CHHAGAN CHANDRAKANT BHUJBAL,MUMBAI vs. INCOME TAX OFFICE 20(1)(3), MUMBAI

2. During the year our company not did any transaction with Shri Chagan C. Bhujbal. Our company purchases grapes 34135 kg. from Hirabai Magan Bhujbal proprietor of Bujbal Farm. The payment of Rs.1723260/- paid to Hirabai M. Bhujbal by cheque in next financial year from Nahis Vinteners Pvt. Ltd. On behalf of Venus Cellars Pvt. Ltd. against purchase of grapes. During the FY 2012-13 Rs.507050/- paid to Hirabai M Bhujbal of last financial year grape purchase payment by cheque from Nashik Vintners Pvt. Ltd. on behalf of Venus Cellars Pvt. Ltd."

From this letter, ld. AO deduced that assessee had no transaction with M/s. Venus Cellars Pvt. Ltd., and they had only transaction with Hirabai M Bhujbal, proprietor of Bhujbal farms. Secondly, even the bills raised by Yunus Khan Pathan, there is a stamp of ‘Bhujbal farm’ and not of the assessee. Ld. AO further noted that Venus Cellars Pvt. Ltd., has given payment for purchase of grapes to ‘Bhujbal farm’, i.e., to Hirabai M Bhujbal, Proprietor and the copy of ledger account of Bhujbal farm in the books of Venus Cellars Pvt. Ltd., have been incorporated. Thus, the ld. AO held that assessee has not dealt with Venus Cellars Pvt. Ltd., hence, the sales shown by assessee of Rs.5,54,000/- to Venus Cellars Pvt. Ltd., is not genuine. In response to the show- cause notice by the AO, assessee had submitted following reply:

Chhagan Chandrakant Bhujbal "1.With regards to your honour's query regarding non compliance to your honour's notice issued u/s 133(6) of the Income Tax Act, 1961 to M/s Rajdheer Wines Pvt. Ltd and why in absence of any reply the income of aRs.6880,100/- should not be treated as income from other sources, in this regard we understand that M/s Rajdheer Wines Pvt Ltd. has complied to your honours' notice by filing reply to your honour's office. It is further submitted that M/s. Rajdheer Wines Pvt Ltd. had filed its reply vide its letter dated 16.03.2016 along with copy of its Acknowledgment of ITR for A.Y. 2013-14, copy of purchase bill of Rs 6,80,100/-, copy of weighting slip and copy of ledger account for period under consideration are enclosed. Further it is submitted that the above mentioned party has submitted the details and complied with your honours' notice and confirmed that payment of Rs.6,80,100/- made by them is in relation with sales of goods by your assessee. It is submitted to your honour that such income is agricultural income and the same is clearly explained and evident from the reply filed by the said party. It is therefore prayed to your honour that income should not be treated as income out of unexplained source and should not be added to the total income under the head Income from other sources,"

With regards to the reply filed by M/s. Venus Cellars Pvt. Ltd. in response to your honours notice u/s. 133(6) issued to the above mentioned party, it is submitted that as per representation made by M/s. Venus Cellars Pvt. Ltd. to your honours regarding the purchase transaction is done between assessee and M/s. Venus Cellars Pvt. Ltd. It is submitted that above mentioned party has already submitted the statement to your honours describing the nature of transaction along with the relevant details and supporting documents further copy of Acknowledgment of ITR, copy of Ledger account from Venus Cellars Pvt Ltd is enclosed. Further with regard to the reply filed by the said party stating that it had not paid to the assessee, rather the party has mentioned that it had paid the amount for purchase of grapes to M/s. Nashik Vinterners Pvt ltd. In this regard, it is submitted that M/s. Venus Cellars Pvt Ltd clearly mentioned the process of grapes which is reproduced herebelow:

However, the ld. AO rejected the said contention and added the entire agricultural receipts of Rs.50,19,100/- and unexplained cash credit to be added u/s.68.

Before the ld. CIT (A), assessee had stated as under:- “It is submitted that the appellant has shown the Agricultural income (gross) amounting to Rs. 50.19 lacs from agricultural Chhagan Chandrakant Bhujbal activities carried out during the year under consideration. It is submitted that your assessee among other activities was engaged in producing grapes from its farm in the name of proprietary concern namely "Amrut Farm It is submitted that appellant has a separate bank account in the name of "Amrul Farm" which was duly submitted vide our submission dated 17.08.2017. It is submitted that your appellant has sold ils agricultural produce majorly to three parties. It is submitted that receipt of amount of agricultural income is majorly to three parties. It is submitted that receipt of amount of agricultural income is majorly through banking channels. The details of agricultural income is as under:- Sr. No. Name of the Quantity Rate Amount in Amt Party per Kg received Rs. in Bank during the year Rs. 1 M/s Vintners 13435 25.5 3,42,592 20,61,005 Ltd. Nashik Pvt. Ltd. 4440 62 2,75,280 18560 26.8 4,97,408 10110 50 5,05,500 20305 60 12,18,300 2 M/s 11335 60 6,80,100 Rajdheer Wines Pvt. Ltd 3 M/s Venus 10870 51 5,54,320 Cellar Pvt. Ltd. 4 Cash Sales 9,45,600 Total 50,19,101 Less 7,39,158 Expenses (as per Capital account) Net 42,79,943 agricultural income

However, the ld. CIT (A) has reduced the addition to Rs.21,23,463/- after observing as under:- “5.5 Considering the above facts. I am of the view that the agriculture income has been inflated to a large extent. The appellant has claimed expenses of Rs. 7,39,158/- against the gross receipts of Rs. 50.19 101/ from agriculture which comes to 14.72%. It is mentioned here that the expenses incurred in agriculture activity is comparatively high and sometime oven the farmers incur losses. Il is a case whore the agriculture Income declared is on higher side. Further, the appellant didn't maintain proper records of the income and didn't furnish any details of expenses with evidence. No evidence of cash sales of Rs. 9,45.600/- has been furnished. It is therefore, reasonable if the agriculture income of Rs. 42,46,926/ is estimated at 50% of the income shown, the appellant get relief of Rs 28,95,637/- (i.e. 50,19,100 - 21,23,463) 9. We have heard both the parties and also perused the relevant finding given in the impugned orders as well as material referred to before us. The only issue involved is whether the agricultural income shown by the assessee is genuine or not. Here in this Chhagan Chandrakant Bhujbal case the ld. AO treated the entire agricultural receipts as unexplained cash credit, whereas the ld. CIT(A) has partly accepted the agricultural income and he has estimated the agricultural income at Rs.28,95,637/- and also accepted expenses shown by the assessee. Since department is not in appeal, therefore, the assessee’s income from agricultural income is liable to be accepted except the quantum of addition confirmed by the ld. CIT (A) is justified or not? From the submissions made before ld. CIT (A), it is seen that assessee has made sales of grapes to various wine companies and some of the amount has also been received through cheque especially from M/s. Nashik Vintners Pvt. Ltd. However, sales from other entities it is very difficult to accept, because in case of Venus Cellars Pvt. Ltd., they have stated that they have bought the grapes from Bhujbal Farms, proprietor Hirabai M Bhujbal. Since all the facts and records especially for sales have not been brought on record before us, therefore, we deem fit that this matter should be restored back to the file of the ld. AO. Assessee should substantiate the sales by furnishing sale bills, bank statement etc., to show that the amount has been received through cheques. Assessee is also directed to file confirmation copy of ledger account from these parties. If the sales from these parties are found to be genuine, then no addition should be made. The assessee should also furnish the complete details of sales and expenses before the ld. AO. Accordingly, the matter is restored back to the file of the ld. AO and since part of the agricultural income to the extent of Rs.28,95,637/- has been accepted, the Chhagan Chandrakant Bhujbal only issue of dispute would be with regard to Rs.21,23,463/-, for which assessee has to demonstrate that the sales made to these parties are genuine through proper bills and copy of ledger accounts. 10. In the result, appeal of the assessee is allowed for statistical purposes.