M/s. Bafna Agro Farm, Sangali V. Assistant Commissioner of Income-tax, (Central ) Circle, Kolhapur, Kolhapur

ITSSA 28/PUN/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3710 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Earning of tax free income
• Section: 143(3); 153A; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / IT(SS)A Nos.24 to 28/PUN/2018 िनधाᭅरण वषᭅ / Assessment Years: 2008-09 to 2012-13 M/s. Bafna Agro Farm, Plot No.20, Pushpak Saraswatinagar, Behind TATA Petro Pump, Sangali- 416146. PAN : AANFB5436C Vs. ACIT (Central) Circle, Kolhapur. Appellant Respondent आदेश / ORDER PER BENCH : These are the appeals filed by the assessee directed against the common orders of ld. Commissioner of Income Tax (Appeals)- 11, Pune [‘the CIT(A)’] dated 07.06.2018 for the assessment year 2008-09 to 2012-13 respectively. 2. Since the identical facts and common issues are involved in all the above captioned five appeals, we proceed to dispose of the same by this common order. Assessee by : Shri Pramod Shingte Revenue by : Shri M. G. Jasnani Date of hearing : 29.06.2022 Date of pronouncement : 30.06.2022 IT(SS)A Nos.24 to 28/PUN/2018 2 3. For the sake of convenience and clarity, the facts relevant to the appeal in IT(SS)A No.24/PUN/2018 for the assessment year 2008-09 are stated herein. 4. The appellant raised the following grounds of appeal :- “1. On the facts and circumstances of the case and in law the Ld CIT(A) erred in upholding the assessment under section 153C even though no material was found to be 'belonging' to the appellant firm during the course of search action on the Bafna Group, Sangli on 25.04.2012. The appellant submits that in the absence of any such material found to be belonging to the appellant firm the assessments made by the DCIT are without jurisdiction and hence need to be quashed. The appellant prays that it be held accordingly. 2. On the facts and circumstances of the case and in law the Ld CIT(A) erred in upholding the stand of the ACIT that income attributable to the process of making dry grapes (raisin) from grapes is business income. The appellant submits that the process of making dry grapes from raw grapes is one of the primary processes making the agricultural produce marketable and hence the same is agricultural income not liable to tax. The appellant prays that the ACIT be directed to delete the addition. The appellant craves leave to add to, amend, alter, delete or modify all or any of the above ground of appeal or raise a new ground of appeal before or at the time of hearing.” 5. Briefly, the facts of the case are as under : The appellant is a partnership firm engaged in the business of cultivating the agricultural lands. The search and seizure operations u/s 132 of the Income Tax Act, 1961 (‘the Act’) were conducted in the case of one Shri Ashok Dagdulal Bafana and group at Sangli on 25.04.2012. During the course of such search and seizure IT(SS)A Nos.24 to 28/PUN/2018 3 operations, it is stated that certain documents belonging to the appellant firm were found and seized by the Investing Wing of the Department and the said documents were passed on to the Assessing Officer of the searched party. The Assessing Officer of the searched party had recorded satisfaction note stating that the seized incriminating documents were belonging to the appellant firm, accordingly, passed on the same to the Assessing Officer of the appellant firm. The scanned image of the satisfaction note recorded by the Assessing Officer of searched party reads as under :- “ORDER SHEET Rag: Bafna Agro Farm A/P Shankh of Sangli Asstt Year : 2007-08 to 2012-13 30/09/2013 Ashok Dagdulal Bafana and group of Sangli in group of cases search operation u/s. 132 of the Act was carried out on 25/04/2012 at the business and residential premises of the assessee. The case is assigned to Central Circle by CIT-I, Kolhapur vide order No. Kop/CIT- I/ITO(HQ-1)ADB/order 127-/2350/2012-13 dtd 24/01/2013. 2. The assessee group is engaged in the business of purchases and sale of Kismis(Raisins). The group is also engaged in commission Agency business, canvassing Kismis and providing cold storage facilities to the farmers/agriculturalist. The search action resulted in seizure of cash of Rs. 19,00,000/- Gold ornaments of Rs. 30,59,415/- and disclosure of additional to the tune of Rs. 5.06 Crores. 3. The brief facts are that the loose paper bundle No. 5 page No. 4 to 9 seized from the residence of Shri Ashok Dagadula Bafna. The page No. 10 to 29 and page no.32 are relating to the investment made in the purchase of land in respect of the firm M/s Bafna Agro Farm. On analysis, it transpires that Shri Ashok Dagdulal Bafna and his family members have constituted a firm in the name of Bafna Agro Farm on 28/12/2006. The firm consists of four partners having equal Sharing ratio. The introduction of initial capital of Rs. 12,500/- each made by the partners totalling to Rs. 50,000/- also needs verification in respect of each entity. On verification of impounded loose paper it is seen that, there is correspondence between National Horticultural Board and Branch IT(SS)A Nos.24 to 28/PUN/2018 4 Manager, Axis Bank Ltd., regarding compliance of lacking documents, for the joint inspection of the project of Shivshakti Sheti Farm, Shankh. The project is subsequently taken over by Bafna Agro Farm. On verification of the final account submitted by the assessee in respect of the firm M/s Bafna Agro Farm, it is seen that the total receipts and income earned by the firm during the last four financial years is as under : Financial Year Total receipts (Rs.) Total Income (Rs.) 2007-08 2702255 954770 2008-09 8859103 4456285 2009-10 12561725 7010544 2010-11 16548277 9496949 Total 4,06,71,360 2,19,18,548 The firm purchased the above agricultural farm from Shivshakti Agro Farm on 11.01.2007. On perusal of the sale deed it transpires that the sellers have sold the property to Bafana’s due to insufficient fund availability to take the agricultural produce and due to loss making agricultural activities. However, it is seen that the firm is showing substantial receipts out of the above farm which is unbelievable. Since the assessee is deriving undisclosed income as evidenced during the course of search, the assessee might have shifted his unaccounted undisclosed income in the hands of the firm which is shown as agricultural income, and exempt under section 10(1) of the I. T.Act, 1961. Further, the sales shown in the hands of firm out of agricultural receipts and investment made in the agricultural activities, needs further verification. There are impounded loose paper agreement of purchase of agricultural land in the name of various members of Bafna family. These documents are in Kannada Language. As per the explanation given by the assessee vide his letter dated 08.08.2012, the transaction are related with the purchase of agricultural land in respect of Bafna Agro Farm. The details thereof are as under : S.No. Name of the Seller Area Acre Gun Date of transaction Amount (Rs.) 1 N. Jaiprakash Prabhu Anchor Building, Behind Urva market Mangalor 7.50 16.11.2010 22,00,000/- 2 K Sunil Prasad Pai Anchor Building, Behind Urva market Mangalor 16.11.2010 10,00,000/- 3 Shri Appasaheb S. Shirhatti and Smt. Laxmibail A Shirhatti of Malapur Mudhol 15.02.2010 8,50,000/- Thus, the assessee has made investment in the land to the extent of Rs. 40.50 lakhs. It appears that the PURCHASE price of land by assessee is lower than the market price. Thus verification, in view of on IT(SS)A Nos.24 to 28/PUN/2018 5 money payment is required. The same is required to be taxed in the hands of the above assessee. The assessee firm as claimed is engaged in the agricultural activities. However, as provided in the Maharashtra State Agricultural Tenancy Act, the firm is not a legal entity to undertake the agricultural activity, since the firm is union of partners and a factitious entity. In view of the above, the taxability of profits shown in the hands of firm out of agricultural activities needs in connection verification and the same is required to be taxed in the hands of the assessee. I have, therefore, reason to believe that the income chargeable to tax has escaped assessment. Issue notice u/s 153C of the I.T.Act, 1961.” 6. On careful perusal of the above satisfaction note, it would reveal that the certain incriminating material suggesting the undisclosed investments in purchase of agricultural land by the appellant firm was found. Based on this satisfaction note, the notices u/s 153C were issued to the appellant firm on 30.09.2013 requiring the appellant firm to file the return of income. In response to the same, the appellant firm filed Rs.Nil income u/s 153C of the Act. The assessment was completed by the Assistant Commissioner of Income Tax (Central) Circle, Kolhapur (‘the Assessing Officer’) vide order dated 30.03.2015 passed u/s 143(3) r.w.s. 153A of the Act after making additions on account of inflated agricultural income. However, no addition was made by the Assessing Officer on account of alleged unexplained investments in purchase of agricultural land. IT(SS)A Nos.24 to 28/PUN/2018 6 7. We have carefully gone through the seized material containing pages 49 at page no.5 to 80 of the Paper Book are in relation to purchase of agricultural land by the appellant firm. We do not find from seized material indicating the inflation of the agricultural income. Thus, the addition made in the impugned assessment order is not based on any material found as result of search and seizure action in the case of Bafana group of cases. It is settled position of law that the addition can be made in the assessment proceedings pursuant to the notices issued u/s 153C/153A of the Act only based on the incriminating material. In the absence of any incriminating material, no addition can be made in the proceedings initiated u/s 153C of the Act. Reliance in this regard can be placed on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Sinhgad Technical Education Society, 84 taxmann.com 290 (SC). Therefore, in the light of settled position of law, the orders of the lower authorities cannot be sustained in the eyes of law. Accordingly, the assessment order passed by the Assessing Officer is hereby quashed. 8. In the result, the appeal filed by the assessee in IT(SS)A No.24/PUN/2018 for A.Y. 2008-09 stands allowed. IT(SS)A Nos.24 to 28/PUN/2018 7 IT(SS)A Nos.25 to 28/PUN/2018, A.Y. 2009-10 to 2012-13 : 9. Since the facts and issues involved in all the above five appeals are identical, therefore, our decision in IT(SS)A No.24/PUN/2018 for A.Y. 2008-09 shall apply mutatis mutandis to the remaining four appeals of the assessee in IT(SS)A Nos.25 to 28/PUN/2018 for A.Y. 2009-10 to 2012-13. Accordingly, the appeals of the assessee in IT(SS)A Nos.25 to 28/PUN/2018 for A.Y. 2009-10 to 2012-13 are allowed. 10. To sum up, all the above five appeals filed by the assessee stand allowed. Order pronounced on this 30 th day of June, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 30 th June, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-11, Pune. 4. The Pr. CIT (Central), Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.