TaxTMI 
TaxTMI 
2002 (5) TMI 874
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....olidated order for the sake of convenience. 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....
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.... challenging the setting aside of the assessment by the CIT(A) and contending that the CIT(A) should have deleted the additions and should not have directed the Assessing Officer to conduct roving enquiries, especially when the Assessing Officer had 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 finding....
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....is lack of jurisdiction and mere irregularity or illegality in the procedure followed cannot be a ground for declaring the assessment null and void. After noticing the judgment of the Hon'ble Bombay High Court, the CIT(A) recorded the 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....
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....n that basis, no objection could be taken. He pointed out that there is no suggestion that the CIT(A) lacked jurisdiction to do so. Since there was no fetter on the power of the CIT(A) to set aside the assessment and direct the Assessing Officer to redo the same on 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) U....
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....es not mean that the additions made by the Assessing Officer in the assessment years 1991-92 and 1992-93 were rightly made by the Assessing Officer. Consequently, the Assessing Officer cannot place any reliance on those findings. (g) The findings given in the assessment years 1991-92 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 independe....
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....tmental authorities was vitiated by suspicion and conjecture and they have viewed the assessee's claim of agricultural income with scepticism right from the beginning, brushing aside whatever evidence that was led in support of the claim and at the same time not taking any step by themselves 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 ....
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....ultural income declared by the assessee as a ruse to bring in undisclosed income and (2) agricultural expenses under Section 69C. Our reasons are given below : Reasons: (i) Judgment of the Hon'ble Bombay High Court in Bharatkumar Modi's case (supra): 16. Though no arguments were advanced before us on 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 2....
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....s for some earlier years. It may be that before him the assessee had placed reliance on those orders where the assessments were annulled; but before us, as already noted, no contention was raised to the effect that the assessment for the year under appeal should be annulled. Under these circumstances, there is no question 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 ....
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....e may be made to the judgment of the Supreme Court in CIT v. Kanpur Coal Syndicate. [1964] 53 ITR 225. The directions which the CIT(A) has given in the present case fall in the second limb of his plenary powers, which have been embodied in Section 251(1)(a) itself. He has set aside the assessment with directions to the Assessing 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 asse....
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....were not reliable and deserved to be rejected." Thereafter, he has also stated that the assessee's case was also not straightaway acceptable and needs further probe. Thus, the CIT(A) thought it fit to set aside the assessment only for the purpose of enabling the Assessing Officer to make detailed enquiries 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 ....
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....ther material to impeach the farmers' statements. This also does not appear to have been done in the fresh assessment proceedings. 23. From the foregoing discussion, it will be seen that the order of the CIT(A) was a mandate to the Assessing Officer which went uncomplied with, both in letter and in spirit. (iii) Non-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....
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....lained by the assessee in paragraph 5 of the reply dated 10-3-2000 to the notice issued by the Assessing Officer. The explanation briefly is that the assessee has taken the sales figure on the basis of the orders received from Madhumilan Syntex Ltd. and not on the basis of the delivery. Though the Assessing Officer has referred to 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....
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....e good the assessment. He should have further realised that the mandate was not so much for the assessee to lead any further evidence (though there was no prohibition in doing so) as to him to cross-check the evidence. In this background of the case, he was not expected to cast the burden on the assessee as if he was in seizing 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....
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....f land to the appellant. However, the assessee's contention right through, including the appeal proceedings before us, has been that those statements have not been furnished to the assessee as required by the rules of natural justice. The CIT(A) vide order dated 30-12-1997 had directed the Assessing Officer 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. ....
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.... pointing out the shortcomings in the enquiries made by the Assessing Officer in the course of the original assessment proceedings. In paragraph 5 of his order dated 30-12-1997, he has remarked as under :- It is true that the Assessing Officer has not properly examined the claim of the appellant 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 ev....
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..... They did not file an appeal to the Tribunal challenging the setting aside or the directions. If at all there was any ambiguity, it was for the Revenue to file an application before the CIT(A) for clarification or take up the matter before the Tribunal and get the directions clarified or modified. 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. ....
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....econd round has stated that copies of the statements were furnished to the assessee, we were not referred by the learned CIT(DR) to any such statement nor to any material to show that the statements were given to the assessee. We have already adverted to the assessee's claim that this year there are 111 farmers 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 tha....
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....e undelivered soyabean was taken on the basis of the estimated realisation value of the crop. The explanation has been noted by the Assessing Officer and again as already seen, he did not bother to check the orders received to find out whether the figure entered in the profit & loss account is really on the basis of the 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 ....
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....been disputed or found inflated. The purchase has already been independently confirmed by the said company. In the block assessment order passed on 29-1-1999, the purchase has not been disputed and no addition has been made for any inflation of purchases. The additions made were only for excess stock and cash found during the search. These 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 cann....