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2016 (5) TMI 956 - ITAT BANGALORE

2016 (5) TMI 956 - ITAT BANGALORE - TMI - Inflation of agricultural income - artificial boosting of income by the assessee - Held that:- When an assessee asserts that the income raised by it is on account of sale of agricultural produces, onus is on the assessee to prove such agricultural income. In our opinion, assessee before us has failed to discharge this onus. Despite number of opportunities given by the AO assessee was unable to establish how it could raise so much plants and saplings from .....

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ed to share application money, there is an infusion of capital which is not a fictitious, but a real one.

CIT (A) in our opinion was oblivious to the date of accounting of the supplementary invoice by the assessee which was on the very same day when it had raised original invoice. He was also oblivious to the ALP of the goods relating to the supplementary invoice fixed by the auditors at zero. He considered the raising of bogus invoices to inflate the agricultural income as mere non-c .....

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that sort at all. We are of the opinion that CIT (A) fell in error in deleting the addition made by the AO. We reverse the order of CIT (A) and reinstate the addition. - Decided in favour of Revenue. - I.T.A No.198/Bang/2012 - Dated:- 12-4-2016 - SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER For The Assessee : Shri. K. R. Pradeep, CA For The Revenue : Shri. Sanjay Kumar, CIT -III PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by the Revenue .....

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ome for the impugned year at nil after claiming exemption for agricultural income of ₹ 10,71,09,148/-. During the course of the assessment proceedings assessee was required to explain the claim with regard to the agricultural income. As per the assessee, its total agricultural income arose out of the sale of mother plants and other floriculture items. The sales claimed by the assessee consisted of the following : Domestic sales ₹ 1,79,33,098/- Export sales to subsidiary Rs.22,74,57,8 .....

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ubsidiary in Ethiopia were as under 4. As per the AO it was clear from the above audit report that for every sale effected to the subsidiary, assessee was raising two invoices. ALP for the supplementary invoice was certified by the auditor as zero in each case. AO after verification found that only the primary invoice was routed through the Customs and not the supplementary one. In his opinion there were no underlying goods to support such supplementary invoices. Explanation of the assessee was .....

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ch would enable the bank to authorise receipt of the export proceeds, arising out of supplementary invoice. AO also noted that despite several opportunities being given, assessee had not substantiated its claim of agricultural income arising out of the supplementary invoices. Further as per the AO against the purported horticulture sale of ₹ 22,74,57,819/-, what was actually received from the subsidiary was only ₹ 3,62,72,680/-. Sum of ₹ 12 crores was squared up vide a journal .....

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n artificial boosting of income by the assessee. He held that actual agricultural income against the alleged sale of ₹ 22,74,57,819/-, the subsidiary was ₹ 4,90,20,714/- only. Balance sum was considered as inflation of agricultural income by the assessee and held as not eligible for exemption from income-tax. Addition of ₹ 17,84,37,105/- was made. 6. Aggrieved assessee moved in appeal before the CIT (A). Argument of the assessee was that computation of agricultural income was n .....

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the assessee was that there was a legitimate reason for raising two invoices for each transaction. As per the assessee even if the agricultural income was from domestic transactions it still remained exempt. Thus according to the assessee addition made by the AO was not justified. 7. CIT (A) was appreciative of the above contentions. According to him, claim of the assessee that first invoice was at a notional value and the second invoice was raised based on ultimate realisation was an acceptable .....

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the AO. 8. Now before us, Ld. DR strongly assailing the order of CIT (A) submitted that there was no procedure like the one followed by the assessee where two invoices could be raised for sale of perishable goods. As per the Ld. DR second invoice was never routed through the Customs. Assessee s own auditors had certified the ALP value of such second invoices as nil. As per the Ld. DR assessee had discontinued this practice in later years. Even the amounts as per the primary invoice were not rea .....

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as per the Ld. DR, two hectares, were open field used for growing rootstock / budwood, one hectare was used for propagation and two hectares were buildings, pathways, etc., Further as per the Ld. DR yield of plants per hectare of green house, as per Indian standard was 60,000 numbers per annum. Therefore the maximum yield from 5 hectares, according to Ld. DR could have been at the best 3 lakh numbers. Adding another 30,000 for open farm yield, assessee could have produced 3,30,000 plants per ann .....

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an Meadows, a subsidiary of the assessee was selling the plants and saplings in the Dutch Auction house and the actual realisation would be known only on the auction floor. As per the Ld. AR at the time of sending the saplings to the subsidiary, a notional amount was shown in the invoice since the actual amount that could be realized would be known only after the auction. As per the Ld. AR this was the reason why supplementary invoice was raised. Such supplementary invoice was raised once the re .....

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were made available to the Customs authorities. In any case according to him, no comparable case was shown by the AO for coming to a conclusion that the yield of the assessee was much higher than the accepted standards. According to the Ld. AR, inflation of agricultural income by itself would not get converted to undisclosed income. 10. We have perused the orders and heard the rival contentions. Ld. AR of the assessee has not disputed the contention of the Department that the total area under cu .....

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from the above holding. 11. Leaving this apart, what we find is that assessee had along with its return filed audit report in form 3 CEB which is required to be furnished u/s.92 E for international transactions with AEs. AO had compiled the figures given at para three above from such report. It is clear from the said report that against the claimed sale of ₹ 22,74,57,819/-, ALP was only ₹ 4,20,20,714/-. This is not the opinion of the AO / TPO, but it is the opinion of the auditors o .....

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s were ultimately sold at the auction floors in Dutch auction, falls flat when we consider the dates on which supplementary invoices raised on Ethiopian Meadows were accounted by the assessee in its books. Both the invoices viz., the original invoice and supplementary invoice, in each case was accounted on the same day. If the version of the assessee that supplementary invoice was raised based on final auction figures was correct, then definitely the accounting for such supplementary invoice, ev .....

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come claimed by an assessee is correct or not, and whether it falls within the definition of that term given in Section 2(1A). When an assessee asserts that the income raised by it is on account of sale of agricultural produces, onus is on the assessee to prove such agricultural income. In our opinion, assessee before us has failed to discharge this onus. Despite number of opportunities given by the AO assessee was unable to establish how it could raise so much plants and saplings from five hect .....

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