IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `B', NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
ITA No.853/Del/2018
Assessment Year: 2014-15
M/s. D S DOORS (INDIA) Vs. Income Tax Officer,
LTD. Ward-1(2), Faridabad
C/o- Saubhagya Agarwal, K-
185/14, Surya Plaza, 1st
Floor, New Friends Colony,
New Delhi
PAN :AAACD5805B
(Appellant) (Respondent)
Appellant by Shri Saubhagya Agarwal &
Ms. Naincy Jain, Advocates
Respondent by Shaveta Nakra Dutta, Sr.DR
Date of hearing 03.01.2019
Date of pronouncement 09.01.2019
ORDER
PER O.P. KANT, A.M.:
This appeal by the assessee is directed against order dated
29/12/2017 passed by the Ld. Commissioner of Income-tax
(Appeals), Faridabad [in short `the Ld. CIT(A)'] for assessment year
2014-15, raising following grounds:
1. That having regard to the facts and circumstances of
the case, Ld. CIT(A) has erred in law and on facts in
making enhancement of addition and further erred in
reducing the agricultural income as accepted by Ld.
AO by Rs.8,34,698/- (i.e. 30% of Rs.27,82,325/-) and
that too on account of alleged ad-hoc expenditure
incurred for carrying out agricultural operation and
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that too without appreciating the facts and
circumstances of the case and without following the
principles of natural justice.
2. That having regard to the facts and circumstances of
the case, Ld. CIT(A) has erred in law and on facts in
confirming the action of Ld. AO in making addition of
Rs. 1,41,58,064/- on account of agricultural income
and that too without appreciating the specific request
of the assessee for making independent enquiry in this
regard.
3. That having regard to the facts and circumstances of
the case, Ld. CIT(A) has erred in law and on facts in
making enhancement of addition with regard to
agricultural expenditure is bad in law and against the
facts and circumstances of the case.
4. That the assessee craves the leave to add, alter or
amend the grounds of appeal at any stage and all the
grounds are without prejudice to each other.
2. Briefly stated facts of the case are that the assessee
company was engaged in the business of manufacturing of
wooden products i.e. doors, window etc. The assessee company
purchased agricultural land in assessment year 2011-12. For the
year under consideration, the assessee company filed return of
income declaring taxable income of Rs.3,91,240/- along with
agricultural income of Rs.1,69,40,389/-. The case was selected
for scrutiny and in the scrutiny assessment completed under
section 143(3) of the Income-tax Act, 1961 (in short `the Act') on
28/12/2016, the Assessing Officer accepted the agricultural
income of Rs.27,82,325/- and balance amount of
Rs.1,41,58,064/-was treated by him as income from undisclosed
sources. The Assessing Officer raised various queries including
expenditure incurred on agriculture operations and sale proceeds
etc. from the assessee for justifying the agricultural income
shown in the return of income. The Assessing Officer has
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reproduced the reply submitted by the assessee on 08/08/2016
in the assessment order, wherein the assessee has claimed
income from sale of fire-wood (Rs.34,50,000/-); wheat
(Rs.20,40,971/-); mustard (Rs.13,24,660/-); husk
(Rs.35,80,000/-); Kharif crops (Rs. 31,90,000/-); Rabi Crops (Rs.
33,54,758/-) etc. The entire agricultural income was claimed to
be deposited in cash in bank accounts. In view of no reply on the
issue of sale receipts vis-à-vis expenditure incurred, the
Assessing Officer again provided numerous opportunities to the
assessee to file reply of the quarries raised earlier. He again
provided an opportunity to the assessee on 07/11/2006
requesting specific information along with supporting documents.
The reply dated 15/11/2016 filed by the assessee has been
reproduced by the Assessing Officer in the assessment order. In
this reply also no quantitative detail as to expenses or the sale
proceeds was filed by the assessee. The Assessing Officer again
issued fresh notice under section 142(1) of the Act raising
queries on the assessee. The replies filed by the assessee were
considered by the Assessing Officer. In nutshell, the submission
of the assessee was that the agriculture operations were carried
out by the cultivators and expenses were also incurred by them
and the assessee sold its share of produces and resultant receipt
was deposited in bank account and claimed the same as
agriculture income. Out of the sum claimed as agriculture
income, the amount of Rs.27,82,325/-has been claimed as
received from produce sold through "J forms" and in respect of
the balance agriculture income, the assessee filed affidavits of
various purchasers of the agriculture produces. The Assessing
Officer also carried out enquiries from independent sources. On
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enquiry from the Dy. Director of Agriculture and Farmers Welfare
Department, the Assessing Officer noticed yield of various crops
and accordingly estimated average yield of wheat. He further
obtained "Khasar Girdawari" from the "Land & Revenue
Department" and found that large chunk of the land remained
vacant during Kharif Season and there was no mention of
"Makka", "Bajra" and " Rice" cultivation on the said land as
against the claim of the assessee of sale of those crops. The
Assessing Officer noticed that the assessee company was having
team of sufficiently skilled employee, still it did not produce any
evidence of the expenditure incurred in respect of agriculture
operations. The assessee furnished "J forms" Rs.27,82,325/- with
the Assessing Officer along with some affidavits of the purchaser
of the agricultural produce. The contention of assessee that crops
were sold to the agriculturist or farmers in the villages, was not
accepted by the Assessing Officer observing as under:
"8. The vague contentions of assessee trying to make out a case as
that of the poor agriculturists as would be found in the villages, are
more in the nature of an unsubstantiated ruse, which hardly be
accepted as genuine enough for allowing such huge allowance of
exemption to the assessee company. Genuineness could validly be
tested on the grounds of principles of preponderance of human
probabilities, which could thus form a valid ground or parameter for
determining the genuineness, stands since settled by the apex court
in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) wherein the apex
court, in declaring the transaction as non-genuine, discarded a host
of documentary evidences filed or relied upon by the assessee-
appellant. That documentary evidences are not by themselves
conclusive, and the truth of the matter or the documents could be
determined on the basis of or on the anvil of the surrounding facts
and circumstances of the case is well settled. The Hon'ble Supreme
Court in the case of Commissioner Of Income-Tax, West vs Durga
Prasad More 82 ITR 540 observed the often quoted following
relevant observation:
"It is true that an apparent must be considered real until it is
shown that there are reasons to believe that, the apparent is
not the real. In a case of the present kind a party who relies on
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a recital in a deed has to establish the truth of those recitals
otherwise it will be very easy to make self-serving statements
in documents either executed or taken by a party and rely on
those recitals. If all that an asses see who wants to evade tax
is to have some recitals made in a document either executed by
him or executed in his favour then the door will be left wide
open to evade tax. A little probing was sufficient in the present
case to show that the apparent was not the real. The taxing
authorities were not, required to put on blinkers while looking at
the documents produced before them. They were entitled to look
into the surrounding circumstances to find out the reality of the
recitals made in those documents. "
2.1 The Ld. Assessing Officer accepted agriculture income to the
extent of Rs.27,82,325/- as sales reflected in "Form J" and
treated the balance amount as income from other sources. The
relevant conclusion of the Assessing Officer is reproduced as
under:
"9. In view of the above discussions, I am constrained to reject the claim of
agriculture income made by assessee company, at Rs. 1,69,40,389/- and restrict
the same to the sale figures as per `Form J' of wheat amounting to Rs. 13,72,409/-
and `Sarson' amounting to Rs.1,46,816/- and sale of `Jawar Ki Kadwi' claimed at
Rs.12,63,100/- totaling Rs.27,82,325/-, and the balance of excess of agriculture
income claimed at Rs. 1,41,58,064/- (Rs.1,69,40,389/- - Rs.27,82,325/-) is
disallowed and treated as unaccounted income of the assessee company
introduced in guise of agriculture income being bogus agriculture income and
added to its returned income. Accordingly, an addition of Rs. 1,41,58,064/- is
made to the income of the assessee company u s 68 of the Income-tax Act. I am
satisfied that the assessee company has concealed income to the tune of
Rs.1,41,58,064/- by furnishing inaccurate particulars of his income. Hence, the
Penalty proceedings u/s 271(1)(c)/274 read with Explanation-1 of the Income Tax
Act, 1961, are initiated separately are being initiated separately.
With the above observations income of the assessee is recomputed as below:
Returned income declared Rs. 3,91,240/-
Addition as discussed above Rs.1,41,58,064/-
Total assessed income Rs.1,45,49,304/-
Agriculture income assessed as above Rs.27,82,325/-
Assessed. Charge interest u/s A, 234B, 234D wherever applicable. Withdraw
interest u/s 244A wherever applicable. Issue requisite documents. Issue Penalty
notice u/s 274 r.w.s 271(1)(c) of the Income-tax Act."
2.2 On further appeal, the Ld. CIT(A) not only upheld the
addition made by the Assessing Officer, but also disallowed
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expenditure at the rate of 30% against the agriculture income of
Rs.27,82,325/- considered by the Assessing Officer and enhanced
the agriculture income by way of amount of Rs.8,34,698/- and
thus making total addition of Rs.1,49,92,762/-. The Ld. CIT(A)
pointed out various discrepancies in the claim of the assessee of
agriculture income and the claim of agricultural produce sold to
62 agriculturist and accordingly upheld the addition made by the
Assessing Officer.
2.3 In respect of the sales shown to have through `J' forms
amounting to Rs.27,82,325/-, the Ld. CIT(A) issued show cause
to the assessee as why the corresponding expenses at the rate of
30% might not be disallowed. Rejecting the contention of the
assessee, he disallowed the corresponding expenses amounting to
Rs.8,34,698/-and enhanced the agriculture income by this
amount making the total disallowance on the issue of agriculture
income to Rs.1,49,92,762/-.
2.4 Against the finding of the Ld. CIT(A), the assessee is in
appeal before the Tribunal, raising the grounds as reproduced
above.
3. Before us, the Ld. counsel of the assessee filed a paperbook
containing pages 1 to 217 and submitted that the assessee has
furnished affidavits of the 62 persons before the Assessing Officer
as well as before the Ld. CIT(A) regarding the claim of sale of
agricultural produce to them. He referred to page 207 of the
paperbook, which is a copy of submission filed before the Ld.
Assessing Officer. The Ld. counsel submitted that in the reply at
point No. 9, the assessee submitted that it can produce all those
persons at its own cost for verification of the agriculture produces
sold. Before us, the contention of the Ld. counsel is that lower
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authorities, has sustained the addition without examining those
62 persons. The Ld. counsel undertook before us for producing all
the persons for verification of averments made in their affidavits
and to justify the agriculture income in the hands of the assessee.
Accordingly, the Ld. counsel submitted that case may be restored
to the file of the Ld. Assessing Officer for deciding a fresh after
examining the 62 persons, which will be produced by the
assessee before him.
4. On the contrary, the Ld. DR relied on the order of the lower
authorities and submitted that those affidavits were self-serving
documents and many deficiencies in those affidavits have been
pointed out by the Ld. CIT(A). According to her, there are other
inconsistencies and enquiries, which support the finding of the
lower authorities that cash deposited in bank is not in the nature
of agriculture income.
5. We have heard the rival submissions and perused the
relevant material on record. In the case, the claim of the assessee
regarding agriculture income is that land was cultivated by the
labourers and they have been paid in kind as part of agricultural
produce. The assessee has shown sale of part of agricultural
produce left to it , as it's agriculture income. The assessee's claim
is that no expenses have been incurred by it. The assessee has
shown sales of agricultural produce like "wheat", "Sarson",
"Jawar Ki Kadwi" amounting to Rs.27,82,325/- through "J forms"
and balance of agricultural produce is claimed as sold to
agriculturist in cash. The Assessing Officer has accepted the
agriculture income by way of sales through "J form but rejected
the claim of agriculture income earned through sales to
agriculturist amounting to Rs.1,41,58,064. The Ld. CIT(A) has
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also disallowed expenses of Rs.8,34,698/-against agricultural
produce sold through `J form'. We have noticed that the Ld.
CIT(A) has sustained the addition observing as under:
1. There is substantial increase in agriculture income in the
year under consideration (Rs.1,69,40,389/-) as compared to
agriculture income in preceding years (AY: 2013-14
Rs.40,39,514/-; AY: 2012-13 Rs. 22,07,995/-; AY 2011-12
Rs. 3,45,150/-).
2. No details of crops planted and sold on the land and acre
yield was provided by the assessee.
3. Sixty two affidavits of the buyers of agriculture produced
have been notarized on 4 different dates by a common
notary.
4. The affidavits filed by the purchaser states that agriculture
produced had been brought by them for consumption of own
family members and large number of animals, whereas they
themselves are agriculturists.
5. No justification of high yield of agriculture produced shown
by the assessee when the agriculturist of the same area in
their affidavits claimed of not having enough crops to
sustain the family and animals.
6. Agriculture produce have been sold every week to new
agriculturist or farmers at astronomical prices.
7. The claim of payment to labourer through barter system was
not found to be believable.
8. The payments of electricity, water, seeds, pesticides,
insecticides etc expenses not explained by the assessee.
9. Huge difference in agriculture produce per acre shown by
the assessee and details of per acre agriculture produce
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collected from agriculture Department for the same
geographical area.
10. Cash deposits in bank account not a proof of
agriculture income shown by the assessee.
6. Before us, there is no dispute on the sale proceeds received
of Rs.27,82,325/- and only grievance of the assessee is that those
sixty two persons to whom it has claimed to have sold the
agriculture produce have not been examined and the Ld. CIT(A)
has pointed out various discrepancies in their affidavits without
providing opportunity of being heard and explain the same.
According to him, this is in violation of the principle of natural
Justice. We agree with the arguments of the learned counsel of
the assessee. The lower authorities should have examined those
persons regarding veracity of the claim of the assessee before
arriving at the conclusion on the issue of claim of agriculture
income of the assessee. Before us, the Ld. counsel has
undertaken to produce all the persons before the Assessing
Officer along with necessary evidences to support the contentious
made in their affidavits. In view of the undertaking on behalf of
the assessee to produce all those persons for examination, we feel
it appropriate to restore this issue to the file of the Assessing
Officer for deciding a fresh after taking into consideration all the
evidences on record, including the result of examination of the
persons which will be produced by the assessee. As the numbers
of persons to be examined are large, we direct the assessee to
start producing the persons before the Assessing Officer within
one month from the date of receipt of this order and produce all
the persons within 3 months thereafter. The assessee shall draw
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a list of persons which will be produced on each working day and
provide such list to the Assessing Officer in advance. The
assessee will carry out examination in Chief and the Assessing
Officer will cross-examine those witnesses produced by the
assessee and may allow the opportunity of re-examination by the
assessee or its counsel if so required. The Assessing Officer may
carry out any other enquiries, which may be required in the facts
and circumstances of the case. The result of enquiries if any
should be provided to the assessee for rebutting any of the
findings of the enquiry. The Assessing Officer may decide the
issue after overall appreciation of all the evidences which are
available on record and which would be collected in restored
proceedings or produced by the assessee. Accordingly, the
grounds of the appeal are allowed for statistical purposes.
7. In the result, appeal of the assessee is allowed for statistical
purposes.
Order is pronounced in the open court on 9th January, 2019.
Sd/- Sd/-
[BHAVNESH SAINI] [O.P. KANT]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 9th January, 2019.
RK/-[d.t.d.s]
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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