TaxTMI 
TaxTMI 
2022 (6) TMI 231
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.... of Rs. 17,78,44,464/- under normal provisions and book profit u/s 115JB was admitted at Rs. 14,74,06,124/-. The case was selected for scrutiny and accordingly notices were issued. In response to the notices, the AR of the appellant appeared and filed the information. After going through the information, the Assessing Officer completed the assessment by making additions of Rs.50,94,74,053/- towards disallowance u/s 10(1), Rs. 1,00,08,831/- towards disallowance u/s 14A and assessed the total income at Rs. 69,73,27,348/-. 4. When the assessee preferred an appeal before the CIT(A), the CIT(A) partly allowed the appeal of the assessee by deleting the disallowance made u/s 10(1) and confirmed the disallowance made u/s 14A of the Act. 5. Aggrieved by the order of the CIT(A), both the assessee and revenue are in appeal before us, by raising the following grounds of appeal: 5.1. Grounds raised by the assessee in AY 2012-13 which are common in AY 2013-14 also are as under: "1. On the facts and in the circumstances of the case, the order of the CIT(A) dismissing the appeal of the appellant is erroneous, illegal and unsustainable both on facts and in law. 2. The CIT....
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....riving income from agriculture ( REF PARA 3.3 AND 3.4) . 6.1 The assessing officer in paragraph 6.1 of the order, had mention that the assessee company has entered into seed production agreement-Master agreement with the farmers, wherein the assessee company with the cooperation of the farmers are producing the hybrid seeds by supplying the foundation seeds and other agricultural input to the farmers. The assessee had submitted that though the earlier assessment years, the assessee was claiming the activities of the assessee as business income however on account of demerger of the seed undertaking, the risk and rewards of growing receipts is entirely to the account of the assessee company. The assessing officer has not agreed to the above said version and have rejected this contention (paragraph 6 .3 and 6.4) of the assessee. 6.2 The AO observed that the activity is of the assessee is an integrated and composite one, right from the research and development to the final marketing/sale of hybrid seeds which involves several stages and the first few stages cannot be isolated and termed as agricultural activity, just because they are produced in the fields allegedly leased in by ....
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....y DR that the Revenue is entitled to bring on record, these new correct facts before the Tribunal as the proceedings are pending before the tribunal pertaining to the year under consideration. It was submitted that the tribunal is having the power to admit the additional documents/evidence/ new evidence if it came into possession of the revenue, even after passing of the impugned order, this is essential so that correct finding of fact can be recorded by the Tribunal . The Ld. DR relied upon power of tribunal mentioned in section 255(6) read with section 131 of the act. Besides that the Ld. DR referred to Rule 29 of the Income Tax Appellate Tribunal Rules which reads as under : The parties to the appeal shall not be entitled to produce additional evidence er oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be able it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the o adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be ....
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.... following pertinent questions related to agricultural operations would yield the right answer in the present case: (i) Who owns the land or who is the leaseholder of the land? (ii) Who tills the land, sows the seeds, provides the fertilizer and pesticides or other inputs? (iii) Who engages and pays for the labour who are employed in agricultural operations? (iv) Who harvests the produce? (v) Who is the owner of the produce? (vi) Who bears the risk of rejection of the produce when the quality standards laid down by the assessee are not met? 5. For all the above questions, the single answer is that the farmers is the person. Merely because the assessee pays some advance and employs his field staff to periodically monitor the operations, the assessee would not become an agriculturist. It is humbly submitted tile;: if the assessee is treated to have conducted agricultural operations in such a situation of contract farming, then each and every money lender cum trader in the villages who pay advance and acquire the monopoly to purchase the produce from the farmer would also become an agriculturist. 6. It is humbly s....
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....cy shall, subject to the provisions of Sections 27 and 28, be liable to be terminated by the landholder or the tenant on any of the grounds and in the manner provided in Section 19". 8. It is also humbly submitted that as per section 9 of the above referred Act, the copy of the lease has to be filed with Tehsildar within 30 days of the execution of the lease deed. It is humbly submitted that the seed production agreement is not in the nature of lease of land and also not as per terms of the Andhra Pradesh (Telangana Area) Tenancy & Agricultural Lands Act, 1950. 9. It is also humbly submitted that the alleged seed production agreement is also made only for the purpose of taxation and not followed in reality. It is humbly submitted that on 17/01/2018, search action u/s 132 of the I.T Act, 1961 was conducted on the assessee and during the search incriminating evidence establishing the real nature of the alleged agreements with farmers is unearthed. Statements of various farmers were recorded. Copies of statements of four farmers recorded on 24/01/2018 and also minutes of meeting held by Collector, Jogulamba Gadwal District with seed cotton growers, seed cotton organi....
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....39; 50,000 shall be directly transferred to the accounts of farmers instead of disbursement through organizers. It was also directed that the organizer system should be abolished. 12. From the above, it can be clearly noticed that the assessee and other seed companies do not take the land on lease but pay an advance that too after charging interest @ 15% p.a and the organizers also pocket part of the price. The seed production agreements are in reality in the nature of produce buy back agreements and by no stretch of imagination, the assessee can be treated as an agriculturist or cultivator. Apparently, the assessee is also not reflecting income from interest @ 15% on the advances made to farmers. 13. Therefore, the claim of exemption u/s 10(1) made by the assessee is untenable and the reliance on the decision in the case of the assessee for A.V 2011-12 is also distinguishable on facts. Also the decision of Hon'ble High Court of Andhra Pradesh in the case of Prabhat Agri Biotech Ltd is not applicable to the present case as the facts are totally different. Reliance in this regard is also placed on the following decisions. 14. In the case of K. Lakshama....
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....h is relevant is quoted below: "21. The judgment of the Hon'ble Karnataka High Court rendered in the case of CIT Vs. Namdhari Seeds Pvt. Ltd. is applicable to the facts of the present case. The submission of the Ld. AR that the present case is different from Namdhari Seeds (supra) case and, therefore, the ratio of the said judgment is not applicable does not appeal to us. It has been submitted by the Ld. AR that the aforesaid was a case where the agreement was contrary to the Karnataka Land Reforms Act however, in the present case, the agreement is not in contravention with any law. We find that the said ground was only an additional factor for denying the claim of agricultural income to the assessee therein. The principle ground for rejection of the claim of the assessee was that no actual agricultural operations were carried out by the assessee therein. The facts are similar to the present case and the ratio of the aforesaid judgment is squarely applicable to the present case. In the aforesaid judgment of Namdhari Seeds, the Hon'ble High Court held as under:- "54. From different terms and conditions of arrangement, what we notice is except supplying the ....
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....certain price provided seeds qualify the specifications as per the agreement. It is nothing short of a fertile womb being offered by a surrogate mother for the growth of child of someone else. The assessee supervises and oversees the sowing cultivation right from the process of sowing till the end in order to get the qualified foundation seeds as per the specifications so as to carry on his trade in selling certified seeds. The main interest of the assessee is to see that good or d healthy seeds are produced by the farmer meeting the requirement specified by it. Such input or scientific method in giving advice to the farmer cannot be termed as either basic agricultural operation or subsequent operations ordinarily employed by the farmer or agriculturist. If the basic operations of agriculture are not carried on by the assessee-company, then the harvested foundation seeds purchased by him and converting them to certification seeds cannot be termed as integrated part of the foundation activity of agriculture. Therefore even if we agree that the mechanical process of agricultural operations either basic operations or subsequent operations would not be an impediment to make such operat....
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....e-29, it was the contention of the Learned AR that Rule-29 does not contemplate filing of the additional documents by the Revenue. 10.1. Secondly, it was the contention of the Learned AR that after search was carried out at the premises of the assessee on 24.12.2018, the assessee has challenged the action of the search etc by filling a writ petition before the Hon'ble High Court of Telangana. The Hon'ble High Court of Telangana vide order dated 11.12.2019 (WP No. 9719 of 2019) has granted interim stay to the assessee allowing the interim prayer of the assessee. The relevant observations of the Hon'ble High Court of Telangana dated 29.04.2019 reads as under : "Petition under Article 226 of the Constitution of India praying that in the circumstances stared in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction especially in the nature of writ of Mandamus calling for the relevant records from the Respondents, and (i) declaring the reason to believe purportedly recorded by 2nd and 3rd Respondents u/s. 132 (I) of the Income Tax Act, 196 I as being arbitrary, illegal, without jurisdiction, malafide and for collateral purpose and (i....
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....ctly, it cannot do indirectly also. 10.3 Thirdly AR has submitted that the assessing officer was aware of seed protection agreement entered by the assessee with the farmers, however nothing was brought on record by the revenue during the assessment proceedings against the assessee by way of recorded statements of farmers. Therefore It was submitted that the revenue can not be given the second inning to plug the holes in its case, through this clandestine method . 10.4 Fourthly Learned AR submitted that it is the consistent case of the Revenue before the Tribunal that the facts of the present case are identical to the earlier order which is subject matter of appeal pending before the Hon'ble High Court of Telangana. 10.5 Lastly it was further submitted by the Learned AR that the proceedings initiated under section 153A are separate and independent proceedings and the material covered by the Revenue pursuant to search under section 132 of the I.T. Act cannot be relied upon by the Revenue for the present proceedings. Further the learned AR relied upon the following judgments including the decision in the case of Shri B. Balanarasimha Reddy : 2. The assessee/petitione....
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....e petition. Hence the writ petition. 3* The impugned order reads as under: There are no reasonable grounds nor hardship exists in the instant case warranting waiver of interest as sought, hence the petition for waiver of interest is rejected. 4* The claim of the petitioner is that because of the circumstances beyond his control, which he has mentioned in the petition for waiver, he was unable to pay the amount due, within the period stipulated and that as he satisfies the three conditions under Section 220(2A) of the Act, he is entitled to be considered for waiver of interest. 5* The learned Standing Counsel for the respondents stated that though the impugned order does not contain reasons, the Department has filed a detailed counter affidavit justifying the rejection of the claim of the petitioner for waiver of interest and hence, the impugned order does not warrant interference. 6. A perusal of the impugned order, which is extracted above, shows that the 1st respondent Commissioner, has not considered the grounds raised by the petitioner in the petition filed under Section 220(2A) of the Act and has passed an order bereft of reasons. ....
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....en at the appropriate stage, after the said documents/evidences are admitted by the tribunal. REJOINDER ARGUMENTS BY REVENUE 11. The Learned CIT-DR intervening the arguments advanced by the Learned AR submitted that the arguments of Learned AR are self-contradictory, on one hand, and the plea that was taken before the Hon'ble High Court of Telangana that there is no incriminating material apart from other things and on the other hand it is to sort-out to make before the Tribunal that it will have bearing on the proceedings under section 153A. Copy of W.P.No.9719 of 2019 is placed on record at page no.340 of the PB filed by the assessee in which the assessee had made the following statement : "Statement recorded from farmers, organizers, growers do not form incriminating material." 11.1. The Learned CIT-DR further submitted that even if it is assumed the search is illegal as contested by the assessee relying on the judgment in the case of Pooranmal 93 ITR 505 (SC) wherein the Hon'ble Supreme Court held that material covered in a search can be used in the assessment proceedings. In the case of UOP LLC 108 ITD 186 (Del.) the ITAT held that there is no bar for the Rev....
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...., affix your thumb impression? (Shri Govindu signs with dated 24/01/2018) (Signatures of the officer and the deponent with date at the end of first page) 05. Did you lease out your lands or given them on rent? If Yes, how many acres were given? I have not leased out or rented out my land to anyone. I am only cultivating my land. 06. Have you entered into seed production agreement with any seed company in relation to your agricultural land or leased out your land to any seed company? No. I have never entered into agreement with any seed company. 07. For leasing out or renting out or for any other agreement regarding your agricultural land, have you given copies of your ration card or Voter ID card or Aadhar Card at any time to anyone? For agreement for sale of seeds, the field assistant of Nuziveedu seeds came to me and took Aadhar card copy and xerox of pattadar passbook. Q8. I am showing a copy of the agreement purportedly signed by you. The copy of the agreement was seized from the plant of Nuziveedu company. Please state whether the signature on this agreement copy is that of your or not (Annexure A....
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.... hybrid seeds through organizer. They give 10 Kg Zinc per acre. The cost of Zinc of 400/- is recovered from final payment. Q15. Whether the expenses incurred by you for the growing the crop/seeds are paid back to you by the company or organizer? The expenses for crop are met by us only. Expenditure for water, fertilizer, pesticides is met by us only. Q16. After growing the crop, to whom you have sold the crop or seeds? Please inform? After growing cotton crop, We take the same to Sri Krishna Ginning Mill of Shri Ramachandra Reddy. We separate the seeds and handover the seeds to the company person. We get our payment through Shri Ramachandra Reddy. Q17. Have you sold the seeds on the basis of income received by you or on the basis of per acre? The risk of the crop is borne by us. If we sell higher yield, we get more money. If we sell lower yield, we get less money. The payment is not on the basis of per acre. Q18. Did you incur loss in any year in growing seeds? If you got loss, whether the seed company took the loss? Four years ago, due to lack of water facility our crop has gone dry. The yield fell down heavil....
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....e produce to the company only. As I get more income, all the difficulties and losses in growing the crop are borne by me only. Even if the crop is dry or wet, washed away, all the loss is borne by me only. The company does not bear any loss. If there is a way for the company to bear part of the loss, it would be better for the farmers. (Signatures of the officer and the deponent with date) All the assertions made by me above are stated without any inducement or threat or influence. " 12.3 From the perusal of above statement and remaining statements it is clear that the farmers have denied execution of any agreement for leasing their lands for seed cultivation and they also denied that the assessee company is farming seeds/modify genetical seeds on the farmers land. Further farmers had also denied that the agreements bear their signatures. Further risk and rewards were of the farmers and not of the assessee. Though the agreement confronted by the revenue pertains to the Kharif season of 2016-17, however it is undisputed that the assessee entered into similar agreement with the farmers, which was mentioned by the Assessing Officer in the order , however there ....
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....should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect. 14. The next question which arises for consideration is as to whether the exercise of discretion in the instant case permitting the additional evidence by the Tribunal, is apposite? It is undisputed that Rule 29 of the Rules is akin to Order 41 Rule 27(1) of the Code of Civil Procedure. The true test in this behalf, as laid down by the Courts, is whether the Appellate Court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. The legitimate occasion, therefore, for exercise of discretion under this rule is not before the Appellate Court hears and examines the case befor....
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....use. Rule 29 of the Income Tax (Appellate Tribunal) Rules categorically permits the Tribunal to allow such documents to be produced for any substantial cause. Once the Tribunal has predicated its decision on that basis, we do not find any reason to interfere with the same. As a result, the questions of law are answered in favour of the assessee and against the Revenue resulting into dismissal of these appeals. No costs." 12.7 Even otherwise, from the bare perusal of Rule 29 of ITAT Rules, it is abundantly clear that it gives discretion to the Bench for admitting additional evidence or documents if filled by the parties ( including the revenue ). Further Tribunal is the final fact-finding authority under the Income tax Act , therefore it is required to maintain equilibrium and neutrality for the both i.e assessee as well revenue . Hence it cannot be held that only the assessee would have right to file the additional evidence and the same right is not available to the revenue. The Tribunal is meant to impart justice to both the parties, and in deserving cases the additional documents may be admitted in the interest of justice and to find out the correct facts . There is one mor....
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....o examine the farmers during the assessment proceedings and thereafter and have not brought on record correct facts. Now since the statements of farmers are available on record which prima facie belies the case of the assessee, therefore these statements along with other documents are required to be confronted to the assessee by the assessing officer in accordance with law so as to find out the real substance and nature of transaction between the assessee and the farmers. In the light of the above discussion, in our considered opinion, the additional evidences/documents filed by the revenue are required to be admitted. 12.9 Another argument raised by the ld. AR of the assessee , was with regard to opposing the admission of the additional evidences/documents that the Hon'ble Telangana High Court has already seized with the matter in the writ petition cited supra wherein various reliefs were sought by the assessee by passing an interim order. In our humble understanding of the proceedings, the interim order passed by the High court had not precluded the revenue from relying upon the said documents during any incidental or other proceedings like one before us. The said documents, i....
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....bject matter of proceedings under section 153A of the Act. 12.11 In fact, the Tribunal during the course of hearing had requested the ld. AR for the assessee to get a positive mandate in its favour from the Hon'ble High Court so that those documents submitted by the revenue need not be considered. However, no response was given by the ld. AR and as such the Tribunal is left with no other option but to examine the said documents and the application filed by the revenue to admit those additional evidence/documents and decide whether the documents are required to be admitted. As observed, the documents are the clinching evidence and goes to the root of the matter and the same are required to be examined after following the due process by the AO/CIT(A) and by the Tribunal. 12.12 Another argument raised by the ld. AR for the assessee is that, the revenue has no ground to file additional evidences/documents as the Tribunal in assessee's own case decided the issue in favour of the assessee in the previous years. In this regard, we are of the opinion that neither the Tribunal nor the lower authorities were having a benefit of examining the documents now filed by the ld. DR for the re....
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.... were recently highlighted in State of A.P. v. T. Suryachandra Rao (2005) 6 SCC 149." 8. In Ram Chandra Singh v. Savitri Devi (2003) 8 SCC 319 it was held thus: "15. x x x Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. 16. Fraud is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter. 17. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. 18. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. x x x x x 23. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of others in relation to....
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.... Same is the position when an order is made for a purpose other than that which finds place in the order. The ulterior or alien purpose clearly speaks of the misuse of the power and it was observed as early as in 1904 by Lord Lindley in General Assembly of Free Church of Scotland v. Overtoun (1904) AC 515, 'that there is a condition implied in this as well as in other instruments which create powers, namely, that the powers shall be used bona fide for the purpose for which they are conferred'. It was said by Warrington, C.J. in Short v. Poole Corpn. (1926) Ch 66, that: 'No public body can be regarded as having statutory authority to act in bad faith or from corrupt motives, and any action purporting to be of that body, but proved to be committed in bad faith or from corrupt motives, would certainly be held to be inoperative.'" 13. Considering the totality of the facts and circumstances of the case, we are of the considered opinion that the additional evidences filed by the revenue are required to be admitted and we admit the same. Having admitted the said documents, the matter is restored to the file of the AO with the following directions: 1) The AO shall exam....