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2015 (11) TMI 855 - ITAT PUNE

2015 (11) TMI 855 - ITAT PUNE - TMI - Addition on account of agricultural income - as per AO It is a clear case of diverting the business income in the guise of agricultural income which is exempt from tax and part of the income has been suppressed by reducing the sale proceed - CIT(A) deleted the addition - Held that:- So far as the agricultural income is concerned it is an admitted fact that as against ₹ 3,63,000/- declared by the assessee during A.Y. 2008-09 the same has been shown at a .....

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e assessee has filed a certificate from the Tahsildar for the impugned assessment year showing the agricultural income at ₹ 17 lakhs. However, the same cannot be sacrosanct. From the order of the AO we find the assessee has also obtained a certificate from the Tahsildar for A.Y. 2008-09 at ₹ 15 lakhs as agricultural income whereas he had declared the agricultural income in his return of income at ₹ 3,63,000/-. Further, the assessee has obtained the certificate from a Talati who .....

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accepting the submissions made by the assessee regarding the extent of agricultural income declared by the assessee. We accordingly set aside the order of the CIT(A). However, considering the totality of the facts of the case, determination of net agricultural income of ₹ 4 lakhs under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. The balance amount of ₹ 13 lakhs will have to be treated as income from other sour .....

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17-03-2009 net income of ₹ 6,52,000/- in our opinion will be reasonable under the facts and circumstances of the case. Since the assessee has declared income from dairy business at ₹ 3,85,919/-, therefore, the difference of ₹ 2,66,081/- is the suppressed income from dairy business. Accordingly, as against the addition of ₹ 32,47,843/- made by the AO, the addition of ₹ 15,16,081/- is sustained, i.e. ₹ 13 lakhs + ₹ 2,66,081/-). The order of the CIT(A) is .....

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imated the provisions of section 40A(3) cannot be applicable. Since in the instant case there is no evidence brought on record by the AO that the assessee had made payment in cash at any time exceeding ₹ 20,000/- per day and since the income has been estimated, therefore, in our opinion the AO was not justified in invoking the provisions of section 40A(3) - Decided against revenue

Addition on account of rent - whether the said expenditure being considered as Revenue in Nature? - .....

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ispute, therefore, we find no infirmity in the order of the CIT(A) deleting the addition. - Decided against revenue

Addition on account of Fuel expenditure - CIT(A) deleted addition - Held that:- From the order of the AO we find the AO merely states that assessee has not voluntarily disallowed any expenses for personal element in the same. Considering the huge volume of business the fuel expenses at ₹ 65,664/- is very reasonable. Therefore, in our opinion, no disallowance is ca .....

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he Revenue reads as under: "1) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Nashik was justified in deleting the addition of ₹ 32,25,325/- out of the total addition made by the AO at ₹ 32,47,843/-. 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 03-10-2010 declaring total income of ₹ 1,63,540/- and agricultural income of ₹ 17 lakhs. The assessee is running a Dairy farm and a Rest .....

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recorded his statement u/s.131 of the I.T. Act. The AO asked the assessee to substantiate his agricultural income in absence of maintenance of any records. The assessee in response to query No.5 of the AO replied that the same has been declared on the basis of certificate issued by the Tahsildar who had issued the same on the basis of information provided by the Talati. The AO again in question no. 26 asked the assessee to explain as to how he had declared the agricultural income of ₹ 17 .....

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07 whereas there is no increase in the land holding of the assessee. The assessee has also not incurred any capital expenditure to increase the output of the agricultural produce. The AO enquired from the office of the Tahsildar and came to the conclusion that such income certificates are issued on the basis of affidavits filed by the applicants. 6. The AO noted from the certificate that the same mentions the date of the affidavit of the applicant. The AO in his question No.15 of the statement r .....

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he AO noted that the certificate issued by the Tahsildar refers to the opinion given by the Talati at Nashik whereas the assessee is located at Dugaon where there is separate Talati. The Talati of Nashik is in no way concerned with the Dugaon land. Further, in the A.Y. 2008-09 the assessee has declared agricultural income of ₹ 3,63,000/- which is considered in the capital account as well as while computing the tax liability. As against this in the certificate issued by the Tahsildar the ag .....

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ppressed business income from the dairy business introduced by the assessee in the guise of agricultural income. He accordingly made addition of ₹ 13,50,000/-. 8. Similarly, the AO noted that at the beginning of the year the assessee had 98 live stock. Throughout the year, there is addition of 42 live stock. Despite there being addition to the live stock, the total sales from the dairy business has increased only by ₹ 10,000/- during the year as compared to the immediately preceding .....

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the assessee the AO noted that the assessee has not maintained any details regarding the day-to-day output of milk. There is no bifurcation regarding the amounts realized from sale of milk and sale of manure. Most of the expenses in respect of cattle feed is also not supported by proper evidence. The medical expenses debited at ₹ 26,825/- did not justify the figure of non-milk live stock claimed. The AO issued summons to the assessee and recorded his statement according to which the averag .....

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idering the average selling price of ₹ 27.50 per litre the realization from sales works out to ₹ 58,21,200/-. Further, the AO noted that the assessee had purchased 4 buffaloes on 30-06-2008, 9 buffaloes on 27-10-2008, 10 buffaloes on 30-11-2008, 4 buffaloes on 15-03-2009, 10 buffaloes on 17-03-2009. The AO also considered the milk output from these buffaloes during the year under consideration and worked out the sale figure of ₹ 68,07,289/-. Considering the sale of milk at S .....

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grown rich crops such as Tomato and Grapes. As per accepted trade practice agricultural produce was sold on as-is-basis, i.e. spot sale. Therefore, no documentary evidence is generated in respect of agricultural activities. Therefore, the certificate of the Tahsildar was submitted to the AO as a proof of income from agricultural activity under the given situation. The Tahsildar is the only person who can make proper assessment of the income of the assessee. Therefore, the AO is not justified in .....

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at the Talati at Nashik is in no way concerned with the land of the assessee located at Dugaon whereas there is separate Talati is also not without authority because it is for the Tahsildar or Talati to decide how to get verification of the land done and the verification of land cannot be carried out as per whims of the AO. It was further stated that whether the Talati at Nashik was authorized to carry out verification of the land or not is a separate issue. 11. So far as the addition of ₹ .....

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o whom daily 1 litre milk/labourer is given by almost all the diaries in Nashik, Wastage of milk because of many reasons has not been considered by the AO. The consumption of milk by calves, consumption of milk by the owners were ignored by the AO. Further, there are many other instances because of which the output of milk or sales is curtailed has also not been considered. The decision of the Pune Bench of the Tribunal wherein the estimation of income from milk/cattle at ₹ 3,750/- per yea .....

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accordingly argued that the addition of ₹ 18,97,843/- made by the AO on account of suppression of receipts from sale of milk should be deleted. 12. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition on account of agricultural income at ₹ 13,50,000/- by observing as under: "6.2 I have carefully considered the facts of the case, the assessment order and submissions on behalf of the appellant. It is undisputed fact that the appellant is having agric .....

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appeared that because of the substantial rise in the agricultural income as disclosed by the appellant, the AO., without critically evaluating facts of the case and material available on record, drew adverse inference and rejected the contentions of the appellant without any valid reasons. The spot sale system particularly in case of sale of grapes is known and accepted practice. The AO. is not justified in brushing aside the certificate of the Tahsildar without bringing on record that the cont .....

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also issued the Summons to the appellant, when the appellant was cooperating in the assessment proceedings. The action of the AO. in rejecting the certificate of Tahsildar without confronting him is illegal particularly when the certificate is issued by a Government Authority under the powers granted to him. It is not the case of A.O. that the agricultural income as disclosed by the appellant cannot be earned in the given circumstances. The appellant has also furnished the approximate quantity o .....

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ount of ₹ 22,518/- and deleted the balance amount by observing as under : "7.2 I have carefully considered the facts of the case, the assessment order and the submissions of the appellant. The action of the AO. in taxing the sale proceeds of Sale of milk instead of profit thereon is prima facie incorrect. The contentions of the Ld. AR. as regards mistakes on the part of the A.O. in not considering the customary distribution of milk to the labourers working in the dairy of the appellan .....

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is also accepted fact that the appellant has not maintained proper record of production of milk, expenses, etc. In such circumstances there is no alternative other than to fairly estimate the income from dairy business. It is also pertinent that the A.O. has not correlated the impugned addition with any unaccounted investment or unaccounted expenditure. Therefore, the turnover estimated by the A.O. shall required to be corrected considering the usage of milk by the labourers, wastage of milk du .....

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y the A.O. at ₹ 68,07,289/- and it would be fair to estimate net profit @8% thereon, which comes to ₹ 4,08,437/- as against estimated by the A.O. at ₹ 32,47,843/-. The assessee has shown income from this source at ₹ 3,85,919/-. Therefore, difference of ₹ 4,08,437/- (-) ₹ 3,85,919/- = ₹ 22,518/- is directed to the added. Consequently the impugned addition of ₹ 32,47,843/- is reduced to ₹ 22,518/-/. This ground of appeal is partly allowed." .....

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gricultural income certificate from the Tahsildar. How and why he approached a different Talati is not known. So far as income from sale of milk is concerned the Ld. Departmental Representative submitted that the assessee admittedly has not maintained any books of account. When there was an increase of 42 buffaloes during the year the increase in sale of milk was only ₹ 10,000/- for the entire year as compared to the preceding assessment year. He submitted that it is a common knowledge tha .....

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rder of the CIT(A). Referring to the ground taken by the revenue he submitted that the department has not taken any specific ground on account of agricultural income. He submitted that the order of the CIT(A) is justified since he has accepted the certificate issued by Tahsildar who is an expert in giving opinion about the agricultural income based on the verification by the Talati. So far as the income from sale of milk is concerned he submitted that there are various reasons for which the esti .....

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airy business is interlinked. The total disallowances by the AO on account of sale of milk was at ₹ 32,47,843/-. Since the AO has considered agricultural income of ₹ 3,50,000/- only the balance amount of ₹ 13,50,000/- was treated as business income introduced and the balance amount of ₹ 18,97,843/- was separately added. Therefore, the Ld. Counsel is not correct in saying that the revenue has not taken any ground on account of agricultural income. 18. We have considered th .....

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85,919/- the AO considering the non maintenance of books of account and number of buffaloes owned by the assessee at the beginning of the year as well as purchases during the year determined sale from milk at ₹ 68,07,289/-. After reducing the sale determined by the assessee at ₹ 35,59,446/- the AO determined the suppression of sale at ₹ 32,47,843/-. Since he has already considered part of the agricultural income as business income, i.e. ₹ 13,50,000/-, therefore, he made a .....

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Ld.CIT(A) restricted the addition of ₹ 32,47,843/- made by the AO to ₹ 22,518/- without any valid reasons. 19. So far as the agricultural income is concerned it is an admitted fact that as against ₹ 3,63,000/- declared by the assessee during A.Y. 2008-09 the same has been shown at an astronomically high figure of ₹ 17 lakhs during the impugned assessment year. The land holding of 8.5 acres has not undergone any change. Since there is no addition to the agricultural land d .....

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he AO we find the assessee has also obtained a certificate from the Tahsildar for A.Y. 2008-09 at ₹ 15 lakhs as agricultural income whereas he had declared the agricultural income in his return of income at ₹ 3,63,000/-. Further, the assessee has obtained the certificate from a Talati who is not the Talati for the land situated at Dugaon. The relevant observation of the AO in the body of the assessment order read as under: "On perusal of the information contained in the certific .....

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3,000/-, which is considered in the capital account, as well as, while computing the tax liability. As against this in the certificate issued by the Tahsildar the agricultural income is stated to be ₹ 15,00,000/- for A.Y. 2008-09. As mentioned in earlier points asssessee has filed incorrect information before the Tahsildar and managed to obtain the income certificate. In view of this fact the certificate issued by the Tahsildar cannot be accepted as an evidence to prove the genuineness of .....

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was not justified in accepting the submissions made by the assessee regarding the extent of agricultural income declared by the assessee. We accordingly set aside the order of the CIT(A). However, considering the totality of the facts of the case, determination of net agricultural income of ₹ 4 lakhs under the facts and circumstances of the case in our opinion will meet the ends of justice. We hold and direct accordingly. The balance amount of ₹ 13 lakhs will have to be treated as i .....

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assumptions and surmises. Although as per the statement of the Assistant Commissioner of Animal Husbandry, Nashik, the average daily output is assessed as 9 liters per day, however, it cannot be uniformly adopted for all the buffaloes for a continuous period of 8 months. Considering the rate of milk at ₹ 27.50 per litre and other surrounding circumstances net income of ₹ 6,000/- per cattle per year in our opinion in the given facts and circumstances of the case will be reasonable. Si .....

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.18,000/- 9 buffaloes purchased on 27-10-2008 (6000/12x5x9) Rs.22,500/- 10 buffaloes purchased on 30-11-2008 (6000/12x4x10) Rs.20,000/- 4 buffaloes purchased on 15-03-2009 and 10 buffaloes purchased on 17-03- 2009 = (6000/12x0.5x14) Rs.3,500/- TOTAL 6,52,000/- 22. Since the assessee has declared income from dairy business at ₹ 3,85,919/-, therefore, the difference of ₹ 2,66,081/- is the suppressed income from dairy business. Accordingly, as against the addition of ₹ 32,47,843/- .....

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icultural income as suppressed business income and while giving effect has simultaneously decided both the issues. The Ld.CIT(A) also while giving relief to the assessee had considered both the issues together and has reduced the addition of ₹ 32,47,843/- to ₹ 22,518/-. Under these circumstances, we find no merit in the argument of the Ld. Counsel for the assessee that since the Revenue has not taken any specific ground for deletion of agricultural income, the Departmental Representa .....

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sment proceedings noted that the assessee has made purchases totaling to ₹ 6,53,970/- from one Shri Pawshemama. No vouchers in respect of these were produced and the payments were made in cash. He therefore invoking the provisions of section 40A(3) disallowed an amount of ₹ 6,53,970/-. Before CIT(A) it was submitted that no payment of cash in excess of ₹ 20,000/- was made. Further, the supplier is also cultivator of sugarcane and therefore the provisions of section 40A(3) are n .....

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sions of section 40A(3) cannot be applicable. Since in the instant case there is no evidence brought on record by the AO that the assessee had made payment in cash at any time exceeding ₹ 20,000/- per day and since the income has been estimated, therefore, in our opinion the AO was not justified in invoking the provisions of section 40A(3). We accordingly uphold the order of the CIT(A) on this issue and the ground raised by the Revenue is dismissed. 28. Ground of appeal No.3 by the Revenue .....

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ing the year and therefore 50% of the rent is not revenue in nature. We find Ld.CIT(A) deleted the addition by observing as under : "9.2 I have considered the facts of the case, the relevant assessment order and submissions on behalf of the appellant, it is an undisputed fact that the impugned expenditure is incurred in respect of the normal business of the appellant. Thought the shop was taken on lease in the first quarter of the year and the same was commercially used in the third quarter .....

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wance of rent is hereby deleted. Therefore, this ground of appeal is allowed." 30. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 31. After hearing both the sides, we find no infirmity in the order of the CIT(A) on this issue. It is an undisputed fact that assessee is engaged in the business of sale of milk. Although he started the restaurant from this premises in the 3rd quarter of the year, however, the assessee has stated before Ld.CIT(A) that he was also doi .....

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