TMI Blog2013 (12) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished and comparing the ratio of expenses incurred to turnover for the earlier years - The scope for some inflation of such expenses should be given – Decided against Revenue. Whether the income from agricultural land is agricultural income or income from other sources – The assessee has shown agricultural income in his original return of income – No material or evidence was found during search showing assessee’s ownership of agricultural land - Held that:- In view of the details of agricultural land holding and document numbers and relevant records furnished - The assessee is the owner of the agricultural lands - In the assessment year 2006-07, the agricultural land was sold and was offered to capital gains – Decided against Revenue. Whether the Assessing Officer is required to confine himself only to the material found during the course of search operation – Held that:- The assessee has filed a letter dated November 24, 2009 explaining that the ownership of the agricultural land purchased in the year 1986 and 87 - The assessee has substantiated the fact of holding agricultural land by way of proper evidence – No question of observing material found during search – Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment year Returned income (Rs.) Assessed income (Rs.) 2002-03 3,21,150 13,23,810 2003-04 4,40,886 28,68,510 2004-05 3,61,721 29,23,266 2005-06 3,41,473 2,04,82,853 2006-07 15,59,508 3,88,66,761 2007-08 30,71,736 2,21,16,055 2008-09 24,74,399 2,74,25,799 3. Aggrieved by the order of the Assessing Officer, the assessee preferred appeals before the Commissioner of Income-tax (Appeals). 4. The first effective ground is directed against the action of the Commissioner of Income-tax (Appeals) in deleting the disallowance of expenditure on account of duplication made by the Assessing Officer for the assessment years 2002-03 to 2005-06. 5. Briefly the facts relating to raise this ground are that the assessee is proprietor of MBA Catering Services doing outdoor catering services and supply of food to the VST employees. During the proceedings under section 132, one of the employees of the assessee admitted that the kitchen facilities of Hyderabad House P. Ltd. was utilised by MBA Catering Servicing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t his finding of double claim of expenses. It is also a fact that the assessee had filed return of income disclosing the business profits on catering services and claimed various expenses. It is also a fact that no evidence except the statement of the manager was forthcoming on this issue at the time of action under section 132. Considering the totality of the circumstances I am of the opinion that the expenses disallowed by the Assessing Officer are genuinely incurred for the business of MBA Catering Services and as such the finding of 'claim of duplication of expenses' is not properly supported. Therefore, the Assessing Officer is directed to delete the additions made under this head-Rs. 4,13,197 for the assessment year 2002-03, Rs. 4,20,029 for the assessment year 2003-04, Rs. 6,21,397 for the assessment year 2004-05, and Rs. 7,88,825 for the assessment year 2005-06." 9. Aggrieved, the Revenue is in appeal before us. 10.We have heard the arguments of both parties, perused the record and gone through the orders of the authorities below. We are in confirmity with the order of the Commissioner of Income-tax (Appeals) as the Department could not bring any material to suggest tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 55,26,172 10% 5,52,617 5,52,617 2008-09 Direct and indirect 49,47,348 10% 4,94,735 4,94,735 14. Before the Commissioner of Income-tax (Appeals), the authorised representative for the assessee argued that the assessee is regularly filing income-tax returns and accordingly filed returns of income for all the assessment years under dispute and disclosed the fact of expenses in those returns and there is no material or evidence in respect of these expenses for the Assessing Officer to resort to such disallowance. The authorised representative for the assessee furnished the details of expenses incurred in cash and through cheque payments. He also raised a ground that without any material found in the course of search proceedings general disallowance cannot be made. He relied on the following decision in support of his above claim (i) LMJ International Ltd. v. Deputy CIT [2008] 119 TTJ (Kol) 214, (ii) Deputy CIT v. Platina Properties Projects Ltd., I. T. A. Nos. 1622, 573 to 576/H/08, Income-tax Appellate Tribunal, Hyderabad. He further argued that the jurisdictional Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees benefits less director's remuneration partial payments were made by cheque towards provident fund and employees' State insurance contribution and balance paid by way of salaries covered by provident fund and employees' State insurance. As regards administrative expenses less sales tax amounting to a portion includes statutory payments like electricity charges, property tax, food licence, labour licence, trade licence, etc. This apart payment of franchise commission, sales tax appeal etc. were stated to have been made by cheques. The assessee also submitted that on payment of rent, franchise commission and security services, in fact TDS was also deducted. 36. The Assessing Officer himself has observed in the assessment order that the assessee had given a breakup of the production expenditure dividing it into purchase of raw materials and packing material. He further observed that it is impossible to verify each and every bill and voucher in support of the production expenditure. Thereafter, he made a disallowance of 15 per cent. of the production expenditure presuming that there is always a chance of inflation of expenditure under this head. The Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing evidence in this regard has been found. Only an ad hoc disallowance of expenditure claimed by the assessee has been made. However, from the observations of the lower authorities it can be inferred that full details of expenditure have not been properly documented. Hence, the possibility of some inflation of such expenses cannot be ruled out. Considering totality of facts and circumstances of the case, we are of the opinion that disallowance of 5 per cent. of labour and site expenses are reasonable.'" 19. Since the issue under consideration is identical to that of Hyderabad House P. Ltd., respectfully following the same, we direct the Assessing Officer to restrict the disallowance to 5 per cent. of cash payments. 20. The next ground raised by the Revenue is directed against the action of the Commissioner of Income-tax (Appeals) in deleting the addition made towards agricultural income for the assessment years 2002-03 to 2005-06. 21. The Assessing Officer made this addition on the ground that no agriculture lands were recorded in the balance-sheet and the assessee had not shown any documentary evidence in support of his claim. He accordingly treated the claim of agricultura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee pointed out that in the regular assessment agricultural income has been accepted. However, in the assessment year 2006-07, the agricultural land was sold and was offered to capital gains, which proved that the assessee was holding agricultural land till the date of sale. 26. After hearing the learned Departmental representative and perusing the record, and after examining the details of agricultural land holding and document numbers and relevant records, we find that the assessee is the owner of the agricultural lands. In these circumstances, we confirm the order of the Commissioner of Income-tax (Appeals) and dismiss the ground raised by the Revenue in this regard. 27. The Revenue raised common grounds as ground Nos. 5 and 6 in the assessment years 2002-03 to 2005-06, which are as follows : "5. The Commissioner of Income-tax (Appeals) has erred in deleting the addition stating that there was no finding of the Assessing Officer that his decision was based on any material found in the course of action under section 132(1) since the insertion of section 158-BI of the Income-tax Act, the Assessing Officer can take into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of agricultural income. Hence, we confirm the order of the Commissioner of Income-tax (Appeals) on this issue. Accordingly, the ground Nos. 5 and 6 raised in the assessment years 2002-03 to 2005-06 are dismissed. 31. Now, we take up the grounds raised in the assessee's appeals (I. T. A. No. 1183 to 1188/Hyd/2012) : 32. Ground No. 1 that the Commissioner of Income-tax (Appeals) is not justified in sustaining the disallowance of expenses at 8 per cent. raised in all the appeals under consideration has been decided in the Revenue appeals vide paragraph 19 (supra). Since this ground of appeal raised by the assessee in all the appeals under consideration have already been decided in the Revenue's appeal, the grounds raised by the assessee as ground No. 1 in I. T. A. No. 1183 to 1188/Hyd/2012, become infructuous. 33. Ground No. 2 that the Commissioner of Income-tax (Appeals) should have held that even on merits the addition on account of agricultural income cannot be sustained, raised in the assessment years 2003-04 to 2005-06 has been decided in the Revenue appeal's, vide paragraphs 20 to 26 (supra) wherein we have upheld the action of the Commissioner of Income-tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of the assessee cannot be accepted as genuine. Some of the credits are obtained from non-residents staying abroad. Therefore, their identity also has not been established. Therefore, the additions so made for the assessment year 2003-04 of Rs. 14,60,000 and Rs. 5,82,870 for the assessment year 2004-05 is confirmed." 37. For the assessment year 2005-06, the Assessing Officer had made two additions under unexplained cash credits of Rs. 32,32,000 and Rs.1,42,79,929 as unexplained credits appearing under Excellence Estates. The total addition of Rs. 1,75,11,929 represented cash credits received from 22 parties. In the remand report the Assessing Officer recommended favourably in respect of 9 creditors after examining the evidences filed by the assessee during the appellate proceedings. In respect of balance 13 creditors in the absence of sufficient and reasonable explanation and evidences furnished by the assessee, the Assessing Officer held these credits were bogus and unexplained. The Commissioner of Income-tax (Appeals) held as follows : "The Assessing Officer is directed to allow a sum of Rs. 1,05,72,833 as explained credits and the same should be reduced fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition must be made as income is estimated. We find from the assessment record that income of the assessee is not estimated. The income is determined after considering the returned income and making further disallowance for discrepancies in voucher/bills produced by the assessee. Even otherwise, when income is estimated by the Assessing Officer, addition under section 68 is permissible. For this purpose, reliance is placed on the decision of the jurisdictional High Court in the case of CIT v. Maduri Rajaiahgari Kistaiah [1979] 120 ITR 294 (AP) is in support of the stand taken by the Assessing Officer. Further, the hon'ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC) held that on rejection of books of account and when business income is estimated, even then addition towards unexplained cash credit can be separately valued. In the present case, the lower authorities have not examined the issue relating to section 68 in proper perspective. Therefore, we remit the issue to the file of the Assessing Officer for fresh consideration and the assessee is directed to cooperate with the Department. 45. In the assessment year 2008-09, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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