Raipur v. Appellant:income<Br>Raipur<Br>Versusincometaxofficer,Officer,Wardward-1(1),-1(1

HIGH COURT OF CHHATTiSGARH AT BILASPURTax Case N0,42 of2010 Versus Present:Shri Raj'eev Shrivastava with Smt. V. Shradha Rao, counsel for theappeliant. Division Bench: Hon'ble Shri Dhirendra Mishra &Hon'bie Shri R.N. Chandrakar, JJ. ORAL JUD6MENT(5-4-2010) The following jgment of the Court was delivered byJ.J. i. The matter is listed on defaujt as pointed out vide office note dated 8-2-2010. The default is condoned.2010. The default is condoned. 2. The appeilant/revenue has preferred this appeal under Sectlon 260-Aof the Income Tax Act, 1961 (for short 'the Act') against the order of thetncome Tax Appeltate Tribunal, Biiaspur Bench (for short 'the Tribunal')of the Income Tax Act, 1961 (for short 'the Act') against the order of thetncome Tax Appeltate Tribunal, Biiaspur Bench (for short 'the Tribunal')^on foliowing substantial of law:- questionon foliowing substantial of law:- question Whether on the facts and in the circumstances, theITATwas legally justified in conflrming the order ofClT(A) who has ignored the materiai facts of the casebroyght on record by the A.O.?ITATwas legally justified in conflrming the order ofClT(A) who has ignored the materiai facts of the casebroyght on record by the A.O.? 3.Briefly stated facts of the case, as projected In the memo of appeal, arethat the assessee filed income tax return for the assessment yearthat the assessee filed income tax return for the assessment year,2005-06 showing agricuitura! income at Rs.75,43,812/- and claiming exemption under Section 10 of the Act.After rejecting books ofaccount under Section 145(3), the A.O. estimated cultivated land at therate of 94.50 acres as against 230 acres shown by the assessee andestimated agricultural income at Rs.1 ,25,000/- per acre.Accordingly,the total sales were estimated at Rs.1,18,12,500/-. Further estimatingagricultural expenses of Rs.1,06,60,2147-, the net agricultural incomewas worked out toRs.11,52.286/- as agalnst Rs.75,43,812/- shown inthe return and difference of Rs.63,91,526/- was treated as income fromother sources and not from agriculfure and the income was brought totax. 4. On appea! by the assessee, the CIT (Appeals) deleted the aboveaddition by observing that most of the observations made by the A.O.in his assessment order are general in nature and not supported byany positive material.The A.O.has rejected booRs result andestimated gross sa!e proceeds of agricutture produce at Rs.1,25,000/-per acre but he has not brought anything on record to support thisestimate.After rejecting the books resuit, the A.O. ought to haveconsidered past assessment of the assessee when assessee's incomeof Rs.56,000/- per acre for a period of 8 months has been accepted inthe earlier year, which is equivalent to Rs.84,000/- acre for the'whole. year.There is nothing on record to show that the assessee has anyother business activity apart from agriculture or had any other sourceof income. The inconsistencies pointed out in the statement of one oftheDirectorsandSupervisorsaregenera!and theassessee'spurchases do not become bogus simply because creditors do notaccount for some of the bills issued by them,The A.O. has not ^ disputed the agriculturat produce, but he has expressed only suspicionthat the income shown by the assessee is excessive though there is nomaterial on record for holding the same. With these observations, theaddition made by the A.O. of Rs-63,91,526/- has been deleted. ^ disputed the agriculturat produce, but he has expressed only suspicionthat the income shown by the assessee is excessive though there is nomaterial on record for holding the same. With these observations, theaddition made by the A.O. of Rs-63,91,526/- has been deleted. 5. The appeal preferred by the Revenue has been further dismissed bythe Tribunal and it has been held that the firm is engaged in agriculturalactivitie? and the agricuiture is the only source of income of theassessee firm.The income shown by the assessee in the past wasalso substantial and he was assessed for agricultural income only.Inthe under conslderation, there was a substantial increase in the yearquantum of receipt which has infiuenced the A.O. for taking such view.The ratio and net ratio in the under consideration gross profit profit yearare least as compared to the past 3 years. The quantum of production,the sale rate and area under cultivation has not been controverted.The A.O. has adopted the figure of Rs.1.25 lakhs per acre afterrejecting the books of account, however, claim of expenses shown inthe account books has been accepted.Once the A.O. rejected thebooks of account, in that case, he ought to have estimated agriculturalincome based upon some reasonable material.The A.O. ought tohave considered the pattern of crop of last year and of this year andthereafter should have worked out the quantum of agricultural income.It is common knowledge that how the market operations take in placerespect of sale and purchase of agriculturai produce and the brokers/third parties do not come forward before the revenue authorities. Theevidence by the assessee has not been found to be false or producedself aenerated and, therefore, no adverse inference can be drawn ''"./f~^.%^ .r^-.^'^SiSFfsKSEl:'i^K -ti<? against the assessee for non-compliance of notice by such parties.The sale of fruits has been accepted by the A.O. in the past years andsubsequent years as agricultural income, however, the A.O. has notconsidered that the case of the assessee was sale of Papita andBanana which could not be setf grown.Accepting the explanation ofthe assessee, learned CIT (Appeals) disregarded the discrepancies inthe statements of partners of the firm/supervisors, however, the A.O.has not considered the explanation and thus accepting reasonsassigned by the CIT (Appeals), the appeal preferred by the revenuehas been dismissed. ''"./f~^.%^ .r^-.^'^SiSFfsKSEl:'i^K -ti<? against the assessee for non-compliance of notice by such parties.The sale of fruits has been accepted by the A.O. in the past years andsubsequent years as agricultural income, however, the A.O. has notconsidered that the case of the assessee was sale of Papita andBanana which could not be setf grown.Accepting the explanation ofthe assessee, learned CIT (Appeals) disregarded the discrepancies inthe statements of partners of the firm/supervisors, however, the A.O.has not considered the explanation and thus accepting reasonsassigned by the CIT (Appeals), the appeal preferred by the revenuehas been dismissed. 6.ShriRajiv Shrivastava,learned counsel for the appellanfrevenuevehemently argued that both the appellate forums have not consideredthe well reasoned order of the Assessing Officer based on informationgathered during eniquiry from the concerned Halka Patwari underSection 133 (6) of the Act.From the replies filed by the assessee, itwould be evident that the assessee did not have correct facts andfigure of area where vegetables were and the replies are growncontradictory with each other.The explanation of the assessee forabnormal increase in the sales has been rejected as there wassubstantial reduction in area under agricultural activities of vegetabiesand fruits. The explanation that good technique of farming and use ofimproved seeds and fertilizers gave record production has beendisbelieved.The brokers through whom produces have been soidhave not been produced for examination.Dealing with various otheraspects, it has been finally held that sales of vegetable and fruitsshown in the books of the assessee and purchase expenses are notvehemently argued that both the appellate forums have not consideredthe well reasoned order of the Assessing Officer based on informationgathered during eniquiry from the concerned Halka Patwari underSection 133 (6) of the Act.From the replies filed by the assessee, itwould be evident that the assessee did not have correct facts andfigure of area where vegetables were and the replies are growncontradictory with each other.The explanation of the assessee forabnormal increase in the sales has been rejected as there wassubstantial reduction in area under agricultural activities of vegetabiesand fruits. The explanation that good technique of farming and use ofimproved seeds and fertilizers gave record production has beendisbelieved.The brokers through whom produces have been soidhave not been produced for examination.Dealing with various otheraspects, it has been finally held that sales of vegetable and fruitsshown in the books of the assessee and purchase expenses are not 7. reliable and the book results are rejected under Section 145 (3) oftheAct. 7. reliable and the book results are rejected under Section 145 (3) oftheAct. He further argued that the Tribunal in ofthe impugned order has para-8held that if the A.O. desired to reject the books of account, then, heshould have estimated the agriculturai Income based upon somereasonable material so as to justify such estimation.However, theTribunal even after recording the above finding did not remand thematter to the A.O. for fresh assessment after setting aside the order oftheCIT(Appeals)andconfirmedtheorderpassedbytheCommissioner (Appeals).In these circumstances, the order of theTribunal confirming the order ofthe CIT (Appeals) cannot be sustainedand the same deserves to be set aside and the A.O. may be directedfor fresh assessment in the light ofthe observations ofthe Tribunal.Relying upon the decision of the Supreme Court in the matter ofCommissioner of Income Tax Vs. Ramakrishna Deo {(1959) 35 ITR312 (SC)}, it was argued that the law is weli settled that it is for aperson who claims exemption to establish it, and there is no reasonwhy it should be otherwise when the exemption claimed is under the ITAct. Since the assessee was claiming exemption on the ground that itwas an agriculturalincome, the burden of proof was upon theassessee to establish that he derived income only from agricuiture.Further relying upon the decision in the matter of Commissionerof income Tax Vs. R. Venkataswamy Naidu {(1956) 29 ITR 529(SC)}, it was argued that in order to claim an exemption from paymentof income-tax in respect of what the assessee considered agricuitura! para-8held that if the A.O. desired to reject the books of account, then, heshould have estimated the agriculturai Income based upon somereasonable material so as to justify such estimation.However, theTribunal even after recording the above finding did not remand thematter to the A.O. for fresh assessment after setting aside the order oftheCIT(Appeals)andconfirmedtheorderpassedbytheCommissioner (Appeals).In these circumstances, the order of theTribunal confirming the order ofthe CIT (Appeals) cannot be sustainedand the same deserves to be set aside and the A.O. may be directedfor fresh assessment in the light ofthe observations ofthe Tribunal.Relying upon the decision of the Supreme Court in the matter ofCommissioner of Income Tax Vs. Ramakrishna Deo {(1959) 35 ITR312 (SC)}, it was argued that the law is weli settled that it is for aperson who claims exemption to establish it, and there is no reasonwhy it should be otherwise when the exemption claimed is under the ITAct. Since the assessee was claiming exemption on the ground that itwas an agriculturalincome, the burden of proof was upon theassessee to establish that he derived income only from agricuiture.Further relying upon the decision in the matter of Commissionerof income Tax Vs. R. Venkataswamy Naidu {(1956) 29 ITR 529(SC)}, it was argued that in order to claim an exemption from paymentof income-tax in respect of what the assessee considered agricuitura!income, the assessee had to before the IT Authorities put proper put proper materials which would enable them to come to a conclusion that theincome which was sought to be assessed was agricultural income.Itwas not for the IT Authorities to prove that it was not agriculturaiincome. materials which would enable them to come to a conclusion that theincome which was sought to be assessed was agricultural income.Itwas not for the IT Authorities to prove that it was not agriculturaiincome. InthematterofJugalKishoreAroraVs.DeputyCommissioner of Income Tax {(2004) 192 CTR (Ail) 174 : (2004) 269iTR 133 (All) : (2004) 141 TAXMAN 187}, the Hlgh Court ofAHahabadconfirmed the order of the Tribunal whereby the matter was remandedto the A.O. So bring on record the nature of operations performed bythe assessee in growing plants in nursery viz. primary as well assecondary on the specific iand area, and thereafter apply the law laiddown by various Courts to the facts of the case to determine whetherthe Income from nursery is agricultural income.Commissioner of Income Tax {(2004) 192 CTR (Ail) 174 : (2004) 269iTR 133 (All) : (2004) 141 TAXMAN 187}, the Hlgh Court ofAHahabadconfirmed the order of the Tribunal whereby the matter was remandedto the A.O. So bring on record the nature of operations performed bythe assessee in growing plants in nursery viz. primary as well assecondary on the specific iand area, and thereafter apply the law laiddown by various Courts to the facts of the case to determine whetherthe Income from nursery is agricultural income. 8.Heard learned counsel for the appellant. Perused the orders in origina!as also orders passed by the appellate forums.as also orders passed by the appellate forums. s.indisputably, both the appellate forums, after eiaborately consideringthe reasons assigned by the A.O. for rejecting books of account andnot accepting explanation of the assessee for substantial increase inproduction of agricultural produce, have set aside the order of the A.O.and recorded a finding of fact that the A.O. did not foliow the proper• procedure after rejecting the books of account to estimate net receiptand expenditure incurred by the assessee. Further by considering theassessment for the preceding years and the gross profrt ratio and netproflt ratio, it has been observed that ratio was least in the year underconsideration.the reasons assigned by the A.O. for rejecting books of account andnot accepting explanation of the assessee for substantial increase inproduction of agricultural produce, have set aside the order of the A.O.and recorded a finding of fact that the A.O. did not foliow the proper• procedure after rejecting the books of account to estimate net receiptand expenditure incurred by the assessee. Further by considering theassessment for the preceding years and the gross profrt ratio and netproflt ratio, it has been observed that ratio was least in the year underconsideration. Ban/e l^ io. It is true that in the case of agricultural income it is the burden of theperson who claims exemption under fhe head agricultural income,however, in the instantcase, both the appellate forums have set asidethe order of the Assessing Officer by accepting books of accountfurnished by the assessee and his explanation for the inconsistenciesin the statements of of firm/sypervisors and non appearance partnersof the brokers summoned by the Department. In our considered view,the whether income derived by an assessee is an agricultural questionincome, whether agricultural income shown by the assessee is and just[or][ it][ is][ excessive][ and][ whether][ explanation][ offered][ by][ the]properassessee regarding inconsistency in the version of partners of thefirm/supervisors is a question of fact and the same has been decidedby the CIT (Appeals) in favour of the assessee which has beensubsequentiy confirmed by the Tribunal. ll.On the basis of aforesaid dlscussion, we are of the view that nosubstantial question of !aw, as proposed, arises for adjudication of thisappeal. The appeal is accordingly dismissed. > Sd/-R.N. ChandrakarJudge Sdf-Dhirendra MishraJudge