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Income Tax Appellate Tribunal, “B-SMC” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM]
This assessee’s appeal is directed against the CIT(A), Kolkata-19’s order, dated 08-12-2017 passed in case no.293/CIT(A)-1918(3)/Kol/14-15 involving proceedings u/s 143(3) of the I.T Act, 1961 ( in short ‘Act’).
Heard both the sides. Case file perused.
The assessee’s first substantive ground challenges correctness of the CIT(A)’s finding upholding the Assessing Officer’s action in not treating the amount of Rs.3,54,766/- as agricultural income vide his detailed discussion para 3 to 3.2 of the CIT(A) :-
“3. Ground No. I(a) pertains to denial of exemption on sale of agricultural produce of Rs.3,54,766/- u/s 10(1) of the I.T. Act. The A.O while making disallowance as treated as below:
"During the year the assessee has claimed exemption. u/ s 10( 1) of the Income Tax Act, 1961 on agricultural income of Rs.3,54, 766/-. On query, the AR submitted vide letter dt.4.12.06 that "we have more than 25 acres of land which is surrounded by agricultural land/paddy field on 3 sides. Some trees were planted over 15 years ago. And they along with sundry vegetable items have yielded to a small agricultural income". The assessee submitted the ledger copy of the agricultural income which shows that Rs.3,54,667/- is the gross sale, no expenses was there. Selling of trees grown for last 15 years is not within the meaning of agricultural income. As no expenses were Incurred it cannot be said that the assessee-incurred some expenditure in showing the seeds, preparation of land, irrigation, nurturing, etc. Moreover, the land is not an agricultural land, it is a part of project of LPG infrastructure facilities, which is in capital work in progress. No breakup or details of what are the products and how the value so arrived has entered in the ledger in cash on different dates has been produce. In view of the above, the assessee's claim of exemption u/s 1 G(1} of the Income Tax Act, .2961 is denied and tile income is treated as income from undisclosed sources."
3.1 During the appellate proceedings, the AIR of the appellant stated that the appellant had correctly recorded the sale proceeds of trees and vegetables which were sold by the appellant to villagers. Such trees and vegetables were produced out of 25 acres of agricultural land owned by the appellant. The A/R also stated that certain trees have been growing for the last 15 years and these have been uprooted and sold to local persons. The AIR also argued that when the existence of agricultural land is not doubled why should the products from the same agricultural land be doubled. The local authority have also categorise this land as "Sali Land" i.e. agricultural land. In support of his contention, the A/R also refers to jurisdictional High Court in the case of CIT v. Suman Tea & Plywood Industries Pvt. Ltd.( 1997) 94 Taxman 305(Calcutta).
3.2 I have considered the assessment order as well as the submissions of the A/ R of the appellant. The jurisdictional High Court case laws cited by the appellant has no application in the instant case. In the case of Suman Tea & Plywood Industries Pvt. Ltd. the forested land which was part and parcel of a Tea Estate was to be considered. In the case of the appellant, the land is essentially used for storage of LPG and it cannot be categorized as Forest Land. What is to be considered for our purpose is whether the land in question was used to produce agricultural products. It has been held in the case of Rama Krishna Deo vs. CIT{SC) 35 ITR 312 2 that income from sale of forest trees of spontaneous growth is not agricultural income, even if, assessee has incurred expenditure on its maintenance. In the case of appellant's case, there is no evidence of any expenditure on maintenance of agricultural products. The Apex Court, in the case of CIT vs. Raja Binoy Kumar Sahar Roy(SC) 32 ITR 466 has held that only income from basic operation of cultivating land and requiring the expenditure of human skill and labour on land is agricultural income. In the case of the appellant, there seems to be no expenditure incurred on human skill or on the basic operation of land cultivation. My conclusion further gets strengthen by adjudication of Hon'ble Madras High Court at 325 ITR 60 in the case of Papaya Farms Pvt. Ltd. Even the sale of the agricultural products have been made to unknown parties and genuineness of the same cannot be established. In a nutshell, the activity of the appellant neither amounted to an agricultural activity to claim exemption u/ 10( 1) of the Act nor to ascertainable persons as no documentary evidence was submitted before me. Ground No. I(a) of the appeal is therefore dismissed “.
I have given my thoughtful consideration to the rival contentions. Learned Counsel vehemently contends during the course of hearing that the assessee’s income in issue from sale of trees deserves to be assessed as agricultural income. I find no merit in assessee’s stand as it has comes on record this assessee has not carried out any agricultural activity as it is engaged in other business operations. I uphold the CIT(A)’s detailed findings both legal as well as factual aspects.
Learned Counsel does not press for assessee’s second substantive ground challenges addition of Rs.13,014 being outstanding balance of tax deducted at source keeping in mind smallness of the sum involved. This second substantive ground is declined accordingly.
Next assessee’s substantive ground seeks to delete disallowance of salary of Rs.1,58,000/- out of Rs. 3,58,0000/- on estimation basis to be not incurred wholly & exclusively for the purpose of business u/s 37 of the Act. I find that neither the lower authorities have drawn any comparative chart of assessee’s similar salary claims in 3 preceding and succeeding assessment years nor the tax payer has been able to prove the same by way of sufficient cogent evidence. I take into account all these facts and circumstances to restrict the impugned disallowance of Rs. 158,000/- to lump sum of Rs.25,000/- with a rider that the same shall not be treated as precedent in any other assessment year.
Coming to assessee’s last grievance challenges disallowance of set off of unabsorbed depreciation of earlier years, both parties in agreement that the same requires factual verification at the Assessing Officer’s level as per law. This last substantive ground is restored back to the Assessing Officer for afresh factual verification and adjudication.
This assessee’s appeal is partly allowed in above terms. Order pronounced in the Court on 20-03-2019