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Facts
The assessee, a partnership firm, owns agricultural land and declared income from agricultural sales. The Assessing Officer (AO) made an addition of Rs. 40,34,970/- under section 68, treating the sale proceeds as unexplained cash credit. The AO disallowed expenses due to lack of vouchers and rejected sales due to unverifiable cash sales. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the land revenue records certified that crops were sown, indicating agricultural operations were carried out. The failure to produce expense bills, particularly when the manager had left, did not invalidate the agricultural income. The issue was the quantum of income, not whether it was agricultural income.
Key Issues
Whether the addition made under section 68 on account of sale of agricultural produce is justified, and whether the assessee has substantiated its agricultural activity and related expenses.
Sections Cited
68, 10(1)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
These appeals by the assessee are directed against order dated 31.03.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2015-16 and 2016-17, raising following grounds:
Florence Agro Farms 2 & 2092/MUM/2024 & 2092/MUM/2024
The Learned CIT(A) erred in confirming the addition of 1. The Learned CIT(A) erred in confirming the addition of 1. The Learned CIT(A) erred in confirming the addition of Rs.40,34,970/- - u/s 68 of the Income Tax Act.
The Learned CIT(A) The Learned CIT(A) further erred in holding that sale further erred in holding that sale of the agriculture agriculture agriculture produce produce produce credited credited credited in in in the the the books books books of of of accounts accounts accounts of of of Rs.40,34,970/- - is not genuine.
3. The Learned CIT(A) further erred in holding that the assessee 3. The Learned CIT(A) further erred in holding that the assessee 3. The Learned CIT(A) further erred in holding that the assessee could not establish carrying out of agricu could not establish carrying out of agricultural activity for earning the ltural activity for earning the income of Rs 34,00,001 on the agricultural land of 17.5 acres income of Rs 34,00,001 on the agricultural land of 17.5 acres income of Rs 34,00,001 on the agricultural land of 17.5 acres Situated at agriculture belt Mahadevpur agriculture belt Mahadevpur Ganganagar, Nashik near Ganganagar, Nashik near the Gangapur dam. the Gangapur dam. 4. The Learned CIT(A) further erred in confirming the finding of the 4. The Learned CIT(A) further erred in confirming the finding of the 4. The Learned CIT(A) further erred in confirming the finding of the AO in makin AO in making the addition u/s 68 purely on the basis of g the addition u/s 68 purely on the basis of assumptions and suspicion and as per some vague data of Census assumptions and suspicion and as per some vague data of Census assumptions and suspicion and as per some vague data of Census 2011 without considering the facts of the case even with these data 2011 without considering the facts of the case even with these data 2011 without considering the facts of the case even with these data which proved that area where land is situated is an agriculture belt which proved that area where land is situated is an agriculture belt which proved that area where land is situated is an agriculture belt and in all the adjacent plots of land agricultural operations are the adjacent plots of land agricultural operations are the adjacent plots of land agricultural operations are carried out. 5. The Learned CIT(A) further erred in confirming the sale of The Learned CIT(A) further erred in confirming the sale of The Learned CIT(A) further erred in confirming the sale of agricultural produce of Rs. 40,34,970/ agricultural produce of Rs. 40,34,970/- u/s 68 of IT Act and not u/s 68 of IT Act and not allowing the exemption u/s 10(1) by ignoring the factual fact allowing the exemption u/s 10(1) by ignoring the factual fact allowing the exemption u/s 10(1) by ignoring the factual facts that the assessee firm owns agricultural land of 17.5 acres at the assessee firm owns agricultural land of 17.5 acres at the assessee firm owns agricultural land of 17.5 acres at Mahadevpur Ganganagar, Nashik near the Gangapur dam and it is Mahadevpur Ganganagar, Nashik near the Gangapur dam and it is Mahadevpur Ganganagar, Nashik near the Gangapur dam and it is an irrigated land where the assessee firm has been carrying on an irrigated land where the assessee firm has been carrying on an irrigated land where the assessee firm has been carrying on agricultural activities since last number of years. agricultural activities since last number of years. 6. The Learned The Learned CIT(A) further erred in confirming the finding of the CIT(A) further erred in confirming the finding of the AO in holding that even if the sales is valid on the basis of cash AO in holding that even if the sales is valid on the basis of cash AO in holding that even if the sales is valid on the basis of cash memos submitted by the assesssee, the assessee has still not memos submitted by the assesssee, the assessee has still not memos submitted by the assesssee, the assessee has still not discharged its onus to substantiate the expenses claimed and discharged its onus to substantiate the expenses claimed and discharged its onus to substantiate the expenses claimed and therefore the assessee's claim of carrying out agricultural activity is e assessee's claim of carrying out agricultural activity is e assessee's claim of carrying out agricultural activity is rejected and sales are taxed at normal rates. rejected and sales are taxed at normal rates. 7. The Learned CIT(A) further erred in not appreciating the fact that The Learned CIT(A) further erred in not appreciating the fact that The Learned CIT(A) further erred in not appreciating the fact that the caretaker and supervisor of the assessee firm had left the job the caretaker and supervisor of the assessee firm had left the job the caretaker and supervisor of the assessee firm had left the job and the hence the bills and vouchers necessary to substantiate the the bills and vouchers necessary to substantiate the expenses claimed were not available. expenses claimed were not available. 8. The Learned CIT(A) further erred in confirming the action of the AO The Learned CIT(A) further erred in confirming the action of the AO The Learned CIT(A) further erred in confirming the action of the AO in treating the sale proceeds of agriculture product as income under in treating the sale proceeds of agriculture product as income under in treating the sale proceeds of agriculture product as income under section 68 without issue section 68 without issue of any show cause notice and calling for of any show cause notice and calling for submission on the treatment given by Ld AO. submission on the treatment given by Ld AO. 9. The Learned CIT(A) further erred in not considering the bare facts The Learned CIT(A) further erred in not considering the bare facts The Learned CIT(A) further erred in not considering the bare facts that assessee owned the irrigated land of 17.5 acres situated in the that assessee owned the irrigated land of 17.5 acres situated in the that assessee owned the irrigated land of 17.5 acres situated in the agriculture belt where surroundi agriculture belt where surrounding land are used for agricultural ng land are used for agricultural activity and grapes and vegetable can give the agriculture income of activity and grapes and vegetable can give the agriculture income of activity and grapes and vegetable can give the agriculture income of Rs 34,00,001/- -per year.
Florence Agro Farms 3 & 2092/MUM/2024 & 2092/MUM/2024
The Learned CIT(A) further erred in rejecting the claim of the The Learned CIT(A) further erred in rejecting the claim of the The Learned CIT(A) further erred in rejecting the claim of the assessee for carrying of the agricultural activity, relying on assessee for carrying of the agricultural activity, relying on assessee for carrying of the agricultural activity, relying on the decision of Apex court in the case of CIT v. Durga Prasad More [1971] decision of Apex court in the case of CIT v. Durga Prasad More [1971] decision of Apex court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal v. 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR CIT [1995] 80 Taxman 89/214 ITR 801 (SC) while both the decisions support the case of the assessee 801 (SC) while both the decisions support the case of the assessee 801 (SC) while both the decisions support the case of the assessee as in these decisions finding was given that revenu as in these decisions finding was given that revenue authorities are e authorities are supposed to consider the surrounding circumstances and apply supposed to consider the surrounding circumstances and apply supposed to consider the surrounding circumstances and apply human probability'. human probability'.
The Learned CIT(A) further erred in holding that sale of The Learned CIT(A) further erred in holding that sale of The Learned CIT(A) further erred in holding that sale of agricultural products are not genuine as assessee has not submitted agricultural products are not genuine as assessee has not submitted agricultural products are not genuine as assessee has not submitted the address of the purchaser the address of the purchaser to whom the agriculture product has to whom the agriculture product has been sold and not considering the decision of Hon'ble Bombay High been sold and not considering the decision of Hon'ble Bombay High been sold and not considering the decision of Hon'ble Bombay High Court in the case of R. B. Court in the case of R. B. Jessaram Fatehchand (Sugar Dept) vs. CIT Jessaram Fatehchand (Sugar Dept) vs. CIT (75 ITR 33) wherein it has been held that there was no necessity ITR 33) wherein it has been held that there was no necessity ITR 33) wherein it has been held that there was no necessity whatsoever for asses whatsoever for assessee to maintain addresses of cash customers see to maintain addresses of cash customers 12. The Learned CIT(A) further erred in not considering the decision 12. The Learned CIT(A) further erred in not considering the decision 12. The Learned CIT(A) further erred in not considering the decision of Hon'ble Supreme Court in the case of Omar Salay Mohamed Salt of Hon'ble Supreme Court in the case of Omar Salay Mohamed Salt of Hon'ble Supreme Court in the case of Omar Salay Mohamed Salt v. CIT/1959] 37 ITR 151 (SC), Uma Charan Shaw & Bros. v. CIT (1959) CIT/1959] 37 ITR 151 (SC), Uma Charan Shaw & Bros. v. CIT (1959) CIT/1959] 37 ITR 151 (SC), Uma Charan Shaw & Bros. v. CIT (1959) [1959] 37 ITR 271 (SC), Lalchand Bhagat Ambica TR 271 (SC), Lalchand Bhagat Ambica Ram v. CIT Ram v. CIT (1959) 37 ITR 288 (SC) and decision of Hon. 37 ITR 288 (SC) and decision of Hon. Kolkata High Court in the case Kolkata High Court in the case of CIT v. Lakshmangarh Estate & Trading Co Ltd. (220 Lakshmangarh Estate & Trading Co Ltd. (220 Taxman 122) Taxman 122) that no addition can be made on the basis of surmises, suspicion that no addition can be made on the basis of surmises, suspicion that no addition can be made on the basis of surmises, suspicion and conjectures. conjectures. 13. The Learned CIT(A) further erred in relying on the decision of 13. The Learned CIT(A) further erred in relying on the decision of 13. The Learned CIT(A) further erred in relying on the decision of Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd, 49 Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd, 49 Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd, 49 ITR 723 for making addition in section 68, as in this case, the credit ITR 723 for making addition in section 68, as in this case, the credit ITR 723 for making addition in section 68, as in this case, the credit entry stands in the name of the third entry stands in the name of the third party on account of loan taken party on account of loan taken and the assessee fails to satisfy the identity of the third party and and the assessee fails to satisfy the identity of the third party and and the assessee fails to satisfy the identity of the third party and also supply such other evidences which prima facie show that entry also supply such other evidences which prima facie show that entry also supply such other evidences which prima facie show that entry is not fictitious. is not fictitious. 14. The Learned CIT(A) further erred in holding that assessee had 14. The Learned CIT(A) further erred in holding that assessee had 14. The Learned CIT(A) further erred in holding that assessee had not submitted the proof of expense incurred i.e. labour charges, t submitted the proof of expense incurred i.e. labour charges, t submitted the proof of expense incurred i.e. labour charges, repairs and maintenance, salary and services rendered, seeds, maintenance, salary and services rendered, seeds, maintenance, salary and services rendered, seeds, fertilizers and pesticide, evidence for stores and spare parts and fertilizers and pesticide, evidence for stores and spare parts and fertilizers and pesticide, evidence for stores and spare parts and tractor hire charges by not considering the fact that assessee i tractor hire charges by not considering the fact that assessee i tractor hire charges by not considering the fact that assessee is not running business activity and do not have trained staff to maintain running business activity and do not have trained staff to maintain running business activity and do not have trained staff to maintain these evidences for small activities of agriculture operations. these evidences for small activities of agriculture operations. these evidences for small activities of agriculture operations. 2. Briefly stated facts of the case are that the assessee, a Briefly stated facts of the case are that the assessee, a Briefly stated facts of the case are that the assessee, a partnership firm, owned agricultural land around 17 acres in Nasik partnership firm, owned agricultural land around 17 acres partnership firm, owned agricultural land around 17 acres district of Maharashtra. The assessee filed return of income for the district of Maharashtra. The assessee filed return of income for the district of Maharashtra. The assessee filed return of income for the year under consideration on 21/08/2015 declaring total income at year under consideration on 21/08/2015 declaring total income at year under consideration on 21/08/2015 declaring total income at rupees nil. In the return of income filed the assessee had shown rupees nil. In the return of income filed the assessee had shown rupees nil. In the return of income filed the assessee had shown
Florence Agro Farms 4 & 2092/MUM/2024 & 2092/MUM/2024 income under the head income under the head ‘profit and gains of the profit and gains of the business or by way of sales of agricultural products amounting to ₹ profession’ by way of sales of agricultural products amounting to by way of sales of agricultural products amounting to and claimed deduction of ₹ 34, 00, 001/ 40, 34, 970/-and claimed deduction of 34, 00, 001/-under section 10(1) of Income-tax Act, 1961 tax Act, 1961 (in short ‘the Act’). The return of ). The return of income filed by the assessee was selected income filed by the assessee was selected for scrutiny assessment for scrutiny assessment and the statutory notices were issued and complied with. In the and the statutory notices were issued and complied with and the statutory notices were issued and complied with course of scrutiny proceeding, course of scrutiny proceeding, the Assessing Officer the Assessing Officer for justifying income from agriculture income from agriculture operation, asked the assessee to file detail asked the assessee to file detail of expenses as well as sales of as well as sales of agricultural products. agricultural products. Firstly, regarding , the expenses i regarding , the expenses incurred , the Assessing Officer asked the , the Assessing Officer asked the assessee to file detail of expenses assessee to file detail of expenses along with copy of the bills , along with copy of the bills , inter- alia, labour charges, repair and maintenance , labour charges, repair and maintenance expenses expenses, salary and services rendered, expenses for seeds, fertilizers and pesticides, d, expenses for seeds, fertilizers and pesticides, d, expenses for seeds, fertilizers and pesticides, stores and store parts, tractor hire charges etc stores and store parts, tractor hire charges etc. In response, the n response, the assessee submitted copies of ledger accounts in respect of the assessee submitted copies of ledger accounts in respect of the assessee submitted copies of ledger accounts in respect of the expenses, but regarding the copies of bills, it was submitted that expenses, but regarding the copies of bills, it was submitted that expenses, but regarding the copies of bills, it was submitted that caretaker and supervisor of the farms , r and supervisor of the farms , ‘Mr Lokhande Mr Lokhande’ had left the job and therefore files of vouchers job and therefore files of vouchers were not available not available, therefore same could not be furnished. The Assessing Officer did not find the same could not be furnished. The Assessing Officer did not find the same could not be furnished. The Assessing Officer did not find the above reply of the assessee satisfactory above reply of the assessee satisfactory and held that the and held that the agriculture farm of the assessee was located in a small town, and rm of the assessee was located in a small town, and rm of the assessee was located in a small town, and population of the same being small, the assessee could have easily population of the same being small, the assessee could have easily population of the same being small, the assessee could have easily provided details of the labour details of the labourers including their name and address including their name and address in view of the limited labour having a in view of the limited labour having a specialized knowledge of the knowledge of the grape cultivation in the town. The reply of the assessee in respect of grape cultivation in the town. The reply of the assessee in respect of grape cultivation in the town. The reply of the assessee in respect of Florence Agro Farms 5 & 2092/MUM/2024 ITA Nos. 2093 & 2092/MUM/2024 other expenses was also rejected by the Assessing Officer. Secondly, other expenses was also rejected by the Assessing Officer. other expenses was also rejected by the Assessing Officer. regarding the sale of agricultural product, the assessee submitted regarding the sale of agricultural product, the assessee submitted regarding the sale of agricultural product, the assessee submitted cash bills issued to various pa to various parties. The assessee submitted bills of he assessee submitted bills of cash sale of agricultural products to two parties namely Sh Dilip ash sale of agricultural products to two parties namely Sh Dilip ash sale of agricultural products to two parties namely Sh Dilip Dere and Sh Dattatray Gabaji Kanse. The Assessing Officer issued Dere and Sh Dattatray Gabaji Kanse. The Assessing Officer issued Dere and Sh Dattatray Gabaji Kanse. The Assessing Officer issued summons under section 131 of the A mmons under section 131 of the Act to those persons and to those persons and recorded their statements recorded their statements, wherein they denied of any such herein they denied of any such purchase from the assessee firm. In view of the no bills in support purchase from the assessee firm. In view of the no bills in support purchase from the assessee firm. In view of the no bills in support of expenses as well as unverifiable cash sales well as unverifiable cash sales, the Assessing Officer, the Assessing Officer, in assessment order dated 29/11/2017 passed under section in assessment order dated 29/11/2017 passed under section in assessment order dated 29/11/2017 passed under section source of deposits of ₹40,34,970/-as 143(3) of the Act, held held the source of deposits of unsatisfactory unsatisfactory unsatisfactory and and and accordingly accordingly accordingly treated treated treated the the the said said said sum sum sum of of of ₹40,34,970/- as unexplained cash credit as unexplained cash credit, taxable under section 68 taxable under section 68 of the Act. In support of his finding the Assessing Officer relied on ct. In support of his finding the Assessing Officer relied on ct. In support of his finding the Assessing Officer relied on eme Court in the case of Sumati Dayal the decision of Hon’ble Supr the decision of Hon’ble Supreme Court in the case of Vs CIT (supra), CIT Vs Durgaprasd More (supra), CIT vs M Vs CIT (supra), CIT Vs Durgaprasd More (supra), CIT vs M Vs CIT (supra), CIT Vs Durgaprasd More (supra), CIT vs M Ganapathi Mudaliar (supra) band Orient Trading Cp.ltd, Vs Ganapathi Mudaliar (supra) band Orient Trading Cp.ltd, Vs Ganapathi Mudaliar (supra) band Orient Trading Cp.ltd, Vs CIT(supra).
2.1 On further appeal, Ld. CIT(A) observed that assessee had not urther appeal, Ld. CIT(A) observed that assessee had not urther appeal, Ld. CIT(A) observed that assessee had not filed any proof of expenses either before the Assessing Officer or expenses either before the Assessing Officer or expenses either before the Assessing Officer or before him except ledger account of the expenses on the pretext before him except ledger account of the expenses on the pretext before him except ledger account of the expenses on the pretext that the caretaker had left the job, the security guard Changing and that the caretaker had left the job, the security guard Changing and that the caretaker had left the job, the security guard Changing and no logbook for their labour no logbook for their labourers was maintained as daily wage s was maintained as daily wage
Florence Agro Farms 6 & 2092/MUM/2024 & 2092/MUM/2024 labourers kept changing. The Ld. CIT(A) accordingly upheld the changing. The Ld. CIT(A) accordingly upheld the changing. The Ld. CIT(A) accordingly upheld the finding of the Assessing Officer observing as under: finding of the Assessing Officer observing as under:
“3.5 Nothing has been produced before me by the appellant to 3.5 Nothing has been produced before me by the appellant to 3.5 Nothing has been produced before me by the appellant to counter the above findings of fact by the Assessing Officer. The counter the above findings of fact by the Assessing Officer. The counter the above findings of fact by the Assessing Officer. The Ld. AO has rightly observed t Ld. AO has rightly observed that the assessee not only has to give hat the assessee not only has to give explanation about nature & source of the credit entries in his explanation about nature & source of the credit entries in his explanation about nature & source of the credit entries in his books, the explanation has to be proper, reasonable & acceptable. books, the explanation has to be proper, reasonable & acceptable. books, the explanation has to be proper, reasonable & acceptable. While discussing the phrases While discussing the phrases proper, reasonable & acceptable, proper, reasonable & acceptable, Hon'ble Apex Court in case Hon'ble Apex Court in case of CIT v. Durga Prasad More [1971] 82 Durga Prasad More [1971] 82 ITR 540 (SC) has pronounced that ITR 540 (SC) has pronounced that "Science has not yet invented "Science has not yet invented any instrument to test the reliability of the evidence placed before any instrument to test the reliability of the evidence placed before any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to a Court or Tribunal. Therefore, the Courts and Tribunals have to a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence be judge the evidence before them by applying the test of human fore them by applying the test of human probabilities". Thus, here, Hon'ble Court has laid down the test of probabilities". Thus, here, Hon'ble Court has laid down the test of probabilities". Thus, here, Hon'ble Court has laid down the test of human probability. This test of human probability has again been human probability. This test of human probability has again been human probability. This test of human probability has again been reiterated by Hon'ble Apex Court in the case of Sumati Dayal v. reiterated by Hon'ble Apex Court in the case of Sumati Dayal v. reiterated by Hon'ble Apex Court in the case of Sumati Dayal v. CIT [1995] 80 Taxma [1995] 80 Taxman 89/214 ITR 801 (SC), wherein it was n 89/214 ITR 801 (SC), wherein it was specifically pronounced that revenue authorities are supposed 'to specifically pronounced that revenue authorities are supposed 'to specifically pronounced that revenue authorities are supposed 'to consider the surrounding circumstances and apply human consider the surrounding circumstances and apply human consider the surrounding circumstances and apply human probability. 3.6 In view of the above discussion, since no evidence has been 3.6 In view of the above discussion, since no evidence has been 3.6 In view of the above discussion, since no evidence has been produced before me d produced before me during the appellate proceedings to counter uring the appellate proceedings to counter the findings of the AO, I am not inclined to interfere in the order of the findings of the AO, I am not inclined to interfere in the order of the findings of the AO, I am not inclined to interfere in the order of Ld. AO. Accordingly, the addition made in the assessment order is Accordingly, the addition made in the assessment order is Accordingly, the addition made in the assessment order is sustained sustained sustained and and and consequently consequently consequently the the the grounds grounds grounds of of of appeal appeal appeal are are are dismissed.”
Aggrieved with the finding of the Ld. CIT(A), the assessee d with the finding of the Ld. CIT(A), the assessee d with the finding of the Ld. CIT(A), the assessee is in appeal before the Income appeal before the Income-Tax Appellate Tribunal ( short the Tax Appellate Tribunal ( short the Tribunal) by way of raising grounds as reproduced above. Tribunal) by way of raising grounds as reproduced above. Tribunal) by way of raising grounds as reproduced above.
Before us learned counsel for the assessee filed Before us learned counsel for the assessee filed Before us learned counsel for the assessee filed a paperwork containing page 1 to 386 in respect of the year unde to 386 in respect of the year unde to 386 in respect of the year under consideration. An additional paperbook combined for assessment 2015 paperbook combined for assessment 2015 paperbook combined for assessment 2015-16 and 2016-17 containing pages 1 to 35 was also filed. 17 containing pages 1 to 35 was also filed.
The learned counsel for the assessee The learned counsel for the assessee submitted that submitted that agricultural land measuring 17.15 was purchase agricultural land measuring 17.15 was purchased by the assessee
Florence Agro Farms 7 & 2092/MUM/2024 & 2092/MUM/2024 by way of two agreements dated 16/05/2006 greements dated 16/05/2006, which have , which have not been disputed by the Assessing disputed by the Assessing Officer. In support of the claim of the In support of the claim of the agricultural operation carried out, the learned counsel referred to agricultural operation carried out, the learned counsel agricultural operation carried out, the learned counsel page n. 98 to 104 of the paper, which are copies of land revenue page n. 98 to 104 of the paper, which are copies of land revenue page n. 98 to 104 of the paper, which are copies of land revenue records maintained b by the Land Revenue Authorities uthorities i.e. ‘talathi’, showing landholding of th showing landholding of the assessee and crops sown on the land e assessee and crops sown on the land during the year under consideration including during the year under consideration including ‘Grapes rapes’, ‘Soyabeen’, ‘Vegetables’, ‘Flowers lowers’ etc. He further referred to pages 105 to 115 of e further referred to pages 105 to 115 of the paper book, which which are cash memo of sales of agricultural sales of agricultural products. The learned counsel also filed copy of the electricity bills rned counsel also filed copy of the electricity bills rned counsel also filed copy of the electricity bills for the electric connection for the electric connection installed on the agriculture farm. installed on the agriculture farm. Further, the learned counsel submitted that the learned counsel submitted that partner of the assessee partner of the assessee firm resides in Mumbai and carry on the business and therefore firm resides in Mumbai and carry on the business and therefore firm resides in Mumbai and carry on the business and therefore they were not involved in carrying out day e not involved in carrying out day-to-day day agricultural operation on the land. The learned counsel submitted that land operation on the land. The learned counsel submitted that land operation on the land. The learned counsel submitted that land purchased by the assessee was given on “ d by the assessee was given on “Bataidari” Bataidari” ( i.e. yield sharing ) to the local farmers to the local farmers of surrounding area as the land is surrounding area as the land is situated in agricultural belt near in agricultural belt near of ‘Gangapur’ ’ Dam. It was submitted that “Bataid Bataidari’ i.e. crop sharing system, is an system, is an agricultural practice where the landowner make ctice where the landowner make available available land to another person, who bea another person, who bears the expenditure of labour and the rs the expenditure of labour and the produce is shared produce is shared by the owner and the tenant. The learned by the owner and the tenant. The learned counsel submitted that as per the system counsel submitted that as per the system, the farmer used to the farmer used to handle the agricultural activities of growing various agriculture handle the agricultural activities of growing various agriculture handle the agricultural activities of growing various agriculture produce and sale the same in the market and incurred the the same in the market and incurred the the same in the market and incurred the Florence Agro Farms 8 & 2092/MUM/2024 ITA Nos. 2093 & 2092/MUM/2024 agricultural expenditure as req agricultural expenditure as required and gave the assessee firm uired and gave the assessee firm 25% of their income from the sale of agricultural products and 25% of their income from the sale of agricultural products and 25% of their income from the sale of agricultural products and other expenses such as electricity and G penses such as electricity and Gram panchayat taxes ram panchayat taxes were born by the assessee firm. However, born by the assessee firm. However, for the assessment year for the assessment years 2014- 15, 2015-16 and 2016 16 and 2016-17, the assessee firm decided to carry out assessee firm decided to carry out the agricultural activity at the agricultural activity at its own and thus appointed, appointed, a manager namely mr Lokhande Lokhande in order to handle and supervise the to handle and supervise the agricultural activity by hiring the labourers agricultural activity by hiring the labourers. The system continued system continued for three years i.e. for asse for three years i.e. for assessment 2014-15, 2015-16 and 2016 16 and 2016-17 and thereafter he left the job, thus, and thereafter he left the job, thus, the land was again given to local the land was again given to local farmers under the “ Bataidari System”. The assessee filed complete farmers under the “ Bataidari System”. The assessee filed complete farmers under the “ Bataidari System”. The assessee filed complete chart of year -wise agricultural income declared, which is wise agricultural income declared, which is wise agricultural income declared, which is reproduced as under: reproduced as under:
Assessment Year ssessment Year Amount of Agricultural Income Amount of Agricultural Income declared by the appellant firm in declared by the appellant firm in the income tax return (Rs.)
2012-13 30,176 2013-14 8,80,094 2014-15 37,21,020 2015-16 34,00,001 2016-17 45,19,566 2017-18 12,28,810 2018-19 11,82,252 2019-20 14,52,020 2020-21 6,84,580
Florence Agro Farms 9 & 2092/MUM/2024 & 2092/MUM/2024 5.1 The learned counsel for the assessee refer learned counsel for the assessee referred red to the above chart and submitted that during the assessment years 2012-13, chart and submitted that during the assessment chart and submitted that during the assessment 2013-14 , 2017-18 , 2018 18 , 2018-19 , 2019-20 and 2020 2020-21, the land remain under “ Bataidari System” and agricultural income in the remain under “ Bataidari System” and agricultural income in the remain under “ Bataidari System” and agricultural income in the range of ₹ 10 lakh to 40 lakh was declared, however for the three 10 lakh to 40 lakh was declared, however for the three 10 lakh to 40 lakh was declared, however for the three assessment years i.e. AY 2014 assessment years i.e. AY 2014-15 to 2016-17, when the operation 17, when the operation were carried out by the assessee itself by the assessee itself and the agricultural income icultural income was comparatively higher than the was comparatively higher than the ‘Bataidari sysem Bataidari sysem’. The learned counsel for assessee referred to income and expenditure account counsel for assessee referred to income and expenditure account counsel for assessee referred to income and expenditure account and balance sheet for all the relevant years, which are available on and balance sheet for all the relevant years, which are available on and balance sheet for all the relevant years, which are available on paperbook pages 10 to 31 of paperbook No. 10 to 31 of paperbook No. II. The learned counsel submitted that agricultural income declared by the assessee, except submitted that agricultural income declared by the assessee submitted that agricultural income declared by the assessee for the assessment year for the assessment years 2014-15, 2015-16 and 2016 16 and 2016-17 has been accepted by the Department. accepted by the Department.
5.2 The learned counsel accordingly submitted that merely for the The learned counsel accordingly submitted that merely for the The learned counsel accordingly submitted that merely for the reason that vouchers for expenses are not maintained and n that vouchers for expenses are not maintained and n that vouchers for expenses are not maintained and agricultural products have been sold in cash, the Assessing Officer agricultural products have been sold in cash, the Assessing Officer agricultural products have been sold in cash, the Assessing Officer cannot ignore the fact of land situated in irrigated area and the land cannot ignore the fact of land situated in irrigated area and the land cannot ignore the fact of land situated in irrigated area and the land revenue record shows crop grown on the agricultural and the only revenue record shows crop grown on the agricultural and revenue record shows crop grown on the agricultural and issue which could be issue which could be left could be of the estimation of the of the estimation of the agricultural income, which can be reliably estimated keeping in agricultural income, which can be reliably estimated keeping in agricultural income, which can be reliably estimated keeping in view the agricultural income declared under “bataidari” system by view the agricultural income declared under “bataidari” system by view the agricultural income declared under “bataidari” system by the assessee in earlier years, which has been the assessee in earlier years, which has been duly duly accepted by the income tax department. income tax department. The ld Counsel further submitted that i The ld Counsel further submitted that if Florence Agro Farms 10 & 2092/MUM/2024 & 2092/MUM/2024 the Assessing Officer was not satisfied with the quantum of the the Assessing Officer was not satisfied with the quantum of the the Assessing Officer was not satisfied with the quantum of the agricultural income shown by the assessee, he could have sent agricultural income shown by the assessee, he could have sent agricultural income shown by the assessee, he could have sent inspector of his office for physical verification of the agricult of his office for physical verification of the agricult of his office for physical verification of the agricultural and of the assessee.
The learned DR on the other hand relied on the order of the The learned DR on the other hand relied on the order of the The learned DR on the other hand relied on the order of the lower authorities and submitted that in view of authorities and submitted that in view of no vouchers authorities and submitted that in view of maintained for expenses incurred, the claim of the assessee of for expenses incurred, the claim of the assessee of for expenses incurred, the claim of the assessee of earning agricultural income has been rightly rejected by the lower earning agricultural income has been rightly rejected by the earning agricultural income has been rightly rejected by the authorities.
We have had rival submission of the parties and perused the We have had rival submission of the parties and perused the We have had rival submission of the parties and perused the relevant material on record. The assessee relevant material on record. The assessee firm purchased firm purchased the agricultural land in the year 2006, in the irrigated belt of Nasik and in the year 2006, in the irrigated belt of Nasik and in the year 2006, in the irrigated belt of Nasik district of Maharashtra district of Maharashtra, on the bank of the ‘Godavari River” (PB Godavari River” (PB- 102). In support of the agricultural activity carried out, the assessee In support of the agricultural activity carried out, the assessee In support of the agricultural activity carried out, the assessee has filed land revenue records, which establish tha filed land revenue records, which establish that different crops t different crops including grapes, soyabeen, including grapes, soyabeen, vegetables, flowers etc. were s flowers etc. were sown on the land. The assessee the land. The assessee has also filed copy of electricity bills and copy of electricity bills and Gram Panchayat tax paid anchayat tax paid (PB-II/7-9), which are available in the , which are available in the paperbook filed before us. The assessee paperbook filed before us. The assessee has also filed income and also filed income and expenditure account and balance sheet for earlier years along with expenditure account and balance sheet for earlier years along with expenditure account and balance sheet for earlier years along with return of income, wherein the agricultural income from the land return of income, wherein the agricultural income from the land return of income, wherein the agricultural income from the land has been declared by the assessee, which has been declared by the assessee, which has not been disturbed has not been disturbed by the Income-tax department. tax department. On the other hand, the Assessing e other hand, the Assessing Officer found that the assessee has maintained ledger accounts for Officer found that the assessee has maintained ledger accounts for Officer found that the assessee has maintained ledger accounts for Florence Agro Farms 11 & 2092/MUM/2024 & 2092/MUM/2024 various expenses, but but, no copies of the bills of expenses were , no copies of the bills of expenses were produced on the pretext that the manager carrying out the produced on the pretext that the manager carrying out the produced on the pretext that the manager carrying out the agricultural activity had left the job a agricultural activity had left the job and therefore the bills nd therefore the bills were not traceable and therefore rejected the claim of the assessee of traceable and therefore rejected the claim of the assessee of traceable and therefore rejected the claim of the assessee of carrying out any agricultural activity. He also rejected the claim of carrying out any agricultural activity. He also rejected the carrying out any agricultural activity. He also rejected the sale of agricultural products in view of the cash vouchers and sale of agricultural products in view of the cash vouchers and sale of agricultural products in view of the cash vouchers and denial of purchase of the pro denial of purchase of the product by two parties. In view of the duct by two parties. In view of the above factual observations, the core question before us is whether above factual observations, the core question before us is whether above factual observations, the core question before us is whether any agricultural activity was carried out by the assessee. In our any agricultural activity was carried out by the assessee. In our any agricultural activity was carried out by the assessee. In our opinion, the land revenue opinion, the land revenue authorities, who maintain authorities, who maintain the record of crops sowed on the ag on the agricultural land, has duly certified that crops as duly certified that crops including grapes, soyabeen and flowers including grapes, soyabeen and flowers had sown. Thus, the fact sown. Thus, the fact that agricultural operation was carried out by the assessee on the that agricultural operation was carried out by the assessee on the that agricultural operation was carried out by the assessee on the land cannot be brushed aside only for the reason that assessee land cannot be brushed aside only for the reason that assessee land cannot be brushed aside only for the reason that assessee failed to produce copy of the bills of expenses particularly labour, ce copy of the bills of expenses particularly labour, ce copy of the bills of expenses particularly labour, seeds, fertilizers etc. and ignoring that agricultural income from the etc. and ignoring that agricultural income from the etc. and ignoring that agricultural income from the same land declared by the assessee was not same land declared by the assessee was not disturbed by the disturbed by the income-tax department tax department in earlier years. The only issue in . The only issue in dispute the year under consideration could be ear under consideration could be of estimation of quantum of estimation of quantum of agricultural income. The assessee submitted that agricultural agricultural income. The assessee submitted that agricultural agricultural income. The assessee submitted that agricultural income in the range of the range of Rs. 10.00 lakhs to Rs. 14 lakh declared by 14 lakh declared by the assessee at the rate of 25% of the value of total agricultural the rate of 25% of the value of total agricultural the rate of 25% of the value of total agricultural produce under the “ bataidari system” has been accepted by the produce under the “ bataidari system” has been accepted by the produce under the “ bataidari system” has been accepted by the Department in earlier years, whereas in the assessment years from Department in earlier years, whereas in the assessment year Department in earlier years, whereas in the assessment year 2014-15 to AY 2016 15 to AY 2016-17 including assessment year under 17 including assessment year under Florence Agro Farms 12 & 2092/MUM/2024 ITA Nos. 2093 & 2092/MUM/2024 consideration, the assessee carried out agricultural operation consideration, the assessee carried out agricultural operation consideration, the assessee carried out agricultural operation engaging the manager and therefore the entire income from the engaging the manager and therefore the entire income from the engaging the manager and therefore the entire income from the agricultural activity agricultural activity arose to assessee without sharing 75% rose to assessee without sharing 75% of the value of the agricultural produce. The agricultural income declared value of the agricultural produce. The agricultural income decla value of the agricultural produce. The agricultural income decla in the year under consideration is in the range of in the year under consideration is in the range of Rs. Rs. 34 lakhs and in assessment year 2016 assessment year 2016-17, it is in the range of it is in the range of Rs. 45 lakhs, which is not excessive in comparison to the income shown under which is not excessive in comparison to the income shown under which is not excessive in comparison to the income shown under the ‘Bataidari’ System in assessment year prior to 2014 System in assessment year prior to 2014-15 and System in assessment year prior to 2014 subsequent to 2016- -17. In view of above discussion, the 17. In view of above discussion, the finding of the lower authorities on the issue in dispute is authorities on the issue in dispute is set aside and the set aside and the addition made by the Assessing Officer is deleted. The grounds of addition made by the Assessing Officer is deleted. The grounds of addition made by the Assessing Officer is deleted. The grounds of the appeal of the assessee accordingly allowed. the appeal of the assessee accordingly allowed.
7.1 The issue in dispute raised an assessment The issue in dispute raised an assessment year year 2016-17 is identical to the issue in dispute raised in assessment year 2015-16, identical to the issue in dispute raised in assessment identical to the issue in dispute raised in assessment therefore following our our finding in assessment year year 2015-16, the grounds raised in assessment year 2016 in assessment year 2016-17 are accordingly decid 17 are accordingly decided mutasis mutandis.
In the result, the appeals of the assessee In the result, the appeals of the assessee for assessment year for assessment year 2015-16 and 2016-17 are allowed. 17 are allowed.