MELODY AGRI FARMS,KOLKATA V. DCIT, CC-20, DELHI

CO 5/DEL/2024

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471588 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BALJEET KAUR
• Assessee Lawyers: SIDHARTH JHAJHARIA; AMIT KEDIA
• Keywords: Business income; Earning of tax free income; Bogus
• Section: 143(3); 153A; 68; 131; 133(6); 13

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. M. Balaganesh, Accountant Member ITA No. 2462/Del/2023: Asstt. Year : 2017-18 ITA No. 2463/Del/2023 : Asstt. Year : 2018-19 ITA No. 2464/Del/2023 : Asstt. Year : 2019-20 DCIT, Central Circle-20, New Delhi-110055 Vs Melody Agri Farms, Flat No. 40703, Block-4, 7th Floor, Fort Oasis, 36B, Panditia Road, West Bengal-700029 (APPELLANT) (RESPONDENT) PAN No. AASFM4545J CO No. 05/Del/2024: Asstt. Year : 2017-18 CO No. 06/Del/2024 : Asstt. Year : 2018-19 CO No. 07/Del/2024 : Asstt. Year : 2019-20 Melody Agri Farms, Flat No. 40703, Block-4, 7th Floor, Fort Oasis, 36B, Panditia Road, West Bengal-700029 Vs DCIT, Central Circle-20, New Delhi-110055 (APPELLANT) (RESPONDENT) PAN No. AASFM4545J Assessee by : Sh. Sidharth Jhajharia, CA & Sh. Amit Kedia, CA Revenue by : Ms. Baljeet Kaur, CIT-DR Date of Hearing: 03.12.2024 Date of Pronouncement: 31.12.2024 ORDER Per Satbeer Singh Godara, Judicial Member: These Revenue’s three appeals ITA Nos. 2462 to 2463/Del/2023 and the assessee’s as many cross objections therein CO Nos. 05 to 07/Del/2024, for A.Ys. 2017-18 to 2019- 20, arise against the CIT(A)-27, New Delhi’s common order dated 27.06.2023 passed in case Nos. CIT(A), Delhi- ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 2 27/11113/2016-17, 10403/2017-18 & 10817/2018-19, in proceedings u/s 153A r.w.s. 143(3) in former twin and u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) in the last assessment year, respectively. 2. Heard both the parties at length. Case files perused. 3. The Revenue’s “lead” appeal ITA No. 2462/Del/2023 for A.Y. 2017-18 raises the following substantive grounds: “1. The Ld. CIT (A) has erred on facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 94,43,247/- by ignoring the finding of the AO without considering substantial material available on record. 2. The Ld. CIT(A) has erred on facts and in law by ignoring the fact that the assessee has claimed bogus transportation bills which were confirmed by Shri Angad Prasad, owner of the Jagdamba Transport, and Shri Ashok Shukla, owner of the Shyam Road Lines while their statements were recorded on oath u/s 131(1) of the Act wherein they accepted that bills raised by them to the assessee were against no such expense in cured in real. 3. The Ld. CIT(A) has erred on facts and in law by ignoring the fact that the assessee sold poultry litter accepting cash at a date even before the purchase the same from M/s True Feed which shows that the assessee has booked inflated expenses in order to route its unaccounted cash in its books and this fact seems to have been ignored by the Ld.CIT(A) while adjudicating the matter during appellate proceedings. 4. The Ld. CIT(A) has erred on facts and in law by ignoring the fact that the assessee has claimed that he was well versed/pioneer in the yield of Banana variety G-9, whereas Shri Pulkit Batra (Director of the Ram Chand Krishna Kumar Cold Store) had admitted on oath that his firm purchased “Robusta” variety of Banana from the M/s Melody Agri Farm. 5. The Ld. CIT(A) has erred on facts and in law by ignoring the fact that Shri Mohd. Ibrahim (close associate of Anuj Poddar) has admitted on oath that ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 3 cash was deposited in his bank account by Shri Anuj Poddar during the F.Y 2017-18. 6. The Ld. CIT(A) has erred on facts and in law by ignoring the facts that the AO had accepted all the expenses as recorded in the books of account of the assessee whereas the AO had disallowed the corresponding expenses of Rs. 39,47,548/- as computed in para no. 5 of the impugned assessment order without considering the fact that these expenses were proved to be bogus. 7. The Ld. CIT(A) has erred on facts and in law by ignoring the facts that without conducting basic enquiry, the AO concluded the impugned sales as bogus on the basis of Mandi Shulk paid by the assessee whereas detailed enquiry were made and statement of many related persons were recorded on oath wherein they admitted that claims/submission of the assessee is false and fabricated. 8. (a)Whether on law and facts of the case the order of the Ld. CIT(A) is erroneous and hot tenable in law and on facts. (b)The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 4. Both the parties invite our attention to the learned CIT(A) detailed appellate discussion reversing assessment findings treating the assessee’s claim of having derived section 10(1) exempt agricultural income from sale of bananas, as under: “8. Ground of Appeal Nos. 5, 6, 7, 9 & 10 relate to addition of Rs.92,85,085/- on account of bogus sales. 8.1 Appellant firm had shown agricultural income of Rs.31,94,255/- (on a total turnover of Rs. 56,13,720/- and after deducting expenses of Rs. 24,19,465/-). 8.2 In the assessment order, the Id. AO has observed that.  books of accounts are not reliable for arriving at receipt /turnover from agricultural activities as there was difference in statement of various persons recorded during search proceeding. ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 4  the appellant has booked inflated /non-genuine expenses on account of purchases, transportation, poultry feed, fertilizers, etc.  sales of agricultural produce were not genuine as availability of land was doubtful and prices of banana were at variance. 8.3 Observations and Findings: 8.3.1 In respect of availability of agricultural land and carrying out of agricultural activities a. During the course of proceedings u/s 153A, the 'Assessment Unit’ Officer at Delhi, had called for a report from Tehsildar of the area of Badhia Tehsil (wherein the farm of M/s Melody Agri Farms) Nichlol, Distt. Maharajganj, who had certified, on the basis of 'revenue records', to the effect that,  agricultural/horticulture activities were being carried on at Badhiya Farm, run and managed by Melody Agri Farms;  such operations were being carried on, through improved and progressive techniques; and  the agricultural/horticulture land holdings (that were being subjected to agricultural/horticulture cultivators) belonged to individuals/ group of 'Industrialists', and a company by the name of Durga Agro Farms. b. From the perusal of the said report, it has also been observed that the Tehsildar had given the certificate, after full inspection of the site, i.e. Badhia Farm and cultivation actually carried on by Sri Gautam Poddar and his wife Dr. (Smt.) Lata Devi Poddar (the two partners) in the name of Melody Agri Farms, and such cultivation had been done in a very- very scientific and progressive manner. On a perusal of such certificate, it is also observed /'that on such land such persons (through Melody Agri Farms) have cultivated BANANA, POTATO, WHEAT, SUGARCANE etc. c. In view of the above observations, the finding of the Id. AO that the appellant did not have agricultural land to carry out agricultural activities is not found to be correct. 8.3.2 In respect of payment of Mandi Shulk ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 5 a. As regards payment of Mandi Shulk, the appellant had made payments, at the maximum rate as were applicable at Nichlol Mandi at the relevant time. b. The rate at which such \"MANDI SHULK” was paid was based on 2.5% of \"rate of BANANA\" prevailing in local Mandi and it had nothing to do with the rate at which the said agri-produce is ultimately sold at destination market (in case of appellant at Azadpur Mandi, Delhi) for BANANA. c. To substantiate its claim, the appellant filed the calculation of determining the Mandi Shulk along with supporting documents. The copy of the same are reproduced as under: ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 6 d. As regards the rate of Banana sold at Azadpur Mandi, Delhi, the appellant has submitted the rates as prevailing during AY 2017-18 as obtained from \"Agricultural Produce Marketing Committee (The Marketing Committee of Azadpur Mandi, Delhi]”. The rates are as under: ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 7 ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 8 e. From the above submissions filed by the appellant, it is observed that, ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 9  the invoice number 75 is in the name of M/s Rajinder Singh Kela Godown Delhi. The quantity and rate of banana are shown as 14677Kg and Rsl3/Kg respectively. The invoice is dated 25.09.2016 and also showing Mandi Shulk [Mandi Tax) as Rs2055/-.  The receipt number 0464 issued by Mandi Samiti is dated 25.09.2016 and has calculated the Mandi Shulk at Rs.2055/- on the basis of rate of banana at Rs.6/kg (prevailing in local area). This receipt has the name of consignee as M/s Rajinder Singh Kela Godown Delhi.  From the rate list of Agricultural Produce Marketing Committee, Delhi it is observed that rate of banana was varying from Rs.1000/quintal to Rs.2100/quintal i.e. Rs.10/kg to Rs.21/kg depending upon market condition and supply of banana. Therefore, the invoice value of Rs.13/kg is well within the limit. f. In view of the above discussion, the contention of the appellant that Id, AO has wrongly calculated the total sale value of banana during the year on the basis of total Mandi Shulk paid by the appellant is found to be sustainable. 8.3.3 It is also observed that the appellant not only produced and sold \"BANANA' but also produced and sold other agri-produce such as Sugarcane, Potato, Wheat, Vegetables etc. The year wise details are as under: Details of sales A.Y 12-13 AY 13-14 AY 14-15 AY 15-16 AY16-17 AY 17-18 AY 18-19 AY 19-20 Mustard 365,217 - - - - - - - - Banana 6,042,524 7,726,220 13,621,586 14,783,735 13,662,691 13,675,725 13,683,294 8,113,694 Paddy Badhya 600,051 - - - - - - - Potato 2,395,955 3,274,016 18,184 2,070,584 633,425 480,340 - - Sugarcane 1,577,992 1,220,517 1,935,083 1,622,099 732,810 399,075 380,058 3,630,708 Vegetables 196,613 270,948 50,504 - - - - - Wheat 58,500 - 125,400 463,112 1,382,648 - 1,230,812 858,540 Haldi & Suran - 354,675- - - - - - - Misc sales - - - 1,669,156 1,360,812 316,665 409,347 624,542 Total 11,236,852 12,846,376 15,750,757 20,608,686 17,772,395 14,871,805 15,703,511 13,227,484 However, the Ld. AO ignored this aspect and simply treated the entire sale as sale of bananas. Further, the Id. AO calculated the total sales on the basis of Mandi Shulk whereas sugarcane was supplied to local sugar mills and such local sale of such produce didn't require payment of MANDI SHULK. Similarly, potato, wheat, ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 10 sugarcane, vegetables were sold locally and such sale neither required any approval of \"Local Mandi\" nor the appellant firm being cultivator was required to pay \"MANDI SHULK\" on such sale of agricultural produce. 8.3.4 All the transactions related to sales, particularly to the outstation parties had not only been recorded in the regular books of account, but remittances from the buyers (by way of sale considerations) too had been received through RTGS/Account Payee cheques and/or another electronic mode. 8.3.5 It is further observed that the appellant had maintained books of account and other records. These accounts were also subjected to Tax Audit. The year wise details are as under: Financial year Assessment year Amount recorded as sales (Rs.) 2012-13 2013-14 1,28,46,376 2013-14 2014-15 1,57,50,757 2014-15 2015-16 2,06,08,686 2015-16 2016-17 1,77,72,395 2016-17 2017-18 1,48,71,805 2017-18 2018-19 1,57,03,511 2018-19 2019-20 1,32,27,483 These tax Audit reports were duly enclosed with return of income for each of the years involved even prior to date of search [i.e. 26.5.2018] and hence the existence of books cannot be rejected on the basis of statements only. Even in statements the issue was place where books of account are kept as the appellant was not able to recall the place where books of accounts were kept. However, these books of accounts were duly produced before the ld. AO during the proceedings u/s 153A of the Act. 8.3.6 As regards the genuineness of various expenses incurred by appellant (such as fertilizers, transportation, poultry feed etc.) it is observed that the Ld. AO has not conducted Any enquiry of his own and has merely relied on enquiry conducted by the Investigation Wing. Even the enquiry conducted by the Investigation Wing is in the nature of recording some statements during post search proceedings. AO himself never made any attempt to verify any such party so mentioned in the order nor issued any notice u/s 133(6) or u/s 131 to such parties. ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 11 8.3.7 The id. AO has stated in the assessment order that the Late Mr. Gautam Poddar had stated in his statement that - all agriculture produce are only sold through the mandi in last 6 years. However, it is found that the statement of Late Mr. Gautam Poddar was in respect of sale of banana only. The relevant part of the statement is reproduced as under: We further submit that, your honour stated mat \"statement given by Sh. Gautam Poaaar (partner) under oath recorded on 14.09.2018 mentions that all the agriculture produce was sold only through local mandis (Gaudara, Nichlaul) and Mandi Shulk @ 2.5% of the total amount of sales was paid to Krishi Vikash Samiti.\" Before dealing with the issue, tire relevant part of the statement is presented hereunder: Hence, in his statement Mr. Poddar has only stated about sale of Banana which is at Azadpur Mandi, Delhi and not in respect of other agri-produce which were sold locally. ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 12 8.3.8 Ld. AO has also doubted about the variety of Banana sold by the appellant Firm. However, during appellate proceeding, the appellant has stated that it has been pioneer in \"Banana produce” and has acclaimed many awards in such respect and to substantiate this it has enclosed various \"newspaper cutting & reviews\" to establish it's claim of production of \"G-9 variety\" is well documented and evidenced. 8.3.9 The Id. AO has stated that Mr. Anuj Poddar has used the Firm as means to launder his unaccounted money. However, barring one or two instances of small transactions, the Id. AO could not bring on record any such evidence that cash was transferred from Mr. Anuj Poddar to the appellant firm and after converting this unaccounted cash into accounted money, the same was transferred through banking channels to Mr. Anuj Poddar or some assets have been purchased by the appellant firm/Mr. Gautam Poddar/Mrs. Lata Devi Poddar in the name of Mr. Anuj Poddar. 8.3.10 Another interesting Observation made was, though the Id. AO has dwelled in major part of his order on bogus/non-genuine agricultural expenses, yet he did not disallow any expense and accepted all the expenses as recorded in the books of account. He has only disallowed the part of the sales treating the same as bogus without examining even a single party to whom sales were made. He could not identify sales to which party is bogus or if parties are existing which sales transactions/bills are bogus. Without conducting even this basic enquiry, he has resorted to calculate bogus sales on the basis of Mandi Shulk paid by the appellant during the year to Mandi Samiti. This methodology adopted by the Id. AO in treating part of sales as bogus sales is not found to be sustainable. 8.3.11 In view of the above discussion, the following additions u/s 68 of the IT Act, on account of bogus sales are deleted and these grounds of appeal are hereby allowed. Sl. No. A.Y. Amount of addition held to be deleted 1 2017-18 92,85,085 2 2018-19 1,15,33,431 3 2019-20 1,20,68,133 ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 13 5. Suffice to say, there is no dispute between the parties that all these cases have emanated from the department’s search action dated 27.05.2018 in M/s Anuj Poddar group of cases. And also that there arises the sole substantive issue for our apt adjudication i.e. correctness of the lower appellate findings holding the Assessing Officer as to have erred in law and on fact in disallowing the assessee’s agricultural income claims (in part) involving Rs.92,95,085/-, Rs.1,15,33,431/- and Rs.1,20,68,133; respectively. 6. We now advert to the basic relevant facts. It emerges from a perusal of the learned Assessing Officer’s identical assessment discussion and the facts emerging from the case files that the assessee had inter alia claimed it’s agricultural income exempt u/s 10(1) of the Act; from bananas produced and sold, to the tune of Rs.1,48,71,805/-, Rs.1,57,03,511/- and Rs.1,32,27,483; assessment year wise, respectively. The Revenue is more than fair in acknowledging the fact that the learned assessing authority thereafter accepted it’s impugned exemption claim of Rs.56,13,720/-, Rs.41,70,080/- and Rs.12,00,000/-; respectively and disallowed the remaining sales forming subject matter of adjudication before us, as bogus ones. 7. It is in this factual backdrop that learned CIT-DR vehemently argues in light of the assessment findings, alleged evidence in the course of search & statement(s), post search inquiries/ investigation carried during scrutiny pinpointing specific defects in bananas production details, transportation and bogus bills raised by the assessee. Ms. Kaur accordingly submits that the learned Assessing Officer’s detailed discussion had not only found the assessee to have claimed bogus ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 14 exemption from bananas sales but also there was detailed evidence unearthed indicating inflated of sales bill as well. 8. Learned counsel first of all invites our attention to it’s charts giving details of exempt income vis-à-vis turnover and the second are clarifying the corresponding details of agricultural produce’s sales right from A.Y. 2012-13 onwards including mustered, banana, paddy, potato, sugarcane, vegetables and wheat etc. accepted all along. His case therefore is that neither there is any issue regarding the assessee’s agricultural land per se nor that of agricultural produce herein as the Assessing Officer had himself accepted section 10(1) claims in the past and in part in the impugned three assessment years (supra). 9. It is in this factual backdrop that we sought to know the exact issue between the parties once again. We are fairly informed by the department as well as assessee that the sole question herein is that of the assessee’s alleged inflated bananas sales figures only wherein the department seeks to assess the same going by local rates at Gorakhpur and surrounding areas whereas the clarification coming from the respondent side endeavour to adopt the national capital territory (“NCT”) rates fetched from sale of the said food crop in Delhi. Learned CIT-DR further made strong pitch to add that the Assessing Officer had also carried out the detailed investigation and thereafter accepted assessee’s impugned claim in part (supra). 10. We have given our thoughtful consideration to the foregoing vehement rival submissions and find no reason to accept either party’s stand in entirety. This is for the precise reason that the sole issue in principle is that of estimation of ITA No. 1726/Del/2017 ITA No. 1566 to 1568 & 2194 to 2196/Del/2018 Uflex Ltd. 15 the rates of the agricultural produce vis-à-vis quantity thereof wherein no abnormalities found qua the instant latter aspect. That being the clinching case, we deem it appropriate in the larger interest of justice to restore the impugned identical addition to the limited extent of Rs.5,00,000/- each in these three assessment years so as to cover all alleged deficiencies. Ordered accordingly. The Revenue’s instant identical sole substantive ground in these three cases is accepted to the extent of Rs.5,00,000/- each with a rider that our instant estimation shall not be treated as a precedent. It’s three appeals ITA Nos. 2462 to 2464/Del/2023 are partly succeed therefore. 11. Faced with this situation, learned counsel is indeed very fair in not pressing for the assessee’s cross objections CO Nos. 5 to 7/Del/2024 (supra). Rejected accordingly. 12. To sum up, these Revenue’s three appeals ITA Nos. 2462to 2464/Del/2023 are partly allowed and assessee’s cross objections CO Nos. 5 to 7/Del/2024 are dismissed as not pressed in above terms. A copy of this common order be placed in the respective case files. Order Pronounced in the Open Court on 31/12/2024. Sd/- Sd/- (M. Balaganesh) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 31 /12/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR "