TMI Blog2017 (8) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... counts we hold that ₹ 13,300/- per acre of water spread area appears to be reasonable and accordingly we uphold the order of the Ld. CIT(A). The estimation of water spread area and the bund area is in accordance with the circular issued by the CBDT. Accordingly, we uphold the order of the Ld. CIT(A) and the revenue’s appeal on this ground is dismissed. Additions made u/s 40A(3) - income estimated - Held that:- In this case, the assessing officer completed the assessment estimating the income @ ₹ 22,000/- per acre. The assessee has not maintained the books of accounts which fact was accepted by both the parties. The purchases were made by Shri Radha Krishna but there is no evidence to show that the expenditure was debited to the P&L account and claimed as a deduction in the hands of the assessee. Therefore we are of the view that the revenue has not placed sufficient evidence to prove that the expenditure was debited by the assessee and attract the disallowance u/s 40A(3) of I.T. Act. Further, the assessment in this case was completed by estimation and once the income is estimated the entire deductions or additions from section 30 to 43D of the Act deemed to have take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived by the Fisheries Department which is net of all expenses is adopted in the case of the assessee. The income of the assessee is estimated @ ₹ 22,000/- per acre and the total income from aqua business is arrived at ₹ 19,02,340/- (22,000 x Ac.86.47). As the assessee had offered ₹ 3,43,270/- as income from fish tanks, the balance amount of ₹ 15,59,070/- is now added to the income returned. While estimating the income, acreage is taken per acre which includes the bunds also to the water spread area. 3. The assessee went on appeal before the CIT(A) and the CIT(A) directed the A.O. to estimate the income @ ₹ 13,300/- per acre for water spread area and directed the A.O. to exclude the bund area from the total land holding under cultivation. For ready reference, we reproduce the order of the Ld. CIT(A)in Para -5.2 to 5.3, which reads as under: 5.2 During the course of appeal hearing, 'the appellant furnished a copy of letter dated 19/10/1993 issued by the Central Board of Direct Taxes wherein it is stated that while computing the Acreage for fish culture 30% has to be taken as bund area and the balance 70% should only be considered as wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome since it was considered by the A.O. while estimating the income. The assessee is having fish pond in the area of 86.47 acres and declared the total income of ₹ 3.43 lakhs, which works out to ₹ 3,970/- per acre and the same is abysmally low. The A.O. while estimating the income, has consulted the Fisheries Department, collected the information and came to a conclusion that the income from pisci culture per acre would be around ₹ 30,000/- and after excluding the bund area, the income works out to ₹ 22,000/- per acre for 70% of the water spread area. The Ld. D.R. submitted that while estimating the income, the A.O. has already considered the water spread area and bund area, hence, it is not necessary to exclude the bund area for estimation of income. Further, the Ld. D.R. argued that a circular which was relied upon by the Ld. CIT(A) was issued on 19.10.1993 and is applicable only for the assessment year 1993-94. Hence, the Ld. D.R. contended that the A.O. has rightly estimated the income @ ₹ 22,000/- per acre after exclusion of bund area and no further adjustment is required and the CIT(A) order should be set aside and restore the assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the assessee. Hence the reliance placed by the AO on the information of Fisheries Department for estimation of income cannot be used against the assessee without giving opportunity to the assessee and the same is against the principles of natural justice and accordingly rejected. As per the board circular the estimated income per acre was ₹ 4000/- on water spread area of 70% of the Fish pond for the year 1993-94 and the same cannot be said to be reasonable for the assessment year 2006-07, which is after 13 years. However, with regard to water spread area of 70% remained unchanged. The Ld. CIT(A) confirmed the estimation of income @ ₹ 22,000/- per acre inclusive of bunds and ₹ 13,300/- for 70% of water spread area since the assessee is not maintaining the books of accounts. The Ld. A.R did not place any evidence to disprove the estimation confirmed by the Ld. CIT(A). The revenue also did not place any evidence to show that the estimation of income @ ₹ 13,300/- is not reasonable. Therefore, in the absence of books of accounts we hold that ₹ 13,300/- per acre of water spread area appears to be reasonable and accordingly we uphold the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of Sri V. Radha Krishna, who is one of the partner of the appellant firm during the course of search proceedings. He made the addition of the total cash payments as evidenced by the account copy. 6.1 During the course of appeal hearing, the learned AR stated that when the income is estimated, no separate addition is warranted u/s. 40A(3) and relied on the following case laws CIT Vs Banwari Lal Banshidhar 229 ITR 229 (Allahabad) CIT Vs Smt.Santosh Jam 296 ITR 324 (P H) CIT Cental (Ludhiana) Vs Gobind Ram 229 Taxmann 491 (P H) CIT Vs Aggarwal Engg Co 302 ITR 246 (P H) Amit Agaiwal Vs [TO 38 ITR (Trib) 77 (Raipur) The learned AR further stated that it is the common practice that in order to gain quantity discounts nearby farmers join together to purchase raw material and share them among themselves. He also stated that no account is in the name of the appellant firm. 6.2 After careful consideration of the case laws submitted by the appellant and facts of the case, I am of the opinion that once income is estimated, there is no question of further additions. Therefore, disallowance made u/s. 40A(3) for Asst. Years 2005-06, 2007-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court order as under: The pattern of assessment under the IT Act is given by s. 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in ss. 30 to 43D. Sec. 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under s. 29 is to be made under s. 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the ITO may reject those books and estimate the income to the best of his judgment. When such an estimate is made it is in substitution of the income that is to be computed under s. 29. In other words, all the deductions which are referred to under s. 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in s. 40 is also taken into account. No doubt there is big difference between profit earned with own capital and profit earned with borrowed capital and such a difference could have been taken into account by the ITO while making an estimate. If the CIT had set aside the estimate on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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