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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH & MS. KAVITHA RAJAGOPAL
Date of Hearing 15.12.2022 Date of Pronouncement 09.02.2023 आदेश / O R D E R Per Amarjit Singh (AM): These 4 appeals filed by the revenue are directed against the different orders of ld. CIT(A)-53, Mumbai. Since, similar issues and identical facts are involved in these appeals except the variation in the amount, therefore for the sake of convenience these 4 appeals are adjudicating together by taking as a lead case and its finding will be applied as mutatis mutandis to the other three appeals. ITA No. 2541/Mum/2021 P a g e | 2 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant “1. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) has erred in ignoring the evidentiary value of statements given by Shri Raman Bhawar and Shri Vinayak Nehe who were managing the farms of the assessee for production of grapes as these statements were never retracted nor anything on the record was brought showing that statements given by them were incorrect 2. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) has failed to appreciate the incriminating material in the form of draft plan for inflation in purchases of grapes which was unearthed during the search action and it had direct relevance to the findings recorded by the Assessing Officer in his assessment order 3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal
, if”
2. Fact in brief is that a search and seizure action u/s 132(1) of the Act was conducted on Samant Group of Mumbai on 23.11.2017 which interalia included the assesse also. The assesse is one of the director of M/s Sula Vineyards Pvt. Ltd. During the course of assessment on perusal of the material seized during the course of search, the A.O noticed that assesse had claimed agricultural income from 3 different farms: (a) Dindori Farm (b) Kadam Farm (c) Samant Farm The A.O also noticed that assesse had shown agricultural receipts in different years as under: 2012-13 1,97,03,628 2013-14 2,39,96,200 2014-15 2,85,92,184 2015-16 3,35,65,563 2016-17 4,18,92,065 2017-18 4,47,52,436
However, after referring the statement of Shri Raman Bhawar and Shri Vinayak Nehe the A.O stated that agricultural receipts from these farms had been inflated. From the detail provided by Mr. Raman P a g e | 3 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant Bhawar the A.O stated that total land holding in Dindori farm was 64 acres and land under grapes cultivation was 35 acre (approximately). From the details provided by Shri Vinayak Nehe in respect of Samant Farm the total cultivated land area was 9 acres out of total area of 17 acres. From the detail provided by Raman Bhawar in respect of Kadam Farm the AO noticed that total land under grape cultivation was 82 acre out of total 107 acres. The A.O worked out the ratio of area under cultivation and the general production yield was computed. On the basis of aforesaid information the assessing officer computed mismatch in the agricultural receipts for different years as under:
A.Y. Dindori Kadam Samant Total Total Excess Farm Farm Farm Agriculture Agriculture Agriculture Receipt Receipt as Income per ROI claimed 2012- NA 5076000 730800 5806800 19703628 13896828 13 2013- 5263196 7310000 671445 13244641 23696200 10451559 14 2014- 4740084 9156000 856800 14752884 28592184 13839300 15 2015- 4559067 7207200 806400 12572667 33565563 20992896 16 2016- 3095836 7137000 739440 10972276 41892065 30919789 17 2017- 5547593 18446000 1255800 25249393 44752436 19503043 18 On analysis of the information the A.O observed that there was inflation of agricultural receipts. Therefore, the assesse was asked to furnish detail of agricultural operations, detail of agricultural land holdings, break-up of the land holding vis-a-vis agricultural activity carried out on them, detail of the cost incurred for agricultural operation etc.
In response the assesse submitted the detail called for. The assesse also submitted that the entire grapes grown in the farm were sold to the company M/s Sula Vineyard Pvt. Ltd. and there was no P a g e | 4 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant inflation as alleged. The assesse also submitted that these facts can also be verified from the company’s record of raw material consumption. It was also explained that no discrepancy was found in the stock of the company during the search and seizure action and quantity of grapes supplied by the assesse were actually used for the manufacturing of wine and the purchase of the grapes made by the company from the assesse were actually without any kind of inflation. The assesse has also provided the detail of different farm as follows: Details Amount (in Rs) Total Grapes sold during the year from 565,28,560 Dindori Far Total Expenses incurred on Dindori Farm 50,81,978 Profit from Dindori Farm 14,46,582 Details Amount (in Rs.) Total Grapes sold during the year from Kadam 2,57,29,960 Farm Total Expenses incurred on Kadam Farm 1,55,51,978 Profit from Kadam Farm 1,01,77,982 Details Amount (in Rs.) Total Grapes sold during the year from 9,20,395 Samant Farm Total Expenses incurred on Samant Farm 9,33,945 Profit from Samant Farm (13,550)
The assesse also submitted that he cultivated high quality of grapes and was able to harvest the grapes successfully which resulted into the huge profits. The assesse also submitted that in his case the agricultural operations did not only require raw materials but also extra labour cost and it would not result into more profit.
The assessing officer was also of the view that the draft plan for purchases of grapes indicated inflation of grapes. The assesse also submitted that if yield and production data were accepted as provided P a g e | 5 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant by Shri Raman Bhawar and Shri Vinayak Nehe it would result in loss from agricultural operations then no prudent businessman would invest capital for making losses in the agricultural operations. However, the A.O has not agreed with the submission of the assesse and stated that assesse had claimed receipt of Rs.3,31,78,951/- therefore, considering the inflation of 56.01% the assessing officer computed inflated agricultural income at Rs.1,85,83,510/- and treated the same as unexplained credit/income from other sources and added to the total income of the assesse u/s 68 of the Act.
Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) had deleted the addition made by the assessing officer. The relevant part of the decision of ld. CIT(A) is reproduced as under: “6.3 I have carefully perused and considered the findings of the AO in the assessment order, written submission of the appellant and material available on record. During the year, the appellant has sold entire grapes grown in his farm to Sula Vineyards Pvt. Ltd. Total Grapes sold during the year from all the three Farm amounted to Rs. 194,34,300/-. After total Expenses of Rs. 1,52,22,324/-, the appellant earned profit of Rs. 42,11,976/- During the course of the appellate proceedings, the appellant has submitted a copy of the Income-tax Settlement Commission's order u/s 245D(4) in the case of Sula Vineyards Pvt. Ltd. From perusal of the 245D(4) order it is noticed that the search action was also conducted in the case of Sula Vineyards Pvt Ltd, and after the search Sula Vineyards Pvt. Ltd filed an application before the Income- tax Settlement Commission (ITSC)for settlement of its income on various issues emanating from the search action. The Income-tax Settlement Commission (ITSC) has passed the order u/s 245D(4) on 27.09.2019. 6.3.1 The ITSC has dealt with the issue regarding the inflation of expenses on account of grape purchases. It is noted by the ITSO that as per Rule 9 report during the course of search at the various premises of Sula Group, four different types of evidences were found suggesting that the applicant had been inflating is purchases of grapes for generating cash. These were enumerated as under: i. Katcha slips and Farmer Vehicle Register maintained at the Dindodri and Gangapur units. ii. Two pages seized from Nana Shelke which has a detailed plan of inflating the purchases for generating cash. iii. Compilation of data obtained from Shri Karan Vasani, Associate Vice President (Wine making Department) and data compiled by Shri Vikram Boob of the accounts department as per SAP software.
P a g e | 6 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant iv. Data provided by Shiri Nana Shelke, (GM Vineyard operations) in respect of forty farmers who were paid excess for grapes and who then returned the cash. The department relying on the Katcha slips and Farmer Vehicle Register maintained at the Dindodri and Gangapur units respectively estimated inflation in the purchases by 27.11% for FY. 15-16 and by 48.08% for F.Y. 16-17 The average of the percentage inflation for the Gangapur and Dindori Units (considering the two F.Ys 2015-16 and 2016-17) was arrived at 37.59%. This average percentage inflation in grapes purchase of 37.59% was applied by the Department for extrapolation for other years, from the AY 2011-12 to 2018-19. Total of Rs. 79,97,60,225/- was computed on account of inflation in purchase of grapes. It was explained by the applicant that in their line of business the yield of wine as percentage to grapes varies from 55% to 75%. In its books of accounts the yield of wine was from 50.92% to 69.62% from FY 10-11 to 17-18. In case Department's working of inflation at 37.59% was accepted, the yield for F.Y. 2015-10 would be 110.55% and for F.Y. 2016-17 would 109.38% which is illogical. Another set of evidence in the form of retrieved images seized from the mobile of Shri Nana Shelke, which was claimed to be a proposal for harvest season of 2017 for inflation of purchase of grapes. These pages show plan of extra booking of grapes of 2199 MT over and above the actual purchase of grapes of 9313 MT. It means 23.6% inflation of grapes was planned for the harvest season 2017 (relevant to FY 2016-17). The applicant had accepted the Inflation in purchase of grape. The appellant also pointed out mistakes in data as per Katcha slips and Farmer Vehicle Register maintained at the Dindodri and Gangapur units. Based on the data provided by Shri. Nana Shelke ( GM Vineyard operations) in respect of forty farmers, who were paid excess cheques for grapes and who then returned the cash, inflation for all the seven years in aforesaid forty names of farmers comes to 11.24 crores which when compared with the total purchases booked comes to 6.07%. The ITSC observed that out of the 4 evidences found during the course of search, none is suitable to be adopted alone to work out the inflation in the year for which data is found itself. In the course of search some data regarding cash generated and cash expenses during FY 16-17 was found in the mobile of Shri T K Shinde GM (Finance). As per these data, total Receipts amounts to Rs.313.98 lakhs and expenses totaling Rs.311.34 lakhs. Second record is in the form of loose paper Folder A-2 seized from a locker in the premises of Gangapur unit. The Folder contained various IOUs along with a sheet bearing the heading Cash: 2017-18 Left hand side shows cash receipts of Rs 1,68,42,134/- and right side contains details of expenses of Rs.1,66,61,264 Apparently it was the cash generated by inflation of purchases. The ITSC considered these two documents as most important piece of evidences which gave the direct evidence of cash generation and expenditure. The generation of cash for F.Y. 16-17 is of Rs. 313.98 Lakhs which is arrived at by P a g e | 7 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant inflating purchases of grapes for Rs. 265.97 Lakhs apart from other sources of cash generation. The total purchases of grapes in FY 16-17 as per statement of Mr. Shinde was Rs. 40.32 crores. Thus the inflation of Rs. 2.66 crores on account of grape purchase gives inflation of approximately 6.6% Thus, the ITSC has accepted inflation of 6.6% for F.Y. 16-17 for purchase value for cash generation. The ITSC also noted that this percentage is also very near to of inflation worked out based on the data maintained by Shri Karan Vasani as per excel sheet which is maintained mainly for production purposes which is very vital original record and sort of primary record. This percentage is also nearer to the percentage of inflation being 0.07%, based on the data regarding extra booking of grapes in accordance with the working provided by Shri Nana shelke, GM Vineyard Operations from forty farmers. The AO has estimated the inflation in sale of grapes on the basis of the ratio of area under cultivation and the general production yield. The AO has not considered the entire seized material before making the estimation. However, the facts emanating from the seized documents show that the appellant has made entire sale of grapes to Sula Vineyards Pvt. Ltd. The seized documents show 6.6% inflation in purchase of grapes by Sula Vineyards Pvt. Ltd. The data provided by Shri Nana Shelke, (GM Vineyard operations) show inflation in purchase of gropes for all the seven years from 2012-13 to 2016-17 amounting to Rs. 11.24 crores. This inflated purchases were made by the Sula Vineyards Pvt. Ltd. from forty farmors, who were paid excess cheques for grapes and who then returned the cash to Sula Vineyards Pvt. Ltd It is also noticed that the appellant's name is not mentioned in the list of 40 parties submitted by Mr. Nana Shelke. In view of the above facts and circumstances of the case, entire sale of grapes by the appellant to Sula Vineyards Pvt. Ltd. cannot be considered as sold at inflated rate. Hence, the addition of Rs.1,19,56,162/- made by the AO in respect of inflated agricultural receipts is deleted. Accordingly, this ground of appeal of the Appellant is allowed.”
During the course of appellate proceedings before the ld. D.R referred the order of the assessing officer and contended that assesse has inflated agricultural production of grapes and ld. CIT(A) has failed to consider the draft plan which showed that there was inflation of agricultural income by the assesse. The ld. D.R also submitted that the two employees Vinayak Nehe and Raman Bhawar had not retracted their statement and supported the order of the ld. CIT(A).
On the other hand, the ld. Counsel submitted after referring the copies of seized paper placed at page no. 245 to 252 of the paper book P a g e | 8 4 Appeals The DCIT, CC-5(3) Vs. Shri Rajeev Samant that name of the assesse Shri Rajeev Samant was not there in the list of the persons who had shown additional production of grapes as accommodation transaction. The ld. Counsel also submitted that the company Sula Vineyard Pvt. Ltd. had approached the Settlement Commission. The settlement commission had adjudicated that 6% of the grapes purchases had been inflated and the same was used for various non business purposes. The ld. Counsel submitted that no such incriminating material was found in the case of the assesse. He also submitted that two employees whose statement were recorded were not the employee of the assesse but they were the employee of the company. The ld. Counsel further submitted that no difference was found in the stock at the factory and the same was tallied with physical stock records and no unaccounted assets have been found during the search. He also submitted that the assesse was a supplier of grapes to Sula Vineyard Pvt. Ltd. and in its case the same have been verified in detail during the search and no discrepancy has been found pertaining to the case of the assesse. The ld. Counsel also submitted that statement of Shri Raman Bhawar and Shri Vinayak Nehe were not considered as a factual piece of an evidence by the Income Tax Settlement Commission and the data provided by the them was not reliable for the purpose of calculating inflated purchases. The ld. Counsel supported the order of the CIT(A). 9. Heard both the sides and perused the material on record. Without reiterating the fact as elaborated above during the course of search proceedings a list of 30 parties were found from M/s Nana Shelke (General manager of Vineyard operation) wherein it was alleged that the grapes were purchased at inflated rates from these 30 parties. The assesse’s name has not been mentioned anywhere in the list. The assesse explained during the course of assessment proceedings that he had cultivated high quality of grapes where were used in manufacturing of high premium wines. In their respective statement the both the