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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by assessee is against the order of CIT(A)-1, Kolhapur, dated 12.01.2017 relating to assessment year 2013-14 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The assessee has raised the following grounds of appeal:-
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On the facts and in the circumstances of the case and in law, the learned C.I.T. [A]-1, Kolhapur erred in confirming the addition of Rs.35,54,780/-, made by the Assessing Officer on account of Income from Other Sources as against the same disclosed by the appellant as Agricultural Income by converting the 'limited scrutiny' of the Capital of the appellant into a detailed scrutiny regarding appellant's business and agricultural income, overruling the guidelines set for scrutiny by the CBDT for this year. The assessment order therefore, may please be treated as invalid and quashed. 2. On the facts and in the circumstances of the case and in law, the learned C.I.T. [A]-1, Kolhapur erred in confirming the addition of Rs.35,54,780/-, made by the Assessing Officer on account of Income from Other Sources denying the appellant's claim of the same as Agricultural Income without appreciating the facts in proper perspectives. The appellate order passed arbitrarily confirming the addition being void and illegal may please be deleted. 3. On the facts and in the circumstances of the case and in law the learned C.I.T.[A]-1, Kolhapur erred in confirming the addition of Rs.35,54,780/-, without appreciating the facts of holding of the land by the appellant as per 7/12 extract and also the land taken on lease for cultivation in evidence of proof that agricultural crops were produced in the said land and sold thereof to earn such Agricultural income. The appellate order passed arbitrarily confirming the addition being void and illegal may please be deleted. 4. On the facts and in the circumstances of the case and in law the learned CIT(A)-I, Kolhapur erred in confirming the addition of Rs.35,54,780/-, denying the contention of the appellant that the 5 persons to whom such Agricultural produces were sold had admitted in their statement before the Assessing Officer as regards purchase of such Agricultural crops of Mangos, Marigold flowers, Brinjals, Sweet potatoes etc. produced by the appellant in the said land. The appellate order passed arbitrarily confirming the addition being void and illegal may please be deleted. 5. On the facts and in the circumstances of the case and in law the learned CIT(A)-I, Kolhapur erred m confirming the addition of Rs.35,54,780/-, according the view of the Assessing Officer as regards the statement given only by 4 persons as against total 57 persons regarding the Loans Advanced in Cash, which had no relevance as to the determination of Agricultural income in the case of the appellant. The appellate order passed arbitrarily confirming the addition being void and illegal may please be deleted. 6. The appellant denies his liability to pay any interest u/s 234B and 234C of the I.T. Act, 1961 and hence the same may please be deleted.
The issue arising in the present appeal is against assessability of income shown from agricultural activity, which was assessed as ‘Income from other sources’ in the hands of assessee, resulting in addition of ₹ 35,54,780/-. All the grounds of appeal raised are in this regard except ground of appeal No.6,
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which is against chargeability of interest under section 234B and 234C of the Act, which is consequential in nature.
Briefly, in the facts of the case, the assessee for the year under consideration had filed his original return of income on 25.02.2015 declaring total income of ₹ 3,09,380/- and agricultural income of ₹ 38,39,780/-. The assessee is an engineer and was engaged in structural design and providing consultancy services. The professional income has been accepted as such by the Assessing Officer. Further, the assessee had declared agricultural income of ₹ 38,39,780/-. The assessee was asked to furnish the details of landholding, area under cultivation, crop grown, gross receipts, expenditure, details of sales, mode of payment received and 7/12 extracts of the landholding. The assessee explained his landholding totaling 52.92 acres, out of which part of the land was inherited by the assessee and about 44 acres was taken on lease. The assessee also filed 7/12 extract of the said land. He was maintaining regular books of account, bills and vouchers for the agricultural activity carried on and he explained that in addition to sugarcane crop, the other crops i.e. vegetable crops were also grown by the assessee. The Assessing Officer vide para 7.2 observed that the assessee had explained to have in its possession about 52.92 acres of land, out of which under cultivation was 27.17 acres. The assessee also filed 7/12 extract issued by Talathi. However, it was noted by the Assessing Officer that cultivation of the crop shown by the assessee was totally different from that recorded in 7/12 records. Considering the agricultural produce declared by the assessee vis-à-vis crop shown in Form 7/12, the Assessing Officer was of the view that agricultural income shown by the assessee was far excessive and exaggerated. He further noted that exaggeration was found because the assessee had shown to advanced
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₹ 33,97,916/- in cash / cheque to various persons and in order to cover up the sources of those advances, the assessee had shown such excessive income by changing the crops itself than noted on Form No.7/12. The assessee was thus, show caused and asked to explain as to why the agricultural income should not be restricted to 25% of total income shown. The assessee was also asked to produce all the persons to whom the agricultural produce was sold. The assessee again explained the nature of crops cultivated by him on different areas of agricultural land in his possession. The plea of assessee was that the Talathi visited the field area once in a year and many of the seasonal crops were not recorded in 7/12 extract. The Assessing Officer also took note of the sale bills produced by the assessee as proof of sale of crops. The assessee during the course of assessment proceedings produced five persons out of total seven persons to whom the crop proceeds were sold during the year. The Assessing Officer recorded their statements and has noted the total amount of sale shown by the assessee and amount of sale admitted by the said persons in tabulated form under para 7.5 at page 18 of the assessment order. Two parties could not be produced by the assessee. The Assessing Officer was of the view that answers given by the said persons were very stereotype. The said persons did not have any shop or fixed place to sell agricultural produce stated to be purchased from the assessee. The Assessing Officer also noted that they did not have creditworthiness to carry out cultivation activity of the said portion. The Assessing Officer held the plea of assessee that seasonal crops and vegetables were not noted in 7/12 extract, was not acceptable.
Another point which was considered by the Assessing Officer was that in assessment year 2012-13, the assessee had not shown any agricultural income in the return of income. In all the earlier years, the Assessing Officer
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also noted that agricultural income shown was meager. The learned Authorized Representative for the assessee here stressed that agricultural income shown in assessment year 2014-15 was ₹ 40,26,615/- but the Assessing Officer held that the said figures were exaggerated. The Assessing Officer also deputed an Inspector on 29.03.2016 to visit the said place, who reported that though there were agricultural lands in the above said area, but the real owner and who was taking cultivation could not be ascertained. He reported that though there were Mango trees of more than 300 but little or no crop of Mangoes was noticed. Another aspect pointed out by the Inspector was that it was not clear whether the agricultural land on the said place was being cultivated by him, was not clear. He reported that there was crops of brinjal in about 1.5 acres of land. The Assessing Officer thus, was of the view that agricultural income shown by the assessee at ₹ 38,39,780/- was exaggerated. He accepted the agricultural income to the extent of ₹ 2,85,000/- and the balance sum of ₹ 35,54,780/- was treated as ‘Income from other sources’.
The CIT(A) upheld the order of Assessing Officer.
The assessee is in appeal against the order of CIT(A).
The learned Authorized Representative for the assessee pointed out that part of agricultural land was inherited by the assessee and the balance land was taken on lease in order to carry out agricultural activities. He further stated that the assessee was maintaining proper books of account for carrying out the agricultural activities. He however, submitted that vegetables or seasonal crops which were grown on the said agricultural land were not shown in 7/12 extract. However, it could not be denied that the said seasonal crops were not grown by the assessee. He pointed out that the same were sold to various
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persons, who had admitted to have purchased the agricultural produce from the assessee, hence there was no merit in holding that the assessee did not have sufficient proof of agricultural activities. He also drew my attention to the agricultural income shown by the assessee in succeeding year at ₹ 40,26,651/- which has been accepted as such and no addition has been made in the hands of assessee. He further pointed out that the assessee was maintaining proper books of account for carrying out the aforesaid activities and there was no merit in rejecting the same. He further filed tabulated details of area under cultivation and the nature of crop so cultivated. The learned Authorized Representative for the assessee placed reliance on the ratio laid down by the Pune Bench of Tribunal in bunch of appeals with lead order in Anjum Shoukat Bagwan Vs. DCIT in ITA Nos.215 to 225/PUN/2013 relating to assessment years 1999-2000 to 2009-10, order dated 15.02.2017, wherein the landholding was 74.32 acres and the Tribunal had accepted agricultural income in the hands of assessee as against the orders of authorities below in assessing the same as ‘Income from other sources’.
The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below with special reference to para 7.7 of the assessment order.
On perusal of record and after hearing both the learned Counsels, the issue which needs adjudication in the present appeal is in relation to the agricultural activity carried on by the assessee and the quantum of income to be accepted in the hands of assessee on account of agricultural income. The assessee was in occupation of total landholding of 52.92 acres, out of which 44 acres were taken on lease. The assessee had filed 7/12 extract of
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the total landholding in his occupation and there is no dispute in this regard. The assessee had shown agricultural income from the said landholding at ₹ 38,39,780/- which was not accepted by the authorities below. The assessee is in appeal against the same. He was maintaining regular books of account of agricultural activity carried on by the assessee. The case of assessee was that he was growing sugarcane and other seasonal crops on the part of said lands, out of which he had received the said agricultural receipts. However, being seasonal crops, Talathi had not mentioned the said agricultural activity on 7/12 extract of the assessee. The total land which was under cultivation was about 27.17 acres. The Assessing Officer was of the view that agricultural income shown was excessive and also exaggerated. The Assessing Officer only accepted agricultural income to the extent of ₹ 2,85,000/- and the balance sum of ₹ 35,54,780/- was treated as ‘Income from other sources’. The assessee before the Tribunal has filed the quantity-wise details of the yield of different crops and sugarcane and also the yield of mango trees, which is as under:-
Sr. No. Particulars Qty Amt Area under (Kgs) cultivation (in Acre) 1 Mangoes 96,494 12,64,100 3.00 2 Sweet Potatoes 18,533 3,59,767 8.50 3 Brinjals 93,957 15,89,165 6.17 4 Marigold 100,272 20,05,540 14.67 5 Sugar Cane 62,825 1,46,812 1.60 Total 3,72,081 53,65,384
Another aspect which needs to be kept in mind is the agricultural income shown by the assessee in the preceding and succeeding years. In the earlier years, undoubtedly, the agricultural income was shown at a lowest scale. However, in immediately succeeding year, the assessee has declared agricultural income of ₹ 40,26,615/- i.e. in assessment year 2014-15. The said agricultural income shown by the assessee has been accepted in toto. The Assessing Officer had carried on certain verifications by deputing an Inspector,
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who reported that there were agricultural lands in the area but he could not ascertain the real owners or who were undertaking cultivation on the same. He also reported that there were mango trees but little or no crops of mangoes were noticed. As per part of his report, Inspector also reported that crops of Brinjal were on about 1.5 acres of agricultural land. In such scenario, where the Inspector has admitted that agricultural lands do exist but it is not clear as to who were the owners, the plea of assessee which is backed by 7/12 extract cannot be rejected. Another aspect of the report of Inspector is that he also reported the existence of mango trees and even of seasonal crop of Brinjal on about 1.5 acres of land. Both these aspects were not mentioned in 7/12 extract and in the totality of the facts and circumstances of the case, I find that there is merit in the claim of assessee and the same cannot be rejected.
Now, coming to the quantum of agricultural income earned by the assessee. I find that similar issue has been decided by the Pune Bench of Tribunal in the case of Anjum Shoukat Bagwan Vs. DCIT (supra), wherein the Assessing Officer was directed to estimate the agricultural income in the hands of assessee. In turn, relying on earlier decision of the Tribunal and vide para 24 at pages 13 to 16 of the order, I hold that mere non-mention of seasonal crops in 7/12 extract would not lead to the conclusion that such produce was never cultivated by the assessee. The landholding under occupation of assessee was large and the assessee was engaged in agricultural activity on the said land in the year under appeal, preceding years and even in succeeding years. Following the proposition laid down by the Tribunal in Anjum Shoukat Bagwan Vs. DCIT (supra), I hold that 80% of the standard yield reported by ICAR in the case of vegetable yield is to be adopted to work out the income from vegetables and flowers in the hands of assessee on the basis of
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landholding. In case of yield from fruits, then 80% of standard yield reported by NHB should be adopted to work out the income in the hands of assessee based on the land on which fruits, plants, etc. were grown. Accordingly, the Assessing Officer is directed not to disturb the same and accept it. The grounds of appeal raised by the assessee are thus, allowed.
In the result, appeal of assessee is allowed.
Order pronounced on this 31st day of August, 2018.
Sd/- (SUSHMA CHOWLA) न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 31st August, 2018. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : 1. अऩीऱाथी / The Appellant; 2. प्रत्यथी / The Respondent; 3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-1, Kolhapur; 4. The Pr.CIT-1, Kolhapur; ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-सदस्य 5. मामऱा / DR ‘SMC’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune