TMI Blog2019 (6) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes, the CIT(A) was of the view that the entire analysis of the AO is based on the evidence produced by the assessee regarding the carrying out of agricultural activities and sale of agricultural produce. CIT(A) was also of the view that the AO has not based his / her conclusions on the fact that any agricultural operations carried out on such land, could not be considered agricultural activity. This finding of the CIT(A) has not been disputed by Revenue. Therefore, the fact that the JDA was entered into and the agricultural lands were converted for non-agricultural purposes has no relevance in the case on hand Whether the assessee HUF carried out agricultural operations during the year ? - The notice issued by the AO, copy of reports given by the Village Accountant, Revenue Inspector and translated copies thereof on appraisal thereof, in the period relevant to Assessment Year 2014-15, the assessee HUF was growing various crops and fruits like ragi, mangoes, bananas, vegetables, coconut, etc., and thereby derived agricultural income. In these factual circumstances, the very basis of the AO to hold that the assessee HUF did not carry on agricultural operations during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring total income of ₹ 6,16,570/- and net agricultural income of ₹ 37,50,000/-. The case was taken up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Income Tax Act, 1961 (in short the Act ) vide order dated 27.12.2016, wherein the assessee s income was determined at ₹ 35,68,820/-; by treating agricultural income declared, to the extent of ₹ 29,52,250/-, as income from other sources. The assessee s appeal was dismissed by the CIT(A)-3, Bangalore, vide order dated 01.01.2019. 3. Aggrieved by the order of CIT(A)-3, Bangalore, dated 01.01.2019 for Assessment Year 2014-15, the assessee has preferred this appeal wherein it has raised the following grounds: 1 . General Ground 1.1. The learned Income Tax Officer, Ward- 1, Ramanagar ( A0') has erred in passing the assessment order under section 143(3) of the Income Tax Act, 1961 ( the Act') in the manner passed by her and the Commissioner of Income Tax-(Appeals)-3 ( CIT(A)') has erred in confirming the said assessment order. The said order being bad in law is liable to be qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a crop by estimating the expenses that would be incurred in relation to growing attic crop by relying on the letter of the horticulture department. 2.8. The learned CIT(A) has erred in not appreciating that minimum or no expenses are required to maintain the banana trees and the family members being involved in the activities, there is a cost saving in the labour expenses to that extent. 2.9. The learned CIT(A) has erred in concluding that in relation to sericulture activity that since the license is in the name of the Karta of the HUF who represents the entire family, being the eldest male member of the HUF no other person has carried out the sericulture activity. 2.10. The learned CIT(A) has erred in relying on the letter of the sericulture extension officer and concluding that no sericulture activity was carried on land beyond the land area measuring acer and 5 guntas and the appellant would he buying and selling cocoons (trading) in so far as the remaining income is concerned. 2.11. The learned CIT(A) has erred in law and facts to the extent of concluding that the income from sericulture activity as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome under the head Income from Other Sources 6.1.1 The learned AR for the assessee was heard in support of the grounds raised (supra). According to the learned AR, the assessee is a HUF comprising of 13 members from agricultural backgrounds owning agricultural lands of approx. 28 acres; with 17 acres being ancestral lands and approx. 11 acres of agricultural lands purchased by the HUF over a period of time. It is submitted that the fact that agricultural operations were carried out by the assessee in the year under consideration is not in dispute and it is only the quantum of agricultural income that is the issue in dispute. The learned AR submits that, compared to the agricultural income of earlier years; i.e., Assessment Year 2012-13 amounting to ₹ 32 lakhs and for Assessment Year 2013-14 of ₹ 36 lakhs, which has been accepted by the Assessing Officer (AO) in scrutiny orders of assessment passed under section 143(3) of the Act for these years, the agricultural income of the year under consideration is ₹ 37,50,000/-; i.e., only a marginal increase of ₹ 1.5 lakhs. The learned AR placed reliance on the decision of the Hon ble Karnataka H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it by growing and feeding mulberry leaves to silk worms is not agricultural income. The learned AR contended that in these circumstances, the income from sericulture during the year under consideration being ₹ 15,42,199/-, then 50% of the same amounting to ₹ 7,71,100/- should be considered as agricultural income and the balance amount of ₹ 7,71,100/- may be held chargeable to tax. 6.2 Per contra, the learned DR for Revenue vehemently supported the orders of the AO/CIT(A); which he submits; has been passed after considering all the facts and therefore the additions made by the AO and upheld by the CIT(A) are to be upheld. 6.3.1 I have considered the rival contentions / submissions put forth and have perused the material on record; including the judicial pronouncements cited. It is not in dispute that the assessee HUF owned agricultural lands in the year under consideration. The AO was of the view that the assessee had entered into a joint development agreement (JDA) and converted for non-agricultural purposes, the CIT(A) at para 4.8 of his order was of the view that the entire analysis of the AO is based on the evidence produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Revenue Inspector submitted in response to information called for by the AO under section 133(6) of the Act. Further, as per details submitted by the learned AR, it is seen that the agricultural income declared by the assessee during the year was only ₹ 1.5 lakhs more than the agricultural income declared by the assessee and accepted by the AO in the scrutiny orders of assessment passed under section 143(3) of the Act for earlier Assessment Years 2012-13 and 2013- 14. In this factual matrix, as discussed above, the AO was not correct in estimating the agricultural income and expenditure incurred to earn the same; to make the impugned additions. 7.2 However, as fairly conceded by the learned AR, income from sale of cocoons cannot be regarded as agricultural income in view of the decision of the Hon ble Apex Court in the case of K. Lakshmanan Co. Vs. CIT (2000) 108 Taxman 167 (SC); wherein it was held that income derived by the assessee from sale of cocoons raised by it by feeding mulberry leaves to silkworms is not agricultural income. In the case on hand, the AO has considered income from sericulture at ₹ 1,92,240/- and 50% thereof viz., ₹ 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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