INCOME TAX OFFICER, SALISBURY PARK vs. SANGRAM VISHWASRAO KACHARE, WADGAOSHERI

1. Cross-objector prays for dismissal of Appeal of Revenue, as not maintainable for tax effect less than Rs.50 lakhs.

by Revenue and prays to confirm the relief granted by CIT(A).

3. Without prejudice to the above Grounds, Order passed U/s.144 r.w.s.144B is Bad in Law. Appellant prays for cancellation of Order.

4. Cross-objector prays for just and equitable relief.

5. Cross-objector prays to add, alter, amend and / or withdraw the Ground/s during appellate proceedings as occasion may demand”

4. Briefly stated, the facts of the case are that the assessee is an agriculturist with plantations of pomegranate, grapes & sugarcane etc. in the village Telangwadi, Shetphal, Khandali and Mohol of Solapur District. For A.Y. 2020-21, the assessee e-filed his return of income on 08/01/2021 declaring a total income of Rs. 10,94,880/- and net agriculture income of Rs. 71,47,053/- (gross agriculture receipt of Rs. 1,23,17,261 – agricultural expenses of Rs. 51,70,208). The case of the assessee was selected for scrutiny under CASS for the reason „agricultural income‟. Accordingly, statutory notices u/s 143(2) & 142(1) of the Income Tax Act, 1961 (the “Act”) were issued and duly served upon the assessee vide ITBA portal. The assessee remained non- complied to the said notices. The Ld. Assessing Officer (“AO”) proceeded to complete the assessment proceedings ex-parte under section 144 of the Act vide his order dated 23/09/2022 by making an addition of Rs.

3 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) 1,23,17,269/- being gross agricultural receipt u/s 69A of the Act as unexplained money in absence of any documentary evidence furnished by the assessee in support of its claim and failure to explain the nature and source of acquisition of money/agricultural income and expenses claimed in respect of the same.

4 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) 6. In rejoinder to the AO‟s report, the assessee furnished its detailed reply along with documentary evidence to various averments made by the Ld. AO which are reproduced as under:- i) With regard to not furnishing the details of processes undertaken to yield the agricultural produce during the year, the appellant has stated that income was derived from cultivation of agricultural produce namely Pomegranate and Grapes. The basic operations include tilling of land, sowing of plants, etc and the subsequent operations include weeding, digging of soil around the growth, removal of undesirable growth, prevention of crop from insects and pests, usage of organic manure, watering the plants, tending, pruning, cutting etc. ii) With regard to not furnishing the details of crop grown/ yield per acre along with crop grown as per revenue records during the year, the appellant had furnished details such as crop-wise area under cultivation as well as crop-wise quantity of crops. The appellant has stated that from the above details furnished during the remand proceedings, one can easily calculate yield per acre. iii) With regard to not furnishing the details of all agricultural Produce made during the AY 2015-16 to AY 2020-21 in the required format, the appellant has stated that during the remand proceedings, he had filed most of the details such as land, name of the crop, total crop produced and crop wise agricultural receipt. The appellant stated during the remand proceedings that agricultural expense incurred is not maintained crop wise and as such the crop- wise net agricultural income and % of net agricultural income could not be furnished. The appellant has also stated that this is not a business activity and there is no such specific requirement under the Act as to maintenance of records in a particular manner. iv) With regard to not furnishing the details of crop wise expenses incurred during the year under consideration, the appellant has stated that he has maintained complete details of agriculture expense incurred of Rs.51,70,208/- along with evidence in form of invoices. However, since agriculture is an activity of an unorganized sector, there is no requirement under the Act to maintain record with crop wise Agricultural Expense and it cannot be ground to reject the agricultural income. v) With regard to not claiming any expenses for transportation of agricultural produce, the appellant has stated that the vehicle number on each of Sale Patti/Invoice is of the vehicle arranged by the customers and therefore no transport charges is incurred. vi) With regard to the jump in the agricultural income, the appellant has stated that the rate per Kg of Pomegranate increased from Rs.25.33 per Kg in AY 2018-19 to Rs.28.07 per Kg in AY 2019-20 to Rs.53.96 per Kg in AY 2020-21. Further, the appellant has started Grape Plantation from FY 2018-19 and the increase in there was increase in grape production on account of various activities undertaken in the previous year resulting in increase in production during the year under consideration. In respect of the agricultural land sold during the year, the appellant has stated that the said land was not used for sale of agricultural produce but for self- consumption. The appellant, relying on the judgment of the Hon'ble

5 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) High Court of Punjab & Haryana in the case of CIT Vs Jarnail Singh Karta 316 ITR 160, stated that the AO hasn't brought on record any vested interest or motive to show higher agricultural income. vii) With regard to not submitting any detail of document evidencing that the lands sold were agricultural lands, the appellant has stated that the AO never called for the information with regard to the sale of rural agricultural land during the remand proceedings. The appellant has now furnished the sale deeds with respect to the sale of agricultural lands. viii) With regard to sale of India Dry Grapes, the appellant has stated that he has sold naturally dried grapes on trees without any chemical or mechanical processing and hence the same is agricultural income and not business income. The grapes are left for natural drying on the plant itself for about a month's time whereby the moisture in the grapes is evaporated naturally without any chemical/artificial process. The appellant has stated that the process which the AO has referred for conversion of green grapes to raisins involves artificial process which the appellant has never carried on and never sold such a product. ix) With regard to drought relief received from Maharashtra State Government totalling to Rs.48,600/-, the appellant has stated that the Hon'ble ITAT Jaipur in the case of ITO Vs Arjundass Omprakash 17 Taxmann.com 74 has held that "a sum received from Government as compensation for loss of cultivation by assessee in respect of his requisitioned agricultural land would constitute agricultural income".

9. At the outset, it was brought to the notice of the Bench that the appeal filed by the Revenue is not maintainable on account of low tax effect which is also the first ground of Cross Objection of the assessee. He submitted a chart showing the calculation of tax effect on the disputed addition of Rs. 1,23,17,259 which comes out to Rs. 34,77,583/.

raised by the Revenue, it can be seen that the Revenue is not contesting the applicability of section 69A of the Act, but only the treatment of income as agricultural income has been contested which shows that the Department has accepted the source of income/money and only the treatment is in dispute. He further submitted that the agricultural income declared by the assessee in earlier years i.e. A.Ys. 2015-16 & 2017-18 has been accepted by the department in the assessment proceedings u/s 143(3) of the Act (para 343 & 349 of the paper book refers). The Ld. AR also filed detailed written submissions on merits of the case in respect of the first and second grounds of appeal of the Revenue, the relevant extract of which is as under:-

15. Without prejudice to the above and w.r.t. the First Ground of Appeal of the Department, the assessee submits as follows:

7 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) a. The details of Net Agricultural Income of the assessee during the last two years and the assessment year under consideration is as follows: b. The assessee has been consistently filing its tax return with disclosure of Agriculture Income and it will not be out of place to state that the return of the assessee is selected for scrutiny Assessment and the Order U/s.143(3) was passed for A Y 2015-16 to AY 2017-18 accepting the Agricultural Income. [Refer Page No.343 to 349] c. The Rural Agricultural Land Sold during the year were used by the assessee for production of food grains for Self- Consumption. The assessee during the year under consideration sold following Rural Agricultural lands - Rural Agricultural Land at S. No.73/1, Village Kadape, Tehsil Mangaon, Dist Raigad for a consideration of Rs.5,13,500/- to Mrs. Uorfi Abhiram Sheth - Rural Agricultural Land at S. No.98/4/A/2, Village Kadape, Tehsil Mangaon, Dist Raigad for a consideration of Rs.9,95,000/- to Mr. Sunil Maloo The above referred land were used by the assessee for production of food grains namely Rice which is used for assessee's personal consumption. [Refer Page No.562 to 563] d. The Compulsory Acquisition of the Rural Agricultural Land by the National Highway Authority of India is used for production of Sugar Cane which was used for cattle fodder. The Ld A.O. during the Remand Proceedings was made aware of the fact that Rural Agricultural Land at Gat No. 1/2, Kamti Bk, Mohol, Solapur admeasuring 20 Guntas was acquired under compulsory acquisition by National Highway Authority of India. The said land was used for cultivation of Sugar Cane. However, the crop was damaged and was used as cattle fodder. [Refer Page No.564 to 565). Therefore, these lands are not used by the assessee for Sale of Agricultural produce but for self-consumption or as a cattle fodder. e. The assessee during the Remand Proceedings filed complete details of the Agricultural land, Area under Cultivation for each of the Agricultural produce sold, Quantity of Agricultural Produce Sold, Amount received from Sale of Agricultural Produce from A Y 2014-15 till A Y 2020-21. [Refer Page No.469 to 474) f. If one analyses the data filed before the Ld A.O. during the remand proceedings and noted at Clause e above Your Honour would note that the above referred Rural Agricultural lands sold and 8 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) lands acquired by the NHAI were never used for sale of agricultural produce to third parties. Therefore, the ground raised by the Ld A.O. in disputing the Agriculture Income without verifying facts needs to be quashed. g. If one analyses the data filed during the remand proceedings and discussed at Point No. b, one will note the following for the increase in amount of Agricultural Receipt:

From the above Your Honour would note that not only the Rate per Kg of Pomegranate has increased from Rs.25.33 per kg in AY 2018- 19, Rs.28.07 per Kg in AY 2019-20 to Rs.53.96 per Kg in A Y 2020- 21 but also the production of Grape has increased from 8,571 Kg to 23,769 Kg. The assessee has made detailed Submission along with documentary evidence for increase in Grape Production before the CIT(A) in its rejoinder h. The Ld CIT(A) after appreciating the details and documents held at Para No. 4.1.5 "The appellant could also furnish the land revenue records along with 7/12 extract in support of the claim that he is owing the agricultural lands and growing agricultural crops in those lands and the AO could not dispute this fact except raising the ground that the appellant's part of agricultural land was acquired by the Government. The appellant has submitted in response to the AO that the part of the lands acquired by the Government were not used for cultivation and the agricultural lands where the plantations are existing were not acquired by the Government." i. Your Honour would also appreciate the fact that the assessee does not carry-out any business activity and Income during the year includes only Interest on Savings and Deposits apart from Agricultural Activity. The ITAT Indore in the case of ITO Vs Smt Shahnaj Bano, /04 Dated 07.01.2005 held "If a person has only agricultural income and no other income, then no addition can be made to the total income unless and until the AO proves that the assessee has any other source of income which is taxable under the Income-tax Act. The AO has not brought on record any material or evidence to show that the assessee was having any other source of income except agricultural income which is not taxable. CIT(A) was, therefore, justified in deleting the addition of Rs. 3,45,356/- to the total income made by the AO because the assessee has no income taxable and agricultural income is not taxable."

9 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) The above decision was followed by ITAT Indore bench in the case of Shri Madhusudan D Harda Vs ITO, Dated 15.06.2022. [Refer Page No.540 to 548] j. The Ld A.O.'s didn't bring on record any vested interest or motive of the assessee to show higher agricultural income. The assessee relies on the decision of the High Court of Punjab & Haryana in the case of CIT Vs Jarnail Singh Karta, 316 ITR 160 wherein it was held that "In fact, there was no material on record to show any vested interest or motive of the assessee to declare the agricultural income higher than the actual amount" [Refer Page No.549 to 551] k. Therefore, the Ld A.O. failed to appreciate all the facts w.r.t. to increase in Agriculture Income and as such the ground raised by the Revenue is liable to be quashed.

16. With regards to Second Ground of Appeal of the department, the assessee submits as follows: a. The assessee during the year under consideration sold Naturally Dried Grape on plants without any chemical or mechanical processing named Indian Dry Grape to M/s. R S International, B-12, Traders Complex, Market Yard, Sangli, PAN AAXPK4594N for a consideration of Rs.38,90,095/- (forming part of the Agricultural Receipt of Rs. 1,23, 17,261/-) [Refer Page No.23) b. The Ld A.O. alleged that Sale of said Naturally dried Grapes is not Agricultural Income but Business Income as the same is a distinguished product made after processing including dehydration. c. Sale of Naturally Dried Grape on plants without any chemical or mechanical processing named Indian Dry Grape is Agriculture Income and not Business Income as alledged by the Ld A.O.

In support of the same 7/12 extract (khatauni)/copy of revenue record is enclosed. e. The assessee, grows grapes and leaves them for natural drying on the plant itself for about a month's time whereby the moisture in the grapes is evaporated naturally without any iota of chemical/artificial process being undertaken. f. This process is ordinarily employed by cultivators to make the same marketable. g. This is one of the primary processes undertaken by the assessee to make the agricultural produce marketable and hence the same is agricultural income. h. The process which the Ld A.O. has referred for conversion of grapes to raisins involves artificial process (dipping in 10 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) solutions containing chemicals and then drying such fruits in the temperature ranging from 35 to 41 degress centigrade and also require machinery and power etc] which the assessee has never carried on and never sold such a product/produce. The assessee filed complete details of all the Agricultural expense incurred along with supporting evidences before the CIT(A). The same was before the Ld A.O. during the Remand proceedings. [Refer Page No.63 to 342] None of the said expense are towards processing of the grapes as alleged by the Ld A.O. Also, the Ld A.O. has also not alleged that the said expense are incurred towards processing of the grapes. i. Your Honour's attention is invited to the following situations whereby the produce is still regarded as Agricultural Produce. Farmers pluck raw mangoes (green colored) and naturally ripen the same. The naturally ripened Mango (yellow colored) sold is still an agricultural produce. Similarly, the Raw Banana (Green coloured) which are plucked from the banana plantations and sold after naturally ripening (yellow in colur) is still an agricultural produce. Similarly, Green Chilli which is used in normal cooking purpose when ripened naturally and sold as Red chilli is still an agricultural produce. Similarly, Maize and the kernels of maize which are extracted after natural drying and sold still remains the agriculture produce. j. As such the naturally dried grapes which are dried naturally on the plant itself is also agricultural activity. As such, sale of green grapes which are kept on the plant itself for natural drying and sold is agricultural income not liable to tax. k. Acceptance by the Tax Department of Sale of Naturally Dried Grapes as Agriculture Income in the Assessment Completed U/s.143(3) for A. Y. 2016-17 & AY 2017-18. i. The assessee has received an amount of Rs.20,19,389/- and Rs.46,43,788/- from Sale of Naturally dried grapes in AY 2016-17 and AY 2017-18. ii. The case of the assessee for A Y 2016-17 was selected for scrutiny to "verify large Agriculture Income and claim of large exempt income" disclosed by the assessee. iii. Similarly, the case of the assessee for AY 2017-18 was selected to verify the Agricultural Income. iv. In both these years after due verification the Ld A.O. has accepted the Agricultural income. v. The assessee relies on the decision of the ITAT Chandigarh Bench, SMC, in the case of Smt Sarabjit Kaur Vs ITO, 142 Taxmann.com 454 held "as has been held by the Hon'ble

11 ITA.No.1986/PUN./2024 & CO No.10/PUN/2025 (Sangram Vishwasrao Kachare) Apex Court the case of Radhasoami Satsang v. CIT [1992] 60 Таxтan 248/193 ITR 321, the conclusion reached in earlier years is binding on subsequent years and should be followed unless there is a material shift in the facts of the case" [Refer Page No.552 to 560] In light of the above, the ground raised by the Ld. A.O. is liable to be quashed.

Order pronounced in the open Court on 08.05.2025.