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2021 (8) TMI 710 - AT - Income TaxDenial of exemption u/s.10(1) in respect of income returned as agricultural income on account of it being unproved - Safed Musli produced - agricultural expenditure Presumably incurred on the standing crops - Denial of deduction u/s. 80-JJA on the profits and gains of the business of sale of biofertilizer and biological agent - HELD THAT:- Preponderance of probabilities weighs heavily in favour of the realization of the agricultural produce of the immediately preceding previous year, quantity of which as at the year-end is not in dispute. Why would not, one may ask, any prudent or reasonable person, who has in fact established himself in the market, sell his standing crops, realizing their value as well as his earnings therefrom? No impeding circumstance has been stated, much less shown by the Revenue. In fact, the same principle finds application by the Tribunal for AY 2005-06. The agricultural activity being proved, Musli was taken as sold at the going market rates, i.e., as recorded in books, despite the non-specification of the buyers. The sale of agricultural produce, i.e., as attributable to the standing crops, is though inferable, and toward which, therefore, further expenditure, as imputed on the basis of the reported profit rate, is adopted. The balance income of ₹ 2.58 lacs, i.e., the agricultural income returned over ₹ 26.84 lacs, would continue to be assessed as income from other sources, for assessment under which head of income there is ample authority, including the decisions relied upon by the Revenue in the instant case. Before parting with this order, it is deemed proper to dilate on an aspect of the matter. The assessment in the instant case was subject to revision on the ground that the AO had not initiated penalty proceedings u/s. 271(1)(c) while completing the assessment. The matter, in further appeal, was set aside by the Tribunal directing the Administrative Commissioner (CIT) to review afresh after allowing proper opportunity of hearing to the assessee. The revision order dated 29/3/2011 is not on record. It is thus not clear as to how could under section 263 proceedings the ld. CIT drop the disallowance of deduction u/s. 80- JJA, made in assessment, more so as the same was deemed erroneous and prejudicial to the interest of the Revenue on account of non-initiation of penalty proceedings. The same constitutes a valid ground for assuming jurisdiction u/s. 263 and, besides, the said aspect has attained finality. The ld. CIT could at best, upon hearing the assessee, regard the non-initiation of penalty proceedings qua the said disallowance as justified. The basis for not disallowing deduction u/s. 80-JJA, admittedly effected in the original assessment, by the AO in the second round is thus not clear. The same is clearly a question of law. It is deemed proper to state this aspect of the assessment as the said question, arising out of the assessment, was neither agitated before nor has been dealt with by the Tribunal. Sure, the non-disallowance of and, consequently, acceptance of the transactions of sale, similarly made, of bio-fertilizer and biological agents, was one of the grounds on which the assessee found favour with the Tribunal for AY 2005-06, and which could therefore be argued as a distinguishing feature for this year. This, however, shall have no impact on the instant adjudication inasmuch as the current year has already been found distinguishable on account of non-substantiation of his case by the assessee due to non-production of other relevant materials - Assessee’s appeal is partly allowed.
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