M/s Virbhadra Singh (HUF), Shimla V. CIT, Shimla

ITA 486/CHANDI/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8927 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: AJAY VOHRA SR SHRI ROHIT JAIN; CHANDER SHEKHAR VERMA S
• Keywords: Unexplained investment; Revision of order; Opportunity of being heard; Retrospective amendment; Additional evidence; Wrong claim; Competent authority; Assessment record; Capital receipt; Revised return
• Section: 143(3); 142(1); 80HHC; 133(6); 139(5); 131; 148; 263; 139; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES : A : CHANDIGARH BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI I.C. SUDHIR, JUDICIAL MEMBER ITA NO.486/CHANDI/2014 ASSESSMENT YEAR : 2010-11 VIRBHADRA SINGH (HUF), HOLLY LODGE, JAKHOO, SHIMLA. PAN : AACHV0223N VS. CIT, SHIMLA. (APPELLANT) (RESPONDENT) ASSESSEES BY : SHRI AJAY VOHRA, SR.ADVOCATE, SHRI ROHIT JAIN & SHRI CHANDER SHEKHAR VERMA, ADVOCATES DEPARTMENT BY : SHRI RAVI SARANGAL, CIT, DR DATE OF HEARING : 29.11.16 TO 30.11.2016 DATE OF PRONOUNCEMENT : 08.12.2016 ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 2 ITA NOS.216 & 215/CHANDI/2014 ASSESSMENT YEARS : 2010-11 & 2009-10 SHRI ANAND CHAUHAN, C/O LIC OF INDIA, MANTA BUILDING, SANJAULI, DISTT. SHIMLA. PAN : ADFPC3964R VS. CIT, SHIMLA. (APPELLANT) (RESPONDENT) ASSESSEES BY : SHRI SUDHIR SEHGAL & SHRI CHANDER SHEKHAR SINGH VERMA, ADVOCATES DEPARTMENT BY : SHRI RAVI SARANGAL, CIT, DR DATE OF HEARING : 01.12.2016 DATE OF PRONOUNCEMENT : 08.12.2016 ITA NO.408/CHANDI/2015 ASSESSMENT YEAR : 2011-12 SHRI ANAND CHAUHAN, S/O SHRI KISHAN CHAND, KAILASH NIWAS, INDER NAGAR, DHALLI, SHIMLA. PAN : ADFPC3964R VS. PCIT, SHIMLA. (APPELLANT) (RESPONDENT) ASSESSEES BY : SHRI SUDHIR SEHGAL & SHRI CHANDER SHEKHAR VERMA, ADVOCATES DEPARTMENT BY : SHRI RAVI SARANGAL, CIT, DR ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 3 DATE OF HEARING : 02.12.2016 DATE OF PRONOUNCEMENT : 08.12.2016 ORDER PER R.S. SYAL, AM: THESE FOUR APPEALS BY THE TWO CONNECTED ASSESSEES AGAINST THE ORDERS PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER ALSO CALLED THE ACT) RELATE TO ASSESSMENT YEARS 2009-1 0 TO 2011-12. SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE ARE ESPOUSING THE APPEALS FOR CONSI DERATION AND DECISION IN THE SAME ORDER IN WHICH THESE WERE ARGU ED. SH. AJAY VOHRA, SENIOR ADVOCATE ARGUED THE APPEAL OF VIRBHADRA SING H (HUF) AND SH. SUDHIR SEHGAL ARGUED THE APPEALS OF SH. ANAND CHAUH AN. SH. RAVI SARANGAL, CIT-DR, ARGUED THE APPEALS OF BOTH THE AS SESSEES ON BEHALF OF THE REVENUE. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 4 VIRBHADRA SINGH (HUF) - (A.Y. 2010-11) 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ORIGINAL RETURN OF INCOME ON 29.7.2010 DECLARING TOTAL INCOM E OF RS.44,67,584/- PLUS AGRICULTURAL INCOME OF RS.15 LAC. NOTICE DATE D 24.8.2011 U/S 143(2) FOR SCRUTINY ASSESSMENT WAS SERVED ON THE ASSESSEE. THE ASSESSEE FILED REVISED RETURN ON 2.3.2012 DECLARING TOTAL INCOME O F RS.44,67,584/- PLUS AGRICULTURAL INCOME OF RS.2,80,92,500/-. ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE ACT ON 28.3.2013 AT THE INCOME DECLARED IN THE REVISED RETURN. THE LD. CIT, ON PERUSAL OF REC ORDS, OBSERVED THAT THE ASSESSMENT WAS COMPLETED IN A ROUTINE AND CASUAL MA NNER WITHOUT MAKING ANY EFFECTIVE INQUIRY. NOTICE U/S 263 WAS I SSUED. AFTER ENTERTAINING OBJECTIONS AND REPLIES FROM THE ASSESS EE, THE LD. CIT CAME TO HOLD THAT THE ASSESSING OFFICER PASSED AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, INTER ALIA , ON THE GROUND THAT THE REVISION OF RETURN WAS WRONGLY ACCEPTED; ACCOUNTING PRINCIPL ES WERE WRONGLY CONSIDERED AND ACCEPTED INASMUCH AS THE AGRICULTURA L INCOME WAS NOT DECLARED ON THE BASIS OF MERCANTILE SYSTEM OF ACCOU NTING, BEING, THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 5 METHOD FOLLOWED BY THE ASSESSEE; DIRECTIONS ISSUED BY THE ADDL. CIT U/S 144A OF THE ACT WERE NOT FULLY COMPLIED WITH; NO R EQUISITE INQUIRY WAS CONDUCTED; AND THE GENUINENESS OF THE DECLARED AGR ICULTURAL INCOME WAS NOT EXAMINED BY THE AO. THE LD. CIT SUMMARISED HIS VIEW JUSTIFYING THE EXERCISE OF REVISIONARY POWER U/S 263, AS UNDER :- I. AFTER THE CASE WAS SELECTED FOR SCRUTINY VIDE NOTI CE U/S 143(2) DATED 24.08.2011, THE ASSESSEE FILED HIS REVISED RE TURN ON 02.03.2012 AT AN ENHANCED AGRICULTURE INCOME OF RS. 2.80 CROR ES AGAINST RS. 15 LAKH SHOWN IN THE ORIGINAL RETURN TO COVER UP THE H UGE INVESTMENT OF RS. 2.65 CRORES MADE IN LIC POLICIES DURING THE REL EVANT YEAR. II. THE ASSESSEE HAS CLAIMED THAT IT HAD BEEN DECLARING ITS INCOME ON THE BASIS OF MERCANTILE SYSTEM AND WHEN HE FINALIZED IT S ACCOUNTS WITH MR. ANAND CHAUHAN HE CAME TO KNOW ABOUT ITS ADDITIO NAL INCOME AND ACCORDINGLY FILED THE REVISED RETURN. III. AS PER THE FACTS ON RECORD, EARNING OF ADDITIONAL I NCOME OF RS. 2.65CRORES SHOWN IN THE REVISED RETURN WAS ALREADY WITHIN THE KNOWLEDGE OF THE ASSESSEE BECAUSE THE SAME WAS ACCR UED, RECEIVED AND INVESTED BY THE ASSESSEE IN LIC POLICIES DURING THE FINANCIAL YEAR ITSELF. IN NO CASE, INCOME WHICH HAS ALREADY BEEN RECEIVED AND INVESTED BY THE ASSESSEE DURING THE FINANCIAL YEAR ITSELF, ITS ACCR UAL CAN BE SAID TO HAVE BEEN DEFERRED OR COME TO THE KNOWLEDGE OF THE ASSES SEE AT A LATER STAGE. IV. THERE IS NO MATERIAL ON RECORD TO JUSTIFY THAT EAR NING OF ADDITIONAL INCOME OF RS, 2.65 CRORES WAS NOT WITHIN THE KNOWLE DGE OF THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 6 ASSESSEE BUT DISCOVERED BY IT AT A LATER STAGE, SO THERE WAS NO BONAFIDE OMISSION IN THE ORIGINAL RETURN BUT THE AS SESSEE HAD KNOWINGLY AND WILLFULLY FILED ITS FALSE OR INCORREC T ORIGINAL RETURN WHICH WAS REVISED AFTER THE CASE WAS SELECTED FOR S CRUTINY. V. A.O. HAD ACCEPTED THE INVALID REVISED RETURN WHICH CAUSED LOSS TO THE REVENUE DUE TO TAX-AFFECT AND ALSO DUE TO NON-I NITIATION OF PENALTY PROCEEDINGS U/S 271(L)(C) ON THE ADDITIONAL INCOME DISCLOSED BY THE ASSESSEE IN THE REVISED RETURN. VI. ASSESSEE HAD INVESTED RS. 3,84,92,500/- IN LIC POLI CIES WHEREAS ADDITIONAL INCOME DECLARED IN THE REVISED RETURN WA S ONLY RS.2,65,92,500/-. SO A.O. HAD FURTHER FAILED TO ENQ UIRE FROM THE ASSESSEE ABOUT THE SOURCE OF RS.1.19 CRORES INVESTE D IN LIC POLICIES OVER AND ABOVE THE ADDITIONAL INCOME DECLARED IN TH E REVISED RETURN. VII. A.O. HAD BLINDLY ACCEPTED THE AGRICULTURAL INCOME O F THE ASSESSEE BY RELYING UPON THE STATEMENT OF MR. ANAND CHAUHAN AS WELL AS MOU BETWEEN THE ASSESSEE AND MR. ANAND CHAUHAN FOR MAIN TAINING THE ORCHARDS BELONGING TO THE ASSESSEE WITHOUT MAKING A NY ENQUIRY ABOUT THE BILLS, VOUCHERS, BOOKS OF ACCOUNTS AND THEIR AU THENTICITY IN RELATION TO AGRICULTURE INCOME DECLARED BY THE ASSE SSEE. SO A.O. RELIED UPON THE SELF MADE INTERNAL DOCUMENTS BETWEEN THE A SSESSEE AND HIS AGENT MR. ANAND CHAUHAN. SINCE THE BENEFIT OF AGRIC ULTURE INCOME WAS CLAIMED BY THE ASSESSEE SO ONUS WAS ON THE ASSESSEE TO ESTABLISH THE EARNING OF AGRICULTURE INCOME WITH THE HELP OF GENU INE BILLS, VOUCHERS, DOCUMENTS, BOOKS OF ACCOUNTS AND THEIR AUTHENTICITY . THE ASSESSEE CANNOT SAVE HIMSELF BY SIMPLY STATING THAT RECORDS WERE MAINTAINED BY HIS AGENT/MANAGER. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 7 VIII. A.O. HAS NOT APPLIED HIS OWN MIND BUT BLINDLY ACCEP TED THE FINDINGS OF ITO, WARD-1, SHIMLA IN THE CASE OF MR. ANAND CHAUHA N, IN RELATION TO AGRICULTURE INCOME DECLARED BY THE ASSESSEE. A.O. H AD TO MAKE HIS OWN ENQUIRY IN RESPECT OF AGRICULTURAL INCOME, BECAUSE AGRICULTURAL INCOME WAS DECLARED BY ASSESSEE HIMSELF, NOT BY MR ANAND CHAUHAN, WHO WAS ASSESSED WITH ITO, WARD-1, SHIMLA. IX. A.O. HAS NOT COMPLIED WITH THE DIRECTIONS GIVEN BY THE ADDL. CIT, SHIMLA RANGE, SHIMLA U/S 144A SPECIFICALLY RE GARDING DETAILS OF INCOME AND EXPENDITURE ACCOUNT, AGRICULTURE INCOME OF THE ASSESSEE IN THE IMMEDIATE PRECEDING AND SUCCEEDING YEARS. A.O. HAS SIMPLY OBTAINED THE MONTH WISE EXPENDITURE ACCOUNT WHICH WAS NOT SU PPORTED BY ANY MUSTER ROLL, BILLS/VOUCHERS OR ANY DOCUMENTARY EVIDENCES OF EXPENSES. REGARDING QUANTUM OF INCOME OF PRECEDING AND SUCCEEDING YEARS, A.O. HAS SIMPLY ACCEPTED THE REPLY OF THE AS SESSEE THAT THE QUANTUM OF CROPS OF A PARTICULAR YEAR DEPENDS UPON THE CLIMATIC CONDITIONS OF A PARTICULAR YEAR. A.O. HAS NOT EVEN TRIED TO PLACE ON RECORD ANY MATERIAL TO JUSTIFY THE MANIFOLD INCREAS E IN AGRICULTURE INCOME AS COMPARED TO EARLIER YEAR. X. EVEN AFTER GIVING SHOW CAUSE NOTICE IN THE CASE OF PROCEEDINGS U/S 263, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE REGARDING THE QUERY RAISED IN THE SHOW CAUSE NOTICE EXCEPT REITERATING THAT ALL THE ISSUES WERE EXPLAINED AT T HE TIME OF ASSESSMENT PROCEEDINGS. 3. IT WAS, THEREFORE, CONCLUDED THAT THE ORDER P ASSED BY THE ASSESSING OFFICER U/S 143(3) WAS ERRONEOUS AS WELL AS PREJUDI CIAL TO THE INTERESTS OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 8 THE REVENUE AND THE SAME WAS CONSEQUENTLY SET ASIDE . THE ASSESSING OFFICER WAS DIRECTED TO FRAME A FRESH ASSESSMENT IN ACCORDANCE WITH THE LAW, FACTS AND AFTER MAKING DUE INQUIRIES. THE ASS ESSEE IS AGGRIEVED AGAINST THE IMPUGNED ORDER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. BEFORE PROCEEDING WITH THE MAT TER, WE CONSIDER IT EXPEDIENT TO RECORD THAT THE CASE IS ON BOARD SINCE 2014 AND GETTING ADJOURNED FOR ONE REASON OR THE OTHER. WHEN THE CAS E WAS TAKEN UP FOR HEARING ON 7.11.2016, THE REVENUE FILED DETAILED WR ITTEN SUBMISSIONS ALONG WITH OTHER DOCUMENTS. THE APPEAL WAS ADJOURNE D TO 8.11.2016. ON SUCH LATER DATE, THE LD. AR, SHRI SUDHIR SEHGAL APPEARED FOR THE ASSESSEE AND OBJECTED TO THE FILING OF WRITTEN SUBM ISSIONS AND PAPER BOOK BY THE REVENUE AT SUCH A LATE STAGE. HE SOUGHT TIME FOR GOING THROUGH THE SAME AND ALSO FOR FILING A REBUTTAL TO THE LD. DRS WRITTEN SUBMISSIONS. HIS REQUEST WAS ACCEPTED AND THE CASE WAS ADJOURNED TO 29.11.2016. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 9 I. EVIDENCE IN APPEAL I. EVIDENCE IN APPEAL AGAINST THE ORDER U/S 263 5.1. SHRI AJAY VOHRA, SR. ADVOCATE, APPEARED FOR THE ASSESSEE ON 29.11.2016 AND OBJECTED TO CERTAIN PORTIONS OF THE WRITTEN SUBMISSIONS OF THE LD. DR AND THE ACCOMPANYING ADDITIONAL EVIDENCE FORTIFYING SUCH WRITTEN SUBMISSIONS. SHRI VOHRA SUBMITTED THAT THE DISCUSSION MADE FROM THE MIDDLE OF PAGE 19 ONWARDS OF THE WRITTEN S UBMISSIONS FILED BY THE REVENUE REFERS TO CERTAIN EVENTS AND DOCUMENTS PERTAINING TO THE PERIOD POSTERIOR TO THE PASSING OF THE IMPUGNED ORD ER BY THE LD. CIT AND, HENCE, THE SAME SHOULD NOT BE TAKEN INTO CONSIDERAT ION. THE SUM AND SUBSTANCE OF HIS SUBMISSIONS WAS THAT THE PARTIES C AN RELY ONLY ON SUCH EVIDENCE BEFORE THE TRIBUNAL WHICH WAS CONSIDERED B Y THE CIT AND NOTHING BEYOND THAT. THIS PRELIMINARY OBJECTION WAS RAISED BY THE LD. AR ON THE STRENGTH OF THE DEFINITION OF THE TERM RECO RD GIVEN IN EXPLANATION 1(B) TO SECTION 263(1) OF THE ACT. THE LD. AR ALSO RELIED ON THE JUDGMENT IN CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) TO BOLSTER THIS SUBMISSION. THIS WAS VEHEMENTLY OPPOSE D BY THE LD. DR. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 10 5.2. SINCE THIS IS A PRELIMINARY OBJECTION RAIS ED BY THE LD. AR, WE DEEM IT USEFUL TO FIRST DEAL WITH THE SAME. THE CO NTENTION IS PRIMARILY FOUNDED ON THE DEFINITION OF THE TERM RECORD GIVEN IN EXPLANATIO N 1(B) TO SECTION 263(1), WHICH PROVIDES THAT : `'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELAT ING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE PRINCIPAL COMMISSIONER OR COMMISSIONER. THE EXPLAN ATION CONTAINING THIS DEFINITION HAS BEEN APPENDED TO SECTION 263, W HICH SECTION DEALS WITH THE REVISION OF ORDERS PREJUDICIAL TO THE REVE NUE. SUB-SECTION (1) OF THIS SECTION PROVIDES THAT THE : `THE PRINCIPAL COMMISSIONER OR COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE A N OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH I NQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTA NCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. A CONJOINT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 11 READING OF THE ABOVE PROVISIONS MANIFESTS THAT THE DEFINITION OF RECORD GIVEN IN EXPLANATION 1 IS APPLICABLE IN SO FAR AS T HE EXERCISE OF POWER OF REVISION BY PRINCIPAL CIT OR CIT IS CONCERNED. 5.3. HERE IT IS PERTINENT TO MENTION THAT SUB-SE CTION (1) OF SECTION 263 WAS INTERPRETED BY CERTAIN JUDICIAL BODIES AS RESTR ICTING THE POWER OF THE CIT TO THE MATERIAL AS WAS AVAILABLE WITH THE AO AT THE TIME OF MAKING ASSESSMENT AND NOT EXTENDING TO NEW MATERIAL COMING INTO EXISTENCE AFTER THE PASSING OF THE ASSESSMENT ORDER UP TO THE PASSING OF THE REVISIONARY ORDER. THE LEGISLATURE STEPPED INTO EL UCIDATE THAT THE TERM 'RECORD' SHALL INCLUDE ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COM MISSIONER AND THIS PROVISION HAS BEEN GIVEN RETROSPECTIVE EFFECT, WHIC H IS APPARENT FROM THE WORDS `AND SHALL BE DEEMED ALWAYS TO HAVE INCLU DED. IT IS AN ENABLING PROVISION INSOFAR AS THE EXERCISE OF POWER OF CIT U/S 263 IS CONCERNED. BY VIRTUE OF THE DEFINITION OF THE TERM `RECORD, THE CIT, FOR SEEING IF THE ASSESSMENT ORDER IS ERRONEOUS AND PRE JUDICIAL TO THE INTERESTS OF THE REVENUE, IS NO MORE RESTRICTED T O CONSIDERING ONLY SUCH ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 12 RECORD AS WAS AVAILABLE WITH THE ASSESSING OFFICER. HE CAN ALSO LOOK INTO OTHER MATERIAL WHICH COMES TO HIS KNOWLEDGE EVEN TH OUGH IT WAS NOT EARLIER EXISTING OR EXISTING BUT NOT CONSIDERED BY THE ASSESSING OFFICER. THE CRUX OF THE MATTER IS THAT THE CIT CAN TAKE COG NIZANCE OF ANYTHING AVAILABLE BEFORE HIM AT THE TIME OF HIS EXAMINATION IN TERMS OF SECTION 263. THUS IT IS PLAIN THAT THE DEFINITION OF THE TE RM `RECORD HAS BEEN GIVEN IN THE CONTEXT OF THE EXERCISE OF POWER BY TH E CIT. PLACEMENT OF THE DEFINITION OF THE TERM `RECORD IN SECTION 263 AND WHICH IS ONLY : ` FOR THE PURPOSES OF THIS SUB-SECTION LEAVES NOTHING TO DOUBT THAT IT IS CONFINED ONLY TO THE REVISIONARY POWER TO BE EXERCI SED BY THE CIT U/S 263(1) OF THE ACT. THIS PROVISION HAS NEITHER BEEN PLACED NOR REFERRED TO IN CHAPTER XX-B DEALING WITH `APPEALS TO THE APPELL ATE TRIBUNAL. IT HAS NO RELATION WITH THE RIGHT OF THE PARTIES TO RELY O N EVIDENCE DURING THE APPELLATE PROCEEDINGS BEFORE THE TRIBUNAL AND SUCH RIGHT TO FILE ADDITIONAL EVIDENCE IS NOT CIRCUMVENTED BY THIS PROVISION. 5.4. THE RELIANCE OF THE LD. AR ON THE CASE OF MAX INDIA (SUPRA) IS MISPLACED. IN THAT CASE, THE AO INTERPRETED THE WOR D `PROFITS IN SECTION ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 13 80HHC IN ASSESSEES FAVOUR BY RELYING ON CERTAIN JU DICIAL DECISIONS. THE CIT REVISED THE ORDER INTERPRETING THE WORD `PROFIT S IN SECTION 80HHC IN FAVOUR OF THE REVENUE. AFTER THE PASSING OF THE REVISIONARY ORDER, THE LAW WAS AMENDED RETROSPECTIVELY IN FAVOUR OF THE RE VENUE. WHEN THE DEPARTMENT TRIED TO RELY ON THE RETROSPECTIVE AME NDMENT, THE HONBLE COURT HELD THAT THE VIEW TAKEN BY THE AO WAS A POSS IBLE VIEW AND HENCE THE SAME COULD NOT HAVE BEEN DISTURBED IN THE EXERC ISE OF POWER U/S 263 BECAUSE : ` DIFFERENT VIEWS EXISTED ON THE DAY WHEN THE CIT PAS SED THE ABOVE ORDER . THE LATER AMENDMENT WAS IGNORED BECAUSE AT THE T IME OF THE PASSING OF THE REVISIONARY ORDER, THE ISSUE WAS DEBATABLE. MATERIAL LATER COMING INTO EXISTENCE, DIAMETRICALLY OPPOSITE TO THE LEGALLY POSSIBLE VIEW TAKEN BY THE AO AT THE TIME OF PASSING THE ORD ER, WAS HELD TO BE IRRELEVANT. THUS IT IS CLEAR THAT THE RATIO DECIDENDI OF THE JUDGMENT IS THAT THERE CAN BE NO REVISION WHEN TWO VIEWS ARE POSSIBL E AND THE AO HAS FOLLOWED ONE OF SUCH POSSIBLE VIEWS. THE LATER RETR OSPECTIVE AMENDMENT IN THE CASE WAS OPPOSITE TO THE CONSCIOUS POSSIBLE VIEW TAKEN BY THE AO. IT IS IN THIS CONTEXT THAT THE NEW EVIDENCE, IN THE FORM OF A LATER RETROSPECTIVE AMENDMENT, JEOPARDIZING THE DEBATABLE NATURE OF ISSUE AT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 14 THE TIME OF PASSING OF THE ORDER BY THE AO/CIT, WA S HELD TO BE NOT RELEVANT. IT HAS NO WHERE BEEN LAID DOWN THAT THE PARTIES TO AN APPEAL ARE DEBARRED FROM RELYING ON ADDITIONAL EVIDENCE BEFO RE THE TRIBUNAL EVEN ON A NON-DEBATABLE ISSUE WHICH WAS SPECIFICALLY TAK EN NOTE OF BY THE CIT IN THE REVISIONARY ORDER ON WHICH THE ASSESSMEN T ORDER IS SILENT. IT WILL BE SEEN INFRA THAT THE ADDITIONAL EVIDENCE RELIED BY THE LD. DR IS NOT IN CONTRADICTION OF ANY POSSIBLE VIEW TAKEN BY THE AO, BUT MERELY SUPPORTS THE CITS VIEW OF NON-APPLICATION OF MIND BY THE AO. 5.5. SIMILAR POSITION FOLLOWS INSOFAR AS THE REL IANCE OF THE LD. AR ON G.M. MITTAL STAINLESS STEEL P. LTD. VS. CIT (2003) 263 ITR 255 (SC) IS CONCERNED. IN THAT CASE, THE AO TREATED THE POWER SUBSIDY AS A CAPITAL RECEIPT BY RELYING ON THE JUDGMENT OF THE JURISDICT IONAL HIGH COURT. THE CIT REVISED THE ORDER BY RELYING ON A CONTRARY JUDG MENT OF ANOTHER HIGH COURT. IT WAS CONTENDED BEFORE THE HONBLE COURT TH AT THE DECISION RELIED BY THE AO WAS LATER ON REVERSED BY THE HONBLE SUPR EME COURT AND HENCE THE REVISIONARY ORDER BE DECLARED AS VALID. R EPELLING SUCH CONTENTION, THE HONBLE APEX COURT HELD THAT POWER OF THE CIT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 15 UNDER SECTION 263 MUST BE EXERCISED ON THE BASIS OF THE MATERIAL THAT WAS AVAILABLE TO HIM WHEN HE EXERCISED THE POWER. AT TH AT TIME, THE ISSUE WHETHER POWER SUBSIDY WAS CAPITAL RECEIPT HAD BEEN CONCLUDED AGAINST THE REVENUE BY THE JURISDICTIONAL HIGH COURT OF THE ASSESSEE AND THE FACT THAT THE SUPREME COURT HAD SUBSEQUENTLY REVERSED TH E DECISION OF THE HIGH COURT, WOULD NOT JUSTIFY THE CIT IN TREATING T HE AOS DECISION AS ERRONEOUS. 5.6. IT IS PATENT THAT THE POSITION PREVAILING I N THIS CASE IS MORE OR LESS SIMILAR TO WHAT WAS THERE IN THE CASE OF MAX INDIA (SUPRA) . IN BOTH THE CASES, THE AO DECIDED THE ISSUE BEFORE HIM IN FAVOU R OF THE ASSESSEE BY RELYING ON A POSSIBLE LEGAL VIEW, WITH WHICH THE CI T DID NOT AGREE ON THE BASIS OF A CONTRARY POSSIBLE VIEW. IN BOTH THE CAS ES, THE ISSUE WAS DEBATABLE AT THE TIME OF PASSING THE ORDERS BY THE AO AS WELL AS CIT. WHEREAS IN MAX INDIA (SUPRA), THERE CAME A LATER RETROSPECTIVE AMENDMENT UPSETTING THE VIEW OF THE AO, IN G. M MITTAL (SUPRA) , THE AOS VIEW WAS FRUSTRATED BY A LATER JUDGMENT OF TH E HONBLE APEX COURT. IN BOTH THE CASES, THE HONBLE SUMMIT COURT HELD THAT SINCE THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 16 ISSUE WAS DEBATABLE AND THE AO TOOK ONE POSSIBLE VI EW BASED ON THE JUDGMENT OF SOME HIGH COURT, THE ASSESSMENT ORDER C OULD NOT BE REVISED DUE TO LATER DEVELOPMENTS. 5.7. IN THE EXTANT CASE, IT WILL BE SEEN INFRA THAT THERE IS NO DEBATABLE ISSUE DECIDED BY THE AO TAKING ONE POSSIBLE VIEW AN D THE ADDITIONAL EVIDENCE, SOUGHT TO BE RELIED BY THE LD. DR, DOES NOT DISTURB SUCH POSSIBLE VIEW OF THE AO OR SUPPORTS THE CONTRARY VI EW OF THE CIT. HERE IS A CASE OF NON-APPLICATION OF MIND BY THE AO AND THE LD. CIT SETTING ASIDE THE ASSESSMENT ORDER TO BE PASSED AFRESH AS P ER LAW AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE IMPUGNED ORDER. THE ADDITIONAL EVIDENCE SIMPLY SUPPORTS THE FINDING OF THE CIT THAT THE AO DID NOT CONDUCT INQUIRY. IN VIEW OF THE FOREGOING DISCUSSION, THE CONTENTION OF THE LD. AR THAT THE DEPARTMENT CANNOT RELY ON ANY EVIDENCE COMING INTO EXISTENCE AFTER THE PASSING OF THE ORDER U/S 263 BY THE CIT, THEREFORE, DESERVES THE FATE OF DISMISSAL. 5.8. HOWEVER, WE FIND THAT THERE IS ONE INHEREN T LIMITATION ON THE FILING OF EVIDENCE BY THE PARTIES BEFORE THE TRIBUN AL IN AN APPEAL AGAINST ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 17 THE ORDER U/S 263. SUCH LIMITATION IS THAT THE REVE NUE CANNOT BUILD A NEW CASE BEFORE THE TRIBUNAL IN SUPPORT OF THE REVISION ARY ORDER. VALIDITY OF THE ORDER, IN THE LIGHT OF REGULAR OR ADDITIONAL E VIDENCE, CAN BE EXAMINED BY THE TRIBUNAL ONLY ON THE TOUCHSTONE OF THE ISSUES CONSIDERED BY THE CIT. THE DEPARTMENT CANNOT SET UP A NEW GRO UND TO STRENGTHEN THE ORDER U/S 263. IF THIS IS ALLOWED, IT WOULD ME AN THAT THE DR IS ALLOWED TO SHARE THE REVISIONARY POWER, WHICH, IN F ACT, VESTS EXCLUSIVELY WITH THE CIT. THE NATURAL COROLLARY IS THAT THE EV IDENCE, INCLUDING ADDITIONAL EVIDENCE, THAT CAN BE FILED BY THE PARTI ES SHOULD CONFINE TO THE ISSUES CONSIDERED BY THE CIT IN HOLDING THE ASSESSM ENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. W E, THEREFORE, HOLD THAT THERE IS NO EMBARGO ON THE POWER OF THE DEPARTMENT TO FILE ANY EVIDENCE, WHETHER EXISTING BEFORE OR AFTER THE ORDE R OF THE CIT, SO LONG AS IT IS GERMANE TO THE ISSUES CONSIDERED BY THE CI T IN EXERCISING THE REVISIONARY POWER AND WHICH DOES NOT DISTURB THE OT HERWISE DEBATABLE NATURE OF ISSUE, IF ANY, INVOLVED IN THE CASE. THE PRELIMINARY OBJECTION BY THE LD. AR IN THIS REGARD FAILS. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 18 II. ADDITIONAL EVIDENCE 6.1. THE LD. AR SERIOUSLY OBJECTED TO THE FILIN G OF ADDITIONAL EVIDENCE BY THE DEPARTMENT. IT WAS ALSO SUBMITTED THAT THERE WAS NO COMPLIANCE BY THE LD. DR OF RULE 29 OF THE ITAT RULES, 1963. 6.2. IN ORDER TO DEAL WITH THIS CONTENTION, WE D EEM IT NECESSARY TO REFER TO RULE 29 OF THE ITAT RULES, 1963, WITH THE CAPTIO N : `PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. IT PROVI DES THAT : `THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDI TIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFORE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMIN ED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE, OR, IF THE INCOME-TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EV IDENCE EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRI BUNAL, FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. A BARE PERUSAL OF THE RULE EXPOSES THAT T HE PARTIES ARE NOT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 19 ENTITLED TO PRODUCE ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. THE SAME CAN BE FILED IF THE TRIBUNAL, INTER ALIA, REQUIRES 'TO ENABLE IT TO PASS ORDERS'. WE ARE NOT CONCERNED WITH OTHER PARTS OF T HE RULE 29. THE CONTENTION RAISED BY THE LD. AR THAT THE DEPARTMENT HAS NO RIGHT TO FILE ADDITIONAL EVIDENCE UNDER RULE 29 IS PARTLY CORRECT IN THE SENSE THAT NO RIGHT VESTS IN ANY PARTY TO PRESS FOR THE ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. IT IS THE PREROGATIVE OF THE T RIBUNAL TO ENTERTAIN ADDITIONAL EVIDENCE FOR ENABLING IT TO PASS ORDER E TC. 6.3. THE LD. DR HAS FILED ALL THE EVIDENCE, INCLU DING ADDITIONAL EVIDENCE, IN A COMMON PAPER BOOK. ALBEIT, NO WRITT EN APPLICATION WAS TECHNICALLY FILED FOR ACCEPTANCE OF ADDITIONAL EVID ENCE UNDER RULE 29, WHICH OUGHT TO HAVE BEEN, YET THE LD. DR ORALLY PR AYED THAT SUCH ADDITIONAL EVIDENCE BE ADMITTED. IT GOES WITHOUT S AYING THAT AN ORAL REQUEST CAN ALSO BE VALIDLY MADE. WE, THEREFORE, TR EAT SUCH AN ORAL REQUEST AS AN APPLICATION IN TERMS OF THE RULE 29. 6.4. SUCH ADDITIONAL EVIDENCE WAS FILED WELL IN ADVANCE AND THE ASSESSEE WAS GIVEN A TIME OF MORE THAN 10 DAYS TO G O THROUGH THE SAME. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 20 CORRECTNESS OF SUCH ADDITIONAL EVIDENCE, TO THE EXT ENT IT DEALS WITH THE ISSUES CONSIDERED BY THE LD. CIT, HAS NOT BEEN CON TROVERTED BY THE LD. AR. IT WILL BE SEEN INFRA THAT NO DEBATABLE ISSUE IS INVOLVED IN THIS CASE AS IT IS A CASE OF THE AO NOT APPLYING HIS MIND BEF ORE CONCLUDING THE ASSESSMENT. SUCH ADDITIONAL EVIDENCE, TO THE EXTENT IT CONCERNS THE ISSUES TAKEN NOTE OF BY THE LD. CIT, IN OUR CONSIDERED OPI NION, HAS AN IMPORTANT BEARING AND IS NOT ALIEN TO THEM. THESE FACTS BRING THE ADDITIONAL EVIDENCE WITHIN THE AMBIT OF THE EXPRESSION 'TO ENA BLE IT TO PASS ORDERS' AS EMPLOYED IN THE RULE 29 MAKING IT ELIGIBLE FOR A DMISSION. 6.5. THE HONBLE DELHI HIGH COURT IN CIT VS. TEXT HUNDRED INDIA P.LTD. (2011)239 CTR (DEL.) 263 HAS HELD THAT THE `DISCRETION LIES WITH THE TRIBUNAL TO ADMIT ADDITIONAL EVIDENCE IN THE IN TEREST OF JUSTICE ONCE THE TRIBUNAL AFFIRMS THE OPINION THAT DOING SO WOUL D BE NECESSARY FOR PROPER ADJUDICATION OF THE MATTER. THIS CAN BE DONE EVEN WHEN APPLICATION IS FILED BY ONE OF THE PARTIES TO THE A PPEAL AND IT NEED NOT TO BE A SUO MOTTO ACTION OF THE TRIBUNAL. IT FURTHER OBSERVED THAT THE TRUE TEST IN THIS BEHALF IS WHETHER THE APPELLATE COURT IS ABLE TO PRONOUNCE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 21 JUDGMENT ON THE MATERIAL BEFORE IT WITHOUT TAKING I NTO CONSIDERATION THE ADDITIONAL EVIDENCE SOUGHT TO BE ADDUCED. THE LEGIT IMATE OCCASION, THEREFORE, FOR EXERCISE OF DISCRETION UNDER THIS RU LE IS NOT BEFORE THE APPELLATE COURT WHICH HEARS AND EXAMINES THE CASE B EFORE IT, BUT ARISES WHEN ON EXAMINING THE EVIDENCE AS IT STANDS, SOME I NHERENT LACUNA OR DEFECT BECOMES APPARENT TO THE APPELLATE COURT COMI NG IN ITS WAY TO PRONOUNCE JUDGMENT. FROM THE ABOVE JUDGMENT IT IS MANIFEST THAT ADDITIONAL EVIDENCE CAN BE ADMITTED ON THE REQUEST BY THE APPEARING PARTIES AND ALSO AT THE SUO MOTU DISCRETION OF THE TRIBUNAL, IF IT CONSIDERS NECESSARY TO ENTERTAIN THE ADDITIONAL EVIDENCE FOR ENABLING IT TO PASS ORDER OR FOR ANY OTHER SUBSTANTIAL CAUSE. THE ADDIT IONAL EVIDENCE SOUGHT TO BE RELIED BY THE LD. DR, TO THE EXTENT IT DOES NOT SET UP A NEW CASE AND IS IN SUPPORT OF THE BROADER REASONS NOTED BY THE L D. CIT IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS, ERGO, ADMITTED. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 22 III. WHETHER ANY SEPARATE ORDER IS REQUIRED BEFOR E ADMITTING ADDITIONAL EVIDENCE. 7.1. THE LD. AR PRESSED INTO SERVICE THE JUDGMEN T IN MARUTI UDYOG LTD. VS. ITAT & ORS. (2000) 244 ITR 303 (DEL) TO CONTEND THAT IF THE TRIBUNAL WAS INCLINED TO ACCEPT THE ADDITIONAL EVID ENCE, THEN, IT MUST FIRST PASS A SEPARATE ORDER INDICATING THE REASONS FOR AC CEPTANCE OF SUCH ADDITIONAL EVIDENCE AND ONLY THEN IT CAN PROCEED WI TH THE MATTER ON MERITS. 7.2. WE FAIL TO COMPREHEND HOW THIS JUDGMENT SU PPORTS THE ASSESSEES VIEW POINT OF PASSING A SEPARATE ORDER FOR ADMISSI ON OF ADDITIONAL EVIDENCE. THE HONBLE HIGH COURT IN THAT CASE WAS DEALING WITH THE ADMISSION OF ADDITIONAL GROUND IN TERMS OF RULE 11 OF THE ITAT RULES, 1963. IT WAS ON APPRECIATION OF THE RELEVANT LEGAL POSITION THAT THE HONBLE HIGH COURT HELD THAT WHILE ADMITTING ADDITI ONAL GROUND OF APPEAL, TRIBUNAL IS REQUIRED TO INDICATE THE REASON S FIRST AND THEN TAKE UP THE APPEAL FOR FINAL DISPOSAL. IN THE OPPUGNATION, WE ARE DEALING WITH THE ADMISSION OF ADDITIONAL EVIDENCE, WHICH IS GOVERNED BY RULE 29 OF THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 23 ITAT RULES. THERE IS AN UNDERLYING DIFFERENCE BETWE EN THE TWO PROVISIONS IN TERMS OF THEIR AMBIT AND CONSEQUENCE. WHEREAS AN ADDITIONAL GROUND MAY END IN TAKING UP A NEW ISSUE REQUIRING SEPARATE ADJUDICATION, ADDITIONAL EVIDENCE SIMPLY SUPPORTS T HE EXISTING ISSUE ALREADY PENDING BEFORE THE BENCH. AS THE ADDITIONAL GROUND MAY ALSO SET UP A NEW CASE, THAT IS WHY, THE HONBLE HIGH COURT HELD THAT A SEPARATE ORDER SHOULD BE PASSED FIRST FOR ITS ADMISSION FACI LITATING THE AGGRIEVED PARTY TO EXERCISE ITS LEGAL RIGHT OF ASSAILING SUCH ADMISSION. AU CONTRAIRE, THE ADDITIONAL EVIDENCE IS ON AN ALTOGETHER DIFFER ENT FOOTING AS IT SIMPLY RELATES TO THE ISSUES ALREADY BEFORE T HE BENCH AND MERELY ENCOMPASSES A NEW MATERIAL CONCERNING SUCH PENDING ISSUES BEFORE IT. THUS, THERE IS NO JUSTIFICATION IN THE LD. ARS ARG UMENT THAT A SEPARATE ORDER SHOULD BE PASSED BEFORE THE ADMISSION OF ADDI TIONAL EVIDENCE. ON A SPECIFIC QUERY, THE LD. AR ADMITTED THAT THERE WA S NO PRECEDENT SUPPORTING HIS PROPOSITION REQUIRING THE TRIBUNAL T O PASS A SEPARATE ORDER BEFORE ACCEPTING ADDITIONAL EVIDENCE. THIS CONTENTI ON, IS THEREFORE, REPELLED. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 24 8. NOW, WE WILL DEAL WITH THE ISSUES CONSIDERED BY THE LD. CIT FOR HOLDING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. II. REVISION OF RETURN 9.1. THE LD. CIT NOTICED THAT THE ASESSEE WAS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING AS PER WHICH WHOLE OF THE AGRI CULTURAL INCOME INCLUDING THE ONE ARISING FROM SHRIKHAND ORCHARD, D AMRALI, SHOULD HAVE BEEN SHOWN IN THE ORIGINAL RETURN. HE HELD THAT THE ACCEPTANCE OF THE REVISED RETURN BY THE AO AS ALSO INCLUDING THE INCO ME ALREADY ACCRUED TO THE ASSESSEE BUT NOT DISCLOSED IN THE ORIGINAL RETU RN, WAS A CLEAR INDICATOR THAT THE REVISED RETURN DID NOT SATISFY THE CONDITI ONS OF SECTION 139(5) OF THE ACT INASMUCH AS IT AMOUNTED TO THE EARLIER INTE NTIONAL NON-DISCLOSURE OF THE CORRECT INCOME. 9.2. THIS WAS OPPOSED BY THE LD. AR ON THE PREMI SE THAT IN MERCANTILE SYSTEM OF ACCOUNTING, INCOME IS OFFERED ON ACCRUAL BASIS. HE SUBMITTED THAT IN THE FACTS OF THE INSTANT CASE, THE ASSESSEE COULD HAVE SHOWN THE AGRICULTURAL INCOME EITHER AT THE END OF THE THIRD YEAR ON FINAL SETTLEMENT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 25 OF ACCOUNT WITH SH. ANAND CHAUHAN, WHO WAS MANAGING ITS SHRIKHAND ORCHARDS, DAMRALI OR ON THE BASIS OF ITS ACCRUAL ON YEAR TO YEAR BASIS. HE STATED THAT THE ASSESSEE INITIALLY OPTED FOR THE FI RST COURSE OF ACTION, BEING AN INTENTION TO DISCLOSE INCOME AT THE END OF THE T HIRD YEAR, BUT LATER ON RESORTED TO THE SECOND COURSE OF ACTION, BEING DISC LOSURE OF INCOME ON YEAR TO YEAR BASIS. HE SUBMITTED THAT BOTH THE COUR SES HAVE THE LEGAL BACKING AND HENCE THE LD. CIT HIMSELF ERRED IN DISL ODGING THE MERCANTILE SYSTEM OF ACCOUNTING RIGHTLY FOLLOWED BY THE ASSESS EE AT THE TIME OF FILING THE ORIGINAL RETURN OF INCOME. THIS WAS STRO NGLY OPPOSED BY THE LD. DR. 9.3. IT HAS BEEN NOTICED ABOVE THAT THE ASSESSEE FILED ITS ORIGINAL RETURN DECLARING, INTER ALIA, AGRICULTURE INCOME AMOUNTING TO RS. 15.00 LAC. NOTICE DATED 24.8.2011 U/S 143(2) FOR SCRUTINY ASSE SSMENT WAS SERVED ON THE ASSESSEE. A REVISED RETURN WAS FILED ON 2.3.20 12 DECLARING AGRICULTURAL INCOME OF RS.2,80,92,500/- WITHOUT ALT ERING THE TAXABLE INCOME AS DECLARED IN THE ORIGINAL RETURN. IN SUPP ORT OF SUCH ENHANCED AGRICULTURAL INCOME SHOWN IN THE REVISED RETURN, T HE ASSESSEE CONTENDED ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 26 BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS THAT IT HAD ENTERED INTO MEMORANDUM OF UNDERSTANDIN G (HEREINAFTER ALSO CALLED `THE MOU) DATED 15 TH JUNE, 2008 WITH ONE SHRI ANAND CHAUHAN FOR MANAGING ITS APPLE ORCHARD MEASURING 105 BIGH AS KNOWN AS SHRIKHAND ORCHARDS, SITUATED AT VILLAGE DAMRALI, CH AK SHYARLA-VARSHOL, TAKLESH, TEHSIL RAMPUR, BUSHHAHAR, DISTRICT SHIMLA, HP, FOR A PERIOD OF THREE YEARS. IT WAS EXPLAINED THAT THE ENTIRE ACTIV ITY OF MANAGING THE ORCHARDS AND SELLING THE CROP WAS ENTRUSTED TO SHRI ANAND CHAUHAN. IT WAS ALSO CLAIMED THAT SHRI CHAUHAN SOLD WHOLE OF TH E APPLE CROP TO M/S UNIVERSAL APPLE ASSOCIATE, PARVANO (UAA) IN CASH AN D DEPOSITED SUCH RECEIPTS IN HIS OWN BANK ACCOUNT, WHICH WERE UTILIZ ED FOR PURCHASING LIC POLICIES IN FAVOUR OF THE ASSESSEE IN TERMS OF THE MOU. IT WAS STILL FURTHER STATED THAT THE ACCOUNT WITH SHRI ANAND CH AUHAN WAS TO BE AND WAS ACTUALLY SETTLED AFTER A PERIOD OF THREE YEARS IN SEPTEMBER, 2011 AND THAT WAS THE REASON FOR REVISING THE RETURN ON 2.3. 2012, AFTER THE ISSUE OF NOTICE U/S 143(2) FOR SCRUTINY ASSESSMENT, DECLARIN G ADDITIONAL INCOME ARISING FROM SHRIKHAND ORCHARDS RELATING TO THE YEA R UNDER CONSIDERATION. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 27 9.4. THIS ARGUMENT OF THE LD. AR CAN BE APPRECI ATED ON HAVING A GLANCE AT THE MOU DATED 15.6.2008, A COPY OF WHICH HAS BEEN FILED BY THE ASSESSEE ON PAGE 29 ONWARDS OF ITS PAPER BOOK. THE MOU PROVIDES THAT SHRI ANAND CHAUHAN IS A HORTICULTURIST HAVING VAST EXPERIENCE OF APPLES AND MANAGING ORCHARDS AND THAT HE AND HIS FA MILY MEMBERS ARE ENGAGED IN THE ACTIVITY OF GROWING APPLES AND MANAG ING ORCHARDS SINCE SUFFICIENTLY LONG TIME. IT HAS BEEN MENTIONED IN T HE MOU THAT SHRI ANAND CHAUHAN: HAS AGREED TO MANAGE AND LOOK AFTER THE ORCHARDS OF THE FIRST PARTY IN LIEU OF A COMMISSION TO BE PAID BY THE FIRST PARTY TO THE SECOND PARTY WHICH HAS BEEN AGREED UPON @ 2% ON THE NET PROCEEDS/INCOME EARNED FROM THE ORCHARD. CLAUSES ( 1) AND (2) OF THE MOU READ AS UNDER :- 1. THAT IN CONSIDERATION OF THE COMMISSION HEREIN BEFORE AGREED UPON TO BE PAID BY THE FIRST PARTY TO THE SECOND PARTY O N THE NET PROCEEDS OF THE APPLE ORCHARD, THE SECOND PARTY SHALL MANAGE & LOOK AFTER IN ALL RESPECT, THE ORCHARD OF THE FIRST PARTY KNOWN AS SHRIKHAND ORCHARD SITUATED AT VILLAGE DAMRALI, CHAK SHYARLA-VARSHOL, TAKLECH, TEHSIL RAMPUR BUSHAHR, DISTT. SHIMLA, H.P. 2. THAT THE SECOND PARTY SHALL BEAR ALL THE EXPENSES OF MANAGIN G ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 28 THIS APPLE ORCHARD, WHICH INCLUDES THE USE OF SPRAY , PESTICIDES, INCIDENTAL & ANCILLARY ACTS REQUIRED TO BE DONE IN GROWING THE APPLE CROP AND FOR OBTAINING BETTER YIELD FROM THE ORCHAR D, TO HARVEST THE CROP, GRADING & PACKAGING THE SAME AND SELL THE APPLES IN THE MARKET, TO RECEIVE THE PROCEEDS/INCOME FROM SELLING THE APPLES , TO INVEST THE PROCEEDS SO OBTAINED FROM THE SALE OF APPLES IN GOVERNMENT SECURITIES, MUTUAL FUNDS, IN SCHEMES OF LIC O R TO INVEST THE MONEY IN THE PRODUCTS OF SCHEDULED BANKS BY ENSURING THE SAFE & BETTER RETUR NS. 9.5. CLAUSE 5 OF THE MOU, WHICH IS ALSO RELEVANT FOR OUR PURPOSE, READS AS UNDER:- THAT THE COMMISSION HEREBY AGREED TO BE PAID SHALL BE PAID @ 2% ON THE NET SALE PROCEEDS AFTER DEDUCTING ALL OTHER EXP ENSES SPENT UPON THE MANAGEMENT OF THE ORCHARD AND SHALL BE PAYABLE AFTER A PERIOD OF 3 YEARS BY THE FIRST PARTY TO THE SECOND PARTY AT THE TIME OF SETTLEMENT OF ACCOUNTS ON THE COMPLETION OF THE PERIOD OF THIS MO U. 9.6. CLAUSE (6) OF THE MOU PROVIDES THAT SHRI ANA ND CHAUHAN SHALL MAINTAIN ACCOUNTS OF INCURRING EXPENSES PERTAINING TO THE MANAGEMENT OF THE ORCHARD AND SHALL MAINTAIN ACCOUNTS OF THE N ET PROCEEDS. THE ASSESSEE MADE OUT A CASE BEFORE THE ASSESSING OFFIC ER, AS HAS BEEN CONTENDED BEFORE US AS WELL, THAT THE AGRICULTURAL INCOME FROM SUCH ORCHARD CAME TO BE KNOWN TO IT ON SETTLING THE ACCO UNT WITH SHRI ANAND ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 29 CHAUHAN IN SEPTEMBER, 2011 AND THAT WAS THE REASON FOR REVISING THE RETURN ON 2.3.2012 WHICH WAS A BONA FIDE AND GENUINE REASON IN TERMS OF SECTION 139(5) OF THE ACT. 9.7. THE ASSESSEE WAS, ADMITTEDLY, FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING. IN CONTRAST TO THE CASH SYSTEM OF ACCO UNTING IN WHICH INCOME IS RECOGNIZED AND CHARGED TO TAX W.R.T. THE TIME OF RECEIPT, UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, INCOME IS RECO GNIZED AND CHARGED TO TAX W.R.T. THE TIME OF ACCRUAL. EVEN IF ACTUAL RECEIPT TAKES PLACE AT A LATER STAGE, THE CHARGEABILITY IS ATTRACTED WHEN ABSOLUTE AND ENFORCEABLE RIGHT TO RECEIVE SUCH INCOME IS FINALLY ACQUIRED. T HE HONBLE SUPREME COURT IN CATENA OF DECISIONS INCLUDING MORVI INDUSTRIES LTD. VS. CIT (1971) 82 ITR 835 (SC) HAS HELD THAT INCOME CAN BE SAID TO ACCRUE WHEN IT BECOMES DUE AND THE DATE OF PAYMENT DOES NOT AFF ECT THE ACCRUAL OF INCOME. 9.8. THE LD. AR HAS CONTENDED THAT SHRIKHAND ORC HARDS, DAMRALI, ACCOUNT WAS SETTLED IN SEPTEMBER, 2011 AND THE RIG HT TO RECEIVE THE INCOME ACCRUED AT THAT STAGE ONLY. IN OUR CONSIDER ED OPINION, THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 30 CONTENTION IS COMPLETELY DEVOID OF MERITS. THE VIEW CANVASSED THAT THE ASSESSEE IS DIFFERENT FROM SH. ANAND CHAUAHAN AND I T RECEIVED INCOME FROM HIM, IS ENTIRELY UNFOUNDED INSOFAR AS THE TRAN SACTIONS OF SHRIKHAND ORCHARD, DAMRALI, ARE CONCERNED. WE HAVE NOTICED F ROM THE MOU THAT THE ASSESSEE IS OWNER OF THIS ORCHARD. THE SERVICES OF SH. CHAUHAN WERE HIRED ONLY TO MAINTAIN THE ORCHARD, FOR WHICH HE WA S ENTITLED TO TWO PERCENT COMMISSION. THUS, SH. CHAUHAN WAS SIMPLY AC TING AS AN AGENT OF THE ASSESSEE IN RESPECT OF THE ACTIVITIES OF THE ORCHARD. IT IS THE ASSESSEE, WHO WAS OWNER OF THE ORCHARD AS A PRINCIP AL OF SH. CHAUHAN. ANY WORK DONE BY AN AGENT IN SUCH CAPACITY IS CONSI DERED AS HAVING BEEN DONE FOR AND ON BEHALF OF HIS PRINCIPAL. A P RINCIPAL CANNOT CLAIM THAT THE ACTIVITIES DONE BY HIS AGENT ARE SEPARATE ACTIVITIES DONE BY THE AGENT IN HIS INDIVIDUAL CAPACITY. THESE ARE CONSIDE RED AS THE ACTIVITIES OF THE PRINCIPAL ONLY. THE ARGUMENT OF THE LD. AR THAT THE INCOME SHOULD BE TREATED TO HAVE ACCRUED TO THE ASSESSEE AT THE END OF THE THREE-YEAR PERIOD IN SEPTEMBER, 2011 MISSES WOOD FROM TREE. WHEN SH. ANAND CHAUHAN WAS EARNING INCOME FROM SUCH TRANSACTIONS DURING TH E PERIOD OF THREE YEARS ON BEHALF OF THE ASSESSEE ALONE, THE ARGUMENT THAT THE INCOME ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 31 ACCRUED TO THE ASSESSEE ONLY WHEN THE ACCOUNT WAS S ETTLED WITH HIS AGENT IN SEPTEMBER, 2011, BECOMES WHOLLY UNTENABLE. UNDE R NO CIRCUMSTANCE CAN BE ASSESSEE CLAIM THAT THE SH. CHAUHAN EARNED I NCOME DURING THE THREE YEARS ON HIS OWN BEHALF AND THE INCOME ACCRUE D TO THE ASSESSEE ONLY AT THE END OF THE THIRD YEAR. THE CONTENTION, IF GIVEN A LOGICAL CONCLUSION, WILL HAVE THE EFFECT OF OBLITERATING TH E RELATIONSHIP BETWEEN AN AGENT AND A PRINCIPAL, WHICH IS AN ABSURD PROPOS ITION. THUS, IT FOLLOWS THAT THE INCOME SO ACCRUED IN THE FINANCIAL YEAR IT SELF, WAS REQUIRED TO BE SHOWN WHILE FILING THE ORIGINAL RETURN. ITS ACCRUA L CANNOT BE CLAIMED TO HAVE BEEN DEFERRED TO A LATER STAGE WHEN SETTLEMENT OF ACCOUNT WAS MADE WITH HIS AGENT IN SEPTEMBER, 2011. WE FIND THAT N OT ONLY THE SALE OF CROP WAS SHOWN TO HAVE BEEN MADE BUT EVEN THE SALE PROCEEDS WERE ALSO REALIZED DURING THE FINANCIAL YEAR ITSELF. THIS SHO WS THAT THE INCOME NOT ONLY ACCRUED BUT WAS ALSO RECEIVED DURING THE YEAR. 9.9. WITHOUT PREJUDICE TO OUR ABOVE FINDING OF ACCRUAL OF INCOME TO THE ASSESSEE AT THE END OF THE YEAR BECAUSE OF ITS PRINCIPAL CHARACTER, THE LEAST THAT THE ASSESSING OFFICER SHOULD HAVE NOTICE D WAS THAT AS PER ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 32 CLAUSE 2 OF THE MOU, THE AGRICULTURAL INCOME WAS T O BE INVESTED ON BEHALF OF THE ASSESSEE IN GOVERNMENT SECURITIES/LIC POLICIES. SUCH LIC POLICIES WERE ADMITTEDLY PURCHASED IN THE NAMES OF THE MEMBERS OF THE ASSESSEE-HUF DURING THE FINANCIAL YEAR ITSELF, ONLY AFTER THEY SIGNED AND FILED THE REQUISITE FORMS. THIS FACT HAS NOT BEEN D ENIED ON BEHALF OF THE ASSESSEE. IT SHOWS THAT THE ASSESSEE WAS NOT OBLIVI OUS TO, BUT WAS WELL AWARE OF SUCH INVESTMENTS IN LIC POLICIES HAVING BE ING MADE FROM ITS AGRICULTURAL INCOME DURING THE RELEVANT FINANCIAL Y EAR ITSELF. 9.10. THE FACT THAT ASSESSEE HAD FULL KNOWLEDGE O F ITS AGRICULTURAL OPERATIONS AND RESULTANT INCOME, IS FURTHER CORROB ORATED FROM THE FACT THAT APART FROM SHOWING AGRICULTURAL INCOME OF RS.1 5 LAC FROM SOME OTHER ORCHARD IN THE ORIGINAL RETURN, THE ASSESSEE ALSO GAVE A FOOT NOTE IN ITS COMPUTATION OF INCOME MENTIONING THAT : AMOUNT OF RS.15,07,841.19 RECEIVED AS COMPENSATION OF ACQUISITION OF AGRICULT URAL LAND AT RAMPUR BY LAO, HPSEB, SHIMLA IS EXEMPT FROM TAX HENCE INCO ME NOT TAKEN INTO ACCOUNT. WHEN THE ASSESSEE WAS ALERT OF ITS O THER AGRICULTURAL INCOME THAT WAS SHOWN IN THE RETURN OF INCOME AND THE FURTHER FACT THAT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 33 INVESTMENT IN LIC POLICIES WERE BEING MADE OUT OF I TS AGRICULTURAL INCOME ARISING FROM SHRIKHAND ORCHARDS, DAMRALI, IT OUGHT TO HAVE ALSO REFLECTED SUCH AGRICULTURAL INCOME IN THE ORIGINAL RETURN, AT LEAST TO THE EXTENT OF INVESTMENTS MADE DURING THE YEAR IN LIC P OLICIES, WHICH FACT WAS WELL WITHIN ITS PLAIN KNOWLEDGE WITHOUT ANY HAS SLES OF SETTLEMENT OF ACCOUNT. UNFORTUNATELY, THE ASSESSEE DID NOT INCLU DE EVEN SUCH INCOME IN ITS ORIGINAL RETURN. IT WAS ONLY AFTER THE ASSES SMENT PROCEEDINGS COMMENCED IN ITS HANDS, THAT A REVISED RETURN WAS F ILED DECLARING ADDITIONAL AGRICULTURAL INCOME OF RS.2.65 CRORE AND ODD FROM SHRIKAND ORCHARD, DAMRALI. 9.11. RELEVANT PORTION OF SUB-SECTION (5) OF S ECTION 139 PROVIDES THAT : `IF ANY PERSON, HAVING FURNISHED A RETURN UNDER S UB-SECTION (1), . DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETI ON OF THE ASSESSMENT, WHICHEVER IS EARLIER. A BARE PERUSAL OF THIS PRO VISION INDICATES THAT ONLY IF THE ASSESSEE DISCOVERS ANY OMISSION OR WRONG STATEMENT IN THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 34 RETURN EARLIER FILED BY HIM, THAT HE CAN FURNISH A REVISED RETURN. IN OTHER WORDS, IF THE OMISSION OR WRONG STATEMENT WAS KNOWN TO THE ASSESSEE AT THE TIME OF FILING THE EARLIER RETURN, THEN IT WIL L NOT FALL WITHIN THE AMBIT OF THE TERM `DISCOVERED, SO AS ENABLE THE ASSESS EE TO OBTAIN THE BENEFIT OF THIS PROVISION. THUS IT IS APPARENT THAT THE AS SESSEES SUCH PLEA OF GETTING KNOWLEDGE OF THE AGRICULTURAL INCOME ON SE TTLEMENT OF ACCOUNT WITH SH. ANAND CHAUHAN IN SEPTEMBER, 2011, DOES NO T FALL WITHIN THE PALE OF THE WORD `DISCOVERS IN SECTION SUB-SECTION (5) OF SECTION 139. THIS FANCIFUL EXPLANATION GIVEN BEFORE THE AO WHICH ALSO CAME TO BE ACCEPTED, WAS NEITHER BONA FIDE NOR GENUINE, WHICH IS A PRE-REQUISITE FOR REVISING A RETURN OF INCOME. THE AO, HAVING FULL KN OWLEDGE OF THE MOU AND THE DECLARED OTHER AGRICULTURAL INCOME IN THE R ETURN ALONG WITH A MENTION OF STILL SOME OTHER AGRICULTURAL INCOME, SH OULD HAVE KEPT HIS EYES OPEN AND NOT ACCEPTED THE SO-CALLED BONA FIDE OF THE ASSESSEE IN FILING THE REVISED RETURN, AFTER THE ISSUE OF NOTIC E FOR SCRUTINY ASSESSMENT. 9.12. THE LD. AR RAISED ONE MORE INTERESTING ARGU MENT THAT INCOME OF RS.2.65 CRORE WAS AN AGRICULTURAL INCOME AND HENCE IT DID NOT MATTER THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 35 YEAR IN WHICH IT WAS OFFERED AS THE SAME WAS EXEMPT FROM TAX. THIS ARGUMENT DESERVES THE FATE OF DISMISSAL AT THE VERY OUTSET. THE LD. CIT, AS WILL BE SEEN HEREINAFTER, HAS GIVEN ELABORATE RE ASONS FOR HOLDING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE FOR THE AO SIMPLY ACCEPTING THE GENUINENESS OF THIS INCOME AS AGRICULTURAL INCOME AND HENCE EXEMPT FROM TAX. HE H AS REFERRED TO MATERIAL AT LENGTH IN HOLDING THAT THE AO SHOULD NO T HAVE ACCEPTED THIS AMOUNT AS AN AGRICULTURAL INCOME. THIS ARGUMENT IS, THEREFORE, JETTISONED. III. NON-COMPLAICE OF DIRECTIONS U/S 144A 10.1. THE LD. CIT HAS HELD THAT THE AO FAILED TO C OMPLY WITH THE DIRECTIONS GIVEN BY THE ADDL. CIT U/S 144A OF THE A CT, WHICH WERE BINDING ON HIM. THIS ISSUE HAS BEEN ELABORATELY DIS CUSSED IN THE IMPUGNED ORDER. 10.2. IT CAN BE SEEN THAT THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SOUGHT DIRECTIONS VIDE HIS LETTER DATED 17.1.2013, WHICH HAS BEEN PLACED AT PAGE 38 OF THE PAPER BOOK. IN THIS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 36 LETTER, THE ASSESSING OFFICER MENTIONED THAT THE RE VISED RETURN WAS FILED WITH AN ADDITIONAL AGRICULTURAL INCOME OF RS.2.65 C RORE AND THE REASON FOR REVISION WAS GIVEN AS LATE FINALISATION OF ACCO UNTS IN RESPECT OF AGRICULTURAL INCOME WITH SHRI ANAND CHAUHAN. THE A SSESSING OFFICER ALSO MENTIONED IN THIS LETTER THAT: THE ASSESSEE H UF IS NOT HAVING ANY EVIDENCE IN RESPECT OF SALE OF HORTICULTURE PRODUCE AND EXPENSES INCURRED THEREON AS ALL THE BILLS/VOUCHERS ARE LYING WITH SH RI ANAND CHAUHAN. PURSUANT TO THIS REQUEST MADE BY THE ASSESSING OFFI CER, THE ADDL. CIT GAVE THE FOLLOWING DIRECTIONS VIDE HIS LETTER DATED 1.2.2013 :- `I) TO CALL FOR AND EXAMINE THE DETAILS OF INCOME/E XPENDITURE A/C IN VIEW OF COL, 4 OF MOD II) TO COORDINATE THE PROCEEDINGS AND SHARE THE INF ORMATION WITH ITO WARD-1, SHIMLA REGARDING THE INVESTIGATION MADE BY HIM IN THE CASE OF SHRI ANAND CHAUHAN , WHO, AS PER, MOU IS LO OKING AFTER THE ORCHARD OF M/S VIRBHADRA SINGH (HUF). 10.3. FURTHER DIRECTIONS WERE GIVEN BY THE ADDTL. CIT ON 7.2.2013, WHICH ARE AS UNDER:- I. TO TALLY THE RECEIPTS OF EXACT AMOUNT OF I NCOME IN HANDS OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 37 THE ASSESSEE FROM SH. ANAND CHAUHAN AND EXACT MOD E OF RECEIPT DATE WISE. II. TO FIND OUT THE DETAILED ACCOUNTS OF ORIGINALLY SHOWN AGRICULTURE INCOME I.E. RS. 15 LACS WITH DATES OF RECEIVING SALE PROCEEDS. III. TO FIND THE DETAILS OF RS. 43,84,396/- INCOME FR OM OTHER SOURCES. IV. TO KEEP IN MIND THE AGRICULTURE INCOME SHOWN IN IMM EDIATE PRECEDING AND SUCCEEDING YEAR FROM THE YEARS IN WHI CH THE INCOME HAS BEEN REVISED I.E. A.Y. 2008-09, 2012-13 WHILE EXAMINING THE GENUINENESS OF THE REVISED AGRICULTUR E INCOME IN THE YEAR 2010-11. 10.4. THE ASSESSING OFFICER PARTLY COMPLIED WITH THE DIRECTIONS OF THE ADDL. CIT ISSUED U/S 144A SEEKING CERTAIN INFORMATI ON FROM THE ASSESSEE. VIDE REPLY DATED 18.2.2013, THE ASSESSEE REITERATED ITS EARLIER SUBMISSIONS, WHICH WERE ACCEPTED AS SUCH. IT CAN B E SEEN ABOVE THAT THE ASSESSING OFFICER WAS SPECIFICALLY DIRECTED TO FIND OUT THE DETAILED ACCOUNT OF ORIGINALLY SHOWN AGRICULTURAL INCOME OF RS.15 LAC WITH DATES OF RECEIVING SALE PROCEEDS. WHEN QUESTIONED, THE AS SESSEE FILED A COPY OF EXPENDITURE ACCOUNT IN RESPECT OF SHRIKHAND ORCHARD S, SARAHAN, BEING MANAGED BY ONE SHRI NARVIR JANARTA, FROM WHICH SUCH NET AGRICULTURAL INCOME OF RS.15.00 LAC WAS CLAIMED TO HAVE BEEN EAR NED AND DECLARED IN ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 38 THE ORIGINAL RETURN. ONLY THE FIGURES OF MONTH-WIS E EXPENSES WERE GIVEN AND THE SAME WERE ALSO NOT SUPPORTED BY ANY BILLS/V OUCHERS. THE ASSESSING OFFICER TOOK SUCH STATEMENT ON RECORD WIT HOUT TALLYING THE DATES ON WHICH THE AGRICULTURAL INCOME FROM SHRI NA RVIR JANARTA WAS RECEIVED AND THE AUTHENTICITY OF SUCH EXPENSES, MOR E SPECIFICALLY WHEN THERE WERE NO SUPPORTING BILLS. 10.5. SIMILARLY, A DIRECTION WAS GIVEN TO TALLY T HE RECEIPTS OF EXACT AMOUNT OF AGRICULTURAL INCOME EARNED FROM SHRIKHAND ORCHARDS, DAMRALI, WHICH WAS BEING MANAGED BY SHRI ANAND CHA UHAN AS PER THE MOU AND TO CONSIDER THE AGRICULTURAL INCOME SHOWN I N THE IMMEDIATELY PRECEDING AND SUCCEEDING YEARS OF THE RELEVANT MOU SO AS TO EXAMINE THE GENUINENESS OF THE REVISED AGRICULTURAL INCOME. NO SUCH INQUIRY WAS CONDUCTED ABOUT THE EARNING OF AGRICULTURAL INCOME FROM SHRIKHAND ORCHARDS, DAMRALI, IMMEDIATELY PRIOR TO AND AFTER T HE DATE OF THE MOU. THE LD. DR HAS SUBMITTED THE DETAILS OF AGRICULTURA L INCOME SHOWN BY THE ASSESSEE IN EARLIER AND LATER YEARS, WHICH IS A S UNDER:- A.Y. 2000-01 - RS. 4,50,000/- A.Y. 2001-02 - RS. 5,00,000/- ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 39 A.Y. 2002-03 - RS. 4,50,000/- A.Y. 2003-04 - RS. 6,00,000/- A.Y. 2004-05 - RS. 8,00,000/- A.Y. 2005-06 - RS. 9,00,000/- A.Y. 2006-07 - RS. 12,05,000/- A.Y. 2007-08 - RS. 16,00,000/- A.Y. 2009-10 - RS. 7,35,000/- (REVISED RS. 2,21,35, 000/-) A.Y. 2010-11 - RS. 15,00,000/- (REVISED RS.2,80,92, 500/-) A.Y. 2011-12 - RS. 25,00,000/- (REVISED RS. 1,55,00 ,000/-) A.Y. 2012-13 - RS. 85,00,000/- A.Y. 2013-14 - RS. 92,00,000/- 10.6. VERACITY OF THE ABOVE STATEMENT OF AGRICULT URAL INCOME SHOWN BY THE ASSESSEE IN THE EARLIER YEARS HAS NOT BEEN CONT ROVERTED BY THE LD. AR. THIS SHOWS THAT THE ASSESSEE WAS EARNING MARGINAL I NCOME IN THE YEARS PRIOR TO THE AY 2009-10 AND AFTER THE A.Y. 2011-12, I.E. THE PERIOD ANTERIOR TO AND POSTERIOR TO THE DATE OF THE MOU. WHEN THE DETAILS OF AGRICULTURAL INCOME FOR EARLIER YEARS, AS DIRECTED TO BE EXAMINED BY THE ADDL. CIT U/S 144A, WERE AVAILABLE WITH THE AO HIMS ELF, IT WAS HIS BOUNDEN DUTY TO FOLLOW THE DIRECTIONS GIVEN BY THE ADDL. CIT. 10.7. THE ASSESSING OFFICER ACCEPTED THE ASSESSE ES CONTENTION ABOUT EARNING OF MANIFOLD NET AGRICULTURAL INCOME OF RS.2 .65 CRORE BY THE ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSESSME NT YEAR UNDER ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 40 CONSIDERATION WITHOUT ANY VERIFICATION. IT IS FURT HER RELEVANT TO NOTE THAT SHRIKHAND ORCHARDS, DAMRALI, IS SPREAD OVER 105 BI GHAS OF LAND. SHRI ANAND CHAUHAN, IN HIS STATEMENT RECORDED BY HIS ASS ESSING OFFICER, A COPY OF WHICH HAS BEEN PLACED BY THE ASSESSEE IN TH E PAPER BOOK BEFORE US AS WAS ALSO AVAILABLE TO THE AO WHILE FINALIZING ASSESSMENT OF THE ASSESSEE, ADMITTED THAT HIS FATHER HAS ORCHARDS SPR EAD OVER 80-85 BIGHAS AND INCOME THEREFROM WAS BETWEEN RS.15-20 LAC. SUC H A HUGE DIFFERENCE IN THE AGRICULTURAL INCOME EARNED FROM T HE FARM OF SHRI ANAND CHAUHANS FAMILY AND SHRIKHAND ORCHARDS, DAMRALI, SHOULD HAVE INSTIGATED THE ASSESSING OFFICER TO INQUIRE THE GEN UINENESS AND EXTENT OF INCOME SHOWN BY THE ASSESSEE, MORE SO, WHEN THE STA TEMENT OF SHRI CHAUHAN WAS BEFORE HIM. REGRETTABLY, THE AO FAILED TO DO SO AND WAS SWAYED BY THE REPLY OF THE ASSESSEE. 10.8. AT THIS JUNCTURE, IT IS PERTINENT TO HAVE A LOOK AT THE RELEVANT PART OF SECTION 144A, WHICH IS AS UNDER :- ` A JOINT COMMISSIONER MAY, ON HIS OWN MOTION OR ON A REFERENCE BEING MADE TO HIM BY THE ASSESSING OFFICER OR ON THE APPL ICATION OF AN ASSESSEE, CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING I N WHICH AN ASSESSMENT IS PENDING AND, IF HE CONSIDERS THAT, HAVING REGARD TO THE NATURE OF THE CASE OR ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 41 THE AMOUNT INVOLVED OR FOR ANY OTHER REASON, IT IS NECESSARY OR EXPEDIENT SO TO DO, HE MAY ISSUE SUCH DIRECTIONS AS HE THINKS FIT FOR T HE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT AND SUCH DIRECTIONS SHALL BE BINDING ON THE ASSESSING OFFICE R . 10.9. IT IS DISCERNIBLE FROM THE MANDATE OF THIS SECTION THAT ONCE DIRECTIONS ARE ISSUED TO THE ASSESSING OFFICER, THE N: ` SUCH DIRECTION SHALL BE BINDING ON THE AO. BINDING NATURE OF THE DIRECTIONS GIVEN BY THE ADDTL. CIT WAS GIVEN A GO BY AND THE ASSESSING OFFI CER DID NOT BOTHER TO COMPLY WITH THE SAME, MORE PARTICULARLY, WHEN SUCH A DIRECTION COULD HAVE BEEN EASILY CARRIED OUT BY EXAMINING THE ASSES SEES RECORD OF INCOME-TAX FOR EARLIER YEARS. DESPITE THE AVAILABI LITY OF SUCH MATERIAL WITH THE ASSESSING OFFICER HIMSELF, HE CHOSE TO ACC EPT THE ASSESSEES CONTENTION ABOUT THE QUANTUM OF AGRICULTURAL INCOME ON FLIMSY GROUND. HE DID NOT CONDUCT ANY INDEPENDENT INQUIRY AT HIS E ND TO SEE IF THE ADJOINING ORCHARDS HAD ALSO SIMILAR BUMPER CROPS DU RING THIS PERIOD. 10.10. THUS, IT IS OVERT THAT THE ASSESSING OFF ICER DID NOT FOLLOW THE REQUISITE DIRECTIONS ISSUED U/S 144A OF THE ACT AND COMPLETED THE ASSESSMENT IN A CASUAL AND ROUTINE MANNER BYPASSING THE SAME. THIS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 42 RENDERS THE ASSESSMENT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. IV. INVESTMENT IN LIC MORE THAN INCOME EARNED DURING THE YEAR 11.1. THE LD. CIT OBSERVED ON PAGE 38 OF HIS ORD ER THAT THE TOTAL INVESTMENT IN THE PURCHASE OF LIC POLICIES DURING T HE YEAR WAS RS.3,84,92,500/-, WHEREAS THE NET AGRICULTURAL INCO ME SHOWN FROM SHRIKHAND ORCHARDS, DAMRALI, IN THE REVISED RETURN STOOD AT RS.2,65,92,500/- ONLY. THOUGH THE ASSESSING OFFICE R DISCUSSED THIS ISSUE ON PAGES 5 AND 6 OF HIS ORDER, BUT, ACCEPTED THE AS SESSEES EXPLANATION WITHOUT ANY VERIFICATION THAT AGRICULTURAL INCOME R ECEIVED DURING THE YEARS 2008-09 TO 2009-10 WAS RS.4,79,92,500/- AND THE AMOUNT INVESTED IN LIC POLICIES DURING THE CURRENT YEAR AM OUNTED TO RS.3.80 CRORE, MEANING THEREBY THAT THE DIFFERENTIAL AMOUN T OF RS.1.65 CRORE (RS.3.80 CRORE INVESTED IN THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR UNDER CONSIDERATION (-) NET AGRICULTURAL INCOM E OF RS.2.65 CRORE FOR SUCH YEAR) WAS INVESTED IN THE CURRENT YEAR FROM TH E SALE PROCEEDS OF THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 43 PRECEDING YEAR. THIS FACT WAS HELD BY THE LD. CIT TO HAVE BEEN LAID TO REST QUIETLY BY THE AO. 11.2. IT IS SIGNIFICANT TO NOTE THE STATEMENT OF SHRI ANAND CHAUHAN DATED 11.2.2013 RECORDED BY ITO, WARD-3, SHIMLA, WH ICH HAS BEEN PLACED BY THE LD. AR ON PAGE 106 ONWARDS OF HIS PAP ER BOOK. IN RESPONSE TO QUESTION AS TO WHERE THE CASH REALISED FROM UAA WAS KEPT WHICH WAS OBVIOUSLY NOT DEPOSITED ON SEVERAL OCCASI ONS FOR MONTHS TOGETHER, SHRI CHAUHAN STATED THAT HE WAS KEEPING THE AMOUNT AT HIS HOUSE ONLY. WHEN ASKED AS TO WHY SUCH AMOUNT WAS N OT IMMEDIATELY INVESTED IN LIC POLICIES AS PER THE MOU, HE STATED THAT HE WAS WAITING FOR THE APPROPRIATE TIME FOR MAKING INVESTMENT. ON A FURTHER QUERY AS TO WHEN HE WAS SO CONCERNED ABOUT THE PROPER INVESTMEN T OF THE ASSESSEES FUNDS IN LIC POLICIES, ETC., THEN WHY DID HE LOSE BANK INTEREST FOR SO MANY MONTHS BY RETAINING HUGE CASH RUNNING INTO CRO RES AT HIS HOUSE, HE REITERATED HIS STAND OF WAITING FOR APPROPRIATE TIM E FOR MAKING INVESTMENT IN LIC POLICIES. AT THIS STAGE, IT IS P ERTINENT TO NOTE CLAUSE (2) OF THE MOU, AS PER WHICH, SH. ANAND CHAUHAN WAS REQUIRED TO ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 44 INVEST THE PROCEEDS SO OBTAINED FROM THE SALE OF APPLES IN GOVERNMENT SECURITIES, MUTUAL FUNDS, IN SCHEMES OF LIC OR TO I NVEST THE MONEY IN THE PRODUCTS OF SCHEDULED BANKS BY ENSURING THE SAFE AND BETTER RETURNS. IT IS CLEAR FROM THE MOU THAT SHRI ANAND CHAUHAN WAS N OT TO KEEP CASH AT HIS HOUSE. RATHER, HE WAS OBLIGED TO INVEST THE SA LE PROCEEDS IN LIC POLICIES, ETC. OR ALTERNATELY TO DEPOSIT IT IN BANK S FOR EARNING BETTER RETURNS. BOTH, THE MOU REQUIRING SH. ANAND CHAUHAN TO KEEP CASH FROM SALE PROCEEDS IN BANK AND THE CONTRADICTORY ST ATEMENT OF SHRI ANAND CHAUHAN TO THE EFFECT THAT HE KEPT CRORES OF RUPEES OF CASH AT HIS HOUSE, WERE AVAILABLE WITH THE ASSESSING OFFICER, B UT HE SIMPLY CHOSE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT A SUM OF RS.1.15 CRORE OUT OF THE TOTAL INVESTMENT OF RS.3.80 CRORE MADE DURING T HE YEAR IN LIC WAS OUT OF THE SALE PROCEEDS OF THE PRECEDING YEAR KEPT AT HIS HOUSE. IT WAS A MATTER OF CONCERN AS TO HOW SUCH A HUGE CASH FROM S ALE PROCEEDS OF THE ASSESSEES CROP WAS CLAIMED TO HAVE BEEN KEPT AT HO USE BY SH. ANAND CHAUHAN. NO EXAMINATION OF THE ISSUE WAS DONE BY TH E ASSESSING OFFICER. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 45 V. GENUINENESS OF AGRICULTURAL INCOME WHETHER DOUBTED BY THE CIT 12.1. THE LD. AR CONTENDED THAT THE LD. CIT DID NOT HOLD THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE ON THE BASIS OF GENUINENESS OF AGRICULTURAL INCOME EARNED BY THE ASSESSEE. IT WAS, THEREFORE, CONTENDED THAT THE ADD ITIONAL EVIDENCE FILED BY THE LD. DR SUPPORTING THE NON-GENUINENESS OF THE AGRICULTURAL INCOME, BE NOT TAKEN INTO CONSIDERATION. 12.2. WE AGREE IN PRINCIPLE, AS HAS ALSO BEEN N OTED ABOVE ALSO THAT DR CANNOT SET UP A NEW GROUND JUSTIFYING THE REVISIONA RY ORDER WHICH IS ABSENT IN THE ORDER. HOWEVER, IN THE FACTS OF THE P RESENT CASE, IT NEEDS TO BE ASCERTAINED IF THE CIT ALSO DOUBTED THE GENUINEN ESS OF AGRICULTURAL INCOME. 12.3. THE LD. CIT STARTED HIS REVISIONARY ORDER ON THE VERY PREMISE THAT THE ASSESSMENT WAS COMPLETED IN A ROUTINE AND CASUA L MANNER PRACTICALLY WITHOUT MAKING ANY EFFECTIVE ENQUIRY. THIS HAS BEE N RECORDED ON PAGE 1, PARA 2 OF THE ORDER. EVEN IN NOTICE ISSUED U/S 263, WHOSE RELEVANT PART ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 46 HAS BEEN REPRODUCED ON PAGES 2 TO 6 OF THE IMPUGNED ORDER, THE LD. CIT NOTICED ON PAGE 4 THAT WHILE FRAMING THE ASSESSMENT , THE AO SIMPLY RELIED ON THE ASSESSMENT FRAMED BY ITO, WARD-1, SHI MLA IN THE CASE OF SHRI ANAND CHAUHAN. PROPER AND INDEPENDENT INQUIRY SHOULD HAVE BEEN MADE BY THE AO HIMSELF RATHER THAN RELYING ON THE A SSESSMENT FRAMED BY THE AO, WARD-1, SHIMLA IN THE CASE OF SHRI ANAND CH AUHAN. HE FURTHER NOTICED THAT: AO BLINDLY ACCEPTED THE QUANTUM OF A GRICULTURAL PRODUCE AS HELD BY THE ITO, WARD-1, SHIMLA, WITHOUT GOING I NTO THE DETAILS KNOWING WELL THAT THE ENTIRE FACT OF INCREASED AGRI CULTURAL INCOME WILL CULMINATE IN THE CASE OF HIS ASSESSEE. THE AO WAS FOUND NOT TO HAVE NOTICED THAT THE AGRICULTURAL INCOME SHOWN PRIOR TO THE PERIOD OF AGREEMENT AND AFTER THE AGREEMENT WAS VERY LOW AND HAS INCREASED MANIFOLDS IN THE REVISED RETURN . HE OPINED THAT: THE ASSESSING OFFICER HAS FAILED TO ENQUIRE INTO THE FOLLOWING POINTS:- 1) CAPACITY OF THE ORCHARD TO ARRIVE AT THE QUANTUM OF APPLE PRODUCE. 2) HE HAS NOT TRIED TO CALCULATE THE ACTUAL YIELD OF A PPLE FROM THE ABOVE ORCHARD. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 47 3) HE HAS NOT ENQUIRED ABOUT THE YIELD OF OTHER ORCHARDS ADJO INING TO SHRIKHAND ORCHARD TO ARRIVE AT THE CORRECT CONCLUSI ON. 4) THE VARIETY OF APPLE, TOTAL QUANTITY AND ITS PREVALENT MARKET RATE FOR DIFFERENT VARIETIES WERE NOT BROUGHT ON RECORD . 5) THOUGH THE FIGURE OF SALE AMOUNT BEING HUGE, HE HAS NOT ENQUIRED INTO THE REASONS FOR WHICH THE ENTIRE CROP WAS SOLD IN CASH. 6) THE AO HAS NOT ENQUIRED ABOUT THE TIME PERIOD IN WH ICH THE APPLE CROP IS RIPE AND TAKEN TO MARKET. 7) THE MODE OF TRANSPORT BY WHICH THE APPLE CROPS TAKE N TO THE MARKET AND ITS FREIGHT PAID 8) ACTUAL EXPENDITURE ON FERTILIZERS, PESTISIZERS, SPR AY ETC. RELATING TO AGRICULTURAL INCOME 9) HE HAS NOT ENQUIRED INTO THE GENUINENESS OF BILLS G IVEN BY M/S UNIVERSAL APPLE ASSOCIATES, PARWANOO SPECIFICALLY I N R/O THE SERIAL NUMBER AND DATES 10) ABOVE ALL IS NOT ENQUIRED INTO THE GENUINENESS OF M OU. 12.4. THEREAFTER, HE OPINED THAT: THE FAILURE ON THE PART OF THE A.O. TO MAKE NECESSARY INQUIRIES MAKES THE ORDER ERRONEOUS, BY REMAINING PASSIVE AND INACTIVE, THE A.O. HAS ALSO CAUSED THE PREJUDICE TO THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 48 REVENUE. THE A.O. ALLOWED THE CLAIM OF AGRICULTURAL INCOME WITHO UT PUTTING ASSESSEE TO PROVE OR WITHOUT ASKING THE ASSESSEE TO LEAD EVIDENCE TO JUSTIFY THE CLAIM OF QUANTUM OF APPLE YIELD ON H IS LAND. THEN, ON PAGE 29 OF THE IMPUGNED ORDER, THE LD.CIT OBSERVED THAT: IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WAS REQUIRED TO VERIFY THE GENUINENESS OF AGRICULTURAL INCOME OF THE ASSESSEE WHICH WAS INVESTED IN LIC POLICIES IN THE NAME OF THE ASSESSEE AND THE MEMBERS OF HUF. THE ASSESSING OFFICER WAS REQUIRED TO ENQUIRE WHETHER T HE ORCHARD, NAMELY, SHRIKHAND ORCARD WAS EVEN CAPABLE OF PRODUC ING SUCH BUMPER APPLE CROP WHICH COULD EARN THE SALE/INCOME TO THE EXTENT IT WAS FOUND TO BE DEPOSITED IN THE BANK ACCOUNTS OF SHRI ANAND CHAUHAN. THEN , ON PAGE 35 OF THE IMPUGNED ORDER, THE LD. CIT NOTICED THAT: IN THE PRESENT CASE ALSO THE ASSESSING OFFICER HAS NOT MADE ESSENT IAL AND CONCLUSIVE ENQUIRY IN RESPECT OF AGRICULTURAL INCOME AND SOURC E OF INVESTMENT IN LIC POLICIES. THE AO WAS FOUND TO HAVE SIMPLY ACCEP TED THE SUBMISSIONS MADE BY THE ASSESSEE WITHOUT ANY MATERI AL EVIDENCE. IN SUCH CIRCUMSTANCES, THE UNEXPLAINED INVESTMENTS IN THE PURCHASE OF LIC POLICIES SHOULD HAVE BEEN DEEPLY ENQUIRED INTO AND VERIFIED TO ARRIVE AT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 49 THE CORRECT CONCLUSION WHICH HE HAS FAILED. THEN, HE RECORDED ON PAGE 36 OF THE IMPUGNED ORDER THAT THE ASSESSEE: HAS FA ILED TO FILE ANY EXPLANATION SUPPORTED BY COGENT EVIDENCE REGARDING THE QUANTUM AND GENUINENESS OF AGRICULTURAL INCOME EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE UNDERSIGNED. WHILE SUMMARISING HIS D ISCUSSION, AS EXTRACTED ABOVE, THE LD.CIT NOTICED THAT THE ASSESS ING OFFICER BLINDLY ACCEPTED THE AGRICULTURAL INCOME AND VIDE POINTS 7 AND 8 HELD THAT THE AO DID NOT INQUIRE INTO : `THE MODE OF TRANSPORT BY WHICH THE APPLE CROPS TAKEN TO THE MARKET AND ITS FREIGHT PAID ; AND ` ACTUAL EXPENDITURE ON FERTILIZERS, PESTISIZERS, SPRAY ETC. RELATING TO AGRICULTURAL INCOME . IN THE PENULTIMATE PAGE OF THE IMPUGNED ORDER, THE LD. CIT CONCLUDED THAT: THE ASSESSING OFFICER HAS NOT MADE THE REQUIRED AN D ESSENTIAL ENQUIRIES AS WARRANTED BY THE FACTS OF THE CASE REGARDING THE AGRICULTURAL INCOME AND SOURCE OF INVESTMENT IN LIC POLICIES. HE HAS NOT APPLIED HIS MIND TO CHECK WHETHER THERE CAN BE ANY POSSIBILITY OR AV AILABILITY OF SUCH A HUGE AGRICULTURAL INCOME. THE ASSESSING OFFICER HAS FAILED TO MAKE PROPER ENQUIRIES IN THIS CASE AND HAS NOT APPLIED H IS MIND IN THE RIGHT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 50 PERSPECTIVE. THIS IS THE CASE WHERE NO RELEVANT EN QUIRIES HAVE BEEN CARRIED OUT. 12.5. THE ABOVE REFERENCES FROM THE IMPUGNED ORD ER MAKE IT PALPABLE THAT THE LD.CIT, APART FROM HOLDING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND OF INVALID REVISED RETURN AND THE AO NOT FOLLOWING DIRECTIONS U/S 144A ETC., ALSO HELD THAT THE ASSESSING OFFICER DID NOT INQUIRE INT O THE GENUINENESS OF AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN THE REVISED RETURN. I. EVIDENCE FILED BY THE LD. AR 13.1. FIRSTLY, WE WILL DEAL WITH CERTAIN EVIDENCE PLACED BY THE LD. AR IN THE ASSESSEES PAPER BOOK TO CONTEND ABOUT THE GENU INENESS OF AGRICULTURAL INCOME. THE LD. AR INVITED OUR ATTENT ION TOWARDS COPIES OF STATEMENTS OF SHRI ANAND CHAUHAN RECORDED BY THE IT O, WARD-3, SHIMLA ON 13.12.2011, 23.1.2013 AND 11.2.2013 PLACED AT PA GES 98 ONWARDS, 103 ONWARDS AND 106 ONWARDS OF THE PAPER BOOK; A CO PY OF ASSESSMENT ORDER DATED 28.3.2013 PASSED U/S 143(3) IN THE CASE OF SHRI ANAND CHAUHAN; AND A COPY OF SETTLEMENT OF ACCOUNT WITH SH. CHAUHAN TO ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 51 CONTEND THAT THE AO CONDUCTED A PROPER INVESTIGATIO N OF THE MATTER AND HENCE THE REVISION WAS NOT WARRANTED. 13.2 IN RESPONSE TO A QUESTION ASKED BY THE AO F ROM SHRI ANAND CHAUHAN IN THE FIRST STATEMENT ABOUT THE INCURRING OF EXPENDITURE ON THE MAINTENANCE OF SUCH ORCHARD, WHICH IS AVAILABLE AT PAGE 99 OF THE ASSESSEES PAPER BOOK, HE STATED THAT THE ASSESSEE WAS DISCHARGING ROUTINE EXPENSES AND ALL OTHER EXPENSES INCLUDING S ENDING CROPS TO MANDI, SUCH AS, GRADING, PACKING AND TRANSPORTATIO N WERE INCURRED BY HIM. IN RESPONSE TO ANOTHER QUESTION ON PAGE 100 OF THE PAPER BOOK, SHRI CHAUHAN ADMITTED TO HAVE RECEIVED COMMISSION @ 2% O N NET SALES. ON PAGE NO.101, HE WAS ASKED ABOUT THE COMMISSION RECE IVED DURING THE FINANCIAL YEAR 2008-09, WHICH WAS ANSWERED AT RS.2. 50 LAC. 13.3. NOW LET US EXAMINE THE TRUTHFULNESS OF SH . CHAUHAN SAYING AND THE AO ACCEPTING IN TERMS OF THE MOU THAT SH. CHAU HAN WAS MEETING ALL NON-ROUTINE EXPENSES, SUCH AS, GRADING, PACKI NG AND TRANSPORTATION. THE LD. DR POINTED OUT THAT SH. CHAUHAN FILED HIS R ETURN WITH A MEAGER INCOME OF RS.3,40,080/- FROM LIC AGENCY. THIS SHOWS THAT HE DID NOT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 52 HAVE ANY RESOURCES FOR INCURRING HUGE EXPENSES ON B EHALF OF THE ASSESSEE. ON A POINTED QUERY, THE LD. AR INITIALLY STATED THAT HIS FAMILY HAD HUGE INCOME FROM AGRICULTURAL AND HE INCURRED T HESE EXPENSES FROM SUCH INCOME. IT CAN BE NOTICED FROM THE SECOND STAT EMENT RECORDED ON 23.1.2013, COPY PLACED BY THE LD. AR, THAT SHRI C HAUHAN ADMITTED, IN RESPONSE TO THE QUESTION ABOUT THE INCOME OF HIS FA MILY FROM APPLE ORCHARDS AND HIS SHARE IN THAT, BY STATING THAT THE APPLE ORCHARDS AND LAND BELONGING TO HIS FAMILY WERE IN THE NAME OF HIS FAT HER ONLY WHO WAS RETAINING THE ENTIRE INCOME THEREFROM. ONLY AT THE TIME OF SOME URGENT NECESSITY, HIS FATHER WAS HELPING HIM AND HE DID NO T HAVE ANY SEPARATE SHARE IN THAT INCOME. 13.4. IT IS AN ADMITTED POSITION THAT SH. CHAUH AN WAS GIVEN COMMISSION AT THE RATE OF 2% OF NET PROCEEDS ONLY A T THE END OF THIRD YEAR ON EXPIRY OF THE MOU. THIS SHOWS THAT SHRI CH AUHAN WAS NOT PAID ANY COMMISSION DURING THE PERIOD OF THREE YEARS AND HE WAS TO MEET ALL THE EXPENSES OF GRADING, PACKING, FREIGHT AND PESTI CIDES, ETC. EITHER FROM HIS OWN RESOURCES OR FROM SALE OF CROP DURING THE I NTERVENING PERIOD. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 53 13.5. PAGE NO.117 OF THE ASSESSEES PAPER BOOK IS A COPY OF COMPOSITE PROFIT & LOSS ACCOUNT OF M/S SHRIKHAND ORCHARDS, DA MRALI, FOR THE PERIOD 1.4.2008 TO 31.3.2011. AS AGAINST THE GROSS APPLE RECEIPTS OF RS.6.91 CRORE, THE ASSESSEE HAS SHOWN INDIRECT EXPE NSES AT RS.81.31 LAC, INCLUDING COMMISSION OF RS.12.19 LAC PAID TO SHRI A NAND CHAUHAN. THIS SHOWS THAT THE REMAINING EXPENDITURE OF RS.69. 12 LAC WERE INCURRED BY SH. CHAUHAN DURING THE PERIOD OF THREE YEARS FRO M HIS OWN RESOURCES OR FROM SALE RECEIPTS. NATURE OF EXPENSES, BEING, PESTICIDES, FRIGHT AND LABOUR ETC. DECIPHER THAT THESE ARE ORDINARILY INCU RRED BEFORE MAKING SALES. PROFIT & LOSS ACCOUNT OF M/S SHRIKHAND ORCH ARDS FOR THE CURRENT YEAR ENDING 31.3.2010 SHOWS THAT TOTAL EXPENSES OF RS.35.24 LAC WERE INCURRED INCLUDING COMMISSION OF RS.5.31 LAC TO SHR I CHAUHAN. IT MEANS THAT ROUGHLY A SUM OF RS.30 LAC WAS INCURRED ON FRE IGHT, LABOUR, PACKING, PESTICIDES, ETC. BY SHRI ANAND CHAUHAN FROM HIS OWN RESOURCES AS AGAINST HIS MARGINAL INCOME FROM LIC. DESPITE SUCH GLARING INCONSISTENCIES, THE AO DID NOT RAISE ANY QUESTION AS TO THE GENUINENESS OF THE AGRICULTURAL INCOME. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 54 13.6. FURTHER, IT HAS BEEN RECORDED IN SUCH STAT EMENTS OF SH. CHAUHAN THAT NO BILLS OR VOUCHERS FOR THE EXPENSES AMOUNTIN G TO RS.81.31 LAC, INCURRED ON SHRIKHAND ORCHARDS, DAMRALI, WERE AVAIL ABLE AS THE SAME WERE DESTROYED AFTER SETTLING ACCOUNT WITH THE ASSE SSEE AT THE END OF THIRD YEAR. SH. CHOUHAN COULD NOT EVEN DISCLOSE THE NAMES OF THE PARTIES TO WHOM SUCH PAYMENTS OF RS.69.12 LAC WERE MADE. IF TH E ASSESSEES CONTENTION IS ACCEPTED, IT WOULD MEAN THAT A SUM OF RS.69.12 LAC WAS INCURRED BY SHRI CHAUHAN AS EXPENDITURE DURING THE PERIOD OF THREE YEARS ON BEHALF OF THE ASSESSEE AND THE SAME WAS ACCEPTED WITHOUT EVEN ASKING FOR ANY DETAIL/SUPPORTING VOUCHERS WORTH THE NAME. 13.7. IT IS FURTHER BEFITTING TO NOTE THAT THE A SSESSEE REPLIED TO THE ASSESSING OFFICER, INTER ALIA , SUBMITTING THE DETAILS OF EXPENSES OF RS.4.60 LAC INCURRED BY IT PERSONALLY DURING THE PE RIOD 1 ST APRIL, 2009 TO 31.3.2010 IN RESPECT OF SHRIKHAND ORCHARDS, DAMRALI , AS PER THE TERMS OF THE MOU. THE ASSESSEE CLAIMED THAT THE ROUTINE EXP ENSES, SUCH AS SALARIES AND WAGES IN RESPECT OF SHRIKHAND ORCHARD S, DAMRALI, WERE INCURRED BY HIM OUT OF AGRICULTURAL PROCEEDS FROM S HRIKHAND ORCHARDS, ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 55 SARAHAN, WHICH WAS MANAGED BY SHRI NARVIR JANARTA. THE ASSESSEE SUBMITTED THAT OUT OF AGRICULTURAL RECEIPTS OF RS.1 9.60 LAC FROM ITS SARAHAN FARM, A SUM OF RS. 4.60 LAC WAS INCURRED FO R MEETING ROUTINE EXPENSES AT DAMRALI. A COPY OF THE DETAILS OF EXP ENSES INCURRED IS AVAILABLE AT PAGE 100 OF THE DEPARTMENTAL PAPER BOO K. THIS PAGE STARTS WITH SHRIKHAND ORCHARDS (REGD.). BELOW THAT, THERE IS A MENTION OF `DAMRALI/SARAHAN. THE WORD DAMRALI HAS BEEN CROS SED AND ONLY `SARAHAN REMAINS. THIS SHOWS THAT THE AGRICULTURAL EXPENSES OF RS.4.60 LAC WERE CLAIMED TO HAVE BEEN INCURRED BY THE ASSES SEE IN RESPECT OF SHRIKHAND ORCHARDS, SARAHAN AND NO AMOUNT WAS INC URRED BY THE ASSESSEE IN RESPECT OF DAMRALI ORCHARDS, MAINTAINED BY SHRI ANAND CHAUHAN. THIS POSITION IS IN CONTRAST TO THE MOU W HICH EXPLICITLY PROVIDES THAT THE ASSESSEE WILL INCUR EXPENSES OF R EGULAR NATURE SUCH AS SALARIES, ETC. AND SHRI CHAUHAN WILL INCUR EXPENSES LIKE FREIGHT, PACKAGING AND PESTICIDES, ETC. ON A QUERY FROM THE BENCH ABOUT THE SOURCE OF INCURRING OF EXPENDITURE IN RESPECT OF DA MRALI ORCHARDS, IT WAS STATED THAT A TOTAL SUM OF RS.4.60 LAC WAS INCURRED IN RESPECT OF BOTH THE ORCHARDS AT DAMRALI AND SARAHAN, WHICH POSITION IS CONTRARY TO WHAT THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 56 ASSESSEE ITSELF FILED DURING THE COURSE OF HIS ASSE SSMENT PROCEEDINGS. THE ASSESSING OFFICER SHOULD HAVE THE COURTESY TO EXAMI NE THIS ASPECT WHICH HAD AN IMPORTANT BEARING ON THE DETERMINATION OF TH E QUANTUM AND GENUINENESS OF AGRICULTURAL INCOME. ONCE AGAIN, TH E AO FAILED ON THIS COUNT AS WELL. 13.8. WE ALSO FIND THAT THERE IS AN APPARENT CO NTRADICTION IN THE AMOUNT OF COMMISSION STATED TO HAVE BEEN RECEIVED B Y SHRI CHAUHAN DURING THE FINANCIAL YEAR 2008-09 AT RS.2.50 LAC AN D THE AMOUNT OF COMMISSION OF RS.4,28,000/- SHOWN IN THE PROFIT & L OSS ACCOUNT OF M/S SHRIKHAND ORCHARDS, DAMRALI, WHOSE COPY IS AVAILABL E ON PAGE 119 OF THE SAME PAPER BOOK FILED BY THE ASSESSEE. HOW THER E COULD BE A DIFFERENCE IN THESE TWO AMOUNTS WAS NOT EXAMINED BY THE AO AND NEITHER THE LD. AR COULD THROW ANY LIGHT ON THE SAM E. 13.9. ON AN OVERVIEW, IT COMES TO THE FORE THAT THE ASSESSEE CLAIMED TO HAVE RECEIVED A SUM OF RS.6.91 CRORE AS NET AGRICUL TURAL INCOME FROM SHRI ANAND CHAUHAN, WHO WAS MAINTAINING THE BANK AC COUNT OF SHRIKHAND ORCHARDS IN HIS OWN NAME AND HIS OTHER FA MILY MEMBERS; ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 57 INCURRING OF ROUTINE EXPENSES BY THE ASSESSEE ITSEL F IN RESPECT OF DAMNRALI ORCHARDS WAS NOT PROVED; A SUM OF RS.69 LA C WAS CLAIMED TO HAVE BEEN INCURRED BY SHRI ANAND CHAUHAN AND NO BIL LS FOR SUCH EXPENSES WERE AVAILABLE; SHRI ANAND CHAUHAN WAS PAI D A SCANTY COMMISSION OF RS.12.19 LAC FOR A PERIOD OF THREE YE ARS, AND THAT TOO, AT THE END OF THE THIRD YEAR FOR SUCH A HUGE RESPONSIB ILITY OF LOOKING AFTER THE RECEIPTS OF RS.6.91 CRORE AND MAKING INVESTMENT S AND INCURRING EXPENSES; SHRI ANAND CHAUHAN WAS HAVING A MEAGER IN COME OF HIS OWN FROM WHICH INCURRING OF EXPENSES OF RS.69 LAC FOR T HE ASSESSEE COULD NOT BE JUSTIFIED; AND FURTHER VARIATION IN THE AMOUNT O F COMMISSION TO SH. CHAUHAN. ALL THESE FACTORS SHOULD HAVE DEFINITELY P RESSED AN ALARM BUTTON IN THE MIND OF THE ASSESSING OFFICER FOR GIV ING A LOGICAL CONCLUSION TO THE ENTIRE SCENARIO, WHICH HE ACCEPTE D WITHOUT ANY WHISPER. II. ADDITIONAL EVIDENCE FILED BY THE LD. DR 14.1. AFTER HAVING DISCUSSED THE EVIDENCE ON REC ORD AND THAT FILED BY THE LD. AR, NOW WE ESPOUSE THE ADDITIONAL EVIDENCE FILED BY THE LD. DR ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 58 TO ARGUE THAT THE AO OUGHT TO HAVE EXAMINED THE GEN UINENESS OF THE AGRICULTURAL INCOME, WHICH HE DID NOT AND THE LD. C IT WAS JUSTIFIED IN HOLDING THE ASSESSMENT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE ON THIS COUNT. SOME OF THE ADDITIONAL E VIDENCED RELIED BY THE LD. DR AROSE DURING THE COURSE OF FURTHER PROCEEDIN GS IN THE HANDS OF SH. ANAND CHAUHAN. 14.2. THE LD. AR SERIOUSLY OBJECTED TO ENTERTAINI NG SUCH ADDITIONAL EVIDENCE BY CONTENDING THAT SH. ANAND CHAUHAN IS A DIFFERENT ASSESSEE AND HENCE THE MATERIAL GATHERED IN HIS CASE SHOULD BE EXCLUDED AT THE THRESHOLD. THE LD. DR VEHEMENTLY CONTENDED THAT SH. ANAND CHAUHANS CASE IS INTEGRATED WITH THE ASSESSEES CASE. HE AL SO PLACED ON RECORD A COPY OF THE LETTER DATED 7.11.2016 FILED BY THE ASS ESSEE ITSELF BEFORE THE BENCH MENTIONING THAT THE ASSESSEES CASE AND SH. A NAND CHAUHANS CASE ARE INTER-CONNECTED AND, HENCE, BE TAKEN UP TO GETHER. 14.3. WE ARE NOT PERSUADED TO ACCEPT THIS OBJECT ION RAISED ON BEHALF OF THE ASSESSEE. IN ORDINARY CIRCUMSTANCES, WHEN THERE ARE TWO DISTINCT ASSESSEES, THE PROCEEDINGS IN THE CASE OF ONE CAN H AVE NO BEARING ON THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 59 PROCEEDINGS IN THE CASE OF THE OTHER. HOWEVER, NOW WE ARE CONFRONTED WITH A SITUATION IN WHICH THE ENTIRE PROCEEDINGS IN THE CASE OF SHRI ANAND CHAUHAN FOR THE THREE YEARS UNDER CONSIDERATI ON DEAL PRIMARILY AND SOLELY WITH THE TRANSACTIONS CARRIED OUT BY HIM FOR AND ON BEHALF OF THE ASSESSEE. THERE IS NO SHRED OF HIS SEPARATE AN D INDEPENDENT TRANSACTIONS WHICH BECAME THE SUBJECT MATTER OF REV ISION U/S 263. WE HAVE NOTICED ABOVE THAT SHRI ANAND CHAUHAN ALLEGED LY CARRIED OUT SUCH TRANSACTIONS AS AN AGENT OF THE ASSESSEE. AS THE AS SESSMENT ORDERS AND THE SUBSEQUENT REVISIONARY ORDERS IN THE CASE OF SH RI ANAND CHAUHAN DEAL EXCLUSIVELY WITH THE TRANSACTIONS CONDUCTED ON BEHALF OF THE ASSESSEE, THE FINDINGS RECORDED OR THE RELIANCE PLA CED BY THE LD. DR ON THE PROCEEDINGS IN HIS CASE, CANNOT BE HELD AS EXTR ANEOUS TO THE ASSESSEES CASE. IN FACT, THE PROCEEDINGS IN THE HA NDS OF SH. ANAND CHAUHAN ARE SHADOW PROCEEDINGS OF THE ASSESSEE AND HENCE CANNOT BE CONSIDERED AS SEPARATE AND INDEPENDENT, SO AS TO DE BAR THEIR CONSIDERATION IN THE ASSESSEES CASE. IT IS FURTH ER PERTINENT TO NOTE THAT POR UNA PARTE , THE LD. AR IS CONTENDING THAT SH. CHAUHAN IS A D ISTINCT ASSESSEE AND NO COGNIZANCE SHOULD BE TAKEN OF THE P ROCEEDINGS IN HIS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 60 CASE, POR OTRA PARTE, HE HAS HIMSELF FILED A SEPARATE PAPER BOOK IN SUPPORT OF HIS ARGUMENT OF PROPER INQUIRY CONDUCTED BY THE AO, WHICH CONTAINS COPY OF THREE STATEMENTS OF SHRI ANAND CHA UHAN RECORDED BY THE ITO, WARD-3, SHIMLA; A COPY OF ASSESSMENT ORDER DATED 28.3.2013 PASSED U/S 143(3) IN THE CASE OF SHRI ANAND CHAUHAN ; AND A COPY OF SETTLEMENT OF ACCOUNT WITH SH. CHAUHAN. IT IS IMPER MISSIBLE TO BLOW HOT AND COLD IN THE SAME BREATH. WE HAVE NOT ONLY ACCEP TED SUCH EVIDENCE BUT ALSO DISCUSSED THE SAME IN AN EARLIER PARA. AS SUCH, THE ADDITIONAL EVIDENCE FILED BY THE LD. DR CANNOT BE BRUSHED ASID E. 15.1. NOW, WE WILL BRIEFLY REFER TO THE ADDITIO NAL EVIDENCE FILED BY THE LD. DR TO SUPPORT THE VIEWPOINT OF THE LD. CIT THA T THE AO FAILED TO EXAMINE THE GENUINENESS OF THE CLAIMED AGRICULTURAL INCOME BY THE ASSESSEE. 15.2. THE LD. DR WHILE REFERRING TO THE ORDER PA SSED BY THE ASSESSING OFFICER OF THE ASSESSEE IN CONSEQUENCE OF THE ORDER U/S 263, SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE THE ORIGINAL OF T HE MOU DATED 15.6.2008 ENTERED INTO WITH SHRI CHAUHAN. HE SUBMI TTED THAT CERTAIN ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 61 CUTTINGS/OVERWRITING WAS FOUND IN THE STAMP PAPER R EGISTER IN WHICH THE NAME OF SH. ANAND CHAUHAN WAS OVERWRITTEN. THIS WA S STATED TO BE A CASE OF FABRICATED MOU ON THE GROUND THAT SUCH STAM P PAPERS WERE IN REALITY SOLD TO SOMEONE ELSE. 15.3. HE ALSO SUBMITTED THAT ANOTHER AGREEMENT DA TED 7.6.2008 WAS ENTERED INTO BY THE ASSESSEE WITH SHRI BISHAMBHAR DAS FOR SELLING FRUITS OF THE SAME SHRIKHAND ORCHARDS AT DAMARALI. IT WAS CONTENDED THAT WHEN THE ASSESSEE ENTERED INTO THE MOU WITH SH. ANA ND CHAUHAN FOR THE SUPERVISION OF HIS FULL ORCHARD AT DAMRALI, HO W HE COULD ENTER INTO A DIFFERENT AGREEMENT WITH SH. BISHAMBHAR DASS FOR TH E SAME ORCHARD OR ITS PART FOR THE SAME PERIOD OR A PART OF THAT. 15.4. REFERRING TO THE CONSEQUENTIAL ASSESSMENT O RDER, THE LD. DR POINTED OUT THAT THE ASPECT OF TRANSPORT OF APPLES BY VEHICLES FROM SHRIKHAND ORCHARDS TO PARVANOO WAS ALSO EXAMINED. IT WAS POINTED OUT THAT ONE SHRI DINESH KUMAR SOOD CLAIMED THAT HIS TI PPERS WERE USED FOR TRANSPORT OF APPLES DURING THE APPLE SEASON OF FINA NCIAL YEAR 2008-09 TO 2010-11. THAT WAS FOUND TO BE INCORRECT BECAUSE THE PARVANO MANDI WAS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 62 NOT OPERATIVE IN FINANCIAL YEAR 2008-09 DUE TO THE ONGOING FOUR-LANING OF CHANDIGARH TO PARVANO HIGHWAY. DETAILS OF VEHICLE CLAIMED TO HAVE BEEN USED FOR TRANSPORT OF APPLES WERE PROVIDED BY SHRI CHUNNI LAL, REPRESENTATIVE OF UAA. EXAMINATION OF SUCH DETAILS REVEALED THAT THE VEHICLES, ON VERIFICATION, TURNED OUT TO BE OIL TAN KERS, SCOOTERS, MOTOR CYCLE AND MARUTI 800 CARS. CERTAIN NUMBERS AS CLAI MED TO HAVE BEEN USED FOR TRANSPORT OF ASSESSEES APPLES WERE NOT EV EN ALLOTTED BY THE RTO. IT WAS FURTHER FOUND DURING THE INQUIRIES FOR THE ASSESSMENT YEAR 2011-12 IN THE ASSESSEES OWN CASE THAT NO ENTRY OF ANY OF THESE VEHICLES WAS EXISTING IN THE GOVERNMENT RECORDS, WHICH FACT WAS CONFIRMED BY THE SUBJECT MATTER SPECIALIST, HORTICULTURE DEPARTM ENT. IT WAS FURTHER CONFIRMED THAT NO SUCH VEHICLES EVEN PASSED THROUGH THE APPLE CONTROL ROOM, FAGU. THE INQUIRIES FURTHER CONFIRMED THAT N O SUCH AGRICULTURAL PRODUCE WAS EVER TRANSPORTED FROM RAMPUR TO PARVANO . 15.5. THE LD. DR ALSO REFERRED TO THE COMPARISON S MADE BY THE AO OF AGRICULTURAL INCOME WITH OTHER PROMINENT BIG APPLE GROWERS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS FOUND THAT SHRI KANWAR ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 63 UDAY SINGH, RAJ BHAWAN ROAD, WOODVALLE PALACE, CHHO TA SHIMLA HAD SHOWN NET AGRICULTURAL INCOME OF RS.16,24,960/- FRO M THE LAND OF 237 BIGHAS OWNED BY HIM. SIMILARLY, SHRI ANIL AND HIS FAMILY, VILLAGE BAROBAGH, PO THANEDAR, DISTRICT SHIMLA HAD DECLARED NET AGRICULTURAL INCOME OF RS.38,86,308/- FROM 300 BIGHAS OF LAND OW NED FOR THE SAME PERIOD. IN THE LIGHT OF THESE FACTS, THE LD. DR CO NTENDED THAT THE SALE PROCEEDS FROM APPLES OF 105 BIGHAS ORCHARD AT RS.2. 80 CRORE DECLARED BY THE ASSESSEE FOR THE YEAR IN QUESTION, WAS NEXT TO IMPOSSIBLE. 15.6. THE LD. DR FURTHER TRIED TO FORTIFY THIS P OINT BY STATING THAT IT WAS CLAIMED THAT ALL THE TRANSACTIONS OF THE SALE OF AP PLE CROP BY SHRI ANAND CHAUHAN ON BEHALF OF THE ASSESSEE DURING THE YEAR U NDER CONSIDERATION WERE MADE ONLY TO UAA. NOT ONLY THAT, THE LD. DR SU BMITTED THAT, DURING THE ENTIRE PERIOD OF THREE YEARS, COVERED UN DER THE MOU, THE ALLEGED SALE OF RS.6.91 CRORE WAS CLAIMED TO HAVE B EEN MADE ONLY TO UAA. REFERRING TO PAGES 50 TO 92 OF THE DEPARTMENT AL PAPER BOOK, BEING COPIES OF THE SO CALLED SALE PROCEED ISSUED BY UAA, THE LD. DR CONTENDED THAT WHEN THE ASSESSEE WAS MAKING SALES, HOW UAA COULD ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 64 ISSUE SALE INVOICES DESIGNATED AS SALE PROCEED. HE SUBMITTED THAT THE SALE INVOICES SHOULD HAVE BEEN ISSUED BY THE ASSESS EE RATHER THAN UAA. HE ALSO DREW OUR ATTENTION TOWARDS THESE SALE PROC EED TO DEMONSTRATE THAT THOUGH THERE WAS A COLUMN OF TRUCK NUMBER, BUT , THAT WAS MISERABLY LEFT BLANK IN ALL SUCH DOCUMENTS. HE ALSO SUBMITTE D THAT THESE COMPUTERIZED BILLS ALLEGEDLY ISSUED BY UAA WERE BOG US AS COULD BE SEEN THAT THE BILL PLACED AT PAGE 86 OF THE PAPER B OOK BEARING NO.1780 HAS BEEN DATED 15.10.2009 AND THE NEXT BILL NO. 992 HAS BEEN DATED 18.10.2009. THE BILL DATED 15.10.2009 SHOULD HAVE A NUMBER PRIOR TO THAT ISSUED ON 18.10.2009, WHEREAS IT WAS THE CONVE RSE CASE. THE LD. DR SUBMITTED THAT THOUGH THE ASSESSING OFFICER CALLED FOR THE ASSESSMENT RECORDS OF SHRI ANAND CHAUHAN BY CO-COORDINATING WI TH HIS ASSESSING OFFICER, BUT, FAILED TO NOTE SUCH GLARING INCONSIST ENCIES WHICH OUGHT TO HAVE STRUCK HIM. 15.7. THE LD. DR ALSO REFERRED TO INQUIRIES WITH FRUIT MERCHANTS WHO WERE REPORTED TO HAVE PAID ADVANCE TO SHRI ANAND CH AUHAN AGAINST THE SALE OF THE ASSESSEES APPLE CROP. SUCH INQUIRY DI VULGED THAT AS AGAINST ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 65 THE STATEMENT OF ACCOUNT OF SHRI ANAND CHAUHAN THAT HE RECEIVED A SUM OF RS.1 CRORE IN CASH DURING MAY, 2010 AS ADVANCE F ROM UAA, THERE WERE NO CORRESPONDING ENTRIES OF CASH PAYMENT IN TH E BOOKS OF UAA. IT FURTHER TRANSPIRED THAT SHRI CHUNNI LAL ON BEHALF O F UAA CLAIMED TO HAVE PAID CASH BY 13 DIFFERENT FIRMS ACROSS THE COU NTRY THROUGH HIM. FURTHER INQUIRIES WERE CONDUCTED FROM THESE 13 FIRM S WHICH DIVULGED THAT EITHER SUCH FIRMS WERE NOT EXISTING/NOT TRACEA BLE OR THEY HAD NOT PAID ANY AMOUNT. 15.8. IN THE LIGHT OF THE ABOVE SUBMISSIONS, TH E LD. DR CONTENDED THAT IT WAS A CASE OF FICTITIOUS SALES OF APPLE CROP ENT ERED BY THE ASSESSEE THROUGH SHRI ANAND CHAUHAN AND, HENCE, THE ENTIRE A MOUNT RECORDED WAS HIS CONCEALED INCOME. 15.9. THE LD. DR ALSO REFERRED TO CERTAIN FINDIN GS GIVEN BY THE DIRECTORATE OF ENFORCEMENT. HE SUBMITTED THAT THE INQUIRY WAS CONDUCTED FROM INDIAN SECURITY PRESS, NASIK WITH RE GARD TO THE STAMP PAPERS USED FOR SIGNING THE AGREEMENT DATED 17.6.20 08 WITH SHRI BISHAMBAR DAS AND SHRI RAM ASHRAY THAKUR, MANAGER O F SHRIKHAND ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 66 ORCHARDS. THE COMPETENT AUTHORITY WAS SPECIFICALLY ASKED TO PROVIDE THE DATES OF PRINTING AND DISPATCH OF THE STAMP PAPERS WITH THE SERIAL NUMBERS WHICH WERE USED FOR SIGNING OF THE SAID AGR EEMENT. THE INDIAN SECURITY PRESS, NASIK, INTIMATED THAT THE SAID STAM P PAPERS WERE DISPATCHED ON 24.9.2008 AND 14.3.2009, RESPECTIVELY WHICH WAS WELL AFTER THE ALLEGED SIGNING OF THE AGREEMENT DATED 17 .6.2008. IT WAS, THEREFORE, SUBMITTED THAT THE ANTE DATED AGREEMENT WAS FABRICATED TO SHOW SOME AGRICULTURAL INCOME WHICH EVIDENCED THAT THERE WAS NO AGRICULTURAL INCOME GENERATED FROM THE SAID ORCHARD EVEN ON THE BASIS OF AGREEMENT DATED 17.6.2008. 15.10. HE ALSO REFERRED TO CERTAIN INQUIRIES CON DUCTED BY THE ENFORCEMENT DIRECTORATE WITH THE STAMP VENDOR WITH REFERENCE TO THE STAMP PAPERS USED FOR THE MOU DATED 15.6.2008. SUC H INQUIRIES TRANSPIRED THAT THE STAMP PAPER FOR THE MOU WITH SH RI ANAND CHAUHAN WAS CLAIMED TO HAVE BEEN PURCHASED FROM THE STAMP V ENDOR, SMT. URMILA GHALTA, WHO WAS SUMMONED, AND HER HUSBAND, W HO APPEARED ON ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 67 HER BEHALF ALONG WITH THE STAMP VENDOR REGISTER SUB MITTED THAT THESE STAMPS WERE ISSUED TO SOMEONE ELSE. 16. THUS, IT IS OBVIOUS THAT THE SUBMISSIONS MADE BY THE LD. DR, WHICH ARE CONTAINED ON PAGES 19 ONWARDS OF HIS WRITTEN SU BMISSIONS, COVERING THE FINDINGS RECORDED IN THE ASSESSMENT ORDER PASSE D U/S 143(3) PURSUANT TO THE IMPUGNED ORDER AND THE INQUIRIES CONDUCTED B Y THE ENFORCEMENT DIRECTORATE AND OTHERS SIMPLY REINFORCE THE LD. CIT S OPINION ABOUT THE NON-EXAMINATION OF GENUINENESS OF THE RECEIPTS OF A GRICULTURAL INCOME BY THE AO. THE ABOVE DISCUSSION FAIRLY INDICATES THAT THE ASSESSING OFFICER MISERABLY FAILED IN CONDUCTING REQUISITE IN QUIRY WHICH WAS WARRANTED IN THE GIVEN CIRCUMSTANCES. 17. THE ASSESSMENT ORDER HAVING BEEN PASSED BY A CCEPTING THE REVISED RETURN OF INCOME, INCONSISTENT WITH THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE; IGNORING THE VITAL DIRECT IONS GIVEN BY THE ADDL.CIT U/S 144A; NOT CORRECTLY EXAMINING THE DIFF ERENCE BETWEEN THE AMOUNT OF AGRICULTURAL INCOME AND THE AMOUNT INVEST ED IN LIC; AND FAILING TO NOTICE THE FACTUAL MATRIX DISCUSSED ABOV E EMANATING FROM THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 68 EVIDENCE ON RECORD, FILED BY THE ASSESSEE AND THE L D. DR, IN OUR CONSIDERED OPINION, RENDERED THE ASSESSMENT ORDER E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE.&& VI. LEGAL PROPOSITIONS I) WHETHER THE AO CONDUCTED ADEQUATE INQUIRY ? 18.1. THE LD. AR SUBMITTED THAT THE ASSESSING OFF ICER MADE PROPER INQUIRY IN THIS CASE. TO BUTTRESS THIS SUBMISSION, HE INVITED OUR ATTENTION TOWARDS PAGE 9 OF THE ASSESSEES PAPER BOOK, WHICH IS A COPY OF NOTICE DATED 25.10.2012 ISSUED BY THE ASSESSING OFFICER U/ S 143(2) OF THE ACT AND ANOTHER NOTICE ON PAGE 10 OF THE PAPER BOOK SEE KING NECESSARY DETAILS FOR THE PURPOSES OF COMPLETION OF ASSESSMEN T. HE REFERRED TO PAGE 13 OF THE PAPER BOOK, WHICH IS A REPLY FURNISH ED BY THE ASSESSEE TO THE ASSESSING OFFICERS NOTICE. IT WAS POINTED OUT THAT THE ASSESSING OFFICER INQUIRED ABOUT THE INCREASE IN THE AGRICULT URAL INCOME IN THE REVISED RETURN AND APPROPRIATE REPLY WAS GIVEN SUBM ITTING VARIOUS DETAILS AS CALLED FOR BY HIM INCLUDING A COPY OF THE MOU DA TED 15.6.2008 WITH SHRI ANAND CHAUHAN. REFERRING TO PAGE 34 OF THE PA PER BOOK, THE LD. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 69 AR SUBMITTED THAT THIS WAS THE REPLY GIVEN BY THE A SSESSEE IN RESPONSE TO ORDER SHEET ENTRY OF THE ASSESSING OFFICER. IT WAS STATED THAT THE ASSESSING OFFICER SOUGHT DIRECTIONS FROM THE ADDL. CIT U/S 144A OF THE ACT AND ALSO ISSUED NOTICE TO SHRI ANAND CHAUHAN, W HOSE COPIES ARE AVAILABLE ON PAGES 38 AND 39 OF THE DEPARTMENTAL PA PER BOOK. THEN, THE LD. AR REFERRED TO THE REPLY GIVEN BY SHRI ANAND CH AUHAN FURNISHING THE NECESSARY DETAILS, WHOSE COPY IS AVAILABLE ON PAGE 40 OF THE PAPER BOOK. DIRECTIONS WERE ALSO ISSUED BY THE ADDITIONAL CIT U /S 144A, INTER ALIA , REQUIRING THE ASSESSING OFFICER TO COORDINATE WITH THE ASSESSING OFFICER OF SHRI ANAND CHAUHAN. THE LD. AR SUBMITTED THAT T HE ASSESSING OFFICER WROTE A LETTER TO THE ASSESSING OFFICER OF SHRI ANAND CHAUHAN SEEKING DETAILS OF INVESTIGATIONS CARRIED OUT IN HI S CASE. THE ASSESSING OFFICER OF SHRI ANAND CHAUHAN FURNISHED REPLY TO TH E ASSESSING OFFICER. ONE MORE NOTICE DATED 11.2.2013 WAS ISSUED TO THE A SSESSEE, WHOSE COPY HAS BEEN PLACED AT PAGE 96 OF THE PAPER BOOK, SEEKI NG DETAILS AS DIRECTED BY THE ADDL. CIT. THE LD. AR CONTENDED THAT THE AS SESSEE GAVE BEFITTING REPLY TO IT AS WELL, WHICH IS AVAILABLE ON PAGE 97 ONWARDS OF THE PAPER BOOK. HE ALSO REFERRED TO THE THREE STATEMENTS OF S HRI ANAND CHAUHAN ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 70 RECORDED BY HIS ASSESSING OFFICER WHICH WERE ALSO T AKEN INTO CONSIDERATION BY THE ASSESSING OFFICER OF THE ASSES SEE BEFORE FINALISING THE ASSESSMENT. IN THE LIGHT OF THE ABOVE MATERIAL, THE LD. AR CONTENDED THAT THERE WAS NO SHORTCOMING ON THE PART OF THE AS SESSING OFFICER IN SO FAR AS THE CONDUCTING OF INQUIRIES QUA THE ASSESSEES ASSESSMENT WAS CONCERNED. 18.2. THE LD. AR ARGUED THAT THE VIEW POINT THA T THE ASSESSING OFFICER DID NOT CONDUCT ANY INQUIRY WAS ERRONEOUS AND AT TH E MOST AND GOING BY THE STANDPOINT OF THE CIT, IT COULD BE A CASE OF IN ADEQUATE ENQUIRY AND NOT A NON-INQUIRY BY THE ASSESSING OFFICER. REFERR ING TO CERTAIN JUDGMENTS INCLUDING CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DELHI), THE LD. AR CONTENDED THAT REVISION IS NOT POSSIBLE IN CASE OF INADEQUATE INQUIRY AND THE SAME CAN BE DONE ONLY WH EN THE ASSESSING OFFICER FAILS TO CONDUCT ANY INQUIRY BEFORE FINALIS ING THE ASSESSMENT. THIS WAS OPPOSED BY THE LD. DR WITH SEVERAL JUDGMENTS IN DICATING THE JUSTIFIABILITY OF REVISIONARY ORDER IN THE CIRCUMST ANCES AS ARE PREVAILING BEFORE US. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 71 18.3. HAVING REGARD TO THE DETAILED DISCUSSION M ADE ABOVE ON THE FACTUAL POSITION OBTAINING IN THIS CASE, EVEN DE HORS THE ADDITIONAL EVIDENCE FILED BY THE LD. DR, IT IS EVIDENT THAT TH E ASSESSING OFFICER, ALBEIT , SOUGHT CERTAIN DETAILS FROM THE ASSESSEE, SHRI AN AND CHAUHAN AND THE ASSESSING OFFICER OF SHRI ANAND CHAUHAN, BUT, R EMAINED DORMANT ON THE SAME. SUCH DETAILS WERE SIMPLY PLACED ON RECOR D WITHOUT FURTHER PROBE, WHICH WAS PRIMA FACIE WARRANTED IN THE CIRCUMSTANCES. HE OUGHT TO HAVE SCRUTINIZED THE EXTENT AND GENUINENESS OF T HE ALLEGED AGRICULTURAL INCOME SHOWN BY THE ASSESSEE, WHICH WAS NOT ONLY H UGE IN COMPARISON WITH THE INCOME SHOWN BY THE ASSESSEE IN THE PERIOD S PRIOR TO AND LATER THAN THE PERIOD COVERED BY THE MOU, BUT ALSO THE I NCOME EARNED BY THE FAMILY OF SHRI ANAND CHAUHAN FROM THEIR OWN SEPARAT E ORCHARD. THE ALLEGED SALES TO UAA ALSO RAISED SEVERE DOUBTS COUP LED WITH THE FACT THAT THERE WAS NO EVIDENCE OF INCURRING EXPENSES ON TRAN SPORTATION, PACKING AND INSECTICIDES, ETC. APART FROM THAT, THE ENTIRE ARRANGEMENT WITH SHRI ANAND CHAUHAN, UNDER WHICH HE WAS SUPPOSEDLY GIVEN AN AUTHORITY TO MANAGE SHRIKHAND ORCHARD, DAMRALI, IN SUCH A WAY T HAT HE REMAINED IN CONTROL OF CASH RUNNING INTO SEVERAL CRORES IN CONT RADICTION OF THE TERMS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 72 OF THE SO-CALLED MOU, ALSO NECESSITATED INQUIRY. AL L THESE FACTORS WERE CRYING HOARSE TO CONDUCT FURTHER INQUIRY AND FIND O UT NOT ONLY THE EXTENT, BUT ALSO THE GENUINENESS OF THE CLAIMED AGRICULTURA L INCOME OF RS.2.65 CRORE. EVEN THE DIRECTIONS GIVEN BY THE ADDTL. CIT WERE NOT HEEDED TO A GREATER EXTENT. THE ABOVE ISSUES SHOULD HAVE BEEN T HE CORNER STONE FOR THE ASSESSING OFFICER TO EMBARK ON FURTHER INQUIRY TO UNEARTH THE TRUTH. CONFRONTED WITH SUCH PECULIAR AND HAIR-RAISING CIRC UMSTANCES, THE ASSESSING OFFICER SHOULD HAVE GOT ALERTED AND DUG T HE MATTER DEEP FOR UNEARTHING THE REALITY OF THE TRANSACTION. UNFORTU NATELY, NOTHING OF THIS SORT WAS DONE BY HIM WHICH IS A PERFECT EXAMPLE OF COMPLETE NON- APPLICATION OF MIND BY THE ASSESSING OFFICER AND OF PASSING THE ASSESSMENT ORDER IN UNDUE HASTE. IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER MISERABLY FAILED TO EXAMINE ALL S UCH RELEVANT ASPECTS WHICH WERE CLEAR POINTER TOWARDS THE NO OR BLEAK PR OBABILITY OF EARNING SUCH A HUGE AGRICULTURAL INCOME. 18.4. THE HONBLE SUPREME COURT IN SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC) CONSIDERED A QUESTION WHETHER THE APPARENT CAN BE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 73 CONSIDERED AS REAL. IT WAS OBSERVED THAT APPARENT M UST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITL ED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY A ND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILIT IES. IT WAS FURTHER OBSERVED THAT AN INFERENCE SHOULD BE DRAWN ON THE B ASIS OF THE CIRCUMSTANCES AVAILABLE ON THE RECORD. CONSIDERING THE CIRCUMSTANCES OF THE TRANSACTION IN THAT CASE, THE HONBLE SUPREME C OURT HELD THAT AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNIN G TICKETS WERE PURCHASED BY THE APPELLANT AFTER THE EVENT AND THE AUTHORITIES WERE RIGHT IN DRAWING AN ADVERSE INFERENCE AGAINST THE ASSESSE E. THE CIRCUMSTANCES AS DISCUSSED IN EARLIER PARAS INDICATE THAT THE APP ARENT WAS NOT PRIMA FACIE REAL AND FURTHER INVESTIGATION WAS CALLED FOR, WHI CH THE AO DID NOT CARRY OUT. 18.5. NOW WE TAKE UP THE ARGUMENT OF THE LD. AR T HAT SINCE THE AO CONDUCTED INQUIRY, WHICH MIGHT NOT HAVE BEEN ADEQUA TE FROM THE STANDARD OF THE LD. CIT, NO REVISION WAS POSSIBLE BECAUSE THE POWER U/S ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 74 263 CAN BE INVOKED ONLY IN CASES OF LACK OF INQUIRY AND NOT INADEQUATE INQUIRY. WE PARTLY AGREE WITH THE CONTENTION THAT W HERE AN INQUIRY IS CONDUCTED BY THE AO AND HE GETS SATISFIED WITH THE GENUINENESS OF THE TRANSACTION, THEN THE CIT CANNOT INTERVENE THROUGH REVISION FOR COMING TO A CONCLUSION THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE CRUX OF THE MATTER IS THAT THE AO SHOULD CONDUCT INQUIRY TO SAT ISFY HIMSELF ABOUT THE GENUINENESS OF TRANSACTIONS. SCOPE OF THE TERM `INQ UIRY CAN BE DIVERSE IN DIFFERENT CIRCUMSTANCES. THERE CAN BE NO STRAITJ ACKET FORMULA TO POSITIVELY CONCLUDE AS TO THE CONDUCTING OR NON-CON DUCTING OF AN `INQUIRY BY THE AO. WHILE, IN SOME CASES, COLLECTI ON OF NECESSARY MATERIAL BY THE AO MAY GIVE AN INFERENCE ABOUT CON DUCTING AN `INQUIRY, IN OTHERS, MERE OBTAINING AND PLACING TH E DOCUMENTS ON RECORD MAY NOT BE EQUALIZED WITH CONDUCTING AN INQUIRY. IT DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. WHERE THE FAC TS ARE JUST ORDINARY AND PRIMA FACIE THERE IS NOTHING UNTOWARD THE RECORDED TRANSACTION , THE OBTAINING OF THE DOCUMENTS AND THE APPLICATION OF M IND THEREON, WITHOUT A FURTHER OUTSIDE INQUIRY, MAY MEAN THAT THE AO DID CONDUCT INQUIRY, ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 75 LEAVING THE QUESTION OPEN AS TO WHETHER IT WAS A PR OPER OR AN IMPROPER ENQUIRY. BUT, WHERE THE FACTUAL SCENARIO OF A CASE PRIMA FACIE INDICATES ABNORMALITIES AND CRY FOR LOOKING DEEP INTO IT, THE N A MERE COLLECTION OF DOCUMENTS CANNOT BE HELD AS CONDUCTING INQUIRY, LEA VE ASIDE, ADEQUATE OR INADEQUATE. IN SUCH LATER CASES, ONLY WHEN THE A O, AFTER COLLECTION OF THE INITIAL DOCUMENTS, EMBARKS UPON THE FURTHER DET AILED INVESTIGATION, THAT WE CAN SAY THAT HE CONDUCTED INQUIRY. WHERE TH E FACTS OF A PARTICULAR TRANSACTION GRAVELLY DEMONSTRATE ABOUT ITS NON-GENU INENESS AND EVEN A CASUAL LOOK AT SUCH FACTS, PRIMA FACIE , DIVULGES FOUL PLAY, THEN THE AO MUST MAKE FURTHER EXAMINATION. COLLECTION AND PLACE MENT OF PAPERS ON RECORD IN SUCH A SITUATION CANNOT BE CONSTRUED AS C ONDUCTING A PROPER INQUIRY. IF IN SUCH CIRCUMSTANCES, THE AO SIMPLY GA THERS DOCUMENTS AND KEEPS THEM ON RECORD, THEN SUCH NOMINAL INQUIRY FAL LS WITHIN THE OVERALL CATEGORY OF `NO INQUIRY BECAUSE OF THE INACTION ON THE PART OF THE AO TO READ A WRITING ON THE WALL. 18.6. AT THIS JUNCTURE, WE WOULD LIKE TO DEAL WIT H THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN CIT VS. MAITHAN INTERNATIONAL (2015) ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 76 375 ITR 123 (CAL) . THE ASSESSEE IN THAT CASE OBTAINED LOANS AGGREGA TING TO RS.1.60 CRORE FROM SIX PRIVATE LIMITED COMPANIES RANGING BETWEEN RS.7 LAC TO RS.1.10 CRORE. THESE COMPANIES HAD FILE D THEIR RETURNS WITH NOMINAL INCOME. THE AO MENTIONED IN THE ASSESSMENT ORDER THAT INSPECTOR WAS DEPUTED TO VERIFY FRESH LOANS RECEIVE D DURING THE YEAR. THE INSPECTOR VERIFIED SUCH LOANS AND GAVE A POSITIVE R EPORT. KEEPING SUCH REPORT ON RECORD, THE AO ACCEPTED THE GENUINENESS O F THE TRANSACTIONS. THE CIT INVOKED SECTION 263 BY OBSERVING THAT THE R EPORT GIVEN BY THE INSPECTOR WAS VERY ELEMENTARY AND SIMPLY MENTIONED THAT HE HAD VERIFIED BANK PASSBOOKS, PROFIT & LOSS ACCOUNT AND BALANCE SHEETS OF THESE COMPANIES. IN NONE OF THE REPORTS, HE HAD COM MENTED ON THE ISSUE OF CREDIT WORTHINESS OF THE PARTIES. THE CIT OPINED THAT THE AO WAS REQUIRED TO MAKE PROPER INVESTIGATION TO DETERMINE WHETHER THE LOANS WERE REALLY MADE BY THE THIRD PARTIES OR THEY HAD C OME OUT OF THE SOURCES OF THE ASSESSEE HIMSELF. THE TRIBUNAL SET ASIDE THE ORDER U/S 263 OF THE ACT BY OBSERVING THAT THE AO DID CONDUCT INQUIRY AN D: IF THERE IS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE LD. CIT TO PASS ORDER U/S 263 OF THE ACT. SETTING ASIDE THE ORDER PASSED ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 77 BY THE TRIBUNAL, THE HONBLE HIGH COURT LAID DOWN T HAT : CIT HAD REASONS TO HOLD THAT CREDIT WORTHINESS OF THE ALLEG ED LENDERS WAS NOT ENQUIRED INTO. IT FURTHER WENT ON TO HOLD THAT A M ERE EXAMINATION OF THE BANK PASSBOOK, PROFIT & LOSS ACCOUNT AND BALANCE SH EET WAS NOT ENOUGH. WHEN THE REQUISITE INQUIRY WAS NOT MADE, THE HONBL E HIGH COURT HELD THAT, THE ASSESSMENT ORDER WAS TO BE TREATED AS ERR ONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT ALSO SET ASIDE THE VIEW OF THE TRIBUNAL ON INADEQUATE ENQUIRY BY HOLDING THAT: IF THE RELEVANT ENQUIRY WAS NOT MADE, IT MAY IN APPROPRIATE CASES AMOUNT TO NO ENQU IRY AND MAY ALSO BE A CASE OF NON-APPLICATION OF MIND. IT FURTHER OBSERVED THAT THE QUESTION OF INADEQUATE ENQUIRY SHOULD BE UNDERSTOOD IN ITS P ROPER PERSPECTIVE AND: IF IT CAN BE SHOWN THAT THE INADEQUATE ENQUIR Y LED THE AO OR MAY HAVE LED INTO ASSUMPTION OF INCORRECT FACTS, THAT C OULD MAKE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. SETTING A BAD TREND HAS ALSO BEEN HELD TO BE PREJUDICIAL TO THE R EVENUE. SIMILAR VIEW HAS BEEN RECENTLY TAKEN BY THE HONBLE CALCUTTA HIG H COURT IN RAJMANDIR ESTATES P. LTD. VS. PR. CIT (2016) 386 IT R 162(CAL). ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 78 18.7. WHEN WE COMPARATIVELY CONSIDER THE INSTANT CASE VIS-A-VIS MAITHAN INTERNATIONAL (SUPRA), IT CAN BE SEEN THAT THE FACTS UNDER CONSIDERATION ARE ON A MUCH WEAKER FOOTING. IN THE PRESENT CASE, THE AO OBTAINED CERTAIN DOCUMENTS AND GOT SATISFIED, WHERE AS IN THE CASE OF MAITHEN INTERNATIONAL (SUPRA) , AN INSPECTOR WAS ALSO DEPUTED TO CONDUCT A FURTHER INQUIRY IN ADDITION TO THE COLLECTION OF DOCUMENTS ETC. AS HAS BEEN DONE IN THE INSTANT CASE. 18.8. DECISION OF THE HONBLE FULL BENCH OF THE G UWAHAT HIGH COURT IN THE CASE OF JAWAHAR BHATTACHARJEE REPORTED IN (2012) 341 ITR 43 4 (GAU.) (FB) IS ALSO AN AUTHORITY FOR THE PROPOSITION THAT : NO T HOLDING SUCH ENQUIRY AS IS NORMAL AND NOT APPLYING MIND TO THE RELEVANT MATERIAL IN MAKING AN ASSESSMENT WOULD CERTAINLY BE ERRONEOU S ASSESSMENT WARRANTING EXERCISE OF REVISIONAL JURISDICTION. 18.9. TESTING THE FACTS OF THE PRESENT CASE ON T HE TOUCHSTONE OF THE RATIO DECIDENDI OF THE ABOVE CASES, WE HAVE NO HESITATION IN HOLDIN G THAT THE PRESENT CASE IS A GLARING EXAMPLE OF NOT MAKING RELEVANT INQUIRY, WHICH AMOUNTS TO `NO INQUIRY AND HENCE IT BECOMES A CASE OF NON- ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 79 APPLICATION OF MIND BY THE AO. ADMITTEDLY, THE ASSE SSING OFFICER DID ISSUE NOTICES AND OBTAINED REPLIES FROM THE ASSESSE E. BUT, WHEN THE PRIMARY FACTS AS BROUGHT ON RECORD THROUGH THE REPL IES OF THE ASSESSEE, STATEMENT OF SHRI ANAND CHAUHAN AND OTHER RELEVANT MATERIAL OBTAINED FROM THE ASSESSING OFFICER OF SHRI ANAND CHAUHAN, W ERE POINTING OUT OBJECTIVELY TOWARDS A NEED TO CARRY OUT FURTHER INV ESTIGATION, WHICH THE ASSESSING OFFICER FAILED, IT WILL BE CALLED AS A CA SE OF PASSING THE ASSESSMENT ORDER IN UNDUE HASTE WITHOUT APPLICATION OF MIND. THIS ARGUMENT, THEREFORE, FAILS. II. DEBATABLE ISSUE 19.1. THE LD. AR THEN CONTENDED THAT THE AO TOOK A POSSIBLE VIEW IN ACCEPTING THE GENUINENESS OF AGRICULTURAL INCOME. I T WAS STATED THAT THE LD. CIT TOOK ANOTHER VIEW IN NOT ACCEPTING THE GENU INENESS OF TRANSACTION ON THE SAME SET OF FACTS. TAKING A POSS IBLE VIEW ON A DEBATABLE ISSUE, IN THE OPINION OF THE LD. AR, TOOK THE ASSESSMENT ORDER OUT OF THE PURVIEW OF REVISION U/S 263. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE JUDGMENT OF THE HON'BLEBLE SUPREME C OURT IN THE CASE OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 80 MALABAR INDUSTRIAL COMPANY VS. CIT (2000) 243 ITR 8 3 (SC). IN FACT, THE LD. DR ALSO RELIED ON THIS JUDGMENT TO BUTTRESS HIS POINT. 19.2. SINCE BOTH THE SIDES HAVE HEAVILY BANKED ON THIS JUDGMENT, LET US EXAMINE THE FACTS OF THE CASE. THE ASSESSEE THEREIN ENTERED INTO AN AGREEMENT FOR SALE OF THE ESTATE OF RUBBER PLANTATI ON. THE AGREEMENT PROVIDED FOR PAYMENT OF THE CONSIDERATION IN INSTAL MENTS. THE PURCHASER COULD NOT ADHERE TO THE SCHEDULE AND, ON HIS REQUES T, THE PARTIES AGREED TO THE EXTENSION OF TIME FOR PAYMENT OF INSTALMENTS ON THE CONDITION OF HIS PAYING COMPENSATION/DAMAGES FOR LOSS OF AGRICULTURA L INCOME. THE PURCHASER PAID THIS AMOUNT. IN THE ANNEXURE TO THE RETURN, THE ASSESSEE NOTED IT AS A COMPENSATION FOR LOSS OF AGRICULTURAL INCOME WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. THE CIT INVOKED HIS REVISIONARY POWER CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WH Y THIS AMOUNT OF COMPENSATION/DAMAGES BE NOT TREATED AS INCOME CHARG EABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST EX EMPT AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER. AFTER CONSIDERING THE REPLY, THE CIT SET ASIDE THE ASSESSMENT ORDER. THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 81 TRIBUNAL DISMISSED THE ASSESSEES APPEAL. WHEN THE MATTER FINALLY CAME UP FOR ADJUDICATION BEFORE THE HON'BLEBLE SUPREME COURT, THEIR LORDSHIPS APPROVED THE REVISIONARY ORDER BY HOLDING THAT : AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF L AW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE S AME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NA TURAL JUSTICE OR . PASSED WITHOUT APPLICATION OF MIND. THEIR LORDSHIPS FURTHER HELD THAT THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS OF WIDE IMPORT. THUS, IT IS APPARENT THAT THE NON-APPL ICATION OF MIND BY THE ASSESSING OFFICER VALIDLY BRINGS AN ASSESSMENT ORDE R WITHIN THE FOLD OF SECTION 263. THIS JUDGMENT SUPPORTS THE VIEW OF THE LD. DR. 19.3. THE RELIANCE OF THE LD. AR ON THIS JUDGMEN T TO CONTEND THAT IF TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER TAKES ONE POSSIBLE VIEW, THE CIT CANNOT REVISE THE ORDER, IS DEFINITELY A SETTLE D POSITION NOT REQUIRING ANY DEBATE. BUT THE FACT OF THE MATTER IS THAT BEF ORE CATEGORIZING A PARTICULAR ISSUE WITHIN THE KEN OF `DEBATABLE ISSUE , IT IS SINE QUA NON THAT THERE SHOULD BE TWO POSSIBLE VIEWS. THE LD. AR HAS ALSO RELIED ON THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 82 JUDGMENT OF THE HONBLE SUMMIT COURT IN MAX INDIA LTD. (SUPRA) FOR THE SAME PROPOSITION. IT HAS BEEN HELD IN THE LATER CASE THAT NO REVISION IS POSSIBLE ON A DEBATABLE ISSUE. IN THIS CASE, WHEN T HE CIT PASSED THE IMPUGNED ORDER UNDER S. 263, TWO VIEWS WERE INHEREN TLY POSSIBLE ON THE MEANING OF THE WORD 'PROFITS' OCCURRING IN THE PROV ISO TO SECTION 80HHC(3). SUBSEQUENT AMENDMENT OF SECTION 80HHC WAS MADE IN THE YEAR 2005, THOUGH RETROSPECTIVELY. THE HONBLE APEX COURT HELD THAT IT DID NOT RENDER THE ORDER OF THE AO ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE AND CIT COULD NOT EXERCISE POWER UNDER SECTION 263. BE THAT AS IT MAY, WE FIND THAT TO BRING A CA SE WITHIN THE FOUR CORNERS OF A DEBATABLE ISSUE AND THE ASSESSING OFFI CER FOLLOWING ONE POSSIBLE VIEW, IT IS NECESSARY THAT HE SHOULD HAVE TAKEN A LEGALLY SUSTAINABLE VIEW. IF THE ASSESSING OFFICER SIMPLY ACCEPTS THE CONTENTION ADVANCED BEFORE HIM WITHOUT REQUIRING ANY INVESTIGA TION WHICH IS PRIMA FACIE WARRANTED, IT CANNOT BE SAID THAT THE ASSESSING OF FICER TOOK A POSSIBLE VIEW, WHICH THE CIT COULD NOT REVISE U/S 2 63. IF THE CONTENTION OF THE LD. AR IS UPHELD THAT WHEN THE AO DECIDES A PARTICULAR ISSUE, RIGHTLY OR WRONGLY, HE TAKES A POSSIBLE VIEW, THEN THE PROVISIONS OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 83 SECTION 263 WILL BE RENDERED REDUNDANT. IN FACT, I T IS ONLY WHEN THE AO TAKES ONE VIEW ON THE MATTER, WHICH IS LEGALLY SUST AINABLE AT THAT POINT OF TIME, THAT THE POWER OF CIT U/S 263 IS OUSTED. TAKI NG A WRONG VIEW ON A MATTER OR BLINDLY ACCEPTING THE CASE WITHOUT ANY AP PLICATION OF MIND, DO NOT FALL WITHIN THE REALM OF THE AO TAKING A POSSIB LE VIEW SO AS TO FORBID THE CIT FROM EXERCISING REVISIONARY POWER. 19.4. WE FIND THAT THE FACTS AND THE RATIO DECIDENDI OF MAX INDIA LTD. (SUPRA) ARE NOWHERE CLOSE TO THE FACTS PREVAILING IN THE I NSTANT CASE. IT IS NOT THE CASE THAT THE AO TOOK A POSSIBLE VIEW, WHIC H THE LD. CIT SUBSTITUTED WITH HIS OWN VIEW. RATHER, WE ARE CONFR ONTED WITH A SITUATION IN WHICH THE AO REMAINED PASSIVE AND DID NOT EITHER OBTAIN THE RELEVANT INFORMATION OR DID NOT ACT ON THE MATERIAL AS WAS T HERE BEFORE HIM, WHICH EX FACIE REQUIRED THOROUGH VERIFICATION. SO, THIS IS A CASE OF NOT TAKING A VIEW AT ALL AND NOT THAT OF TAKING A POSSIBLE VIEW ON THE MATTER. THE HONBLE SUPREME COURT IN THE ABOVE CASE HAS HELD TH AT WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WH ICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 84 INTEREST OF THE REVENUE ` UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW . THE INSTANT CASE IS COVERED UNDER THE EXCEPTION A S ITALICIZED, BEING THE AO TAKING A VIEW WHICH IS NOT SUSTAINABLE IN LAW. TURNING TO THE FACTS, WE FIND THAT THE AO SIMPLY AC CEPTED THE MATERIAL AVAILABLE BEFORE HIM. NO QUASI JUDICIAL AUTHORITY EQUIPPED WITH A SOUND MIND COULD HAVE FORMED A VIEW AS TO THE GENUINENESS AND THE CORRECTNESS OF THE EXTENT OF AGRICULTURAL INCOME DE CLARED BY THE ASSESSEE IN THE GIVEN CIRCUMSTANCES WITHOUT FURTHER INVESTIG ATION. THUS, IT IS WHOLLY INAPT TO CONTEND THAT THE ASSESSING OFFICER MADE PROPER INQUIRY AND TOOK A POSSIBLE VIEW IN ACCEPTING THE DECLARED AGRICULTURAL INCOME AS SUCH. III. CIT SHOULD HAVE HIMSELF SHOWN INFIRMITY IN THE ASSESSMENT ORDER RATHER THAN SENDING THE MATTER BACK TO THE AO 20.1. THE LD. AR, RELYING ON CERTAIN DECISIONS, CONTENDED THAT BEFORE BRANDING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE, IT WAS INCUMBENT UPON THE CIT TO EXPRESSLY SHOW MISTAKES IN THE ASSESSMENT ORDER MAKING IT ERR ONEOUS AND ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 85 PREJUDICIAL TO THE INTEREST OF THE REVENUE. A MERE MENTION IN THE ORDER OF THE CIT THAT PROPER INQUIRY WAS NOT CONDUCTED, IN T HE OPINION OF THE LD. AR, WAS AN INCORRECT APPRECIATION OF THE PROVISIONS OF SECTION 263. SO LONG AS THERE IS AN EVIDENCE ON THE RECORD OF THE A O ABOUT CONDUCTING OF A PROPER INQUIRY, THE LD. AR ARGUED, THAT THE LD. C IT CANNOT INVOKE THE PROVISIONS OF SECTION 263. THE SUM AND SUBSTANCE OF THE SUBMISSION WAS THAT BEFORE ASSUMING JURISDICTION U/S 263, THE LD. CIT WAS SUPPOSED TO POINT OUT WHERE THE AO WENT WRONG. IT WAS FURTHER SUBMITTED THAT IF THE LD.CIT WAS NOT SATISFIED WITH THE INCOME ACCEPTED B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, HE SHOULD HAVE HIM SELF CARRIED OUT THE NECESSARY INVESTIGATION DURING THE COURSE OF PROCEE DINGS U/S 263 AND DETERMINED THE AMOUNT OF INCOME WHICH THE ASSESSEE, IN HIS OPINION, GENUINELY EARNED FROM AGRICULTURAL OPERATIONS. 20.2. WE AGREE WITH THE LEGAL PROPOSITION ADVANCE D BY THE LD. AR, BUT IN OUR CONSIDERED OPINION, THE SAME DOES NOT APPLY TO THE FACTS OF THE INSTANT CASE. SUCH A PROPOSITION APPLIES WHERE THE AO HAS MADE PROPER ENQUIRY AND STILL COMES TO A WRONG CONCLUSION, WHIC H RENDERS THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 86 ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. IN SUCH CIRCUMSTANCES, IT BECOMES THE DUTY OF THE C IT TO EXPRESSLY POINT OUT WHERE THE AO WENT WRONG ON MERITS. BUT IN A CAS E, WHERE NO INQUIRY HAS BEEN CONDUCTED AT ALL OR THE SO-CALLED INQUIRY CONDUCTED BY THE AO IS AS GOOD AS NO ENQUIRY, AS IS THE CASE UNDER CONS IDERATION, IN SUCH CIRCUMSTANCES, THE CIT SIMPLY NEEDS TO POINT OUT TH OSE RELEVANT ASPECTS OF ASSESSMENT, WHICH THE AO LOST SIGHT OF, BUT WERE REQUIRED TO BE PROPERLY PROBED. IN SUCH CASES, THE ASSESSMENT ORD ER IS SET ASIDE WITH THE DIRECTION TO THE AO FOR LOOKING INTO THE MATTER AFRESH AND THEN DECIDING THE ISSUE PROPERLY. THERE CAN BE NO WAY FO R THE CIT TO TELL ERRONEOUS APPROACH OF THE AO ON MERITS IN SUCH CIRC UMSTANCES BECAUSE THE VIEW OF THE AO ON MERITS IS NOT AVAILABLE. REQU IRING THE CIT TO INDICATE WHERE THE AO WENT WRONG ON MERITS IN `NO I NQUIRY CASES, IS LIKE REQUIRING AN IMPOSSIBLE THING TO BE DONE. IT I S AXIOMATIC THAT THE LAW DOES NOT REQUIRE AN IMPOSSIBLE TO BE COMPLIED WITH. WE ARE REMINDED OF THE LEGAL MAXIM, `LEX NEMINEM COGIT AD VANA SEU IMPOSSIBLIA , WHICH MEANS THAT THE LAW COMPELS NO ONE TO DO IMPOSSIBLE THINGS. WHEN WE APPROACH THE FACTS OF THE CASE UNDER CONSIDERATION, IT BECOMES MANIFEST ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 87 THAT THE EXTENT OF INQUIRY CONDUCTED BY THE AO, BEI NG AS GOOD AS NO INQUIRY, WAS SUFFICIENT IN ITSELF TO EMPOWER THE CI T FOR INVOKING HIS JURISDICTION U/S 263 CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT TO BE MADE. 20.3. OUR VIEW IS FURTHER CORROBORATED BY THE LA NGUAGE OF SECTION 263, WHICH GIVES PLENARY POWERS TO THE CIT BY PROVIDING IN SUB-SECTION (1) THAT THE CIT MAY: PASS SUCH ORDER AS THE CIRCUMSTANCES JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT . THOUGH IT IS WITHIN THE POWER OF THE CIT TO MODIFY THE ASSESSMENT AS HE CONSIDERS EXPEDIENT AFTER MAKING NECESSARY INQUIRY, AT THE SAME TIME, H E IS EQUALLY EMPOWERED TO CANCEL THE ASSESSMENT AND DIRECT A FRE SH ASSESSMENT, OF COURSE, AFTER POINTING OUT THAT THE ASSESSING OFFIC ER FAILED TO MAKE AN INQUIRY AS WAS REQUIRED IN THE CASE. IN THE INSTANT CASE, THE LD.CIT CHOSE THE STATUTORY OPTION GIVEN TO HIM AND TOOK AN UNIMP EACHABLE VIEW IN CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. NO FAULT CAN BE FOUND WITH THE SAME. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 88 20.4. SIMILAR POSITION HAS BEEN LAID DOWN BY THE DELHI HIGH COURT IN GEE VEE ENTERPRISES VS. ADDL. CIT AND OTHERS (1975) 99 ITR 375 (DEL) , IN WHICH THE ASSESSEE WAS INCORPORATED WITH THE OBJ ECT OF ACQUIRING LOAN AND MAKING CONSTRUCTION. IT PURCHASED SOME BUNGALOW AFTER BORROWING LOANS AS ITS SHARE CAPITAL WAS VERY LIMITED. SOME O F THE DIRECTORS AND SHAREHOLDERS OF THAT ASSESSEE COMPANY ENTERED INTO PARTNERSHIP. AN AGREEMENT WAS ENTERED INTO BETWEEN TWO SISTER CONCE RNS. THE PARTNERSHIP WAS TO COMPLETE A MULTI-STORIED BUILDIN G ON THE PLOT AFTER TAKING ADVANCES FROM THE LICENSEE TO WHOM FLATS IN THE BUILDING WERE TO BE ALLOTTED. THE PARTNER WAS TO KEEP 90% OF ITS MON EY AND PAY 10% OF IT TO THE COMPANY AS CONSIDERATION FOR THIS AGREEMENT. IN VIEW OF THE 10% OF THE MONEY SO RECEIVED, THE COMPANY WAS TO ISSUE SHARES TO LICENSEES WHO WERE TO TAKE UP THE FLATS. THE ITO MADE THE ASS ESSMENTS OF THE COMPANY AND THE FIRM ON THAT BASIS APPARENTLY WITHO UT ASCERTAINING THE TRUTH OF THE FACTS. THEREAFTER, REVISION WAS DONE B Y THE CIT AND THE MATTER WENT BEFORE THE HONBLE DELHI HIGH COURT. TH E ASSESSEE CONTENDED THAT THE ITO HAD MADE THE ENQUIRIES AND W AS SATISFIED ABOUT THE TRUTH OF THE FACTS AND HENCE REVISION WAS NOT M AINTAINABLE. REPELLING ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 89 THE CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE, IT WAS HELD THAT THE: CIT WAS JUSTIFIED IN EXERCISING HIS REVISIONAL JUR ISDICTION ON THE GROUND THAT THE ITO HAD NOT MADE SUFFICIENT ENQUIRIES BEFO RE GRANTING REGISTRATION TO THE FIRM AND IT WAS NOT NECESSARY F OR THE CIT TO HAVE HIMSELF MADE ENQUIRIES BEFORE CANCELLING ASSESSMENT . IN OUR CONSIDERED OPINION, THIS JUDGMENT IS AN ANSWER TO THE CONTENTI ON PUT FORTH ON BEHALF OF THE ASSESSEE THAT THE CIT MUST INITIALLY INDICAT E THE MISTAKE IN THE ASSESSMENT ORDER ON MERITS BY MAKING PROPER ENQUIRY AT HIS END BEFORE CANCELLING ASSESSMENT UNDER SECTION 263. THIS JUDGM ENT MAKES IT PALPABLE THAT THE VERY FACT THAT THE ITO HAD NOT M ADE SUFFICIENT ENQUIRIES BEFORE GRANTING REGISTRATION TO THE FIRM WAS CONSIDERED AS SUFFICIENT ENOUGH TO CLOTHE THE CIT WITH THE POWER TO REVISE THE ASSESSMENT ORDER AND IT WAS NOT CONSIDERED NECESSAR Y IN SUCH CIRCUMSTANCES: FOR THE CIT TO HAVE HIMSELF MADE EN QUIRIES BEFORE CANCELLING THE ASSESSMENT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) HOLDING THAT AN ASSESSMENT MADE BY THE AO IN UNDUE HASTE WITHOUT MAKING ANY ENQUIRY WOULD RENDER AN ASSESSMENT ORDER ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 90 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. SIMILAR VIEW HAS BEEN REITERATED BY THE HONBLE APEX COURT IN SMT. TARA DEVI AGGARWAL VS. CIT (1973) 88 ITR 323 (SC ). WE HAVE HELD IN EARLIER PARTS OF THIS ORDER THAT THE ASSESSMENT ORDER UNDER CONSI DERATION WAS PASSED IN UNDUE HASTE, THEREBY MAKING IT RIGHTLY ELIGIBLE FOR REVISION BY THE CIT U/S 263 OF THE ACT. IN VIEW OF THE FOREGOING DISCUS SION, WE ARE SATISFIED THAT THE LD. CIT WAS RIGHT IN SETTING ASIDE THE ASS ESSMENT ORDER AND DIRECTING THE AO TO MAKE A FRESH ASSESSMENT. THE I MPUGNED ORDER IS, THEREFORE, COUNTENANCED. 21. IN THE RESULT, THE APPEAL IS DISMISSED. ANAND CHAUHAN (A.Y. 2010-11) 22. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.3,40,080/- WHICH WAS P ROCESSED U/S 143(1) OF THE ACT. PERUSAL OF THE AIR INFORMATION REVEALE D THAT THE ASSESSEE HAD DEPOSITED HUGE CASH AMOUNTING TO RS.2,12,72,500 IN HIS BANK ACCOUNTS DURING THE YEAR. THIS WAS NOT REFLECTED FR OM THE RETURN OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 91 INCOME. NOTICE WAS ISSUED U/S 148 ON ACCOUNT OF NO N-DISCLOSURE OF BANK ACCOUNTS. THE ASSESSEE FILED REVISED RETURN, BUT, DID NOT SUBMIT ANY INFORMATION IN RESPECT OF CASH DEPOSITS IN THE BANK ACCOUNT. ON SPECIFICALLY REQUIRED TO EXPLAIN CASH DEPOSIT ENTRI ES IN THE PNB ACCOUNT, THE ASSESSEE DEPOSED, VIDE HIS STATEMENT RECORDED O N 23.1.2013, THAT THE CASH DEPOSITED IN THE BANK ACCOUNT PERTAINED TO VIR BHADRA SINGH (HUF) RECEIVED AGAINST THE SALE OF APPLE CROP PURSUANT TO THE MOU DATED 15.6.2008 ENTERED INTO BY VIRBHADRA SINGH (HUF) HIM WITH. IN SUPPORT OF THIS, HE FURNISHED COPIES OF BILLS ISSUED BY M/S UNIVERSAL APPLE ASSOCIATE (UAA) TO WHOM HE SOLD APPLE CROP ON BEHAL F OF VIRBHADRA SINGH (HUF). THE ASSESSING OFFICER ACCEPTED THE ST ATEMENT OF SHRI ANAND CHAUHAN THAT ALL THE ACTIVITIES CARRIED OUT A T SHRIKHAND ORCHARDS, DAMRALI, PERTAINED TO VIRBHADRA SINGH (HUF) AND TH E ASSESSEE WAS ONLY AN AGENT. HE REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF EXPENSES INCURRED FOR THE PURPOSE. THE ASSESSEE GAVE SUCH D ETAILS OF EXPENSES TOTALLING TO RS.35.24 LAC INCLUDING HIS COMMISSION. WHEN ASKED TO SUBSTANTIATE SUCH EXPENSES WITH NECESSARY BILLS AND VOUCHERS, THE ASSESSEE SUBMITTED THAT THESE BILLS WERE DESTROYED AFTER THE OWNER OF THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 92 ORCHARD AGREED ON THE AMOUNT SPENT BY HIM. THE ASS ESSING OFFICER HELD THAT EXPENSES ONLY TO THE TUNE OF RS.15 LAC COULD B E ACCEPTED AS GENUINE AS AGAINST EXPENSES OF RS.29.93 LAC CLAIMED TO HAVE BEEN INCURRED APART FROM COMMISSION TO THE ASSESSEE. HE, THEREFORE, MA DE DISALLOWANCE OF RS.14,93,613/- APART FROM SOME OTHER SMALL DISALLOW ANCE OF RS.25,000/- IN RELATION TO LIC BUSINESS AND DETERMINED TOTAL IN COME AT RS.18,58,700/-. 23. THE LD. CIT, ON PERUSAL OF RECORD, NOTICED T HAT THE ASSESSING OFFICER SIMPLY RELIED UPON THE COMMISSION ISSUED U/ S 131 TO THE ITO, RAMPUR FOR THE A.Y. 2009-10 AND DID NOT INQUIRE ABO UT THE GENUINENESS OF APPLE CROP IN SHRIKHAND ORCHARDS UNDER MOU ARRAN GEMENT. HE FURTHER NOTICED THAT THE ASSESSING OFFICER RESTRICT ED HIS ENQUIRY LIMITS TO FIND OUT THE OWNERSHIP OF LAND AT SHRIKHAND ORCHARD S, DAMRALI MEASURING 105 BIGHAS AND NUMBER OF APPLE TREES ON T HAT, BUT, FAILED TO INQUIRE THE VARIETY OF APPLES ALONG WITH ITS MARKET RATE; WHY SUCH HUGE CROP SALE WAS MADE IN CASH; ACTUAL YIELD OF APPLE F ROM THE ABOVE ORCHARD; AND THE TIME PERIOD IN WHICH APPLE CROP RI PENS AND IS TAKEN TO ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 93 THE MARKET. HE FURTHER HELD THAT THE ASSESSING OFFI CER ACCEPTED THE CLAIM OF SALE PROCEEDS WITHOUT REQUIRING THE ASSESSEE TO LEAD EVIDENCE TO JUSTIFY THE QUANTUM OF APPLE YIELD ON THE ABOVE LAN D. HE STILL FURTHER OBSERVED THAT THE ASSESSING OFFICER SOUGHT DIRECTIO NS FROM THE ADDL. CIT U/S 144A. HE HAS REFERRED TO NON-COMPLIANCE OF SUC H DIRECTIONS BY THE ASSESSING OFFICER. SPECIFIC DETAILS HAVE BEEN GIVE N ON PAGES 9-11 OF THE IMPUGNED ORDER ABOUT THE DIRECTIONS ISSUED BY THE L D. ADDL. CIT U/S 144A WHICH WERE NOT COMPLIED WITH BY THE ASSESSING OFFICER. THE LD. CIT ALSO NOTICED THAT THE ASSESSING OFFICER DID NOT EXAMINE THE GENUINENESS OF THE SALE TRANSACTIONS INASMUCH AS TH E BILLS ISSUED BY UAA WERE NOT PROPER AS THE COLUMNS OF REGISTRATION NUMBER, CONTRACT NUMBER, TRUCK NUMBER, ETC. WERE LEFT BLANK. SERIAL NUMBER ON THE BILLS ALONG WITH DATES WERE ALSO FOUND TO BE NOT IN CHRON OLOGICAL ORDER. THESE WERE COMPUTER GENERATED BILLS AND THE ASSESSING OFF ICER DID NOT MAKE ANY ATTEMPT TO ASCERTAIN THE GENUINENESS OF THE BIL LS. THIS ASPECT HAS BEEN DISCUSSED ON PAGE 12 PARA 5 OF THE IMPUGNED OR DER. HE FURTHER NOTICED THAT THE NET AGRICULTURAL INCOME FROM ORCHA RDS WAS SHOWN AT RS.2.65 CRORE AND ODD, WHEREAS TOTAL INVESTMENT IN PURCHASE OF LIC ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 94 POLICIES IN THE NAME OF VIRBHADRA SINGH (HUF) AND H IS FAMILY MEMBERS WAS RS.3.84 CRORE AND ODD AND THE ASSESSEES EXPLAN ATION THAT THERE WAS SURPLUS CASH IN HAND AT THE BEGINNING OF THE YEAR W AS ACCEPTED WITHOUT ANY VERIFICATION AS TO HOW SHRI CHAUHAN COULD HAVE KEPT CASH OF RS.1.03 CRORE AS ON 1.4.2009 WHEN HE WAS MAINTAINING BANK A CCOUNT ON BEHALF OF VIRBHADRA SINGH (HUF). HE FURTHER NOTICED ON PAGE 22 OF HIS ORDER THAT THE ASSESSING OFFICER DID NOT MAKE ESSENTIAL AND CO NCLUSIVE INQUIRY IN RESPECT OF CASH DEPOSITS IN THE BANK ACCOUNT AND, I N THE ABSENCE OF SUCH INQUIRY, THE CASH DEPOSITS REMAINED UNEXPLAINED WAR RANTING ADDITION U/S 69 OF THE ACT, WHICH THE ASSESSING OFFICER DID NOT CARRY OUT. THE LD.CIT NOTICED ON PAGE 26 OF HIS ORDER THAT THE ASSESSING OFFICER WENT ON INQUIRING ABOUT THE EXPENSES INCURRED WITHOUT EXAMI NING THE SALES ASPECT. HE FOUND THAT: IN THE ABSENCE OF THE REQU ISITE INFORMATION, ONE OF THE ALTERNATIVES LEFT WITH THE A.O. WAS TO MAKE THE REFERENCE TO OTHER APPLE GROWERS, WHICH HE DID NOT. HE SUMMARISED HI S VIEW AS UNDER:- I. THE A.O. FAILED TO ASCERTAIN WHETHER THE SRIKHAND ORCHARD IS CAPABLE TO PRODUCING THIS MUCH QUANTUM OF APPLE PRO DUCE AND TO ASCERTAIN ITS VALUE THAT MAY ENABLE THE ASSESSEE TO RECEIVE HUGE CASH AND DEPOSIT THE SAME INTO BANK ACCOUNTS FROM W HICH THE LIC POLICIES WORTH RS. 3,84,92,500/- CAN BE PURCHASED. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 95 II. THE AO HAS FAILED TO INQUIRE FROM WHERE THE ASSESSE E HAS INVESTED THE OVER AND ABOVE FUNDS FOR PURCHASING TH E LIC POLICIES WORTH RS. 3,84,92,500/- WHEN THE AGRICULTU RE INCOME WAS RS.2,65,92,500/- MEANING THEREBY THE UNEXPLAINED SO URCE OF RS. 1.19 CRORES. III. THE ASSESSEE CLAIMED THAT IN THE PREVIOUS YEAR I.E. A.Y. 2009-10, HE HAD SOLD APPLE CROP WORTH 89 LAC TO THE VISITING TRADERS OF WHICH NO EVIDENCE WAS OBTAINED BY THE A.O. BY ACCEP TING THIS CONTENTION OF THE ASSESSEE WITHOUT ANY DOCUMENTARY EVIDENCE AND ALSO THE VERSION OF THE ASSESSEE THAT THERE WAS CAS H IN HAND OF THE PREVIOUS YEAR TO MAKE THE A.O. FAILED TO ARRIVE AT THE RIGHT CONCLUSION THAT THIS UNEXPLAINED SOURCE OF RS. 1.19 CRORE IS TO BE FIXED IN THE A.Y. 2010-11. IV. THE A.O. HAS FAILED TO COMPLY THE DIRECTIONS OF THE ADDL. COMMISSIONER OF INCOME TAX, SHIMLA RANGE, SHIMLA U/ S 144A OF THE INCOME TAX, 1961 AS DISCUSSED IN ABOVE PARAS AND MORE PARTICULARLY TO ASCERTAIN THE QUANTUM OF THE AGRICU LTURE APPLE CROP FROM OTHER MAJOR PRODUCERS OF THE SAME AREAS AS WEL L AS FROM HORTICULTURE DEPARTMENT AND OTHER RELEVANT AGENCIES REGARDING PER TREE YIELD AND RATE. 24. IN THE LIGHT OF THE FOREGOING DISCUSSION, THE LD. CIT HELD THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. THE SAME WAS SET ASIDE AND THE ASSESSING OFFICER WAS DIRECTED TO FRAME A FRESH ASSESSMENT IN ACCORDANCE WITH THE LAW, FACTS AND AFTER MAKING DUE INQUIRIES. THE ASSESSEE IS AGGRIEVED AG AINST THE FINDINGS RECORDED BY THE LD.CIT. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 96 25. THE LD. AR SUBMITTED THAT THE ASSESSING OFFI CER CONDUCTED PROPER INQUIRIES IN THIS CASE. IN SUPPORT OF THE SAME, HE RELIED ON THE NOTICE DATED 10.1.2013 ISSUED BY THE ASSESSING OFFICER CAL LING FOR INFORMATION DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE S REPLY THERETO WHICH IS AVAILABLE AT PAGES 9-14 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE STATEMENT OF SHRI ANAND CHAUHAN WAS RECORD ED WHOSE COPY IS AVAILABLE ON PAGE 15 OF THE PAPER BOOK. HE ALSO RE FERRED TO THE OFFICE NOTE, WHICH IS PART OF THE ASSESSMENT ORDER, AS GIV EN ON PAGE 143 ONWARDS OF THE DEPARTMENTAL PAPER BOOK. THE LD. AR CONTENDED THAT ALL THE ISSUES ACCEPTED BY THE ASSESSING OFFICER HA VE BEEN DISCUSSED IN THE OFFICE NOTE IN WHICH HE, INTER ALIA, ACCEPTED THE GENUINENESS OF THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE FROM SHRI KHAND ORCHARD, DAMRALI, UNDER THE MOU ARRANGEMENT. IT WAS, THUS ARGUED THAT THERE WAS NO REASON TO BRAND THE ASSESSMENT ORDER ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, SO AS TO QUALIFY FOR REVISION U/S 263 OF THE ACT. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 97 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. BEFORE PROCEEDING FURTHER, WE W ANT TO RECORD THAT SH. SUDHIR SEHGAL, THE LD. AR RAISED ALL THE PRELIMINAR Y OBJECTIONS ABOUT THE SCOPE OF EVIDENCE, ADDITIONAL EVIDENCE AND PASSING OF SEPARATE ORDER BEFORE ADMISSION OF ADDITION EVIDENCE, AS WERE RAIS ED IN THE CASE OF VIRBHADRA SINGH (HUF). FOR THE REASONS GIVEN IN OU R ORDER PASSED ABOVE IN THE CASE OF VIRBHADRA SINGH (HUF), SUCH OB JECTIONS ARE NOT ALLOWED. 27. ON MERITS, WE FIND THAT THE ASSESSING OFFIC ER ACCEPTED THE ASSESSEES EXPLANATION THAT HE CARRIED OUT ACTIVITI ES AT SHRIKHAND ORCHARDS, DAMRALI, ON BEHALF OF VIRBHADRA SINGH (H UF) AND ALSO ACCEPTED THAT THE DEPOSITS MADE IN THE ASSESSEES B ANK ACCOUNT WERE ON ACCOUNT OF GENUINE CROP SALES MADE BY HIM. IN DOIN G SO, HE RELIED ON THE PROCEEDINGS OF ASSESSMENT FOR THE PRECEDING YEAR IN THE ASSESSEES OWN CASE. WE FIND THE ASSESSEES PLEA ABOUT THE AO CAL LING FOR THE DETAILS AS NOTED ABOVE IS CORRECT, TO THIS EXTENT. HOWEVER, I N OUR CONSIDERED OPINION, THE SO-CALLED INQUIRY MADE BY THE ASSESSIN G OFFICER IS NOTHING ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 98 SHORT OF A MERE SIGHTLESS ACCEPTANCE OF THE ASSESSE ES VERSION WITHOUT ANY VERIFICATION. IN OTHER WORDS, THIS IS AS GOOD AS `NO INQUIRY CONDUCTED BY THE ASSESSING OFFICER IN THE GIVEN FAC TS AND CIRCUMSTANCES. WE HAVE MADE ELABORATE DISCUSSION ABOVE ON THIS ASP ECT IN OUR ORDER PASSED IN THE CASE OF VIRBHADRA SINGH (HUF) FOR THE SAME ASSESSMENT YEAR. SINCE THE TRANSACTIONS UNDER CHALLENGE IN THE CASE OF THE ASSESSEE ARE, IN FACT, THE TRANSACTIONS OF VIRBHADRA SINGH ( HUF), WE DO NOT WISH TO REPEAT THE SAME HERE ONCE AGAIN AND ADOPT THEM A S SUCH. 28. APART FROM THE ABOVE, WE ARE INCLINED TO UPH OLD THE IMPUGNED ORDER ON THE FOLLOWING FURTHER REASONS. I. THE ASSESSEE KEPT ON ASKING THE ASSESSING OFFICE R TO CALL VIRBHADRA SINGH (HUF) AND MAKE NECESSARY INQUIRIES ABOUT THE TRANSACTIONS CONCERNING SHRIKHAND ORCHARDS, DAMRALI, WHICH THE ASSESSING OFFICER DID NOT. HE SIMPLY ACCEPTED THE ASSESSEES POINT O F VIEW ON ALL THE TRANSACTIONS PERTAINING TO VIRBHADRA SINGH (HUF) WI THOUT EVEN BOTHERING TO TAKE ANY CONFIRMATION FROM IT. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 99 II. THE ASSESSEE STATED BEFORE THE ASSESSING OFFI CER IN HIS STATEMENT, WHICH IS AVAILABLE ON PAGE 15 OF THE ASSESSEES PAP ER BOOK, THAT ROUGHLY 80% OF THE SALES WERE MADE TO UAA AND REST OF THE S ALES WERE MADE TO VISITING TRADERS. AS AGAINST THAT, THE ASSESSEE HA D SHOWN SALES ONLY TO UAA. THE AO COMPLETELY LOST SIGHT OF THE FACT THAT WHY THE REMAINING 20% SALE, AS ADMITTED BY SHRI ANAND CHAUHAN, WERE N OT RECORDED. III. THE ASSESSING OFFICER FAILED TO NOTE THAT THE BILLS ISSUED BY UAA DID NOT REFER TO QUALITY OF APPLE, WHEREAS THERE WERE W IDE VARIATIONS IN THE SALE RATES. THIS CAN BE SEEN FROM PAGE 84 OF THE DE PARTMENTAL PAPER BOOK WHICH IS BILL NO.3540 DATED 12.8.2009 OF UAA. THERE IS REFERENCE TO 310 CASES IN WHICH RATE HAS BEEN SHOWN AS RS.900 PER BOX AND FOR ANOTHER 105 CASES, THE RATE IS RS.550/- PER BOX. O N BILL NO.1989 DATED 19.8.2009, THE RATE CHARGED FOR 403 CASES HAS BEEN SHOWN AS RS.1780/- PER CASE. THERE IS NO REFERENCE TO ANY QUALITY OF T HE APPLES SOLD. WHILE DISCUSSING THE CASE OF VIRBHADRA SINGH (HUF), WE HA VE NOTICED SEVERAL ANOMALIES IN SUCH SALE BILLS ISSUED BY UAA, BEING A PURCHASER. IT IS ONLY A SELLER, WHO ISSUES BILLS AND NOT THE PURCHAS ER. IT IS FURTHER ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 100 OBSERVED THAT THERE IS INCONSISTENCY IN THE BILL NU MBERS AND DATES. WHEREAS BILL DATED 12.8.2009 IS HAVING NUMBER 3540, THE BILL OF A LATER DATE, NAMELY, 19.8.2009 IS HAVING NO.1989. NUMBERI NG ON THE BILLS SHOULD HAVE BEEN THE OTHER WAY ROUND. THOUGH THESE BILLS WERE AVAILABLE WITH THE ASSESSING OFFICER, BUT HE DID NOT NOTICE T HESE GLARING DEFICIENCIES. IV. THE ASSESSING OFFICER OBSERVED VIDE HIS NOTIC E DATED 8/11.3.2013, WHOSE COPY IS PLACED AT PAGE 19 ONWARDS OF THE ASSE SSEES PAPER BOOK, THAT THE AMOUNTS SHOWN AS CASH RECEIVED FROM UAA AN D THE AMOUNT DEPOSITED IN THE BANK INDICATED THAT A HUGE SUM OF RS.2.91 CRORE FROM THE ALLEGED SALE OF CROP REMAINED WITH THE ASSESSEE FOR A PERIOD OF MORE THAN SIX MONTHS; RS.2.41 CRORE REMAINED WITH THE AS SESSEE FOR TWO MONTHS; APART FROM A SUM OF RS.1.41 CRORE REMAINING WITH THE ASSESSEE FOR A PERIOD OF 25 DAYS ETC. WHILE DISCUSSING THE CASE OF VIRBHADRA SINGH (HUF) ABOVE, WE HAVE OBSERVED THAT THE MOU RE QUIRED THE ASSESSEE TO DEPOSIT CASH IN BANK ACCOUNT SO AS TO E ARN BETTER RETURNS. DESPITE NOTICING THAT A HUGE CASH OUT OF SALE PROCE EDS WAS SHOWN TO ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 101 HAVE REMAINED WITH THE ASSESSEE AT HIS HOUSE, THE A SSESSING OFFICER DID NOT PROCEED TO DISCOVER THE REASONS FOR DEVIATION F ROM THE TERMS OF THE MOU, WHICH IS A CRUCIAL FACTOR AND REQUIRED INVESTI GATION, WHICH THE AO DID NOT. V. AS REGARDS THE GENUINENESS OF AGRICULTURAL INC OME SHOWN BY THE ASSESSEE FROM SHRIKHAND ORCHARDS, DAMRALI UNDER THE MOU ARRANGEMENT, THE ASSESSING OFFICER MENTIONED IN HIS OFFICE NOTE ANNEXED TO THE ASSESSMENT ORDER THAT IN THE ASSESSMENT OF T HE ASSESSEE FOR THE A.Y. 2009-10, THE ASSESSING OFFICER ISSUED COMMISSI ON TO THE ITO, RAMPUR, BUSHAHR, SHIMLA IN ORDER TO VERIFY THE AREA UNDER ORCHARD LAND HOLDING AND NUMBER OF TOTAL APPLE TREES. HE LEFT TH IS ASPECT FROM CONSIDERATION FOR THE YEAR UNDER CONSIDERATION BY O BSERVING : THEREFORE, VERIFICATION OF THESE FACTS, AGAIN, WAS NOT REQUIRE D. FURTHER, SALE OF APPLE CROP TO M/S UNIVERSAL APPLE ASSOCIATES IS VERIFIABL E FROM SALE BILLS AS WELL AS BOOKS OF ACCOUNT. THIS SHOWS THAT THE ASSE SSING OFFICER SIMPLY RELIED ON THE PROCEEDINGS FOR THE A.Y. 2009-10 FOR HOLDING THE AGRICULTURAL INCOME OF THE CURRENT YEAR TO BE GENUI NE. NO VERIFICATION ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 102 WAS MADE FOR THE TRANSACTIONS OF THE CURRENT YEAR. HE FURTHER HELD THAT SALE TO UAA WAS VERIFIABLE FROM SALE BILLS. WE HAV E NOTICED IN AN EARLIER PARA ABOUT THE VERACITY OF SALE BILLS ISSUE D BY UAA. THESE BILLS WERE ALTHOUGH AVAILABLE WITH THE ASSESSING OFFICER, BUT, HE DID NOT NOTICE THE ALARMING INCONSISTENCIES IN THEM AS HAVE BEEN D ISCUSSED ABOVE. VI. IN OFFICE NOTE NO.2 TO THE ASSESSMENT ORDER, THE ASSESSING OFFICER STATED THAT SALE OF RS.89.80 LAC WAS MADE TO VISITI NG TRADERS IN ADDITION TO SALE OF RS.1.50 CRORE TO UAA. HE RECORDED THAT: THE ASSESSEE, HOWEVER, DID NOT PROVIDE DETAILS OF SUCH VISITING TRADERS. THEREFORE, THIS INFORMATION IS BEING PASSED ON TO THE ACIT, SHIMLA, FOR TAKING NECESSARY ACTION, IF ANY, REQUIRED IN THE CASE OF SHRI VIRBHA DRA SINGH FOR A.Y. 2009-10 ON THE BASIS OF THIS FACT. WHEN THE ASSESS ING OFFICER HIMSELF NOTICED THAT CASH SALE OF RS.89.80 LAC WAS ADMITTED BY THE ASSESSEE TO HAVE BEEN MADE TO VISITING TRADERS, IT WAS OBLIGATO RY ON HIS PART TO SEE WHERE SUCH SALE WAS RECORDED IN THE BOOKS OF ACCOUN T. AS AGAINST THIS POSITION, THE LD.AR ADMITTED THAT SALE OF RS.89.80 LAC WAS NOT MADE DIRECTLY TO VISITING TRADERS, BUT THE ENTIRE SALE A MOUNTING TO RS.2.39 CRORE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 103 WAS MADE TO UAA. THE AO, INSTEAD OF EXAMINING THE ISSUE AT HIS HAND, CONVENIENTLY PASSED THE BUCK TO THE ACIT SHIMLA FOR TAKING NECESSARY ACTION, IF WARRANTED. VII. IN OFFICE NOTE NO.3, THE ASSESSING OFFICER NOTICED THAT ITO, WARD- 2, SHIMLA PASSED ON INFORMATION THAT DURING THE FIN ANCIAL YEAR 2009-10, THE ASSESSEE HAD PAID CASH AMOUNTING TO RS.49.50 LA C TO ONE SHRI MEGH RAJ SHARMA, DEVELOPMENT OFFICER OF LIC FOR PURCHASI NG OF LIC POLICIES IN THE NAME OF SMT. PRATIBHA SINGH, W/O SHRI VIRBHA DRA SINGH. HE FURTHER NOTICED THAT: THE FACT WAS VERIFIED FROM C ASH BOOK MAINTAINED BY MY ASSESSEE WHICH REVEALED THAT HE HAD PAID TO SHRI MEGH RAJ SHARMA A SUM OF RS.1 CRORE AND NOT RS.50 LAC AS INTIMATED BY ITO, WARD-2, SHIMLA. THERE IS ALSO SOME DISCREPANCY OF DATES O F PAYMENTS.. THUS, THE BOOKS OF THE ASSESSEE SUFFER FROM SOME DE FECTS. HOWEVER, THIS IS NOT GOING TO HAVE ANY IMPACT IN THE PRESENT CASE SINCE THE ASSESSEE HAD PAID CASH OUT OF MOU INCOME WHICH WAS AVAILABLE IN BOOKS. THIS, AGAIN, SHOWS THAT HOW THE ASSESSING OFFICER, AFTER DULY NOTICING THAT THERE WERE APPARENT DISCREPANCY IN THE BOOKS QUA THE AMOUNT RECORDED ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 104 AND THE AMOUNT ACTUALLY INVESTED IN LIC, SIMPLY LEF T THE MATTER THERE AND THEM. THIS SHOWS THAT ALTHOUGH HE NOTED SOME OF THE DISCREPANCIES, BUT LEFT THEM AS SUCH BY SIMPLY MAKING THEM PART OF OFF ICE NOTE TO THE ASSESSMENT ORDER RATHER THAN GIVING A LOGICAL CONCL USION TO THE SAME. VIII. APART FROM THE ABOVE, IT IS NOTICED THAT T HE ASSESSING OFFICER SIMPLY IGNORED SOME OF THE VITAL DIRECTIONS GIVEN B Y THE ADDL.CIT U/S 144A WHICH ARE OTHERWISE BINDING ON THE ASSESSING O FFICER IN TERMS OF THE MANDATE OF THE PROVISION, AS WE HAVE NOTED ABOV E IN THE CASE OF VIRBHADRA SINGH (HUF). SOME OF SUCH DIRECTIONS AND THE ACTION/INACTION OF THE ASSESSING OFFICER TAKEN ON THEM, AS NOTED I N THE IMPUGNED ORDER, ARE AS UNDER:- A) TO FIND OUT THE CIRCUMSTANCES UNDER WHICH THE CA SH TRANSACTIONS WERE MADE. NOTHING IS ON RECORD TO SHOW THAT THERE WERE COMPE LLING CIRCUMSTANCES UNDER WHICH UNDER WHICH CASH TRANSACT ION I.E. CASH DEPOSITS ON ACCOUNT OF ALLEGED SALE PROCEEDS OF APP LE CROP WERE MADE. B) TO FIND OUT WHETHER ANY OF THEM, I.E. THE ASSES SEE AND THE BENEFICIARY IS HAVING ANY BANK ACCOUNT AT THE PLACE OF TRANSACTION. THIS POINT HAS NOT BEEN VERIFIED BY THE A.O. C) TO ASK FOR DETAILS OF AVERAGE PRODUCTION AND INC OME PER TREE IN CASE OF OTHER MAJOR PRODUCERS OF APPLE IN THE SAME AREA BY ISSUING COMMISSION TO ITO, RAMPUR. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 105 NO SUCH ACTION HAS BEEN TAKEN BY THE A.O. EXCEPT F OR RELYING UPON THE REPORT OF ITO, RAMPUR RECORDED BY OTHER A. O. DURING THE ASSESSMENT PROCEEDINGS OF AN EARLIER ASSESSMENT YEA R I.E. A.Y. 2009- IT WAS SPECIFICALLY DIRECTED TO INQUIRE THE PRODUCT ION OF OTHER PRODUCER AND NOT THAT OF SHRIKHAND ORCHARD. IT WAS VERY IMPORTANT DIRECTIONS FROM WHICH IT COULD HAVE BEEN ASCERTAINE D WHETHER SHRIKHAND ORCHARD IS CAPABLE OF PRODUCING SO MUCH A PPLE PRODUCE AS CLAIMED BY THE ASSESSEE SO AS TO ENABLE HIM TO DEPO SIT HEFTY CASH IN BANK ACCOUNT. WHEN THERE WAS SPECIFIC DIRECTION FRO M THE ADDL. CIT THE AO SHOULD HAVE COMPLIED WITH THE DIRECTIONS. D) TO CALL OF INFORMATION FROM HORTICULTURE DEPART MENT AND OTHER RELEVANT AGENCIES REGARDING PER TREE YIELD AND RATE DURING THE RELEVANT PERIOD. NO REFERENCE IS MADE TO HORTICULTURE DEPARTMENT AND OTHER RELEVANT AGENCIES. E) TO CALL FOR DETAILS AND EXAMINE THE PAYMENTS MAD E BY UNIVERSAL APPLE ASSOCIATES TO SH. ANAND CHAUHAN AND THE AVAIL ABILITY OF CASH IN THE HAND OF UNIVERSAL APPLE ASSOCIATES. ALSO EXAMIN E THE RATE AT WHICH THE PAYMENTS MADE TO OTHER PARTIES. NO ENQUIRY HAVE BEEN MADE BY THE A.O. IN RESPECT OF EXAMINING THE RATES AT WHICH THE PAYMENTS ARE MADE TO OTHER P ARTNERS. F) TO ASK UNIVERSAL APPLE ASSOCIATES TO EXPLAIN THE BILLS ISSUED BY HIM TO SH. ANAND CHAUHAN IN VIEW OF SERIAL NUMBER O F THE BILLS AND DATE AS IT SEEMS VERY UNUSUAL. ASK HIM TO PRODUCE R ELEVANT BILL BOOKS AND VERIFY THE GENUINENESS. ALSO OBTAIN THE COPY OF CONCERNED PAGES OF CASH BOOKS. NO SUCH VERIFICATION HAVE BEEN MADE BY THE A.O. 29. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT THE LD. CIT WAS FULLY JUSTIFIED IN SETTING ASIDE THE ASSESS MENT ORDER PASSED BY ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 106 THE ASSESSING OFFICER WHICH IS NOT ONLY ERRONEOUS, BUT ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 30. THE LD. AR ALSO ASSAILED THE IMPUGNED ORDER B Y ADOPTING THE ARGUMENTS ON THE LEGAL PROPOSITIONS MADE IN THE CAS E OF VIRBHADRA SINGH (HUF), NAMELY, INADEQUATE INQUIRY BY THE AO CANNOT EMPOWER THE CIT TO REVISE ORDER; DEBATABLE ISSUE; AND THE CIT SHOUL D HAVE HIMSELF SHOWN INFIRMITY IN THE ASSESSMENT ORDER RATHER THAN SENDI NG THE MATTER BACK TO THE AO. WE HAVE ELABORATELY DEALT WITH SUCH ISSUES IN OUR ORDER OF VIRBHADRA SINGH (HUF), WHICH MUTATIS MUTANDIS APPLY TO THE ASSESSEE ALSO. ANAND CHAUHAN (A.Y.2009-10) 31. BRIEFLY STATED, THE FACTS OF THE CASE ARE T HAT THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.1,83,700/- WHIC H WAS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSEE EARNED INCOME BY M EANS OF COMMISSION FROM LIC. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 23.12.2011 MAKING A DISALL OWANCE OF RS.11,568/- OUT OF CERTAIN EXPENSES INCURRED DURING THE COURSE OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 107 CONDUCTING HIS LIC BUSINESS. ANOTHER DISALLOWANCE O F RS.29,496/- WAS MADE TOWARDS INTEREST CLAIMED BY THE ASSESSEE AS DE DUCTION AT RS.42,412/-. THUS, AS AGAINST THE RETURNED INCOME O F RS.1,83,700/-, THE TOTAL INCOME WAS COMPUTED AT RS.2.24 LAC. THE LD.C IT, ON PERUSAL OF RECORDS NOTICED THAT THE ASSESSMENT WAS COMPLETED I N A VERY CASUAL MANNER PRACTICALLY WITHOUT MAKING ANY EFFECTIVE ENQ UIRY. SHOW CAUSE NOTICE WAS ISSUED U/S 263 ON THE GROUND THAT THE AS SESSING OFFICER HAD CALLED FOR DETAILS OF BANK ACCOUNTS MAINTAINED WITH PNB, SANJAULI, SHIMLA AND HDFC AND THE ASSESSEE WAS REQUIRED TO EX PLAIN THE TRANSACTIONS MADE IN THESE ACCOUNTS. THE ASSESSEE INITIALLY DID NOT FURNISH ANY DETAILS ABOUT HIS PNB ACCOUNT. THEREAF TER, THE ASSESSEE, VIDE HIS LETTER DATED 21.10.2011 STATED THAT THE PN B ACCOUNT WAS A JOINT ACCOUNT WITH HIS OTHER FAMILY MEMBERS AND ONLY THE AGRICULTURAL INCOME OF THE JOINT FAMILY WAS DEPOSITED IN THE SAME. HOW EVER, VIDE A LATER LETTER DATED 22.11.2011, THE ASSESSEE CAME OUT CONT ENDING THAT THIS ACCOUNT WAS MAINTAINED BY HIM AS A REPRESENTATIVE O F VIRBHADRA SINGH (HUF) PURSUANT TO AN MOU DATED 15.6.2008. THE LD. CIT NOTICED THAT THE ASSESSING OFFICER DID NOT EXAMINE THE DETAILS O F CASH DEPOSITED IN ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 108 THIS BANK ACCOUNT AMOUNTING TO RS.1.04 CRORE. CERT AIN OTHER REASONS WERE ALSO RECORDED BY THE LD.CIT REQUIRING THE ASSE SSEE TO TENDER HIS EXPLANATION. AFTER CONSIDERING THE RELEVANT MATERI AL AVAILABLE BEFORE HIM, HE HELD THAT THE ASSESSING OFFICER DID NOT MAK E ANY INQUIRY TO ASCERTAIN FROM WHERE CASH WAS DEPOSITED IN THE BANK ACCOUNT AND FURTHER, NO EFFORTS WERE MADE TO ESTABLISH THE IDEN TITY OF THE PERSONS TO WHOM THE AGRICULTURAL PRODUCE WAS CLAIMED TO HAVE B EEN SOLD AND FURTHER WHETHER THE ASSESSEE WAS IN POSSESSION OF C ASH AS PER ACCOUNTS WHICH WAS LATER ON DEPOSITED BY HIM IN THE BANK ACC OUNTS FOR ONWARD INVESTMENT IN LIC POLICIES IN THE NAME OF SHRI VIRB HADRA SINGH AND HIS FAMILY MEMBERS. HE FURTHER HELD THAT THE ASSESSING OFFICER RESTRICTED HIS INQUIRY ONLY TO FINDING OUT THE OWNERSHIP OF LAND M EASURING 103 BIGHAS AND THE NUMBER OF APPLE TREES ON THIS LAND, BUT, HE FAILED TO INQUIRE THE VARIETY OF APPLES, QUALITY AND QUANTITY AND ITS PRE VALENT MARKET RATES; TO CALCULATE THE POSSIBLE ACTUAL YIELD OF APPLE CROP F ROM THE ABOVE ORCHARD; AND THOUGH THE FIGURE OF SALE AMOUNT BEING HUGE AND THE ENTIRE SALES WERE MADE IN CASH, HE DID NOT ENQUIRE: ABOUT THE IDENTIFICATION/GENUINENESS OF PURCHASERS OF APPLE C ROP, PARTICULARLY SO- ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 109 CALLED VISITING TRADERS. HE FURTHER HELD THAT THE ASSESSING OFFICER DID NOT OBTAIN ANY STATEMENT OF INCOME/EXPENDITURE IN RESPE CT OF SHRIKHAND ORCHARDS, DAMRALI, WHICH THE ASSESSEE WAS REQUIRED TO MAINTAIN IN ACCORDANCE WITH THE TERMS OF THE MOU. HE ALSO NOTIC ED THAT THE AO DID NOT SEEK ANY THIRD PARTY EVIDENCE IN THE FORM OF CO PIES OF SALE BILLS, EXPENSE VOUCHERS, WHICH WERE SUPPOSED TO BE WITH TH E ASSESSEE HIMSELF TILL THE FINALISATION OF ACCOUNTS WITH SHRI VIRBHAD RA SINGH. 32. HE FURTHER NOTICED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE HIS LETTER DATED 22.11.2011 SUBMITTED THAT A SUM OF RS. 5,00,000/- WAS DEPOSITED IN HIS HDFC BANK ACCOUNT O N 20.11.2008 BY ONE SH. SADH RAM SHARMA FOR PURCHASE OF LIC POLICY AND THE ASSESSEE ISSUED A CHEQUE IN FAVOUR OF LIC OF INDIA ON 26.11. 2008 FOR ISSUANCE OF LIC POLICY IN THE NAME OF SH. SADH RAM SHARMA. ON E NQUIRY FROM THE BRANCH MANAGER, LIC, SANJAULI, IT WAS REVEALED THAT NO LIC POLICY IN THE NAME OF SH. SADH RAM SHARMA WAS ISSUED AGAINST THE AMOUNT OF RS. 5,00,000/-. THUS, THE CONTENTION OF THE ASSESSEE TH AT A SUM OF RS. 5 LAKH WAS DEPOSITED INTO HIS BANK ACCOUNT BY ONE SH. SADH RAM SHARMA ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 110 TURNED OUT FAKE. THE A.O. DID NOT TAKE THIS ISSUE I NTO CONSIDERATION WHILE COMPLETING THE ASSESSMENT U/S 143(3). IN THE BACKDR OP OF THE ABOVE FACTORS AND CERTAIN OTHERS AS NOTED IN THE IMPUGNED ORDER, THE LD.CIT CAME TO HOLD THAT NO PROPER INQUIRY WAS CONDUCTED B EFORE FINALISING THE ASSESSMENT U/S 143(3). HE SUMMARISED HIS VIEW ON P AGE 32 TO 34 OF THE IMPUGNED ORDER AS UNDER:- I. THE ASSESSEE HAS CLAIMED IN HIS INITIAL REPLY D ATED 12.11.2011 THAT CASH ACCOUNT BELONGS TO JOINT FAMILY VERSION BY GIV ING A COPY OF MOU & SUBMITTED THAT CASH DEPOSITS ARE FROM SALE OF AGR ICULTURE PRODUCE ON BEHALF OF SH. VIRBHADRA SINGH (HUF). THE A.O. ACCEP TED THE REPLY OF THE ASSESSEE BLINDLY WITHOUT VERIFYING THE REASONS FOR CHANGE OF HIS EARLIER EXPLANATION AND FURTHER MORE WITHOUT EVEN O BTAINING ANY CONFIRMATION/EXPLANATION FROM SH. VIRBHADRA SINGH I N RESPECT TO GENERATION OF HUGE CASH IN THE HANDS OF THE ASSESSE E WHICH ARE CLAIMED AS THE SALE PROCEEDS OF AGRICULTURE PRODUCE OF SH. VIRBHADRA SINGH (HUF). II. THE ASSESSEE IN HIS REPLY DATED 22.11.2011 CLAI MED THAT A SUM OF RS. 5,00,000/- WAS DEPOSITED IN HIS HDFC BANK ACCOUNT B Y SH. SADH RAM SHARMA ON 20.11.2008 FOR ISSUANCE OF LIC POLICY IN THE NAME OF SH. SADH RAM SHARMA, WHEREAS NO POLICY WAS FOUND BY A.O . IN THE NAME OF SH. SADH RAM SHARMA A CONFIRMED BY BRANCH MANAGE R OF LIC. IN SPITE OF WRONG CLAIM OF THE ASSESSEE, THE ASSESSEE ORDER IS SILENT ON THIS ISSUE. NO FURTHER ENQUIRY SEEMS TO HAVE BEEN MADE B Y THE AO. III. ON ONE HAND, ASSESSEE IS ADMITTING THE FACT T HAT AS PER THE TERMS OF MOU, HE SHALL MAINTAIN THE ACCOUNTS OF SALE PROC EEDS OF SHRIKHAND ORCHARD AND SETTLE THE ACCOUNTS ON THE EXPIRY OF SA ID AGREEMENT, RECEIVE ALL THE SALE PROCEEDS AND INVEST THE NET PROCEEDS I N GOVT. SECURITIES, LIC ETC IN THE NAME OF BENEFICIARIES, ON THE OTHER HAND , ASSESSEE IS OBJECTING THAT A.O. IS NOT DUTY BOUND TO ENQUIRE ABOUT THE AG RICULTURE INCOME OF HIS PRINCIPAL I.E. SHRI VIRBHADRA SINGH FROM THE AS SESSEE. SINCE THE CASH ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 111 WAS NOT DEPOSITED IN THE BANK ACCOUNTS OF THE ASSES SEE HIMSELF AND HIS IS CLAIMING TO HAVE MAINTAINED ACCOUNTS OF AGRICULT URE PRODUCE OF HIS PRINCIPAL, THE ONUS LIES ON THE ASSESSEE TO PROVE T HE GENUINENESS OF SOURCES OF CASH DEPOSITED IN HIS BANK ACCOUNT AND C O-RELATE THE SAME WITH THE SALE TRANSACTIONS. HE CANT ESCAPE BY SIMP LY STATING THAT A.O. IS NOT DUTY BOUND TO ENQUIRE ABOUT THE AGRICULTURE INC OME OF HIS PRINCIPAL BECAUSE HE IS HIMSELF CLAIMING THAT CASH WE SET ASI DE THE ORDER OF LD. CIT(A) AND DEPOSITED IN HIS BANK ACCOUNT FROM THE SALE PROCEED OF AGRICULTURE PRODUCE OF HIS PRINCIPAL WHOSE ACCOUNTS ARE BEING MAINTAINED BY HIM AND SALE PROCEEDS ARE ALSO BEING COLLECTED BY HIM. A.O. HAS NEITHER MADE FURTHER ENQUIRY FROM SH. VIRB HADRA SINGH (HUF) TO VERIFY THE CLAIM OF THE ASSESSEE NOR VERIFIED TH E ACCOUNTS OF AGRICULTURE PRODUCE I.E. INCOME AND EXPENDITURE STA TEMENT AND ACCEPTED THE REPLY OF THE ASSESSEE ARBITRARILY. 33. THAT IS HOW, HE HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WHICH WA S SET ASIDE AND THE DIRECTION WAS ISSUED TO FRAME A FRESH ASSESSMENT IN ACCORDANCE WITH THE FACTS ON RECORD AND AFTER MAKING DUE ENQUIRIES TO V ERIFY WHETHER THE CASH DEPOSITS IN THE SAVING BANK ACCOUNT OF THE ASSESSEE WITH PNB PERTAINED TO THE ASSESSEE HIMSELF OR TO ANY OTHER PERSON. TH E ASSESSEE IS AGGRIEVED AGAINST THIS ORDER. 34. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. BEFORE PROCEEDING FURTHER, WE W ANT TO RECORD THAT SH. SUDHIR SEHGAL, THE LD. AR RAISED ALL THE PRELIMINAR Y OBJECTIONS ABOUT THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 112 SCOPE OF EVIDENCE, ADDITIONAL EVIDENCE AND PASSING OF SEPARATE ORDER BEFORE ADMISSION OF ADDITION EVIDENCE, AS WERE RAIS ED IN THE CASE OF VIRBHADRA SINGH (HUF). FOR THE REASONS GIVEN IN OU R ORDER PASSED ABOVE IN THE CASE OF VIRBHADRA SINGH (HUF), SUCH OB JECTIONS ARE REPELLED. 35. ON MERITS, IT IS FOUND THAT THERE IS NO DISCU SSION WORTH THE NAME IN THE ONE AND A HALF PAGED ASSESSMENT ORDER ABOUT THE ASSESSEE MANAGING SHRIKHAND ORCHARDS, DAMRALI ON BEHALF OF VIRBHADRA SINGH (HUF). WE AGREE WITH THE CONTENTION ADVANCED BY THE LD. AR TH AT MERELY BECAUSE THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ABOU T THE RELEVANT ISSUES CANNOT PER SE BE DECISIVE OF NON-APPLICATION OF MIND BY THE ASSE SSING OFFICER. HOWEVER, THERE SHOULD BE SOME MATERIAL ON RECORD TO INDICATE THAT THE ASSESSING OFFICER DID CONDUCT APPROPRIATE ENQUIRIES AND INVESTIGATED THE MATTER BEFORE FINALISING THE ASSES SMENT ALBEIT WITHOUT RECORDING THE DETAILS IN THE ASSESSMENT ORDER. THE LD. AR REFERRED TO THE QUESTIONNAIRE ON PAGE 12 OF THE ASSESSEES PAPER BO OK WHICH WAS RESPONDED TO BY THE ASSESSEE. HE ALSO REFERRED TO CERTAIN ENQUIRY ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 113 CONDUCTED BY THE ASSESSING OFFICER ABOUT THE POSSIB ILITY OF THE EXTENT OF CROP THAT COULD BE RAISED ON SHRIKHAND ORCHARDS, DA MRALI. IN THE LIGHT OF THIS MATERIAL, THE LD. AR CONTENDED THAT THE ASS ESSING OFFICER CONDUCTED PROPER INQUIRY THOUGH RELEVANT DISCUSSION WAS NOT MADE IN THE ASSESSMENT ORDER. 36. IN OUR CONSIDERED OPINION, THIS IS A CASE OF NO INQUIRY CONDUCTED BY THE ASSESSING OFFICER BEFORE FINALIZING THE ASSESSM ENT. WE FORTIFY OUR CONCLUSION WITH THE FOLLOWING REASONS :- I. THE CASE WAS SELECTED FOR SCRUTINY ON THE BASI S OF HUGE DEPOSITS MADE BY THE ASSESSEE IN PNB ACCOUNT. THE ASSESSING OFFI CER VIDE HIS NOTICE DATED 15.7.2011 ISSUED U/S 142(1) OF THE ACT, REQUI RED THE ASSESSEE TO FURNISH COPIES OF BANK ACCOUNTS ALONG WITH OTHER DE TAILS. THE ASSESSEE VIDE HIS LETTER DATED 25.8.2011 SUBMITTED THAT HE H AD ONLY ONE BANK ACCOUNT WITH HDFC BANK AND ANOTHER CAR LOAN ACCOUNT WITH STATE BANK OF INDIA. NO DISCLOSURE WAS MADE ABOUT HIS HAVING AN ACCOUNT IN PNB IN WHICH HUGE DEPOSITS WERE MADE. THEN, ANOTHER NO TICE WAS ISSUED DATED 21/23.9.2011 INDICATING THAT AS PER INFORMATI ON AVAILABLE WITH THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 114 DEPARTMENT, THE ASSESSEE WAS OPERATING ANOTHER BANK ACCOUNT WITH PNB ALONG WITH SHRI JOGINDER AND VEENA ETC., IN WHICH S EVERAL CASH DEPOSITS WERE MADE. IN RESPONSE TO THIS LETTER, THE ASSESSE E STATED VIDE HIS REPLY DATED 21.10.2011 THAT: ONLY THE AGRICULTURAL INCOME/COMMISSION INCOME OF THE JOINT FAMILY IS DEPOSITED IN IT . IT WAS ONLY LATER ON, VIDE LETTER DATED 22.11.2011, THAT THE ASSESSEE ADMITTE D ABOUT ENTERING INTO AN MOU FOR MAINTAINING SHRIKHAND ORCHARDS, DAMRALI ON BEHALF OF VIRBHADRA SINGH (HUF) AT 2% COMMISSION AND THE DEPO SITS IN THE BANK ACCOUNT WERE SALE PROCEEDS FROM SHRIKHAND ORCHARDS, DAMRALI. THE ASSESSING OFFICER DID NOT PAY ANY ATTENTION TO THE FACT THAT THE ASSESSEE WAS INTENTIONALLY HIDING THE PARTICULARS OF PNB ACC OUNT AND IT WAS ONLY WHEN HE MADE IT CLEARLY KNOWN TO THE ASSESSEE THAT THE DEPARTMENT HAD INFORMATION ABOUT HIS HAVING PNB ACCOUNT IN WHICH HUGE DEPOSITS WERE MADE, THAT HE, FIRSTLY CAME OUT WITH AN EXPLANATION THAT IT WAS AN ACCOUNT MAINTAINED FOR HIS FAMILYS AGRICULTURAL INCOME AND ONLY LATER ON, WHEN CORNERED, HE ADMITTED THAT HE WAS MAINTAINING THIS ON BEHALF OF VIRBHADRA SINGH (HUF). THESE DEVELOPMENTS SHOULD H AVE INSTIGATED THE ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 115 ASSESSING OFFICER TO CONDUCT PROPER INQUIRY ABOUT T HE VACILLATING STAND OF THE ASSESSEE. II. THE ASSESSEE SUBMITTED THAT THE ENTRIES IN T HE BANK ACCOUNT WERE ON BEHALF OF VIRBHADRA SINGH (HUF) AND HE WAS SIMPLY M ANAGING THE AFFAIRS OF SHRIKHAND ORCHARDS, DAMRALI ON A COMMISS ION @ 2% OF NET SALE PROCEEDS. THE ASSESSING OFFICER SIMPLY ACCEPT ED THE ASSESSEES VERSION WITHOUT EVEN BOTHERING TO INQUIRE THIS MATT ER FROM VIRBHADRA SINGH (HUF). WHAT TO TALK OF MAKING AN INQUIRY FROM VIRBHADRA SINGH (HUF) FOR ASCERTAINING IF THE ASSESSEES CONTENTION THAT THE BANK DEPOSIT PERTAINED TO IT, THE ASSESSING OFFICER DID NOT EVEN CONSIDER IT PRUDENT TO ASK FOR CONFIRMATION ON THIS ISSUE FROM VIRBHADRA S INGH (HUF). III. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT A SUM OF RS.5 LAC WAS DEPOSITED IN HIS HDFC BA NK ACCOUNT ON 20.11.2008 BY ONE SHRI SADH RAM SHARMA FOR PURCHASE OF LIC POLICY AND HE ISSUED A CHEQUE IN FAVOUR OF LIC OF INDIA DA TED 26.11.2008 FOR ISSUANCE OF LIC POLICY IN THE NAME OF SHRI SADH RAM SHARMA. THE INFORMATION RECEIVED FROM THE BRANCH MANAGER, LIC S ANJAULI, VIDE HIS ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 116 LETTER DATED 14.12.2011, REVEALED THAT NO LIC POLI CY IN THE NAME OF SHRI SADH RAM SHARMA WAS ISSUED AGAINST THE AMOUNT OF RS .5 LAC. THE ASSESSING OFFICER GAVE A SILENT BURIAL TO THIS FACT AND DID NOT DEEM IT NECESSARY TO CALL FOR THE ASSESSEES EXPLANATION AN D MAKE NECESSARY ADDITION. IV. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFF ICER THAT ENTRIES IN PNB ACCOUNT WERE ON BEHALF OF VIRBHADRA SINGH (HUF) . SALE PROCEED WAS DEPOSITED IN THE SAID BANK ACCOUNT AND WITHDRAW ALS WERE MADE MAINLY FOR INVESTING IN LIC POLICIES ON BEHALF OF T HE MEMBERS OF THE HUF. FIRST LIC POLICY WAS PURCHASED BY THE ASSESSE E ON BEHALF OF VIRBHADRA SINGH (HUF) FOR A SUM OF RS.10 LAC FOR WH ICH NECESSARY FORM WAS FILLED IN ON 18.6.2008, WHOSE COPY IS AVAILABLE ON PAGE 62 OF THE PAPER BOOK. A COPY OF THE ASSESSEES BANK ACCOUNT I S AVAILABLE ON PAGE 19 OF THE PAPER BOOK, WHICH SHOWS THAT CASH OF RS.1 0 LAC WAS DEPOSITED ON 19.6.2008 AND THE CHEQUE WAS CLEARED ON 24.6.200 8. THE ASSESSEE SUBMITTED CASH BOOK OF SHRIKHAND ORCHARDS, DAMRALI, BEFORE THE ASSESSING OFFICER, WHOSE COPY IS ALSO AVAILABLE ON RECORD. FIRST PAGE OF ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 117 THE CASH BOOK STARTS WITH RECEIPT OF RS.5 LAC FROM UAA ON 1.6.2008 AND THERE IS ANOTHER RECEIPT OF RS.5 LAC FROM UAA ON 13 .6.2008. IT IS THIS AMOUNT OF RS.10 LAC WHICH WAS CLAIMED TO HAVE BEEN DEPOSITED BY THE ASSESSEE IN THE BANK ACCOUNT ON 19.6.2008 TO ENABLE THE CLEARANCE OF CHEQUE ISSUED FOR INVESTMENT IN LIC POLICIES. IT I S STRANGE THAT WHEN THE ASSESSEE ENTERED INTO MOU WITH VIRBHADRA SINGH (HUF ) ON 15.6.2008, HOW HE COULD MAINTAIN A BANK ACCOUNT BEFORE THAT DA TE W.E.F. 1.6.2008 AND RECEIVE/DEPOSIT THE ALLEGED ADVANCE RECEIVED FR OM UAA TOTALLING RS.10 LAC THESE FUNDAMENTAL ISSUES REQUIRING INVEST IGATION AT THE ASSESSING OFFICERS END WERE LOST SIGHT OF AND THE ASSESSMENT WAS FRAMED BY MAKING A SMALL DISALLOWANCE FROM THE EXPENSES. THE LD.CIT HAS RIGHTLY HELD ON PAGE 7 OF THE IMPUGNED ORDER THAT T HE ASSESSING OFFICER RESTRICTED HIS INQUIRY ONLY IN FINDING OUT THE OWNE RSHIP OF LAND AND NUMBER OF APPLE TREES, BUT, FAILED TO ENQUIRE AS TO HOW SUCH HUGE AMOUNT OF THE ALLEGED SALE WAS DEPOSITED IN THE BANK ACCOU NT WITHOUT INQUIRING ABOUT THE IDENTIFICATION/GENUINENESS OF THE PURCHAS ERS OF THE APPLE CROP AND THE POSSIBLE ACTUAL YIELD OF APPLE CROP FROM TH E ABOVE ORCHARD ALONG WITH VARIETY AND ITS PREVALENT MARKET RATES. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 118 V. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFI CER THAT HE MADE SALES OF RS.1,50,03,596/- TO UAA AND CROP WORTH RS. 89,80,000/- WAS SOLD TO OTHER VISITING TRADERS AT THE ORCHARD ITSEL F. AS AGAINST THIS, THE ASSESSEE HAS RECORDED ALL THE SALES IN HIS BOOKS A S HAVING BEEN MADE TO UAA. IF THE ASSESSEE ACTUALLY MADE SALE OF CROP TO UAA FOR A SUM OF RS.2.39 CRORE, THEN, THE ISSUE THAT WHERE THE SALE OF RS.89.80 LAC MADE TO OTHER VISITING TRADERS WAS RECORDED, WAS NOT VERIFI ED BY THE ASSESSING OFFICER. IF SUCH SALE MADE TO OTHER VISITING TRADE RS WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, THE AO OUGHT TO HAVE CAUSED I NVESTIGATION AND MADE NECESSARY ADDITION. THIS SHOWS THAT THE ASSES SING OFFICER DID NOT CONDUCT ANY INQUIRY ABOUT THE ALLEGED SALE OF APPLE CROP MADE BY THE ASSESSEE ON BEHALF VIRBHADRA SINGH (HUF). THE LD. AR HAS CANDIDLY ADMITTED THAT THE ASSESSING OFFICER DID NOT ENQUIR E FROM UAA ABOUT THE AMOUNT OF SALES MADE TO THEM. 37. THE ABOVE FACTORS, MOST OF WHICH HAVE BEEN DI SCUSSED BY THE LD.CIT TO HOLD THAT THE ASSESSING OFFICER BLINDLY A CCEPTED THE ASSESSEES VERSION AND FAILED TO CONDUCT PROPER INQUIRY AND SO ME OTHER FACTORS TO ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 119 WHICH OUR ATTENTION HAS BEEN DRAWN BY THE LD. DR SU PPORTING THE BROADER ISSUE TAKEN UP BY THE LD.CIT, AMPLY GO TO PROVE THAT THE ASSESSING OFFICER DID NOT CONDUCT ANY INQUIRY ON TH E RELEVANT ISSUES CONCERNING THE ASSESSMENT. IN VIEW OF THE FOREGOIN G DISCUSSION, WE ARE SATISFIED THAT THE LD. CIT WAS WHOLLY JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER WHICH IS NOT ONLY ERRONEOUS, BUT A LSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 38. THE LD. AR ALSO ASSAILED THE IMPUGNED ORDER BY ADOPTING THE ARGUMENTS ON THE LEGAL PROPOSITIONS MADE IN THE CAS E OF VIRBHADRA SINGH (HUF), NAMELY, INADEQUATE INQUIRY BY THE AO CANNOT EMPOWER THE CIT TO REVISE ORDER; DEBATABLE ISSUE; AND THE CIT SHOUL D HAVE HIMSELF SHOWN INFIRMITY IN THE ASSESSMENT ORDER RATHER THAN SENDI NG THE MATTER BACK TO THE AO. WE HAVE ELABORATELY DEALT WITH SUCH ISSUES IN OUR ORDER OF VIRBHADRA SINGH (HUF), WHICH MUTATIS MUTANDIS APPLY TO THE ASSESSEE ALSO. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 120 ANAND CHAUHAN (A.Y. 2011-12) 39. BRIEFLY STATED, THE FACTS OF THE CASE ARE TH AT THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.2,56,690/-. THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT TO EXAMINE THE SOURCE OF CASH D EPOSITS IN THE SAVING BANK ACCOUNT AS PER THE AIR INFORMATION. ON EXAMINA TION OF BOOKS OF ACCOUNT OF THE ASSESSEE MAINTAINED WITH THE PNB, SA NJAULI, SHIMLA, THE ASSESSING OFFICER NOTICED THAT HEAVY CASH DEPOSITS WERE MADE AMOUNTING TO RS.1.35 CRORE AND ODD. A SUM OF RS.1.30 CRORE W AS TRANSFERRED TO LIC FROM THIS ACCOUNT IN THE NAMES OF MEMBERS OF VIRBHA DRA SINGH (HUF). THE ASSESSEE SUBMITTED THAT THE SOURCE OF CASH DEPO SITS IN THE BANK ACCOUNT WAS AGRICULTURAL INCOME RECEIVED ON BEHALF OF VIRBHADRA SINGH (HUF) PURSUANT TO THE MOU DATED 15.6.2008. THE ASS ESSING OFFICER NOTICED THAT AGRICULTURAL INCOME OF THE HUF WAS SHO WN TO HAVE INCREASED MANIFOLD AS COMPARED TO MARGINAL AGRICULT URAL INCOME SHOWN IN THE ASSESSMENT YEARS PRIOR TO THE MOU, I.E., A.Y . 2008-09 AND EARLIER YEARS. HE FURTHER NOTICED THAT VIRBHADRA SINGH (HU F) REVISED ITS RETURN DECLARING AGRICULTURAL INCOME OF RS.1.55 CRORE AS A GAINST THE ORIGINALLY ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 121 DECLARED INCOME OF RS.25 LAC. THE ASSESSING OFFIC ER NOTICED ON PAGE 4 OF HIS ORDER THAT VIRBHADRA SINGH (HUF) ALSO ENTERE D INTO AGREEMENT WITH SHRI BISHAMBAR DASS DATED 17.6.2008 IN RESPECT OF SHRIKHAND ORCHARDS, DAMRALI. HE OBSERVED THAT IT WAS NOT CLE AR FROM THE AGREEMENT DATED 17.6.2008 THAT THE SAME WAS FOR ENT IRE SHRIKHAND ORCHARDS, DAMRALI OR A PART OF IT. HE ALSO ASKED TH E ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT ALONG WITH SUPPORTING BILLS AN D VOUCHERS IN RESPECT OF EXPENSES INCURRED BY THE ASSESSEE IN THE MANAGEM ENT OF SHRIKHAND ORCHARDS, DAMRALI. THE ASSESSEE STATED THAT NO REC ORD OF EXPENSES WAS AVAILABLE BECAUSE THE SAME WAS DESTROYED AFTER THE SETTLEMENT OF ACCOUNT WITH VIRBHADRA SINGH (HUF). SIMILARLY, NAMES OF PE RSONS TO WHOM HUGE LABOUR AND FREIGHT CHARGES, ETC., WERE PAID, W ERE ALSO NOT FURNISHED. HE FURTHER NOTICED THAT THE CASH BOOK ALSO DID NOT CONTAIN DETAILS OF PAYMENTS PROPERLY. THEN, HE REQUIRED THE ASSESSEE TO PRODUCE THE ORIGINAL MOU DATED 15.6.2008 FOR VERIFICATION. THE ASSESSEE FAILED TO PRODUCE THE SAME TILL THE PASSING OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER LAUNCHED CERTAIN INQUIRIES WITH THE REGIONA L TRANSPORT OFFICER/SDM FOR ASCERTAINING THE VERACITY OF SALES SHOWN TO UAA. IT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 122 TRANSPIRED THAT SOME OF THE VEHICLES MENTIONED ON B EHALF OF THE ASSESSEE TO HAVE BEEN USED FOR CARRYING APPLE CROPS TO PARVA NO, WERE EITHER TIPPER/OIL TANKERS AND SCOOTER WHILE OTHER NUMBERS GIVEN BY THE ASSESSEE WERE NOT ALLOTTED TO ANY VEHICLE AS PER THE RECORD OF RTO/SDM. THE ASSESSING OFFICER ALSO CONDUCTED ENQUIRIES FROM SUB JECT MATTER SPECIALIST, APPLE CONTROL ROOM, FAGU SET UP FOR MAI NTAINING RECORD OF VEHICLES LOADED WITH APPLIES COMING FROM UPPER SHIM LA AND ADJOINING AREAS, WHICH REVEALED THAT CERTAIN AFFIDAVITS FILED BY THE ASSESSEE IN SUPPORT OF SOME OF THE VEHICLES BEING USED FOR TRAN SPORTING APPLES, WERE WRONG. ON CROSS EXAMINATION BY THE ASSESSEE, IT WA S REVEALED THAT THE SUBJECT MATTER SPECIALIST WAS NOT MAINTAINING PROPE R RECORDS IN RESPECT OF ALL THE TRUCKS COMING TO THE MANDI. THE AO ALSO CONDUCTED INQUIRY FROM HORTICULTURE DEPARTMENT FOR FINDING OUT THE AP PROXIMATE YIELD, WHICH COULD BE OBTAINED FROM 105 BIGHAS OF ORCHARD DURING THE RELEVANT FINANCIAL YEAR. SUCH FIGURE WAS GIVEN AT ROUGHLY RS .64 LAC WITHOUT CONSIDERING THE EXPENSES. THE ASSESSING OFFICER MA DE COMPARISON OF APPLE CROP SHOWN BY THE ASSESSEE WITH OTHER GROWERS OF THE AREA. SHRI KANWAR UDAI SINGH, RAJ BHAWAN ROAD, CHHOTA SHIMLA H AVING 237 ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 123 BIGHAS OF LAND DECLARED AGRICULTURAL INCOME OF RS.2 2.74 LAC AND SHRI ANIL STOKES AND FAMILY HAVING 300 BIGHAS HAD SHOWN NET AGRICULTURAL INCOME AT RS.30.72 LAC. THE ASSESSEE ALSO FURNISHE D AFFIDAVITS FROM TWO PERSONS WHO HAD SHOWN AGRICULTURAL INCOME OF RS.31 LAC AND RS.40 LAC FROM 45 BIGHAS AND 40 BIGHAS DURING THE YEAR 2010. IT WAS SEEN THAT AS AGAINST THIS EXTENT OF AGRICULTURAL INCOME SHOWN BY THE OTHERS, THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF RS.1.50 C RORE FROM SHRIKHAND ORCHARDS, DAMRALI. THE ASSESSING OFFICER ALSO COND UCTED INQUIRY FROM UAA, WHICH REVEALED THAT THEY HAD SHOWN PAYMENT OF RS.1.50 CRORE TO THE ASSESSEE AGAINST THE ALLEGED SALE OF APPLES. O UT OF SAID PAYMENT A SUM OF RS.1 CRORE WAS PAID AS ADVANCE DURING THE PE RIOD 1.5.2010 TO 8.5.2010. EXAMINATION OF CASH BOOK OF UAA FOR THE RESPECTIVE PERIOD SHOWED THAT THERE WERE NO ENTRIES IN RESPECT OF SUC H ADVANCE PAYMENT OF RS.1 CRORE. WHEN CONFRONTED, IT WAS STATED THAT SU CH SUM OF RS.1 CRORE WAS PAID BY AGENTS OF UAA FOR WHICH JOURNAL ENTRIES WERE RECORDED. ADDRESSES OF SUCH AGENTS OF BUYER WERE OBTAINED. N OTICES TO 13 OF SUCH ALLEGED AGENTS WERE ISSUED, OUT OF WHICH EIGHT WERE RECEIVED BACK UNSERVED AND NO COMPLIANCE WAS MADE BY THE REST. TH E ASSESSING ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 124 OFFICER ALSO OBSERVED THAT THE BILLS ISSUED BY UAA WERE NOT IN SERIAL NUMBERS WHICH SEEMED TO BE VERY UNUSUAL. HE ALSO C OMPARED THE AGRICULTURAL INCOME SHOWN IN THE RETURNS BY VIRBHAD RA SINGH (HUF) FROM A.Y. 2005-06 ONWARDS TILL A.Y. 2011-12 AND FOU ND THAT THE INCOME DECLARED DURING THE TENURE OF MOU WAS EXCEPTIONALLY HIGH. IN THE ULTIMATE ANALYSIS, HE HELD THAT THE SUM OF RS.1 CRO RE, BEING THE ALLEGED SALE OF APPLE CROP TO UAA THROUGH AGENTS OF BUYERS, WAS UNEXPLAINED AS WITHOUT ANY SOURCE OF DEPOSIT. THEREFORE, AN ADDIT ION OF RS.1 CRORE WAS MADE ON PROTECTIVE BASIS. THE LD.CIT FOR THE DETAI LED REASONS SET OUT IN THE IMPUGNED ORDER, HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE S AME WAS SET ASIDE AND THE ASSESSING OFFICER WAS DIRECTED TO FRAME THE ASS ESSMENT AFRESH IN ACCORDANCE WITH THE LAW AND THE FACTS AS TAKEN NOTE OF BY HIM. 40. THE LD. AR VEHEMENTLY ARGUED THAT UNLIKE FO R THE AYS 2009-10 AND 2010-11, THE AO CARRIED OUT COMPLETE INVESTIGAT ION IN THE MATTER AND, HENCE, IT COULD NOT BE SAID THAT NO ENQUIRY WA S MADE BY THE AO NECESSITATING REVISION OF ORDER. HE TOOK US THROUG H THE ASSESSMENT ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 125 ORDER, THE SUMMARY OF WHICH HAS BEEN RECORDED IN EA RLIER PARAS. THIS WAS COUNTERED BY LD. DR WHO ALSO TOOK US THROUGH EL ABORATE MATERIAL TO SHOW THAT THE AO ERRED IN MAKING NECESSARY INQUIRIE S AND DRAWING INCORRECT INFERENCES. HE, THEREFORE, REQUESTED FOR UPHOLDING THE IMPUGNED ORDER. 41. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIAL ON RECORD. FOR THIS YEAR ALSO, WE WANT TO RECORD THAT SH. SUDHIR SEHGAL, THE LD. AR RAISED ALL THE PRELIMINARY OBJEC TIONS ABOUT THE SCOPE OF EVIDENCE, ADDITIONAL EVIDENCE AND PASSING OF SEP ARATE ORDER BEFORE ADMISSION OF ADDITION EVIDENCE, AS WERE RAISED IN T HE CASE OF VIRBHADRA SINGH (HUF). FOR THE REASONS GIVEN IN OUR ORDER PA SSED ABOVE IN THE CASE OF VIRBHADRA SINGH (HUF), SUCH OBJECTIONS ARE REJECTED. 42. ON MERITS, IT IS NOTICED THAT THOUGH THE AO H AS REFERRED TO CERTAIN INQUIRIES CONDUCTED BY HIM, BUT, SUCH INQUIRIES, IN OUR CONSIDERED OPINION, WERE NOT GIVEN A LOGICAL CONCLUSION. THE INQUIRIES SO MADE WERE NOT ACTED UPON IN THE MANNER IN WHICH THEY OUG HT TO HAVE BEEN BY ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 126 A PERSON REASONABLY INSTRUCTED IN LAW. WE COUNTENA NCE THE VIEW TAKEN BY THE LD. CIT REVISING THE ASSESSMENT ORDER FOR TH E FOLLOWING REASONS :- I. THE ASSESSEE DID NOT FURNISH BILLS AND VOUCHERS OF EXPENSES DESPITE BEING SPECIFICALLY REQUESTED BY THE AO, WHICH IS EV IDENT FROM PARA 4.2 OF THE ASSESSMENT ORDER. IT WAS MERELY STATED THAT NO RECORD OF EXPENSES WAS AVAILABLE BECAUSE THE SAME WAS DESTROYED AFTER SETTLEMENT OF ACCOUNT WITH VIRBHADRA SINGH (HUF). THE ASSESSEE D ID NOT EVEN DISCLOSE THE NAMES OF DEALERS FROM WHOM PESTICIDES, INSECTICIDES, PACKING BOXES, ETC, WERE PURCHASED. SIMILARLY, NAM ES OF PERSONS TO WHOM HUGE LABOUR AND FREIGHT WAS PAID WERE ALSO NOT FURNISHED. THOUGH THESE FACTS HAVE BEEN RECORDED BY THE AO IN PARA 4.2.1 OF THE ASSESSMENT ORDER, BUT, HE LEFT THE MATTER THERE AND THEN. II. THE AO SPECIFICALLY REQUIRED THE ASSESSEE TO PRODUCE ORIGINAL MOU DATED 15.6.2008 WITH VIRBHADRA SINGH (HUF). THIS M ATTER HAS BEEN DISCUSSED IN PARA 4.3 OF THE ASSESSMENT ORDER. DES PITE AMPLE OPPORTUNITY, THE ASSESSEE FAILED TO PRODUCE THE SAM E BUT RELIED ON ITS COPY. WHEN AN INQUIRY WAS INITIATED FOR EXAMINING THE ORIGINAL MOU, ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 127 THE AO SHOULD HAVE ASCERTAINED THE REASONS AS TO WH Y THE ASSESSEE WAS NOT DELIBERATELY FURNISHING THE SAME. NOTHING WAS D ONE ON THIS SCORE AND THE ASSESSMENT WAS CONCLUDED ON THE BASIS OF A COPY OF THE MOU DESPITE THE ORIGINAL HAVING BEEN CATEGORICALLY DIRECTED TO BE PRODUCED. III. THE AO CONDUCTED INQUIRIES IN RESPECT OF VE HICLES USED FOR TRANSPORTING APPLES TO PARVANO MANDI, WHICH ISSUE HAS BEEN DISCUSSED IN PARA 4.4 OF THE ASSESSMENT ORDER. SUCH INQUIRY TRANSPIRED THAT SOME OF THE VEHICLE NUMBERS PROVIDED BY UAA FOR ALLEGEDLY T RANSPORTING THE APPLE CROP BY THE ASSESSEE ON BEHALF OF VIRBHADRA S INGH (HUF) WERE EITHER TIPPERS/OIL TANKERS/SCOOTERS, WHICH WERE NOT IN A POSITION TO BE UTILIZED FOR CARRYING APPLES OR THE NUMBERS OF VEHI CLES GIVEN WERE NOT ALLOTTED TO ANY VEHICLE AS PER THE RECORD OF RTO/SD M. SUCH AN IMPORTANT ASPECT, WHICH BRINGS THE ALLEGED SALES BY THE ASSESSEE IN THE ARENA OF DOUBT, WAS IGNORED EXCEPT FOR MAKING AN AD DITION OF RS.1 CRORE IN RESPECT OF CASH DEPOSIT ENTRIES IN THE BANK ACCO UNT, THAT WERE NOT TRACEABLE FROM THE BOOKS OF ACCOUNT OF UAA. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 128 V. THE AO THOUGH CONDUCTED INQUIRY FOR COMPARING THE APPLE CROP WITH OTHER GROWERS OF THE AREA AND FOUND THAT THE ASSESS EES CLAIMED TURNOVER WAS SEVERAL TIMES HIGHER, BUT HE DID NOT PROCEED FU RTHER BY IMPLIEDLY ACCEPTING THE COMPARABLE CASES SUPPLIED BY THE ASSE SSEE. IN SUCH COMPARABLE CASES, INCOME WAS SHOWN AT RS.31 LAC AND RS.40 LAC FOR THE YEAR 2010 AGAINST 45 BIGHAS AND 40 BIGHAS OF LAND. NO EVIDENCE WAS FILED IN RESPECT OF SUCH INCOME STATED IN THEIR AFF IDAVITS. EVEN OTHERWISE, THIS ESTIMATE OF INCOME SHOWN BY THESE TWO PARTIES DID NOT JUSTIFY THE INCOME OF RS.1.50 CRORE SHOWN BY THE ASSESSEE FROM 105 BIGHAS. THE AO SHOULD HAVE PROCEEDED FURTHER INSTEAD OF CLOSING THE CHAPTER THERE AND THEN. VI. INQUIRIES FROM UAA REVEALED THAT A SUM OF RS. 1.00 CRORE SHOWN TO HAVE BEEN DEPOSITED BY THE ASSESSEE IN HIS BANK ACC OUNT IN MAY, 2010, WAS NOT RECORDED IN THEIR BOOKS OF ACCOUNT. ON INQ UIRY, IT WAS STATED THAT THIS AMOUNT WAS PAID BY THE AGENTS OF BUYERS. WHEN THE AO ISSUED NOTICES U/S 133(6) TO THE SAID 13 PERSONS, NONE OF THEM APPEARED. THE AO SIMPLY LEFT THE MATTER TO DIE THERE WITHOUT PROC EEDING FURTHER. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 129 VII. THE AO HIMSELF RECORDED IN PARA 4.8.2 OF HI S ORDER THAT THE BILLS ISSUED BY UAA FOR THE ALLEGED PURCHASE OF APPLE CRO PS WERE NOT IN SERIAL NUMBERS AND SEEMED TO BE VERY UNUSUAL AND DOUBTFUL. HE FURTHER RECORDED THAT NO SATISFACTORY EXPLANATION WAS OFFER ED IN THIS REGARD EITHER BY THE ASSESSEE OR UAA. STILL, HE PROCEEDED TO ACCEPT THE GENUINENESS OF SUCH SALE TRANSACTIONS BY THE ASSESS EE. VIII. THE ASSESSEE REPEATEDLY REQUESTED THE AO T O CALL VIRBHADRA SINGH (HUF) U/S 133(6) FOR ANY INQUIRY IN RESPECT OF SHRI KHAND ORCHARDS, DAMRALI. THIS HAS BEEN RECORDED IN PARA 5.2.1 OF THE ASSESSMENT ORDER. THE AO DID NOT ISSUE ANY NOTICE FOR VERIFYING VERAC ITY OF THE TRANSACTIONS. IX. IN PARAS 5.2.3 AND 5.2.4 OF THE ASSESSMENT O RDER, THE AO DOUBTED ABOUT THE GENUINENESS OF EXPENSES BECAUSE NO BILLS/ VOUCHERS WERE PRODUCED ON THE PREMISE THAT THOSE WERE DESTROYED A FTER THE SETTLEMENT OF THE MOU. IN THE OPINION OF THE AO, THE ASSESSEE SHOULD HAVE INTIMATED THE NAMES AND ADDRESSES OF LABOUR CONTRAC TORS AS WELL AS THE OTHER DEALERS FROM WHOM INSECTICIDES/PESTICIDES AND PACKING BOX, ETC., ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 130 WERE PURCHASED. THEN, HE RECORDED IN PARA 5.2.4 TH AT: IN THESE CIRCUMSTANCES, IT APPEARS THAT THE ASSESSEE HAS NOT INCURRED THE EXPENSES AND ONLY MANIPULATED THE ACCOUNTS TO JUSTIFY THE HU GE AGRICULTURAL INCOME OF THE OWNER OF THE SHRIKHAND ORCHARDS. DES PITE MAKING SUCH RECORDING, HE ACCEPTED THE GENUINENESS OF EXPENSES INCURRED AND THE SALES MADE BY THE ASSESSEE. X. IT IS FURTHER PERTINENT TO NOTE THAT THE BOOKS OF ACCOUNT IN RESPECT OF SHRIKHAND ORCHARDS, DAMRALI PRODUCED BEFORE THE AO REVEALED THAT ALL THE EXPENSES WERE SHOWN TO HAVE BEEN INCURRED ON ON E DATE ONLY, I.E., 31.10.2010 AND THAT TOO IN CASH. PACKING MATERIAL ACCOUNT HAS ONLY ONE ENTRY DATED 31.10.2010 FOR RS.6,36,831/-; PESTICIDE S AND INSECTICIDES ACCOUNT HAS ALSO ONLY ONE ENTRY DATED 31.10.2010 FO R RS.3,25,631/- AND LABOUR CHARGES ACCOUNT HAS ALSO ONLY ONE ENTRY DATE D 31.10.2010 FOR A SUM OF RS.3,50,000/-. THIS SHOWS THAT THE ASSESSEE CLAIMED TO HAVE INCURRED ALL THE EXPENSES ON PACKING MATERIAL, PEST ICIDES/INSECTICIDES AND LABOUR CHARGES ONLY ON A SINGLE DAY THROUGHOUT THE YEAR. THE AO SHOULD HAVE THE COURTESY OF EXAMINING SUCH UNUSUAL FEATURE, MORE SO, ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 131 WHEN THE ASSESSEE WAS NOT PRODUCING ANY BILLS/VOUCH ERS FOR SUCH EXPENSES DESPITE HIS REPEATED REQUESTS. 43. AN OVERVIEW OF THE ABOVE FEATURES INDICATES THAT THE AGRICULTURAL PRODUCE WAS NOT PROVED; TRANSPORTATION OF THE SAME TO UAA WAS ALSO NOT PROVED; BILLS ISSUED BY UAA WERE NOT GENUINE; CASH RECEIVED FROM UAA SHOWN AT RS.1.00 CRORE DID NOT APPEAR IN THEIR BOOK S OF ACCOUNT; THE EXPENSES CLAIMED WERE NOT BACKED BY ANY VOUCHERS/BI LLS; AND ALL THE EXPENSES WERE CLAIMED TO HAVE BEEN INCURRED ON ONE SINGLE DAY AND THAT TOO IN CASH. WE FAIL TO COMPREHEND AS TO HOW THE A SSESSMENT ORDER ACCEPTING THE GENUINENESS OF CARRYING OUT THE AGRIC ULTURAL OPERATIONS AND EARNING A HUGE INCOME IN SUCH CIRCUMSTANCES CAN BE CONSIDERED AS AN ORDER MADE AFTER PROPER INQUIRY AS HAS BEEN CANVASS ED BY THE ASSESSEE. IT IS A CASE OF A PATENT NON-APPLICATION OF MIND BY THE AO TO THE FACTS, WHICH WERE LOUDLY CALLING FOR IN-DEPTH INVESTIGATIO N. IN OUR CONSIDERED OPINION, THE LD.CIT WAS FULLY JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER AND DIRECTING THE AO TO FRAME A FRESH ASSESSM ENT. ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 132 44. THE LD. AR FOR THIS YEAR HAS ALSO ASSAILED THE IMPUGNED ORDER BY ADOPTING THE ARGUMENTS ON THE LEGAL PROPOSITIONS MA DE IN THE CASE OF VIRBHADRA SINGH (HUF), NAMELY, INADEQUATE INQUIRY B Y THE AO CANNOT EMPOWER THE CIT TO REVISE ORDER; DEBATABLE ISSUE; A ND THE CIT SHOULD HAVE HIMSELF SHOWN INFIRMITY IN THE ASSESSMENT ORDE R RATHER THAN SENDING THE MATTER BACK TO THE AO. WE HAVE ELABORAT ELY DEALT WITH SUCH ISSUES IN OUR ORDER OF VIRBHADRA SINGH (HUF), WHICH MUTATIS MUTANDIS APPLY TO THE ASSESSEE ALSO. 45. IN THE RESULT, ALL THE APPEALS ARE DISMISSE D. THE ORDER PRONOUNCED IN THE OPEN COURT ON 08.12.201 6. SD/- SD/- [I.C. SUDHIR] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 08 TH DECEMBER, 2016. DK ITA NOS.486, 216 & 215/CHANDI/2014 ITA NO.408/CHANDI/2015 133 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.