TMI Blog2010 (10) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 20,57,385/- shown by the assessee as agricultural income. The A.O. disallowed the claim of the assessee s agriculture income primarily on the basis that the assessee has incurred all the expenses in cash. The sales have also been carried out in cash. The books of accounts and the vouchers maintained by the assessee are self-generated. Even it was also observed that purchases carried out by the assessee are not verifiable. The A.O. did not deny the holding of the land by assessee as well as the cultivation being carried out therein on the basis of copy of khasra khatonies filed by the assessee. When the matter went before the CIT(A), the CIT(A) allowed the appeal of the assessee, deleting the addition of ₹ 41,11,287/- and directed the A.O. to accept the income shown by the assessee from agriculture including the profit on sale of agricultural land by holding as under :- 4.2 The submissions made by the appellant and the evidence adduced before the AO and also produced before me followed by rejoinder on the remand report have been considered. The AO has referred in his remand report that M/s Mangal Khad Beej Bhandar was a Kirana Shop as per information collected by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations on the products of the land would not be enough to invest the subsequent operations with agricultural character. They should be in conjunction with, and in continuation of, the basic operation which is the sine qua non of an agricultural operation. Without it the subsequent operation do not acquire the character of agricultural operations. It may be mentioned that the nature of the produce raised has no relevance to the character of agricultural operations. Accordingly, agriculture would include horticulture, floriculture, arboriculture and sylviculture vide Pavadai Pathan Vs Ramaswami Chetty, AIR 1922 Mad 351. It would include the raising of groves, plantations , grass or pasture . It would extend to cultivation of all commodities of (i) food value, such as sugarcane vide CIT Vs. Ravalgoan Sugar Farm Limited [1947] 15 ITR 297 Bombay , Murugesa Chetty Vs. Chinnathamvi Goundan [1901] ILR 24 Mad 421( a coconut garden is a fruit garden)AIR 1937 Madras 254, mangoes vide Sarojini Devi Vs. Shri Krishna AIR 1944 Mad 401, [1947] 15 ITR 235 (All) orange, jack fruit , tamarind and plantains vide CIT Vs. KE Sundara Mudaliar [1950] 18 ITR 259. The relevant evidence produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be upheld for the very reason of assessee having placed on record of the AO the relevant evidences running in page 51 to 156 of the paperbook which admittedly existed on AO s record also and AO has not brought any evidence to dispute the claim of the appellant. Also it is a fact that assessee has not been confronted with any adverse material in possession of AO or brought on record by the AO as on the date of passing the assessment order . The submission made by the assessee that the material collected by the AO behind the back of the assessee without disclosing the material or giving an opportunity to cross examine the person making the statement can not be used against the assessee. There was violation of principal of Natural Justice. Honorable Delhi High Court decision in the case of CIT Vs. Rajesh Kumar (2008) 306 ITR 27 (Del.) has also been considered. The ACIT-4, Agra in his remand report in the case of assessee s sister concern M/s Aravali Agro Farms P Ltd. has himself admitted that the information called for u/s 133(6) had not been received till the date of assessment. Hence also in absence of any adverse material available on AO s record as on the date of completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of extent of agriculture produce derived by him at the farm house by bringing relevant material on record which the AO has not disputed except saying that the assessee has derived receipts from agriculture produce sale in cash. This is no ground to discard the whole affair which is supported by relevant evidence right from sowing to tilling and sale thereof with relevant incidental activities carried out during the course. The detailed submissions made by the assessee along with relevant documents running in 150 pages which are part of AO s record also were sent to AO and in the remand report he has not brought any material against the assessee or the assessee has not been confronted with any adverse material even in the remand proceedings so as to support the stand taken by the AO in the assessment order. The Madras High Court has held that agriculture would include the raising of groves plantations, grass or pasture. Mangoes vide Sarojini Devi Vs. Shri Krishna AIR 1944 Mad 401 , orange, jackfruit , tamarind and plantains vide CIT Vs. KE Sundari Mudaliya [1950] 18 ITR 259, 274 Mad. Therefore the agriculture crop grown i.e. of papaya banana is also found to have been covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng sale proceeds of papaya banana represents assesses unexplained money without bringing any contrary evidence on record in order to disprove the claim of agriculture income from agro farming carried out by the assessee except mere saying that the sales were effected in cash ignoring the evidence right from the ownership of agriculture land, field cultivation to the stage of sprouting out of fruits , basic operations, subsequent operations carried on by the assessee to crop up papaya and banana and subsequent sale thereof. In agriculture sector the phenomenon of cash sale is very common and there is no restriction to it and even at the end of purchaser of agriculture crop, he has been kept outside the preview by specific provisions of section 40A(3) read with Rule 6DD(f). On the contrary the AO except making a theoretical discussion has not brought any evidence on record to rebut the authenticity of the explanation furnished by appellant supported by the relevant evidence both documentary and otherwise. The claim of the appellant also do find support from the ratio laid down by the apex court discussed above. When the produce is there the essential part of its sale is bound to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has failed to make out a case to treat the sale proceeds of agriculture produce of ₹ 39,55,925/- as income from other sources includible u/s 68 of IT Act, 1961. It appears that AO has not considered the entire facts in the right perspective. He has taxed the interest income on IT Refund as income from other sources u/s 68 of IT Act which is illegal and it appears that AO has not applied his mind while making the aforesaid addition. Likewise the receipts shown by the assessee as profit on sale of agriculture land cannot be added u/s 68 of IT Act when assessee has furnished complete details of purchase, sale supported by the copy of sale deed, the amount received by him and the amount for which the land was purchased. Therefore the addition made by the AO at ₹ 152,799/- which is included in the total addition of ₹ 41,11,287/- u/s 68 is also not tenable. Accordingly on the facts of the case as discussed above the finding of the AO that no agriculture activity was carried out by the assessee is not upheld and the addition made by the AO u/s 68 at ₹ 41,11,287/- excluding ₹ 2,563/- which is interest on income tax refund and is taxable under the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention was drawn towards pages A to F of the Paper Book showing the photograph of the A.O. and the Inspector. It was pointed out that there was no evidence with the Department which may prove that the assessee has not derived the agricultural income. The A.O. has duly accepted the agricultural income as shown by the assessee made under section 147/143(3) for the A.Ys. 2003-04 and 2004-05 vide order dated 23.12.2008. The copies of Assessment Orders were filed before us which are available at page nos.4 6 of the written submission filed by the assessee. 6. We have carefully considered the rival submission along with the orders of the Tax Authorities below. This is an admitted fact that the assessee was owning the land. The assessee has also cultivated the land i.e. the assessee has carried out all the basic operations including tilting, watering and planting on the land. The assessee has produced the khasra and khatauni in respect of agricultural land stating therein that agricultural crops were produced by the assessee during the year. The Department has accepted the agricultural income returned by the assessee during the A.Ys. 2003-04 2004-05 in the assessment made under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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