Commissioner Of Income Tax,Chandigarh-Ii v. Sh. Jarnail Singh Kartash. Jarnial Singh & Sons, Huf,H

ITA No.166 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.166 of 2008Date of decision:12.5.2008 Commissioner of Income tax,Chandigarh-II Versus ......Appellant Sh. Jarnail Singh KartaSh. Jarnial Singh & Sons, HUF,H.No.1161, Sec 34-C,Chandigarh ......Respondent CORAM:-HON'BLE MR.JUSTICE RAJIVE BHALLAHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Ms. Urvashi Dhugga, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . 1.The revenue has filed the present appeal under Section 260-Aof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) againstthe order dated 21.8.2007 passed by the Income Tax Appellate Tribunal,Chandigarh Bench-B in ITA No.963/Chandi/2006 and has sought to raisethe following substantial questions of law:- “Whether in the facts and circumstances of the case andin law the order of the ITAT is perverse, being based onconjectures and surmises and the findings of theAssessing Officer as well as the CIT(A) have beenignored without any cogent material?” 2.The assessee declared agricultural income at Rs.7,50,000/-from cultivation of 36 acres of own agricultural land and 6 acres of leasedagricultural land. In support of the said declaration, the assessee producedrevenue record, J-forms and claimed that the agricultural income was netof expenses @ 25%. However, the submissions of the assessee were not accepted by the Assessing Officer, who determined the agricultural incomeof the assessee at Rs.5,52,561/- holding that the yield declared was high.The remaining income of Rs.1,97,439/- was taxed as income from othersources vide order dated 16.1.2006. 3.Being aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) who confirmed the action of theAssessing Officer and dismissed the appeal filed by the assessee vide hisorder dated 24.10.2006. 4.Not satisfied with the order of the Commissioner of IncomeTax (Appeals), an appeal before the Income Tax Appellate Tribunal wasfiled by the assessee, which was allowed vide order dated 21.8.2007.While allowing the appeal, the Tribunal held that the assessee, who is anagriculturist, has produced evidence on record, in support of his claim andincome declared by him on estimate basis is bona fide. The findings of theTribunal in this regard are reproduced:- “I have considered the rival submissions carefully.Firstly, it is abundantly clear from the record thatthe assessee has declared agricultural income inthe past also. The factum of the assessee beingengaged in the activity yielding agricultural incomein the past as well as during the year underconsideration is not in dispute. The disputeessentially revolves around the quantum ofagricultural income declared for the reason thatthe assessee does not maintain any regular booksof account in this regard. The assessee claimedto have estimated his agricultural income byreducing from the gross sale realization theexpenses to the extent of 25%. This manner of “I have considered the rival submissions carefully.Firstly, it is abundantly clear from the record thatthe assessee has declared agricultural income inthe past also. The factum of the assessee beingengaged in the activity yielding agricultural incomein the past as well as during the year underconsideration is not in dispute. The disputeessentially revolves around the quantum ofagricultural income declared for the reason thatthe assessee does not maintain any regular booksof account in this regard. The assessee claimedto have estimated his agricultural income byreducing from the gross sale realization theexpenses to the extent of 25%. This manner of declaring agricultural income itself shows that ithas been declared on estimate basis. Now theissue is as to whether the estimate made by theassessee can be construed as reasonableconsidering the claim of agricultural operationscarried out, size of land holdings, past history etc.In this context, we find that the assessee hasattempted to explain that it had 36 acres of landunder cultivation, partly owned by him and partlybelonging to his brother in addition to 6 acres ofland taken on lease. The Assessing Officer didnot accept the plea of the assessee with respectto the leased land for the reason that it was notsubstantiated. In so far as the non-acceptance ofthe quantum of agricultural income is concerned,the Assessing Officer referred to a Journal ofHaryana Agricultural University to deduce as towhat should be per acre yield from the land ownedby the assessee. On that basis, he held that theyield declared by the assessee was high. In myconsidered opinion the approach of the AssessingOfficer was manifested by the reason that in theabsence of the books of account, the agriculturalincome was not verifiable. This aspect is justified.However, the approach adopted thereafter by theAssessing Officer of not going by the materialadduced by the assessee in support of theestimate is also wrong for the reason that there isno finding much less a whisper that the material sought to be relied upon by the assessee waslacking in credibility. In fact the certificate ofaverage income per acre of land obtained fromvillage 'Patwari' which indicates an income level ofRs.36,000/- per acre, cannot be brushed aside.Moreover, the assessee submitted the 'J-forms'evidencing sale of agricultural produce butsubjecting the same to microscopic scrutiny to cullout the yield etc. is an unjustified exercise. Whatthe Assessing Officer was to essentially do was toonly verify the estimates made by the assessee.No doubt, there is always an element ofsubjectivity in estimation. Unless it can be madeout that the estimate is on a wild basis or is totallylacking in bona fides only then the AssessingOfficer would be justified in substituting hisestimates in the place of estimation done by theassessee. There is no such exercise on the partof the Assessing Officer emerging in the instantcase. Having regard to the aforesaid discussion,in my view the Assessing Officer was not justifiedin rejecting the claim of the assessee for havingderived agricultural income of Rs.7,50,000/- forthe year under consideration. Moreover, in theimmediately preceding year, the assessee hasdeclared agricultural income of Rs.7,00,000/-. Nodoubt, the income for assessment year 2002-03has not been subjected to scrutiny assessment yetthe trend of income declared cannot be lost sight of while considering the efficacy of incomedeclared by the assessee. of while considering the efficacy of incomedeclared by the assessee. Moreover, there is no material on record to showany vested interest or motive with the assessee todeclare agriculture income higher than the actualamount. This is for the reason that the copies ofthe bank account do not show any investmentmade by the assessee. In fact, the assessee hassupported his plea by filing an affidavit to theeffect that the income earned during assessmentyear under consideration was spent on agricultureinputs or household expenses. Thus, the estimatedeclared by the assessee can be construed asbona fide. Therefore, I am inclined to uphold thestand of the assessee.” 5.Ms. Urvashi Dhugga, learned counsel for the revenue, hasargued that the agricultural income declared by the assessee was on anestimate basis and the same was on the higher side considering the yieldavailable from the land in question and therefore, the findings of theTribunal are perverse and are based upon conjectures and surmises andthe findings of the Assessing Officer as well as the Commissioner ofIncome Tax (Appeals) have been ignored without any written material onrecord. 6.We have heard learned counsel for the revenue and perusedthe record. 7.We find no merit in the contention raised by the counsel for therevenue-appellant. The Tribunal has given a pure finding of fact afterconsidering the evidence on record with regard to the agricultural income of the assessee. We find that the approach adopted by the Assessing Officer, by not relying upon the material produced by the assessee in support ofthe estimation of income is wrong, because there is no finding that thematerial sought to be relied upon by the assessee was lacking in credibility.The certificate of average income per acre of land issued by the VillagePatwari indicates the income level of Rs.36,000/- per acre which cannot beignored. Moreover, the assessee had submitted the J-forms evidencingthe sale of agricultural produce. No doubt, there is always an element ofsubjectivity in estimation. However, if it can be made out that the estimateis without any basis or is totally lacking the bona fides and only then theAssessing Officer would be justified in substituting his estimate in place ofthe estimation of agricultural income done by the assessee. There is nosuch situation in this case. In fact, there is no material on record to showany vested interest or motive with the assessee to declare the agriculturalincome higher than the actual amount. 8.Thus, no substantial question of law arises in the present caseand the appeal is dismissed being without any merit. (RAKESH KUMAR GARG) JUDGE May 12, 2008ps (RAJIVE BHALLA) JUDGE