPAL OF NATURAL JUSTICE . HONORABLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. RAJESH KUMAR (2008) 306 ITR 27 (DEL.) HAS ALSO BEEN CONSIDERED. THE ACIT-4, AGRA IN HIS REMAND REP ORT IN THE CASE OF ASSESSEES SISTER CONCERN M/S ARAVALI AGRO FARMS P LTD. HAS HI MSELF ADMITTED THAT THE INFORMATION CALLED FOR U/S 133(6) HAD NOT BEEN RECE IVED TILL THE DATE OF ASSESSMENT. HENCE ALSO IN ABSENCE OF ANY ADVERSE MATERIAL AVAIL ABLE ON AOS RECORD AS ON THE DATE OF COMPLETION OF ASSESSMENT THERE IS NO LEGAL BASIS TO GIVE THE AFORESAID FINDING THAT THE EXPENDITURE CLAIMED WAS BOGUS. AFT ER APPRECIATION OF THE EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE ON THE S TRENGTH OF EVIDENCE PLACED ON RECORD BEFORE THE AO AND IN APPEAL THE AOS FINDING THAT ASSESSEE DID NOT HAVE ANY AGRICULTURE INCOME DURING THE YEAR IS NOT TENAB LE. EVEN FROM THE PAST RECORD OF THE DIRECTORS IT IS FOUND THAT THE DIRECTORS HAD BEEN EARNING INCOME FROM AGRICULTURE WHICH HAS BEEN DISCLOSED TO THE DEPARTM ENT AND ACCEPTED. THE APPELLANT IN SUPPORT OF HIS AFORESAID ASSERTION PRO DUCED THE COPY IN THE CASE OF SATISH CHAHAR FOR RS.8,82,650/- IN THE A.Y. 2003-04 VIDE ACK NO. 100200 DT. 27- 11-2003 AND EVEN ACCEPTED IN APPEAL VIDE APPEAL NO. 517/CIT(A)-I/AGRA/ACIT- 1/AGRA/2006-07 DT. 15-05-2008. THE AO IN HIS REMAND REPORT HAS STATED THAT THERE W AS NO OFFICIAL VISIT OF THE OFFICERS OF THE DEPARTMENT IS ONLY MERE HEARSAY, HE IT APPEARS HE HAS NOT LOOKED INTO THE EVIDENCES PRODUCED IN THE FORM OF CD FOLLO WED BY PHOTOGRAPHS WHERE THE DEPARTMENTAL OFFICERS PRESENCE IN MAKING THE FARM V ISIT IS APPARENT AND FURTHER THE ACIT-4, AGRA IN HIS REMAND REPORT SUBMITTED IN THE CASE OF M/S ARAVALI AGRO FARMS PVT. LTD., AGRA HAS ADMITTED THAT THE VISIT W AS UNDERTAKEN BY THE DEPARTMENTAL OFFICERS AFTER TWO AND A HALF YEARS OF THE AGRICULTURE OPERATIONS HAVE WITNESS THE EXISTENCE OF AGRICULTURE OPERATION S BEING CARRIED OUT ON EXTENSIVE SCALE AND THIS GOES IN FAVOUR OF ASSESSEE SUPPORTING HIS CASE THAT THE AGRO-FARMING WAS BEING CARRIED OUT NOT ONLY IN THE YEAR UNDER APPEAL BUT IT IS 6 FOUND TO BE IN CONTINUITY EVEN IN SUCCESSIVE ASSESS MENT YEARS AND THE INCOME THERE FROM SO DERIVED. IT IS A COMMON KNOWLEDGE THA T A TREE CANNOT BE GROWN OVERNIGHT NOR ANY FARMHOUSE CAN BE DEVELOPED OVERNI GHT. HENCE THE AOS FINDING THAT APPELLANT DID NOT CARRY OUT ANY AGRICULTURE AC TIVITY AND DERIVE AGRICULTURE INCOME AS A RESULT THEREFROM IS DEVOID OF FACTS AND CANNOT BE UPHELD. ONCE AGRICULTURE ACTIVITY IS ADMITTEDLY EXISTED, THERE I S BOUND TO BE AGRICULTURE PRODUCE AND INCOME THEREFROM. IN AGRICULTURE SECTOR SALE OF AGRICULTURE PRODUCE IN CASH IS A NORMAL FACTOR AND IT ACT DOES NOT IMPOSE ANY REST RICTION ON PURCHASE OR SALE OF AGRICULTURE PRODUCE IN CASH. THEREFORE ALSO NO ADVE RSE INFERENCE CAN BE DRAWN ON THE BASIS OF THE FACT THAT SALES WERE EFFECTED I N CASH. THE APPELLANT HAS ALSO GIVEN JUSTIFICATION OF EXTENT OF AGRICULTURE PRODUC E DERIVED BY HIM AT THE FARM HOUSE BY BRINGING RELEVANT MATERIAL ON RECORD WHICH THE AO HAS NOT DISPUTED EXCEPT SAYING THAT THE ASSESSEE HAS DERIVED RECEIPT S FROM AGRICULTURE PRODUCE SALE IN CASH. THIS IS NO GROUND TO DISCARD THE WHOLE AFF AIR WHICH IS SUPPORTED BY RELEVANT EVIDENCE RIGHT FROM SOWING TO TILLING AND SALE THEREOF WITH RELEVANT INCIDENTAL ACTIVITIES CARRIED OUT DURING THE COURSE . THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE ALONG WITH RELEVANT DOCUMENTS RUNNI NG IN 150 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 AS SESSEE HAS NOT BEEN CONFRONTED WITH ANY ADVERSE MATERIAL EVEN IN THE REMAND PROCEE DINGS SO AS TO SUPPORT THE STAND TAKEN BY THE AO IN THE ASSESSMENT ORDER. THE MADRAS HIGH COURT HAS HELD THAT AGRICULTURE WOU LD INCLUDE THE RAISING OF GROVES PLANTATIONS, GRASS OR PASTURE. MANGOES VIDE SAROJINI DEVI VS. SHRI KRISHNA AIR 1944 MAD 401 , ORANGE, JACKFRUIT , TAM ARIND AND PLANTAINS VIDE CIT VS. KE SUNDARI MUDALIYA [1950] 18 ITR 259, 274 MAD. THEREFORE THE AGRICULTURE CROP GROWN I.E. OF PAPAYA & BANANA IS ALSO FOUND TO HAVE BEEN COVERED UNDER THE HEAD INCOME FROM AGRICULTURE. THE APPELLANT HAS ALSO ESTABLISHED THE REASONABLENE SS OF QUANTITY OF AGRICULTURE CROP DERIVED ON THE STRENGTH OF THE DATA OF VARIOUS PERIODICALS IN WHICH THE ASSESSES INVOLVEMENT IN DOING THE PAPAYA ON LARGE S CALE FARMING HAS COME UP AS A SPECIAL MENTION, THE COPY OF WHICH WAS PRODUCED B EFORE THE AO VIDE REPLY DT. 27-12-2007.(PB PAGE NO. G TO L) ON THE STRENGTH OF THE BILLS/VOUCHERS, MUSTER ROLL PRODUCED FOR HUMAN LABOUR PUT IN AND ITS RELEVANT USE IN THE FARMHOUSE, IT CANNOT BE PRESUMED THAT THERE WAS NO BASIC OR SUBSEQUENT OPERATION OF AGRICULTURE CARRIE D OUT BY THE ASSESSEE COMPANY FOR FIELD CULTIVATION OR CULTIVATION OF THE GROUND IN THE SENSE OF TILLING OF THE LAND, PLANTING AND SIMILAR OPERATIONS ON THE LAND. THE HONORABLE SUPREME COURT IN THE CASE OF DAKESHWARI COTTON MILLS LTD. VS. CIT 26 ITR 775 HAS HELD THAT IN MAKING AN ASSESSMENT ORDER, THE A O IS NOT ENTITLED TO MAKE PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE ON ANY MATERIAL AT ALL. THE APEX COURT HAS FURTHER HELD THAT THERE MUST BE SOMETHING MORE THAN MERE SUSPICION TO SUPPORT THE A SSESSMENT ORDER. IN OTHER WORDS THE ASSESSMENT MUST BE MADE NOT ON MERE SUSPI CION BUT ON LEGITIMATE 7 MATERIAL FROM WHICH A REASONABLE INFERENCE MAY BE D RAWN. THE ASSESSEE HAD BEYOND ANY DOUBT ON THE STRENGTH OF EVIDENCE PRODUC ED BY HIM WHICH CANNOT BE SAID TO BE A MERE PAPER WORK AND ARE RATHER RELATED TO INDEPENDENT EVIDENCE OF PHYSICAL POSSESSION OF AGRICULTURE LAND, SPROUTING OUT OF AGRICULTURE CROP FROM THE LAND FOLLOWED BY BASIC AND SUBSEQUENT OPERATIONS CA RRIED OUT BY HIM SUCH AS SOWING, NURTURING, PLANTING ETC. SUPPORTED BY THE P HYSICAL VISIT OF THE FARM HOUSE BY THE ASSESSING OFFICER IN ORDER TO VERIFY THE COR RECTNESS OF THE CLAIM MADE FOR THE INCOME DERIVED FROM AGRICULTURE ARE THE INSTANCES W HICH SPEAKS OF FURNISHING A SATISFACTORY EXPLANATION REGARDING THE SOURCE OF CR EDIT APPEARING IN HIS BOOKS REPRESENTING SALE PROCEEDS OF PAPAYA AND BANANA. TH E ASSESSEE HAS EXPLAINED THE TRANSACTION OF SALE OF AGRICULTURE PRODUCE THROUGH WHICH THE CREDIT ENTRIES REPRESENTING SALE PROCEEDS APPEAR IN HIS BOOKS. IT IS FOUND THAT THERE IS NO DIRECT NEXUS BETWEEN THE FACTS OF THE CASE AND CONCLUSIONS REACHED BY THE AO BY COMPLETELY IGNORING THE EVIDENCE PUT BEFORE HIM BY THE ASSESSEE. THE AO HAS JUMPED TO THE CONCLUSION THAT THE CREDIT ENTRIES RE PRESENTING SALE PROCEEDS OF PAPAYA & BANANA REPRESENTS ASSESSES UNEXPLAINED MON EY WITHOUT BRINGING ANY CONTRARY EVIDENCE ON RECORD IN ORDER TO DISPROVE TH E CLAIM OF AGRICULTURE INCOME FROM AGRO FARMING CARRIED OUT BY THE ASSESSEE EXCEP T MERE SAYING THAT THE SALES WERE EFFECTED IN CASH IGNORING THE EVIDENCE RIGHT F ROM THE OWNERSHIP OF AGRICULTURE LAND, FIELD CULTIVATION TO THE STAGE OF SPROUTING OUT OF FRUITS , BASIC OPERATIONS, SUBSEQUENT OPERATIONS CARRIED ON BY THE ASSESSEE TO CROP UP PAPAYA AND BANANA AND SUBSEQUENT SALE THEREOF. IN AGRICULT URE SECTOR THE PHENOMENON OF CASH SALE IS VERY COMMON AND THERE IS NO RESTRICTIO N TO IT AND EVEN AT THE END OF PURCHASER OF AGRICULTURE CROP, HE HAS BEEN KEPT OUT SIDE THE PERVIEW BY SPECIFIC PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD(F). ON THE CONTRARY THE AO EXCEPT MAKING A THEORETICAL DISCUSSION HAS NOT BROU GHT ANY EVIDENCE ON RECORD TO REBUT THE AUTHENTICITY OF THE EXPLANATION FURNISHED BY APPELLANT SUPPORTED BY THE RELEVANT EVIDENCE BOTH DOCUMENTARY AND OTHERWISE. T HE CLAIM OF THE APPELLANT ALSO DO FIND SUPPORT FROM THE RATIO LAID DOWN BY TH E APEX COURT DISCUSSED ABOVE. WHEN THE PRODUCE IS THERE THE ESSENTIAL PART OF ITS SALE IS BOUND TO BE THERE AND CANNOT BE REJECTED. THUS THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BY MERE PRESUMPTION AND WITHOUT BRINGING ON RECORD ANY RELE VANT MATERIAL, EVIDENCE BY THE AO WHICH THE AO HAS FAILED TO DO. AS FOR AOS ACTION FOR MAKING THE ADDITION U/S 68 P RESUMING THAT SALE PROCEEDS OF AGRICULTURE PRODUCE REPRESENTED ASSESSES INCOME FRO M UNDISCLOSED SOURCES AND IT IS LIABLE TO BE ADDED U/S 68, IT IS RELEVANT TO MEN TION THAT SECTION 68 OF IT ACT, 1961 IS COUCHED IN RELATION TO CREDIT ENTRIES FOUND IN THE BOOKS OF THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR. IT ORDAINS THAT WHERE THE ASSESSEE 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 INSTANT CA SE THE ASSESSEE HAS BROUGHT ON RECORD OF AO SUBSTANTIAL EVIDENCE TO SUPPORT HIS CL AIM OF HAVING DERIVED AGRICULTURE INCOME DURING THE YEAR AND ALSO IN THE PAST. THE AO HAS NOT BEEN ABLE TO BRING ON RECORD ANY RELEVANT MATERIAL OR EVIDENC E AT ALL TO SUPPORT HIS CASE THAT THE SALE PROCEEDS OF AGRICULTURE PRODUCE AS CR EDITED IN ASSESSES BOOKS REPRESENTED THE INCOME FROM UNDISCLOSED SOURCES. TH E AO HAS ALSO FAILED TO CORRELATE THE CREDITS OF SALE PROCEEDS FROM ANY OTH ER SOURCE OTHER THAN 8 AGRICULTURE BY COLLECTING ANY RELEVANT MATERIAL. TH ERE IS NO DISPUTE ABOUT THE EXTENT AND REASONABLENESS OF QUANTITY OF AGRICULTUR E CROP DERIVED AND SHOWN. IT IS ALSO RELEVANT TO POINT OUT THAT THE INCOME DISCLOSE D BY THE DIRECTORS IN THEIR INDIVIDUAL RETURNS HAD BEEN SHOWN AND ACCEPTED IN T HE PAST AS MENTIONED ABOVE. IN THE CASE OF ACIT VS. SHRI BABA RUPA DAS ITA NO.1 543/DEL/1998 DT.31-1-2002, C BENCH TRIBUNAL NEW DELHI AFTER HAVING CONSIDERED THE SUPREME COURT DECISION IN THE CASE OF CIT VS. SMT. P. K. NOORJAHAN [1999] 237 ITR 570 HAS HELD ALTHOUGH AS A LEGAL PROPOSITION THE RESULTS OF SEC TION 68 DO APPLY TO EACH AND EVERY CREDIT ENTRY IN THE BOOKS OF ACCOUNT TO BE MA INTAINED BUT THE EXPLANATION OF THE ASSESSEE HAS TO BE CONSIDERED DEPENDING UPON TH E FACTS AND CIRCUMSTANCES OF EACH CASE IN THEIR ENTIRETY. WHERE SOURCES FOR THE CREDITS HAVE BEEN IDENTIFIED BY THE ASSESSEE, THE ADDITION CANNOT BE MADE BY EXERCI SING THE DISCRETION OF MAKING AN ADDITION IN TERMS OF SECTION 68. AFTER CONSIDER ING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE SUPPOR TED BY THE PARAMETERS AND PRINCIPLES LAID DOWN BY THE HONORABLE COURT AS DISC USSED ABOVE, THE AO HAS FAILED TO MAKE OUT A CASE TO TREAT THE SALE PROCEEDS OF AG RICULTURE PRODUCE OF RS.39,55,925/- AS INCOME FROM OTHER SOURCES INCLUDI BLE U/S 68 OF IT ACT, 1961. IT APPEARS THAT AO HAS NOT CONSIDERED THE ENTIRE FACTS IN THE RIGHT PERSPECTIVE. HE HAS TAXED THE INTEREST INCOME ON IT REFUND AS INCOM E FROM OTHER SOURCES U/S 68 OF IT ACT WHICH IS ILLEGAL AND IT APPEARS THAT AO HAS NOT APPLIED HIS MIND WHILE MAKING THE AFORESAID ADDITION. LIKEWISE THE RECEIPT S SHOWN BY THE ASSESSEE AS PROFIT ON SALE OF AGRICULTURE LAND CANNOT BE ADDED U/S 68 OF IT ACT WHEN ASSESSEE HAS FURNISHED COMPLETE DETAILS OF PURCHASE, SALE SU PPORTED BY THE COPY OF SALE DEED, THE AMOUNT RECEIVED BY HIM AND THE AMOUNT FOR WHICH THE LAND WAS PURCHASED. THEREFORE THE ADDITION MADE BY THE AO AT RS.152,799/- WHICH IS INCLUDED IN THE TOTAL ADDITION OF RS.41,11,287/- U/ S 68 IS ALSO NOT TENABLE. ACCORDINGLY ON THE FACTS OF THE CASE AS DISCUSSED A BOVE THE FINDING OF THE AO THAT NO AGRICULTURE ACTIVITY WAS CARRIED OUT BY THE ASSE SSEE IS NOT UPHELD AND THE ADDITION MADE BY THE AO U/S 68 AT RS.41,11,287/- EX CLUDING RS.2,563/- WHICH IS INTEREST ON INCOME TAX REFUND AND IS TAXABLE UNDER THE IT ACT ,IS DIRECTED TO BE DELETED. IN THE RESULT THE INCOME SHOWN FROM AGRICU LTURE AT RS.20,54,822/- WHICH INCLUDES PROFIT ON SALE OF AGRICULTURE LAND AT RS.1 52,799/-WHICH IS NOT TAXABLE UNDER THE IT ACT BY VIRTUE OF CONSTITUTIONAL LIMITA TION IS DIRECTED TO BE ACCEPTED. IN THE RESULT THE APPEAL IS ALLOWED. 4. THE LD. D.R. BEFORE US VEHEMENTLY RELIED ON THE ORDER OF THE A.O. AND CONTENDED THAT THE PURCHASES AS WELL AS THE SALES MADE BY THE ASSESSEE WERE NOT VERIFIABLE. THE BOOKS AND VOUCHERS MAINTAINED BY THE ASSESSEE ARE SELF-GENERATED. ALL THE TRANSACTION HAD BEEN CARRIED OUT BY THE ASSESSEE IN CASH. ON QUERY FROM THE BENCH HE DID N OT DENY THAT THE ASSESSEE COMPANY WAS 9 HOLDING THE LAND AND THE ASSESSEE HAS SUBMITTED THE KHASRA & KHATONI AS WELL AS THE DOCUMENTS TO ESTABLISH THAT AGRICULTURAL ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE. 5. THE LD. A.R., ON THE OTHER HAND, RELIED ON THE O RDER OF THE CIT(A) AND POINTED OUT THAT THE ASSESSEE HAS CARRIED OUT THE BASIC OPERATION FOR TH E AGRICULTURE. THE ASSESSEE WAS HOLDING THE LAND AND THIS FACT WAS NOT DENIED BY THE A.O. THE AGRICULTURAL CROP HAS GROWN ON THE LAND BY PERFORMING THE BASIC OPERATIONS. THE ASSESSEE HAS CARRIED OUT AGRICULTURAL OPERATION WITH THE HELP OF THE EMPLOYEES AT THE FARM. THE SALES OF TH E AGRICULTURAL PRODUCE WERE MADE IN CASH TO THE BUYERS OF THE AGRICULTURAL PRODUCE WHO CAME TO FARM DIRECTLY. THE MAIN CROPS GROWN WAS PAPAYA AND BANANA. THIS FACT IS APPARENT FROM RECO RD. NECESSARY DOCUMENTS PROVING THE SALES WERE DULY PRODUCED BY THE ASSESSEE. THE ASSESSEE H AS SUBMITTED THE NARRATION SUPPORTED BY DOCUMENTARY EVIDENCE AND FOR THIS OUR ATTENTION WAS DRAWN TO THE PAPER BOOK. IT WAS POINTED OUT THAT THE ASSESSEE HAS PURCHASED THE MANURE AND FERTILIZERS TO THE EXTENT OF RS.3,74,272/-. THE AUTHENTICITY OF THE PARTY M/S MANGAL KHAD BEEJ BHAN DAR WAS MUCH IN EXISTENCE. FOR THIS, ATTENTION WAS DRAWN TO THE BILLS AND VOUCHERS OF M/ S. MANGAL KHAD BEEJ BHANDAR. IT WAS POINTED OUT THAT PAYMENTS WERE MADE THROUGH DDS. E VEN PHOTOGRAPH OF M/S MANGAL KHAD BEEJ BHANDAR WAS ALSO PRODUCED AND MADE PART OF THE PAPE R BOOK. IT WAS POINTED OUT THAT M/S. MANGAL KHAD BEEJ BHANDAR WAS DULY REGISTERED WITH T HE CONCERNED AUTHORITY WITH THE FERTILIZER LICENSE NO.71 BESIDES PESTICIDES LICENSE NO.28. TH E LD. A.R. EVEN POINTED OUT THAT THE A.O. AS WELL AS THE TEAM DULY INSPECTED THE SITE AND FOR WH ICH ATTENTION WAS DRAWN TOWARDS PAGES A TO F OF THE PAPER BOOK SHOWING THE PHOTOGRAPH OF THE A.O . AND THE INSPECTOR. IT WAS POINTED OUT THAT THERE WAS NO EVIDENCE WITH THE DEPARTMENT WHICH MAY PROVE THAT THE ASSESSEE HAS NOT DERIVED THE AGRICULTURAL INCOME. THE A.O. HAS DULY ACCEPTE D THE AGRICULTURAL INCOME AS SHOWN BY THE ASSESSEE MADE UNDER SECTION 147/143(3) FOR THE A.YS . 2003-04 AND 2004-05 VIDE ORDER DATED 10 23.12.2008. THE COPIES OF ASSESSMENT ORDERS WERE F ILED BEFORE US WHICH ARE AVAILABLE AT PAGE NOS.4 & 6 OF THE WRITTEN SUBMISSION FILED BY THE AS SESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. THIS IS AN ADMITTED FACT THAT T HE ASSESSEE WAS OWNING THE LAND. THE ASSESSEE HAS ALSO CULTIVATED THE LAND I.E. THE ASSESSEE HAS CARRIED OUT ALL THE BASIC OPERATIONS INCLUDING TILTING, WATERING AND PLANTING ON THE LAND. THE AS SESSEE HAS PRODUCED THE KHASRA AND KHATAUNI IN RESPECT OF AGRICULTURAL LAND STATING THEREIN THAT A GRICULTURAL CROPS WERE PRODUCED BY THE ASSESSEE DURING THE YEAR. THE DEPARTMENT HAS ACCEPTED THE A GRICULTURAL INCOME RETURNED BY THE ASSESSEE DURING THE A.YS. 2003-04 & 2004-05 IN THE ASSESSMEN T MADE UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT FROM THE SAME VERY LAND. TH E ASSESSMENT ORDERS ARE DATED 23.12.2008. THIS FACT IS NOT DENIED BY THE LD. D.R. ONCE THE A GRICULTURAL INCOME IS DULY ACCEPTED BY THE A.O. IN ALL THESE A.YS. AFTER VERIFICATION, IN OUR OPINI ON, THERE REMAINS NO MERIT IN THE APPEAL OF THE REVENUE. THE LD. D.R. ALTHOUGH VEHEMENTLY SUPPORTE D THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT ADDUCE ANY EVIDENCE WHICH MAY PROVE THAT THE FACTS INVOLVED IN THIS A.Y. ARE DIFFERENT FROM THE A.Y. 2003-04 AND 2004-05. APPARENT IS REA L. ONUS IS ON THE PERSON WHO ALLEGES APPARENT IS NOT REAL. THE INCOME SHOWN BY THE ASSE SSEE IS THE REVENUE DERIVED FROM THE LAND WHICH IS SITUATED IN INDIA AND USED FOR AGRICULTURA L PURPOSES. NO IOTA OF EVIDENCE TO THE CONTRARY IS BROUGHT ON RECORD. THE ASSESSEE HAS INCURRED TH E EXPENDITURE IN CASH AND HAS SOLD THE AGRICULTURE PRODUCE IN CASH CANNOT BE THE BASIS TO CONCLUDE THAT THE ASSESSEE HAS NOT DERIVED THE AGRICULTURAL INCOME. THE ASSESSEE IS A PRIVATE LIM ITED COMPANY AND HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AS REQUIRED UNDER THE COMPANIES A CT. THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET HAS BEEN PREPARED AND APPROVED IN THE GENERAL BODY MEETING OF THE COMPANY. THE ENTRIES IN THE BOOKS ARE NOT PROVED TO BE BOGUS . THE INCOME-TAX ACT DOES NOT PROHIBIT THE 11 ASSESSEE TO INCUR THE EXPENDITURE IN CASH. EVEN TH ERE IS NO PROVISION UNDER THE INCOME TAX ACT DEBARRING THE ASSESSEE FROM SELLING AGRICULTURAL CR OPS IN CASH. NO ADDITION CAN BE SUSTAINED MERELY ON THE BASIS OF THE SUSPICION HOWSOEVER IS S TRONG IT MAY BE. WE, THEREFORE, ARE OF THE OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE O RDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE A.O. UNDER SECTION 68 AND DIRECTED THE A.O. TO ACCEPT THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE. THIS IS NOT A FIT CASE WHICH WARRANTS OUR INTERFERENCE. THE ORDER OF THE CIT(A) IS VERY EXHAUSTIVE, EXPLICI T AND DEALT WITH ALL THE OBJECTIONS TAKEN BY THE A.O. WE, THEREFORE, CONFIRM THE FINDING AS REPRODU CED HEREINABOVE OF THE CIT(A). THUS, ITA NO.26/AGR/2009 FILED BY THE REVENUE STANDS DISMISSE D. 7. SINCE THE FACTS INVOLVED IN REST OF THE APPEALS, I.E. ITA NOS.659/AGR/2008, 43/AGR/2009, 44/AGR/2009 & 45/AGR/2009, ARE ALSO SIMILAR TO THE FACTS AS ARE IN ITA NO.26/AGR/2009, WE, THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DEC ISION IN ITA NO.26/AGR/2009, CONFIRM THE ORDERS OF THE CIT(A) IN RESPECT OF EACH OF THE ABOV E APPEALS. THUS, ITA NOS.659/AGR/2008, 43/AGR/2009, 44/AGR/2009 & 45/AGR/2009 FILED BY THE REVENUE STAND DISMISSED. 8. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE STAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 08.10.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 8 TH OCTOBER, 2010. PBN/* 12 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY