Income Tax Appellate Tribunal - Pune
Anjum Shoukat Bagwan, Ichalkaranji vs Dcit, Central Circle,, Kolhapur on 15 February, 2017
आयकर अपील य अ धकरण] पुणे यायपीठ "बी" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
सु ी सुषमा चावला, या यक सद य एवं ी अ नल चतुव"द , लेखा सद य के सम%
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM
आयकर अपील सं. / ITA Nos.215 to 225/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
Anjum Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... अपीलाथ /Appellant
PAN No.ABPAB9820C
Vs.
The Dy. Commissioner of Income Tax,
Central Circle, Kolhapur .... यथ / Respondent
आयकर अपील सं. / ITA Nos.467 to 477/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
The Income Tax Officer,
Central, Kolhapur .... अपीलाथ /Appellant
Vs.
Anjum Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... यथ / Respondent
PAN No.ABPAB9820C
आयकर अपील सं. / ITA Nos.171 to 181/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
Arish Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... अपीलाथ /Appellant
PAN No.ABYPB5125F
Vs.
2
Anjum and Group
The Dy. Commissioner of Income Tax,
Central Circle, Kolhapur .... यथ / Respondent
आयकर अपील सं. / ITA Nos.489 to 499/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
The Income Tax Officer,
Central, Kolhapur .... अपीलाथ /Appellant
Vs.
Arish Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... यथ / Respondent
PAN No. ABYPB5125F
आयकर अपील सं. / ITA Nos.182 to 192/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
Shahnaz Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... अपीलाथ /Appellant
PAN No.ABYPB5123DF
Vs.
The Dy. Commissioner of Income Tax,
Central Circle, Kolhapur .... यथ / Respondent
आयकर अपील सं. / ITA Nos.478 to 488/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
The Income Tax Officer,
Central, Kolhapur .... अपीलाथ /Appellant
Vs.
Shahnaz Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... यथ / Respondent
PAN No.ABYPB5123DF
3
Anjum and Group
आयकर अपील सं. / ITA Nos.204 to 214/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
Kaish Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... अपीलाथ /Appellant
PAN No.AFWPB6636C
Vs.
The Dy. Commissioner of Income Tax,
Central Circle, Kolhapur .... यथ / Respondent
आयकर अपील सं. / ITA Nos.456 to 466/PUN/2013
नधा'रण वष' / Assessment Years : 1999-2000 to 2009-10
The Income Tax Officer,
Central, Kolhapur .... अपीलाथ /Appellant
Vs.
Kaish Shoukat Bagwan,
6/464, Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... यथ / Respondent
PAN No. AFWPB6636C
आयकर अपील सं. / ITA Nos.226 & 227/PUN/2013
नधा'रण वष' / Assessment Years : 2004-05 & 2005-06
Soniya Nagari Vinkar &
Vinkar Vyavasaik Sah. Pat Sanstha Ltd.,
H.No.193, W.No.9,
Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... अपीलाथ /Appellant
PAN No.AAAJS2234E
Vs.
The Dy. Commissioner of Income Tax,
Central Circle, Kolhapur .... यथ / Respondent
4
Anjum and Group
आयकर अपील सं. / ITA Nos.445 & 446/PUN/2013
नधा'रण वष' / Assessment Years : 2004-05 & 2005-06
The Income Tax Officer,
Central, Kolhapur .... अपीलाथ /Appellant
Vs.
Soniya Nagari Vinkar &
Vinkar Vyavasaik Sah. Pat Sanstha Ltd.,
H.No.193, W.No.9,
Near Jayashree Sizing,
Sangli Road,
Ichalkaranji - 416 115 .... यथ / Respondent
PAN No.AAAJS2234E
अपीलाथ क ओर से / Appellant by : Shri M.K. Kulkarni
यथ क ओर से / Respondent by : Shri O.A. Mao
सुनवाई क तार ख / घोषणा क तार ख /
Date of Hearing :08.12.2016 Date of Pronouncement: 15.02.2017
आदे श / ORDER
PER SUSHMA CHOWLA, JM :
This bunch of appeals filed by the assessee and revenue are against consolidated orders of CIT(A) Kolhapur relating to Assessment Years 1999- 2000 to 2009-10 against respective orders passed under section 143(3) r.w.s. 153A/147 of the Income Tax Act, 1961 (in short 'the Act').
2. The assessee in ITA No.216/PUN/2013 relating to assessment year 2000-2001 has raised the following grounds of appeal:-
"Under facts & under the circumstances of the case -
1. Hon. CIT [A] has grossly erred in not accepting the book results for Agriculture Income of the appellant. Whereas, learned CIT[A] has adopted following methodology for estimating income from Sugarcane and Vegetable/Fruits etc:5
Anjum and Group • From Sugarcane Gross receipts, 54% is deducted towards agriculture expenses and amount paid towards contractual farming [Batai]. For arriving at this conclusion, Hon CIT[A] has totally relied on the facts of the case of Badshah Bagwan, and referring the facts of Badshah Bagwan's case, the formula of 54% deduction is applied. Whereas, in the case of appellant, not a single document has been found and seized to establish and substantiate that the appellant had given his land on contractual [Batai] farming.
Hence, deduction on account of estimated expenditure and contractual farming is purely on assumption and presumption, hence needs to be disapproved. It is humbly prayed that, the book results of the appellant may kindly be approved.
• Non Sugarcane sales for Vegetable/Fruits etc are estimated @ 150% of notional income from Sugarcane Sale. From said Gross receipts, 50% is deducted towards agriculture expenses and amount paid towards contractual farming [Batai], under the following caption"
mentioned in the tabulation - Table II [Para 30 of the order]"
L. Less: Expenses & Contractual Farming factor @ 50% For arriving at this conclusion, Hon CIT[A] has totally relied on the facts of case of Badshah Bagwan, and referring the facts of Badshah Bagwan' s case, the formula of 50% deduction is applied. Whereas, in case of appellant, not a single document has been found and seized to establish and substantiate that, appellant had given his land on contractual [Batai] farming.
• Further, in para 25 of the order, Hon CIT[A] has mentioned that, "It is also well-known that, normally vegetables are not grown on sharing system or batai basis"
In view of the remarks mentioned above, the disallowance made on account of Contractual Farming [Batai] is uncalled for and needs to be disapproved. Hence, deduction on account of estimated expenditure and contractual farming is purely on assumption and presumption, hence needs to be disapproved. It is humbly prayed that, the book results of the appellant may kindly be approved.
2. The appellant may be allowed to add / rectify the grounds of appeal."
3. Similar grounds have been raised by the assessee in ITA No.215/PUN/2013, relating to assessment year 1999-2000.
4. The Revenue in ITA No.468/PUN/2013, relating to assessment year 2000-2001 has raised the following grounds of appeal:- 6
Anjum and Group "1. CIT(A) erred in not confirming the additions made by the A.O. on the issue of agricultural income from sale of sugarcane, Vegetables & other agricultural income from flowers, fruits, coconuts etc. in toto disregarding the evidences brought out in the assessment order.
2. The Ld. CIT(A) failed to appreciate that the assessee sought to explain the source of the assets found during search through agricultural income and therefore addition on the issue of agricultural income is in essence addition of unexplained investment of the assessee in various assets.
3. The Ld. CIT(A) failed to appreciate that onus is on the assessee to explain the source of the assets and assessee failed to discharge the onus cast on him through documentary evidence.
4. The Ld. CIT failed to appreciate that the assessee is a non-filer, no books of account have been maintained and the assets have been unearthed only as a result of search action. Therefore, allowing claim of exempt agricultural income as source of assets without documentary evidence would be giving undue advantage to the assessee vis-a-vis law abiding assessees.
5. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in partially deleting the addition on the issue of agricultural income ignoring the fact that the share of 46% of net agricultural income to assessee in batai/ adheli system means 46% of net agricultural income to farmer also, which leaves only 8% towards agricultural expenses for all the above assessment years, which is not acceptable.
6. The appellant prays that, the order of the Ld. CIT(A) be vacated and that of the AO's order may be restored.
7. The appellant craves leave to add, alter, amend, modify any of the above grounds raised, any other grounds at the time of proceedings before the Hon'ble Tribunal which may please be granted."
5. Similar grounds have been raised by the Revenue in ITA No.467/PUN/2013, relating to assessment year 1999-2000.
6. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was conducted at the residential as well as business premises of Bagwan Group on 18.05.2006. The assessee being one of the group was also covered under search and certain incriminating documents were found and seized. Consequent thereto, the Assessing Officer issued notice under section 153A of the Act requiring the assessee to furnish the return of income. In response thereto, the assessee had filed the return of income declaring total 7 Anjum and Group income of Rs.75,670/- and agricultural income of Rs.5,20,315/-. The said income was also declared by the assessee in the return of income filed under section 139(1) of the Act. The assessee had bifurcated the agricultural income as under:-
Sugarcane proceeds --
Non-sugarcane proceeds 681058
(vegetables, flowers, fruits, coconut)
TOTAL 681058
Less Agricultural expenses 160743
Net Agricultural income 520315
7. The assessee was asked to furnish the details of agricultural expenses along with bills, sale bills of crops, details of agricultural operations, 7/12 extract of the agricultural land owned by the assessee, crop-wise area of land under cultivation and the average yield of all the crops. The assessee was also asked to furnish chart in respect of all the family members showing crop- wise area of land under cultivation as per 7/12 extract. The Assessing Officer from the details submitted by the assessee observed that the gross receipts from sugarcane and non-sugarcane crops (vegetables) differ in case of all family members as far as yield per acre was concerned. The assessee claimed that the agricultural land owned by the family members was cultivated collectively. The crops raised from the lands were sold in the names of family members randomly and there was no clear-cut bifurcation as to cultivation of crops and its sales amongst the family members. The assessee thus, requested to consider the agricultural income for the family as a whole. The Assessing Officer accepted the said plea of the assessee and proceeded to allocate the agricultural income in the names of various family members according to their agricultural land holdings.
8
Anjum and Group
8. The Assessing Officer on perusal of details noted that the total sugarcane sale proceeds of Rs.8,98,591/- and net sugarcane sale proceeds after considering the agricultural expenses were only 23.30% as compared to 40% of expenses required for any crop. The Assessing Officer also noted that the agricultural expenses for sugarcane in the case of Shri Badshah A. Bagwan, assessee's own real brother had been shown at 40% to 50% of gross receipts. The assessee was show caused as to why the agricultural income should not be considered at 40% of gross receipts. The assessee pointed out that the average expenses for agricultural activities ranges between 23.07% to 36.59%. He also pointed out that regular books of account for expenses were being kept and the details of expenses could be verified. The observation of agricultural expenses at about 40% of the receipts was in connection with field size of 1-5 acres, whereas field size of agricultural lands owned by the assessee was big i.e. ranging between 25-60 acres. The assessee also pointed out that multiple and sub-crops were regularly taken and hence, the yield ratio was high. The assessee also claimed that its irrigation facility was unique and also huge water storage capacities were created on field for constant water supply and hence, extraordinary results of output. The Assessing Officer however, did not accept the contention of assessee, where the assessee himself had agreed that in normal course the agricultural expenses for crop were atleast 40%. The Assessing Officer thus, re-computed net sugarcane receipts in assessee's family case by allowing 40% of agricultural expenses. In respect of agricultural income from vegetables, the Assessing Officer noted that the assessee had shown gross receipts from vegetables on very high side as compared to normal agriculturists. The Assessing Officer has tabulated the average gross receipts per acre vis-à-vis area under vegetables as per 7/12 extract, which reads as under:-
9
Anjum and Group Asst. Year Average gross Area under vegetables receipts per acre as per 7/12 extracts 2000-01 Rs 1,81,639/- 28.13 acres 2001-02 Rs 91,110/- 57.31 acres 2002-03 Rs 1,43,372/- 74.29 acres 2003-04 Rs 1,24,428/- 77.05 acres 2004-05 Rs 1,89,337/- 80.21 acres 2005-06 Rs 1,69,684/- 87.05 acres 2006-07 Rs 55,280/- 112.19 acres
9. The Assessing Officer further noted certain discrepancies as regards the receipts from vegetables which are summed up at pages 5 and 6 of the assessment order. In view of the said facts, the Assessing Officer was of the view that the agricultural income shown by the assessee was not correct and the assessee had inflated his agricultural income to explain investment in unexplained assets. However, considering the facts that some vegetables would have been grown by the assessee, the net agricultural income of the assessee from vegetables was considered at Rs.6,000/- per acre after deducting 40% of expenses from gross receipts of Rs.10,000/- per acre and the assessee was show caused in this regard. The assessee furnished its reply to the said proposition raised by the Assessing Officer which is incorporated under para 14 at pages 6 and 7 of the assessment order. The assessee also filed Xerox copies of affidavit of retail vendors, confirming that the said vendors had purchased vegetables from the assessee group and letters from the farmers carrying on agricultural activity adjacent to the assessee's firm, confirming that the assessee was carrying on agricultural activity on the said farms. The Assessing Officer rejected the contention of assessee as per para 15 at pages 7 to 11 of the assessment order. The Assessing Officer was of the view that in the absence of any supporting bills for inputs for vegetables grown and in the absence of any evidence filed by the assessee with regard to transport for input or output, weigh bill expenses and in the absence of narration on 7/12 extract amongst other reasons establishes 10 Anjum and Group that the assessee had inflated his agricultural income from non-sugarcane crops as per his convenience. The assessee again was asked to furnish the details crop-wise area under cultivation which the assessee had failed to furnish and in the absence of the same, since the assessee was having agricultural income from vegetables, the same was estimated at Rs.6,000/- per acre and rejecting the contention of assessee of paying 50% of the agricultural receipts to the farmers, the agricultural income of the assessee was worked out under para 20 of the assessment order at pages 12 and 13 of the assessment order. The Assessing Officer thus, computed the agricultural income in the hands of assessee in each of the years and worked out the excess agricultural income shown by the assessee year-wise. The Assessing Officer also noted that the capital of assessee as shown in the balance sheet was inclusive of agricultural income and where the assessee had inflated the agricultural income, then in turn, the assets shown through balance sheet to that extent became unexplained and addition of the said amount was made to the taxable income of the assessee. The Assessing Officer year-wise has worked out the quantum of unexplained assets and made the addition accordingly.
10. Before the CIT(A) the assessee made elaborate submissions, vis-à-vis its land holdings and the income generated from agricultural operations. The Ld. Authorised Representative for the assessee also pointed out that there was no merit in the order of the Assessing Officer to estimate the agricultural income in the hands of the assessee whereas the said income was correctly shown by the assessee in the respective hands in the respective years. The assessee also agitated the order of Assessing Officer in estimating that 50% of the agricultural receipts were given to the farmers because of the statement of one Shri Namdeo Buva who in his statement recorded on 18-05-2005 had 11 Anjum and Group stated that he cultivated sugarcane on 9 acres of assessee's land for 1/4th share. The Assessing Officer applied the said proposition to the whole land holding of the assessee and estimated the income in the hands of the assessee. Before the CIT(A) the Ld. Authorised Representative for the assessee pointed out that the said statement has been withdrawn by Shri Namdeo Buva and hence no merit in estimating that 50% of the agricultural produce has been paid to the farmers. The CIT(A) after considering the detailed submissions made by the assessee summarized the same under different heads as under :
i. Agricultural income from sugarcane
ii. Agricultural income from vegetables
iii. Payment of 50% of agricultural receipts to farmers
11. The assessee also contended that the crops were cultivated not as per notings in the 7/12 extracts but as per weather conditions, market situations etc. The assessee filed the details of land for sugarcane and non sugarcane cultivation before the CIT(A) and the basis for calculation was also explained. The submissions of the assessee were forwarded to the Assessing Officer along with the statements recorded during cross examination in respect of the commission agents and Shri Namdeo Buva. The Assessing Officer in the remand report stated that the statements given by commission agent during cross examination were afterthought and could not be relied upon. Similarly, the statement of Shri Namdeo Buva was also applied by the Assessing Officer in the remand proceedings. The CIT(A) noted that though elaborate submissions were made by the assessee in respect of agricultural income, it was a fact that there was no details of inputs for conducting agricultural activity and there were no details of daily expenses incurred on agricultural activity in the form of labour, power, water or of seeds and fertilizers etc. Further area- 12
Anjum and Group wise land cultivation details were not available, sales of vegetables were all in cash and the sale bills were not serially numbered and were sometimes without dates etc. The CIT(A) was of the view that in the above said circumstances there were not sufficient reasons to estimate the agricultural income in the manner that the Assessing Officer has done. However, in the absence of reliable data maintained by the assessee the income has to be estimated in the hands of the assessee. The CIT(A) considered the land holdings of the assessee group and observed that the land holding had increased more than 3 fold during the period 1999-2000 to 2005-06. Further, the entire land holding had increased in rural agricultural areas. The CIT(A) thus inferred that the agricultural activity had been adopted by the assessee and family members as prime earning activity of the group. Another point noted by the CIT(A) as per Table No.1 of page 13 of the appellate order was that the assessee had always utilized more land for cultivation and growing of vegetables than the land utilized for cultivation and growth of sugarcane.
12. The CIT(A) under para 26 noted the contention of the assessee in support of its income from agricultural activities by creating elaborate infrastructure by way of laying of direct pipelines of 8 and 6 inches from the Panchganga river and creation of huge water storage facilities in their farm, which was capable of storing few lakhs of litres of water. The assessee had also introduced drip irrigation facilities for irrigation of vegetables and flowers. Further the assessee used mechanized and automated farming equipments for sowing, cutting spraying of pesticides etc. The CIT(A) also noted the contention of the assessee that the assessee had undertaken systematic and scientific procedures to select the crop pattern and also employed the services of experts for optimized agricultural activity. Since the piece of land was very big, the assessee contended that the agricultural activities could be carried out 13 Anjum and Group by using automated mechanical devices and scientific methods. The CIT(A) acknowledged that it could not be denied that the assessee would not have taken to growing vegetables on large tract of land unless it was providing very good returns or yield. The CIT(A) thus held that there was necessity of approximation and estimation. However, the CIT(A) held that the agricultural results shown by the assessee could not be accepted as sacrosanct and correct. The observation of the Assessing Officer that sale of vegetables was not effected through brokers or marketing committee was held to be not relevant by the CIT(A). The CIT(A) acknowledged that the assessee belong to Bagwan community which was traditionally a grower and seller of vegetables and flowers. Since the community which were largely connected with retail vending of vegetables and fruits etc. the CIT(A) observed that the produce could be directly purchased from the assessee rather than from purchasing through marketing committee. Even otherwise the current business trend of marketing agricultural commodities was direct sale to organized vendors and in view thereof the contention of the assessee was accepted. However, the observations made by the Assessing Officer in respect of sale bills, statements given by persons including Shri Harunbhai Abdulgani Bagwan, Shri Zakhir Hussein, Abdulhaq Abdulhameed Bagwan and Shri Namdeo Buva as per the CIT(A) appears to be in order. Therefore, the books of account maintained were held to be unreliable and inaccurate. Further the income was estimated in the hands of the assessee by applying ratio as in the case of assessee's brother Shri Badshah A. Bagwan and the average agricultural income per acre was computed as per Table No.2 at page 25 of the appellate order. The CIT(A) accordingly estimated the yield of sugarcane per acre and also the total acreage was determined. The CIT(A) also determined total acreage under the vegetables and flowers and rejecting the claim of the assessee and did not accept the Assessing Officer's view that under the batai system, gross 14 Anjum and Group produce is divided between the owner of the land and the tenant. The CIT(A) acknowledged that in respect of gross income from sugarcane cultivation there was no dispute as the same was obtained from sugar mills. However, the methodology of allocation of expenses as held in Shri Badshah Bagwan's case was adopted in the instant case also in respect of the income from vegetables and fruits etc. The quantum of income determined by the Assessing Officer @ Rs.6000/- per acre was held to be abysmally low and the CIT(A) held it reasonable and estimated the gross yield from the sale of vegetables, fruits, flowers in the rupee terms at 150% of the yield of monetary terms of sugarcane cultivation. From this figure of gross yield, the CIT(A) held that 50% had to be reduced to account for expenses and consequent thereof the income per acre for non sugarcane produce was tabulated in Table No.3. Accordingly, the income of the assessee for agricultural activities, i.e. holding of 9 acres was computed in Table No.4 at page 27 of the appellate order and the Assessing Officer was directed to adopt the figures in the column 'Agricultural income' and tax the difference between the agricultural income worked out above and the income declared in the return of income, if any, as assessee's unexplained income during the respective assessment years.
13. The assessee is in appeal against the order of CIT(A) in estimating the income in the hands of the assessee. The revenue has also filed an appeal against the order of CIT(A) in reworking the agricultural income in the hands of the assessee as against the order of the Assessing Officer in adopting the same @ Rs.6,000/- per acre.
14. The Ld. Authorised Representative for the assessee pointed out that the estimation of income and expenses relating to the agricultural activities by the assessee group was estimated by the Assessing Officer against which the CIT(A) gave relief but the estimation of income was on lower side than the 15 Anjum and Group market trend, i.e. the data available against yield of vegetables, fruits and flowers. Our attention was drawn to the order of CIT(A) wherein year-wise net agriculture income has been computed in the hands of the assessee. The Ld. Authorised Representative for the assessee pointed out that the case of revenue was that the assessee had inflated the agricultural income in order to justify the cost of acquisition of various assets found during the course of search, however, the same was not true. He vehemently stated that the assessee was holding big size of agricultural land ranging between 25 to 60 acres and was wholetime engaged in agricultural activities. Multiple and sub- crops were regularly taken and consequently the income in the form of gross receipts was higher and in proportion to the low percentage of expenditure. He further pointed out that where continuous water supply was available to the farm of the assessee from Panchganga river with separate pipeline and higher water storage capacities were created for constant water supply to fields, resulted in giving extraordinary profits which merits to be accepted. The assessee claims that it was maintaining proper books of account in respect of the expenses. The assessee pointed out that there was no merit in the orders of the authorities below in making the estimation wherein the Assessing Officer had estimated yield @ Rs.6,000/- per acre wherein the CIT(A) had increased the yield per acre to Rs.25,605/-.
15. The Ld. Authorised Representative for the assessee pointed out that in the agricultural operations carried out by the assessee the yield could not be constant because it depends on various factors, i.e. water supply, weather, nature of seeds etc. Our attention was drawn to the tabulated details filed in this regard and it was pointed out by the assessee that where the assessee has been showing the results which vary from year to year, the same should be accepted. The Ld. Authorised Representative for the assessee further 16 Anjum and Group fairly admitted that it was not maintaining proper vouchers and because of the huge land holding exact details in respect of each co-owner were not available. He fairly agreed that some estimation has to be made, however, the estimation made by the revenue authorities was on lower side.
16. In respect of the sugarcane produce, the Ld. Authorised Representative for the assessee pointed out that there was no merit in estimating the expenditure at 40%. He also pointed out that the Assessing Officer had relied on the order of Shri Badshah Bagwan to estimate expenditure at 40% which was never confronted to the assessee and the same could not be relied upon. He pointed out that in the case of Anjum Shoukat Bagwan there was only income from sale of vegetables and flowers and for yield in vegetable activities ICAR had laid down various norms. In this regard, he placed reliance on the ratio laid down by the Pune Bench of the Tribunal in the case of Venkateshwara Agricultural Farm in ITA Nos.753 to 759/PN/2009 relation to assessment years 2001-02 to 2006-07 order dated 23-09-2011 with lead order in the case of Shri Babulal Laxminarayan Malu in ITA Nos. 241 to 243/PN/2009 relating to Assessment Years 2001-02, 2002-03 & 2006-07 wherein similar estimation of agricultural income was made in the hands of assessee.
17. The Ld. Authorised Representative for the assessee pointed out that there was no fruits on the land grown by the assessee. During the course of hearing the Ld. Authorised Representative for the assessee further filed details of copy of books of Mahatma Phule Krishi Vidyapeeth, Rahuri (MKVP) giving full details of fruits, sugarcane, vegetables and information as to its cultivation, water requirement and irrigation of plant in Marathi. No English translation of the said document was filed.
17
Anjum and Group
18. The Ld. Departmental Representative for the revenue stressed that in the absence of proper documentation being maintained by the assessee there was no merit in the claim of the assessee. He stressed that even the 7/12 extract of the land holding of the assessee does not reflect the claim of the assessee. The assessee claims that it had sold the vegetables, flowers/fruits through cash but no sale has been made through Agricultural Produce Market Committee (in short 'APMC') or commission agent. He referred to the various defects pointed out by the Assessing Officer in the claim of the assessee and the documentation maintained by the assessee but he fairly agreed that the reasonable estimate merits to be made in the case of assessee.
19. The Ld. Authorised Representative for the assessee pointed out that the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Vs. CIT reported in 26 ITR 775 held that even when estimation is to be made, no guess working could be applied and the estimation should be on some basis. Our attention was further drawn to the decision in the case of Sujan Singh Bundela Vs. ACIT reported in 3 SOT 0491 and the decision in the case of Late S.M. Bashir Vs. ITO reported in 13 TTJ 0236 wherein Assessing Officer estimated the income in the hands of the assessee.
20. The Ld. Authorised Representative for the assessee pointed out that the estimation made by the Assessing Officer was purely on guess work and the same could not have been applied. He also referred to the copy of 7/12 extracts filed wherein a noting was made as to Bhaggi palla, i.e.vegetables. He stressed that when there is large land holding, then many a times the revenue authorities make general reference but do not mention the crop particularly and especially in the case of vegetables where overlapping crops are grown, then it is difficult to keep track of the vegetables grown by the owner off the agricultural land and hence no mention in the 7/12 extract. 18
Anjum and Group However, he pointed out that it does not mean that the assessee is not engaged in carrying on the agricultural activities on the said land.
21. We have heard rival contentions and perused the record. The dispute which arises in the present bunch of appeals are against the estimation of agricultural income in the hands of the assessee. The family of the assessee is engaged in agricultural operations on the agricultural land which is jointly owned by the family members. Undoubtedly, the family members are aware of the percentage of their land holding but since the agricultural operations are being carried out jointly on the said piece of land which ranges between 25 to 60 acres over the period of years and where multiple and sub-crops of vegetables were regularly undertaken, the assessee shows his inability to concretely prove the receipts arising in the individual lands. The claim of the assessee before the authorities below and even before us is that the gross agricultural receipts earned by the assessee were high because of the situation of the land and also because of various other factors. The assessee claims that it has continuous water supply available from Panchganga river with separate dedicated pipeline to its land. Further the assessee has created high water storage capacities for constant water supply to its field which in turn gives extraordinary results. The assessee had also introduced drip irrigation facilities for irrigation to vegetables and flowers. Further used mechanized and automated farming equipment for sowing, cutting and spraying pesticides etc. was also claimed by the assessee. In such circumstances, where the size of the agricultural land owned by the assessee and its family was very big as compared to the normal land holdings, there is merit in the claim of the assessee that it can carry out the agricultural activities by using automated mechanical devices and scientific methods. The assessee had also employed the services of experts for optimized agricultural activity where the assessee 19 Anjum and Group has undertaken systematic and scientific procedures to carry out the agricultural activities on its land holding. We find merit in the claim of the assessee that it would yield higher results. In such circumstances the yield from such big farms would be more than the yield of an ordinary farmer who operates on a smaller field. The CIT(A) had acknowledged that the assessee's family is known in the area to be engaged in the cultivation of vegetables and fruits and where the assessee is undertaking such activity on a large piece of land and where the assessee is aggregating the agricultural land from year to year. Until and unless the said activity was giving good returns or yields the assessee would not continuously be engaged in such operation. Accordingly, the estimation made by the Assessing Officer by adopting the yield @ Rs.6,000/- per acre is definitely on the lower side. The Assessing Officer had rejected the claim of the assessee as no organized sales activity was undertaken by the assessee. The assessee claimed that it was selling the agricultural produce in cash to various persons and it was not selling through Agriculture Produce Market Committee or any brokers. It is not relevant and not necessary for a farmer to compulsorily sell his produce through the broker or the marketing committee especially in today's scenario where the agricultural commodities are being directly sold in the dedicated markets or to organized vendors. Since the assessee is engaged in the said activity on a large scale and where his relatives are also engaged in similar activity, the option is available to the assessee to sell the said produce directly in the market and save the cost of commission when sold through brokers and also negotiate the rates of produce sold by it. The direct marketing approach adopted by the assessee cannot be faulted with especially where the assessee and his family owns such a large area of land for cultivation. It is not the case of the revenue authorities that the assessee is not engaged in agricultural activities on its land holding. The dispute which has arisen in the 20 Anjum and Group present appeals is the yield from the agricultural activity undertaken by the assessee where the Assessing Officer has estimated the yield at Rs.6,000/- per acre and the CIT(A) has enhanced the same to Rs.25,605/- per acre. The year-wise details of agricultural income declared by assessee, assessed by Assessing Officer and CIT(A) are as under :
Smt. Anjum Shoukat Bagwan A.Y. 1999-00, 2000-01 to 2009-10 Agricultural Income No. A.Y Agricultural % of Agricultural % of As per Ld. Addition on income declared income declared CIT (A) account of declared by income assessed by income Order unexplained the the A.O assets assessee inflated Agr.
Income 1 1999-00 310,000.00 22.31 69,154.00 71.32 221,088.00 --- 2 2000-01 520,315.00 9.57 49,777.00 44.29 230,445.00 --- 3 2001-02 730,250.00 6.21 45,339.00 30.89 225,549.00 684,911.00 4 2002-03 970,490.00 3.17 30,789.00 22.60 219,375.00 939,701.00 5 2003-04 615,345.00 7.91 48,648.00 34.63 213,075.00 566,697.00 6 2004-05 769,180.00 6.98 53,709.00 29.58 227,502.00 713,471.00 7 2005-06 950,531.00 4.80 45,638.00 34.88 331,542.00 904,983.00 8 2006-07 606,038.00 15.08 91,385.00 60.96 369,432.00 514,653.00 9 2007-08 286,826.00 32.50 93,218.00 72.90 209,098.00 --- 10 2008-09 309,928.00 50.00 154,964.00 74.92 232,210.00 --- 11 2009-10 194,368.00 50.00 97,184.00 79.61 154,741.00 ---
22. The assessee for the year under appeal, i.e. A.Y. 2000-20001 had declared the gross agricultural income at Rs.6,81,058/- against which it had claimed agricultural expenses at Rs.1,60,743/- and declared the net agricultural income at Rs.5,20,315/-. The Assessing Officer had estimated the agricultural income at Rs.49,777/- and the CIT(A) had estimated the same at Rs.2,30,445/-. No proper basis has been adopted by either of the authorities to work out the agricultural yield in the hands of the assessee and work out the income thereafter. The case of the assessee is twofold that not only it has higher yield because of various factors but also the expenses on agricultural activities were controlled because of collective agricultural operations carried by it. We find merit in the plea of the assessee in this regard. However, in the 21 Anjum and Group absence of complete data being maintained by the assessee it is a fit case for estimating the income in the hands of the assessee.
23. Before working out the estimation in the hands of the assessee one more aspect which is to be kept in mind is the inference drawn by the Assessing Officer on the basis of certain statements recorded during the course of search and thereafter. Since the income has been estimated in the hands of the assessee no relevance is to be attached to the said statements.
One of the person Shri Namdeo Buva during the assessment proceedings had withdrawn his statement that he was being paid 50% of the agricultural produce for sowing the land. In the said contradiction in the statements recorded in the case, cannot be relied upon to estimate the income in the hands of the assessee. In any case agricultural expense @50% is high.
24. We find similar issue of estimation of agricultural income arose before the Pune Bench of the Tribunal in the case of Venkateshwara Agricultural Farm in ITA Nos. 386 to 390/PN/2009 (Lead Appeal being Shri Babulal Laxminarayan Malu- ITA Nos. 241 to 243/PN/2009) order dated 23-09-2011 wherein also the complete details were not being maintained and the assessee was also selling the vegetables and fruits in cash. The 7/12 extracts did not have clear mention of the vegetables and fruits but the assessee claimed to have sold the same. The Assessing Officer had estimated the income in the hands of the assessee on account of agriculture and the balance income declared by the assessee was held to be income from undisclosed sources, as in the case of the assessee. The case of the assessee before the Tribunal was that the 7/12 extracts could not decide the issue of the actual crops being grown by the assessee and simply because crops was sold in cash it could not be said that it was a bogus sale. The 22 Anjum and Group Tribunal accepted the plea of the assessee that the sales of agricultural produce including the vegetables and fruits were normally made in cash and such a claim of the assessee could not be totally denied. But since the books of account have not been maintained properly the Tribunal held to be a fit case to estimate the income from the activities undertaken by the assessee on land holding of 74.32 acres. The Tribunal thus directed the Assessing Officer to estimate the income from fruits and vegetables upto 80% of the standard yield reported by the NHB in the case of fruits and ICAR in the case of vegetables. The Tribunal further held that where the assessee had already shown the yield below 80% of the standard yield reported by the above Government bodies, the Assessing Officer should not disturb the same and accept it. The relevant finding of the Tribunal at para 66 reads as under :
"66. Considering the above submissions, there is no doubt on the contention of the Ld. A.R. that books of account maintained by the assessee in regular course of the business cannot be outrightly rejected without assigning proper reason for the same but in the present case before us, the availability of books of account regularly maintained remained doubtful as the same was not found during the course of search and seizure or survey operations. The A.O nowhere has accepted any specific wording that books of accounts were found during the course of search or survey operation , hence existence of the same always remained in doubt. Under these circumstances, the only option left with the authorities below was to examine the possibility of acceptance of the claimed agriculture income by the assessee on estimate basis keeping in mind the area of land held by the assessee and agricultural activities, shown by the assessee thereon supported with evidence. The A.O noted that there was substantial cash deposits in the account of the assessee which were stated to be out of agricultural income. From the details furnished of agricultural income, it was seen that while part of agricultural produce was properly billed, some of vegetables and fruits were shown to have been sold in cash, these sales were not supported by third party evidence. Other sales of Soyabeen, Onion, rice, sugarcane etc., were supported by third party evidence. Vegetables and fruits which were sold in cash were not mentioned in 7/12 extracts. The A.O. accepted only those sales which were supported by evidence as genuine sales of agricultural produce. The A.O noted that no books were found during the course of search/survey. He also noted that the very fact that books were maintained was not sufficient to accept the agricultural income declared. We thus find that the A.O has said so in different context, firstly the assessee had not maintained books of account regarding the agricultural activities as the same was not found during the course of search/survey 23 Anjum and Group and secondly; even if the books were maintained it was not sufficient to accept the agricultural income declared since income in cash was not supported by evidence. The A.O accordingly concluded that the cash sales shown as agricultural income was bogus and it represented the income from undisclosed sources. The contention of the assessee before the ld CIT(A) remained that the cultivation of fruit was a fact which was duly mentioned in 7/12 extracts. However, no mention of such products cannot lead to conclusion that such products were never cultivated. It was again claimed that books have been regularly maintained and available for verification. The further contention regarding 7/12 extracts remained that on many occasions, 7/12 extracts contains the same notations from year to year as information is simply copied from year to year without actual verification. It was further contended that simply because crops are sold in cash, it cannot be said that it was a bogus sale. In normal practice, agricultural produce are mostly sold in cash at the spot. It is the reason that provisions of Section 40A(3) does not apply where the payment in cash is for purchase of agricultural produce from the farmers. Regarding vegetables, the assessee submitted that vegetables are normally grown as inter crops between two main crops and generally the cultivation of vegetables is not mentioned in 7/12 extracts. The Ld CIT(A) has observed that finding of the A.O with regard to sale of fruits is not correct since the copies of 7/12 extracts furnished by the assessee contained details of fruits grown on the land. The fruits are described as mangoes, chikku, banana, coconut, papaya, lemon etc., Regarding vegetable, the ld CIT(A) has observed that compared to the land holding the sale of vegetables at Rs. 15 lakhs over the period of 7 years cannot be said to be an unlikely sum especially when the assessee is primarily an agricultural farm which has been set up for the agricultural activities. He has further noted that the A.O has added the entire amount shown as cash sales as income of the assessee from undisclosed income without appreciating that if this income is removed from the agricultural receipt, a peculiar situation emerges in which in almost all the years, the income is lower than the total expenditure debited to the books resulting in loss from agricultural activities, which is unusual to say. He has also noted that the production of fruits is within the standards published by Indian Government bodies. He has also noted that yield of fruits and vegetables per unit area was compared with the standards evolved by the National Housing Bank for the purpose of agricultural credit. He noted that except in the case of banana the standards of yield followed by NHB are much higher than the actual yield obtained by the assessee. He has noted further that in case of banana also while assessee's yield is actually higher than the standards, the average yield over the period works out to 56 as against the standard of 65. The Ld CIT(A) has noted further that the assessee was asked to produce the cash books, sales ledger etc., examination of these documents showed that the cash deposits which have been found by the A.O vary from very small figures to little above Rs. 1,00,000/-. It is not as if the cash deposits are of large amounts in one lumpsum. Secondly, the deposits are well placed which lays support to the assessees' contention that the amount do not represent each and every sale but consolidated figures of sale over a certain number of days. It was also stated that certain cash expenses are also incurred from the cash receipts and only the net amount remaining is deposited in the account. The distribution of the cash deposits, the magnitude of the deposit do not appear to be such as to conclude that these are not amounts received by way of cash sales but 24 Anjum and Group unaccounted income introduced into the books. The Ld CIT(A) has also noted in para No. 11 that assessee has maintained books of account where each and every items of purchase and sale and other expenses were recorded. We do not agree with this noting of the ld CIT(A) as nowhere in the assessment order nor it is the case of the Ld CIT(A) that books of accounts were found available during the course of search or survey operation. No plausible reasons has been assigned by the assessee regarding the non-availability of books of accounts during the course of search or survey. Thus, reliability of such books of account even if furnished at later stage is always questionable. Under these circumstances, we do not fully agree with the conclusion of the Ld CIT(A) that the addition made by the A.O on account of cash sales of fruits and vegetables are liable to be deleted. At the same time, we agree with the contention of the Ld. A.R. which has also been accepted by the ld CIT(A) that sales of agricultural produce including fruits and vegetables are also normally made in cash, hence such claim of the assessee cannot be totally denied. Since the books of account regarding the agricultural activity especially specific about fruits and vegetables, questioned before us have not been maintained in the regular course of the affairs, thus correct income cannot be deduced therefrom. We are therefore of the view, that it is a fit case to estimate the income from these activities of the assessees as holding of land of 74.32 acres by the assessee has not been denied nor this fact has been denied that the assessee is primarily an agriculture farm which has been set up for the business of agriculture. We are of the view that under the circumstances of the case, it would be reasonable to estimate the claimed income from fruits and vegetables by accepting the claim of the assessee in this regard upto the 80 % of the standard yield reported by NHB in the case of fruits and of ICAR in case of vegetable yield. Where the assessee has already shown the yield below 80% of the standard yield reported by the above government bodies, A.O should not disturb the same and accept it. It is ordered accordingly. The ground is thus partly allowed. Dairy Income."
The issue which is arising in the present case before us is on similar footing as before the Tribunal in the case of Shri Venkateshwara Agricultural Farm (supra). The assessee's land holding is large and the family members of the Bagwan group are engaged in cultivation of vegetables and flowers and in some cases in fruits on the said land. Majorly the agricultural land holding is cultivated with vegetables and flowers. The assessee is not maintaining the books of account regularly. We have already held that there is need for estimation for agricultural income in the hands of the assessee. The Ld. Authorised Representative for the assessee before us agreed to the proposition laid down by the Pune Bench of the Tribunal that 80% of the 25 Anjum and Group standard yield reported by ICAR in the case of Vegetable yield be adopted to work out the income from Vegetables and flowers in the hands of the assessee on the basis of individual land holdings. Accordingly, we hold so. Necessary evidence would be furnished in this regard by the assessee. The Assessing Officer shall give reasonable opportunity of hearing to the assessee. In case there is yield from fruits, then 80% of the standard yield reported by NHB should be adopted to work out the income in the hands of the assessee based on their land holding. However, in case the assessee has already shown the yield below 80% of the standard yield reported by the above said Government bodies, then the Assessing Officer is directed not to disturb the same and accept it.
25. Another issue which was considered by both the Assessing Officer and the CIT(A) was the expenses on contractual factor. While estimating the agricultural income the Assessing Officer/Commissioner of Income Tax (Appeals) had taken note of the facts of Shri Badshah Bagwan, wherein the statement of one person was recorded who stated that for carrying on the agricultural activities on part of the land, he was getting batai @50% of the receipts. The said statement was withdrawn on a later stage. However, the said fact was adopted by the Assessing Officer and the Commissioner of Income Tax (Appeals) in order to estimate the income in the hands of the assessee. We have already decided the issue of estimation in the hands of the assessee in the paras hereinabove with our directions. We further hold that no further deduction is to be made on account of contractual farming factor @50%. The basis for the said estimation is pursuant to the facts of Shri Badshah Bagwan and where the statement of the said person was never confronted to the assessee nor the information supplied to the assessee, the said information cannot be applied to decide the issue against the assessee. 26
Anjum and Group In any case, in the facts of the case, the assessee has claimed that it has grown vegetables on its agricultural land holding and he pleads that the said vegetables are not grown on sharing system basis. We find merit in the plea of the assessee in this regard and accordingly we hold so.
26. The second estimation of agricultural income in the hands of the assessee is on account of sugarcane wherein part of the land was under the crop of sugarcane from A.Y. 2001-02 onwards. The question arose of estimation of the said agricultural income from sugarcane produce relying on the facts of Shri Badshah Bagwan and 50% was deducted towards agricultural expenses and paid towards contractual farming. Since the facts of the present case are at variance to the facts in Shri Badshah Bagwan, we find no merit in deducting any amount towards batai expenses in respect of the estimation of income arising from sugarcane plantation. We direct the Assessing Officer to apply 80% of the rates available to the surgarcane produce as sugarcane is sold to Mills. Necessary evidence would be furnished by the assessee to establish its case. The Assessing Officer shall give reasonable opportunity of hearing to the assessee before adjudicating the issue of income arising from sugarcane produce and also as held in the case of vegetables and flowers.
27. Before adjudicating other issues which are raised in the present bunch of appeals we may also address the issue raised by the Assessing Officer on unaccounted investment in assets found during the course of search which the assessee claims that it has sourced through agricultural income but the revenue is of the view that said claim of the assessee is ill-founded as the agricultural income declared by the assessee is higher than what is actually earned by the assessee.
27
Anjum and Group
28. The next aspect of the issue is that the assessee had declared the amount as agricultural income, part of which has been accepted as agricultural income by the authorities below and the balance amount has been assessed as income from other sources in the hands of the assessee. Once the amount has been so assessed, i.e. on account of agricultural income and/or on account of income from other sources then the source of the aforesaid assets found during the course of the search, stand explained. However, we have already adjudicated the issue of estimation of agricultural income in the hands of the assessee in the respective years in the paras hereinabove and the Assessing Officer is directed to verify as to where the said agricultural income assessed in the hands of the assessee justifies the source of acquisition of the assets found during the course of search. Once the income is estimated in the hands of the assessee the same is presumably held to have been utilized for the acquisition of the assets and there is no merit in any other addition in the hands of the assessee on account of unexplained investment in assets found during the course of search. We hold so. The appeal filed by the assessee is partly allowed and the appeal filed by the revenue is dismissed.
29. Now coming to the appeal of the Revenue in ITA No.473/PUN/2013, relating to assessment year 2005-06 the revenue has raised the following additional grounds of appeal:-
"6. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in deleting the addition towards investment in benami FDRs and interest charged thereon for A.Y. 2005-06 ignoring the fact that assessee could not explain sources for the said investments".
7. The order of Ld. CIT(A) deleting the addition towards unexplained investment made by the assessee holding that the substantive additions have been confirmed in the hands of respective Pat Sanstha/ Banks is erroneous, as substantive additions were not actually confirmed in the hand of respective Patsansthas/ Banks as claimed of the said Patsanstha u/s 80P(2)(a)(i) has been allowed by the CIT(A) by which entire additions u/s 68 of the Act nullified.
28
Anjum and Group
8. Without prejudice to the above ground Ld. CIT(A) has erred in not exercising his plenary powers which are conterminous with that of A.O as per ratio laid down by CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225, 229 (SC).
9. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in giving relief to the assessee for A.Y 2005-06 on the issue of negative cash balance by reworking the cash flow statements ignoring the evidences in respect of investments and expenses of the assessee brought out in the assessment order?
10. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in giving relief to the assessee for A.Y. 2005-06 on the issue of suo moto declaration of Rs. 15,00,000/- which was made by the assessee to cover up any discrepancies, when the A.O. has already considered while working out the total undisclosed income of the assessee.?"
30. The next issue which is raised by way of grounds of appeal No.6 to 8 in assessment year 2005-06 by revenue is against deletion of addition made towards investment in benami FDRs and interest charged thereon for assessment year 2005-06 only.
31. Briefly in the facts of the case, during the course of search at the residence of the assessee, a notebook was found and seized. On its verification, it was noted that there were details of FDRs made in various banks and Pat Sanstha. From the notings, it was seen that the FDRs were kept with various different entities and from the details, the name of the person through whom the deposit was prepared was also written. However, no such deposits in the name of Anjum Shoukat Bagwan or his family members was made in the said Pat Sanstha/banks on the respective dates.
The details of FDRs as per the seized inventory No.11 are tabulated under para 22 at page 15 of the assessment order. The assessee was asked to explain as to why the said investment in the FDR should not be added as undisclosed income in the hands of the assessee. The explanation of the 29 Anjum and Group assessee was group of persons had planned to bid for Octoroi contract of Sangli Municipal Corporation, which required bank carrying on a substantial amount of more than Rs.400 lakhs. In view thereof, an attempt was made to note down the investments held by each of the group which can be utilized for securing bank guarantee. The assessee further explained that due to difference of opinion the venture did not take place and no bid was made. The explanation of the assessee was rejected as no documentary evidence was filed in support of the claim that notings were just made for getting bank guarantee before giving to Sangli Municipal Corporation for Octroi contract.
Another reply was given by the assessee saying that the institute/banks were in working condition and were functioning and the said FDRs were benami. It was vehemently argued that merely on the basis of chit of paper ownership could not assigned to a particular person where the total record of the institute from whom the FDR was issued was available for verification. The assessee explained the nature of the entries on the said FDRs and pointed out that partly the amounts have been shown by the respective persons and the balance belongs to the Institute. The contention of the assessee was rejected by the Assessing Officer in view of the notings in the diary. Further the Assessing Officer observed that as the assessee had shown bogus agricultural income then the same could not have been utilized for investment in FDRs. Accordingly, addition was made of Rs.8,28,981/- on account of unexplained investment in FDRs in Soniya Pat Sanstha.
32. Further from the perusal of the cash flow statement, the Assessing Officer noted the investments made by the assessee during the year and again gave a finding that in order to source the said investments the assessee had inflated the agricultural income. Reference was made to the seized documents and the Assessing Officer came to the conclusion that the main 30 Anjum and Group source of income of the assessee was from money lending business which in turn was utilized for investment in assets and benami FDRs including negative cash in hand and hence the Assessing Officer treated the said investments as unexplained, though addition was made on account of unexplained of the agricultural income declared by the assessee.
33. The CIT(A) allowed the claim of the assessee holding that the primary responsibility of proving the deposit was of the Pat Sanstha or the Cooperative banks where the deposits were found. The CIT(A) noted that the additions have been made in the case of Pat Sanstha since the initial burden has not been discharged where the Pat Sanstha was unable to establish the identity of the depositor and hence the genuineness of the transaction was not proved.
The CIT(A) thus observed that the contents of the loose sheet showing deposits in various Pat Sanstha were not substantive proof of the fact that the amounts mentioned in the said page belongs to the assessee and in any case if the said FDRs were unexplained then they would constitute the business income in the hands of the respective Pat Sanstha or the Cooperative Banks and the assessee would not be liable to be held as owner of these amounts.
The CIT(A) also noted that the amounts mentioned against Soniya Nagari Vinkar & Vinkat Vyavsaik Sahakari Pat Sanstha has already been added in the assessment of the said concern and hence no merit in making any addition in the hands of the assessee. Further, the addition made on account of interest on FDRs was also deleted by the CIT(A).
34. The revenue is in appeal against the aforesaid finding of the CIT(A).
35. The Ld. Authorised Representative for the assessee pointed out that the aforesaid FDRs are not in the name of the assessee but belong to the Pat Sanstha and is to be included in the hands of Pat Sanstha. The Ld. 31 Anjum and Group Authorised Representative for the assessee while arguing the appeals of the Pat Sanstha, i.e. Soniya Nagari Vinkar & Vinkar Vyavasaik Sah. Pat Sanstha Ltd., had also withdrawn the appeals filed against addition u/s.68 of the I.T. Act on account of investment in FDRs. In other words, where the addition on account of unexplained deposits has already been made in the hands of Pat Sanstha there is no merit in making any further addition in the hands of the assessee on account of same FDRs. Accordingly, we uphold the order of the CIT(A) in this regard and dismiss the grounds of appeal raised by the revenue.
Consequently no addition is warranted on account of interest chargeable on the said FDRs.
36. The revenue has failed to address the issue raised by way of grounds of appeal Nos.9 to 11 and also in the absence of any addition made by the Assessing Officer on any other account except non acceptance of agricultural income and the addition on account of FDRs there is no merit in the other grounds of appeal raised and the same are dismissed.
ITA Nos. 171 to 181/PUN/2013 - Arish Shoukat Bagwan - (Assessee's appeal) ITA Nos. 489 to 499/PUN/2013 - Arish Shoukat Bagwan - (Revenue's appeal)
37. The Ld. Authorised Representative for the assessee pointed out that facts and issue in bunch of appeals relating to Arish Shoukat Bagwan for all the respective years are same, i.e. estimation of agricultural income and also ground of appeal No.6 in assessment year 2005-06 where addition was made on account of FDRs and other investments, which was deleted by CIT(A) and Revenue is in appeal. However, no addition is warranted on account of FDRs as amount is added in the hands of Pat Sanstha. Further funds are available 32 Anjum and Group with the assessee for the respective investments and no further addition is warranted in the hands of the assessee.
38. We find that the issue raised in this bunch of appeals filed by the assessee and the revenue for assessment years 1999-2000 to 2009-10 are identical to the issues raised in Anjum Shoukat Bagwan and our decision on all the issues would apply mutatis mutandis.
ITA Nos. 182 to 192/PUN/2013 - Shahanaz Shoukat Bagwan - (Assessee's appeal) ITA Nos. 478 to 488/PUN/2013 - Shahanaz Shoukat Bagwan - (Revenue's appeal) ITA Nos. 204 to 214/PUN/2013 - Kaish Shoukat Bagwan - (Assessee's appeal) ITA Nos. 456 to 466/PUN/2013 - Kaish Shoukat Bagwan - (Revenue's appeal)
39. Similarly the issue raised in the appeals filed by the assessee in the case of Shahanaz Shoukat Bagwan and Kaish Shoukat Bagwan are identical to the issues raised in the case of Anjum Shoukat Bagwan and also addition made on account of notings made of investment in FDRs in assessment year 2005-06, is same and our decision in Anjum Shoukat Bagwan on all issues would apply mutatis mutandis.
40. Now coming to the appeals filed by the Pat Sanstha Soniya Nagari Vinkar and Vinkar Vyavsaik Sahakari Pat Sanstha Ltd. the assessee is in appeal for assessments years 2004-05 and 2005-06 against the order passed under section143(3) r.w.s. 153A of the Act.
41. The assessee has raised common grounds in both the appeals in ITA Nos. 226 & 227/PUN/2013 relating to assessment years 2004-05 and 2005-06 and grounds in ITA No.226/PUN/2013 read as under :33
Anjum and Group "Under facts & under the circumstances of the case -
1. Ld.CIT(A) has erred in confirming the addition made on account of unexplained cash credits in the form of FDRs lying in various individual names u/s.68 of the I.T. Act, 1961.
The requisite details and documents as required to substantiate the credit worthiness of the deposit were duly submitted. Hence, the addition u/s.68 is uncalled for.
It is humbly prayed that, the addition u/s.68 of the I.T. Act, 1961 wrongly made may please be deleted.
2. The appellant may be allowed to add/rectify the grounds of appeal.
42. The revenue has raised common grounds in both the appeals in ITA Nos. 445 & 446/PUN/2013 relating to assessment years 2004-05 and 2005-06 and grounds in ITA No.445/PUN/2013 read as under :
"1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in holding on one hand that the addition of unexplained FDRs u/s. 68 of the Act was correctly made by A.O and deciding on the other hand that the said unexplained income is eligible for deduction u/ s. 80P(2)(a)(i)?
2. The Ld. CIT(A) erred in not appreciating the facts that addition made u/s. 68 of the Act is not income under the head "Profits and gain of business"
and hence. is ineligible for deduction u/s. 80P(2)(a)(i).
3.(i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing deduction u/s. 80P(2)(a)(i) to the assessee ignoring the decision of Hon'ble Supreme Court in the case of The Totgars Co Operative Sale Society Ltd Vs. ITO, 332 ITR 283 held that deduction u/s. 80P(2)(a)(i) as allowable only on business income
(ii) It has been held by Hon'ble Gujarat High Court in the case of Fakir Mohemad Haji Hasan Vs. CIT (2001) 247 ITR 290 that income u/s. 68 of the Act is a deemed income and is not to be computed under any of the five heads of income classified in section 14 of the Act. This view has been reiterated by Hori'ble Chattisgarh High Court in the case of Dhanush General Stores Vs. CIT (2011) 339 ITR 651.
4(i) The Ld. CIT(A) erred in relying on the decision of ITAT Pune in the case of Shri. Mahaveer Nagari Sahakari Pat Sanstha ignoring the facts that the said decision is distinguishable on facts in as much as in the said case the unexplained deposits were owned were up by the depositors as undisclosed income whereas in the present case no one has owned up to the unexplained FDRs.
(ii) Without prejudice, the ITAT, Pune while rendering the decision in the case of Shri Mahaveer Nagari Sah. Pat Sanstha did not consider the judicial precedents mentioned at Ground No.3 supra. Therefore, the said decision of ITAT is not binding on CIT(A) as rule of sub-silentio is applicable (Shanmugvel nadir Vs. Tamil Nadu & another 263 ITR 658 (SC).
34
Anjum and Group
5. Without prejudice to the above grounds Ld CIT(A) should have relied on the judicial precedents mentioned at Ground No.3 Supra and by not doing so he has erred in not exercising his plenary powers which are conterminous with that of Assessing Officer as per the ratio laid down by CIT Vs. Kanpur Coal Syndicate (1964) 53 ITR 225, 229 (SC).
6. The appellant prays that he order of the Ld CIT(A) be vacated and that of the AO's order may be restored.
7. The appellant craves leave to add, alter, amend, modify any of the above grounds raised, any other grounds at the time of proceedings before the Hon 'ble which may please be granted.
43. The Ld. Authorised Representative for the assessee pointed out that the only addition made was on account of unexplained cash credits in the form of FDRs lying in various names in the premises of the Pat Sanstha, which was made under section 68 of the Act. The Ld. Authorised Representative for the assessee pointed out that the assessee wants to withdraw the appeals filed against the aforesaid additions made under section 68 of the Act relating to assessment years 2004-05 & 2005-06. In view thereof, the additions made on account of unexplained investment in FDRs is upheld in the hands of the assessee and the appeals filed by the assessee are dismissed as "withdrawn".
44. In the appeals filed by the revenue relating to assessments years 2004- 05 and 2005-06 the Ld. Authorised Representative for the assessee pointed out that the only issue was the claim of deduction under section 80P(2)(a)(i) of the Act on such addition made on account of unexplained FDRs under section 68 of the Act. The Ld. Authorised Representative for the assessee pointed out that the Assessing Officer had denied the said claim, however the CIT(A) had allowed the claim of the assessee by allowing deduction u/s.80P of the Act in respect of such additions. The CIT(A) held the assessee to be eligible to the said claim of deduction u/s.80P(2)(a)(i) of the Act since the cash credits were taxed in the hands of the assessee as income from other sources, i.e. 35 Anjum and Group providing credit facility to its members. For this proposition, reliance was placed on the ratio laid down by the Pune Bench of the Tribunal in the case of DCIT, Circle-3(1) Dhule Vs. Shri Agrasen Sahakari Pat Sanstha Maryadit vide ITA No.1459/PN/2005 order dated 30-06-2011.
45. The revenue is in appeal against the aforesaid findings of the CIT(A).
46. The Ld. Departmental Representative for the revenue placed reliance on the order of Assessing Officer.
47. The Ld. Authorised Representative for the assessee pointed out that the issue stands covered by the order of the Tribunal in the case of Shri Mahavir Nagari Sahakari Pat Sanstha Ltd. Vs. Dy.CIT reported in 74 TTJ 793 and in the case of CIT Vs. Pragati Co.op. Bank Ltd. reported in (2008) 278 ITR
170.
48. We have heard the rival contentions and perused the record. We find the Pune Bench of the Tribunal in Shri Mahavir Nagari Sahakari Pat Sanstha Ltd. Vs. DCIT has held that cash credits on account of various deposits in benami/bogus names, even if, taxed, would be considered as income of the same business, i.e. providing credit facilities to its members and accordingly would be entitled to deduction u/s.80P of the Act. Following the same proposition as laid down by the Pune Bench of the Tribunal in various cases we hold that the assessee is entitled to claim deduction u/s.80P of the Act on the aforesaid addition made under section 68 of the Act even if certain errors were found in the explanation of the assessee. Accordingly we uphold the order of the CIT(A) and dismiss the grounds of appeal raised by the revenue in both the appeals 36 Anjum and Group
49. In the result all the appeals of different assessees are partly allowed and the appeals of the revenue are dismissed.
Order pronounced on this 15th day of February, 2017.
Sd/- Sd/-
(ANIL CHATURVEDI) (SUSHMA CHOWLA)
लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER
th
पण
ु े Pune; दनांक Dated : 15 February, 2017.
Satish
आदे श क) * त+ल,प अ-े,षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A) Kolhapur.
4. The CIT-I/II, Kolhapur / CIT (Central), Pune
5. !वभागीय $त$न%ध, आयकर अपील य अ%धकरण, "बी" / DR,
6. ITAT, "B" Pune;
गाड+ फाईल / Guard file आदे शानस ु ार/ BY ORDER, स या!पत $त //True Copy// सहायक पंजीकार / Assistant Registrar, आयकर अपील य अ%धकरण, पुणे / ITAT, Pune