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Income Tax Appellate Tribunal, DELHI BENCHES “SMC-1” : DELHI
Before: SHRI R.K. PANDA
Date of Hearing : 18.11.2021 Date of Pronouncement : 26.11.2021 ORDER
This appeal filed by the Assessee is directed against the Order dated 20.06.2019 of the Ld. CIT(A)-9, New Delhi, relating to the A.Y. 2016-2017.
None appeared on behalf of the assessee at the time of hearing nor any petition seeking adjournment of the case has been filed. A perusal of the record shows that this appeal has been fixed for hearing on a number of times by 2 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. issuing notice through RPAD and on all occasions the Postal Authorities have returned the notice with the remarks “Left”. The assessee has also not taken any steps to intimate the changed address, if any. Therefore, I deem it proper to decide the issue on the basis of the material available on record and after hearing the Ld. D.R.
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) in upholding the order passed under section 143(3) of the I.T. Act and sustaining the addition of Rs.21,60,000/- made by the A.O. rejecting the claim of the same as agricultural income.
Facts of the case, in brief, are that the assessee is a company and filed its return of income on 07.10.2016 declaring total income of Rs.3,98,300/-. The case was processed under section 143(1) of the Act. Subsequently, the case was selected under CASS in limited scrutiny category to examine the following issues :
3 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi.
Reason Description Issue Mismatch between income/ receipt credited to Profit & Loss account considered under other heads of income and income from heads of income other than business/ profession (Schedule BP, Schedule EI & Part-B-TI of return). Large agricultural income Whether the claim of (Schedule EI or Part-B TI of agricultural income is ITR) correct.
4.1. The A.O. accordingly issued notice under section 143(2) of the Act. Subsequently notice under section 142(1) of the Act along with questionnaire was issued to the assessee company for necessary compliance.
4.2. During the course of assessment proceedings, the A.O. noticed that the assessee company during the year under consideration was engaged in the farming and agriculture of all kind of seeds, flowers, plants, nursery, floriculture & sericulture. The assessee company has shown total revenue of Rs.1,96,47,872/- from its agricultural operations including rent of Rs.21,60,000/-
4 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. from agricultural land. On being questioned by the A.O. it was submitted that the assessee company was in receipt of sale proceeds of vegetables, fruits, flowers, leaves, strawberry, etc. for a total sum of Rs.1,74,87,872/- and rent of Rs.21,60,000/- received from M/s. Asian Hotels (North) Ltd under a contract for use of space for nursery plants. During the course of assessment proceedings the A.O. noticed that the assessee company had entered into a Memorandum of Understanding (MOU) dated 01.07.2003 with Sh. Shiv Kumar Jatia for carrying out agricultural operations on 5.25 acres agricultural land at Farm No.l, Sultanpur Farms, Village Gadaipur, Tehsil hauz Khas, Delhi. On the said agricultural land, necessary infrastructure & various equipments for cultivation has also been provided to the assessee company along with the land. The said MoU has been extended by the assessee company upto 31.03.2022 for a charge of Rs.30.00 lacs per annum. Further, it was also noticed that the assessee company has entered into a contract vide letter dated 11.03.2015 for use of space for nursery plants and storing of plants owned by 5 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. M/s. Asian Hotels (North) Ltd at Farm No.l, Sultanpur Farms, Village Gadaipur, Tehsil hauz Khas, Delhi for a charge of Rs.1.80 lacs per month i.e. Rs.21.60 lacs annually. It was noticed that the assessee company has shown rent from agricultural land of Rs.21.60 lacs in its Profit & Loss Account for the AY 2016-17 and has also claimed exemption on this rent by considering it as agricultural income. The A.O. noticed that the assessee company has earned rental income of Rs.21.60 lacs by sub- letting the space for storing of nursery plants owned by M/s. Asian Hotels (North) Ltd at the agricultural land which was let out to the assessee company on rent by Sh. Shiv Kumar Jatia vide MoU dated 01.07.2003. Further, the income from activity of sub-letting of the said property for the purposes of storing of plants cannot be claimed as income from agricultural operations. Thus, the rent receipts of Rs.21.60 Lacs; received from M/s. Asian Hotels (North) Ltd were not exempted as per the Act and these receipts should have been taxed under the head Income from other sources u/s 56 of the Act for the AY 2016-17.
6 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. 4.3. In order to verify the actual activities being carried out as claimed by the assessee company for the agricultural purposes, the A.O. deputed his Inspector to conduct field enquiries and submit his report, to which the Inspector gave the following report which has been reproduced by the A.O. in the body of the assessment order at para 4.3 which reads as under :
“With regard to renting part of the land to M/s.
Asian Hotels (North) Ltd., it was informed that there is no specific area given to them. M/s. Asian Hotels (North)
Ltd. does not utilize the land for farming, but uses only for keeping and maintaining flower pots. The flower pots are kept according to the requirements of sunlight/ shade for the flower plants. On the said premise, around 2000 pots were present and maintenance of the same was handled by Mr. Raja Ram, staff of M/s.
Asian Hotels (North) Ltd. However, the quality and 7 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. standard of these flower plants and pot was very local and not up to the standard of Hayatt Hotels (M/s. Asian Hotels (North) Ltd. Further, nowhere in the entire farm house there was any board in the name of M/s. Asian Hotels (North) Ltd. or in the name of Hayatt Hotels.
For keeping the plants under the shade plants are kept in the backside of the farm house.”
4.4. The A.O. also issued notice under section 133(6) to M/s. Asian Hotels (North) Ltd., to submit complete details of purchase/sale transactions, the property/space/land i.e. address, land area, location, structure description, etc. taken on rent from the assessee company along with documentary evidence of rent agreement etc. and details of the activities & operations being carried out by the assessee company at the property/space/land.
4.5. After receiving reply from M/s. Asian Hotels (North) Ltd., in response to notice under section 133(6) of 8 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. the Act and further submission thereafter, the A.O. issued a final show cause to the assessee to explain as to why the rent receipt of Rs.21,60,000/- should not be taxed under the Head “Income from other sources” under section 56 of the I.T. Act, 1961. Rejecting the various explanation given by the assessee, the A.O. held that the amount of rent receipt of Rs.21,60,000/- from M/s. Asian Hotels (North) Ltd., are not agricultural income and not exempt under section 10(1) of the I.T. Act and are to be taxed under the Head “Income from other sources” under section 56 of the I.T. Act, 1961. He, accordingly, rejected the claim of exemption and made addition of Rs.21,60,000/- to the returned income of Rs.3,98,300/- and thus, determined the total income of the assessee company at Rs.25,58,300/-.
4.6. In appeal, the Ld. CIT(A) upheld the action of the A.O.
Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
9 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi.
I have heard the Ld. D.R. and perused the record. I find the A.O. in the instant case after considering various submissions made by the assessee from time to time, report of the Inspector and the reply of M/s. Asian Hotels (North) Ltd., to the notice under section 133(6), treated the rent receipt of Rs.21,60,000/- received by the assessee from M/s. Asian Hotels (North) Ltd. as income from other sources as against agricultural income claimed by the assessee and made the addition of the same to the total income of the assessee. I find the Ld. CIT(A) upheld the action of the A.O. by observing as under :
10 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. 11 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi. 12 ITA.No.6277/Del./2019 Transparent Agro Private Limited, Mehrauli, New Delhi.
7.1. I find the Ld. CIT(A) while rejecting the claim of agricultural income has given a detailed reasoning which in my opinion is a reasoned one and does not call for any interference. I, therefore, uphold the same and the grounds raised by the assessee are dismissed.
8. In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 26.11.2021.