R NAGESH GOWDA ,BANGALORE vs. THE INCOME TAX OFFICER WARD-3(2)(2), BANGALORE

The assessee is an individual. For asst. year 2015-16, the assesee field return of income declaring total income of Rs.Nil. The assessee in the return of income had shown agricultural income to the tune of Rs.54,46,450/-. To verify to claim of the assessee regarding agricultural income, the case was selected for scrutiny under CASS.

2 4. In the proceedings before the AO, the assessee filed evidence to show that he was holding agricultural land of an extent of 15 acres at survey No.184, 185, 186 and 190 at Kalenahalli, Dandiganahalli HObli, Channarayappatna Taluk, Hassan District. The assessee claimed that he had cultivated coconut plantation in 7 acres, banana plantation in 3 acres and ginger crop in 5 acres. The claim of the assessee was that the lands were well fed with water from bore well and Hemavathy river irrigation cannal. The assessee claimed that he was supervising the agricultural activities by employing labourers for carrying out agricultural operations. The assessee claimed that banana and coconut have been sold locally to buyers at the farm and that ginger was also sold to farmers at the farm. Gross agricultural income derived by the assessee was Rs.60,40,000/- and after incurring an expenditure of Rs.5,93,550/-, the assessee claimed to have received net agricultural income of Rs.54,46,450/-. The assessee also claimed that it had not sold the agricultural produce to any trader or through APMC market and therefore no sale bill or vouchers were available with him.

Temporary Labour for Ginger and Banana 1,20,000 (800 Man days labour * 150 Per Day) 2. Permanent Labour for Supervision and Maintenance 1,80,000 3. Fertile Soil Purchase 70,000 4. Manure, Fertilizers, Composts, Organic Manure, Medicines 1,50,000 5. Equipments Hire for tilling, Sowing and cutting 40,000

The conclusion of the AO on the basis of the above was that assessee did not grow banana during the previous year relevant to asst. year 2015-16. The AO also issued a direction to the ITO Ward-I , Hassan

The AO issued show cause notice dated 20/12/2017 calling upon the assessee to show cause as to why the agricultural income shown by the assessee should not be disbelieved to the extent of Rs.32,30,500/- and the said sum of Rs.32,30,500/- should not be brought to tax as income from other source. In response there to, the assessee addressed

The assessee therefore submitted that the RTC extract produced by the V.A.O. in response to the notice of the AO was not correct. The assesse also submitted that the report of the Inspector should not be believed as the inspection by the Inspector was at a period much latter in point of time than the period relating to the previous year relevant to AY 2015-16.

The AO also disputed the price at which coconut as well as ginger were claimed to have been sold by the assessee. The AO obtained rates of ginger as per the APMC data Chanarayapatana during the previous year and came to the conclusion that the rate per kg of gingers was only Rs.20 per kg. He did not agree with the rates of coconut as given by the assessee at Rs.20 per coconut and accepted the price of only Rs.12 per

Similarly the AO arrived at the income from Ginger as follows:- From the above data it can be seen that the maximum price of ginger was Rs.2000/- per quintal on 21/6/2014. The rate per kg works out to Rs.20/-. After considering the assessee's claim that yield of ginger was Rs.97500 Kgs., the income works out to Rs.19,50,000/-. The excess Income claimed by the assessee of Rs.9,75,000/- is treated as income from other sources. In the light of the above discussions, the income from agriculture claimed by the assessee is found to be excessive and the gross total agricultural income of the assessee is re -worked as under:

Aggrieved by the order of the AO, the assessee filed appeal before the CIT(A) who confirmed the order of the AO. Aggrieved by the order of the CIT(A), the assessee has failed present appeal before the Tribunal.

I have heard the rival submissions. The issues that arise for consideration are with regard to the quantum of agricultural income earned by the assessee and as to whether the assessee grown banana crop during the relevant provision year. There appears to be contradictory certificates of V.A.O. on the kind of crop grown by the assessee on the land owned by the assessee. While in the certificate produced by the assessee, banana crop is stated to have been grown by the assessee, while in the certificate given to the AO, Banana crop is not found to have been grown by the assessee. In the submissions before the CIT(A), the assessee had requested for an opportunity of cross examining the Inspector with regard to the basis on which he came to the conclusion that the assessee has not grown banana crop. Such an opportunity was neither given by the AO nor the CIT(A). Apart from the above, the assessee has filed an Affidavit before the Tribunal, copies of which is placed at page 40 to 42 of assessee’s paper book. In the said affidavit, the assessee has given a details of the persons to whom he has sold his agricultural produce as follows:-

I produced about 42,000 Kgs., of Banana from 3000 banana plants and sold the same at Rs.40/- per Kg., to one Sri Prakash Kumar, Alphonso Nagar, Channarayapatna.

I produced about 66,000 pieces of coconut from 220 coconut trees and sold the same at Rs.20/- per piece to one Sri Shankar, Honnashettyhalli, Channarayapatna Taluk.

I produced about 97,500 Kgs., of Ginger and sold the same at the rate of Rs.30 per Kg., to one Sri Murali, A KaTenahalli, Channarayapatna Taluk and One Sri Ajith Gowda, Sasalupura, Channarayanapatna Taluk.”

It is also been pleaded before me that even assuming that the agricultural income declared by an assessee is disbelieved no addition could be made u/s 69 or 69A or 69B of the Act unless the agricultural income is claimed as a source for explaining any investments. In this regard, the ld counsel for the assessee has placed reliance on the following decisions:- 1) Kamal Kishore Chandak Vs. ITO, 103 TTJ 843 (2006) 2) Pannalal Holani Vs. ITO, ITA (2009) 123 TTJ 142 3) KC Choudary Vs. ITO, (1984) 03 CCH 115 4) Rao Ravi Kumar Vs. DCIT, (2013) 35 CCH 386

I have considered the rival submissions. I am of the view that all the aspects pointed out by the ld counsel for the assessee requires fresh examination by the AO before coming to the conclusion that the agricultural income declared by the assessee to the extent disbelieved has to be assessed under the head ‘income from other sources’. The first aspect which needs to be ascertained is the agricultural holding and nature of crops grown by the assessee. For this purpose, the contradictory certificates issued by the V.A needs to be clarified by examining the V.A., if the AO so desires. The Inspector has also to be examined on his report because the inspection was done at a later point of time and the basis on which Inspector came to the conclusion regarding the crops grown by the assessee has to be explained and in this regard assessee should be afforded an opportunity of cross examination. The assessee should also be permitted to prove the sale value of his produce and in this regard, the assessee should be permitted to produce the affidavits from the purchases of agricultural produces. The AO on clarification on all the above aspects should take a view on the quantum of agricultural income declared by the assessee. Thereafter, the AO is also required to examine whether an addition to the extent of short fall, if any, in the quantum of agricultural income should be made to the total income of the assessee under the deeming provisions of the Act, in the light of decisions of tribunal cited before me. The AO will afford opportunity of being heard to the assessee before deciding the assessee. Appeal of the is treated as allowed for statistical purposes.