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Facts
The assessee, Arya Agri & Aqua Private Limited, engaged in agriculture and fishery, claimed agricultural income as exempt for AY 2016-17 and 2018-19. The AO, confirmed by CIT(A), made an addition of Rs.1,45,00,000/- (for A.Y. 2016-17) under Section 68 of the Income Tax Act, treating the agricultural income as unexplained cash credit, based on an Inspector's report that questioned the agricultural activities. The assessee contested this, providing evidence of genuine agricultural operations including photographs, video, and bank support.
Held
The Tribunal condoned the delay in filing the appeals. It found that the assessee genuinely carried out agricultural activities, supported by tangible evidence such as photographs, video, purchase bills for agricultural inputs (DAP, UREA, pesticides), and bank credit facilities. Noting that even the Inspector's report admitted isolated patches of paddy, the Tribunal concluded that the agricultural income declared was genuine and deleted the addition made under Section 68 for both assessment years.
Key Issues
Whether income declared as agricultural income can be treated as unexplained cash credit under Section 68 of the Income Tax Act, and whether the assessee genuinely conducted agricultural activities to earn such income.
Sections Cited
Section 68, Section 143(2), Section 143(3), Section 142(1), Section 156, Section 274, Section 271(1)(c)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MANISH AGARWAL
O R D E R आदेश आदेश आदेश Per Bench : These two appeals are filed by the assessee against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, passed in IT Appeal No.CIT(A), NFAC/2017-18/10048149 & CIT(A), Bhubaneswar- 1/10537/2018-19, vide DIN & Order No.ITBA/NFAC/S/250/2024- 25/1068127205(1) & ITBA/NFAC/S/250/2024-25/1065677607(1), both dated 29.08.2024 & 14.06.2024 for the assessment year 2016-2017 & 2018-2019.
At the outset, on perusal of the appeal record, it is found that appeal of the assesee for A.Y.2018-2019 is filed belatedly by 12 days and appeal of the assesee for A.Y.2016-2017 is filed belatedly by 73 days. In both the appeals, the assesee has filed condonation applications along with affidavit stating sufficient reasons for delay in filing both the appeals. Ld. Sr. DR did not object to condone the delay. Accordingly, we condone the respective delay in filing both the appeals and appeals are heard finally.
No.461/CTK/2024 for A.Y.2016-2017, wherein the assesee has raised the following grounds :-
1. That the impugned Appellate Order by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Income Tax Department, Govt. of India is bad in law and without application of mind.
2. That the Ld. CIT(A) has erred in confirming the order of the Assessing Officer assessing the taxable income of the assessee based on erroneous facts and without applying his mind while considering the agricultural income as unexplained credit u/s 68 and accordingly made the addition of Rs.1,88,34,720 and raised the demand against the assessee. The assessee vehemently opposes such action of the Assessing Officer and also aggrieved by the CIT(A) for not allowing the appeal adjudicated in favour of the assessee based on the facts of the case and consistent in recognizing the income by the assessee for last several years. The assessee prays before the Hon'ble Income Tax Appellate Tribunal to reject the addition made by the AO and allow the income as agricultural income and accordingly adjudicate the matter in favour of the assessee. Therefore, the addition of Rs.1,88,34,720 be deleted on the facts and circumstances of the case.
That the Appellant craves the leave of the Hon'ble Bench to add, alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal, submit written submissions, paper book and such other facts and figures before or at the time of hearing of the case, if necessity so arises.
Brief facts of the case are that the assesee is a private limited company, engaged in the business of cultivation of agriculture produce and fishery products. The case of the assesee was selected for limited scrutiny to verify the agriculture income claimed as exempt and the assessment was completed vide order dated 29.12.2018, wherein the addition of Rs.1,45,00,000/- was made u/s.68 of the Act by holding that the agricultural income declared by the assesee is unexplained cash credit. The assesee has claimed net agriculture income of Rs.96,28,307/- AO was of the opinion that no agriculture activity was carried out, he held the agriculture income as unexplained and made the addition on the gross agriculture income of Rs.1,45,00,000/- as unexplained cash credit u/s.68 of the Act. In first appeal, ld. CIT(A) confirmed the addition. Thus, the assesee is in appeal before us.
During the course of hearing, ld. AR of the assesee submitted that the assesee is having total approx 200 bighas of land situated in two different areas and undisputedly the land in question is agricultural in nature. On both the pieces of land, the assesee is having many ponds where fishery products are produced and besides this agricultural produce are also cultivated on the remaining part of the land. During the year out of the total receipts of Rs.6,78,95,547/-, the sale of fishery products was of Rs.5,33,55,132/- and sale of agricultural produce was of Rs.1,45,40,415/-. The ld. AR submitted that the AO has not doubted the income from fishery products, however, has doubted the agricultural activity and made the addition on Rs.1.45 crores out of total agriculture receipts holding the same as unexplained cash credit. The ld. AR submitted that the assesee has claimed expenses which includes the expenses on purchase of seeds for both the activities and while alleging the agricultural income as unexplained, the AO observed that the assesee has failed to produce the bills of seeds purchased. However, while alleging so, the AO has adopted double standards where on one hand he allowed the deduction towards purchase of seeds for fishery products and products. He further submitted that during the course of assessment proceedings the Ward Inspector visited the land of the assesee to verify as to whether the agricultural activities were actually carried out or not. He further submitted that no order authorizing the inspector to make such verification is made as is evident from the perusal of order sheet which is placed in paper book. Ld. AR stated that as per the Inspector’s report, he observed that there were no trees etc. were available as claimed by the assesee for having agricultural income at the time of his visit which was carried out in October, 2018. As per the ld. AR the Inspector visited the land in October, 2018 when the assesee has almost shut down the agricultural activity, therefore, when the Inspector visited lands of the assesee, he could not find the trees from which the assesee has claimed the agricultural income. Ld. AR stated that the visit of Inspector was after more than 2 years from the end of previous year relevant to assessment year under appeal. He further submitted that the inspector has made verification from the local villagers, however, no enquiry whatsoever was made from the employees of the assesee, who were available at the premises and were involved in agricultural activity. Since the local villagers are totally unrelated and outsiders, were not aware of activity that was carried out by the assesee, thus, their version could not be relied upon. Had the Inspector made the enquiry from the correct persons, the true picture of the real nature of the activity carried out by the assesee would come to surface. Ld. AR also filed certain photographs in the paper ponds as well as agricultural produces are clearly visible. Moreover, during the course of hearing, a pen drive containing the video of total land owned by the assesee was also submitted, which were played during the course of hearing through computer and both the parties i.e. the ld. AR of the assesee and the ld. Sr. DR had a look on the video. As per the said video it is clearly visible that both agricultural as well as fishery production activities were carried out by the assesee. These pen drives are placed on record. The ld. AR also drew our attention to the report of Inspector where he observed that some standing crop of paddy is there at the land of the assesee in isolation patches which further established that agricultural activities were carried out on the said laid while the Inspector has visited. Ld. AR further drew our attention to the sanctioned letter issued by the Bank of India, Jaydev Vihar Branch, Bhubaneswar where the bank has allowed the credit facility to the assesee on the said land and the funds were allowed to the production used for fisheries, agricultural etc. From the perusal of the balance sheet also it appears that during the year under appeal, there were outstanding balance of the bank loan and it is an admitted fact that when a nationalized bank had made the advances it had carried out the periodical visits to the borrowers premises to confirm that the funds were utilized for which they were granted and further periodic stock statements were also obtained by the bankers to ensure that the credits facility was properly utilized and duly supported by the securities. In view of these facts, the ld. AR prayed that having fishery production, thus, the addition made by the AO holding agricultural income as unexplained cash credit deserves to be deleted.
On the other hand, ld. Sr. DR vehemently supported the orders of the lower authorities and submitted that the assesee has failed to controvert the finding of the AO with regard to the agricultural activity carried out at the land which are based on spot enquiry by Inspector.
Further the assesee has not produced entire bills & vouchers of expenses claimed against agriculture income. Therefore, he requested for the confirmation of the addition so made and confirmed by the lower authorities.
We have heard the rival submissions and perused the material available on record. In the instant case, one thing is not disputed by either of the party that the land in question was agricultural land and is used for agricultural purpose only. This fact is further confirmed by the Ward Inspector, who visited the land for verification of the agricultural activities.
The report so submitted by the Inspector is reproduced as under :- admitted that in isolated patches standing crop of paddy is available.
Moreover, from the perusal of the report, we find that the Inspector has failed to make proper and adequate enquiry nor had recorded statements of any person. Further the Inspector had made enquiries from the local villagers and had not confronted the employees of the assesee who were not only taken care of the land but also actively engaged in the agricultural activities and were available when he visited the land. It appears that the Inspector chose not to make any enquiry from them to ascertain true nature of the activity carried out. It is further seen from the copy of the order sheet placed in the paper book pages 73 to 74 where there is no entry of the AO deputing the Inspector for making spot verification nor any entries made for submission of the report to the AO or its further examination. The said order sheet is reproduced as below :-
The assesee has claimed expenses towards purchases of seeds.
The expenses pertaining to fishery business were allowed as claimed, however, the AO has doubted the expenses claimed against agricultural income by alleging that the same were without any supporting. Further from the perusal of the video clip submitted by the assesee, the ld. Sr. DR perusal of the photographs also we found that the agricultural activities were carried out on the said land. The ld AR also drew our attention to few copies of the bills for purchase of fertilizers which are in paper book placed before us. As perusal of the bills, it is seen that the bills are relating to DAP, UREA, pesticides etc. which could only be used for agricultural production and not for fishery production. All these facts lead to believe that assesee was actively engaged in the agricultural activity and, therefore, the receipts from the agricultural produce cannot be doubted. This view is also supported by field enquiry report of the Inspector where he very categorically observed that paddy was available in patches at the land of assesee. Under these circumstances, we are of the view that the assesee has been able to establish that agricultural activity was carried out by it and further able to substantiate the agricultural income earned from the sale of agricultural produce which were cultivated on the land owned by it with all plausible evidences and, therefore, the addition made on this account is hereby deleted and the grounds of appeal of the assesee are allowed.
Now, we shall take up the appeal of the assesee for A.Y.2018-2019 facts discussed in the appeal for A.Y.2016-2017. As the arguments put forth by both the parties are identical to the grounds raised for both the years under consideration, except different in figures, therefore, the reasoning given by us in the appeal i.e. shall apply Accordingly, we hold that the agricultural income declared by the assesee is genuine and addition made in this regard is hereby deleted. Thus, grounds of appeal of the assesee for this year also are allowed.
In the result, both appeals of the assesee are allowed.
Order pronounced in the open court on 23/01/2025.