TaxTMI 
TaxTMI 
2015 (11) TMI 855
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.... had declared agricultural income of Rs. 17 lakhs. No separate records are maintained in respect of agricultural income. However, it was submitted that the gross receipts from agriculture is Rs. 24,00,240/- and the expenditure is Rs. 7 lakhs. 4. The AO summoned the assessee and recorded his statement u/s.131 of the I.T. Act. The AO asked the assessee to substantiate his agricultural income in absence of maintenance of any records. The assessee in response to query No.5 of the AO replied that the same has been declared on the basis of certificate issued by the Tahsildar who had issued the same on the basis of information provided by the Talati. The AO again in question no. 26 asked the assessee to explain as to how he had declared the agricultural income of Rs. 17 lakhs in the return filed on 03-02-2010 when the certificate has been issued by Tahsildar on 19-12-2010. It was replied by the assessee that he had applied for the certificate on 19-01-2010 and the certificate was issued on 19-12-2010. In view of the above, the AO was of the opinion that the assessee has not produced any evidence except the certificate issued by the Tahsildar. 5. From the past records, the AO noted that ....
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....he live stock, the total sales from the dairy business has increased only by Rs. 10,000/- during the year as compared to the immediately preceding assessment year. According to the AO, instead of the business income rising due to addition of live stock there is five fold rise in his agricultural income despite there being no addition to agricultural land or the method of cultivation. This, according to the AO, clearly indicates that the assessee has suppressed his income from dairy business which is taxable and introduced the same in the guise of agricultural income which is exempt from income-tax. 9. From the various details furnished by the assessee the AO noted that the assessee has not maintained any details regarding the day-to-day output of milk. There is no bifurcation regarding the amounts realized from sale of milk and sale of manure. Most of the expenses in respect of cattle feed is also not supported by proper evidence. The medical expenses debited at Rs. 26,825/- did not justify the figure of non-milk live stock claimed. The AO issued summons to the assessee and recorded his statement according to which the average daily output of milk from buffaloes is around 8 to 10 ....
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....AO that the Talati at Nashik is in no way concerned with the land of the assessee located at Dugaon whereas there is separate Talati is also not without authority because it is for the Tahsildar or Talati to decide how to get verification of the land done and the verification of land cannot be carried out as per whims of the AO. It was further stated that whether the Talati at Nashik was authorized to carry out verification of the land or not is a separate issue. 11. So far as the addition of Rs. 18,97,843/- on account of income from dairy business is concerned, it was submitted that the AO has taxed the gross receipts and not profit thereon. It was argued that during 2000-01 there were surveys carried out by the department on some of the dairy owners who were having more than 200 to 400 cattle. It was proved beyond doubt that the diaries do not have evidence in respect of output of milk because the same is unorganized sector. The AO has not considered the use of milk by the labourers to whom daily 1 litre milk/labourer is given by almost all the diaries in Nashik, Wastage of milk because of many reasons has not been considered by the AO. The consumption of milk by calves, consump....
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....e is issued by him on the basis of actual visit to field by the Talathi, understanding of nature, quantum and quality of crops grown and the market rates during the relevant period. There is no law which compels agriculturist to maintain the books of account or bills/vouchers, etc. in respect of agricultural activity. The AO. in the course of assessment proceedings also issued the Summons to the appellant, when the appellant was cooperating in the assessment proceedings. The action of the AO. in rejecting the certificate of Tahsildar without confronting him is illegal particularly when the certificate is issued by a Government Authority under the powers granted to him. It is not the case of A.O. that the agricultural income as disclosed by the appellant cannot be earned in the given circumstances. The appellant has also furnished the approximate quantity of crops produced in each of his agricultural field, which is also not found to be unreasonable. The sale rates as stated by the appellant of the crops are also not found to be unreasonable. Therefore, considering the totality of the facts, the impugned addition made by the AO. of Rs. l3,50,000/- is hereby deleted. This ground of a....
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....difference of Rs. 4,08,437/- (-) Rs. 3,85,919/- = Rs. 22,518/- is directed to the added. Consequently the impugned addition of Rs. 32,47,843/- is reduced to Rs. 22,518/-/. This ground of appeal is partly allowed." 14. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 15. The Ld. Departmental Representative strongly opposed the order of the CIT(A). He submitted that when the agricultural income was declared at Rs. 3,63,000/- in A.Y.208-09 and there is no increase in the land holding by the assessee the agricultural income of Rs. 17 lakhs declared during the year is not justified. He submitted that the assessee on the basis of report from a different Talati obtained the agricultural income certificate from the Tahsildar. How and why he approached a different Talati is not known. So far as income from sale of milk is concerned the Ld. Departmental Representative submitted that the assessee admittedly has not maintained any books of account. When there was an increase of 42 buffaloes during the year the increase in sale of milk was only Rs. 10,000/- for the entire year as compared to the preceding assessment year. He submitted that it is a common knowledge t....
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....her, since the assessee had declared the income from dairy business at Rs. 3,85,919/- the AO considering the non maintenance of books of account and number of buffaloes owned by the assessee at the beginning of the year as well as purchases during the year determined sale from milk at Rs. 68,07,289/-. After reducing the sale determined by the assessee at Rs. 35,59,446/- the AO determined the suppression of sale at Rs. 32,47,843/-. Since he has already considered part of the agricultural income as business income, i.e. Rs. 13,50,000/-, therefore, he made addition of the balance amount of Rs. 18,97,843/-. Thus he made total addition of Rs. 32,47,843/- We find the Ld.CIT(A) relying on the certificate produced by the assessee from the Tahsildar deleted the addition made by the AO on account of agricultural income of Rs. 13,50,000/-. So far as the income from dairy business is concerned, the Ld.CIT(A) sustained an amount of Rs. 22,518/- out of addition of Rs. 18,97,843/- made by the AO. It is the grievance of the revenue that the Ld.CIT(A) restricted the addition of Rs. 32,47,843/- made by the AO to Rs. 22,518/- without any valid reasons. 19. So far as the agricultural income is concer....
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....is own admission the assessee declared agricultural income at Rs. 3,63,000/- in A.Y. 2008-09 as against the agricultural income certificate of Rs. 15 lakhs obtained from the Talsildar, therefore, in absence of any increase in land holding and pattern of cropping the agricultural income at Rs. 17 lakhs by no stretch of imagination can be accepted. Therefore, the CIT(A) in our opinion was not justified in accepting the submissions made by the assessee regarding the extent of agricultural income declared by the assessee. We accordingly set aside the order of the CIT(A). However, considering the totality of the facts of the case, determination of net agricultural income of Rs. 4 lakhs under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. The balance amount of Rs. 13 lakhs will have to be treated as income from other sources. 21. Now coming to the extent of sale of milk from dairy business is concerned we find as against the sale figure of Rs. 35,59,446/- stated by the assesssee the AO determined the same at Rs. 68,07,289/-. While doing so, he considered the 98 live stock at the beginning of the year which will give ....
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.... Rs. 22,518/-. Under these circumstances, we find no merit in the argument of the Ld. Counsel for the assessee that since the Revenue has not taken any specific ground for deletion of agricultural income, the Departmental Representative cannot argue the matter on this issue. This argument in our opinion is devoid of any merit and therefore the same is rejected. 24. Ground of appeal No.2 by the Revenue reads as under: "2) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Nashik was justified in deleting the disallowance of Rs. 6,53,970/- on account of violation of provisions of section 40A(3) of the Income Tax Act,1961." 25. Facts, in brief, are that the AO during the course of assessment proceedings noted that the assessee has made purchases totaling to Rs. 6,53,970/- from one Shri Pawshemama. No vouchers in respect of these were produced and the payments were made in cash. He therefore invoking the provisions of section 40A(3) disallowed an amount of Rs. 6,53,970/-. Before CIT(A) it was submitted that no payment of cash in excess of Rs. 20,000/- was made. Further, the supplier is also cultivator of sugarcane and therefore the provisions of section 40....