TaxTMI 
TaxTMI 
2009 (9) TMI 617
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....97-98, the assessee declared agricultural income of Rs. 6,04,950. Similarly, for the asst. yr. 1998-99, the assessee declared agricultural income of Rs. 5,36,448. In support of the agricultural income, the assessee filed three lease deeds evidencing the fact that the assessee had taken agricultural lands on lease and following were the details of the lands taken on lease: (i) Agricultural land to the extent of 39 acres in Khasara No. 302/23 and Khasara No. 302/30 of Village Mohbatta from one Shri Arun Agrawal son of Shri Lakhanlal Agrawal. (ii) Another land to the extent of 39 acres in Khasara No. 302/28 in Mohbatta Village was taken on lease from one Shri Ripudmen Agrawal son of Shri Devdatta Agrawal. (iii) Another about 15 acres of land in Khasara No. 302/32 in Village Mohabatta was taken on lease from one Jyoti Agrawal son of Shri Bgarat Agrawal. Apart from confirmations of lease in favour of the assessee, the owners of the lands also confirmed the fact that they received the lease amounts as mentioned in the lease deeds. 3. The assessee had claimed that he had sold the agricultural produce raised on the lands through Mandi and the sale receipt in respect of sale ....
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....ugh the intermediary Shri Nandkishore Sahu and did not know the purchaser. The AO, however, was not convinced with this reply given by the assessee. Consequently, Shri Mohd. Farooqh, the friend of the assessee who introduced Kochayas Shri Nandkishore Sahu to the assessee as well as Shri Nandkishore Sahu who acted as Kochayas or intermediary in the sale of the agricultural produce of the assessee were examined by the AO. In their examination, they confirmed the fact as stated by the assessee. Mr. Nandkishore Sahu, Kochayas, deposed that he had arranged for sale of the agricultural produce of the assessee and earned commission thereon. He also stated that whatever Mandi receipts were given to him by the purchaser had been given by him to the assessee. The AO also examined one Shri Rameshwar Dewangan who was an employee of the assessee who was looking after the land of the assessee. He deposed that two thousand bags of paddy were produced under his supervision and the produce so produced were sold through Kochayas. 4. The AO was still not convinced and he doubted the genuineness and truth of the explanation offered by the assessee. In particular, he noticed that only the agricultur....
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....ossibility of earning more than 30 per cent after deducting lease rent. Considering the above facts, 50 per cent of agriculture income i.e., Rs. 3,02,475 (which is disproportionate) is being disallowed and added to the total income of the assessee. Since the assessee has furnished inaccurate particulars of his income in the return therefore, penalty proceedings under s. 271(1)(c) is initiated separately. Rs. Total income as shown in the return. 2,17,750 Add: Agriculture income (as discussed) 3,02,450 Total income 5,20,225 Agricultural income 3,02,475 Assessed under s. 143(3). Issue demand notice and challan. Charge interest as per law. Issue penalty notice under s. 271(1)(c)." Aggrieved by the findings of the AO, the assessee preferred appeals for both the assessment years under consideration to the CIT(A). 5. The CIT(A), on consideration of the case as put forth by the assessee before the AO, came to the following conclusions: (i) That the evidence produced by the assessee that he carried on agricultural operations has not been proved to be false or fabricated but the AO based his conclusion only on suspicion. ....
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.... other hand, relied on the order of the CIT(A) and submitted that there was nothing on record before the AO to come to a conclusion that 50 per cent of the agricultural income declared by the assessee was fictitious. Referring to the observations of the AO about the returns from the agricultural land prior to the lease of the lands by the owners in favour of the assessee, he submitted that the return from the agricultural operations depends on a various factors, like quality of paddy grown, quality of seeds, irrigation facility created, monsoon factor and over all efficient management of the agricultural activity. The AO has ignored the fact that the assessee has spent money and labour which resulted in higher yield from the agricultural lands. With regard to the sale proceeds of the agricultural produce, he brought to our notice the various circumstances which were in favour of the assessee and submitted that there was no evidence available before the AO to come to the conclusion that the sale value declared by the assessee was not correct. He relied on the following decisions: 1. Shiv Prakash vs. CIT (1983) 139 ITR 844 (J&K). 2. Roshan Di Hatti vs. CIT 1977 CTR (SC) 200 : (....
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....aid to the assessee has been categorically affirmed by the intermediary Mr. Nandkishore Sahu. The quantum of sale proceeds stated to have been received by the assessee on sale of agricultural produce cannot, therefore, be disputed. With regard to the quantum of income earned by the lessors of lands prior to the lease in favour of the assessee, as rightly contended by the learned counsel for the assessee, yield of agricultural produce depends on several factors and there can be no formula of universal application. Besides all these, the AO has not brought out any evidence on record for disbelieving 50 per cent of the agricultural income returned by the assessee. There is no evidence on record to show that 50 per cent of the agricultural income is in fact undisclosed income earned by the assessee during the two relevant previous years. In the case of Dhakeshwari Cotton Mills Ltd. vs. CIT the Hon'ble Supreme Court has held that in making an assessment, the AO is not fettered by any technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in Court of law, but the AO is not entitled to make a pure guess and make an assessment....