Shri Dilip Mehta, Jabalpur V. A.C.I.T, Jabalpur

ITA 52/JAB/2013

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8462 (ITAT-JABALPUR)
• Duration Of Justice: 8 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWATI AGARWAL JT
• Keywords: Question of law; Initiation of penalty proceedings; Onus to prove; Set aside
• Section: 271(1)(c); 143(3); 191; 13; 263

Judgement Text

ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH , JABALPUR (SMC) (THROUGH VIDEO CONFERENCING) BEFORE SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER ITA NO.52/JAB/2013 ASSESSMENT YEAR: 2006-07 DILIP MEHTA, JABALPUR (M.P.) [PAN: AAJPM 8444K] VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, JABALPUR, (APPELLANT) (RESPONDENT) APPELLANT BY SH. SAPAN USRETHE ADVOCATE RESPONDENT BY SMT. SWATI AGARWAL, JT. CIT DATE OF HEARING 11/8/2021 DATE OF PRONOUNCEMENT 16/8/2021 ORDER PER SANJAY ARORA, AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JABALPUR (CI T(A) FOR SHORT) DATED 12/9/2012, DISMISSING THE ASSESSEES APPEAL CONTEST ING HIS ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE AC T HEREINAFTER) FOR THE ASSESSMENT YEAR (AY) 2006-07 VIDE ORDER DATED 28/12 /2011. 2. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY SHRI USRETHE, THE LD. COUNSEL FOR THE ASSESSEE, THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE TRIBUNALS ORDER IN HIS OWN CASE FOR AY 2005-06, COPIES OF WHICH, I.E., THE THIRD MEMBER ORDER DATED 20/3/2020 AND THE DIVISION BENCH ORDER (GIVING EFFECT TO THE MAJORITY VIEW) DA TED 20/7/2020, STAND FURNISHED BY HIM TO THE TRIBUNAL (WITH A COPY TO TH E REVENUE) ON 12/7/2021. ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 2 NARRATING THE BACKGROUND FACTS OF THE CASE, HE EXPL AINED THAT THE ASSESSMENT IN THIS CASE WAS ORIGINALLY MADE U/S. 143(3) ON 26/12/ 2008 (APB PGS. 46-51), MAKING TWO ADJUSTMENTS TO THE ASSESSEES RETURNED I NCOME, BEING: A). DENIAL OF EXEMPTION U/S.10(1) IN RESPECT OF INC OME RETURNED AS AGRICULTURAL INCOME ON ACCOUNT OF IT BEING UNPROVED TO THE EXTEN T OF RS. 28.56 LACS; AND B). DENIAL OF DEDUCTION U/S. 80-JJA ON THE PROFITS AND GAINS OF THE BUSINESS OF SALE OF BIOFERTILIZER AND BIOLOGICAL AGENT, AT RS. 10.69 LACS. THE SAME WAS SUBJECT TO REVISION U/S. 263 OF THE AC T BY THE COMMISSIONER OF INCOME TAX-II, JABALPUR (CIT FOR SHORT) ON THE GR OUND THAT PENALTY U/S. 271(1)(C) HAD NOT BEEN INITIATED BY THE ASSESSING O FFICER (AO) WHILE COMPLETING THE ASSESSMENT, WHICH WAS ALSO DIRECTED TO BE FRAMED AFRESH. THE MATTER, IN FURTHER APPEAL, WAS SET ASIDE BY THE TRI BUNAL (IN ITA 186/JAB/2009, DATED 26/10/2009) TO THE FILE OF THE LD. CIT, WHO, IN THE SET ASIDE PROCEEDINGS, VIDE ORDER DATED 29/3/2011, DROPPED THE PROCEEDINGS U/S. 263 QUA THE DEDUCTION U/S. 80-JJA, AND REMITTED THE MATTER BACK TO THE AO FOR FRESH EXAMINATION ON THE ISSUE OF DENIAL OF EXEMPTION U/S. 10(1). THE AO, VI DE ORDER DATED 28/12/2011, REPEATED THE DENIAL OF EXEMPTION U/S. 10(1), ASSESS ING THE RETURNED AGRICULTURAL INCOME (RS. 29.42 LACS) AS INCOME FROM OTHER SOURCE S (TO THE EXTENT OF RS. 28.56 LACS) INASMUCH AS NO IMPROVEMENT IN HIS CASE HAD BE EN MADE BY THE ASSESSEE IN THE SET-ASIDE PROCEEDINGS. THE SAME WAS CONFIRMED B Y THE LD. CIT(A), OBSERVING THE FACTS AND CIRCUMSTANCES OF THE CASE T O BE THE SAME AS THAT FOR AY 2005-06, FOR WHICH YEAR THE FIRST APPELLATE AUTHORI TY HAD CONFIRMED THE ASSESSMENT, SIMILARLY, OF THE AGRICULTURAL INCOME A S INCOME FROM OTHER SOURCES (VIDE ORDER U/S. 143(3), DATED 31/12/2007 (APB 36-4 5)). THE ASSESSEES FURTHER APPEAL TO THE TRIBUNAL HAS SINCE BEEN, AS CLARIFIED EARLIER, ACCEPTED BY IT, I.E., ON THE ISSUE OF GENUINENESS OF THE CLAIM QUA AGRICULTURAL INCOME AND, THUS, OF THE CLAIM OF EXEMPTION U/S. 10(1) IN ITS RESPECT, REVER SING THE ORDER BY THE FIRST APPELLATE AUTHORITY, RELIED UPON BY THE LD. CIT(A). HE WOULD THEN TAKE THE BENCH THROUGH THE ASSESSMENT ORDERS DATED 26/12/200 8 AND 28/12/2011; THE ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 3 IMPUGNED ORDER, AS WELL AS THE TRIBUNALS ORDER DAT ED 20/3/2020 RECORDING FINDINGS IN RESPECT OF AGRICULTURAL INCOME IN FAVOU R OF THE ASSESSEE, WHICH IS THE ONLY ISSUE BEING AGITATED IN THE INSTANT APPEAL, AS WAS THE CASE FOR AY 2005-06. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD, INCLUDING THE ASSESSMENT ORDER FOR AY 2005-06, ALSO REFERRED TO D URING HEARING. 3.1 THE ASSESSEES CASE IS THAT HE HAS ADVANCED ALL THE RELEVANT MATERIAL, SAVE THAT ALREADY IN THE POSSESSION OF THE REVENUE, TOWA RD EVIDENCING THE UNDERTAKING OF AGRICULTURAL ACTIVITY AND SALE OF AG RICULTURAL PRODUCE. THE MANNER OF HIS FUNCTIONING AND BOOK-KEEPING REMAINS THE SAM E AS FOR THE PRECEDING AS WELL AS THE SUCCEEDING YEARS. THE INCOME RETURNED A S AGRICULTURAL INCOME BE, THEREFORE, ACCEPTED AS SUCH, AS FOR THE IMMEDIATELY PRECEDING YEAR, WHICH HAS THE APPROVAL OF THE TRIBUNAL, WITH THE REVENUES CA SE FOR THE CURRENT YEAR BEING NO DIFFERENT FROM THAT YEAR, I.E., THE NON-VERIFICA TION OF THE CASH SALE BILLS (CASH MEMOS) ISSUED BY THE ASSESSEE INASMUCH AS THEY DO N OT CONTAIN THE PARTICULARS OF THE BUYER/S WHO HAD MADE THE CASH PAYMENT/S THER ETO. AS AGAINST THE REPORTED SALE OF AGRICULTURAL PRODUCE AT 46.83 LACS, ONLY 1.37 LACS HAS BEEN RECEIVED BY CHEQUE/BANK DRAFT FROM THREE IDENTIFIED PARTIES. THE EXEMPTION U/S. 10(1) HAS ACCORDINGLY BEEN WORKED OUT BY THE AO ON PROPORTION ATE BASIS, ACCEPTING THE SALE PROCEEDS RECEIVED THUS AS GENUINE. IN DOING SO , IT, AS FOR AY 2005-06, RELIES ON THE FOLLOWING CASE LAW, EMPHASIZING THE TRITE LA W THAT THE BURDEN TO PROVE A CLAIM QUA AN EXEMPTION OR DEDUCTION IS ON THE PERSON CLAIMIN G THE SAME, I.E., THE ASSESSEE: CIT V. R. VENKATASWAMY NAIDU [1956] 29 ITR 529 (SC); CIT V. RAMAKRISHNA DEO [1959] 35 ITR 312 (SC); RIDHKARANDAS POONAMCHAND BHURA V. CIT [1998] 231 ITR 604 (MP); AND GOPI RAM LILA V. CIT [1997] 225 ITR 320 (RAJ). THE BURDEN WOULD INCLUDE BOTH, THE NATUR E AS WELL AS THE VOLUME OF THE INCOME SUBJECT TO EXEMPTION/DEDUCTION, AS WELL AS THE QUANTUM OF THE LATTER. ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 4 3.2 THE PRINCIPLE OF LAW IS WELL-SETTLED, AND ADMIT S OF NO TWO VIEWS. IN ALL CASES IN WHICH RECEIPT IS SOUGHT TO BE TAXED AS INC OME, THE BURDEN IS UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PR OVISION. WHERE, HOWEVER, AS IN THE INSTANT CASE, THE RECEIPT IS IN THE NATURE O F INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE, BECAUSE IT FALLS WITHIN THE EXEMPTION PROVIDED BY THE ACT, LIES ON THE ASSESSEE ( PARIMISETTI SEETHARAMAMMA V. CIT [1965] 57 ITR 532 (SC)). AS NOTED BY IT WITH REFERENCE TO THE DECISIO N IN CIT V. CALCUTTA AGENCY LTD . [1951] 19 ITR 191 (SC), ALSO QUOTING THEREFROM, T HE BURDEN TO PROVE THE NECESSARY FACTS TOWARD HIS CLAIMS, PREFERRED PER HI S RETURN OF INCOME, IS ON THE ASSESSEE. AS FURTHER EXPLAINED BY IT, THE BURDEN ON THE REVENUE, HOWEVER, IS SUBJECT TO THE SOURCE OF THE RECEIPT BEING, UNLIKE THE INSTANT CASE, NOT IN DISPUTE; THE APEX COURT HOLDING AS: (PG. 537) WHETHER A RECEIPT IS LIABLE TO BE TREATED AS INCOME DEPENDS VERY LARGELY ON THE FACTS AND CIRCUMSTANCES OF THE CASE; IT IS OPEN TO THE IN COME-TAX AUTHORITIES TO RAISE AN INFERENCE THAT A RECEIPT BY AN ASSESSEE IS ASSESSAB LE INCOME WHERE HE FAILS TO DISCLOSE SATISFACTORILY THE SOURCE AND THE NATURE OF THE REC EIPT. BUT IN THIS CASE THE SOURCE OF THE INCOME WAS DISCLOSED BY THE APPELLANT, AND THERE WA S NO DISPUTE ABOUT THE TRUTH OF THE DISCLOSURE . AS EXPLAINED EARLIER BY THE HONBLE COURT IN KALE KHAN MOHAMMED HANIF V. CIT [1963] 50 ITR 1 (SC), AGAIN A DECISION BY ITS LAR GER BENCH (AS INDEED ITS DECISIONS BEING RELIED UPON BY THE REVENUE), AFFIRM ING THAT BY THE HONBLE JURISDICTIONAL HIGH COURT (REPORTED AT [1958] 34 IT R 669 (MP)), THE ONUS TO PROVE THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BE EN RECEIVED BY THE ASSESSEE IS ON HIM. IF HE DISPUTES THE LIABILITY TO TAX, IT WAS FOR HIM TO SHOW THAT EITHER THE RECEIPT WAS NOT INCOME OR THAT, IF IT WAS, IT WAS E XEMPT FROM TAXATION UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH A PRO OF, THE AO IS ENTITLED TO TREAT IT AS TAXABLE INCOME. 3.3 BE THAT AS IT MAY, I, HOWEVER, OBSERVE NO DISPU TE QUA THE SAID PROPOSITION OF LAW. ALL THAT THE ASSESSEE, ACCEPTING THE LEGAL PROPOSITION AFORE-STATED, AND ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 5 RELYING ON THE ORDER BY THE TRIBUNAL IN HIS CASE FO R AY 2005-06, CONTENDS THAT HE HAS, ON FACTS, PROVED TO HAVE UNDERTAKEN AGRICUL TURE, AND INCOME THEREFROM, DULY REFLECTED IN HIS AUDITED ACCOUNTS, AS RIGHTLY RETURNED, I.E., AS FOR AY 2005- 06, FOR WHICH YEAR HE HAS FOUND FAVOUR, UNDER THE SAME FACTS AND CIRCUMSTANCES, WITH THE TRIBUNAL, SO THAT THE INCOME, RETURNED LIK E-WISE FOR THE CURRENT YEAR, BE ACCEPTED AS SUCH. NOW, WITHOUT DOUBT, THE ARGUMENT IS UNEXCEPTIONAL. SUBJECT, THEREFORE, TO AN ABSENCE OF ANY CHANGE IN THE FACTS & CIRCUMSTANCES OF THE CASE, TOWARD WHICH THE ASSESSMENT ORDERS FOR BOTH THE YEA RS; THE IMPUGNED ORDER, AS WELL AS THE TRIBUNALS ORDER FOR AY 2005-06 WERE RE AD OUT DURING HEARING, THE FINDINGS ISSUED BY THE TRIBUNAL FOR THAT YEAR WOULD OBTAIN AND APPLY FOR THE CURRENT YEAR AS WELL. 3.4 THE MATTER IS, THUS, PRINCIPALLY FACTUAL. ON FA CTS, IT IS OBSERVED THAT THE ASSESSEE HAS, FOR THE CURRENT YEAR, NOT PRODUCED TH E BOOKS OF ACCOUNT AND THE BILLS AND VOUCHERS FOR THE EXPENDITURE CLAIMED TO B E INCURRED ON AGRICULTURAL ACTIVITY, AS WELL AS THE SALE BILLS, AS STATED EMPH ATICALLY AT PGS.3-4 OF THE ASSESSMENT ORDER DATED 28/12/2011. THE NON-PRODUCTI ON OF THE SALE BILLS, STATED TO BE ON ACCOUNT OF THE SAME BEING IMPOUNDED BY THE ADDL. CIT, RANGE-I, JABALPUR, WOULD THOUGH BE TO NO MOMENT CONSIDERING THE REVENUES CASE, I.E., THE NON-VERIFIABILITY OF THE SALE OF AGRICULTURAL P RODUCE WHICH IS ALMOST WHOLLY IN CASH, IN VIEW OF THE NON-MENTION OF THE BUYERS PARTICULARS ON THE SALE BILLS, AN ADMITTED POSITION. NO VALUE, THEN, CAN BE ATTACH ED TO THE REVENUES OBJECTION QUA NON-PRODUCTION OF CASH SALE BILLS. QUA THE NON-PRODUCTION OF THE BOOKS OF ACCOUNT AND AGRICULTURAL EXPENDITURE BILLS/VOUCHERS DURING ASSESSMENT PROCEEDINGS, PARTICULARLY CONSIDERING THAT THE MATT ER WAS, IN REVISION, REMITTED FOR FRESH CONSIDERATION, SH. USRETHE, ON BEING QUES TIONED BY THE BENCH DURING HEARING, WOULD SUBMIT THAT THE SAME WERE, AS FOR AY 2005-06, IMPOUNDED BY THE REVENUE, DULY EXPLAINED IN APPELLATE PROCEEDING S, DRAWING REFERENCE TO PARA 2.2 (PGS. 2-3) OF THE IMPUGNED ORDER, NOTING THE SA ME, BESIDES REITERATING THE ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 6 ASSESSEES RELIANCE ON THE TRIBUNALS ORDER FOR AY 2005-06. THE SAME IS SANS ANY REFERENCE TO THE NON-PRODUCTION OF THE PROOF FO R INCURRING EXPENDITURE ON AGRICULTURE, AND ONLY RIGHTLY SO AS THE EXPENSE VOU CHERS FOR THAT YEAR WERE PRODUCED DURING ASSESSMENT PROCEEDINGS (REFER PG. 3 OF THE ASSESSMENT ORDER, AT APB PG. 38). FOR THE CURRENT YEAR, ON THE CONTRARY, THE AO CATEGORICALLY NOTES THEIR NON-PRODUCTION. THERE IS IN THE ASSESSMENT OR DER FOR AY 2005-06 NO MENTION OF OR REFERENCE TO THE EXPENSE VOUCHERS FOR AY 2006-07, FOR FURNISHING WHICH THERE WAS IN FACT NO OCCASION NOR WERE CALLED FOR, FOR THEM TO BE IMPOUNDED THEREAT, I.E., DURING THE ASSESSMENT PROC EEDINGS FOR THAT YEAR. FURTHER, THE REFERENCE IN PARA 2.2 SUPRA IS QUA NON-PRODUCTION OF SALE BILLS, AND NOT OF BOOKS OF ACCOUNT AND EXPENSE VOUCHERS. THE A SSESSEES CLAIM IN ITS RESPECT IS THUS A BALD CLAIM, WITHOUT ANY EVIDENCE. APART THEREFROM, THE FOLLOWING DIFFERENCES BETWEEN THE TWO YEARS WERE OBSERVED BY THE BENCH DURING HEARING, AND THE ASSES SEE REQUIRED TO FURNISH THE NECESSARY DOCUMENTS/EXPLANATIONS: A). THE KHASRA NAKAL (REVENUE RECORD), ESTABLISHING AGRICULTURAL ACTIVITY, HAD BEEN ADDUCED BY THE ASSESSEE ONLY FOR THREE PRECEDI NG YEARS, I.E., UP TO FY 2004- 05 (AY 2005-06). WHETHER, THEREFORE, IT HAD BEEN SO FOR THE CURRENT YEAR, I.E., FY 2005-06, EVIDENCING AGRICULTURAL ACTIVITY FOR THIS YEAR? IF SO, COPY THEREOF; B). THE BASIS FOR THE CLAIM OF CULTIVATION OF SAFED MUSLI FOR THE CURRENT YEAR INASMUCH AS, ADMITTEDLY, THERE WAS NO PURCHASE OF M USLI DURING THE YEAR (REFER PARAS 17 & 28 OF THE TRIBUNALS ORDER DATED 20/3/20 20). ALSO, THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND ANY PROO F OF INCURRING EXPENDITURE ON AGRICULTURAL ACTIVITY; AND C). THE AGRICULTURE PROFIT FOR THE CURRENT YEAR, AT ~ 63% (OF THE SALE VALUE), IS ONLY ~6% LOWER THAN THAT FOR AY 2005-06 (~ 69%), WHILE T HE DIFFERENCE IN THE AVERAGE SALE PRICE OF MUSLI, WHICH CONSTITUTES THE BULK OF THE AGRICULTURAL SALE, IS VERY STEEP, I.E., AT RS.131 PER KG., AS COMPARED TO RS. 306/KG. FOR AY 2005-06 (REFER PARA 28 OF THE TRIBUNALS ORDER DATED 20/3/2 020). IN OTHER WORDS, GOING BY THE SALE PRICE OF MUSLI FOR THE TWO YEARS, A SIMILA R PER UNIT COST OF PRODUCTION FOR THE CURRENT YEAR SHOULD RESULT IN A MUCH LOWER PROF IT (OR PROFIT RATIO) FOR THE CURRENT YEAR. ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 7 THE PROFIT & LOSS (P&L) ACCOUNTS FOR FINANCIAL YEAR S 2004-05 TO 2006-07 WERE FURNISHED IN RESPONSE (COPY ON RECORD). PER WRITTEN SUBMISSIONS THE DISCLOSED PROFIT WAS SOUGHT TO BE EXPLAINED IN TERMS OF THE S ALE QUANTITY/S AND SALE RATE/S. KHASRA NAKAL (FOR THE CURRENT YEAR) WAS NOT SUBMITT ED, THOUGH, ON ASKING, STATED BY SH. USRETHE, WITH REFERENCE TO THE ASSESSMENT OR DER, TO HAVE BEEN FURNISHED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 3.5 THE ISSUES ARISING FOR ADJUDICATION, THUS, ARE: A). IF THE UNDERTAKING OF AGRICULTURAL ACTIVITY DUR ING THE CURRENT YEAR HAS BEEN PROVED AND, IF SO, TO WHAT EXTENT; AND B). WITHOUT PREJUDICE, THE EXTENT OF INCOME, IF ANY , THAT CAN BE SAID TO BE DERIVED FROM AGRICULTURE FOR THE CURRENT YEAR. EVEN THOUGH HOLDING OF AGRICULTURAL LAND OR EVEN PR OVING THE AGRICULTURAL ACTIVITY WOULD NOT BY ITSELF PROVE AGRICULTURAL INC OME, MUCH LESS TO THE EXTENT STATED, IN THE INSTANT CASE THE SAID ACTIVITY ITSEL F, WHOLLY A MATTER OF FACT, CANNOT BE SAID TO HAVE BEEN ESTABLISHED. THE PRODUCTION OF KHASRA NAKAL FOR AY 2005- 06 WAS TAKEN BY THE TRIBUNAL AS A PRIMARY EVIDENCE TOWARD HAVING UNDERTAKEN AGRICULTURE ACTIVITY (REFER PARAS 28, 29 & 30). AGR ICULTURAL ACTIVITY FOR THAT YEAR WOULD NOT BY ITSELF TRANSLATE INTO THE SAID ACTIVIT Y FOR THE CURRENT YEAR, PARTICULARLY CONSIDERING THAT THE SAME HAS BEEN CON FIRMED AS SINCE DISCONTINUED, I.E., ON THE INSPECTION OF THE ASSESSEES LAND ON 2 6/11/2007. KHASRA NAKAL FOR THE CURRENT YEAR, SPECIFICALLY CALLED FOR DURING HEARIN G, WAS NOT FURNISHED BY EITHER PARTY, AND FOR NO GOOD REASON. THE MENTION OF ITS S UBMISSION IN THE ASSESSMENT ORDER IS WITHOUT REFERENCE TO THE YEAR, WHICH IS EX TREMELY RELEVANT. IN FACT, THERE IS NO MATERIAL ON RECORD TO SHOW IT, I.E., FOR THE CURRENT YEAR, HAVING BEEN FURNISHED AT ANY STAGE. EVEN IF, FOR ARGUMENT SAKE, IT IS ASSUMED TO HAVE BEEN FURNISHED DURING ASSESSMENT PROCEEDINGS, WHAT PREVE NTS THE ASSESSEE FROM DOING SO NOW, BEING A DOCUMENT WHICH IS A PUBLIC RE CORD, WHICH CAN THEREFORE BE PROCURED, AND OUGHT TO HAVE BEEN, PARTICULARLY I N VIEW OF THE UNDERTAKING OF ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 8 AGRICULTURAL ACTIVITY HAVING BEEN SERIOUSLY DOUBTED BY THE REVENUE. COUPLED WITH THE ABSENCE OF PRODUCTION OF BOOKS OF ACCOUNT AND EXPENSE VOUCHERS, WHICH STAND FURNISHED FOR AY 2005-06, THE AGRICULTU RE ACTIVITY CANNOT BE SAID TO HAVE BEEN PROVED FOR THE CURRENT YEAR. IT IS TRITE LAW THAT NON-FURNISHING OF BEST EVIDENCE, WHICH THE PARTY COULD LEAD, WOULD ENTITLE DRAWING AN ADVERSE INFERENCE ( UNION OF INDIA V. RAI DEB SINGH BIST [1973] 88 ITR 200 (SC)). IN FACT, THE P&L A/C FOR THE CURRENT YEAR ITSELF REFLE CTS NO FRESH CULTIVATION OF MUSLI, WHICH ACCOUNTS FOR OVER 86% OF THE TOTAL SAL E FOR THE YEAR . COMING TO THE SECOND ASPECT, STATED, WITHOUT PREJUD ICE, HEREINABOVE, THE P&L A/CS, HOWEVER, MATERIALLY ALTER THE COMPLEXION OF THE CASE. EVEN AS ARGUED BY SH. USRETHE, THE SALE OF AGRICULTURAL PRODUCE, W HICH FOR MUSLI IS AT AN AVERAGE RATE MUCH BELOW THAT FOR AY 2005-06, SINCE ACCEPTED, WOULD GET ESTABLISHED ON THE BASIS OF THE CLOSING STOCK (OF S TANDING CROPS) FOR THAT YEAR TOGETHER WITH THE SALE THEREOF FOR THE CURRENT YEAR , I.E., NOTWITHSTANDING THE NON- SUBMISSION OF THE KHASRA NAKAL (REVENUE RECORD). TH E ARGUMENT HAS MERIT. THE UNDERTAKING OF AGRICULTURAL ACTIVITY FOR THE PRECED ING YEARS, AS WELL AS THE FINANCIAL STATEMENTS FOR THOSE YEARS, STAND CONFIRM ED BY THE TRIBUNAL. AS SUCH, THE PREPONDERANCE OF PROBABILITIES WEIGHS HEAVILY I N FAVOUR OF THE REALIZATION OF THE AGRICULTURAL PRODUCE OF THE IMMEDIATELY PRECEDI NG PREVIOUS YEAR, QUANTITY OF WHICH AS AT THE YEAR-END IS NOT IN DISPUTE. WHY WOULD NOT, ONE MAY ASK, ANY PRUDENT OR REASONABLE PERSON, WHO HAS IN FACT ESTAB LISHED HIMSELF IN THE MARKET, SELL HIS STANDING CROPS, REALIZING THEIR VALUE AS W ELL AS HIS EARNINGS THEREFROM ? NO IMPEDING CIRCUMSTANCE HAS BEEN STATED, MUCH LESS SHOWN BY THE REVENUE. IN FACT, THE SAME PRINCIPLE FINDS APPLICATION BY THE T RIBUNAL FOR AY 2005-06. THE AGRICULTURAL ACTIVITY BEING PROVED, MUSLI WAS TAKEN AS SOLD AT THE GOING MARKET RATES, I.E., AS RECORDED IN BOOKS, DESPITE THE NON- SPECIFICATION OF THE BUYERS. THE ONLY QUESTION THAT WOULD SURVIVE IS THE EXTENT OF SUCH EARNING. THE P&L A/CS FOR THE PREVIOUS YEARS ENDING 31/3/2005 & 31/3/2006 REFLECT THE ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 9 CLOSING STOCK OF STANDING CROP OF MUSLI AT 34,520 K G. (VALUED AT . 12,82,034) AND ITS SALE FOR THE CURRENT YEAR AT . 40.35 LACS RESPECTIVELY, WHICH FIGURES ALSO FIND MENTION IN THE TRIBUNALS ORDER DATED 20/3/202 0 (FOR AY 2005-06) (PARAS 21, 28). THE SAID SALE, ON THE BASIS OF THE AVERAGE SALE RATE OF .131/KG., IMPLIES A QUANTITY OF 30,801 KG., WHICH, SUBJECT TO THE WAS TAGE ELEMENT, WOULD STAND COVERED BY THE OPENING STOCK (34,520 KG.). AS REGAR DS WASTAGE, THE SALE OF THIS CROP FOR AY 2005-06, I.E., . 92.05 LACS, WORKS TO 30,081 KGS. ON THE BASIS OF THE AVERAGE SALE PRICE FOR THAT YEAR ( .306/KG.), WHICH QUANTITY IS INCLUSIVE OF WASTAGE, AS, APART FROM BEING SO STATED IN THE TRIB UNALS ORDER ITSELF, IT GETS CONFIRMED ON THE BASIS OF THE QUANTITY OF THE REMAI NING STOCK (USED FOR CULTIVATION), WHICH IS THE BALANCING FIGURE AFTER D EDUCTING THE SAID QUANTITY FROM THE OPENING STOCK OF 38,000 KG., I.E., 7,919 KG., A LSO NOTED THEREIN (PARA 21). THE SALE FIGURE FOR THE CURRENT YEAR, I.E., 30,801 KG., IS THUS INFERABLY ALSO AT GROSS OF WASTAGE, WHICH GETS ALSO CONFIRMED FROM THE P&L A/C FOR THE CURRENT YEAR, STATING THE CLOSING STOCK AT A DIFFERENCE OF MEAGRE 38 KGS. THE DIFFERENCE BETWEEN THE CARRYING COST AND SALE OF MUSLI, I.E., .27.53 LACS ( .40.35 LACS - . 12.82 LACS), OR AT 68% OF THE SALE, BEING COMPARABL E WITH THE PROFIT FOR AY 2005-06, JUSTIFIES THE DISCLOSED PROFIT RATE FOR TH E CURRENT YEAR. AS REGARDS THE SALE OF AGRICULTURAL PRODUCE OTHER T HAN MUSLI, VALUED AT . 75,000 AS ON 31/3/2005, QUANTITY THEREOF IS NOT MEN TIONED EITHER IN THE P&L A/C OR THE TRIBUNALS ORDER SUPRA. THE PROFIT DISCLOSED FOR THE CURRENT YEAR IS AT 62.82%, SO THAT THE BALANCE 37.18% REPRESENTS COST, WHICH WOULD THEREFORE HAVE TO BE APPLIED TO ESTIMATE THE SALE VALUE THEREOF. H ERE IT MAY BE RELEVANT TO STATE THAT EVEN THOUGH THE REVENUES OBJECTION IS PRIMARI LY TO THE NON-PROVING OF THE CREDITS ASCRIBED TO THE SALE OF AGRICULTURAL PRODUC E, I.E., THE NATURE OF THE RECEIPT, IT HAS NOT BROUGHT THE ENTIRE SUCH RECEIPT TO TAX, BUT ONLY THE AGRICULTURAL INCOME COMPRISED THEREIN, WORKED OUT ON PROPORTIONATE BASI S. THE UNDERTAKING OF AGRICULTURAL ACTIVITY, TO WHATEVER EXTENT, AS WELL AS THE PROPORTION OF THE INCOME ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 10 IMBEDDED THEREIN, IS, THUS, ACCEPTED . FOR THE MUSLI CROP, SOLD AT . 40.35 LACS, DEDUCTING THE PROFIT @ 62.82% ( . 25.35 LACS) IMPLIES A COST OF . 15.00 LACS, OR AN EXPENDITURE OF . 2.18 LACS ON THE CROP OF . 12.82 LACS, WHICH WORKS TO 17% OF THE CROP COST. A SIMILAR EXPENSE RATIO ON THE OT HER CROPS IMPLIES A COST OF . 0.13 LACS (I.E., . 0.75 LACS X 17%), RESULTING IN THE TOTAL COST AT . 0.88 LACS, WHICH, AT 37.18% OF SALE, MAKES FOR A SALE VALUE OF .2.37 LACS. EVEN IF, THEREFORE, THE ENTIRE OPENING STOCK IS REGARDED AS SOLD, SO THAT NO PART OF IT IS USED FOR CULTIVATION, ITS SALE WOULD BE AT .2.37 LACS. THAT WOULD GIVE A TOTAL AGRICULTURAL SALE FOR THE YEAR AT .RS. 42.72 LACS (I.E., . 40.35 LACS + . 2.37 LACS), YIELDING A PROFIT OF .26.84 LACS, BEING 62.82% OF .42.72 LACS. INCOME TO THAT EXTENT IS TO BE, ACCORDINGLY, REGARDED AS AGRI CULTURAL INCOME. THE EXEMPTION U/S. 10(1), THUS, WOULD STAND TO BE ALLOWED AT .26.84 LACS, AS AGAINST AT .0.86 LACS BY THE REVENUE, WHICH, NEEDLESS TO ADD, WOULD GET SUBSUMED THEREIN. I AM CONSCIOUS THAT THE COST OF SALE OF THE AGRICUL TURAL PRODUCE, IMPUTED ON THE BASIS OF THE PROFIT/PROFIT RATIO DISCLOSED F OR THE CURRENT YEAR, I.E., AT . 15.88 LACS (I.E., . 42.72 LACS - . 26.84 LACS), EXCEEDS THE OPENING STOCK OF STANDING CROPS FOR THE YEAR ( . 13.57 LACS), SO THAT THE DIFFERENCE ( . 2.31 LACS), BEING EXPENDITURE ON AGRICULTURAL ACTIVITY, IS A TA CIT ADMISSION OF THE SAID ACTIVITY HAVING BEEN UNDERTAKEN DURING THE YEAR, IN WHICH CASE THE AGRICULTURE SALE OUGHT TO BE ADOPTED AT THE BOOK FIGURE FOR THE CURRENT YEAR, I.E., . 46.83 LACS. THE ARGUMENT, THOUGH IMPRESSIVE, IS NOT BACKE D BY ANY EVIDENCE OR MATERIAL ON RECORD, ONLY ON THE BASIS OF WHICH COUL D THE TRIBUNAL ISSUE ANY FINDING OF FACT IN DECIDING A MATTER BEFORE IT ( REFER, INTER ALIA, CIT V. RADHA KISHAN NANDLAL [1975] 99 ITR 143 (SC); CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC)). THE AGRICULTURAL SALE, ADMITTED B Y THE AO AT . 1.37 LACS, HAS BEEN ACCEPTED FOR MUSLI AT THAT REPORTED BY THE ASS ESSEE ( . 40.35 LACS), BEING COVERED BY THE OPENING STOCK THEREOF, WHILE ALSO EX TENDING THAT FOR OTHER AGRICULTURAL PRODUCE TO THE ENTIRE OPENING STOCK TH EREOF, ADOPTING THE DISCLOSED ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 11 PROFIT RATE WHICH, IT MAY BE APPRECIATED, CANNOT BE EXCEEDED. SOME EXPENDITURE ON STANDING CROPS, WHICH WOULD IN THE VERY LEAST RE QUIRE BEING HARVESTED, PACKED, STORED, AND SOLD IN THE MARKET, WHICH COULD AGAIN ONLY BE OVER A PERIOD OF TIME, ENTAILING BOTH DIRECT AND INDIRECT (FIXED) COSTS, IS ONLY INFERABLE, AND AT . 2.31 LACS (I.E., . 15.88 LACS - . 13.57 LACS), CONSIDERED REASONABLE. FURTHER, THE AGRICULTURAL EXPENDITURE OF . 2.31 LACS PRESUMABLY INCURRED ON THE STANDING CROPS, CAN ONLY BE APPROPRIATED UNIFORMLY ON THE QU ANTITY (OR, IN ITS ABSENCE, ITS SURROGATE, I.E., COST) OF THE STANDING CROPS AT THE BEGINNING OF THE YEAR. THE FOREGOING ALSO EXPLAINS THE ESTIMATION OF THE SALE VALUE OF THE CROPS OTHER THAN SAFED MUSLI IN A SUM NOT IN EXCESS OF . 2.37 LACS. IN SUM 4. THE ASSESSEE, WHO PLEADED HIS CASE AS COVERED BY THE TRIBUNALS ORDER FOR THE IMMEDIATELY PRECEDING YEAR, HAS, FOR HIS PART, FOR THE CURRENT YEAR, IN CONTRADISTINCTION, NOT PRODUCED EITHER THE KHASRA N AKAL OR THE BOOKS OF ACCOUNT OR ANY PROOF OF INCURRING AGRICULTURAL EXPENDITURE, SO AS TO CONTEND HAVING PROVED UNDERTAKING ANY FURTHER AGRICULTURAL ACTIVIT Y, WHICH WAS FOUND DISCONTINUED BY THE REVENUE ON AN INSPECTION OF THE ASSESSEES SITE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2005-06. AS EXPLAINED IN CIT V. R. VENKATA SWAMY NAIDU (SUPRA), IN ORDER TO CLAIM AN EXEMPTION FROM PAYME NT OF INCOME-TAX IN RESPECT OF WHAT THE ASSESSEE CONSIDER ED AGRICULTURAL INCOME, THE ASSESSEE HAD TO PUT BEFORE THE REVENUE AUTHORITIES PROPER MATERIALS WHICH WOULD ENABLE THEM TO COME TO A CONCLUSION THAT THE INCOME WHICH WAS SOUGHT TO BE ASSESSED WAS AGRICULTURAL INCOME. IT WAS NOT FOR THE REVENUE TO PROVE THAT IT WAS NOT AGRICULTURAL INCOME. THE SALE OF AGRICULTUR AL PRODUCE, I.E., AS ATTRIBUTABLE TO THE STANDING CROPS, IS THOUGH INFER ABLE, AND TOWARD WHICH, THEREFORE, FURTHER EXPENDITURE, AS IMPUTED ON THE B ASIS OF THE REPORTED PROFIT RATE, IS ADOPTED. THE BALANCE INCOME OF .2.58 LACS, I.E., THE AGRICULTURAL INCOME ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 12 RETURNED OVER .26.84 LACS, WOULD CONTINUE TO BE ASSESSED AS INCOM E FROM OTHER SOURCES, FOR ASSESSMENT UNDER WHICH HEAD OF INCOME THERE IS AMPLE AUTHORITY, INCLUDING THE DECISIONS RELIED UPON BY THE REVENUE IN THE INSTANT CASE. BEFORE PARTING WITH THIS ORDER, IT IS DEEMED PROPER TO DILATE ON AN ASPECT OF THE MATTER. THE ASSESSMENT IN THE INSTANT CASE W AS SUBJECT TO REVISION ON THE GROUND THAT THE AO HAD NOT INITIATED PENALTY PROCEE DINGS U/S. 271(1)(C) WHILE COMPLETING THE ASSESSMENT. THE MATTER, IN FURTHER A PPEAL, WAS SET ASIDE BY THE TRIBUNAL DIRECTING THE ADMINISTRATIVE COMMISSIONER (CIT) TO REVIEW AFRESH AFTER ALLOWING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THE REVISION ORDER DATED 29/3/2011 IS NOT ON RECORD. IT IS THUS NOT CL EAR AS TO HOW COULD UNDER SECTION 263 PROCEEDINGS THE LD. CIT DROP THE DISALL OWANCE OF DEDUCTION U/S. 80- JJA MADE IN ASSESSMENT, MORE SO AS THE SAME WAS DEE MED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOU NT OF NON-INITIATION OF PENALTY PROCEEDINGS. THE SAME SURE CONSTITUTES A VALID GROU ND FOR ASSUMING JURISDICTION U/S. 263 AND, BESIDES, THE SAID ASPECT HAS ATTAINED FINALITY. THIS AS THE DISALLOWANCE OF DEDUCTION U/S. 80-JJA COULD ONLY BE CONTESTED BY THE ASSESSEE IN APPELLATE PROCEEDINGS. THE LD. CIT COULD AT BEST , UPON HEARING THE ASSESSEE, REGARD THE NON-INITIATION OF PENALTY PROCEEDINGS QUA THE SAID DISALLOWANCE AS JUSTIFIED. THE BASIS FOR NOT DISALLOWING DEDUCTION U/S. 80-JJA, ADMITTEDLY EFFECTED IN THE ORIGINAL ASSESSMENT, BY THE AO IN T HE SECOND ROUND IS THUS NOT CLEAR. THE SAME IS CLEARLY A QUESTION OF LAW. IT IS DEEMED PROPER TO STATE THIS ASPECT OF THE ASSESSMENT AS THE SAID QUESTION, ARIS ING OUT OF THE ASSESSMENT, WAS NEITHER AGITATED BEFORE NOR HAS BEEN DEALT WITH BY THE TRIBUNAL. SURE, THE NON- DISALLOWANCE OF AND, CONSEQUENTLY, ACCEPTANCE OF TH E TRANSACTIONS OF SALE, SIMILARLY MADE, OF BIO-FERTILIZER AND BIOLOGICAL AG ENTS, WAS ONE OF THE GROUNDS ON WHICH THE ASSESSEE FOUND FAVOUR WITH THE TRIBUNA L FOR AY 2005-06, AND WHICH COULD THEREFORE BE ARGUED AS A DISTINGUISHING FEATURE FOR THIS YEAR. THIS, HOWEVER, SHALL HAVE NO IMPACT ON THE INSTANT ADJUDI CATION INASMUCH AS THE ITA NO. 52/JAB/2013 (AY 2006-07) DILIP MEHTA V. ASTT. CIT 13 CURRENT YEAR HAS ALREADY BEEN FOUND DISTINGUISHABLE ON ACCOUNT OF NON- SUBSTANTIATION OF HIS CASE BY THE ASSESSEE DUE TO N ON-PRODUCTION OF OTHER RELEVANT MATERIALS. IN FACT, THE P&L A/C FOR THE YE AR ITSELF SHOWS DISCONTINUANCE OF FRESH CULTIVATION OF SAFED MUSLI, THE PRINCIPAL CROP, SINCE THE SOWING SEASON DURING F.Y. 2004-05, THE PREVIOUS YEAR RELEVANT TO AY 2005-06. (REFER PARAS 3.4, 3.5) I DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 16, 20 21 SD/ - (SANJAY ARORA) ACCOUNTANT MEMBER DATED: 16/8/2021 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: SHRI DILIP MEHTA, PROP. M/S. RAJUL B UILDERS, RAJUL ARCADE, NAPIER TOWN, JABALPUR, MP 2. THE RESPONDENT: ASSISTANT COMMISSIONER OF INCOME TA X, CIRCLE 1(1), JABALPUR 3. THE CIT-1, JABALPUR 4. THE CIT(A), JABALPUR 5. THE SR. DR, ITAT, JABALPUR 6. GUARD FILE // TRU E COPY //