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TMI Blog2015 (11) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is with regard to treatment of income earned from the activity of the nursery as agricultural income and exempt u/s.10(1) of the I.T. Act. In the crossobjection, the assessee is challenging the reopening of assessment, which is based on audit objection. 3. The facts of the case are that the assessee is an individual and grown plants in nursery on the agricultural land owned by him at Velichai Village near Kelambakkam measuring acres 23.03 cents and acres 16.93 cents in Chengalpet and derived income from sale of such plants. The assessee filed the original return of income for the AY 2007-08 on 24.10.2007 declaring a total income of Rs. 3,47,238/- and agricultural income of Rs. 51,89,480/-. The assessment was completed u/s.143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nai in the case of Chennai Petroleum Corpn. Ltd A. Y. 2006-07 (ITA NO.66/11-12/LTU(A) dated 08.01.2013 relying on the High Court of Delhi in the case of Consolidated Photo and Finvest Ltd. v. ACIT (281 ITR 394) (2006) and High Court of Mumbai in the case of Dr.Amir's Pathological Laboratory v. JCIT (252 ITR 673) has held that mere production of books of account, balance-sheet and profit and loss account will not necessarily amount to disclosure necessary for Explanation 1 of Sec.147. (v) High Court of Delhi in the case of Honda Siel Power Products Ltd v. DCIT (197 taxman 415) (2011) has held that merely because the material lies embedded in the material evidence which the AO could have uncovered but did not uncover, is not a good reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. The Id.AR has primarily questioned the reopening of the assessment based on audit objection. We disagree with this contention of the ld. AR. Reopening on the basis of audit objection was upheld as valid by the Supreme Court in CIT v. P. V.S. Beedies Pvt. Ltd (SC) (237 ITR 13). The head note is quoted as below: "Reassessment - Information - Internal Audit Party entitled to point out factual error or omission in assessment - Reopening of case on basis of actual error pointed out by Internal Audit Party is permissible under Law - ITO granting deduction under section 80G on account of donation to Charitable Trust overlooking fact that recognition granted to charitable trust had expired - Reopening was on basis of factual information giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.10(1) of the Act. The CIT(Appeals) observed that from Expalantion-3 to sec.2(1A) of the Act, the income from nursery should be taken as agricultural income, as inserted by the Finance Act, 2008 w.e.f. 1.4.09. The provisions are reproduced as under: "2(1A) "Agriculture Income" means- Explanation 3 - For the purpose of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agriculture income. 7.1 According to the CIT (Appeals), the amended provisions treated the income derived from nursery as agriculture income which are applicable from AY. 09-10. As per the decision in the case of CIT v. Green Gold Tree Farmers P Ltd (2008) 167 Taxman 151, (Uttarakand), relied on by the Id.AR, sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Explanation 3 which was brought in from AY. 09-10. It was also observed by the CIT(Appeals) that these decisions were even prior to AY. 07-08, therefore, in the assessee's case they are very much applicable. Further, the CIT(Appeals) observed that clarification as to whether the activity of nursery falls under agricultural activity or not was burning for quite some-time and the legislature has made it clear with the insertion of Explanation-3. It does not mean that the definition of agriculture income prior to insertion of this explanation did not include nursery as agricultural activity at all. The explanation is not an amendment to the main provisions of the definition of agriculture income. It is only a clarification of what agric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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