Income Tax Officer (Ward) -4, Margao V. Mrs. Essubi Ganesh Prabhudessai, Goa

ITA 69/PAN/2014

• Counselvise Citation: 6924114 RSA 2014
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Business income; Income from undisclosed sources; Principle of natural justice; Earning of tax free income; Competent authority
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 69 /PNJ/2014 (ASSESSMENT YEAR - 2009 - 10) THE INCOME TAX OFFICER, WARD - 4, MARGAO - GOA . (APPELLANT) VS. MRS. ESSUBAI GANESH PRABHUDESSAI RAM NIWAS, COTAMBI CHANDOR, SELCETE - GOA - 403714 PAN:AFBPP3478H (RESPONDENT) APPELL ANT BY : SHRI NISHANT K. , LD. DR RESPONDENT BY : SHRI SHRINIVAS NAYAK, CA DATE OF HEARING : 23 /06/2014 DAT E O F PRONOUNCEMENT : 08 /08 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAI NST THE ORDER OF CIT(A) - PANAJI , DATED 06.11 .2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE FOLLOWING REVISED GROUNDS ARE RAISED IN THIS APPEAL AS UNDER: - 1. THE ORDER OF LEARNED CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN ALLOWING RELIEF OF RS 47,85,000/ - BEING ADDITION MADE BY THE ASSESSING OFFICER UNDE R THE HEAD OTHER SOURCES AS AGAINST SOURCE OF AGRICULTURAL RECEIPTS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT SITE VISITS AND ENQUIRES WERE CAUSED TO BE MADE THROUGH THE INSPECTOR WHO REPORTE D THAT THERE WAS NO FARM EXISTING IN WHICH THE PURPORTED ORNAMENTAL PLANTS ARE NURTURED. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAD CAUSED TO BE MADE DETAILED ENQUIRIES WITH THE RELEVANT GOVERNMENTAL AUTHORITIES WHO CONFIRMED THAT NO LICENCE WAS EVER ISSUED UNDER THE GOA FRUIT AND ORNAMENTAL PLANT NURSERIES (REGULATION) ACT 1995 AND NO SUCH NURSERY WAS FOR KNOWN TO EXIST. 2 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAD ALSO COLLECTED SUBSTANTIAL DIRECT AND CIRCUMSTANTIAL EVIDENCE SUCH AS INADEQUACIES IN THE DOCUMENTS, BARREN NATURE OF THE LAND, TRANSACTION BETWEEN RELATED PERSONS, ABSENCE OF REGISTERED LABOURERS, LEASE RENTALS, LOW PURCHASES OF SEEDS AND RAW MATERIAL, LOW QUANTUM OF E XPENSES ETC TO REACH A FINDING THAT THE CLAIM OF AGRICULTURAL INCOME IS A FICTION. 6. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE EXISTENCE OF A COLOURABLE ARRANGEMENT BETWEEN THE ASSESSEE AND HER SON FOR THE PURPOSE OF BIFURCATING THE ACTIVITY OF THE NURSERY INTO AGRICULTURAL AND BUSINESS AND IS APPARENTLY MADE SO AS TO ENABLE HER SON TO JUSTIFY THE CLAIM OF EXPENDITURE ON ACQUISITION OF THE PLANTS.. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF THE HEARING 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF ASSESSING OFFICER RESTORED . 2. 1. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 30.09.2009 WITH TOTAL INCOME AT RS.6,13,536/ - AND CLAIMED EXEMPTIO N ON AGRICULTURAL INCOME OF RS. 24,27,770/ - . THE ASSESSEE HAS CLAIMED THE EXEMPT INCOME FROM AGRICULTURAL ACTIVITIES CARRIED ON BY HIM. THE ASSESSING OFFICER TRIED TO VERIFY THE HOLDING OF LAND (AREA SU RVEY NOS., LOCATION - ADDRESS) OF SELF AND FAMILY MEMBERS; COPY OF FORM NO. 1 AND (XIV ) IN RESPECT OF EACH LAND SHOWING RECORDING OF THE CROPS DONE FOR KHARIF AND VAINGON SEASONS; DETAILS OF LANDS HELD ON LEASE, IF ANY; NAME OF THE AGRICULTURAL PRODUCE AND Q UANTITY OF PRODUCE; EVIDENCE FOR THEIR SALE PROCEEDS, VOUCHERS FOR THE EXPENSES INCURRED AND COPY OF EXTRACT FROM THE RECORDS OF THE COMPETENT AUTHORITY IN RESPECT OF CROP(S) RAISED MODE OF TRANSPORT OF PRODUCE FROM THE FILED/FARM, NAME AND ADDRESS OF TRAN SPORT AGENCY ETC. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE HAS TREATED THAT ASSESSEE IS PROPRIETOR OF M/S CHANDRESHWAR FARMS WHICH HAS ITS LAND AT COTOMBI, CHANDOR AND CULTIVATED ORNAMENTAL PLANTS. THERE ORNAMENTAL PLANTS WERE CLAIMED TO HA VE BEEN SOLD ONLY TO ASSESSEES SON MR. VENKATESH GANESH PRABHUDESAI, WHO IS PROP RIETOR OF M/S HARIYALEE NURSERY AND UNDERTAKES GARDEN CONTRACTS AND LANDSCAPING. THE ASSESSEE HAS PRODUCED THE BILLS FOR THE PERIOD FROM 01.04.2008 TO 31.03. 2009 AMOUNTING TOT ALLING TO RS. 57,64,756/ - . THE 3 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE CLAIMED OF PROPAGATION AND SALES OF ORNAMENTAL PLANTS, BEING DISPROPORTIONATE TO THE SIZE OF LAND ON WHICH HE SAME WAS CLAIMED TO HAVE PRODUCED, THEREFORE, THE ASSESSING OFFI CER WANTED TO VERIFY WHETHER THE ASSESSEE HAS CARRIED AGRICULTURAL ACTIVITIES AND WHETHER THE ASSESSEE HAS OBTAINED THE LICENSE FROM GOA AUTHORITIES AND AFTER MAKING THE ENQUIRY THE ASSESSING OFFICER WAS OF THE VIEW THAT CHANDRESWAR FARM HAS EVER OBTAINED ANY LICENSE AND THE LAND IS NOT SUFFICIENT FOR PRODUCING THE SUCH NURSERY WHICH IS CLAIMED TO HAVE BEEN PRODUCED FROM HIS LAND. MOREOVER, M/S. CHANDRESHWAR FARM IS NOT REGISTERED WITH LABOUR DEPARTMENT. UNDER THIS CIRCUM STANCES THE ASSESSING OFFICER WAS D EPUTED THE INSPECTOR TO VERIFY WHETHER ON THE LAND THE NURSERY HAS CLAIMED BY THE ASSESSEE EXISTS OR NOT. THE IN SPECTOR HAS VERIFIED THE SPOT AND HE WAS OF THE VIEW THAT SUCH NURSERY WAS NOT ORNAMENTAL, THEREFORE, ASSESSING OFFICER HAS NOT ALLOWED THE EXEM PTION ON AGRICULTURAL INCOME AS CLAIMED BY THE ASSESSEE AND HE HAS MADE THE ADDITION. 2.2 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 7.3. IN MY OPINION, ON THE BASIS OF FACTS OF THIS CASE, THE CONCL USION DRAWN BY THE A.O. IS ILL - CONCEIVED AND PREMATURE. THE EXISTENCE OF LAND AND NURSERY IS AUTHENTICATED. THE APPELLANT HAD TECHNICAL EXPERTISE AVAILABLE IN THE FORM OF HER SON, VENKATESH, WHO IS ADMITTEDLY A PH. D. IN HORTICULTURE SCIENCE. HIS ENTIRE BUSINESS INCO ME IS DERIVED FROM SELLING OF ORNAMENTAL PLANTS, WHICH ARE INDEED COSTLY, AND LANDSCAPING. IF IT WAS NOT AGRICULTURAL INCOME ACCORDING TO THE A.O., THE A.O HAS NOT MADE ANY EFFORTS TO FIND OUT THE REAL SOURCE OF HER INCOME, WHICH HE HAS CHOSEN TO TERM AS D EPOSITS MADE FROM UNDISCLOSED SOURCES. THERE IS NOTHING IN THE STATEMENT OF MR. VENKATESH ALSO, WHICH EVEN REMOTELY INDICATES THAT PLANTS WERE NOT GROWN BY THE APPELLANT. THE A.O. WRITES THAT THE APPELLANT IS A 71 YRS. OLD RETIRED TEACHER. WHAT COULD BE AN UNDISCLOSED SOURCE FOR SUCH AN OLD LADY? IT IS CLEAR FROM THE FACTS OF THIS CASE THAT THE A.O. HAS COMPLETED ASSESSMENT WITH A PRE - MEDITATED MIND AND THE CONCLUSION DRAWN BY THE A.O. IS NOT BASED ON FACTS AND RECORDS BUT ON GUESSWORK, PRES UMPTION AND SURM ISES, WHICH CAN NOT BE SUSTAINED. THE ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF ENTIRE RECORDS AVAILABLE WITH THE A.O. AND NOT ON THE BITS AND PIECES TAKEN OUT OF THEM. IN VIEW OF THE ABOVE, THE A.O. IS DIRECTED TO DELETE ENTIRE ADDI TION AMOUNTING TO RS.4 7,85,000/ - 4 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI 2.3 . THE LEARNED DR HAS SUBMITTED THAT INSPECTOR HAS VISITED THE PLOT AT COTOMBI, CHANDOR, SALETE. THE INSPECTOR WAS REJECTED THE PLOT AT COTOMBI, CHANDOR, SALCETE AND HE FOUND THAT AT THE VISITING SITE THERE WAS NO PLANTS WERE SEEN AND SOME PL ANTS STANDING THEREIN DISTINCTLY HAD APPEARANCE OF PLANTS BROUGHT FROM SOMEWHERE AND STORED. THE ASSESSEE HAS SOLD THE PLANT TO HIS SON WHO IS PHD IN HORTICULTURE. THE ASSESSEE CHANDRESHWAR FARM HAS NOT REGISTERED WITH LABOUR DEPARTMENT AND THE ASSESSEE HA S NOT OBTAINE D ANY LICENCE UNDER GOA FRUIT AND ORNAMENT AL PLANT NURSERIES ( REGULATION ) ACT , 1995 (GOA ACT 13 OF 1997 ), THEREFORE, THIS EVIDENCE GOES TO SHOW THAT ASSESSEE HAS NOT SOLD ANY AGR ICULTURAL PRODUCE, I.E., ORNAMENTAL P LAN T SINCE 2002 . THEREFORE, THE ACTION OF THE AO DOUBTED ABOUT THE GENUINENESS O F THE AGRICULTURAL INCOME IS SUPPORTED BY THE DOCUMENTARY EVIDENCE AND THE DECISION RELIED UPON BY THE CIT(A) IS NOT RELEVANT TO THE FACTS OF THE CASE. 2.4. ON THE OTHER HAND, LEARNED AR RELIE D UPON THE DECISION OF HONBLE UTRAKHAND HIGH COURT IN THE CASE OF CIT VS. GREEN GOLD TREE FARMERS (P.) LTD. 167 TAXMAN 151 AND HYDRABAD TRIBUNAL DECISION BENCH - B IN THE CASE OF ASSISTANT DIRECTOR OF INCOME TAX VS. A.P. FOREST DEVELOPMENT CORPORATION, 223 TAX MAN (HYD) 24. THE LEARNED AR SUBMITTED THE WRIT SUBMISSION WHICH READ AS UNDER: 1. THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM AGRICULTURE, PENSION AND OTHER SOURCES. 2. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 30,41,307/ - . 3. ASSESSEE IS COVERED UNDER SECTION 5A OF THE INCOME TAX ACT1961, WHEREBY THE INCOME OF THE ASSES S EE IS APPORTIONED BETWEEN HUSBAND AND WIFE. 4. THE ASSESSEE CASE HAS BEEN ASSESSED BY ITO WARD - 4, MARGAO, GOA, U/S. 143 (3) OF THE INCOME TAX ACT. 5. SCRUTINY NOTICE U/S 143(2) OF THE IT ACT, WAS SERVED ON THE ASSESSEE ON 13/09/2010 AND THE AO PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE IT ACT, ADDING RS.47,85,000/ - AS DEPOSITS MADE IN THE BANK FROM INCOME FROM UNDISCLOSED SOURCES. 6. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD EXPLAINED 5 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI AND SUBMITTED THE RELEVANT DETAILS FOR CLAIMING THE TAX EXEMPTION ON AGRICULTURE INCOME. 7. DURING THE ASSESSMENT YEAR, THE ASSESSEE HAD CL AIMED AGRICULTURE INCOME OF RS.24,27,770/ - IN ADDITION TO THEIR OTHER INCOMES. 8. WITHOUT CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, THE AO HAS PASSED THE ORDER U/S 143(3) OF THE INCOME TAX ACT1961, DATED 29.12.2011 CONSIDERING NET TAXABLE INCOME OF RS.53,98,540/ - AFTER ADDING FIXED DEPOSITS MADE IN THE BANK OF RS.47,85,000/ - AS INCOME FROM UNDISCLOSED SOURCES. 9. THE ASSESSEE HAD APPEALED TO CIT (A), AGAINST THE ORDER OF THE AO AND THE APPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND THE ADDI TIONS MADE BY THE AO WERE DELETED. IN THIS CONNECTION WE WISH TO MAKE THE FOLLOWING SUBMISSIONS FOR YOUR KIND CONSIDERATION. 1. THE ASSESSEE IS PENSIONER AND IS ENGAGED IN AGRICULTURE AND HAS NURSERY FARM BY NAME M/S. HANDRESHWAR FARMS AT SURVEY NO. 11, K INAYA XETAVORIL MUDDI, COTOMBI, QUEPEM, GOA, SPREAD ACROSS AREA OF 10,150 SQUARE METERS, THE AGRICULTURE LAND BELONGS TO SHRI MAHADEV DEVASTHAN, COTOMBI, QUEPEM, GOA AND HAS BEEN LEASED TO SON OF THE ASSESSEE SHRI. VENKATESH GANESH PRABHUDESSAI FROM WHOM T HE ASSESSEE HAS OBTAINED CONSENT TO CARRY OUT THE AGRICULTURE ACTIVITIES. COPY OF THE LEASE DEED AND CONSENT ENCLOSED - ANNEXURE I. 2. THE ASSESSEE HAS BEEN CARRYING OUT AGRICULTURE ACTIVITIES ON THE LAND FOR MORE THAN 10 YEARS AND HAS BEEN CONSISTENTLY FI LING THEIR RETURN OF INCOME. T HE BOOKS OF ACCOUNTS OF THE ASS E S SEE HAS BEEN AUDITED BY CHARTERED ACCOUNTANT U/S 44AB OF THE INCOME TAX ACT1961 AND THE COPY OF THE AUDIT REPORT ALONG WITH THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET IS ENCLOSED - ANNEXURE II. 3. ASSESSEES SON SHRI. VENKATESH GANESH PRABHUDESSAI HAVING ACADEMICS OF PH.D. IN HORTICULTURE IS PROPRIETOR OF M/S. HARIYALEE NURSERY AND HE TAKES JOB WORKS FOR LANDSCAPING, GARDENING AND SUPPLY OF PLANTS FROM DIFFERENT PARTIES IN GOA. M/S. HARIYALEE NURSERY PURCHASES MOST OF ITS PLANTS REQUIREMENT FROM M/ S. CHANDRESHWAR FARMS. M/ S. HARIYALEE NURSERY REGULARLY ACCOUNTS THE PURCHASES MADE BY THEM FROM M/S. CHANDRESHWAR FARMS IN THE NORMAL COURSE OF BUSINESS AND THE INCOME OF M/S. HARIYALEE NURSERY IS TAXED AS BUSINESS INCOME. CONSIDERING THAT 90% OF THE SALES MADE BY M/S. CHANDRESHWAR FARMS ARE TO M/S. HARIYALEE NURSERY, WE ENCLOSE THE COPY OF THE INCOME TAX RETURN OF M/ S. HARIYALEE NURSERY (SHRI. VENKATESH PRABHUDESSAI) FOR AX 2009 - 10. ANNEXURE - III. 4. WE REFER TO THE GROUND OF APPEAL RAISED BY THE APPELLANT IN REGARD TO THE EXISTING OF THE FARM AND WOULD LIKE TO BRING THE FOLLOWING FACTS ON RECORD. A. UNDER POINT NO. 14 OF THE AO ORDER, HE HIMSELF HAS ACKNOWLEDGED THE EXISTING OF THE FARM THE DETAIL EXTRACT OF THE RELEVANT PORTION IS PRODUCED BELOW: 6 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI 14. AFTER ENSURING THE FACT THAT THE SAID CHANDRESHWAR FARM HAS NOT OBTAINED LICENSE AND ALSO THAT NO ORNAMENTAL PLANT NURSERY BY SUCH NAME HAS BEEN REPORTED TO BE CULTIVATING, PROPAGATING ORNAMENTAL PLANT S OR CARRYING ON BUSINESS OF NURSERY AT COTOMBI, CHANDOR, SALCETE, INCOME TAX INSPECTOR OF THIS OFFICE WAS DIRECTED TO VISIT THE SITE AND REPORT. THE INSPECTOR REPORTED THAT HE VISITED THE PLOT AT COTOMBI AND LOCATED THE SAME WITH THE HELP OF LOCALS PASSIN G BY ON THE ROAD THAT LEADS TO CHANDOR FROM PARODA ON AVEDE ROAD WHERE A PRIMARY HEALTH CENTRE AND A PRIMARY SCHOOL EXISTS ADJACENT TO THE LAND ENCLOSED BY A LATERITE COMPOUND WALL WITH A METALLIC GATE ON WHICH THE NAME HARIYALEE NURSERY WAS FABRICATED. THE COMPOUND HAD SOME SHADE NETS IN WHICH NO PLANTS WERE SEEN AND SOME PLANTS STANDING THEREIN DISTINCTLY HAD APPEARANCE OF PLANTS BROUGHT FROM SOMEWHERE AND STORED. NO PERSON WAS FOUND INSIDE THE ENCLOSURE TO ATTEND OR GUARD THE PLACE WHICH HAD ALMOST AN ABANDONED APPEARANCE. B. FURTHER, THE AO HAS FAILED TO RECOGNIZE THE SCRUTINY ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT1961, OF AY 2007 - 08 BY ITO - WARD - 2, MARGAO, GOA, AND CLAUSE 4 OF THE ORDER IS PRODUCED BELOW: ON VISITING THE NURSERY IT WAS NOTICED THAT THE PLANTS IN THE NURSERY ARE GROWN IN THE LAND AS WELL AS IN THE POTS OF DIFFERENT SIZES AND ALL THE ACTIVITIES LIKE WEEDING, MANURING, WATERING ETC, ALL THE AGRICULTURE OPERATIONS ARE BEING CARRIED OUT DURING THE COURSE OF NURSERY OPE RATIONS. - COPY OF THE ORDER ENCLOSED - ANNEXURE IV. C. FURTHER, WE BRING ON RECORD THE EXPERT SITE INSPECTION REPORT DATED 29.12.2011 CARRIED OUT BY GOVT. REGD. VALUER MR. C X MENEZES, WHO IS ALSO EX. DIRECTOR OF AGRICULTURE, THE RELEVANT EXTRACT OF THE REPORT IS PRODUCED BELOW: 5. PRESENTLY IN THE NURSERY, THE PROPAGATION OF PLANTS OF VARIETIES SUCH AS VARIOUS VARIETIES OF DURANTAS, BOUGAINVILLAS, ACALYPHAS, IXORA, GAIPHIMIA, ERENTHEMUM, ALPINIA, OPHIOPHOGON, DIANELLA, HAMALIA ETC., AND OTHER FOLIAGE FL OWERING VARIETIES DIFFERENT PALM VARIETIES , DIFFERENT VARIETIES GROUND COVERS LIKE ZEBRINA, IRESENE, ALTERNENTHERA, VARIOUS CREEPERS VARIETIES, GRASS VARIETIES LIKE MEXICAN, DOOB GRASS, BERMUDA PASPALAWM, VARIOUS VARIETIES OF BOMBOOS ETC. 6. I ALSO OBSERV ED IN THE NURSERY, THAT BIG SIZE PLANTS LIKE CYCAS, PALMS, FICUS VARIETIES AND FOLIAGE AND FLOWERING PLANTS ARE GROWN. 7. I ALSO OBSERVED THAT PLANT V ARIETIES LIKE VARIETIES OF LILYS AND BULBOUS PLANTS ARE MULTIPLIED BY GERMINATING SEEDS AND BULBS. - COPY OF THE REPORT ENCLOSED - ANNEXURE V. D. ALL THE ABOVE CLEARLY STATES THE EXISTING OF THE FARM AT M/S. CHANDRESHWAR FARMS AT SURVEY NO. 11, KINAYA XETAVORIL MUDDI, COTOMBI, QUEPEM, GOA. 5. FURTHER, THE ASSESSEES NON REGISTERING OF THE NURSERY FOR LICENCE F ROM THE GOA FRUIT AND ORNAMENTAL PLANT NURSERIES (REGULATION) ACT, 1995 (GOA ACT 13 OF 1997) SHOULD NOT RESTRICT THE ASSESSEE FROM CLAIMING THE INCOME EARNED FROM AGRICULTURAL ACTIVITIES AS AGRICULTURE INCOME. WE RELY UPON THE BELOW DECIDED JUDGMENTS IN TH E MATTER. 7 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI [2008] 167 TAXMAN 151 (UTTARAKHAND) HIGH COURT OF UTTARAKHAND COMMISSIONER OF INCOMETAX*, MEERUT V. GREEN GOLD TREE FARMERS (P.) LTD. [2012] 23 TAXMANN.COM 24 (HYD.) IN THE ITAT HYDERABAD BENCH B ASSISTANT DIRECTOR OF INCOME - TAX (EXEMPTION) II, HYDERABAD V. A.P. FOREST DEVELOPMENT CORPORATION* IT IS ALSO TO BE NOTED THAT THE ASSESSEE HAS SUBSEQUENTLY OBTAINE D THE NECESSARY LICENCE / REGISTRATION FROM THE AUTHORITIES - COPY OF THE SAME IS ENCLOSED - ANNE XURE - VI. 6. THE CONTENTION OF THE AO A S PER THE ORDER IS THAT THE AGRICULTURAL LAND I.E FARM M/ S. CHANDRESHWAR FARM DOES NOT EXIST SINCE 2002, WHEREAS THE AO FAILED TO APPRECIATE THE FACT THAT HIS FELLO W INCOME TAX OFFICER FROM WARD - 2, MARGAO, GOA, HAD INSPECTED THE SAME FARM IN YEAR 2008 A ND GIVEN HIS REPORT WHILE PASSING THE ORDER FOR AY 2007 - 08. 7. THE LEARNED AO IN HIS IMPUGNED ORDER HAS HIS HAS GIVEN VARIOUS GROUNDS AND JUSTIFICATION AND THEREBY DRAWN CONCLUSION THAT, THE ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURE ACTIVITIES. HOWEVER HE HAS NOT DISALLOWED EXEMPTION CALIMED BY THE ASSESSEE U/S 10(1) OF THE ACT. ON THE CONTRARY ALL THE FIXED DEPOSITED DULY ACCOUNTED IN THE BOOKS WHICH ARE AUDITED U/S 44AB OF THE ACT AS INVESTMENT FROM UNDISCLOSED SOURCE AMOUNTING TO RS. 47,85,000/ - . HENC E THE AO HAS ERRED IN CONCLUDING TO TAX THE DEPOSIT U/S 69 AS UN EXPLAINED INVESTMENT WITHOUT REJECTING THE BOOKS OF ACCOUNTS. FURTHER SECTION 69 IS APPLICABLE TO ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS IF ANY MAINT AINED BY HIM FOR ANY SOURCE OF INCOME... IN THE PRESENT CASE, THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS, WHICH ARE DULY AUDITED U/S 44AB OF THE INCOME TAX ACT AND ALL THE FIXED DEPOSITS ARE DULY ACCOUNTED AND SOURCE OF SUCH INVESTMENT ARE DULY EXPLAIN ED AND ACCOUNTED FOR. 8. CONSIDERING THE ABOVE THE ADDITIONS MADE BY THE AO HAS BEEN RIGHTLY DELETED BY CIT(A) IN HIS ORDER DATED.06.11.2013. IN PARA 7.3 OF THE ORDER HON. CIT(A) HAS OBSERVED THAT, IN MY OPINION, ON THE BASIS OF FACTS OF THIS CASE, THE CONCLUSION DRAWN BY THE A. 0. IS ILL - CONCEIVED AND PREMATURE. THE EXISTENCE OF LAND AND NURSERY IS AUTHENTICATED. THE APPELLANT HAD TECHNICAL EXPERTISE AVAILABLE IN THE FORM OF HER SON, VENKATESH, WHO IS ADMITTEDLY A PH. D. IN HORTICULTURE SCIENCE. HIS ENTIRE BUSINESS INCOME IS DERIVED FROM SELLING OF ORNAMENTAL PLANTS, WHICH ARE INDEED COSTLY, AND LANDSCAPING. IF IT WAS NOT AGRICULTURAL INCOME ACCORDING TO THE A. 0., THE A. 0. HAS NOT MADE ANY EFFORTS TO FIND OUT THE REAL SOURCE OF HER INCOME, WHICH HE HAS CHOSEN TO TERM AS DEPOSITS MADE FROM UNDISCLOSED SOURCES. THERE IS NOTHING IN THE STATEMENT OF MR. VENKATESH ALSO, WHICH EVEN REMOTELY INDICATES THAT, PLANTS WERE NOT GROWN BY THE APPELLANT. THE A.O . WRITES THAT APPELLANT IS A 71 YEAR OLD RETIRED TEACHER. WHAT COULD BE AN UNDISCLOSED SOURCE FOR SUCH AN OLD LADY? IT IS CLEAR FROM THE FACTS OF THIS CASE THAT THE A. 0. HAS COMPLET ED ASSESSMENT WITH A PRE - MEDITA TED MIND AND THE CONCLUSION DRAWN BY THE A. 0. IS NOT BASED ON FACTS AND RECORDS BUT ON GUESS WORK, PRES UMPTION AND SURMISES, WHICH 8 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI CAN NOT BE SUSTAINED. THE ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF ENTIRE RECORDS AVAILABLE WITH THE A.O . AND NOT ON THE BITS AND PIECES TAKEN OUT OF THEM . IN VIEW OF THE ABOVE, THE A.O . IS DIRECTED TO DELETE ENTIRE ADDITION AMOUNTING TO RS.47,85,000/ - FURTHER, ALL THE ABOVE ISSUES WERE RAISED BY THE ASSESSEE WITH THE CIT (A) AND ALSO THE DOCUMENTS WERE SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AS SUCH ASSESSEE REQUEST FOR TAKING THE ABOVE ON RECORD AND DISPOSAL OF THE APPEAL WHILE UPHOLDING NATURAL JUSTICE. THE LEARNED AR HAS SUBMITTED THAT IN A.Y.2006 - 0 7 THIS IS THE SAME ASSESSEE WHO WAS MAINTAINING A NURSERY AT COTOMBI, CHANDOR. THE ASSESSING OFFIC ER WAS VISITED THE NURSERY AND IT WAS NOTICED THAT PLANT IN THE NURSERY ARE GROWN IN THE LAND AS WELL AS IN THE PLOTS OF DIFFERENT SIZE AND ALL THE ACTIVITIES LIKE WEEDING, MANURING, WATERING ETC., ALL THE AGRICULTURAL OPERATIONS ARE BEING CARRIED OUT DURI NG THE COURSE OF NURSERY OPERATION. THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT ASSESSEE WAS CARRIED OUT NURSERY ACTIVITIES. THE EX - DIRECTOR OF AGRICULTURE , WHO HAS ALSO VISITED THE SITE AND GAVE OBSERVATION. AS PER THE DECISION OF HONBLE HYDERABAD TRIBUNAL IN THE CASE OF ASSISTANT DIRECTOR OF INCOME - TAX(EXEMPTION) II, HYDERABAD VS. A.P FOREST DEVELOPMENT CORPORATION IN ITA NO.875(HYD) OF 2011, WHEREIN THE ASSESSEE HAS CARRIED OUT AGRICULTUR AL ACTIVITIES AND CIT(A) IS JUSTIFIED. 3 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE AS SESSEE HAS ENGAGED IN PRODUCTION OF ORNAMENTAL PLANTS. THE ASSESSEE ENGAGED IN BUSINES S OF AGRICULTURAL PRODUCTION AND HE HAS NURSERY FARMS BY NAME M/S. CHANDESHWAR FARMS AT SURVEY NO.11, KINAYA XETAVARIL MODDI, COTOMBI, QUEPEM, GOA, SPREAD ACROSS AREA OF 10,150 SQUARE METERS. THE AGRICULTURAL LAND BELONGS TO SHRI MAHADEV DEVESTHAN, COTOMBI , QUEPEM, GOA AND HAS BEEN LEASED TO SON OF THE ASSESSEE SHRI VENKATESH GANESH PRBHUDESSAI FROM WHOM THE ASSESSEE HAS OBTAINED CONSENT TO CARRY OUT THE AGRICULTURAL ACTIVITIES ON THE LAND FOR MORE THAN 10 YEARS AND HAS BEEN CONSISTENTLY FILING THEIR RETURN OF INCOME. THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN AUDITED BY CHARTER ACCOUNTANT U/S. 44AB OF 9 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI THE INCOME TAX ACT. 1961 AND THE COPY OF THE AUDIT REPORT ALONG WITH THE RETURN. THE ASSESSEES SON SHRI. VENKATESH GANESH PRABHUDESSAI IS PROPRIETOR OF M/S . HARIYALEE NURSERY AND HE TAKES JOB WORKS FOR LANDSCAPING, GARDENING AND SUPPLY OF PLANTS FROM DIFFERENT PARTIES IN GOA. M/S. CHANDESHWAR FARMS. M/S. HARIYALEE NURSERY PURCHASE S MOST OF ITS PLANTS FROM M/S. CHANDRESHWAR FARMS. THE INCOME OF HARIAYALEE NU RSERY IS TAXED AS BUSINESS INCOME. CONSIDERING THAT 90% OF THE SALES MADE BY M/S. CHANDRESHWAR FARMS ARE TO M/S. HARIYALEE NURSERY ONLY. WE FIND THAT THE ASSESSEE HAS NOT TAKEN ANY LICENCE UNDER GOA FRUIT AND ORNAMENTAL PLANT NURSERIES (REGULATION) ACT, 1995 (GOA ACT 13 OF 1997). IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. A. P. FOREST DEPARTMENT, 23 TAXMAN.COM IT IS HELD THAT IF THE ASSESSEE HAS NO T OBTAINED ANY VALID LICENCE FROM CONCERNED AUTHORITY FOR CARRYING OUT NURSERY BUT IF HE PROVES THAT HE HAS CAR RIED OUT AGRICULTURE ACTIVITIES, T HE ASSESSEE IS ENTITLED FOR EXEMPTION IN RESPECT OF SUCH AGRICULTURAL ACTIVITIES. THEREFORE, THE ASSESSING OFFICERS OBJECTION I S ALREADY DECIDED BY THE TRIBUNAL THAT VALID LICENCE IS NOT NECESSARY FOR CLAIM ING THE EXEMPTION FOR AGRICULTURE ACTIVITIES . THE ASSESSING OFFICER HAS OBJECTED THAT ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURAL ACTIVIT IES AND NO LAND IS SITUATED WHE R E THE ASSESSEE CLAIMS TO HAVE GROWN THE NURSERY PLANT. THE ASSESSEE HA S SUBMITTED B EFORE US D EED OF L EASE ON PAGE 6 TO13 OF PAPER BO OK. THE ASSESSEE HAS TAKEN PLOT OF LAND FOR A GRICULTURE PURPOSE FROM DEVASTHAN AND THE LEASE AGREEMENT WAS FOR PERIOD OF 20 YEARS. THE ASSESSEE IS GROWING PLANT ON THIS LAND. THE ASSESSEE HAS OBTAINED THE LICENCE FROM DI RECTORATE OF AGRICULTURE WHICH IS AT PAGE 48 OF THE PAPER BOOK. THE LICENCE W AS OBTAINED ON 3.2.2012 AND THE ASSESSEE HAS OBTAINED THE LICENCE FOR CARRYING OUT T HE AGRICULTURAL ON THE SAME PLO T. THE ASSESSEE HAS SUBMITTED THE BILL BOOK AND THE ASSESSEE T R IED TO PROVE THAT HE HAS GROWN THE ORNAMENTAL PLANT. THE ASSESSEE HAS ALSO CARRIED OUT THE SIMILAR AGRICULTURAL ACTIVITIES IN F.Y. - 2008 - 09 AND RETURN OF INCOME WAS FILED. SIMILARLY IN A.Y.2007 - 08 SIMILAR 10 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI ACTIVITIES WERE CARRIED OUT BY THE A SSESSEE AND THE INCOME TAX DEPARTMENT HAS PROCESSED THE RETURN U/S. 143(3) OF THE ACT. ON PARA - 4 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVED AS UNDER: ON VISITING THE NURSERY, IT WAS NOTICED THAT THE PLANTS IN THE NURSERY ARE GROWN IN THE LAND AS WELL AS IN THE P OTS OF DIFFERENT SIZE AND ALL THE ACTIVITIES LIKE WEEDING, MANURING, WATERING ETC. ALL THE AGRICULTURAL OPERATIONS ARE BEING CARRIED OUT DURING THE COURSE OF NURSERY OPERATION. THE A.R. OF THE ASSESSEE STATED THAT ALL THE PLANTS HA VE BEEN SOLD TO M/S. HARIYALI NURSERY, A PROPRIETARY FIRM WHICH IS OWNED BY MR. VENKATESH PRABHUDESSAI, SON OF THE ASSESSEE. WHAT EVER SALES HARIYALEE NURSERY MAKE TO DIFFERENT CUSTOMERS HAS BEEN TREATED AS BUSINESS INCOME IN THE HANDS OF HARIYALEE NURSERY . IN VIEW OF THE ABOVE NO ADDITION MADE ON ACCOUNT OF NURSERY INCOME. IN THE PREVIOUS YEAR 2006 - 07 THE ASSESSEE HAS CARRIED OUT THE AGRICULTURAL ACTIVITIES FOR WHICH RETURN WAS PROCESSED. IN THE YEAR UNDER CONSIDERATION THE AOS OBJECTION IS THAT THE ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURAL ACTIVITIES. THE INSPECTOR WAS DEPUTED FOR MAKING ENQUIRY WHETHER THE ASSESSEE HAS CARRIED ANY AGRICULTURAL ACTIVITIES OR NOT. THE INS PECTOR REPORTED THAT THERE WAS SOME LAND ON WHICH THE COMPOUND WALL WITH META LLIC GATE ON WHICH THE NAME HARIYALEE NURSERY WA S FABRICATED. THE COMPOUND HAD SOME SHA D E NETS IN WHICH NO PLANTS WERE SEEN AND SOME PLANTS STANDING THEREIN DISTINCTLY HAD APPEARANCE OF PLANT B ROUGHT FROM SOMEWHERE AND STORED. THE INSPECTOR HAS DOUBTED AB OUT THE GENUINE NES S OF THE AGRICULTURAL INCOME. THE ASSESSING OFFICER, THEREAFTER RECORDED THE STATEMENTS OF THE ASSESSEES SON AND HE C A ME TO CONCLUSION THAT ASSESSEE HAS NOT CARRIED ANY AGRICULTURAL ACTIVITIES AND HE HAS NOT PRODUCED ANY ORNAMENTAL PLANT S ETC. WE FIND THAT THE CIT(A) IN HIS ORDER HAS HELD THAT THE ASSESSEE HAS CARRIED OUT AGRICULTURAL ACTIVITIES WHICH HAS BEEN VERIFIED BY THE ASSESSING OFFICER . THEREFORE, THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAS CARRIED OUT AGRICULTURAL ACTIVITIE S. WE FIND THAT AS PER THE DOCUMENTARY EVIDENCE THE LAND EXISTS, THEREFORE, PROPER COURSE FOR THE AO WAS TO MAKE ENQUIRY FROM THE RESPECTIVE LAND RECORDS OFFICER AND HE SHOULD FIND OUT WHETHER ANY AGRICULTURAL ACTIVITIES WAS CARRIED OUT OR NOT. THE A SSESS ING OFFICER FAILED TO MAKE THE ENQUIRY AND HE JUMPED TO CONCLUSION THAT NO AGRICULTURAL 11 . ITA NO.69/PNJ/2014 (A.Y.2009 - 10) ITO VS. MRS. ESSUBAI GANESH PRABHUDESSAI ACTIVITIES WAS CARRIED OUT. WE FIND THAT ASSESSEE HAS PRODUCED ALL THE DOCUMENTARY EVIDENCE TO SHOW THAT ASSESSEE HAS IN FACT CARR IED OUT AGRICULTURAL ACTIVITIES. T HE REFORE, WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 5. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONO UNCED IN THE OPEN COURT ON 8 .8 .2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER P LACE : PANAJI / GOA DATED : 8 .8 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER