TaxTMI 
TaxTMI 
2017 (2) TMI 1112
X X X X Extracts X X X X
X X X X Extracts X X X X
....e case - 1. Hon. CIT [A] has grossly erred in not accepting the book results for Agriculture Income of the appellant. Whereas, learned CIT[A] has adopted following methodology for estimating income from Sugarcane and Vegetable/Fruits etc: * From Sugarcane Gross receipts, 54% is deducted towards agriculture expenses and amount paid towards contractual farming [Batai]. For arriving at this conclusion, Hon CIT[A] has totally relied on the facts of the case of Badshah Bagwan, and referring the facts of Badshah Bagwan's case, the formula of 54% deduction is applied. Whereas, in the case of appellant, not a single document has been found and seized to establish and substantiate that the appellant had given his land on contractual [Batai] farming. Hence, deduction on account of estimated expenditure and contractual farming is purely on assumption and presumption, hence needs to be disapproved. It is humbly prayed that, the book results of the appellant may kindly be approved. * Non Sugarcane sales for Vegetable/Fruits etc are estimated @ 150% of notional income from Sugarcane Sale. From said Gross receipts, 50% is deducted towards agriculture expenses and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ult of search action. Therefore, allowing claim of exempt agricultural income as source of assets without documentary evidence would be giving undue advantage to the assessee vis-a-vis law abiding assessees. 5. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in partially deleting the addition on the issue of agricultural income ignoring the fact that the share of 46% of net agricultural income to assessee in batai/ adheli system means 46% of net agricultural income to farmer also, which leaves only 8% towards agricultural expenses for all the above assessment years, which is not acceptable. 6. The appellant prays that, the order of the Ld. CIT(A) be vacated and that of the AO's order may be restored. 7. The appellant craves leave to add, alter, amend, modify any of the above grounds raised, any other grounds at the time of proceedings before the Hon'ble Tribunal which may please be granted." 5. Similar grounds have been raised by the Revenue in ITA No.467/PUN/2013, relating to assessment year 1999-2000. 6. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was conducted a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essing Officer also noted that the agricultural expenses for sugarcane in the case of Shri Badshah A. Bagwan, assessee's own real brother had been shown at 40% to 50% of gross receipts. The assessee was show caused as to why the agricultural income should not be considered at 40% of gross receipts. The assessee pointed out that the average expenses for agricultural activities ranges between 23.07% to 36.59%. He also pointed out that regular books of account for expenses were being kept and the details of expenses could be verified. The observation of agricultural expenses at about 40% of the receipts was in connection with field size of 1-5 acres, whereas field size of agricultural lands owned by the assessee was big i.e. ranging between 25-60 acres. The assessee also pointed out that multiple and sub-crops were regularly taken and hence, the yield ratio was high. The assessee also claimed that its irrigation facility was unique and also huge water storage capacities were created on field for constant water supply and hence, extraordinary results of output. The Assessing Officer however, did not accept the contention of assessee, where the assessee himself had agreed that in normal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the absence of any evidence filed by the assessee with regard to transport for input or output, weigh bill expenses and in the absence of narration on 7/12 extract amongst other reasons establishes that the assessee had inflated his agricultural income from non-sugarcane crops as per his convenience. The assessee again was asked to furnish the details crop-wise area under cultivation which the assessee had failed to furnish and in the absence of the same, since the assessee was having agricultural income from vegetables, the same was estimated at Rs. 6,000/- per acre and rejecting the contention of assessee of paying 50% of the agricultural receipts to the farmers, the agricultural income of the assessee was worked out under para 20 of the assessment order at pages 12 and 13 of the assessment order. The Assessing Officer thus, computed the agricultural income in the hands of assessee in each of the years and worked out the excess agricultural income shown by the assessee year-wise. The Assessing Officer also noted that the capital of assessee as shown in the balance sheet was inclusive of agricultural income and where the assessee had inflated the agricultural income, then in turn,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of Shri Namdeo Buva was also applied by the Assessing Officer in the remand proceedings. The CIT(A) noted that though elaborate submissions were made by the assessee in respect of agricultural income, it was a fact that there was no details of inputs for conducting agricultural activity and there were no details of daily expenses incurred on agricultural activity in the form of labour, power, water or of seeds and fertilizers etc. Further areawise land cultivation details were not available, sales of vegetables were all in cash and the sale bills were not serially numbered and were sometimes without dates etc. The CIT(A) was of the view that in the above said circumstances there were not sufficient reasons to estimate the agricultural income in the manner that the Assessing Officer has done. However, in the absence of reliable data maintained by the assessee the income has to be estimated in the hands of the assessee. The CIT(A) considered the land holdings of the assessee group and observed that the land holding had increased more than 3 fold during the period 1999-2000 to 2005-06. Further, the entire land holding had increased in rural agricultural areas. The CIT(A) thus infe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....zed vendors and in view thereof the contention of the assessee was accepted. However, the observations made by the Assessing Officer in respect of sale bills, statements given by persons including Shri Harunbhai Abdulgani Bagwan, Shri Zakhir Hussein, Abdulhaq Abdulhameed Bagwan and Shri Namdeo Buva as per the CIT(A) appears to be in order. Therefore, the books of account maintained were held to be unreliable and inaccurate. Further the income was estimated in the hands of the assessee by applying ratio as in the case of assessee's brother Shri Badshah A. Bagwan and the average agricultural income per acre was computed as per Table No.2 at page 25 of the appellate order. The CIT(A) accordingly estimated the yield of sugarcane per acre and also the total acreage was determined. The CIT(A) also determined total acreage under the vegetables and flowers and rejecting the claim of the assessee and did not accept the Assessing Officer's view that under the batai system, gross produce is divided between the owner of the land and the tenant. The CIT(A) acknowledged that in respect of gross income from sugarcane cultivation there was no dispute as the same was obtained from sugar mills. Howe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....time engaged in agricultural activities. Multiple and subcrops were regularly taken and consequently the income in the form of gross receipts was higher and in proportion to the low percentage of expenditure. He further pointed out that where continuous water supply was available to the farm of the assessee from Panchganga river with separate pipeline and higher water storage capacities were created for constant water supply to fields, resulted in giving extraordinary profits which merits to be accepted. The assessee claims that it was maintaining proper books of account in respect of the expenses. The assessee pointed out that there was no merit in the orders of the authorities below in making the estimation wherein the Assessing Officer had estimated yield @ Rs. 6,000/- per acre wherein the CIT(A) had increased the yield per acre to Rs. 25,605/-. 15. The Ld. Authorised Representative for the assessee pointed out that in the agricultural operations carried out by the assessee the yield could not be constant because it depends on various factors, i.e. water supply, weather, nature of seeds etc. Our attention was drawn to the tabulated details filed in this regard and it was poin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....through cash but no sale has been made through Agricultural Produce Market Committee (in short 'APMC') or commission agent. He referred to the various defects pointed out by the Assessing Officer in the claim of the assessee and the documentation maintained by the assessee but he fairly agreed that the reasonable estimate merits to be made in the case of assessee. 19. The Ld. Authorised Representative for the assessee pointed out that the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Vs. CIT reported in 26 ITR 775 held that even when estimation is to be made, no guess working could be applied and the estimation should be on some basis. Our attention was further drawn to the decision in the case of Sujan Singh Bundela Vs. ACIT reported in 3 SOT 0491 and the decision in the case of Late S.M. Bashir Vs. ITO reported in 13 TTJ 0236 wherein Assessing Officer estimated the income in the hands of the assessee. 20. The Ld. Authorised Representative for the assessee pointed out that the estimation made by the Assessing Officer was purely on guess work and the same could not have been applied. He also referred to the copy of 7/12 extracts filed wherein a noting was made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xperts for optimized agricultural activity where the assessee has undertaken systematic and scientific procedures to carry out the agricultural activities on its land holding. We find merit in the claim of the assessee that it would yield higher results. In such circumstances the yield from such big farms would be more than the yield of an ordinary farmer who operates on a smaller field. The CIT(A) had acknowledged that the assessee's family is known in the area to be engaged in the cultivation of vegetables and fruits and where the assessee is undertaking such activity on a large piece of land and where the assessee is aggregating the agricultural land from year to year. Until and unless the said activity was giving good returns or yields the assessee would not continuously be engaged in such operation. Accordingly, the estimation made by the Assessing Officer by adopting the yield @ Rs. 6,000/- per acre is definitely on the lower side. The Assessing Officer had rejected the claim of the assessee as no organized sales activity was undertaken by the assessee. The assessee claimed that it was selling the agricultural produce in cash to various persons and it was not selling through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8.00 72.90 209,098.00 --- 10 2008-09 309,928.00 50.00 154,964.00 74.92 232,210.00 --- 11 2009-10 194,368.00 50.00 97,184.00 79.61 154,741.00 --- 22. The assessee for the year under appeal, i.e. A.Y. 2000-20001 had declared the gross agricultural income at Rs. 6,81,058/- against which it had claimed agricultural expenses at Rs. 1,60,743/- and declared the net agricultural income at Rs. 5,20,315/-. The Assessing Officer had estimated the agricultural income at Rs. 49,777/- and the CIT(A) had estimated the same at Rs. 2,30,445/-. No proper basis has been adopted by either of the authorities to work out the agricultural yield in the hands of the assessee and work out the income thereafter. The case of the assessee is twofold that not only it has higher yield because of various factors but also the expenses on agricultural activities were controlled because of collective agricultural operations carried by it. We find merit in the plea of the assessee in this regard. However, in the absence of complete data being maintained by the assessee it is a fit case for estimating the income in the hands of the assessee. 23. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee had already shown the yield below 80% of the standard yield reported by the above Government bodies, the Assessing Officer should not disturb the same and accept it. The relevant finding of the Tribunal at para 66 reads as under : "66. Considering the above submissions, there is no doubt on the contention of the Ld. A.R. that books of account maintained by the assessee in regular course of the business cannot be outrightly rejected without assigning proper reason for the same but in the present case before us, the availability of books of account regularly maintained remained doubtful as the same was not found during the course of search and seizure or survey operations. The A.O nowhere has accepted any specific wording that books of accounts were found during the course of search or survey operation , hence existence of the same always remained in doubt. Under these circumstances, the only option left with the authorities below was to examine the possibility of acceptance of the claimed agriculture income by the assessee on estimate basis keeping in mind the area of land held by the assessee and agricultural activities, shown by the assessee thereon supported with evidence. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ween two main crops and generally the cultivation of vegetables is not mentioned in 7/12 extracts. The Ld CIT(A) has observed that finding of the A.O with regard to sale of fruits is not correct since the copies of 7/12 extracts furnished by the assessee contained details of fruits grown on the land. The fruits are described as mangoes, chikku, banana, coconut, papaya, lemon etc., Regarding vegetable, the ld CIT(A) has observed that compared to the land holding the sale of vegetables at Rs. 15 lakhs over the period of 7 years cannot be said to be an unlikely sum especially when the assessee is primarily an agricultural farm which has been set up for the agricultural activities. He has further noted that the A.O has added the entire amount shown as cash sales as income of the assessee from undisclosed income without appreciating that if this income is removed from the agricultural receipt, a peculiar situation emerges in which in almost all the years, the income is lower than the total expenditure debited to the books resulting in loss from agricultural activities, which is unusual to say. He has also noted that the production of fruits is within the standards published by Indian Go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ural produce including fruits and vegetables are also normally made in cash, hence such claim of the assessee cannot be totally denied. Since the books of account regarding the agricultural activity especially specific about fruits and vegetables, questioned before us have not been maintained in the regular course of the affairs, thus correct income cannot be deduced therefrom. We are therefore of the view, that it is a fit case to estimate the income from these activities of the assessees as holding of land of 74.32 acres by the assessee has not been denied nor this fact has been denied that the assessee is primarily an agriculture farm which has been set up for the business of agriculture. We are of the view that under the circumstances of the case, it would be reasonable to estimate the claimed income from fruits and vegetables by accepting the claim of the assessee in this regard upto the 80 % of the standard yield reported by NHB in the case of fruits and of ICAR in case of vegetable yield. Where the assessee has already shown the yield below 80% of the standard yield reported by the above government bodies, A.O should not disturb the same and accept it. It is ordered accordin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uction is to be made on account of contractual farming factor @50%. The basis for the said estimation is pursuant to the facts of Shri Badshah Bagwan and where the statement of the said person was never confronted to the assessee nor the information supplied to the assessee, the said information cannot be applied to decide the issue against the assessee. In any case, in the facts of the case, the assessee has claimed that it has grown vegetables on its agricultural land holding and he pleads that the said vegetables are not grown on sharing system basis. We find merit in the plea of the assessee in this regard and accordingly we hold so. 26. The second estimation of agricultural income in the hands of the assessee is on account of sugarcane wherein part of the land was under the crop of sugarcane from A.Y. 2001-02 onwards. The question arose of estimation of the said agricultural income from sugarcane produce relying on the facts of Shri Badshah Bagwan and 50% was deducted towards agricultural expenses and paid towards contractual farming. Since the facts of the present case are at variance to the facts in Shri Badshah Bagwan, we find no merit in deducting any amount towards bat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e following additional grounds of appeal:- "6. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in deleting the addition towards investment in benami FDRs and interest charged thereon for A.Y. 2005-06 ignoring the fact that assessee could not explain sources for the said investments". 7. The order of Ld. CIT(A) deleting the addition towards unexplained investment made by the assessee holding that the substantive additions have been confirmed in the hands of respective Pat Sanstha/ Banks is erroneous, as substantive additions were not actually confirmed in the hand of respective Patsansthas/ Banks as claimed of the said Patsanstha u/s 80P(2)(a)(i) has been allowed by the CIT(A) by which entire additions u/s 68 of the Act nullified. 8. Without prejudice to the above ground Ld. CIT(A) has erred in not exercising his plenary powers which are conterminous with that of A.O as per ratio laid down by CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225, 229 (SC). 9. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in giving relief to the assessee for A.Y 2005-06 on the issue of negativ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were in working condition and were functioning and the said FDRs were benami. It was vehemently argued that merely on the basis of chit of paper ownership could not assigned to a particular person where the total record of the institute from whom the FDR was issued was available for verification. The assessee explained the nature of the entries on the said FDRs and pointed out that partly the amounts have been shown by the respective persons and the balance belongs to the Institute. The contention of the assessee was rejected by the Assessing Officer in view of the notings in the diary. Further the Assessing Officer observed that as the assessee had shown bogus agricultural income then the same could not have been utilized for investment in FDRs. Accordingly, addition was made of Rs. 8,28,981/- on account of unexplained investment in FDRs in Soniya Pat Sanstha. 32. Further from the perusal of the cash flow statement, the Assessing Officer noted the investments made by the assessee during the year and again gave a finding that in order to source the said investments the assessee had inflated the agricultural income. Reference was made to the seized documents and the Assessing Of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... account of same FDRs. Accordingly, we uphold the order of the CIT(A) in this regard and dismiss the grounds of appeal raised by the revenue. Consequently no addition is warranted on account of interest chargeable on the said FDRs. 36. The revenue has failed to address the issue raised by way of grounds of appeal Nos.9 to 11 and also in the absence of any addition made by the Assessing Officer on any other account except non acceptance of agricultural income and the addition on account of FDRs there is no merit in the other grounds of appeal raised and the same are dismissed. ITA Nos. 171 to 181/PUN/2013 - Arish Shoukat Bagwan - (Assessee's appeal) ITA Nos. 489 to 499/PUN/2013 - Arish Shoukat Bagwan - (Revenue's appeal) 37. The Ld. Authorised Representative for the assessee pointed out that facts and issue in bunch of appeals relating to Arish Shoukat Bagwan for all the respective years are same, i.e. estimation of agricultural income and also ground of appeal No.6 in assessment year 2005-06 where addition was made on account of FDRs and other investments, which was deleted by CIT(A) and Revenue is in appeal. However, no addition is warranted on account of FDRs as amoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in holding on one hand that the addition of unexplained FDRs u/s. 68 of the Act was correctly made by A.O and deciding on the other hand that the said unexplained income is eligible for deduction u/ s. 80P(2)(a)(i)? 2. The Ld. CIT(A) erred in not appreciating the facts that addition made u/s. 68 of the Act is not income under the head "Profits and gain of business" and hence. is ineligible for deduction u/s. 80P(2)(a)(i). 3.(i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing deduction u/s. 80P(2)(a)(i) to the assessee ignoring the decision of Hon'ble Supreme Court in the case of The Totgars Co Operative Sale Society Ltd Vs. ITO, 332 ITR 283 held that deduction u/s. 80P(2)(a)(i) as allowable only on business income (ii) It has been held by Hon'ble Gujarat High Court in the case of Fakir Mohemad Haji Hasan Vs. CIT (2001) 247 ITR 290 that income u/s. 68 of the Act is a deemed income and is not to be computed under any of the five heads of income classified in section 14 of the Act. This view has been reit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 80P(2)(a)(i) of the Act on such addition made on account of unexplained FDRs under section 68 of the Act. The Ld. Authorised Representative for the assessee pointed out that the Assessing Officer had denied the said claim, however the CIT(A) had allowed the claim of the assessee by allowing deduction u/s.80P of the Act in respect of such additions. The CIT(A) held the assessee to be eligible to the said claim of deduction u/s.80P(2)(a)(i) of the Act since the cash credits were taxed in the hands of the assessee as income from other sources, i.e. providing credit facility to its members. For this proposition, reliance was placed on the ratio laid down by the Pune Bench of the Tribunal in the case of DCIT, Circle-3(1) Dhule Vs. Shri Agrasen Sahakari Pat Sanstha Maryadit vide ITA No.1459/PN/2005 order dated 30-06-2011. 45. The revenue is in appeal against the aforesaid findings of the CIT(A). 46. The Ld. Departmental Representative for the revenue placed reliance on the order of Assessing Officer. 47. The Ld. Authorised Representative for the assessee pointed out that the issue stands covered by the order of the Tribunal in the case of Shri Mahavir Nagari Sahakari Pa....