2014 (12) TMI 464 - AT - Income Tax

Tribunal affirms deletion of Rs. 3,02,73,124 agricultural income addition by CIT(A), rejecting revenue's appeal.

DCIT, Central Circle, Kolhapur Versus Ghodawat Industries (I) Pvt. Ltd.,

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 3,02,73,124/- on account of agricultural income, dismissing the revenue's appeal. ... Addition of agricultural income – AO was of the view that the assessee had declared excess agricultural income and treated the income as undisclosed income – Held that:- CIT(A) was rightly of the view that the AO did not utilize the opportunity provided to him by the office to examine the parties to whom sales were made - The purpose of a remand is to ensure that adequate opportunity is provided to both parties to examine the case and put forth both views in the shortest period of time – as decided in assessee’s own case for the earlier assessment year, it has been held that the AO had wrongly inferred from the material produced before him that the method of accounting for sale of flowers was incorrect or that the alleged discrepancies were addressed to the assessee asking for an explanation for the same. CIT(A) rightly held that allegation that the sale patties are doubtful, does not have any merit – the AO did not have sufficient evidence to reject the production figures returned by assessee in respect of agricultural products, crops and flowers and treated the part of income from other sources - revenue authorities have not disputed the land holding i.e. 40.03 hectors of assessee and agricultural activity - a similar addition made in AY 2004-05 was deleted by CIT(A) and revenue have not preferred appeal against the same - in AY 2006-07, agricultural income on the same holding has been accepted by the AO – thus, the CIT(A) rightly deleted the addition – the order of the CIT(A) is upheld – Decided against revenue. Issues Involved:1. Deletion of the addition made on account of Agricultural Income of Rs. 3,02,73,124/- by the CIT(A).Issue-wise Detailed Analysis:1. Deletion of the Addition Made on Account of Agricultural Income of Rs. 3,02,73,124/-:The revenue filed an appeal against the order of the Commissioner of Income Tax (Appeal) [CIT(A)], Kolhapur, dated 18.12.2012, for the assessment year (A.Y.) 2005-06. The primary issue was the deletion of the addition of Rs. 3,02,73,124/- made by the Assessing Officer (AO) on account of agricultural income.The assessee, a private limited company, filed a return declaring total income of Rs. 8,93,51,850/- and agricultural income of Rs. 4,17,76,016/-. The AO observed discrepancies in the agricultural income declared by the assessee, noting that the net profit percentage was 83.67% compared to expenses at 16.33%. The AO scrutinized the details of total land holding, agricultural production, and verification of sale bills, concluding that the assessee had declared excess agricultural income of Rs. 3,02,73,124/-, treating it as undisclosed income.The CIT(A), upon appeal, analyzed the issue considering land holding, agricultural production, and sale thereof, and granted relief to the assessee. The CIT(A) referenced the decision in the assessee's own case for A.Y. 2004-05, where a similar addition was deleted, and noted that the revenue had not appealed against that decision. Additionally, for A.Y. 2006-07, the agricultural income was accepted by the AO, who only disputed the expenditure for earning the same.Regarding the verification of sale bills, the CIT(A) found that the revenue authorities did not dispute the land holding of 40.03 hectares. The AO had raised issues about the sale bills, including their serial numbering, identical addresses and telephone numbers, and discrepancies in terms such as 'Commission' being overwritten as 'discount'. The AO also noted that many letters issued to sale parties under section 133(6) were returned unserved, leading to doubts about the existence of these parties. The AO concluded that the bills produced did not reflect the correct status of the assessee's accounts.In the appeal proceedings, the assessee contended that the discrepancies noted by the AO were incorrect and that sale bills were maintained by agents, over which the assessee had no control. The CIT(A) observed that the AO did not utilize the opportunity to examine the parties to whom sales were made during the remand proceedings. The CIT(A) noted that the AO's observations about the genuineness of transactions were not substantiated, and the AO did not avail of the opportunity to confirm his doubts.The CIT(A) concluded that the AO did not have sufficient evidence to reject the production figures returned by the assessee and that the allegation that the sale patties were doubtful lacked merit. The CIT(A) upheld the agricultural income declared by the assessee, considering the land holding and agricultural activity.The Tribunal found no reason to interfere with the CIT(A)'s reasoned finding and upheld the deletion of the addition of Rs. 3,02,73,124/- made by the AO.Conclusion:The appeal filed by the revenue was dismissed, and the CIT(A)'s order deleting the addition made on account of agricultural income was upheld.