RUSTOM SOLI SETHNA, MUMBAI V. ITO, WARD 13 (2)(2), MUMBAI

ITA 6241/MUM/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9196 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 01-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS JOTHILAKSHMI NAYAK
• Assessee Lawyers: FEROZE ANDHYARUJ INA
• Keywords: Business income; Income from undisclosed sources; Salary income; Revised return; Set aside
• Section: 143(3); 201; 13; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI AMARJIT SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6241/MUM/2019 ASSESSMENT YEAR: 2016 - 17 MR. RUSTOM SOLI SETHNA, HILL COURT, PALI HILL, BANDRA, MUMBAI - 400050. VS. INCOME TAX OFFICER, WARD 13(2)(2 ), AAYAKAR BHAVAN, MAHARISHI KARVE ROAD, MUMBAI - 400021. PAN NO. AADPS6622B APPELLANT RESPONDENT ASSESSEE BY : MR. FEROZE ANDHYARUJINA, AR REVENUE BY : MRS . JOTHILAKSHMI NAYAK , SR. DR DATE OF HEARING : 16/12/2019 DATE OF PRONOUNCEMENT : 31/12/2019 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2016 - 17. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 154 R.W.S. 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: I. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER PASSED BY THE ASSESSING O FFICER (AO) BY DISALLOWING AGRICULTURAL INC OME OF MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 2 RS.17,71,331/ - AND CONSIDERING RS. 24,78,858/ - AS INCOME FROM UNDISCLOSED SOURCES CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. A THE CIT(A)/ AO HAVE GROSSLY ERRED IN FACTS AND IN LAW BY DISREGARDING THE DOCUME NTARY EVIDENCE PRODUCED BY THE A PPELLANT FROM TIME TO TIME IN SUPPORT OF THE GENUINE AGR ICULTURAL INCOME EARNED BY THE A PPELLANT DURING THE AY 2016 - 17. B THE CIT(A) / AO HAVE GROSSLY ERRED ON FACTS BY DISREGARDING THE AGE OF THE CASHEW TREES AND THE PROFIT MARGIN IT CAN EARN EVEN A FTER APPLYING THE ESTIMATE USED BY THE AO IN ITS ASSESSMENT ORDER. II. THAT THE ADDITION OF RS. 24,78,858/ - MADE BY THE AO ON ACCOUNT OF AGRICULTURAL INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND CONFIRMED BY THE CIT(A) BE DELETED. 3. THE ASSESSEE IS A PROPRIETOR OF M/S KYRUS INDUSTRIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SALARY INCOME, BUSINESS INCOME AND AGRICULTURAL INCOME. THE AGRICULTURAL INCOME IS DERIVED FROM SALE OF RAW CASHEW NUTS. THE ASSESSEE FILED REVISED RETURN FOR THE AS SESSMENT YEAR (AY) 2016 - 17 ON 21.03.2017 DECLARING TOTAL INCOME OF RS.12,38,186/ - . HE DECLARED AGRICULTURAL INCOME OF RS.21,36,233/ - AS EXEMPT BUT SHOWED IT FOR THE PURPOSE OF TAX RATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED A SHOW CA USE NOTICE TO THE ASSESSEE WHICH HAS BEEN EXTRACTED AT PARA 3.1 OF THE ASSESSMENT ORDER. IN RESPONSE TO IT, THE ASSESSEE FILED A REPLY DATED 24.12.2018 BEFORE THE AO. HOWEVER, IT IS NOTED BY THE AO THAT THE ASSESSEE FAILED TO FURNISH COMPLETE DETAILS IN SU PPORT OF EARNING OF AGRICULTURAL INCOME OF RS.28,43,760/ - ; FURTHER THE ASSESSEE FAILED TO FURNISH DETAILS OF THE AGRICULTURAL LAND AND THE CULTIVATED LAND WITH CROPS; THE PART DETAILS FURNISHED MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 3 BY THE ASSESSEE ARE NOT VERIFIABLE IN ABSENCE OF COMPLETE ADDR ESS ; THE CLAIM OF THE ASSESSEE THAT HE HAS SOLD AGRICULTURE PRODUCE TO MR. GULAM MOHD GAFOOR RAKHANGE AND ASHOK LALE ARE ALSO NOT PROVE D WITH BANK STATEMENTS ; THE NAMES MENTIONED ON THE BILLS ARE NOT MATCHING WITH THE NAMES AS PER BANK STATEMENT, THEREFORE, THE SALE BILLS WILL NOT HAVE ANY CREDIBILITY TO PROVE THE SALE OF AGRICULTURE PRODUCE BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, THE AO REFERRED TO NABARD MODEL PROFILE FOR 1.0 HA CASHEW CULTIVATION WHICH STATES THAT A YIELD OF 8 - 10 KG PER TREE COULD BE ACHIEVED AND WILL FETCH A PRICE OF RS.65 - 70 PER KG IN THE INTERNAL MARKET. PERUSING THE EXTRACT OF 7/12 PRODUCE D BY THE ASSESSEE, T HE AO NOTED THAT CULTIVATED LAND FOR THE CROP - CASHEW IS ONLY 9.4 HECTORS (23.2274 ACRES). ACCORDINGLY, HE ESTIMATED THE ACTUAL CROP OF CASHEW IN THE CULTIVATED LAND AS UNDER : TOTAL ACRE 23.2274 SURPLUS/INCOME PER ACRE RS.15,710/ - PER YEAR THUS THE AO CALCULATED THE TOTAL AGRICULTURAL INCOME FROM CASHEW CROP IN 23.2274 ACRES AT RS.3,64,902/ - . ACCORDINGLY, HE RESTRICTED THE AGRICULTURAL INCOME TO RS.3,64,902/ - AND TREATED THE EXCESS CLAIM OF RS.24,78,858/ - AS INCOME FROM UNDISCLOSED SOURCES. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 28.06.2019 THE LD. CIT(A) DISMISSED THE APPEAL WITH THE FOLLOWING REASONS : MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 4 6.5 THE APPELLANT HAS NOT PRODUCED ANY OF THE ABOVE DOCUME NTS IN SUPPORT OF ITS CONTENTION. ALL THAT THE APPELLANT HAD PRODUCED WAS ASSESSMENT ORDER OF EARLIER YEARS, CONFIRMATION LETTERS, NAME AND ADDRESS OF FEW PERSONS WHOM HE CLAIMED TO HAVE SOLD THE PRODUCTS. I FIND STRONG FORCE ON THE FINDING OF THE AO THAT THE PRODUCTION SHOWN BY THE APPELLANT RANGES UPTO 300% OF THE MAXIMUM YIELD GROWN BY FARMERS IN GOOD SOIL WITH WELL IRRIGATION FACILITIES AND BETTER CLIMATIC CONDITIONS. THE FINDINGS RECORDED IN THE ASSESSMENT ORDER COMPARING TO THE AVERAGE PRODUCTION PER ACRE AS PUBLISHED BY NABARD HAVE CONSIDERABLE COGENCY. UPON APPRECIATING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE FIRM VIEW THE APPELLANT FAILED TO ESTABLISH ITS CASE BY PRODUCING EVIDENCE OF BASIC OPERATIONS CARRIED OUT BY HIM FOR EARNI NG ABNORMAL AGRICULTURAL INCOME. IT DID NOT MEET THE ENTIRE REQUIREMENTS OF THE STATURE IN RESPECT OF EXCESS AGRICULTURAL INCOME IN AS MUCH AS HE FAILED TO PRODUCE THE PROOF OF PERFORMANCE OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIVATOR OR RECEIVER OF R ENT IN KIND AS CLAIMED. 6.6 THE APPELLANT SUBMITTED THAT HE OWNED AGRICULTURAL LAND AGGREGATING TO 23.24 HECTARES WHICH WORKS OUT TO 57.42 ACRES AND THE AO HAS WRONGLY CONSIDERED THE LAND HOLDING AS 9 HECTRES EQUAL TO 23.2274 ACRES M THE ASSESSMENT ORDER. HOWEVER, THE APPELLANT HAS NOT PRODUCED DOCUMENTS OR ANY PROOF SUBSTANTIATING HIS CLAIM OF AREA UNDER CULTIVATION. WITHOUT SUBSTANTIAL DOCUMENTARY EVIDENCES, THE APPELLANT'S CLAIM CANNOT BE ACCEPTED. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE APPELLANT HAD FILED DETAILS CALLED FOR BY THE AO FROM TIME TO TIME ON VARIOUS DATES INCLUDING DETA ILS OF AGRICULTURAL INCOME ; THE AO HAD FIRST ASKED FOR 7/12 EXTRACT FOR THE AY 2011 - 12 WHICH WAS FILED ; THEREAFTER, THE AO AS KED FOR 7/12 EXTRACTS FOR THE AY 2016 - 17 WHICH WAS ALSO FILED. IT IS FURTHER EXPLAINED THAT THE AO HAS WRONGLY ARRIVED AT A FINDING BY USING THE DATA FOR FOUR YEARS OLD MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 5 TREES AS SHOWN IN ANNEXURE III, WHICH SHOW AN INCOME OF RS.15,710/ - PER ACRE; THE TREES ARE OVER 20 YEARS OLD AND AS PER THE SAME ANNEXURE III, AS INCLUDED BY THE AO IN THE ORDER, THE YIELD PER ACRE IS RS.84,130/ - FOR TREES OF 10 YEARS AGE. THUS IT IS ARGUED THAT THE AO HAS ERRED IN NOT ACCEPTING THAT THE TREES ARE OVER TEN YEARS OLD AND WIL L GIVE A LARGER YIELD ; THE AO HAS ERRED IN STATING THAT THE TREES NEED FERTILIZER, WHEREAS ONCE CASHEW TREES ARE MATURE, FERTILIZATION IS NOT REQUIRED. ON FACTS IT IS STATED BY HIM THAT THE AO HAS ERRED IN STATING THAT LAND AREA IS 23.2274 ACRES, WHEN IT IS 23.24 HECTARES WHICH IS 57.42 ACRES (ONE HECTARE EQUALS 2.47 ACRE). IT IS FURTHER SUBMITTED THAT THE TREES HAVE BEEN PLANTED IN THE YEARS 1997 AND 1998 AND ARE WELL OVER 10 YEARS OLD AND THIS FACT WAS BROUGHT TO THE NOTICE OF THE AO. FURTHER, IT IS STAT ED THAT THE ASSESSEE HAS EARNED AGRICULTURAL INCOME FROM SALE OF CASHEW NUT AND IT HAS BEEN SHOWN IN THE RETURN OF INCOME FILED FOR EARLIER YEARS. THE LD. COUNSEL FILES A COPY OF CONFIRMATION FROM THREE PARTIES WHICH WERE FILED BEFORE THE CIT(A). 6. ON TH E OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITS THAT IT HAS BEEN RECORDED BY THE LD. CIT(A) THAT THE APPELLANT HAS NOT PRODUCED DOCUMENTS OR ANY PROOF SUBSTANTIATING HIS CLAIM OF AREA UNDER CULTIVATION AND WITHOUT SUBSTANTIAL DOCUMENTARY EVI DENCE, THE APPELLANTS CLAIM CANNOT BE ACCEPTED. THUS THE LD. DR SUPPORTS THE ORDER PASSED BY THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE ASSESSEE HAS FILED BEFORE THE AO , 7/12 EXTRACT FOR THE AY 201 1 - 12 AND FOR AY 2016 - 17. IN THE INSTANT CASE, AS EVIDENT FROM RECORD THE ACTUAL AGRICULTURAL AREA OF THE HOLDING FOR THE IMPUGNED ASSESSMENT YEAR IS 23.24 MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 6 HECTARES. SIMPLE CONVERSION TELLS US THAT 1HECTARE IS EQUAL TO 2.47 ACRE. HENCE, THE AREA ON WHICH CA SHEW TREES ARE GROWN IS 57.42 ACRES. THUS THE AO HAS MADE A MISTAKE IN ARRIVING THAT THE LAND AREA IS 23.2274 ACRES, WHEREAS IT IS 23.24 HECTARES WHICH IS 57.42 ACRES (1 HECTARE EQUALS 2.47 ACRE). FURTHER, AS EVIDENT FROM RECORD, THE TREES HAVE BEEN PLANTE D IN THE YEARS 1997 AND 1998 AND ARE WELL OVER 10 YEARS OLD. THE AO HAS WRONGLY TAKEN THE DATA FOR FOUR YEARS OLD TREES AS SHOWN IN ANNEXURE III, WHICH SHOW AN INCOME OF RS.15,710/ - PER ACRE. IN FACT, THE TREES ARE OVER 20 YEARS OLD AND AS PER ANNEXURE III AS INCLUDED BY THE AO IN THE ORDER, THE YIELD PER ACRE IS RS.84,130/ - . THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME FROM AY 2002 - 03 FROM SALE OF RAW CASHEW NUT AND THE SAME HAS BEEN REFLECTED IN HIS RETURN OF INCOME. THE AGRICULTURAL INCOME SHOWN BY THE ASS ESSEE FOR THE AYS 2002 - 03, 2005 - 06, 2006 - 07, 2009 - 10 AND 2012 - 13 HAS BEEN ACCEPTED BY THE REVENUE IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS HYPOTHETICALLY ARRIVED AT AGRICULTU RE INCOME OF RS.3,64,902/ - AND TREATED THE EXCESS CLAIM OF RS.24,78,858/ - AS INCOME FROM UNDISCLOSED SOURCES, WITHOUT ANY BASIS. AS THE ABOVE ORDER OF THE AO IS NOT BASED ON FACTS OR EVIDENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A). WE DIRECT THE AO TO ACCEPT THE RETURN OF INCOME FILED BY THE ASSESSEE. MR. RUSTOM SOLI SETHNA ITA NO. 6241/MUM/2019 7 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2019. SD/ - SD/ - (AMARJIT SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/12/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI