Loading judgment…
Facts
The assessee, Florence Agro Farms, appealed against an order confirming an addition of Rs. 45,05,306/- related to the sale of agricultural produce. The lower authorities questioned the substantiation of these sales and the nature of the income as agricultural.
Held
The Tribunal held that the fact of agricultural operations being carried out on the land cannot be disregarded solely due to the failure to produce expense bills. Relying on previous decisions for AY 2015-16 and 2016-17, the Tribunal found no significant variation in facts and set aside the additions made by the Assessing Officer.
Key Issues
Whether the sale of agricultural produce is substantiated and constitutes agricultural income, and if the addition made by the Assessing Officer is justified based on the evidence and previous rulings.
Sections Cited
68, 69C, 254(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of National Faceless Appeal Centre (NFAC) / Ld. CIT(A), Mumbai dated 19.12.2023 for assessment year (AY) 2011-12. The assessee has raised following grounds of appeal:
“1. The Learned CIT(A) erred in confirming the addition of Rs. 45,05,306/- u/s 68 of the Income Tax Act.
2. The Learned CIT(A) further erred in holding that sale of the agriculture produce credited in the books of accounts of Rs.45,05,306/- is not substantiated/proved when facts remain that the grapes and the vegetable like tomato, cauliflower, onion etc produced on the land are sold in the local Nashik market and are sold by care taker cum supervisor Mr. Lokhande.
3. The Learned CIT(A) further erred in merely relied on the statement of Shri DilipLaxman Dere to whom the grapes are sold and Shri Dattatray Gabaji Kanse to whom the vegetables are sold in the Vashi market and ignoring the facts that sale of the agriculture product was handled by Mr. Lokhande who was care taker cum supervisor at Nashik and services of Mr. Lokhande has been retrenched in 2015 and not available and appellant firm was not in position to throw any light on the statement of the two persons recorded by you the AO.
4. The Learned CIT(A) further erred in confirming of Rs. 45,05,306/- u/s 68 of IT Act being the sale of agricultural produce of the agricultural land of 17.5 acres at Mahadevpur Ganganagar, Nashik near the Gangapur dam in agriculture belt and it is an irrigated land where the assessee firm has been carrying on agricultural activities since last number of years.
5. The Learned CIT(A) further erred in not treating the sale of agricultural produce of Rs.45,05,306/-as agricultural income in spite of the facts that land is situated at village Mahadevpur, Nashik District and appellant is holding index of 7/12 extract issued by the Talati District Nashik in its name and the facts of carrying on of the agricultural activities could have been inquired by the AO by sending his inspector at Nashik were land is situated even the same was requested before AO.
6. The Learned CIT(A) further erred in confirming the addition of Rs. 38,000/- u/s 69C on the ground that assessee firm had paid the commission of Rs. 38,000/- to Shri Dilip Laxman Dere M/s. Gabaji Rambhau Kanse & Co. for obtaining the bills of the sale of agricultural produce without inquiring who had paid and whether in cash or cheque, antecedent of Shri Dilip Laxman Dere regarding his activities and income.
7. The Learned CIT(A) further erred in relying on the decision of Hon'ble SC in the case of Commissioner of Income Tax v. P. Mohanakala, (2007) 6 SCC 21 ignoring the judgements of CIT VS. Daulat Ram Rawatmull reported in 87 ITR 349 wherein Apex court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so and decision of Supreme Court in the case of Umacharan Shah & Bros. vs CIT, 37 ITR 271 that suspicion however strong, cannot take the place of evidence.
8. The Appellant craves leave to, add to, alter or amend any ground before or at the time of hearing.”
Rival submissions of both the parties have been heard and record perused.
The learned Authorised Representative (ld. AR) of the assessee submits that grounds of appeal raised by the assessee are covered in favour of assessee by the decision of Division Bench of Mumbai Tribunal in assessee’s own case for A.Y. 2015-16 and 2016-17 in & 2092/M/2024 respectively.
The ld. AR of the assessee while explaining the facts of the case submits that assessee has 17.15 acres of land in District Nasik. The area of land is not disputed by assessing officer. On identical set of facts, the assessing officer disallowed similar agricultural income for A.Y. 2014-15, 2015-16 & 2016-17.
However, on before Tribunal relief was allowed to the assessee in allowing similar agriculture income. There is no variation in facts in this assessment year. The ld. AR of the assessee fairly submits that the income in A.Y. 2014- 15, 2015-16 & 2016-17 were comparatively higher vis-à-vis the similar agriculture income shown in A.Y. 2012-13, 2013-14 & 2017-18 onwards. In three years i.e. A.Y. 2014-15 to 2016-17, the agricultural operations were carried out by assessee themselves and in remaining assessment year, it was carried out on sharing system / bataidari system, otherwise there is no difference in fact. In those years, the income was divided among the assessee and bataidar. Once, the similar agricultural income in A.Y. 201-5-16 and 2016-17 has been accepted by Tribunal, there is no question for not accepting the similar agricultural income in the year under consideration. The ld. AR of the assessee by referring various documents on record which consists of receipt of agriculture product and details of agriculture holding along with nature of crops grown therein submits that agriculture income is in consonance with the area of agriculture land. The ld AR of the assessee pray for allowing appeal of the assessee.
On the other hand, the learned Senior Departmental Representative (ld. Sr.
DR) for the revenue by referring para 5 at page no. 8 of order of Tribunal for AY 2015-16 & 2016-17 would submit that pattern of agriculture income shown in various assessment years is doubtful. The assessee has not shown, cost of seeds, fertilizers or other cost incurred by assessee. The facts are not properly investigated by assessing officer. There is no evidence to agriculture activities on record, thus, the matter may be restored back to the file of assessing officer with the direction for making full-fledged investigation of fact, if the agriculture land is irrigated, unirrigated, source of irrigation, if any physical decision of the land. The ld. Sr. DR submits that all those facts narrated by him is not considered by Tribunal, therefore, his prayer may be accepted for restoring the matter back to the assessing officer. Or in alternative, the bench may seek verification of facts by calling the report by appointing commission.
I have considered the contentions of both the parties and have gone through the orders of lower authorities carefully. On careful comparison of facts for the year under consideration vis-à-vis A.Y. 2015-16 & 2016-17, I find that there is no much variation on fact. The bench has considered all vital facts before allowing relief to the assessee. Moreover, the decision in A.Y. 2015-16 & 2016-17 is passed by Division Bench. Therefore, the same is respectfully followed. The relevant part of decision of Division Bench in A.Y. 2015-16 and 2016-17 is extracted below:
We have had rival submission of the parties and perused the relevant material on record. The assessee firm purchased the agricultural land in the year 2006, in the irrigated belt of Nasik district of Maharashtra, on the bank of the ‘Godavari River” (PB-102). In support of the agricultural activity carried out, the assessee has filed land revenue records, which establish that different crops including grapes, soyabeen, vegetables, flowers etc. were sown on the land. The assessee has also filed copy of electricity bills and Gram Panchayat tax paid (PB-II/7-9), which are available in the paperbook filed before us. The assessee has also filed income and expenditure account and balance sheet for earlier years along with return of income, wherein the agricultural income from the land has been declared by the assessee, which has not been disturbed by the Income-tax department. On the other hand,
the Assessing Officer found that the assessee has maintained ledger accounts for various expenses, but, no copies of the bills of expenses were produced on the pretext that the manager carrying out the agricultural activity had left the job and therefore the bills were not traceable and therefore rejected the claim of the assessee of carrying out any agricultural activity. He also rejected the claim of sale of agricultural products in view of the cash vouchers and denial of purchase of the product by two parties. In view of the above factual observations, the core question before us is whether any agricultural activity was carried out by the assessee. In our opinion, the land revenue authorities, who maintain the record of crops sowed on the agricultural land, has duly certified that crops including grapes, soyabeen and flowers had sown. Thus, the fact that agricultural operation was carried out by the assessee on the land cannot be brushed aside only for the reason that assessee failed to produce copy of the bills of expenses particularly labour, seeds, fertilizers etc. and ignoring that agricultural income from the same land declared by the assessee was not disturbed by the income-tax department in earlier years. The only issue in dispute the year under consideration could be of estimation of quantum of agricultural income. The assessee submitted that agricultural income in the range of Rs. 10.00 lakhs toRs. 14 lakh declared by the assessee at the rate of 25% of the value of total agricultural produce under the “ bataidari system” has been accepted by the Department in earlier years, whereas in the assessment years from 2014-15 to AY 2016-17 including assessment year under consideration, the assessee carried out agricultural operation engaging the manager and therefore the entire income from the agricultural activity arose to assessee without sharing 75% of the value of the agricultural produce. The agricultural income declared in the year under consideration is in the range of Rs. 34 lakhs and in assessment year 2016-17, it is in the range of Rs. 45 lakhs, which is not excessive in comparison to the income shown under the ‘Bataidari’ System in assessment year prior to 2014-15 and subsequent to 2016-17. In view of above discussion, the finding of the lower authorities on the issue in dispute is set aside and the addition made by the Assessing Officer is deleted. The grounds of the appeal of the assessee accordingly allowed.
7.1 The issue in dispute raised an assessment year 2016-17 is identical to the issue in dispute raised in assessment year 2015-16, therefore following our finding in assessment year 2015-16, the grounds raised in assessment year 2016-17 are accordingly decided mutasis mutandis.
In the result, the appeals of the assessee for assessment year 2015-16 and 2016-17 are allowed.”
Considering consistent decision of Division Bench of this Tribunal as referred above and respectfully following the same, the grounds of appeal raised by assessee is allowed.
In the result, the appeal of the assessee is allowed.