2017 (4) TMI 909 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on poultry droppings estimation & unaccounted income

The Tribunal dismissed the Revenue's appeals for all assessment years 2006-07 to 2012-13, upholding the CIT(A)'s decisions. The Tribunal found that the ... Sale of manure in the nature of poultry droppings - CIT(Appeals) directed to exclude dropping of birds reared by contract farmers from stock available for sale - Assessment u/s 153A - Held that:- Assessing Officer had accepted the expert opinion insofar as it related to feed consumption of bird at 55-60 KGs for 60-weeks. However, when it came to poultry dropping, he refused to consider the opinion of the said expert. The said expert had clearly mentioned that recoverable manure would not exceed 10 KGs per bird. In our opinion, when reliance is placed on the opinion of an expert, it cannot be considered in part and rejected in part. It should have been considered in whole. Since the addition made by the A.O. is based on the expert opinion of Prof. D. Narahari, Senior Vice President of Indian Poultry Science Association, we are of the opinion that the CIT(Appeals) was justified in directing the A.O. to accept the expert opinion in toto. Assessee itself had estimated the droppings per year per bird at 14 KGs, which was higher than the estimation of 10 KGs per bird made by the expert. We are, therefore, of the opinion that the order of the CIT(Appeals) cannot be faulted on this count. Insofar as bird droppings were concerned, Assessing Officer himself had excluded bird droppings of poultry raised by contracting farms. Such reduction in bird droppings, as noted by the Ld. CIT(Appeals), was to be based on the number of birds grown at contracting farms and not based on the number of birds held in closing stock as done by the Assessing Officer. Just because assessee had valued stock of birds considering a particular strength, we cannot say that poultry droppings of birds under contact farming were not to be excluded. We are of the opinion that the CIT(Appeals) was fair in giving such directions. We do not find any reason to interfere with the order of the CIT(Appeals) in this regard also. Unexplained investment addition under Section 69B - Held that:- Assessee had estimated and admitted unaccounted income from sale of bird droppings and broken eggs during the course of assessment proceedings before the Assessing Officer. We have already upheld the order of the CIT(Appeals) with regard to deletion of additions made by the Ld. A.O. on additional income estimated from sale of bird droppings. In our opinion, the finding of the Ld. CIT(Appeals) that additional income from bird droppings for various assessment years covered by the search assessment was adequate to meet the onmoney payment of ₹ 2,37,99,820/- was justified. Telescoping was rightly allowed by the Ld. CIT(Appeals). We do not find any reason to interfere with the order of the CIT(Appeals) on this aspect also. Revenue appeal dismissed. Issues Involved:1. Estimated addition for sale of manure in the nature of poultry droppings.2. Exclusion of poultry droppings of birds reared by contract farmers from stock available for sale.3. Deletion of addition for unexplained investment under Section 69B of the Income-tax Act, 1961 for assessment year 2010-11.Issue-wise Detailed Analysis:1. Estimated Addition for Sale of Manure in the Nature of Poultry Droppings:The Revenue challenged the deletion of an estimated addition made by the Assessing Officer (A.O.) for the sale of manure in the nature of poultry droppings. The assessee, engaged in poultry and feed business, was subjected to a search, and proceedings under Section 133A of the Income-tax Act, 1961 were initiated. The Managing Director of the assessee confirmed unaccounted sales of poultry droppings. The A.O. sought an opinion from an expert who estimated that the average poultry dropping per bird per annum would be 25 Kgs. The A.O. reworked the income from poultry droppings based on this estimate, leading to additions for each year. However, the Commissioner of Income Tax (Appeals) [CIT(A)] found that the expert had estimated bird dropping per year at 10 KGs and held that the A.O.'s adoption of 19.10 KGs was unsupported by material evidence. The CIT(A) accepted the assessee's estimate of 14 KGs per bird as fair and directed the A.O. to adopt a rate of Rs. 750 per ton for assessment year 2012-13 and work out the rates on a reverse basis up to assessment year 2006-07. The Tribunal upheld the CIT(A)'s decision, noting that the A.O. should have considered the expert opinion in whole, not in part.2. Exclusion of Poultry Droppings of Birds Reared by Contract Farmers from Stock Available for Sale:The CIT(A) directed the A.O. to exclude the birds grown under contract farming from the stock of birds while working out the bird droppings. The CIT(A) observed that the A.O. had calculated bird droppings based on the closing stock of birds without considering the number of birds grown at contracting farms. The Tribunal agreed with the CIT(A), stating that the exclusion of birds under contract farming was fair and necessary to arrive at an accurate estimate of bird droppings income. The Tribunal found no reason to interfere with the CIT(A)'s order on this issue.3. Deletion of Addition for Unexplained Investment under Section 69B of the Income-tax Act, 1961 for Assessment Year 2010-11:During the search, it was found that the assessee had acquired land for a consideration higher than the registered value, leading to an addition of Rs. 2,37,99,820/- for unexplained investment. The CIT(A) accepted the assessee's argument that the realization from the unaccounted sale of bird droppings should be considered for telescoping with the on-money payment. The Tribunal upheld the CIT(A)'s decision, noting that the additional income from bird droppings was adequate to meet the on-money payment, and telescoping was rightly allowed.Conclusion:The Tribunal dismissed the Revenue's appeals for all the assessment years 2006-07 to 2012-13, upholding the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) had correctly addressed the estimation of poultry droppings, the exclusion of contract farm birds, and the telescoping of unaccounted income for unexplained investment.