SATISH WAMAN WAGH,MUMBAI vs. JT. CIT RANGE - 24(1), MUMBAI

Aforesaid appeal by assessee for Assessment Year [AY] 2011-12 contest the order of the Ld. Commissioner of Income-Tax (Appeals)- 42[CIT(A)], Mumbai, Appeal No.CIT(A)-42/IT-378/14-15 dated 19/05/2016 qua confirmation & enhancement of certain additions on account of agricultural income reflected by the assessee in his return of income. The assessment for impugned AY was framed by Ld. Joint Satish Waman Wagh Assessment Year-2011-12 Commissioner of Income Tax-24(1), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 03/03/2014 wherein the assessee was assessed at Rs.154.30 Lacs after certain additions / disallowances. The assessee had reflected agricultural income of Rs.36.25 Lacs in the return of income which has been accepted for Rs.10 Lacs and the balance amount of Rs.26.25 Lacs has been added as cash credit u/s 68 in the hands of the assessee. The nature / quantum of agricultural income earned by the assessee is the sole subject matter of this appeal.

The assessee being resident individual was engaged in manufacturing of pharmaceutical drugs and chemicals etc. during impugned AY. In support of agricultural income earned during the year, the assessee submitted copy of 7/12 extract and purchase agreement of agricultural land. The income was stated to be earned out of cash sale of flowers, coconuts, chiku, kaju and vegetables. The assessee defended the income by submitting that the area of the land was 11 acres approx. and income @3 Lacs per acre was reasonable expected earnings. However, it was noted that no proper books of accounts were being maintained by the assessee and in support of the income, only few sale bill were produced. The assessee failed to furnish complete and specific details regarding agricultural activity carried out by him. Resultantly, for want of adequate details, Ld. AO accepted the agricultural income to the extent of Rs.10 Lacs and added the balance amount as cash credit u/s 68. 3. Aggrieved, the assessee contested the same without any success before the Ld. CIT(A) vide impugned order dated 19/05/2016, wherein the Ld. CIT(A) not only confirmed the stand of Ld. AO but also opined Satish Waman Wagh Assessment Year-2011-12 that even the balance income of Rs.10 Lacs was to be assessed as cash credit. The matter was concluded in the following manner: Decision: The facts of the case, as summarized above, and the relevant orders and written submissions made are all duly considered. The sole ground of appeal is decided as under. The claim of the assessee concerning his agricultural income is fantastic. The assessee has claimed he has acquired about 11 acres of land for a sum of Rs.23,00,000/- at Village Uplat, Tal. Talasari, Dist. Thane vide an irrevocable general power of attorney dated 31.03.2009. This indicates that F.Y. 2009-10 was the first year in which the assessee owned an agricultural land. The business of the assessee is carried out at Lote Parshuram Indl. Area, MIDC, Tal. Khed, Dist. Ratnagiri. This is quite far from agricultural lands in Dist. Thane. The assessee has claimed that the agricultural land had Orchards of Coconuts, Chikoo, Kaju, Mangoes etc. and the assessee has also cultivated vegetables and flowers on the land. The assessee claimed that during the F.Y. 2010-11 he had spent a sum of Rs. 48,000/- on fertilizer, manure and seeds and the assessee also claimed to have spent Rs.1,08,000/- on wages in respect of the agricultural land. As against these expenses the assessee claimed that he has earned agricultural income of Rs.36,25,000/-. This translates into a 157% return on the total investment in the farmland in one year which is unbelievable. The assessing officer called for the details of the crops cultivated alongwith the details of the produce, the fertilizers purchased, the manure purchased, the labour employed and the details of payments made to the labour in respect of this agricultural income. The assessee claimed that everything was done in cash and the agricultural work is done on ‘batai’ i.e. the crop is shared with the farm workers who manage the farm and incur expenses on the farmland. This indicates that the gross return from the farm was nearly double the income declared by the assessee as the ‘batai’ is usually done in the ratio 50:50. Before the AO the assessee was not able to produce any Books of Account or agreements in respect of ‘batai’. The assessee was also not able to produce any other details except for a few bills. The assessing officer concluded that the assessee is unable to explain and justify the source of the income and accordingly held that a sum of RS.26,25,000/- represents unexplained income and the same was brought to tax under section 68 of the Act.

The Ld. Authorized Representative for assessee Shri. Rahul K.Hakani defended the agriculture income reflected by the assessee by drawing our attention to the documents placed in the paper book. It was submitted that the assessee reflected similar agricultural income of Rs.21.80 Lacs in AY 2012-13 which has been accepted by the revenue in scrutiny assessment u/s 143(3). The same has been controverted by the Ld. Departmental Represented Shri Ram Tiwari by submitting that each year’s assessment was independent unit of assessment and even the primary onus of earning of agricultural income has not been discharged by the assessee.

We have carefully heard the rival contention and perused the relevant material available on record. Upon due consideration, we find that the assessee has preferred the claim of agricultural income merely on the basis of Land purchase documents and few sale bills. The land was purchased for 23 Lacs against which the assessee reflected agricultural income of Rs.36.25 Lacs, being his share of income and the same translates into whopping return of 157%. The land has been stated to be cultivated on batai basis and as per the observations of Ld. CIT(A), the same is done on 50:50 basis which mean the income from the aforesaid land was much more. No evidence could be adduced by the assessee to demonstrate carrying out of any primary & secondary agricultural operations on the said land during impugned AY. No record of income and expenditure was kept by the assessee and further no details about the persons who facilitated carrying out of the agricultural operations could be produced by the assessee. Thus, the primary onus Satish Waman Wagh Assessment Year-2011-12 of substantiating the income remained un-discharged. However, giving the benefit of the fact that the assessee was in possession of agricultural land and few sale bills were produced by him before lower authorities, we confirm the stand of Ld. AO and delete the enhancement of Rs.10 Lacs as done by Ld. CIT(A). In other words, the addition of Rs.26.25 Lacs as made by Ld. AO u/s 68 stands confirmed. The action of Ld. AO in estimating the agricultural income @ Rs.10 Lacs also stand confirmed.

Resultantly, the assessee’s appeal stand partly allowed.