RUSTOM SOLI SETHNA,MUMBAI vs. ITO, WARD 13 (2)(2), MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2016-17. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-21, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 154 r.w.s. 143(3) of the Income Tax Act 1961, (the ‘Act’).

During the course of assessment proceedings, the AO issued a show cause notice to the assessee which has been extracted at para 3.1 of the assessment order. In response to it, the assessee filed a reply dated 24.12.2018 before the AO. However, it is noted by the AO that the assessee failed to furnish complete details in support of earning of agricultural income of Rs.28,43,760/-; further the assessee failed to furnish details of the agricultural land and the cultivated land with crops; the part details furnished

Mr. Rustom Soli Sethna by the assessee are not verifiable in absence of complete address ; the claim of the assessee that he has sold agriculture produce to Mr. Gulam Mohd Gafoor Rakhange and Ashok Lale are also not proved with bank statements ; the names mentioned on the bills are not matching with the names as per bank statement, therefore, the sale bills will not have any credibility to prove the sale of agriculture produce by the assessee.

In view of the above facts, the AO referred to NABARD model profile for 1.0 ha Cashew Cultivation which states that a yield of 8-10 kg per tree could be achieved and will fetch a price of Rs.65-70 per kg in the internal market. Perusing the extract of 7/12 produced by the assessee, the AO noted that cultivated land for the crop-cashew is only 9.4 hectors (23.2274 acres). Accordingly, he estimated the actual crop of cashew in the cultivated land as under :

Total acre 23.2274

Surplus/Income per acre Rs.15,710/- per year Thus the AO calculated the total agricultural income from cashew crop in 23.2274 acres at Rs.3,64,902/-. Accordingly, he restricted the agricultural income to Rs.3,64,902/- and treated the excess claim of Rs.24,78,858/- as income from undisclosed sources.

Mr. Rustom Soli Sethna “6.5 The appellant has not produced any of the above documents in support of its contention. All that the appellant had produced was assessment order of earlier years, confirmation letters, name and address of few persons whom he claimed to have sold the products. I find strong force on the finding of the AO that the production shown by the appellant ranges upto 300% of the maximum yield grown by farmers in good soil with well irrigation facilities and better climatic conditions. The findings recorded in the assessment order comparing to the average production per acre as published by NABARD have considerable cogency. Upon appreciating the entire facts and circumstances of the case, I am of the firm view the appellant failed to establish its case by producing evidence of basic operations carried out by him for earning abnormal agricultural income. It did not meet the entire requirements of the stature in respect of excess agricultural income in as much as he failed to produce the proof of performance of any process ordinarily employed by a cultivator or receiver of rent in kind as claimed.

6.6 The Appellant submitted that he owned agricultural land aggregating to 23.24 hectares which works out to 57.42 acres and the AO has wrongly considered the land holding as 9 hectres equal to 23.2274 acres m the assessment order. However, the appellant has not produced documents or any proof substantiating his claim of area under cultivation. Without substantial documentary evidences, the appellant's claim cannot be accepted.”

Mr. Rustom Soli Sethna Annexure III, which show an income of Rs.15,710/- per acre; the trees are over 20 years old and as per the same Annexure III, as included by the AO in the order, the yield per acre is Rs.84,130/- for trees of 10 years age. Thus it is argued that the AO has erred in not accepting that the trees are over ten years old and will give a larger yield ; the AO has erred in stating that the trees need fertilizer, whereas once cashew trees are mature, fertilization is not required. On facts it is stated by him that the AO has erred in stating that land area is 23.2274 acres, when it is 23.24 hectares which is 57.42 acres (one hectare equals 2.47 acre). It is further submitted that the trees have been planted in the years 1997 and 1998 and are well over 10 years old and this fact was brought to the notice of the AO. Further, it is stated that the assessee has earned agricultural income from sale of cashew nut and it has been shown in the return of income filed for earlier years. The Ld. counsel files a copy of confirmation from three parties which were filed before the CIT(A).

Mr. Rustom Soli Sethna hectares. Simple conversion tells us that 1hectare is equal to 2.47 acre. Hence, the area on which cashew trees are grown is 57.42 acres. Thus the AO has made a mistake in arriving that the land area is 23.2274 acres, whereas it is 23.24 hectares which is 57.42 acres (1 hectare equals 2.47 acre). Further, as evident from record, the trees have been planted in the years 1997 and 1998 and are well over 10 years old. The AO has wrongly taken the data for four years old trees as shown in Annexure III, which show an income of Rs.15,710/- per acre. In fact, the trees are over 20 years old and as per Annexure III as included by the AO in the order, the yield per acre is Rs.84,130/-. The assessee has shown agricultural income from AY 2002-03 from sale of raw cashew nut and the same has been reflected in his return of income. The agricultural income shown by the assessee for the AYs 2002-03, 2005-06, 2006-07, 2009-10 and 2012-13 has been accepted by the Revenue in the assessment made u/s 143(3) of the Act.

In view of the above facts, we are of the considered view that the AO has hypothetically arrived at agriculture income of Rs.3,64,902/- and treated the excess claim of Rs.24,78,858/- as income from undisclosed sources, without any basis.

As the above order of the AO is not based on facts or evidence, we set aside the order of the Ld. CIT(A). We direct the AO to accept the return of income filed by the assessee.

Mr. Rustom Soli Sethna