SMT ANNAPURNA ,TUMKUR vs. INCOME TAX OFFICER WARD-1 , TUMKUR

Smt. Annapurna, No. 11, Sri Ranga, TPK I Main The Income Tax Officer, Road, vs. Ward – 1, Raghavendranagar, Tumkur. Tumkur – 572 102. PAN: AEMPA9240E APPELLANT RESPONDENT Appellant by : Shri Shreehari Kutsa, CA Respondent by : Smt. K. Lakshmi, JCIT (DR) Date of hearing : 10.12.2018 Date of Pronouncement : 28.12.2018 O R D E R

Per Shri A.K. Garodia, Accountant Member

by the assessee are as under. “1. The Order of the learned Commissioner passed under section 250 of the Act is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case.

2. The Appellant denies herself liable to be assessed to tax on a total income of Rs.9,90,380/- as determined by the learned AO and confirmed by the learned CIT(A) as against the total income of Rs. 2,90,380/- as declared by the Appellant on the facts and circumstances of the case.

3. The CIT(A) failed to appreciate that the addition of Rs.7,00,003/- is not justified in law and on the facts and circumstances of the case.

4. The CIT(A) ought to have appreciated that the income in question is exempt and question of making it taxable does not arise on the facts and circumstances of the case.

5. The CIT(A) failed to appreciate that there is no income derived by the Appellant from dairy farming on the facts and circumstances of the case.

6. The learned Commissioner of Income Tax (Appeals) is not justified in dismissing the appeal without affording adequate opportunity of hearing on the facts and circumstances of the case.

7. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

8. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal Page 2 of 7 may be allowed in the interest of justice and equity.”

3. The ld. AR of assessee submitted that written submissions had already been filed on 23.10.2018 and the appeal may be decided by considering the written submissions. The ld. DR of revenue supported the order of CIT(A).

4. I have considered the rival submissions. I find that the issue in dispute was decided by CIT(A) as per para 5 of his order which is reproduced hereinbelow for ready reference. “5. The appellant has filed, written submission on 29-06-2018 in support of her grounds of appeal

, which has duly been considered. Admittedly, there was no details maintained by the assessee as regards quantity or, crops sold, details of sale proceeds, cost of expenditure incurred. The assessee did not furnish any of these details before the AO in spite of several opportunities provided. Under these circumstances, the AO has adopted the correct approach of referring the matter to the officer of agriculture department of state government for verification and report. It is observed that the report hail taken into account the nature of crop, age of the plant, yield per plant, market value of the crop and has calculated the income alter considering the cost of cultivation. Therefore, the contentions of the appellant against the report prepared by the Dy. Director Horticulture, who is a government officer, are not sustainable. The argument of the appellant of not being provided an opportunity to coulter the report is also not correct as the AO has mentioned in the order that a show cause notice was issued to the assessee as to why agricultural income should not be adopted as per report of the Dy. Director Horticulture and the reply of the assessee dated 25-12-2017 has duly been considered by the AO. In view of above, the contentions of the appellant cannot be accepted. The adoption of agricultural income at Rs. 18 lakhs by the AO, under the facts in the case of the assessee, as against Rs. 25 lakhs declared in the return of income, is considered to be reasonable and justified. Consequently, the action of the AO to add balance of Rs. 7 lakhs as income from other sources is also upheld. Therefore, the ground of appeal of the appellant fails.”

5. I have considered the rival submissions and perused the material on record. First, I reproduce the written submissions dated 23.10.2018 of the learned AR of the assessee. The same read as under:- “The Appellant most respectfully submits the following for kind consideration and gracious favorable orders of this Hon'ble Tribunal-

1. The Appellant filed return of income declaring total income of Rs.2,80,380/- and agriculture income of Rs.25,00,000/-. Case was selected for scrutiny and the learned AO called upon the Appellant to furnish details of agriculture income.

2. The Appellant furnished the details in relation to the agriculture activity by way of RTC and crop information. The learned AO Page 3 of 7 requested the Dy. Director of Horticulture (ZP) Tumkur to conduct inspection and furnish report on quantitative details of crops grown, number of trees, approximate income and probable expenditure.

7. The Appellant, aggrieved by the order of the AO, preferred statutory appeal before the CIT(A). Before the CIT(A) the Appellant filed written submissions. The CIT(A) however passed the appellate order dismissing the appeal of the Appellant. Aggrieved by the order of the CIT(A), the Appellant is before your Honour.

Page 5 of 7 that the Appellant has installed water-sprinkler in the farm and therefore irrigation too happens electrically and there is no labour involved for this purpose. Further, electricity expenditure is totally minimal in agriculture activity and so is water expenditure. These are practices of common knowledge in agriculture and the learned AO ought to have appreciated the same. d. In view of the above, the learned AO ought not to have held that the expenditure will have been incurred. The learned AO relied on the horticulture department report - which report - contrary to the observation of the AO and CIT(A) - was not confronted to the Appellant for answering. However, it is submitted that the report of the horticulture department has been prepared on the ideal-scenario basis, wherein they have reported mechanically without taking into account actual facts at all. In fact, the horticulture department did not even report that the Appellant cultivated Ragi in inter-cropping method with Coconut trees. e. As regards the observation of the learned AO that Appellant did not submitdetails regarding agriculture income earned, the same is being submitted now before this Hon'ble Tribunal as follows - Particulars ~ Income Coconut (approximately 600 trees and 100 kg 8,50,000 avg yield = 60,000* 14) Arecanut (approximately 5800 trees and avg 18,10,000 1.2 kg yield = 6960 kg @ Rs.260) Ragi (avg 6 quintal yield on 10 acres = 60 90,000 quintals @ 15,000/- per quintal) Total 27,50,000 Expenditure towards labour, cattle, etc., 2,50,000 Net Agriculture Income 25,00,000 f. The learned AO failed to appreciate that there is a dispute here only withregards to the expenditure portion and not income portion and the relevant expenditure in the case of the Appellant has already been explained before the AO but the AO chose to stick to the theoretical calculations and not the factual explanations by the Appellant. g. In order to buttress the submissions of the Appellant as regards the expenditure being minimal in monetary terms, the Appellant is filing an affidavit swearing the contents of this written submission. h. It is a settled law that affidavit is also an evidence and the department is bound to accept the submission of the assessee, unless it has a reason to believe on the merits of the case that the submission is not true. The Appellant's style of organic agriculture and traditional labour employment is very common in agriculture and therefore the department would not be justified in turning blind eye to the facts presented by Assessee herself. i. Further, the AO is not justified in making addition in the hands of the Appellant without suggesting as to what the source of income is. An addition, if made, has to be definite and not obscure. j. It is submitted that the gross income as determined by the horticulture department of Rs.25,95,540/- is less than the gross income of Rs.27,00,000/-declared by the Appellant in the return of income. (Page 3 of paper-book). k. It is further submitted that undue emphasis is being laid on labour expenditure, without appreciating that crops like coconut and arecanut are such that they do not need any day-to-day maintenance other than watering and the Appellant has drip-irrigation system because of which watering happens electrically. Coconut requires a person to climb every 45 days and cut the grown-coconuts and Arecanut too requires minimal day-to-day labour involvement, unlike other crops like paddy, wheat, jowar, etc., which are heavily labor intensive. The learned AO ought to have appreciated the nature of crop before deciding the labor-intensiveness. l. Without prejudice, it is submitted that the action of the learned AO and confirmation thereof by the learned CIT(A) is not in accordance with law. The reliance of both the authorities on the report of horticulture department when the same is not provided to the Appellant vitiates the principles of natural justice. The CIT(A) is not justified in ignoring the plea of the Appellant in the written submission to direct the AO to provide the copy of the report of horticulture department. It is prayed before this Tribunal that the detailed explanation of the Appellant in this submission with regard to agricultural activity stands to explain all the issues raised by the AO in the assessment order.

6. I find that it is noted by the AO in Para 9 of his order that the very reason for obtaining a report on the realistic income was due to the fact that assessee had no proper data on quantity of crops sold, date on which sold, the cost of expenditure incurred, the rate at which sold etc. Hence, this contention in Page 7 of 7 Para 8 of the written submissions reproduced above is not correct that there is no independent examination by the AO. In fact, the assessee has not brought on record any detail or evidence about item produced, quantity produced, sale price and details of expenses incurred such as seeds, fertilizer, labour charges and cost of transportation of produce to the market etc. I also find that the assessee has declared income of Rs. 2.80 Lakhs and exempt income (agriculture) of Rs. 25 Lakhs which has been accepted by the AO to the extent of Rs. 17 Lakhs on the basis of the detailed report of the Horticulture Department regarding realistic income. Before CIT(A) also, the assessee has not produced any details or evidence regarding quantity of crops sold, date on which sold, the cost of expenditure incurred, the rate at which sold etc. Before the Tribunal also, no such details are brought on record along with details of expenses incurred. The assessee has simply stated in Schedule 4 of statement of income that there is gross receipt of agricultural income of Rs. 27.50 Lakhs, expenditure of Rs. 2.50 Lakhs and Net income of Rs. 25 Lakhs. Under this factual position, I find no reason to interfere in the order of CIT(A) on this issue.