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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI A.K GARODIA & SMT. BEENA PILLAI
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal of the assessee arises out of order dated 31/03/2018 passed by Ld.CIT(A)-5, Bangalore for assessment year 2001-02 on following grounds of appeal: “1. The learned assessing officer had erred in passing the order in the manner passed by him
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and the CIT(A) has also erred in not only confirming but also enhancing the assessment. The orders passed by authorities below are bad in law and are liable to be quashed. 2. In any case, the learned CIT(A) has erred in assuming jurisdiction u/s 251(1)(c) of the Act and erred in enhancing the impugned order which was passed for effect to the order of the honourable High court by treating the entire agricultural income in dispute as business income. The action of CIT(A) in enhancing the income being wholly erroneous both on facts and law applicable is to be disregarded and the enhancement as done is to be deleted. 3. The learned CIT(A) has erred in not appreciating the facts of the case that the assessing officer himself has allowed agricultural income to the extent of Rs. 3,43,11,842/- and that this matter was not in dispute. Therefore, the action of CIT(A) in taking the entire agricultural income including which was allowed by the Assessing Officer (and which was not in dispute) on business income is bad in law and on fact. 4. Without prejudice, the learned Assessing Officer had erred in assessing the income at Rs. 4.08,02,789/- by allowing deduction in respect of respect of agricultural income of only Rs. 3.43,11,842/-. On the facts and circumstances of the case, the computation of income is erroneous. The correct computation is to be adopted. 5. Without prejudice, the authorities below have erred in not appreciating the fact that business income of the appellant is eligible for deduction U/s. 8011B of the I.T. Act and also erred in holding that in the absence of specific direction from the High court and also not claiming the deduction in return of income, the claim of the appellant is not acceptable. The conclusion drawn is contrary to law applicable and facts to be rejected and suitable relief in accordance with law is to be granted.
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The appellant denies to pay the Interest U/s. 234B, 234D and 220(2) of the I.T. Act, 1961. The interest having been levied erroneously is to be deleted. . In any case and without prejudice the calculation of interest is excessive. 7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the order passed be quashed or in the alternative a) the enhancement as done by the CIT(A) be deleted. b) The income as claimed exempt u/s 10(1) of the Act by the appellant be accepted. c) If the agricultural income is assessed as business income then eligible deduction U/s. 801B be granted and d) interest levied be deleted.” Brief facts of the present appeal are as under: 2. At the outset, it is necessary to record the brief history of the present appeal which is as under: 1. Ld.AO passed the original assessment order under section 143(3) on 29/03/2004 making addition of Rs.3,84,13,288/- by denying exemption under section 10 (1) of the Act in respect of agricultural income from contract farming. Ld.AO also disallowed provision for guarantee amounting to Rs.16,21,841/-. Relevant order placed at page 21-36 of appeal memo 2. Against order passed by Ld.AO, assessee preferred appeal before Ld.CIT(A) and disputed the disallowance made by Ld.AO in respect of alleged agricultural income of Rs.3,84,13,288/-. Ld.CIT(A) allowed the claim of assessee. Relevant order is placed at page 92-96 of paper book filed on 10/07/2019. 3. Revenue preferred appeal before this Tribunal against the order of Ld.CIT(A). This Tribunal while considering the claim of assessee,
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observed that 10% of the said income is only attributable to the business of assessee and the balance 90% amounts to agricultural income. This Tribunal thus restricted the disallowance to 10% of Rs.3,84,13,288/- in its order dated 14/07/2006. Relevant order is placed at page 99 to 133 of paper book filed on 10/07/2019. 4. Revenue and assessee further carried the issue before Hon’ble High Court Revenue alleged treatment 90% of Rs.3,84,13,288/- as apportioned income by this Tribunal. The question raised before Hon’ble High Court by revenue was as under: “whether the appellate authorities were correct in holding that the activity carried on by the assessee by trading in imported seeds agricultural activity on land taken on lease and contract farming considered agricultural income which was exempt under section 10 (1) of the Act” 5. Hon’ble High Court in ITA No. 75/2007 (being revenue’s appeal) for assessment year 2001-02 has summed up the issue alleged in para 3-6 of its order at page 198 of paper book. Hon’ble High Court framed the question of law to be answered as under: “1. Whether the Tribunal was right in holding that income derived by the assessee from manufacturing of seeds and sale of the same would amount to agricultural income which would be exempt under section 10 (1) of the Act?
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Whether the Tribunal was right in not taking into consideration the fact that assessee could not have had agricultural land in view of the provision of section 79-A of Karnataka Land Reforms Act?” 6. In appeal filed by assessee being ITA No. 284/2007, following question of law was admitted by Hon’ble High Court: “whether the Tribunal having held that hybrid seeds produced by the appellant was agricultural produce and income therefrom is agricultural income, was right in law in holding the process of certification of hybrid seeds produced by the appellant to make it marketable could not be held to be a process ordinarily employed by the cultivator and to that extent the income derived could not be treated as agricultural income as defined under section 2 (1A) of the act?” 7. Hon’ble High Court while considering the 1st question in revenue’s appeal and the question admitted in assessee’s appeal opined that, entire amount earned by assessee is to be treated as business income and assessing officer was justified in treating the said sum as income under the head business income. Categorical observation by Hon’ble High Court is in para 58 at page 280 of paper book. 3. Ld.AO accordingly, passed order giving effect to order dated 24/10/2011 Hon’ble High Court order on 21/03/2012 which is placed at page 19 of appeal memo.
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Assessee on one hand, preferred appeal before Hon’ble Supreme Court against order passed by Hon’ble High Court. On the other hand, against disallowance of Rs.3,84,18,913/- computed by Ld.AO, while giving order giving effect to Hon’ble High Court’s order, before Ld.CIT(A). 5. Ld.CIT(A) while considering this issue enhanced addition by interpreting order of Hon’ble High Court in such a way that the amount allowed by Ld.AO in the original assessment order (amounting to Rs.3,43,11,842/- under section 10 (1)), to be considered for disallowance in the hands of assessee. 6. Against enhancement made by Ld.CIT(A), assessee is in appeal before us. 7. It has been submitted by Ld.AR that, agricultural income amounting to Rs.3,43,11,842/- was exempted by Ld.AO himself in original assessment order dated 29/03/2004. He submitted that, this issue was not disputed by assessee before any of authorities in the 1st round of appeal, and that, this issue does not arise out of order 14/07/2006 passed by Tribunal against which revenue and assessee preferred appeal before Hon’ble High Court. He submitted that, issue alleged by both assessee as well as revenue before Hon’ble High Court was in respect of income amounting to Rs.3,84,18,913/- that arose from activities carried on in contract land. He placed reliance on computation by Ld.AO in original assessment order, grounds raised before Ld.CIT(A) and
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before this Tribunal in support of this contention in first round of appeal. 8. Succinctly, Ld.AR admitted that, OGE passed by Ld.AO of order passed by Hon’ble High Court was correct, and that to keep the issue alive, assessee preferred appeal before Ld.CIT(A) against the OGE. 9. On the contrary, Ld.Sr.DR placed reliance on order passed by Ld.CIT(A). 10. We have perused submissions advanced by both sides in light of records placed before us. 11. We agree with Ld.AR that, only issue raised by revenue before Hon’ble High Court was in respect of 90% deduction granted by this Tribunal as agricultural income earned by assessee from contract land and issue raised by assessee before Hon’ble High Court was in respect of disallowance of 10% of such income earned from contrace land as business income. 12. We also note that revenue could not have raised any other issue before Hon’ble High Court as they do not arise out of order passed by this Tribunal dated 14/07/2006. We also note that there was no additional ground raised by revenue before Hon’ble High Court. Hon’ble High Court passed order reversing decision of this Tribunal and holding that entire income earned from contract land is business income. Under such circumstances, Ld.CIT(A) did not have jurisdiction to issue enhancement notice to assessee
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to consider claim which was allowed by Ld.AO in original assessment order passed dated 29/03/2004 and was not alleged by assessee before Ld.CIT(A). 13. On a query being raised by the bench regarding any further appeal preferred by assessee, Ld.AR submitted that, assessee has filed SLP before Hon’ble Supreme Court, against order passed by Hon’ble High Court, which was admitted on 08/01/2015 and has been converted into Civil Appeal no.000356/2015. Ld.AR has filed case status before Hon’ble Supreme Court, according to which the appeal is pending final hearing. 14. We note that, the issue considered by Ld.CIT(A) for invoking section 151 was never alleged by assessee in first round of appeal, before Ld.CIT(A) or by revenue before this Tribunal. Admitedly, assessee should not have filed appeal before Ld.CIT(A) against Ld.AO’s OGE to order passed by Hon’ble High Court. Entire confusion arose only because of the appeal filed by assessee, before Ld.CIT(A), against OGE passed by Ld.AO to order passed by Hon’ble High Court. In our opinion, assessee suffered for its own fault. 15. Further, assessee in appeal filed before us against the impugned order, has not restricted its issue that arises out of the impugned order. We record our strong dismay to such recourse taken by assessee. In our view, Ld.CIT(A) and assessee erred by
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initiating protracted litigation which is not in accordance with the procedure laid down by the Act. 16. With above observation, we do not find any infirmity in taxable income computed by Ld.AO in OGE to Hon’ble High Court on 21/03/2012. We also hold that enhancement by Ld.CIT(A) is invalid as it is on an issue that does not arise out of order passed by Hon’ble High Court. Accordingly Ground2-3 stands allowed. The remaining issue alleged by assessee stands rejected. In the result, appeal filed by assessee stands partly allowed. Order pronounced in the open court on 28th Oct, 2020. Sd/- Sd/- (A.K GARODIA) (BEENA PILLAI) Accountant Member Judicial Member
Bangalore, Dated, the 28th Oct, 2020. /Vms/
Copy to:
Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.
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Date Initial 1. Draft dictated on On Dragon Sr.PS 2. Draft placed before -10-2020 Sr.PS author 3. Draft proposed & -10-2020 JM/AM placed before the second member 4. Draft -10-2020 JM/AM discussed/approved by Second Member. 5. Approved Draft comes -10-2020 Sr.PS/PS to the Sr.PS/PS 6. Kept for -10-2020 Sr.PS pronouncement on 7. Date of uploading the -10-2020 Sr.PS order on Website 8. If not uploaded, -- Sr.PS furnish the reason 9. File sent to the Bench -10-2020 Sr.PS Clerk 10. Date on which file goes to the AR 11. Date on which file goes to the Head Clerk. 12. Date of dispatch of Order. 13. Draft dictation sheets No Sr.PS are attached