TaxTMI 
TaxTMI 
2025 (7) TMI 1097
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....ies relating to agricultural income were raised by the Assessment Unit and answered by the appellant. II. The order of the Ld.Principal Commissioner of Income tax, Madurai-1 is opposed to the facts of the appellant's case and the law applicable to such facts. III. The Ld.Pr.CIT failed to note that the coffee beans after harvesting were not subjected to processes like curing roasting and grinding and accordingly sub-rule (1) or (1A) of Rule 7B of the Income tax Rules, 1962 does not apply to the appellant's case. IV. The Ld.Pr CIT failed to note that letters from the buyers evidencing sale of uncured coffee beans were provided and accordingly Rule 7B of the IT Rules, 1962 has not application. V. The Pr CIT erred in not taking into account the Explanation below Rule 7B of the IT Rules, 1962 and the definition of the term 'curing' as assigned in sec. 3(d) of the Coffee Act, 1942 (7 of 1942). VI. The Ld.Pr CIT failed to note that the assessment Unit, NFAC, Delhi issued a long questionnaire with as many as 15 queries all relating to 'agricultural income', considered the appellant's reply to all the points and thereafter passed the scrutiny ass....
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....in return of income for A.Y.2020-21. ii. You claimed that it derived agricultural income from sale of pepper and coffee picked dried and sold as raw coffee. Even though part of the agricultural income is from sale of coffee, you have not admitted any Business Income. It may be pointed out that it is not possible for the estates to sell raw coffee without curing / processing. As per the TNAU",. OF Tamil Nadu As per the TNAU AGRITECH PORTAL University Agricultural (https://agritech.tnau.ac.in/postharvest/pht_plantationcrop_coffee.html) the curing process prepares the coffee beans for market. Most of the bills produced for sale of agricultural produce show sale of coffee. The descriptions found in some of the bills such as 'robusta parchment, robusta cherry. As per rule 7B of Income Tax Rules, 1962, 25% of the income derived from the sale of coffee grown and cured, has to be deemed as business income and in the case of sale of coffee grown, cured and roasted and grounded, 40% of the income has to be deemed as business income. iii. During the scrutiny proceeding, the above aspects were not examined by the Assessing Officer. Without proper enquiry and non-application o....
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....ion of Rule 7B would not apply. Such reply was made by the assessee on his own but not with reference to any specific query with respect to Rule 7B raised by the AO. Thus, during the assessment proceedings, the AO has not enquired into applicability of Rule 7B, i.e. whether before selling coffee beans, the assessee has done only pulping/drying and has not done any processes involved in 'curing' (other than pulping) mechanically and without such enquiry, he has accepted the claim of agricultural income which include income from coffee. Thus, the Assessing Officer has not conducted proper inquiry and verification with regard to the issue whether the assessee has done any mechanical processes other than pulping or the assessee has done pulping alone. 5.6 In para 3 and para 5 of his reply dated 14.01.2025, the assessee has stated ver subjected to the process of curing by him before being sold and that the coffee beans after pulping and drying were sold as such to the curer. In support of this claim, he has enclosed a letter dated Nil issued by Namazco International Trades and Exports in which it is stated that raw and uncured coffee was purchased by it from C.T.Ramanat....
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....r. M. K. Biju, CIT relied upon the impugned order of the PCIT and vehemently supported the reasoning of the order. 7. We have heard the rival submissions and perused the record of the order of the PCIT and submissions of the assessee. 8. The questionnaire/ Annexure to notice u/s 142(1) dated 05.11.2021 vide DIN ITBA/AST/F/142(1)/2021-22/1036740938(1) is as under: ANNEXURE ".....Kindly provide the following details: 1. Provide the details of Nature and type of Agricultural income along with details of processes undertaken. 2. Provide the details of Measurement of Agricultural land in acre. 3. Details of Whether Agricultural land is owned or held on lease. 4. Details of whether Agricultural land is irrigated or rain fed. 5. Provide the details of Name of district along with PIN code in which Agricultural land is situated 6. Copy of Khatauni (crop record maintained by State Govt) 7. Doumentary evidences with regard mode of sale of Agricultural proceeds along with copy of contracts, if any. 8. Documentary evidences with regard to following Expenses :- - Seed - Fertilizer ....
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.... 29.64 TOTAL 60.61 (3). Details of Whether Agricultural land is owned or held on lease :- The above agrl. Lands are fully owned and no part of it is lease held. (4). Details of whether Agricultural land is irrigated or rain fed :- Rain fed as also irrigated. (5). Provide the details of Name of district long with PIN code in which Agricultural land is situated :- Coffee estate lands situated at Athur Nallur Village. Pin: 571237, Kodagu District. Karnataka State. (6). Copy of Khatauni (crop record maintained by State Govt.) - Copies of crop record (5 sheets) issued by RTC Agriculture Committee, Govt, of Karnataka is enclosed. Also a copy of the Certificate of Registration of a Registered Owner as per the Coffee Market Expansion Act, 1942 issued in the year 1978 is enclosed. (7). Documentary evidence with regard to mode of sale of Agricultural proceeds along with copy of contracts, if any :- Dried raw coffee beans and pepper are sold to different dealers and payment directly sent to bank account by NEFT/RTGS/Bank Transaction. Copies of the following bills are sent herewith :-- S. No. Name of trader. Bill date. ....
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.... (12). Copy of Nature & details of Total Income, if any :- I wish to state that I (my HUF) do not derive any business income. As per the return of income filed on 10-01-2021 for AY 2020-21. I derive incomes under the head "House property" and 'Other sources' [ interest from Bank FD and SB accounts, Lease rent and dividends ]. The computation of total income and agrl. income is as under :- Income under the head 'House property", Rs. 45,000. Income under the head . Other sources'. Bank SB Int. 392422. Bank FD Int. 84140 IT Refund Int. 153. Lease rent. 6000. Dividend Rs.3900 - exempt. Rs. 4,82,715. Gross Total Income. Rs. 5,27,715. 1.ess :- Deduction u/s.80TTA. Rs. 10,000. Total income. Rs. 5,17,715. Agricultural income. Gross. 5426518. Less: Expenses. 980734. Rs. 44,45,784. Aggregated Income. Rs. 49,63,500. It would be appropriate to state that, as already mentioned in the answers to Query Nos. I and 7 above, the raw coffee beans, after drying, are sold as such i.e. without "curing" and, therefore, the provisions of sub-Rules (1) and (IA) o....
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.... under: (1) Provide the details of Nature and type of Agricultural income along with details of process undertaken:- Agricultural Income is from Sale of Coffee and Peper. Coffee Picked, dried and sold as raw coffee. (7) Documentary evidences with regard mode of sale of Agricultural proceeds along with copy of contracts, if any. ANNEXURE Kindly provide the following details: 1. Provide the details of Nature and type of Agricultural income along with details of processes undertaken. 2. Provide the details of Measurement of Agricultural land in acre. 3. Details of Whether Agricultural land is owned or held on lease. 4. Details of whether Agricultural land is irrigated or rain fed. 5. Provide the details of Name of district along with PIN code in which Agricultural land is situated 6. Copy of Khatauni (crop record maintained by State Govt) 7. Doumentary evidences with regard mode of sale of Agricultural proceeds along with copy of contracts, if any. 8. Documentary evidences with regard to following Expenses :- - Seed - Fertilizer -Pesticides ....
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....emsworth (P.) Ltd. HC-Karnataka 119 taxmann.com 358 Shriram Properties Limited ITAT-Chennai 2023 (4) TMI 375 Cavinkare (P.) Ltd. ITAT-Chennai 149 taxmann.com 296 Rajkumar Impex Pvt. Limited ITAT-Chennai 2023 (6) TMI 812 FCA Engineering India Pvt. Ltd. ITAT-Chennai ITΑ 684/CHNY/2023 Keller (M) SDN BHD ITAT-Chennai ITA 1319/CHNY/2023 International Seaport Dredging Pvt. Limited ITAT-Chennai ΙΤΑ1597/CHNY/2024 Sindya Securities & Investments (P.) Ltd. ITAT-Chennai 157 taxmann.com 591 Torrent Pharmaceuticals Ltd. ITAT Ahmedabad 97 taxmann.com 671 13. We are of the considered view that if a query was raised during original assessment which was responded by the Appellant and issue was allowed in the assessment, even if such enquiry is inadequate, the PCIT was not justified in invoking the provisions of section 263 of the Act. We further add that the PCIT can invoke revisionary jurisdiction under section 263 of the Act only if the order subject to revision, passed by the Ld. AO is both erroneous as well as prejudicial to the interest of the revenue and further, if the Ld. AO had taken one o....
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....lared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner, '(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under Section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] ***' 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two-pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of t....
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....t order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of ....
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....e Dadabhoy & Co.v.S.P. Jain[(1957) 31 ITR 872(Cal)], the High Court of Karnataka in CIT v.T. Narayana Pai[(1975) 98 ITR 422(Kant)], the High Court of Bombay in CITv.Gabriel India Ltd.[(1993) 203 ITR 108(Bom)] and the High Court of Gujarat in CITv.Minalben S. Parikh[(1995) 215 ITR 81(Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co.v.CIT[(1987) 163 ITR 129(Mad)] interpreting 'prejudicial to the interests of the Revenue'. The High Court held: "In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration''. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to th....
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....pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- "8.2 In the Impugned Order, the Ld. Commissioner of Income Tax-IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income....
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....lication(s), if any''. 15. The Hon'ble Supreme Court in the case of CIT vs. M.Chandra Sekhar [151 ITR 433 (SC)] has held that the presumption that A.O. has considered the details filed by the assessee was "founded" on the principle that an officer entrusted with a judicial or quasi- judicial duty must be presumed to have discharged his duties in a proper and bonafide manner. This view is confirmed by the full bench decision of the Delhi high court in CIT Vs. Kelvinator of India Ltd (256 ITR 1) (Delhi FB), was upheld by the Supreme court in Commissioner of Income Tax Vs. Kelvinator Of India Ltd ( 320 ITR 561)(SC). 16. The Hon'ble High Court of Bombay in the case of Marico Ltd., vs. ACIT in writ petition No.1917 of 2019 dated 21.08.2019, wherein the Hon'ble High Court has clearly pointed out once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow that the AO has accepted the assessee's submission, so as to not deal with that issue in the assessment order. 17. Even the Hon'ble High Court of Bombay in the case of PCIT vs. Shivshahi Punarvasan Prakalp Ltd., in ITA No.397 of 2018, orde....