ASSISTANT COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE-2, RAJAHMUNDRY vs. USHA BALA AGRO FARMS PVT. LTD, ELURU

PER BENCH :

The captioned appeals are filed by the Revenue against the order of

the Ld. CIT (Appeals), Visakhapatnam-3 in DIN & Order No.

ITBA/APL/S/250/2023-24/1052589571(1), ITBA/APL/S/250/2023-

24/1052589825(1); ITBA/APL/S/250/2023-24/1052591413(1);

ITBA/APL/S/250/2023-24/1052591834(1); ITBA/APL/S/250/2023-

24/1052592275(1), dated 4/5/2023 for the AYs 2015-16 to 2019-20

respectively. Since the Revenue has raised the common issues in all

these appeals, they are clubbed, heard together and disposed off in this

consolidated order. The assessee has filed cross objections. Considering

the similarity of the issues involved, we shall take up ITA No.

203/Viz/2023 (AY: 2015-16) as a lead appeal.

ITA No.203/Viz/2023 (AY: 2015-16)

CIT(A), Visakhapatnam-3 arising out of the order passed U/s.

153A of the Income Tax Act (the Act) in DIN & Order No

ITBA/AST/S/153A/2021-22/1041719889(1), dated 27/03/2022

for the AY 2015-16.

Limited Company deriving income from Aqua Culture filed its

return of income on 29/09/2015 declaring total income of Rs.

21,56,660/-. Subsequently, a search and seizure operation U/s.

132 of the Act was conducted on 28/01/2021 in the case of the

assessee. Since the impugned assessment year falls under the

block of six years a notice U/s. 153A of the Act was issued. In

response, the assessee filed its return of income on 29/11/2021

admitting total income of Rs. 1,29,56,660/- by including an

additional income of Rs. 1,08,00,000/-. Subsequently, the Ld. AO

issued notices U/s. 143(2) and 142(1) of the Act. In response the

assessee furnished the information as called for by the Ld. AO

from time to time. During the search operations, certain amount

of cash was seized from the lockers. Further, the Ld. AO also

observed that the seized material contains hand written books

which contains the details of date wise receipts and payments

pertaining to the entities of Usha Bala Group. The Ld. AO

requested Sri VV Balakrishna Rao to explain the nature of

transactions. In response, Mr. VV Balakrishna Rao stated that

the said hand written books were rough version of daily cash

receipts and payments which may contain some duplicate

4 transactions, non-material transactions and some of the

transactions are recorded in the regular books of accounts. The

Ld. AO rejected the explanation of Sr. VV Balakrishna Rao and

concluded that the daily cash receipts and payments are

systematically entered and cannot be considered as a rough

version. The Ld. AO further also observed that the assessee has

indulged in huge transactions in cash mode which is possible

only by using hawala mode of transfer of cash. It was also

submitted before the Ld. AO that the assessee admitted

unaccounted cash of Rs. 30 Crs is also recorded as payments in

the hand written books which further indicate that the said hand

written books are not rough version as stated by Sri VV

Balakrishna Rao. The Ld. AO further observed that Sri VV

Balakrishna Rao had declared additional income of Rs. 40 Crs

based on the transactions present in the said hand written

books. The Ld. AO also reproduced entity wise admission of

undisclosed income based on the transactions present in the said

hand written books as detailed in the assessment order. The Ld.

AO further observed that most of these receipts and payments are

related to Aqua Culture entities of Usha Bala Group and are not

recorded in the regular books of account. The Ld. AO also

further observed that a part of money has been received in cash

5 and partly through banking channels. The Ld. AO further also

noticed that even the expenditure incurred in cash for child fish

purchase, feed purchase and medicine purchase are also not

recorded in the books of account. The Ld. AO also stated that

there are three entities dealing with Aqua Culture business of

Usha Bala Group viz., Usha Bala Agro Farms (P) Ltd, UBK Hotels

& Resorts (P) Ltd and VBK Exim (P) Ltd. The Ld. AO also

tabulated the land holdings of the above entities as per the

submissions of Sri VV Balakrishna Rao vide answer to Q.No. 18

of the statement recorded on 29/07/2021 as under:

S. Entity Own Leased Total No. (Acres) (Acres) (Acres) 1. Usha Bala Agro Farms 130 110 240 (P) Ltd 2. UBK Hotels & Resorts _ 65 65 (P) Ltd 3. VBK Exim (P) Ltd 52 52 Total 130 227 357

The Ld. AO further observed that since the Aqua Culture activity

being operated in 357 Acres, the exact entity of each transaction

could not be identified by Sri VV Balakrishna Rao. Therefore, the

Ld. AO based on the seized material vide Annexures

UPF/RP/EL/41, 74, 81, 82, 90 to 155 observed that there are

various types of unaccounted receipts and payments including

Aqua culture pertaining to the entities Usha Bala Agro Farms Pvt

Ltd (UBAFPL), UBK Hotels & Resorts Pvt Ltd (UBKHRPL) and VBK

Exim Pvt Ltd (VBKEPL). The details of the receipts and payments

for the FY 2014-15 relevant to the AY 2015-16 are segregated in

respect of UBAF & UBKH & VBKE as under:

Transaction Receipts Transaction Type Payments Type Fish Sales 47502079 Payments 4206417 Lease Income 20615744 Feed Purchase 9978839 Receipts 7708022 Land Purchase in ITR 0 Lease Income & 5531790 Labour Payments 7047371 Fish Sales Bogus Payments 792910 Lease Payment 1325929 in ITR Scrap Sales 243375 Payments into Bank 2000000 Child Fish Purchase 0 Land purchase not in 0 ITR Medicine Purchases 2665278 Salary Payment 20000 Transportation 70990 Charges Sand Filling 0 Electricity Bill 62123 Donations 0 Total 82393920 Total 27376947

The Ld AO thus worked out the unaccounted income at Rs.

5,50,16,973/- (ie total receipts – total payments) as above. The

Ld AO then bifurcated the unaccounted income to Usha Bala

Agro Farms Pvt Ltd (UBAFPL), UBK Hotels & Resorts Pvt Ltd

(UBKHRPL) and VBK Exim Pvt Ltd (VBKEPL), in the ratio of their

turnover as discussed above, since no separate entity wise

7 transactions were recorded in the said hand written books. The

entity wise bifurcation of undisclosed income for the AY 2015-16

is as below:

FY AY UBAFPL UBKHRPL VBKEPL Total 2014-15 2015-16 45592824 3940808 5483342 55016973

Thus, the undisclosed income of M/s. Usha Bala Agro Farms Pvt

Ltd consequent to the search is worked out to (from the above

table) for the AY 2015-16 as under:

FY Undisclosed income worked out in Rs. 2014-15 45592824

The Ld. AO also noticed that this unaccounted income generated

by various entities was used by the assessee as on money

component in purchase of properties like land, building and

Gold. The Ld. AO therefore issued a show cause notice to the

assessee as to why the difference between the unaccounted

income worked on the basis of incriminating material seized of

Rs. 4,55,92,824/- and Rs. 1,08,00,000/- admitted in the return

of income filed U/s. 153A of the Act amounting to Rs.

3,47,92,824/- should not be added to the total income for the

year under consideration as undisclosed income as per the seized

hand written books. In response to the show cause notice, the

assessee referred to the statement recorded on 18/08/2021 and

8 submitted that maintaining regular books of account is not

possible in Aqua Culture because it is a non-organized sector.

The assessee further also submitted that the Ld. AO has arrived

at the income on estimation on the lands given on own culture

and leased rental receipts could not be accepted since the

activities of pisci culture is not so profitable. The assessee also

further submitted before the Ld. AO that the income on fish

culture per acre would be between Rs. 30,000/- to Rs. 35,000/-

on own lands and Rs. 20,000/- to Rs. 25,000/- from leased

lands. The assessee also submitted that the bund area should be

excluded while computing the income from Aqua Culture on acre

basis. The Ld. AO observed that the above submissions were not

supported by cogent evidences and hence rejected the objections

raised by the assessee. The Ld. AO therefore proceeded to add an

amount of Rs.3,47,92,824/- to the total income of the assessee

as undisclosed income. Aggrieved by the order of the Ld. AO, the

assessee filed an appeal before the Ld. CIT(A)-3, Visakhapatnam.

the assessee’s Representative, found that no separate entity wise

transactions are recorded in the said hand written books. The Ld

CIT also found that the basis for working out of the undisclosed

income of the assessee for the year under consideration lacks

clarity by the Ld. AO. Further, the Ld. CIT(A), also observed that

there is no corroborative evidence on record to consider the

contentions of the Ld. AO. The Ld. CIT(A) therefore placed

reliance on the Central Board of Direct Taxes [CBDT] Instruction

No. 8/2014, dated 27/10/2014 and by relying on the Hon’ble

Jurisdictional ITAT decision in the case of DCIT, Circle-2(1),

Vijayawada vs. Krishna Fisheries Vijayawada in ITA Nos. 325 to

330/Vizag/2015 for AY 2006-07 to 2011-12 and found that the

assessee has admitted an income of Rs. 74,458/- (average per

acre) which is above the estimate made by jurisdictional Bench in

the case of Krishna Fisheries Vijayawada (supra). The Ld. CIT(A)

therefore deleted the additions made by the Ld. AO. Aggrieved by

the order of the Ld. CIT(A), the Revenue is in appeal before us by

raising the following grounds of appeal:

“1. The order of the Ld. CIT (A) is erroneous on grounds of facts and law.

10 while deciding the above estimation which will not have any relevance when incriminating material was seized evidencing undisclosed income?

they need no adjudication.

by the Ld. CIT (A) by relying on the Board Instruction and the

decision of the jurisdictional ITAT Bench in the case of Krishna

Fisheries Vijayawada (supra). The Ld. DR at the outset

submitted that in the case relied on by the Ld. CIT(A) in the case

of Krishna Fisheries Vijayawada (supra) there is no incriminating

material. However, in the instant case, there is incriminating

material which has been relied on by the Ld. AO while making the

11 additions. The Ld. AR therefore pleaded that the order of the Ld.

AO be upheld.

Per contra, the Ld. Authorized Representative referred to the

sworn statement of the Managing Director wherein he has clearly

mentioned that the rough cash books prepared by the Accountant

cannot be relied upon. Further, the Ld. AR submitted that with

respect to the receipts and payments prepared by the Ld. AO

based on the seized material, there is no authenticity of the

income receipts extracted by the Ld. AO. Further, the Ld. AR

also argued that the Ld. AO also failed to identify the undisclosed

income entity wise and has merely estimated based on the

accounted turnover. Further, the Ld. AR also submitted that the

assessee has declared Rs. 30 Crs in Income Disclosure Scheme,

2016 [IDS-2016] and Rs. 40 Crs for the group companies during

the search and seizure operations. The Ld. AR further submitted

that Sri VV Balakrishna Rao in his sworn statement on

18/8/2021 has clearly explained the difficulty in maintaining the

regular books of account in this kind of business as it (Aqua

Culture) is a non-organized sector. The Ld. AR further submitted

that the assessee has admitted an income of Rs. 1,08,00,000/- in

addition to the original return of income filed U/s. 139(1) of the

Act. The average income admitted per acre is around Rs.

74,458/- which is more than the estimate of income in the case

of Krishna Fisheries Vijayawada (supra). The Ld. AR also further

submitted the following table:

USHABALA AGRO FARMS PRIVATE LIMITED Calculation of per acre income admitted after deducting bund portion

AY Income as Admitted Total income Total Per acre per section income in acreage income 139(1) 153 returns cultivated 2015-16 21,56,660 1,08,00,000 1,29,56,660 168 77,123 2016-17 16,82,368 1,08,00,000 1,24,82,368 168 74,300 2017-18 15,35,102 1,08,00,000 1,23,35,102 168 73,423 2018-19 15,88,732 1,08,00,000 1,23,88,732 168 73,742 2019-20 15,16,588 1,08,00,000 1,23,16,588 168 73,313

Calculation of per Acre income admitted without deducting bunds portion

AY Income as Admitted Total income Total Per acre per section income in acreage income 139(1) 153 returns cultivated 2015-16 21,56,660 1,08,00,000 1,29,56,660 168 53,986 2016-17 16,82,368 1,08,00,000 1,24,82,368 168 52,010 2017-18 15,35,102 1,08,00,000 1,23,35,102 168 51,396 2018-19 15,88,732 1,08,00,000 1,23,88,732 168 51,620 2019-20 15,16,588 1,08,00,000 1,23,16,588 168 51,319

Calculation of per Acre income as per AO after deducting bunds portion

AY Addition Admitted Total income Total Per acre made as per income in acreage income the AO 153 returns cultivated 2015-16 2,74,72,850 2,74,72,850 168 1,63,529 2016-17 1,59,43,297 1,59,43,297 168 94,901 2017-18 2,40,86,862 2,40,86,862 168 1,43,374 2018-19 2,29,14,122 2,29,14,122 168 1,36,394 2019-20 2,79,06,292 2,79,06,292 168 1,66,109

Calculation of per Acre income as per AO without deducting bunds portion

AY Addition Admitted Total income Total Per acre made as per income in acreage income the AO 153 returns cultivated 2015-16 2,74,72,850 2,74,72,850 240 1,14,470 2016-17 1,59,43,297 1,59,43,297 240 66,430 2017-18 2,40,86,862 2,40,86,862 240 1,00,362 2018-19 2,29,14,122 2,29,14,122 240 95,476 2019-20 2,79,06,292 2,79,06,292 240 1,16,276

The Ld. AR therefore pleaded that since the assessee has

declared higher income, the order of the Ld. CIT(A) be upheld.

available on record as well as the orders of the Ld. Revenue

Authorities. It is an admitted fact that the assessee has offered

an additional income of Rs. 1,08,00,000/- while filing return of

income U/s. 153A of the Act which translates to Rs. 74,458/- per

Acre. Based on the land holdings of the assessee with respect to

Aqua Culture it is noticed that the assessee has admitted an

average income of Rs. 74,458/- as detailed in its submissions.

Further, the Ld. AO has merely relied on the seized material but

has not corroborated with the additional evidence while

calculating the revenue per acre estimated for the business of

Aqua Culture by the assessee and its group companies. It is also

noticed that Sri VV Balakrishna Rao in his sworn statement has

stated that it is a rough version of daily cash receipts and

14 payments which also contains some duplicate entries. Further, it

is also an admitted fact that maintaining books of accounts in

this line of business (Aqua Culture) which is a non-organized

sector, which is further evident from the fact that the CBDT has

issued Instruction No. 8/2014, dated 17/10/2014 that the

income with respect to Fish Culture in Andhra Pradesh may be

decided by committee comprising of Two Commissioners, Two

Representatives of Farmer’s Association to determine the income

that may be estimated for that Financial Year. Therefore, in

these given circumstances, we also find that the Ld. AO has

estimated the income based on the net receipts calculated as per

the seized material and by apportioning it on the basis of the

accounted turnover of three entities dealing with Aqua Culture

business of Usha Bala Group viz., Usha Bala Agro Farms (P) Ltd,

UBK Hotels & Resorts (P) Ltd and VBK Exim (P) Ltd. The Ld. AO

has rejected the reply to the show cause notice without assigning

proper reasons by merely relying on the estimation without any

justification. Further, we also find that the Ld. AO has not given

any break-up of the income by deducting the bund area and also

the income from Fish Culture with respect to the leased lands.

We therefore find that the Ld.CIT (A) while discussing the issue

at length in his order has considered the CBDT Instruction No.

15 8/2014 (supra) and also the decision of the jurisdictional Bench

of ITAT in the case of Krishna Fisheries Vijayawada (supra) and

has concluded that the additional income of Rs. 74,458/- per

Acre disclosed by the assessee is reasonable and in accordance

guidelines issued by the CBDT and is also above the amount of

Rs. 25,000/- to Rs. 35,000/- per Acre fixed by the decision of

this Bench in the case of Krishna Fisheries Viajaywada (supra).

We also find from the submissions made by the Ld. AR that if the

addition is made as per the Ld. AO, the income per acre on an

average works out to Rs. 1,20,000/- which is practically

impossible in the opinion of the assessee in this trade. From the

facts discussed as above, we are of the considered view that since

the assessee has offered an amount of Rs. 74,458/-per Acre (net

of Bund area), and which is more than the rate per Acre fixed by

the jurisdictional Bench, the Ld. CIT(A) has rightly held and

deleted the addition made without any justification /

corroborative evidences, by the Ld. AO, and therefore we find no

infirmity in the order of the Ld. CIT(A) and thereby dismiss the

grounds raised by the Revenue.

I.T.A. Nos. 204, 205, 206 & 207/Viz/2023 Assessment Years: 2016-17 to 2019-20

which is adjudicated in the foregoing paragraphs of this order in ITA No. 203/Viz/2023, mutatis mutandis applies to the issues raised by the Revenue in its appeals for the AYs 2016-17 to 2019- 20. Accordingly, grounds raised by the Revenue are dismissed.

C.O. Nos. 23, 24, 25, 26 & 27/Viz/2023 (In आयकर अपील सं./ I.T.A. Nos.203, 204, 205, 206 & 207/Viz/2023) (�नधा�रण वष� / Assessment Years: 2015-16 to 2019-20)

of the 07 Grounds of Cross Objections raised by the assessee for

17 the AYs 2015-16 to 2019-20, Ground No.7 is general in nature and the Grounds No. 1 to 6 are fully supportive in nature to the decision of the Ld. CIT(A). Since the Grounds raised by the Revenue in its appeals for the AY 2015-16 to 2019-20 are dismissed and held in favour of the assessee, the adjudication of these grounds of Cross Objections raised by the assessee becomes infructuous. Thus, all the Cross Objections raised by the assessee are disposed off.

Pronounced in the open Court on 19th October, 2023.

Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

Dated :19.10.2023 OKK - SPS

आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – M/s. Usha Bala Agro Farms Pvt Ltd., 1. Somanchivari Street, Powerpet, Eluru, West Godavari District, Andhra Pradesh. राज�व/The Revenue – Assistant Commissioner of Income Tax, 2. Central Circle-2, Shiva Towers, 5th Floor, Danavaipeta, Rajahmundry, Andhra Pradesh-533103. 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam