TMI Blog2014 (2) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... onnaire issued by AO had no question about the agricultural income already assessed -This income was not being shown for the first time and has been regularly accepted year to year by department in preceding years – thus, the assessee had no remedy except to file additional evidence in first appeal – thus, assessee was prevented by sufficient cause in filing these papers during the course of 153A assessment proceedings – Relying upon COMMISSIONER OF INCOME TAX Versus TEXT HUNDRED INDIA PVT. LTD. [2013 (6) TMI 72 - DELHI HIGH COURT] - In 153A/C assessments additions cannot be made unless they are based on any incriminating material or inquiries based on such material. There is neither reference nor reliance on any incriminating material - Besides there is no reference to any inquiries conducted by AO based on any incriminating material – the additions have been rightly deleted by the CIT(A) on this count – the assessee owns a fairly large agricultural holding known as Prag Farms - Agricultural income has been returned and accepted by department year after year - Confirmation from agricultural tenant is on record - AO cannot reject documentary evidence on surmises and conjectures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his inability to furnish any information. AO mode the impugned additions as mentioned above in respect of each assessment year holding that assessee could not substantiate that agricultural income declared in the regular returns of income was in facts agricultural income. The income was held to be not agricultural income and was assessed as income from unexplained sources. Thus the exempt income returned by assessee was held to be taxable income u/s 153A. The reasons, observations and findings for additions do not refer to any incriminating material and are limited to only one paragraph in 2003-04, which by and large are similar in each year and reads as under: "In the absence of any evidence to establish that the income of Rs. 10.00 lacs shown as agricultural income was actually so the income of Rs. 10.00 lacs cannot but be considered as income from undisclosed sources. Addition of Rs. 10.00 lacs is consequently made to the total income on this account. With these remarks the total taxable income is computed in this case as under: Total income as returned Rs. 22,720 Add: Income from undisclosed sources (as discussed) Rs. 10,00,000/- Total taxable income Rs. 10,22,720/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on 22- 12-2010 and a general questionnaire was also issued on the same date in which it is mentioned that the reply to the same should be filed by "23-09-2010 at 11.30 AM/PM". In this questionnaire there are no specific questions about agricultural income but only a general note about sources of income during the year with supporting evidence was sought. There is no doubt in my mind that the impugned assessment was completed in undue haste by the AO due to' the fact that it was getting time barred on 31/12/2010 and that adequate opportunity was not given to the appellant. The Assessing officer has not raised any doubts about the veracity of the documents furnished by the appellant during the remand proceedings but has only argued that these may not be taken on record at this stage. To my mind, these documents are material to decide the question as to whether the claim of agricultural income as made by the appellant is correct or not. The Hon. jurisdictional High Court in the case of CIT vs. Text Hundred India Pvt. Ltd.: 239 CTR 263, held that Rule 29 enables the Tribunal to admit any additional evidence which would be necessary to do substantial justice in the matter. Their Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support the ownership of land by the appellant. (iv) The appellant also furnished proof w.r.t. sale of sugar cane to sugar mills during the years 2002-03 to 2009-10 by 'Prag Agriculture Farm'. It is to be noted that 50% of the entire land of the family commonly known as 'Prag Agriculture Farm' belongs to the assessee. (v) The appellant has also claimed that during the period of family dispute which ranged from 1994 to 2010, the appellant was in possession of a part of his agriculture land ( 28 acre out of his total holding of 946 acre) which was rented out @ 10 Lac PA to a local cultivator Sh. Swatantra Rai. A copy of confirmation from Shri Swatantra Rai giving his complete address has been filed to support this claim. This confirmation shows that following. amounts were received by the appellant from Shri Swatantra Rai as rent for the said 28 acres of land for various years: 2002-03 Rs. 10,00,000/- 2003-04 Rs. 1,05,500/- 2004-05 Rs. 1,35,400/- 2005-06 Rs. 10,00,000/- 2006-07 Rs. 10,00,000/- 2007-08 Rs. 10,03,600/- 2008-09 Rs. 10,56,500/- Rs. 53,01,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n decided in CIT Vs. Maddi Venkatasubbayya [1951] 20 ITR 151 (Mad), where the assessee was a firm, which had only purchased standing crop and therefore could not be treated as having such interest in land, so as to constitute the profits from the sale of the tobacco crop as agricultural income. This judgment of the Hon. Court, however, indicates what would constitute the requisite interest in the following words: "The owner of the land, or of an interest therein, be he the landlord, ryot, lessee or usufructuary mortgagee, has an interest in the land and derives his income from the land. He may actually cultivate the land or he may receive the rent from cultivating tenants. In either case, the rent is the immediate and collective source of income and if the rent is derived from agriculture, the exemption from tax is attracted. " Section 2(1)(a), (b)(ii) and (iii) and (c) of the Act clearly indicate that the person entitled to exemption are the persons falling within the following categories: The owner who lets agricultural land to cultivating tenants for a stipulated rent, the owner of agricultural land in which the tenant has a permanent right of occupancy with liability to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no details of input cost was submitted by him. As regards the land produce record, the appellant has. produced the same before the undersigned which signifies the harvesting of crops and agriculture operations in those years -, It is, therefore, held that the appellant has furnished adequate evidence to support his claim of agricultural income during the years in question which has not been controverted by the AO by bringing any adverse material on record. As such, the addition made by the AO treating the agricultural income as income from undisclosed sources cannot be upheld. This ground of appeal is , therefore, decided in favour of the appellant and the additions made in all the A. yrs. 2003- 2004 to 2009-10 on account of treatment of agricultural income as undisclosed income is hereby deleted." Aggrieved revenue is before us. 4. Ld. Counsel for the assessee made a prayer for admission of further additional evidence contending that AO made the additions in a summary manner without giving adequate opportunity and time for furnishing the evidence. Before ld. CIT(A) assessee furnished the additional evidence which could be gathered by that time. Though ld. CIT(A) has delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. The first effective notice for attending assessment proceedings is dated. 22-12-2010 asking the attendance on 27-12-10. Assessee duly attended with general record available. as the very same agricultural income was already accepted by the department in regular assessments. AO during the course of hearing dated 27-12-2010 required specific information. Assessee at this juncture expressed its inability for forthwith compliance and requested further time, which was denied by AO and the impugned assessments were framed on 31-12-2010. These facts clearly demonstrate that only due to insufficient opportunity of hearing, assessee was prevented by a sufficient cause in responding to requisite evidence before AO. In these circumstances no lapses or latches can be attributed to assessee. Therefore, the additional evidence was sought to be filed before ld. CIT(A) for which a proper application u/r 46A was filed along with the additional evidence, gist thereof is as under: "The evidences / proof of agriculture income could not be produced before the AO on account of following reasons: 1. There was intense dispute among the family members of the assessee over the issue of agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional evidence duly forwarded it to AO giving full opportunity of enquiry, investigation and ascertainment of facts and further to file detailed observations and comments thereon. Revenue cannot adopt such a course of action i.e. neither to give proper time for assessment and frame an arbitrary assessment and not allowing the assessee to bring material on record to defend such arbitrary action. It is pleaded that income tax proceedings are not adversarial proceedings, there is no lis between assessee and department. The entire proceedings are framed to ensure a fair and proper determination of tax liability. Thus while ascertaining the correct tax liability revenue has to be fair in the proceedings i.e. to give proper opportunity of hearing and ensuring smooth procedure to allow proper evidence to come on record. In contradistinction, in this case AO has made no such endeavor to frame a proper assessment, it rather has turned out to be an arbitrary exercise. If ld. CIT(A) has corrected these aberrations by admitting additional evidence and carrying out due exercise of verification in this behalf, revenue has no justification to challenge it. 8.2. In these circumstances it emerges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of 153A assessment proceedings. 9.2. Apropos CIT(A)'s action of admitting the additional evidence, in our considered view, in the given facts and circumstances the action is fully justified. AO has submitted the remand report on both counts i.e. admission thereof and on merits. Manish buildwell case was much earlier pronounced. In these circumstances AO should have requested ld. CIT(A) to first decide the admissibility of additional evidence and then to call remand report on merits. Having filed remand report on both counts, it does not behold on revenue now to take a technical plea in this behalf more so when Manish Buildwell case was already reported before the submission of remand report by AO. Ld. CIT(A)s reliance on Delhi High Court judgments on the cases of Text Hundred India and Virgin securities (supra) is well placed and reinforces our view. Consequently revenue ground on admission of additional evidence is dismissed. 10. Apropos merits ld DR contends that : i. The confirmation filed by Shri Swatantra Rai is typed on a computer. He being an agriculturist, it indicates that the confirmation was prepared by the assessee and is signed as ordered. Thus t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30/11/09 wherein the name of assessee is appearing as a joint owner being a proof of land ownership in the name of assessee (page 15 paper book); iii. Copy of Court's order family settlement deed showing settlement of 946.50 acres of agricultural land in favor of assessee (pages 16-52 paper book); iv. Copy of confirmation issued by Sugarcane development society with respect to production of sugarcane during various years in Prag Agriculture Farms (pages 53-55 paper book); v. Certificate from Nayab Tehsildar certifying that the agricultural operations are being carried out in the land (page 56 paper book); vi. Confirmation (page 57 paper book) from the cultivating tenant Sh. Swatantra Rai stating payments of annual rent made to assessee during various years for utilization of land for cultivation purposes. (c) The CIT(A) has categorically recorded that during the remand proceedings the AO was specifically asked to send his report on the "genuineness or otherwise of the documents submitted". AO has not raised any pertinent question about the veracity of evidences filed. AO has simply stated that in the absence of evidence of agricultural operations and corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Ld. Counsel for the assessee contends that in vie of these legal and factual submissions categorical findings of ld. CIT(A) based on evidence and remand report, the additions have been rightly deleted. Orders of CIT(A) are relied on. 12. We have considered the rival submissions and perused the material available on record and proceed to decide the appeals in following manner: Legal issue: 12.1. Ld. Counsel for the assessee has vehemently argued that no incriminating material what so ever was found during the course of search to suggest that the agriculture income earned by the assessee and accepted by the department in earlier years was not agricultural and it represented any unexplained income of the assessee. It is also not disputed that agriculture income has been assessed year after year. In the absence of any incriminating material legally these additions cannot be made. We have perused the case laws relied on by assessee which raise following proposition: (i) All Cargo Global Logistics Ltd. v. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) - for the proposition that in assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this A. Y in appeals. In result the issue is decided in favour of the assessee and against the revenue. In view of this finding the remaining grounds questioning the merits of additions/disallowances do not need adjudication as they have become infructuous and academic only . Consequently appeals preferred by the assessee for the A.Ys. 2003-04, 2004-05, 2005-06 and 2006-07 are allowed and appeals preferred by the revenue in the A.Ys. 2002-03, 2005-06, 2006-07 are dismissed. (v) MGF Automobiles Ltd. V. ACIT, ITA No's 4212 4213/Del/2011 - In the present case it is apparent that on the date of search be on 12/09/2007, the assessments for assessment year 2004-05 2005-06 were already completed. There was no incriminating material found during search for these years as is apparent from arguments of Ld. AR and from records and Ld. Departmental Representative did not bring to our notice regarding any incriminating material having been found during search. Therefore following the Judicial Precedents, we are of the opinion that though assessments for the above year were bound to be reopened but additions could be made only if some incriminating document was found during search. (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of search. 12.2. In our considered view this proposition is by now well settled that in 153A/C assessments additions cannot be made unless they are based on any incriminating material or inquiries based on such material. It clearly emerges from record that there is neither reference nor reliance on any incriminating material. Besides there is no reference to any inquiries conducted by AO based on any incriminating material. In these circumstances and relying on these case laws we hold that these additions have been rightly deleted by the CIT(A) on this count. Factual Issue: 12.3. From facts also it emerges that assessee owns a fairly large agricultural holding known as Prag Farms. Agricultural income has been returned and accepted by department year after year. Confirmation from agricultural tenant is on record. It has been doubted by AO on some conjectures like computer print, in that case he may have examined the tenant. Without carrying out such exercise AO cannot reject documentary evidence on surmises and conjectures. Assessee has supported his claim based on relevant agricultural record. The tenant has confirmed that the agricultural expenses were borne by him and n ..... 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