MR.KALLAPPAIAH NAGARAJA ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(2)(1), BANGALORE

O R D E R

Per Shri A.K. Garodia, Accountant Member

by the assessee are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) is prejudicial to the interests of the appellant, is had and erroneous in law and against the facts and circumstances of the case.

2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition of Rs. 20,98,898 on the ground that no expenditure was claimed against the agricultural income which is perverse and contrary to the materials available on record.

3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition of Rs. 20,98,898 even though the addition was made purely on an adhoc basis without any materials to support the addition. Each of the above grounds is without prejudice to one another, the appellant craves the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise all or any of the above grounds either before or at the time of hearing this appeal.”

3. Para no. 5 of the order of CIT(A) contains the facts and the issue in dispute along with the assessee’s arguments and the decision of CIT(A) and hence, Page 2 of 4 this Para from the order of CIT(A) is reproduced hereinbelow for ready reference. “5. I have considered the above grounds of appeal, statement of facts and written submissions filed by the appellant and also perused the assessment order. The Assessing Officer has given a finding that from the return filed by the assessee it was observed that the assessee was in receipt of Income from house property, business and income from other sources, apart from net agriculture income of Rs. 41,97,778/-. During the course of hearing., the assessee was asked to submit the proof of agricultural income of Rs. 41,97,798/- along with documentary proof to substantiate the claim. The assessee submitted that he was in possession of about 41.28 acres of agriculture land at various place in Thenginagoppa Village, Alageri Village and Gejjenahalli village and submitted the details of land and copies of RTC to substantiate the claim. The reply and the documents submitted by the assessee was verified and was accepted to the extent of 50% of the agricultural income claimed. Hence, the balance 50% of the agricultural income of Rs. 41,97,978/- amounting to Rs. 20,98,898/- was disallowed and added back to returned income in absence of sufficient supporting documents. The assessment concluded after addition of Rs. 20,98,898/-. During the appellate proceedings the appellant submitted that he owned agricultural land having standing crop of Arecanut trees of 20-30 years old. The Arecanut collected from trees are stored and the processed at farm level and also processed and stored in society at Shimoga for more than one year which was a practice in his native place. Further submitted that on his instructions the stored Arecanut were sold by the society on his behalf when the rate was high and made the payment. For the year 2014-15 the appellant sold 4862 Kg's for Rs. 16,79,0321/- and 10,702 Kgs for Rs. 40,83,508/-. The copies of the ledger extract for sale of Arecanut furnished before me have been perused. The appellant further submitted that there are Coconut trees also and Coconut were sold in local market and the amount was collected through cash. The appellant had submitted copy of land records, sale bill of agricultural produce before the Assessing Officer. Further no material was brought on record by the Assessing Officer to the effect that agricultural produce on the land were not sold by the assessee or that the produce has not been sold in any societies. Therefore, it cannot be presumed that the appellant has not cultivated any crop. However, the agricultural income stated to be derived from that extent of land by any stretch of imagination is not possible. The appellant has shown the sale proceeds of agricultural produce as received in cash and though the copies of the receipts of the societies produced before Assessing Officer the appellant had not shown any expenditure incurred against such huge receipts of agricultural income and therefore the Assessing Officer had reason to believe that the appellant has shown agricultural income at the higher side. The appellant now contesting that the Assessing Officer had not brought any material on record disbelieving of 50% of the agricultural income

Page 3 of 4 cannot be accepted and therefore the grounds of appeal are not allowed.”

4. In course of hearing before me, it was submitted by ld. AR of assessee that as per page no. 20 of paper book is the statement of income for the present year submitted by the assessee before AO and CIT(A) and as per the same, as against gross income on account of sale of various agricultural items such as arecanuts, coconuts, sapota, mango and jake of Rs. 63,84,113/-, net profit shown by the assessee is only Rs. 41,97,798/- and therefore, it is apparent that the assessee has shown various expenditure to the extent of Rs. 21,86,315/- on account of Fertilizers & Chemicals, Labour Charges, Interest on Agr. Loans, Interest on vehicle loans, Travelling & Conveyance, Vehicle Maintenance, Transportation Charges, Bank Charges and Depreciation. He submitted that in view of these facts, this is not correct on the part of authorities below to say that the assessee has not shown any expenditure incurred against such huge receipts from agricultural income. At this juncture, a query was made by the bench as to how the agricultural produce were transported to the point of sale. In reply, it was submitted that the same was transported by own vehicles as well as by outside vehicles and in support of this, he submitted that as per statement of income available on page no. 20 of paper book, various expenses are incurred on account of vehicle maintenance and transportation charges along with depreciation of vehicles and interest on vehicle loans. The ld. DR of revenue submitted that it has been submitted before the authorities below that the arecanuts collected from the trees are stored and are processed at Shimoga for more than one year which was a practice in native place of the assessee. He submitted that as per the statement of income submitted by assessee on page no. 20 of paper book, there is neither any opening stock nor any closing stock. He submitted that under these facts, the order of CIT (A) should be confirmed.

5. I have considered the rival submissions. I find that in para no. 5 of the order of CIT(A) as reproduced above, this is the finding of CIT(A) that the assessee has not shown any expenditure incurred against such huge receipts of income but this appears to be incorrect in view of the statement of income available on page no. 20 of paper book for the present year. At the same time, complete details regarding mode of transportation and comparison chart of sales in the present year and in earlier years has to be looked into. Regarding the comparison chart, it was submitted by ld. AR of assessee that as per page no. 32 of paper book being para no. 10 of the submissions made before CIT (A), comparison chart was submitted showing sales in Assessment Year 2011-12 at Rs. 9.17 Lakhs, Assessment Year 2012-13 – Rs. 4.90 Lakhs, Assessment Year 2013-14 Rs. 32.36 Lakhs and Assessment Year 2014-15 Rs. 22.70 Lakhs as against the sale in the present year of Rs. 63.84 Lakhs. When the bench pointed out that the claim of the sales in the present year is very much excessive compared to the Page 4 of 4 earlier years, it was submitted by ld. AR of assessee that there is increase in selling rate in the present year. At this juncture, the bench wanted to know regarding the quantity of sales in the present year and these four years for which sales details are available on page no. 32 of the paper book. In reply, he submitted that quantity details are not readily available. He submitted that the matter may be restored back to the file of AO/CIT(A) for fresh decision and if this is done, then all the required details will be submitted by the assessee.

6. I also find that the quantum of sale proceeds shown by the assessee in the present year is not comparable with earlier years. It is seen that the same is very much on higher side in the present year of Rs. 63.84 Lakhs as against maximum of Rs. 32.36 Lakhs in Assessment Year 2013-14. It is further less in the remaining three years i.e. in Assessment Year 2014-15 Rs. 22.70 Lakhs, Assessment Year 2012-13 Rs. 4.90 Lakhs and Assessment Year 2011-12 Rs. 9.17 Lakhs. There may be increase in selling prices but the same has to be established and the quantity of goods produced and sold has also to be compared. Hence, I feel it proper to restore the matter back to the file of CIT(A) for fresh decision in the light of above discussion after providing adequate opportunity of being heard to both sides.