DCIT, Cirlce-3(3), Hyderabad V. Shri Yeturi Ramachandra Reddy, Hyderabad

ITA 349/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74647 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.348/HYD/2011 : ASSESSMENT YEAR 2006 - 07 ITA NO.349/HYD/2011 : ASSESSMENT YEAR 2007 - 08 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 3(3), HYDERABAD V/S. SHRI YETURI RAMACHANDRA REDDY, HYDERABAD ( PAN - AAEPY 9574 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JEEVAN LAL LAVIDIYA DR RESPONDENT BY : SHRI A.V.RAGHURAM DATE OF HEARING 8.1.2014 DATE OF PRONOUNCEMENT 26.2.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THESE TWO APPEALS, FILED BY THE REVENUE , ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME - TAX(APPEALS), GUNTUR BOTH DATED 15.11.2010 FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. SINCE THERE ARE CERTAIN COMMON FEATURES, BOTH THESE APPEALS ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.348/HYD/2011 : ASSESSMENT YEAR 2006 - 07 2 . FACTUAL BACKGROUND LEADING TO THE FILING OF THIS APPEAL BEFORE US IS THAT THE ASSESSEE IS AN IND I VIDUAL ENGAGED IN CIVIL CONTRACTS, AND H A S FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07, ADMITTING AN INCOME OF RS .19,73,128, BESIDES AGRICULTURAL INCOME RS.9,90,180. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER S.143(3) OF THE ACT, ON A TOTAL INCOME OF RS.2,45,78,274, VIDE ORDER OF ASSESSMENT 5.1.2008, IN THE FI RST PLACE, DISALLOWED EXPENDITURE CLAIMED BY THE ASSESSEE AGAINST BUSINESS INCOME, OF ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 2 RS.23,10,466, ON THE GROUND THAT NO BUSINESS ACTIVITY TOOK PLACE DURING THE YEAR UNDER APPEAL; AND ALSO MADE THE FOLLOWING ADDITIONS UNDER THE HEAD OTHER SOURCES - ( 1 ) UNE XPLAINED CASH DEPOSITS IN THE BANK ACCOUNTS RS. 10,29,500 ( 2 ) UNEXPLAINED INVESTMENT IN SHARES RS. 1,92,00,000 ( 3 ) AGRICULTURAL INCOME TREATED AS INCOME FROM OTHER SOURCES RS. 9,65,180 3 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE MADE ELABORAT E SUBMISSIONS CONTESTING THE ABOVE ADDITIONS. THE CIT( A) CALLED FOR A REMAND REPORT IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE, AND CONSIDERING THE REPLIES OF THE ASSESSING OFFICER, IN THE LIGHT OF FURTHER SUBMISSIONS OF THE ASSESSEE THEREON, DISPOSED OF THE APPEAL BEFORE HIM, IN RELATION TO EACH OF THE ADDITIONS CONTESTED BEFORE HIM. 4 . AS FOR THE DISALLOWANCE OF BUSINESS EXPENDITURE, THE CIT(A), NOTICED THAT THE ASSESSEE, BEING A CIVIL CONTRACTOR, HAS RAISED DISPUTES WITH REGARD TO PAYMENTS FOR CONTRACTS. A PERUSAL OF THE EXPENDITURE CLAIMED SHOWS THAT THE SAME WAS MAINLY DUE TO DISPUTES ONLY AND COPIES OF ONE OF THE SUITS CLEARLY DEMONSTRATES THE SAME. HE NOTED THAT IN THE CASE OF A BUSINESSMAN OF THIS TYPE, IT CANNOT BE CONCLUDED THAT HE IS NOT IN BUSINESS SIMPLY BECAUSE HE HAS NO RECEIPTS, AND A S LONG AS EXPENDITURE RELATES TO THE CASES PERTAINING TO THE BUSINESS RECEIPTS, THAT WERE ADMITTED IN THE EARLIER YEARS, IT HAS TO BE HELD AS BUSINESS EXPENDITURE ONLY. WITH THESE OBSERVATIONS, THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE WITH REGARD TO BUSINESS EXPENDITURE AND DELETED THE ADDITION OF RS.23,10,466 MADE BY THE ASSESSING OFFICER IN THIS BEHALF. 5 . WE HEARD BOTH SIDES ON THIS ISSUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY REASON GIVEN BY THE ASSESSING OFFICER FOR DISALLOWI NG THE ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 3 BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE WAS THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR. THE FINDING OF THE CIT(A) IS THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE RELATES TO DISPUTES RAISED BY THE ASSESSEE WITH REGARD TO THE AMOUNTS D UE ON THE CONTRACTS EXECUTED. RAISING DISPUTES FOR THE AMOUNTS DUE TO BE RECEIVED AND INCURRING EXPENDITURE IN CONNECTION WITH SUCH DISPUTES, CERTAINLY FORMS PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE. SUCH EXPENDITURE AS LONG AS IT IS IN CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESSEE, HAS TO BE ALLOWED, AS HELD BY THE CIT(A), IRRESPECTIVE OF WHETHER THE ASSESSEE IS ACTUALLY CONTINUING WITH THE TAKING UP OF NEW CONTRACTS OR EXECUTING THEM REGULARLY. IN THIS VIEW OF THE MATTER, WE FIND NO INFIR MITY IN THE IMPUGNED ORDER OF THE CIT(A). WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUND NO.4 OF THE REVENUE ON THIS ISSUE. 6 . WITH REGARD TO U NEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT S , IT WAS CONTENDED THAT THEY REPRESENT THE DEPOSIT S IN AB N AMRO OF R S .99,500 ON 25.07. 2005 AND OF RS.30,000 ON 2 . 1.2006 , THE ADDITION WAS MADE ON THE GROUND THAT THE SOURCES FOR THE SAME ARE NOT PROPERLY EXPLAINED. THE ASSESSEE FURNISHED A COPY O F THE RECEIPTS AND PAYMENTS FOR THE RELE V ANT PERIOD, SHOWING SOUR CES FOR DEPOSI TI NG IN THE BANK ACCOUNT IN RESPECT OF DEPOSITS OF ABOVE RS.20,000. IT WAS SUBMITTED THAT THE AGGREGATE OF THE DEPOSITS IS ONLY RS.1,29,500 AND NOT RS.10,29,500 AS MADE OUT BY THE ASSESSING OFFICER. THE CIT(A) NOTED FROM THE CASH BOOK AND T HE STATEMENT THAT THE OPENING BALANCE IN THE RECEIPTS AND PAYMENTS ACCOUNT IS FROM THE EARLIER YEAR S AND FURTHER THAT THE BANK ACCOUNTS OF BOTH SBI AND ABN AMRO ARE REFLECTED IN THE CONSOLIDATED BALANCE SHE E T. HE NOTED THAT THE ASSESSEE EXPLAINED THAT TH E RENT ARREARS AND RENTS ARE ADMITTED AS INCOME FROM PROPERTY. ON VERIFICATION FROM COMPUTATION STATEMENT FILED WITH THE RETURN OF INCOME, THE CIT(A) FOUND THE SAID STATEMENT OF THE ASSESSEE TO BE TRUE AND THE ENTRIES ARE ALSO SUPPORTED BY THE ENTRIES IN THE CASH BOOK. THE CIT(A) FURTHER NOTED THAT THE AMOUNT OF RS.99,500 CONSIDERED BY THE ASSESSING OFFICER AS CASH DEPOSIT IN ABN AMRO WHILE MAKING THE ADDITION, WAS NOT BY CASH, BUT BY CHEQUES FROM THE BANK STATEMENT OF ABN ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 4 AMRO. ACCORDINGLY, HE HELD THA T THERE WAS NO CASE TO HOLD THAT THE DEPOSITS IN ABN AMRO AND SBI AS UNEXPLAINED AND AS SUCH , THERE IS NO WARRANT FOR ANY ADDITION. FOR THESE REASONS AND C ONSIDERIN G THE EVIDENCE FURNISHED BY THE ASSESSEE BEFORE HIM , WHICH WAS ALSO BEFORE THE ASSESSING OFFICER, THE CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CREDITS IN THE BANK ACCOUNT. AGGRI E VED, REVENUE IS IN APPEAL ON THIS I S SUE. 7 . WE HEARD BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE CIT(A), AFTER ANALYZING THE RECEIPTS AND PAYMENTS ACCOUNT AND ON VERIFICATION FROM COMPUTATION STATEMENT FILED WITH THE RETURN OF INCOME, WHICH WERE FOUND TO BE SUPPORTED BY ENTRIES IN THE CASH BOOK, CAME TO THE CONCLUSION THAT THERE W AS NO WARRANT FOR ANY ADDITION ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNTS. HE NOTED THAT THE OUT OF TOTAL DEPOSITS OF RS.1,29,500, WHICH WAS WRONGLY TAKEN AS RS.10,29,500 BY THE ASSESSING OFFICER, DEPOSIT OF RS.99,500 IN ABN AMRO BANK WAS THROUGH CHEQU ES AND NOT CASH AS ALLEGED, AS EVIDENT FROM THE BANK STATEMENT. CONSIDERING THE REASONING GIVEN BY THE CIT(A), WITH WHICH WE AGREE, AND IN THE ABSENCE OF ANYTHING TO THE CONTRARY BROUGHT ON RECORD BY THE REVENUE BEFORE US, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE CIT(A) ON THIS ASPECT. REVENUES GROUND ON THIS ISSUE, BEING GROUND NO.2, IS ALSO REJECTED. 8 . AS FOR TH E ADDITION OF R S .1,92,00,000 MADE ON ACCOUNT OF INVESTMENT IN SHARES, FACTS IN BRIEF ARE THAT THE ASSESSING OFFICER MADE THIS ADDITION ON THE G R OUND THAT HE INVESTMENT IN YATURU BIO TECH LIMITED CLAIMED BY THE ASSESSEE WAS NOT APPEARING IN THE BALANCE SHEET. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT THE INVESTMENT WAS MADE THROUGH AN MOU ENTE R ED INT O WITH THE SAID COMPANY, ACCOR D ING TO WHICH ASSESSEE ALON G WITH OTHERS WERE TO SUPPLY ALOE LEAVES TO THE COMPANY FOR EIGHT YEARS. AS AGAINST THE ADVANCE REQUIRED TO BE PAID TOWARDS SUPPLY O F MATERIAL, THE ASSESSEE WAS PAID I N THE FORM OF SHARES IN THE COMP ANY. A COPY OF THE SAID MOU SUBMITTED AS ANNEXURE E, WHICH, THE CIT(A) NOTED CLEARLY EXPLAIN E D THAT THERE WAS NO ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 5 INVESTMENT MADE BY THE ASSESSEE AND IT WAS ONLY AGAINST AD V ANCE FOR ALOE LE A VES THE SHARES WERE ALLOTTED. FURTHER, THE CIT(A) NOTED THE AMOUNT WAS NO T RS.1,92,00,000 BUT IT WAS RS.1,15,20,000 AS SUBMITTED VI D E ASSESSEES LETTER DATED 11.3.2009 SUBMIT T ED BEFORE THE ASSESSING OFFICER AS PART OF ANNEXURE D. THE ASSESSING OFFICER , IT WAS CONTENDED BEFORE THE CIT(A) , WITHOUT VERIFYING THIS FACT FROM THE MOU , HAS MADE THE IMPUGNED ADDITION OF R S .1,9 2 ,00,000. EVEN OTHERWISE, THE INVESTMENT IS NO T REFLECTED IN THE BALAN C E SHEET BECAU S E THE B ALAN C E S HEET SUBMITTED WITH THE RETURN OF IN C OM E WAS ONLY BUSINESS BALANCE SHEET AND NO T PERSONAL B ALAN C E S HEET. IT WAS SUBMITTED BEFORE TH E CIT(A) THAT THE ASSESSING OFFICER WITHOUT VERIFYING OR ENQUIRING INTO TH E ISSUE HAS CONCLUDED THAT THE SAME IS NO T APPEARING IN THE B ALANCE S HEET AND HENCE, IT REPRESENTED UNEXPLAINED IN V ESTM E N T. BEFORE THE CIT(A), A COP Y OF THE CONSOLIDATED B ALANCE S HEET WAS SUBMI T TED, WHICH REFLECTED THE INVESTMENT IN SHARES IN QUESTION. CONSIDERING THESE SUBMISSIONS OF THE ASSESSEE, COMMENTS OF THE ASSESSING OFFICER, AND FURTHER ARGUMENTS OF THE ASSESSEE THEREAFTER, THE CIT(A), DELET ED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, OBSERVING THAT THE ONLY REASON FOR MAKING THE ADDITION BY THE ASSESSING OFFICER WAS THAT THE INVESTMENT WAS NOT APPEARING IN THE BALANCE SHEET FILED BEFORE THE ASSESSING OFFICER, AND THE MOU DOES NOT SEEM TO BE A GENUINE ONE. AS AGAINST THIS, THE CIT(A) CONCLUDED THAT THERE IS NOTHING WHICH WARRANTS A CONCLUSION THAT THE MNOU WAS NOT A GENUINE ONE. HE ALSO TOOK NOTE THAT THE VALUE OF SHARES AS PER MOU WAS ONLY RS.1,15,20,000 AND NOT RS.1,92,00,000. HE F OUND THAT THESE SHARES FIND PLACE IN THE CONSOLIDATED BALANCE SHEET AND SCHEDULE V THEREOF. HE ALSO FOUND THAT THERE WAS NO CASH OUTFLOW AS INVESTMENT IN THIS TRANSACTION BECAUSE THE SHARES WERE ALLOTTED AGAINST ADVANCE FOR SUPPLY OF RAW MATERIAL, AND AS SUCH THE TRANSACTION RESULTS IN ENTRY ON BOTH ASS E TS SIDE AND LIABILITIES SIDE AND NO ADDITION COULD HAVE BEEN MADE IN RESPECT OF SUCH TRANSACTION, EVEN IF THE MOU WERE TO BE DOUBTED. CONSEQUENTLY, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFF ICER ON THIS COUNT. HENCE, REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 6 9 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. THE REASON FOR MAKING THE IMPUGNED ADDITION IS THAT THE INVESTMENT IN QUESTION DOES NOT APPEAR IN THE BA LANCE SHEET AND THE MOU DOES NOT APPEAR TO BE GENUINE. AS NOTED BY THE CIT(A) IN THE IMPUGNED ORDER, IN THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER TO THE CIT(A), THE ASSESSING OFFICER REMAINED SILENT ON THE ASPECT OF THE MOU BEING NOT GENUINE. A COPY OF THE MOU IS ALSO FURNISHED IN THE PAPER - BOOK FILED BEFORE US. IT IS TO BE NOTED THAT THE COMPANY IN QUESTION HAS BEEN FLOATED BY THE ASSESSEES FAMILY. BUT MERELY BECAUSE IT IS A FAMILY FLOATED COMPANY, ONE CANNOT DOUBT ITS BONA FIDES , IN THE ABSENCE OF ANY CONCRETE MATERIAL TO DOUBT ITS BONA FIDES. THE COMPANY WAS IN ITS INITIAL STAGES AND AS SUCH , IT WAS NOT IN A POSITION TO MEET THE FUND REQUIREMENT FOR PURCHASE OF M A TE R IAL, AND CONSEQUENTLY, AN ARRANGEMENT WAS MADE THROUGH MOU, IN QUESTION, TO ENSURE CONTINUOUS SUPPLY OF RAW - MATERIAL BY AGREEING TO TREAT PART OF THE CONSID E RA T ION FOR RAW - MATERIAL , BEING ADVANCE , IN THE FORM O F SHA R ES, AND TO PAY ONLY BALANCE AMOUNT AT THE TIME OF RECEIVING RAW - MA T ERIAL. THUS, THE SO CALLED INVESTMENT IN SHAR ES HAVE BEEN DERIVED BY THE ASSESSEE BY VIRTUE OF THE TRANSACTION IN TERMS OF THE MOU, AND NOT ON ACCOUNT OF ANY CASH OUTFLOW FROM THE ASSESSEES END. IN THE ABSENCE OF ANY FUND FLOW IN THE PROCESS OF ACQUIRING SHARES, THE QUESTION OF ANY UNEXPLAINED INVE STMENT DOES NOT ARISE. WHEN THE ACQUISITION OF SHARES BY THE ASSESSEE IS NOT DISPUTED, ONE HAS TO ACCEPT THE GENUINENESS OF THE MOU, SINCE ALLOTMENT OF SHARES WAS RESULT OF THE ARRANGEMENT IN TERMS OF THE MOU ONLY . AS FOR THE OBSERVATION OF THE ASSESSIN G OFFICER AS TO THE ABSENCE OF THE SHARES IN QUESTION IN THE BALANCE SHEET, THE POSITION HAS BEEN RECONCILED, AND IT IS EVIDENT FROM THE IMPUGNED ORDER OF THE CIT(A) THAT THE SAID ITEM FINDS PLACE IN THE CONSOLIDATED BALANCE SHEET AND SCHEDULE V. WE ARE IN AGREEMENT WITH THE REASONING GIVEN BY THE CIT(A) FOR DELETING THE ADDITION MADE BY THE ASSESSING OFFICER IN THIS BEHALF. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) ON THIS ASPECT AND REJECT THE GROUND OF THE REVENUE, BEING GROUND NO.3, ON THIS ISSUE. ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 7 1 0 . AS FOR THE NEXT GROUND RELATING TO THE ADDITION MADE OF RS.9,65,180, TREATING PART OF THE AGRICULTURAL INCOME DISCLOSED BY THE ASSESSEE TREATING AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER MADE THIS ADDITION ON THE GROUND THAT NO EVIDENCE W AS FILED BY THE ASSESSEE, THOUGH CALLED FOR. IT WAS THE CASE OF THE ASSESSEE THAT THE ASSESSING OFFICER NEVER SPECIFICALLY ASKED FOR ADDITION IN SUPPORT OF AGRICULTURAL INCOME. IT WAS ALSO STATED THAT THOUGH THE ASSESSING OFFICER OBSERVED THAT NO EVIDENCE WAS FURNISHED, ACCEPTED RS.25,000 AS AGRICULTURAL INCOME ON THE BASIS OF PREVIOUS YEAR. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAS GONE THROUGH THE MOU, AS PER WHICH THE ASSESSEE RECEIVED SHARES IN LIEU OF ADVANCE AGAINST SUPP LY OF ALOE LEAVES. ALL THESE ASPECTS, WHICH WERE WITHIN THE KNOWLEDGE OF THE ASSESSING OFFICER, CLEARLY ESTABLISH THE VALUE OF THE AGRICULTURAL PRODUCE, VIZ. ALOE LEAVES, SUPPLIED BY THE ASSESSEE. CONSIDERING ALL THESE ASPECTS IN THE LIGHT OF THE REMAND REPORT OF THE ASSESSEE, AND FURTHER ARGUMENTS BEFORE HIM THEREON, THE CIT(A) CONCLUDED THAT THERE WAS NO CASE TO HOLD THAT THE AGRICULTURAL INCOME TO THE EXTENT OF RS.9,65,000 WAS NOT GENUINE. HENCE, HOLDING THAT THE ASSESSEE WOULD HAVE HAD AGRICULTURAL INCOME OF RS.9,90,000 FROM ALOE PLANTATION AND VEGETABLES, AND DIRECTED TO THE ASSESSING OFFICER TO TREAT THE ENTIRE AMOUNT AS AGRICULTURAL INCOME. AGGRIEVED, REVENUE IS IN APPEAL ON THIS ISSUE. 1 1 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY SUPPORTING THE ORDER FO THE ASSESSING OFFICER, SUBMITTED THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO INDICATE THAT ALOE PLANTATIONS HAVE ACTUALLY BEEN GROWN. IN THE CIRCUMSTANCES, HE SUBMITT ED THAT THERE IS NO BASIS FOR THE CIT(A) TO DISTURB THE FINDINGS OF THE ASSESSING OFFICER AND TO ACCEPT THE CORRECTNESS O F TH E ASSESSEE S CLAIM WITH REGARD TO AGRICULTURAL INCOME. IT IS ALSO SUBMITTED THAT THE ASSESSEE CLAIMED AGRICULTURAL INCOME OF ONLY RS.25,000 IN THE PRECEDING YEAR AND OF OVER RS.29 LAKHS IN THE SUCCEEDING YEAR. IN SUPPORT OF HER CONCLUSIONS, THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISIONS OF THE APEX COURT IN THE CASE OF CIT V/S. RAMAKRISHNA DEO (35 ITR 312) AND CIT V/S. VENKATA SWAMY NAIDU (29 ITR 529). ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 8 1 2 . T H E LEARNED AUTHORISED REPRESENTATIVE ON THE O THER HAND, STRONGLY RELIED ON THE ORDER OF THE CIT(A) , 1 3 . WE HEARD BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE DO NOT FIND ANY INFIRMITY IN THE REASONING GIVEN BY THE CIT(A) FOR ACCEPTING THE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE. THE FACTUM OF AGRICULTURAL ACTIVITY IS PROVED BY THE PROVED ACTS OF SUPPLY OF RAW - MATERIAL TO M/S. YETURI BIO - TECH P. LTD. BILLS FOR THE SUPPLY OF SUCH RAW - MATERIAL TO THE SAID COMPANY ARE ALSO PRODUCED IN THE PAPER - BOOK FILED BEFORE US . IT IS ONLY ON ACCOUNT OF SUPPLY OF SUCH RAW - MATERIAL, THAT THE ASSESSEE CO ULD ACQUIRE SHARES OF THAT COMPANY, AS PART CONSIDERATION. T HERE COULD BE SEVERAL FACTORS , LIKE ACTIVE PARTICIPATION OR NEED FOR AGRICULTURAL ACTIVITY, CLIMATIC CONDITIONS, MARKET CONDITIONS, ETC. FOR WILD FLUCTUATION S IN TH E AGRICULTURAL INCOME DECLARED B Y THE ASSESSEE FROM YEAR TO YEAR, AND IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD, TO DISPUTE THE CLAIM OF THE ASSESSEE, MERELY ON ACCOUNT OF DRASTIC RISE OR FALL IN SUCH INCOME CLAIMED, ONE CANNOT DOUBT THE VERY EXISTENCE OF AGRICULTURAL INCOME. IN THE FACTS OF THE PRESENT CASE, ADMITTEDLY, IT IS ALOE LEAVES, WHICH IS CLAIMED TO BE THE AGRICULTURAL PRODUCE OF THE ASSESSEE. IT IS THE CLAIM OF THE ASSESSEE THAT M/S. YETURI BIO - TECH P. LTD., HAS BEEN FLOATED BY THE FAMILY OF THE ASSESSEE AND IT IS IN P RIMITIVE STAGES OF ITS BUSINESS ACTIVITY. T H AT BEING SO, IT IS QUITE POSSIBLE THAT THE ASSESSEE IS ACTIVELY CONCENTRATING ON AGRICULTURAL ACTIVITY AND GROWTH OF ALOE LEAVES IN THE YEAS UNDER CONSIDERATION , SINCE IT IS THE RAW MATERIAL FOR THE COMPANY FLOA TED. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE IMPU G N E D ORDER OF THE CIT(A). W E ACCORDINGLY UPHOLD THE SAME REJECTING THE GR O UND OF THE REVENUE ON THIS ISSUE. ITA NO.349/HYD/2011 : ASSESSMENT YEAR 2007 - 08 1 4 . THE FIRST EFFECTIVE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE OF BUSINESS EXPENDITURE. ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 9 15. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. THE AMOUNT OF DISALLOWANCE INVOLVED IS RS.3,63,935. FOR THIS YEA R ALSO, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO BUSINESS EXPENDITURE ON THE GROUND THAT THERE WAS NO BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE, AND THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER FOLLOWING HIS APPELLATE ORDER FOR ASSESSMENT YEAR 2006 - 07. FACTS AND CIRCUMSTANCES OF THE CASE BEING IDENTICAL FOR THE YEAR UNDER APPEAL BEING IDENTICAL TO THE ONES CONSIDERED BY US FOR THE ASSESSMENT YEAR 2006 - 07, FOR THE DET AILED REASONS DISCUSSED IN PARA 5 HEREINABOVE, IN THE CONTEXT OF THE CORRESPONDING GROUND OF THE REVENUE ON THIS ISSUE FOR THE ASSESSMENT YEAR 2006 - 07, WE UPHOLD THE ORDER OF THE CIT(A), AND REJECT THE GROUND OF THE REVENUE ON THIS ISSUE. 16. THE NEXT EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFICER DISBELIEVING THE AGR ICULTURAL INCOME CLAIMED BY THE ASSESSEE, WHICH HAS BEEN DELETED BY THE CIT(A) . 17. WE HEARD BOTH SIDES AND PERUSED THE ORDER S OF THE REVENUE AUTHORITIES. THE AMOUNT OF DISALLOWANCE INVOLVED IS RS. 29 , 08 , 370 . FOR THIS YEAR ALSO, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO AGRICULTURAL INCOME ON THE GROUND THAT THERE WAS NO EVIDENCE AS TO THE AGRICU LTURAL ACTIVITY CARRIED ON BY THE ASSESSEE, AND THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER FOLLOWING HIS APPELLATE ORDER FOR ASSESSMENT YEAR 2006 - 07. FACTS AND CIRCUMSTANCES OF THE CASE BEING IDENTI CAL FOR THE YEAR UNDER APPEAL BEING IDENTICAL TO THE ONES CONSIDERED BY US FOR THE ASSESSMENT YEAR 2006 - 07, FOR THE DETAILED REASONS DISCUSSED IN PARA 13 HEREINABOVE, IN THE CONTEXT OF THE CORRESPONDING GROUND OF THE REVENUE ON THIS ISSUE FOR THE ASSESSMEN T YEAR 2006 - 07, WE UPHOLD THE ORDER OF THE CIT(A), AND REJECT THE GROUND OF THE REVENUE ON THIS ISSUE. ITA NO. 348 & 349/ HYD/20 11 SHRI YETURI RAMACHANDRA REDDY, HYDERABAD 10 1 8 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 26.2.2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 26 TH FEBRUARY, 2014 COPY FORWARDED TO: 1. SHRI YETURI RAMACHANDRA REDDY, 6 - 3 - 248 - 1 - A, YETURI, 843, BANJARA AVENUE, BANJARA HILLS, HYDERABAD 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3) , WARANGAL 3. COMMISSIONER OF INCOME - TAX(APPEALS) GUNTUR 4. COMMISSIONER OF INCOME - TAX GUNTUR 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S