TaxTMI 
TaxTMI 
2002 (5) TMI 874
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....e. 3. By common consent, the appeals in the case of Smt. Kusumdevi Modi were taken up first and argued elaborately by both the sides, not only because the main order of the CIT(A) has been passed in this case, but also because the facts in all other cases are identical. No separate arguments were therefore advanced in the other appeals. In the succeeding paragraphs, therefore, we proceed to narrate the facts in the case of Smt. Kusumdevi Modi and our decision therein would govern all the appeals. Before we proceed to do so, we would however furnish the brief particulars about the different assessee, the additions made etc. in the form of the following chart :- SI.No. IT A Nos. Name of the Assessee Additions made in dispute Agricultural income treated as income from undisclosed sources Agriculture expenditure added Under Section Rs. Rs. 1. 888/MUM/98 1836/MUM/2001 Smt. Sudhadevi Modi 81,62,980 16,72,774 2. 889/MUM/98 1839/MUM/2001 Shri Anurag Modi 1,14,95,253 24,53,481 3. 890/MUM/98 1837/M/2001 Smt. Ritu Modi, Mumbai. 18,36,535 4,39,819 4. 891/MUM/98 1840/MUM/2001 Shri Manmohan Modi, HUF 66,65,824 14,82,745 5. 892/MUM/98 1835/MUM/2001 Shri Ashish Modi....
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....not found any defect or discrepancy in the evidence led by the assessee in support of the agricultural operations. 7. During the pendency of the appeal before the Tribunal, the Assessing Officer took up the fresh assessment proceedings. He noticed the findings given by the Assessing Officer in the assessment for the assessment years 1991-92 and 1992-93 where also the assessee had declared substantial agricultural income. He noticed that in those years, the assessee's claim had been rejected and additions were made on the footing that the agricultural income really represented the assessee's undisclosed income. The Assessing Officer observed that the facts for the year under consideration now are the same as those obtaining in the assessment years 1991-92 and 1992-93 to a large extent and those findings would apply with equal force to the present year also. He expressly stated that he was relying upon the comprehensive findings given in the those assessment years by the Assessing Officer. Thereafter, he issued a notice under Section 142(1) dated 12-1-2000 calling upon the assessee to furnish certain information. The assessee furnished the required information by letter date....
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....he following findings :- (a) The assessee failed to explain the contradictions in the statements of the farmers, who are her own witnesses. (b) The assessee did not establish the carrying out of the primary or secondary agricultural operations. (c) The Assessing Officer had examined the farmers, who denied having carried out any agricultural operations on behalf of the assessee. The Assessing Officer had carried out the directions given by the CIT(A) in his order dated 30-12-97. (d) Though the CIT(A) had technically set aside the original assessment order, in effect he had confirmed the findings given therein. (e) The claim that the agricultural produce, soyabean, was sold to Madhumilan Syntex Ltd. cannot be accepted because the company and the assessees have acted in collusion. (f) The assessee's explanation that the produce (soyabean) was stored in the agricultural fields themselves, open to the vagaries of nature, was against human probabilities and cannot be accepted. On the basis of the above findings, the CIT(A) held that the additions have been rightly made, in arriving at this conclusion, he referred to the following judgments of the Supreme Court:- (1) McDowell....
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....the basis of his directions and after making the enquiry as directed by him, the assessee's challenge to the order of the CIT(A) must fail. 12. In the appeals filed against the order of the CIT(A) passed in the second round, sustaining the additions made by the Assessing Officer, the assessee has taken various contentions. The assessee has also filed written submissions dated 20-4-2002. The following are the main contentions :- (a) The Assessing Officer has not followed the directions given by the CIT(A) vide order dated 30-12-97 and therefore the additions cannot stand. Reliance has been placed on the following orders of the Tribunal wherein it has been held that additions made in the fresh assessment without following the directions of the CIT(A) are unsustainable :- (1) Asstt. CIT v. Anima Investment Ltd. [2000] 73 ITD 125 (Delhi) (TM). (2) Sudershan Kumar v. ITO [1997] 62 ITD 243 (Asr.) (TM). (3) Udeyraja Goliya (HUF) v. Asstt. CIT [1998] 64 ITD 21 (Bom.) (TM). (b) The Assessing Officer has taken up the fresh assessment by notice under Section 142(1) dated 12-1-2000, after a delay of two years from the date of the order of the CIT(A) setting aside the original assessm....
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....and 1992-93 which are heavily relied upon by the Assessing Officer for the year under appeal are not binding on the Assessing Officer, because each assessment year is different and the findings of facts given on the basis of the evidence furnished for one year cannot automatically be incorporated in the assessment order in respect of a different year, especially when the assessee has let in independent evidence for the other year. It was further pointed out that the assessee has taken lease of land from 111 farmers who are completely different from the farmers from whom she took lands on lease in the previous years relevant to the assessment years 1991-92 and 1992-93. Further, the assessee has let in much more substantial and reliable evidence in support of her claim that she carried on agricultural operations during the accounting year relevant for the year under appeal and this has to be independently considered without placing undue reliance on the findings given in the earlier assessment years on the basis of the evidence led in those years. (h) The assessee's claim is that it has sold soyabeans to Madhumilan Syntex Ltd. Though the Assessing Officer has doubted the claim, ....
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.... to disprove the same or prove that the claim was false or bogus. This is clear from the fact that the Assessing Officer did not take any steps to comply with the directions given by the CIT(A) for two long years but suddenly proceeded to issue a notice under Section 142(1), which was complied with by the assessee. But whatever details were furnished was refused to be looked into fairly, reasonably and objectively. The additions were made almost as if the authorities were pre-determined to make them in any case. They should therefore be deleted. 13. The learned CIT(DR) on the other hand made the following submissions : (a) Basically, it was for the assessee to prove the claim that she derived agricultural income by cultivation and sale of soyabean with acceptable or unimpeachable evidence, which burden she has failed to discharge. He relied on the findings given in the assessments for the earlier years. In this regard, he pointed out that though the farmers from whom the assessee claims to have taken lease of land in the year under appeal may be different from those in the earlier years, the modus operandi of the assessee is the same and therefore those earlier findings would be ....
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.... behalf of the Department on the basis of the above judgment of the Hon'ble Jurisdictional High Court, we may nevertheless notice the same because it was contended on behalf of the assessee that the said judgment does not contain or lay down any proposition which is against the assessee on merits and also because the CIT(A) in the second round has referred to the judgment. The judgment related to the assessment year 1993-94 where the Tribunal, Bombay Bench, following the order of the Tribunal for the assessment years 1991-92 and 1992-93, annulled the assessment on the ground that no opportunity had been afforded by the Assessing Officer to the assessee to contradict the materials/statements on which he had relied while completing the assessment. The Hon'ble High Court, accepting the appeal filed by the Department against the order of the Tribunal under Section 260A of the Act, held that failure to adhere to the rules of natural justice and to afford an opportunity to the assessee to meet the case against him is a procedural irregularity or illegality which does not affect the jurisdiction of the Assessing Officer and therefore in such a situation the assessment cannot be an....
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....ion of the Tribunal annulling the assessment. In that case, as rightly pointed out on behalf of the assessee, the judgment of the Hon'ble Bombay High Court (supra) is in no way against the assessee in her case on merits. (ii) The order of the CIT(A) in the first round: 18. It would be of some use to refer briefly to the order of the CIT(A) dated 30-12-97 setting aside the original assessment with certain directions. Paragraph 6 of the order is reproduced below : In view of such facts, it is necessary that the matter is restored back to the file of the Assessing Officer who should make further enquiries about agricultural activities claim to have been carried on by the appellant, whether actually carried on, whether expenditure incurred when and where, whether produce worth crores was actually stored for months in the villages as is claimed and so on. The Assessing Officer, in view of past history of the case, should make enquiries about the existence of the trucks claim to have been used for transportation, their use by the appellant and the payments made for them. The Assessing Officer has not so far made any enquiries about the source of expenditure incurred and how such h....
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....ng Officer to carry out enquiries on certain lines. It was not shown before us on behalf of the Department that this order of the CIT(A) has not been accepted by them and an appeal has been filed before the Tribunal. Having thus accepted the order, it was the duty of the Assessing Officer to carry out the enquiries as directed by the CIT(A). 20. A perusal of the fresh assessment order passed under Section 143(3) read with Section 250 and the conduct of the Assessing Officer however shows that he has not complied with the directions of the CIT(A). We see force in the contention of the assessee that the Assessing Officer, instead of taking up the fresh assessment proceedings within a reasonable time from the date of the order of the CIT(A), took them up only in the month of January 2000, after a delay of 2 years. Precious time was thus lost for which the assessees are not responsible. Even when the proceedings were taken up the Assessing Officer merely issued a notice under Section 142(1) raising many queries which were complied with by the assessee by letter dated 10-3-2000. The Assessing Officer, instead of dealing with the evidence/details filed by the assessee, took the general ....
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....into the assessee's claim. He had even indicated the lines on which the enquiries are to be made. By way of guidance to the Assessing Officer, he also indicated certain specific areas where further probe or clarification was necessary to be obtained. These were- (a) discrepancies in the assessee's account in the books of Madhumilan Syntex Ltd.; (b) absence of certain bills showing the sales in the ledger account; (c) difference between the figure of assessee's sales to the company and the company's purchase figure from the assessee; (d) minor discrepancy in the cash flow statement filed by the assessee regarding the figure of sales to the company and the amount of cash received; (e) reason for heavy cash payments by the company to the assessee in violation of the provisions of the Income-tax Act; (f) verification of the claim that the trucks claimed to have been engaged in me transportation of the soyabean to the company were actually so engaged; (g) storage of goods in the field, open to the vagaries of nature and payment for watch and ward; (h) discrepancy in the sale figure shown by the assessee in her profit & loss account and the stock figure shown in t....
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....consideration of the evidence in the fresh assessment proceedings : 24. A careful reading of the fresh assessment order shows that the Assessing Officer has not applied his mind nor considered in details the evidence/details furnished by the assessee. The tabular statement filed by the assessee along with the written submissions dated 20-4-2002 in the course of the hearing before us shows two columns - the first column showing the requirement of the Assessing Officer by notice issued under Section 142(1) and the second column showing how the same has been met by the assessee. The statement has been prepared headwise : (a) Description of the land taken on lease, with area, location etc. (b) Name & complete postal address of the farmers (c) Details of lease agreements such as duration, that they were not registered but only notarised, amount of lease rent etc. (d) Expenses incurred for agricultural operations such as purchase of seeds, fertilizers, pesticides, watch and ward etc., mode of payment, mode of transport of cash to villages by whom, addresses of payees, datewise source of payment and receipt of sale proceeds (i.e., cash flow statement) and connected evidence. (e) Det....
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.... the explanation, he has not disputed the claim made therein regarding the basis of the figure of sales. He has made certain observations which are very general in nature which appear to us to be based on suspicion or scepticism. Suspicion or scepticism can certainly constitute the starting point for further enquiry but by themselves do not constitute proof, however plausible, theoretically, such suspicion might be. The Assessing Officer did not consider it necessary to check the version of the assessee by calling for the orders placed by Madhumilan Syntex Ltd., which were claimed to be the basis for the sales figures. It is not as if the assessee had put forth such a claim for the first time before the Assessing Officer. The CIT(A) had himself noticed the "discrepancy" while dealing with the appeal against the original assessment and had made observations cautioning the Assessing Officer about the sales being inflated to show more agricultural income. Therefore, there was all the more reason for the Assessing Officer to have taken steps to probe the matter further without losing time. The same explanation was given before him by the assessee after two years but still the....
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....izing of the original assessment proceedings where the primary onus is on the assessee to prove his claim. Therefore, his observations at page 8 of the fresh assessment order to the effect that the assessee did not discharge the onus to "prove and establish beyond doubt that the agricultural operations were actually carried out and such income was earned out of such operations only" show too simplistic an approach to the matter, insensitive to the directions of the CIT(A) and his appellate order read as a whole. His observation that the information provided by the assessee in the course of the original assessment proceedings was "too sketchy and did not help in proving/establishing that agricultural operations were in fact carried out" is belied by the observations of the CIT(A) and the further observation that the assessee failed to prove the same even during the fresh assessment proceedings is too vague, sweeping and has no bearing on the turn of events. (iv) Evidence led by the assessee and merits thereof: 28. We now proceed to a consideration of the evidence that was let in by the assessee to prove the income earned by way of cultivation and sale of soyabe....
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....er to give the statements recorded by him to the appellants, but this direction does not appear to have been heeded in the fresh assessment proceedings. 30. Be that as it may, in the course of the original assessment proceedings, the Assessing Officer had examined Sharma who had confirmed the carrying on of the agricultural operations. But since he passed away in 1998 due to stroke, he could not be produced for examination by the Assessing Officer in the course of the fresh assessment proceedings. 31. We have already noticed how the Assessing Officer has dealt with the evidence in the course of the fresh assessment proceedings. The CIT(A) sitting in appeal over the fresh assessment has basically made the following points : (a) The assessee has not discharged the burden of proving that she derived agricultural income by cultivating soyabean and selling the same to MSL. (b) The Assessing Officer has been able to prove the falsity of the assessee's claim by making extensive enquiries in the course of the original assessment proceedings from the farmers who had given contradictory statements regarding the agricultural operations carried out allegedly on behalf of the appellants....
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....pellant and the evidence filed in support of it. Though the Assessing Officer has made a reference to the facts and circumstances of appellant's case in earlier years, he has not made enquiries on the lines made by the Assessing Officer in A.Y. 1992-93. The Assessing Officer in that year examined or got examined a large number of farmers and most of the traders, made enquiries from the Mandi Samithi to ascertain the veracity of appellant's claim detected, called for and examined some of the bank accounts of the traders from where cheques issued to the appellant were cleared, made enquiries with office of Food Controller, Sales tax authorities and other concerned depts. and sent a detailed show cause notice to get the explanation of the appellant on all the material collected and intended to be used against her. Nothing of that kind was done by the Assessing Officer during the year. No evidence has been brought on record to prove that the lease agreements submitted by the appellant, as also the other documents filed in support of her claim were not reliable and deserved to be rejected. No details have been mentioned by the Assessing Officer as to how he found the statements ....
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....ed. This was not done. Even if the Department had considered that the setting aside with directions for further enquiry was meaningless because the Assessing Officer had already carried out the exercise in the course of the original assessment proceedings itself, it could have made out a grievance against the order of the CIT(A) and filed an appeal to the Tribunal to get the grievance redressed. This also was not done. Thus, the order had become final and parties have acted on that basis. By not filing an appeal to the Tribunal against the order of the CIT(A) setting aside the assessment with directions, the income-tax authorities have accepted that the enquiry on the lines indicated by the CIT(A) had not been carried out during the original assessment proceedings. If that is the correct position, it was not for the successor-CIT(A) to remark on the merits of the order of the predecessor. 34. Turning now to the evidence, the following have been given by the assessee in the original assessment proceedings : (a) Lease documents (b) Purchase vouchers for fertilisers and seeds (c) Details for expenses such as lease rent, tractor charges, pesticides, labour etc. (d) Affidavits from....
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....armers from whom the appellants have taken lands on lease and they are all different from the farmers from whom the leases were taken in the earlier assessment years. Again, this claim was not challenged or disputed. In that case, there should be something in the fresh assessment order to show that the Assessing Officer furnished copies of statements of farmers (out of those 111) to the appellants in compliance with the directions of the CIT(A). We have searched the fresh assessment order in vain for some proof or statement of the Assessing Officer to this effect. We have also looked into the Annexure to the notice issued under Section 142(1). It contains no reference to such statements, let alone furnishing copies thereof to the assessee. Under these circumstances, we are unable to know the basis of the finding given by the CIT(A) in paragraph 16 of his order to the effect that the copies of the statement of the farmers who denied having cultivated the land on behalf of the appellants were given to the appellants. Perhaps he was referring to the lease documents executed in the accounting years relevant to the assessment years 1991-92, 1992-93 etc., which were probably given to the....
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....e orders. The discrepancy has to be therefore taken as having been properly explained. (d) Storage of the crop: 40. The Assessing Officer has said that the appellants do not have any godown to store the crop. But the explanation of the appellants is that the crop was not stored in any godown, but were stored in the agricultural fields themselves, after being harvested. The crop was transported directly from the fields by trucks. As per the details filed in the paperbook, we find that the entire stock of soyabean was cleared within a month between 6-10-1993 and 25-10-1993. The appellants had taken care to cover the crop without leaving them susceptible to the vagaries of nature. They had also employed and paid watch and ward staff. The payment is supported by the entries made in the cash flow statement. Further, the statement of Sharma given in the course of the original assessment proceedings also supports the fact. (e) Transportation of the crop : 41. To prove the transport of the crop, the assessee has produced evidence which are complied at pages 417 onwards of the paper-book filed by the assessee. These have to be read with pages 32 onwards. Each sale of the produce is supp....
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....ese additions have also been deleted by the CIT(A) by order dated 14-3-2002. Copies of this order were also filed. 45. If the case of the income-tax authorities is that the assessee brought in her unaccounted monies in the guise of agricultural income by way of cultivation and sale of soyabean, for which there is according to them no evidence or the evidence led has been got up for occasion or concocted, it would not be unreasonable to expect some action to be taken in the case of the purchaser of the produce, which in this case is Madhumilan Syntex Ltd. We were informed on behalf of the assessee that the same Assessing Officer who is in charge of the assessments of the appellants is also in charge of the assessment of the said company. If the sale of soyabeans to the company by the appellants is a concocted story, the purchase by the company cannot be genuine. But no action has been shown to have been taken in the assessment of the company to disallow the purchases as bogus or inflated. Even after the search, no such action has been taken. This shows the inconsistency in the stand of the Assessing Officer. (h) Cash flow statement, sale proceeds etc. 46. The assessee-appellants ....