Shri Dhulabhai M.Patel, Baroda V. The Income tax Officer,Ward-5(4), Baroda

ITA 2919/AHD/2009

• Counselvise Citation: 291920514 RSA 2009
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 26-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI
• Assessee Lawyers: JAIMINE GANDHI
• Keywords: Income from undisclosed sources; Principle of natural justice; Source of fund; Reason to believe

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , . .! ' , #$ # % BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ./ I.T.A. NO.2919/AHD/2009 ( ' ' ' ' / / / / ASSESSMENT YEAR : 2003-04) SHRI DHULABHAI M.PATEL RAJAT VILLA OPP.PANDYA MARRIAGE HALL, HARNI JAKATNAKA BARODA / VS. THE ITO WARD-5(4) BARODA ( #$ ./!) ./ PAN/GIR NO. : AJKPP 8903 A ( (* / // / APPELLANT ) .. ( +,(*/ RESPONDENT ) (* - #/ APPELLANT BY : SHRI JAIMINE GANDHI +,(* . - # / RESPONDENT BY : SHRI G.S.SOURYAWANSHI, SR.D.R. / . 0$/ // / DATE OF HEARING : 11/08/2011 12' . 0$ / DATE OF PRONOUNCEMENT : #3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VI, BARODA DATED 13/08/2009. THE ONLY GROUND RAISED IS REPRODUCED BELOW:- 2. THE LEARNED COMMISSIONER (AP0PEALS) ERRED IN C ONFIRMING THE ADDITION OF RS.2,00,000/- TREATING THE RECEIPT FROM AGRICULTURAL INCOME AS INCOME FROM UNDISCLOSED SOUR CES. ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT DATED 21/02/2006 ARE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY HAS FURNISHED THE INCOME DIS CLOSING AGRICULTURAL INCOME AT RS.6,50,000/-, THEREFORE, THE TAXABLE IN COME WAS RETURNED AT RS.NIL. AS PER THE NATURE OF BUSINESS, IT WAS FOUN D THAT THE ASSESSEE IS A BUILDER AS WELL AS AN AGRICULTURIST. IT WAS NOTED BY THE AO THAT GROSS AGRICULTURAL INCOME AT RS.9,29,317/- WAS DISCLOSED AND CLAIMED AGRICULTURAL EXPENSE OF RS.2,79,317/-. AS PER AO, THE ASSESSEE WAS ASKED TO FURNISH 7/12 AND 8/A, DETAILS OF SALE OF A GRICULTURAL PRODUCE AND DETAILS OF EXPENSES TO EARN THE AGRICULTURAL INCOME . CROP-WISE AGRICULTURE INCOME WAS INFORMED AS UNDER:- CROP INCOME TOBACCO RS.3,86,192/- BOR RS. 15,000/- PADDY (PARIMAL) RS.1,12,500/- PADDY (GIRASAR) RS. 37,625/- MAIZE RS. 50,000/- WHEAT RS. 65,000/- MANGO RS. 63,000/- LEMON RS. 20,000/- SUNDIYU (PUDA) RS.1,45,000/- DRUM STICK RS. 35,000/- TOTALAGRICULTURE INCOME RS.9,29,317/- 3. VIDE AN ANOTHER INFORMATION, FURTHER DETAILS WER E FURNISHED AS UNDER:- DATE OF RECEIPT PARTICULAR TO WHOM SOLD AMOUNT MODE OF PAYMENT 31.05.2002 MANGO 4200 KG VARIOUS PARTIES 63,000/- CASH ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 3 - 08.10.2002 LEMON 1000 KGS. VARIOUS PARTIES 10,000/- CASH 08.10.2002 LEMON 1000 KGS. VARIOUS PARTIES 10,000/- CASH 10.07.2002 MAIZE 1600 KGS. VARIOUS PARTIES 25,000/- CASH 03.09.2002 MAIZE 1600 KGS VARIOUS PARTIES 25,000/- CASH 16.09.2002 SUDHIYA 10600 KGS. VARIOUS PARTIES 79,500/- CASH 27.09.2002 SUDHIYA 8730 KGS. VARIOUS PARTIES 65,500/- CASH 13.091.2003 BOR 1500 KGS. VARIOUS PARTIES 15,000/- CASH 01.02.2003 DANGAR 22500 KGS. VARIOUS PARTIES 1,12,500/- CASH 04.02.2003 DANGAR PIDY 7490KG. SURESH R.PATEL 37,625/- CHEQUE 15.02.2003 WHEAT 65 QUINTAL VARIOUS PARTIES 65,000/- CASH 15.02.2003 DRUMSTICK VARIOUS PARTIES 35,000/- CASH 22.06.2002 TOBACCO 13768 KGS. CHANDUBHAI S.PATEL 3,86,192/- CHEQUE TOTAL 9,29,317/- 3.1. THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF EXPENSES AS UNDER:- PARTICULARS AMOUNT DIESEL FOR TRACTOR AND PUMPSET 80,000/- LABOUR 1,20,000/- MANURA 65,000/- MISCELLANEOUS EXPENSES 14,317/- TOTAL 2,79,317/- HOWEVER, THE AO WAS NOT CONVINCED. IN HIS OPINION , THE ASSESSEE WAS ABLE TO FURNISH THE DETAILS OF SALE ONLY IN RES PECT OF AGRICULTURE ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 4 - RECEIPTS OF RS.4,23,817/-. ACCORDING TO AO, THE SA LE OF AGRICULTURE PRODUCTS TO THE TUNE OF RS.5,05,500/- COULD NOT BE ESTABLISHED. IN RESPECT OF THE SAID BALANCE AGRICULTURE PRODUCE, THE SUPPOR TING EVIDENCES WERE NOT ACCEPTABLE TO THE AO, HENCE THE SAID AMOUNT WAS TAXED AS INCOME FROM UNDISCLOSED SOURCES. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. AFTER HEARING THE SUBMISSIONS AND ON PERUSAL OF THE EVIDENCES FILED, LD.CIT(A) HAS GRANTED PART RELIEF VIDE FOLLOWING PARAGRAPH:- 4.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND THE CONTENTIONS OF THE APPELLANT. IT IS AN ADMITTED F ACT THAT IN THE 7/12 EXTRACT, ONLY THE MAIN CROPS TOBACCO AND PADDY ARE INDICATED BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS CLAIMED THAT INCIDENTAL CROPS SUCH AS DRUMSTICK, MANGO, BOR ETC. , ARE ALSO GROWN WITH THE SAME AGRICULTURAL FACILITIES AND THA T FOR SUCH SUNDRY CROPS, THE SALE RECEIPTS ARE ONLY BY CASH AN D IN SUPPORT THEREOF SELF GENERATED VOUCHERS WERE PRODUCED. IT IS ALSO SEEN THAT IN THE PRECEDING YEAR THE APPELLANT HAD SHOWN GROSS RECEIPT OF RS.5.8 LACS OF WHICH RS.3.33 LACS WERE RECEIVED THR OUGH CHEQUES AND RS.2.47 LACS BY CASH. THE A.Y. 2003-04 WAS ALS O A SCRUTINY ASSESSMENT AND THE CLAIM OF AGRICULTURAL INCOME WAS NOT DISTURBED BY THE ASSESSING OFFICER. WHILE ON THE HAND, THE G ROUND REALITY AND THE COMMON PRACTICES SUGGEST THAT THE SALE OF S UCH INCIDENTAL CROPS TO SMALL VENDORS WHO ARE ILLITERATE AND THEY HAVE NO BANK ACCOUNTS WOULD BE IN CASH ON THE OTHER HAND, IT IS ALSO ADMITTED THAT SUCH RECEIPTS CAN BE EASILY INFLATED. CONSIDE RING THE FACTS OF THE CASE, THE PAST TRENDS OF THE AGRICULTURAL INCOM E, THE PREVALENT MARKET PRACTICES IN MY VIEW IT WOULD BE FAIR TO RESTRICT THE DISALLOWANCE TO RS.2,00,000/-. THE GROUND IS THUS PARTLY ALLOWED. 5. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE COMPILATION FILED BEFORE US CONTAINING THE EXPLANAT IONS FURNISHED BEFORE ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 5 - THE AUTHORITIES BELOW ALONG WITH THE COGENT MATERIA L. THIS IS A SMALL ISSUE TO DECIDE WHETHER THE REVENUE AUTHORITIES HAV E CORRECTLY ESTIMATED THE AGRICULTURE INCOME OF THE ASSESSEE. UNDISPUTED FACT IS THAT THE ASSESSEE HAS SUBSTANTIAL LAND HOLDING AND IN SUPPOR T FURNISHED THE 7/12 EXTRACT AS WELL AS 8/A EXTRACT. IT WAS STATED THA T THE TOBACCO TO THE EXTENT OF RS.3,86,192/- WAS SOLD TO ONE SHRI CHANDU BHAI S.PATEL AND THE PAYMENT WAS RECEIVED THROUGH CHEQUE. IT WAS ALSO INFORMED THAT PADDY OF RS.37,625/- WAS SOLD TO ONE SHRI SURESH R.PATEL AND THE AMOUNT WAS RECEIVED THROUGH CHEQUE. THE OTHER AGRICULTURE PRO DUCE SUCH AS, LEMON, MANGO, MAIZE, ETC. WERE SOLD IN CASH STATED TO BE T O VARIOUS PARTIES, ADMITTEDLY NAMES WERE NOT AVAILABLE TO THE ASSESSEE . IN RESPECT OF THE CASH SALES, THE REVENUE AUTHORITIES HAVE DOUBTS AND THEREFORE THE AO HAD ESTIMATED THE ADDITION AT RS.5,05,500/-, HOWEVER, T HE SAME WAS RESTRICTED TO RS.2 LACS ONLY BY THE CIT(A). AT THIS JUNCTURE , IT IS WORTH TO MENTION THAT UNDISPUTEDLY THE ADDITION WAS PURELY ON AN EST IMATION. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT BASICALLY HE HA PPENED TO BE AN AGRICULTURIST, HOWEVER, ALSO STARTED SOME CONSTRUCT ION BUSINESS AT VADODARA. THAT PROJECT WAS IN NASCENT STAGE DURIN G THE YEAR UNDER CONSIDERATION. MEANING THEREBY THE ASSESSEE WAS ST ATED TO BE PURELY AN AGRICULTURIST AND HE HAD NO OTHER RESOURCES OF INCO ME. IT IS VEHEMENTLY ARGUED THAT THE AOS ALLEGATION WAS ABSOLUTELY WRON G AND ILL-FOUNDED THAT THE ASSESSEE HAD OTHER RESOURCES OF INCOME ALL EGED TO BE INCOME FROM UNDISCLOSED SOURCES . IT WAS VEHEMENTLY PLEA DED THAT THE ASSESSEE HAD NO RESOURCES OR SCOPE OF EARNING ANY OTHER INCO ME EXCEPT THE AGRICULTURE INCOME. IN SUPPORT OF THIS ARGUMENT, A DECISION OF ITAT DELHI BENCH A PRONOUNCED IN THE CASE OF PRADEEP BATRA VS. IAC ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 6 - [1991] 39 ITD 406 (DELHI) HAS BEEN CITED, WHEREIN IT WAS HELD AS UNDER:- FOLLOWING THE DECISION OF THE KERALA HIGH COURT IN THE CASE O/K.J. JOSEPH V. ITO [1980] 121 ITR 178 IT IS CLEAR THAT BY PROVIDING FO R INCLUSION OF AGRICULTURAL INCOME FOR RATE PURPOSES, THE ASSESSING OFFICERS HAVE NOT BEEN GIVEN THE POWERS TO ASSESS AND DETERM INE THE AGRICULTURAL INCOME. LEVY OF TAX AND DETERMINATION OF AGRICULTUR AL INCOME FOR THE PURPOSES OF TAXATION IS WITHIN THE COMPETENCE OF TH E STATE LEGISLATURE AND, THEREFORE, IT IS UNIMAGINABLE THAT THE ASSESSING OF FICERS WOULD GET THE POWER OF DETERMINATION OF AGRICULTURAL INCOME UNDER THE PROVISIONS OF THE ACT FOR THE PURPOSES OF TAXATION.. IN A CASE WHERE THE ONLY SOURCE OF INCOME IS AGRICU LTURAL INCOME, THE ASSESSING OFFICER IS NOT COMPETENT TO DETERMINE THE INCOME FROM AGRICULTURE. HOWEVER, WHERE THE ITO HAS REASON TO BELIEVE THAT THE ASSESSEE HAD MADE INVESTMENT, IT WOULD BE OPEN TO H IM TO PUT TO TEST THE CLAIM OF THE ASSESSEE THAT THE INVESTMENT MADE IS O UT OF INCOME FROM AGRICULTURAL OPERATIONS. AT THAT TIME THE ASSESSING OFFICER WOULD BE AT LIBERTY TO DETERMINE THE INCOME FOR THE LIMITED PUR POSE OF CONSIDERING THE CLAIM OF THE ASSESSEE EXPLAINING THE SOURCE OF INVE STMENT. IN SUCH EVENTUALITY THE ASSESSING OFFICER WOULD NOT BE ACTI NG WITHOUT JURISDICTION AS DETERMINATION OF INCOME FROM AGRICULTURE WOULD B E FOR DETERMINING THE INCOME ASSESSABLE UNDER THE PROVISIONS OF ACT FOR T HE PURPOSES OF WHICH IT WOULD BE NECESSARY TO COMPUTE THE AGRICULTURAL INCO ME. IN THE INSTANT CASE, ASSESSING OFFICER HAD DETERMIN ED THE AGRICULTURAL INCOME OF THE ASSESSEE AT LESS THAN WHAT HAD BEEN D ISCLOSED BY THE ASSESSEE. THE ASSESSEE HAD NOT BEEN FOUND TO HAVE M ADE ANY INVESTMENT NOR HAD THE ASSESSEE CLAIMED TO HAVE MADE ANY FROM THE AGRICULTURAL INCOME. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE ASSESSING OFFICER HAD NO POWER TO DETERMINE THE INC OME FROM AGRICULTURE. THE ADDITION MADE BY THE ASSESSING OFFICER IN THE PROCESS OF DETERMINING THE AGRICULTURAL INCOME WAS UNCALLED FO R AND WAS LIABLE TO BE DELETED. 6. SINCE THE RESPECTED COORDINATE BENCH HAS TAKEN A VIEW, FOLLOWING A DECISION OF HONBLE KERALA HIGH COURT, THAT IN CA SES WHERE THE ONLY SOURCE OF INCOME IS THE AGRICULTURAL INCOME, THEREF ORE IT WOULD NOT BE OPEN TO AO TO PUT TO TEST THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SAID ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 7 - AGRICULTURAL INCOME. IN THE SAID DECISION, A DECISI ON OF HONBLE PUNJAB & HARYANA HIGH COURT OF JASWANT RAI VS. CWT [1977] 107 ITR 477 (P&H) AND AN ANOTHER DECISION OF HONBLE KERAL A HIGH COURT IN THE CASE OF K.J. JOSEPH VS. ITO [1980] I21 ITR 178 (KER .) HAS ALSO BEEN CITED. IN THE LIGHT OF THE TOTALITY OF THE CIRCUMS TANCES OF THE CASE AND CONSIDERING THE EVIDENCES IN RESPECT OF SALE OF AGR ICULTURAL LAND AND THE AGRICULTURAL HOLDING , IT IS JUSTIFIABLE TO HOLD T HAT THE AGRICULTURAL INCOME AS SHOWN BY THE ASSESSEE WAS MORE OR LESS AN ACCEPT ABLE CORRECT AGRICULTURAL INCOME FOR THE YEAR UNDER CONSIDERATIO N. WE HAVE ALSO NOTICED THAT FROM THE SIDE OF THE REVENUE, THERE WA S NO DENIAL OF THE FACT THAT IN THE PAST AS WELL THE ASSESSEES SUBSTANTIAL AGRICULTURAL INCOME, AS DISCLOSED VIDE INCOME TAX RETURN FILED, WERE ALSO A CCEPTED BY THE REVENUE DEPARTMENT. IN VIEW OF THIS, AS ALSO UNDER THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, NATURAL JUSTICE DO WARRA NT TO REVERSE THE FINDINGS OF THE AUTHORITIES BELOW. THEREFORE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED 31/ 10 /2011 ORDER PRONOUNCED IN THE COURT SD/- SD/- (AM) (JM) AKG MKS 31.10.11 40.. , . ../ T.C. NAIR, SR. PS ITA NO. 2919/AHD/2009 SHRI DHULABHAI M.PATEL VS. ITO ASST.YEAR - 2003-04 - 8 - #3 . +5 6#5' #3 . +5 6#5' #3 . +5 6#5' #3 . +5 6#5'/ COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-VI, BARODA 5. 5:; + , , / DR, ITAT, AHMEDABAD 6. ;< =/ / GUARD FILE. #3 #3 #3 #3 / BY ORDER, ,5 + //TRUE COPY// > >> >/ // / ! ! ! ! ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..18.10.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.10.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER