Income Tax Appellate Tribunal - Nagpur
Income Tax Officer vs Rajendra Tiwari on 8 September, 2003
Equivalent citations: (2004)82TTJ(NAG)347
ORDER
N.V. Vasudevan, J.M.
1. These are appeals by the Revenue against the common order dt. 8th June, 2001, of the CIT(A)-I, Raipur, relating to the asst. yrs. 1998-99 and 1997-98, respectively. The common grounds of appeals of the Revenue for both the assessment years read as under:
"On the facts and in the circumstance of the case, the learned CIT(A) was not justified in :
"1. deleting the disallowance of Rs. 3,02,475 (Rs. 2,68,224 in asst. yr. 1998-99) made out of claim of agricultural income of Rs. 6,04,950 (Rs. 5,36,448 in asst. yr. 1998-99).
2. allowing the assessee's appeal in part by overlooking all the material brought on record by the AO for treating 50 per cent of the claim as income from undisclosed sources."
2. The facts giving rise to the aforesaid appeals are as follows :
The assessee is an individual who derives income from agriculture and also share income from the firm. In the return of income for the asst. yr. 1997-98, the assessee declared agricultural income of Rs. 6,04,950. Similarly, for the asst. yr. 1998-99, the assessee declared agricultural income of Rs. 5,36,448. In support of the agricultural income, the assessee filed three lease deeds evidencing the fact that the assessee had taken agricultural lands on lease and following were the details of the lands taken on lease:
(i) Agricultural land to the extent of 39 acres in Khasara No. 302/23 and Khasara No. 302/30 of Village Mohbatta from one Shri Arun Agrawal son of Shri Lakhanlal Agrawal.
(ii) Another land to the extent of 39 acres in Khasara No. 302/28 in Mohbatta Village was taken on lease from one Shri Ripudmen Agrawal son of Shri Devdatta Agrawal.
(iii) Another about 15 acres of land in Khasara No. 302/32 in Village Mohabatta was taken on lease from one Jyoti Agrawal son of Shri Bgarat Agrawal.
Apart from confirmations of lease in favour of the assessee, the owners of the lands also confirmed the fact that they received the lease amounts as mentioned in the lease deeds.
3. The assessee had claimed that he had sold the agricultural produce raised on the lands through Mandi and the sale receipt in respect of sale of paddy was also filed before the AO. The assessee had incurred expenses towards purchase of fertilizers. In support of the said expenditure, the assessee had filed bills from Navin Beej Utpadak Sahakari Samiti Matyadit evidencing purchase of fertilisers. Another fact which emerged from the confirmation letters of the owners of the lands was that prior to the lease of their lands to the assessee, Shri Arun Agrawal was receiving net income of Rs. 52,000 to Rs. 55,000 per annum, from the agricultural land. In the case of Shri Ripudaman Agrawal, he was earning income of Rs. 50,000 to Rs. 52,000 from agricultural land prior to its lease to the assessee. In the case of Shri Jyoti Agrawal, he had stated that a sum of Rs. 2,000 per annum was received from the agricultural land prior to the lease in favour of the assessee. In the light of all these materials available before the AO, firstly, doubted the quantum of receipt stated to have been received by the assessee on sale of agricultural produce. He, therefore, addressed a letter to Krishi Upaj Mandi Samiti, Tilda (Neora), regarding the receipt produced by the assessee in connection with the sale of the agricultural produce. The receipt filed by the assessee showed that the agricultural produce were sold to Binni Enterprises. The secretary of the said Samiti, Tilda, wrote to the AO that the assessee did not sell any produce through the Mandi. He further informed that there was no licensee firm in the name of Binni Enterprises. The AO, therefore, came to the conclusion that the sale bills produced by the assessee were prima facie fictitious. When confronted, the assessee explained that he had effected the sale of agricultural produce through Kochayas i.e., intermediary or middlemen. It was explained by the assessee that one Mohd. Farooqh who was his friend had introduced one Shri Nandkishore Sahu who was a Kochayas and through whom the agricultural produces were sold. It was further explained by the assessee that Shri Nandkishore Sahu was a middleman and he earned only commission on sale of agricultural produce of the assessee. It was also submitted that if the receipt obtained by Shri Nandkishore Sahu to the effect that if the sales have been effected to Binni Enterprises through Mandi turned out to be untrue, the assessee cannot be held responsible for the same as admittedly, the assessee had dealt with only through the intermediary Shri Nandkishore Sahu and did not know the purchaser. The AO, however, was not convinced with this reply given by the assessee. Consequently, Shri Mohd. Farooqh, the friend of the assessee who introduced Kochayas Shri Nandkishore Sahu to the assessee as well as Shri Nandkishore Sahu who acted as Kochayas or intermediary in the sale of the agricultural produce of the assessee were examined by the AO. In their examination, they confirmed the fact as stated by the assessee. Mr. Nandkishore Sahu, Kochayas, deposed that he had arranged for sale of the agricultural produce of the assessee and earned commission thereon. He also stated that whatever Mandi receipts were given to him by the purchaser had been given by him to the assessee. The AO also examined one Shri Rameshwar Dewangan who was an employee of the assessee who was looking after the land of the assessee. He deposed that two thousand bags of paddy were produced under his supervision and the produce so produced were sold through Kochayas.
4. The AO was still not convinced and he doubted the genuineness and truth of the explanation offered by the assessee. In particular, he noticed that only the agricultural income declared by the lessor of the lands prior to the lease to the assessee was only Rs. 55,000, Rs. 30,000 and Rs. 55,000 respectively. Though this was the net income, their deposition before the Inspector who was deputed by the AO to make enquiries from the lessors of the lands, was to the effect that what they earned as net income is only of 30 per cent to 40 per cent of the total sale price. In the light of these conflicting evidence available before the AO, the AO held as follows in paras 9 and 10 of his assessment order:
"All these facts do not support the assessee, even then the following facts shelter the case of the assessee :
(i) The assessee had taken agriculture land on lease.
(ii) Statement of farmers confirm that they had leased their land to Shri Rajendra Tiwari.
(iii) Navin Beej Utpadak Sahakari Samiti Maryadit sold fertilizers to Shri Rajendra Tiwari.
(iv) Rameshwar Dewangan who looked after the land had given statement that 2,000 bags of paddy was produced under his supervision.
(v) The assessee had sold paddy but the purchaser had delivered him the fictitious receipts. At the time of obtaining the receipts, he had no occasion for raising any suspicion about the receipts being fictitious.
(vi) The assessee had taken approx. 100 acres of agricultural land on lease and on 100 acres of land, 2,000 bags of paddy can be produced @ 20 bags per acre.
BUT
(a) The assessee has no evidence that 2,000 bags of paddy was produced.
(b) All the land in areas of Sigma are not so fertile which can produce average 20 bags of paddy. Almost land Bharri and Bhata.
(c) On lease out land farmers themselves cultivate and with experience of cultivation, they earn Rs. 1,25,000 to 1,40,000 by cultivating crops of paddy, chana, masoor, moong, lakahdi, etc. and on the same land taken on lease, the assessee has earned 5-6 lakhs of annual income.
(d) The assessee could not produce accounts relating to agricultural income. The proportion of income and expenditure shown in not reliable.
(e) It is evident from the statement of land owners 1. Shri Ghayshyam Sunder Agrawal. 2. Shri Makhan Gopal Agrawal, Shri Baidu Hari Agrawal and other three farmers that from their land 30 per cent to 40 per cent of the total production is earned as net income. Even if, it is assumed that the assessee has done agricultural production, there is no possibility of earning more than 30 per cent after deducting lease rent.
Considering the above facts, 50 per cent of agriculture income i.e., Rs. 3,02,475 (which is disproportionate) is being disallowed and added to the total income of the assessee. Since the assessee has furnished inaccurate particulars of his income in the return therefore, penalty proceedings under Section 271(1)(c) is initiated separately.
Rs.
Total income as shown in the return, 2,17,750 Add: Agriculture income (as discussed) 3,02,450 Total income 5,20,225 Agricultural income 3,02,475
Assessed under Section 143(3). Issue demand notice and challan. Charge interest as per law. Issue penalty notice under Section 271(1)(c)."
Aggrieved by the findings of the AO, the assessee preferred appeals for both the assessment years under consideration to the CIT(A).
5. The CIT(A), on consideration of the case as put forth by the assessee before the AO, came to the following conclusions:
(i) That the evidence produced by the assessee that he carried on agricultural operations has not been proved to be false or fabricated but the AO based his conclusion only on suspicion.
(ii) In the light of the deposition of Shri Nandkishore Sahu who arranged for the sale of agricultural produce of the assessee, there was no evidence on record to show that what was deposed by Shri Sahu was false or fabricated one. He also held that the receipt given by the purchaser from the intermediary and the same had been passed on by him to the assessee and in such circumstances, the assessee cannot be held responsible if the genuineness and authenticity of the party whose name was mentioned in the receipt given to him by Shri Nandkishore Sahu turned to be not correct. He also took note of the fact that Shri Nandkishore Sahu was an illiterate and was living on a meagre earning of commission and had deposed that the Mandi receipt given to him by the purchaser had been passed on to the assessee. The CIT(A), therefore, concluded that the sales of agricultural produces through Shri Nandkishore Sahu cannot be doubted. He also found that there was no legal requirement that the agricultural produce should be sold only through Mandi and not directly through mediator.
(iii) The AO placed reliance on the Income-tax Inspector's report in rejecting the claim of the assessee in part and this report of the Inspector was obtained behind the back of the assessee without any opportunity of cross-examination to the assessee and, therefore, it has no evidentiary value.
The CIT(A), accordingly directed the AO to delete the additions made in both the assessment years and directed the AO to accept the agricultural incomes as returned by the assessee. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us.
6. The learned Departmental Representative took us through the order of assessment and submitted that the AO has very categorically come to the conclusion that the assessee failed to discharge his onus of proving the quantum of agricultural income. In the absence of evidence, on the part of the assessee, to substantiate the agricultural income, it was submitted by the learned Departmental Representative that the addition made by the AO was justified. According to him, the CIT(A) has not taken due note of the various findings in the order of assessment while deleting the additions made by the AO. He, therefore, submitted that the orders of the AO for both the years under consideration be restored.
7. The learned counsel for the assessee, on the other hand, relied on the order of the CIT(A) and submitted that there was nothing on record before the AO to come to a conclusion that 50 per cent of the agricultural income declared by the assessee was fictitious. Referring to the observations of the AO about the returns from the agricultural land prior to the lease of the lands by the owners in favour of the assessee, he submitted that the return from the agricultural operations depends on a various factors, like quality of paddy grown, quality of seeds, irrigation facility created, monsoon factor and over all efficient management of the agricultural activity. The AO has ignored the fact that the assessee has spent money and labour which resulted in higher yield from the agricultural lands. With regard to the sale proceeds of the agricultural produce, he brought to our notice the various circumstances which were in favour of the assessee and submitted that there was no evidence available before the AO to come to the conclusion that the sale value declared by the assessee was not correct. He relied on the following decisions:
1. Shiv Prakash v. CIT (1983) 139 ITR 844 (J&K).
2. Roshan Di Haiti v. CIT (1977) 107 ITR 938 (SC).
3. Sona Electric Co. v. CIT (1985) 152 ITR 507 (Del)
4. Smt. P.K. Noorjahan v. CIT (1999) 237 ITR 570 (SC).
5. Moghul Durbar v. CIT (1995) 216 ITR 301 (AP).
6. Dhakeshwari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC).
7. R.N. Chatterjee 26 ITC 396.
8. CIT v. Aayachand Jani Vaidya (1975) 98 ITR 280 (All).
8. We have considered the rival submissions. On perusal of the order of assessment, it is clear that the AO did not dispute the fact that the assessee had taken on lease about 100 acres of land from its owners. The fact that, on 100 acres of agricultural land, 2,000 bags of paddy were produced and this fact is substantiated by the statement of Shri Rameshwar Dewangan who was looking after the lands. A certificate from the Patwari that yields of paddy from the lands in the concerned area was 75 per cent was also filed by the assessee. The fact that the agricultural produce were sold through intermediary is proved by the deposition of Shri Rameshwar Dewangan and Shri Mohd. Farooqh who acted as intermediary in the transaction. The assessee produced the Mandi receipt to support the sale value of the agricultural produce disclosed in the agricultural P&L a/c filed for both the assessment years. It is this Mandi receipt which was disputed by the AO and the AO addressed a letter to Krishi Upaj Mandi Samiti, Tilda through whom the paddy was alleged to have been sold to Binni Enterprises and the Mandi secretary appears to have informed the AO that Shri Rajendra Tiwari i.e., the assessee, did not sell any produce to Binni Enterprises through Mandi. It was the evidence of the intermediary Shri Nandkishore Sahu that he sold the produce to the purchaser who passed on the Mandi receipt and he in turn, gave this Mandi receipt to the assessee. The fact that the Mandi receipt evidences the sale of produce to Binni Enterprises is not in dispute.
When the transaction is done through intermediary, the assessee, as a seller cannot be held responsible for the defect in the receipt obtained from the purchaser through intermediary. Admittedly, the assessee did not have knowledge about the purchaser and it was Shri Nandkishore Sahu who knew the purchaser. The fact that the agricultural produce were sold and the price as stated in the receipt has been paid to the assessee has been categorically affirmed by the intermediary Mr. Nandkishore Sahu. The quantum of sale proceeds stated to have been received by the assessee on sale of agricultural produce cannot, therefore, be disputed. With regard to the quantum of income earned by the lessors of lands prior to the lease in favour of the assessee, as rightly contended by the learned counsel for the assessee, yield of agricultural produce depends on several factors and there can be no formula of universal application. Besides all these, the AO has not brought out any evidence on record for disbelieving 50 per cent of the agricultural income returned by the assessee. There is no evidence on record to show that 50 per cent of the agricultural income is in fact undisclosed income earned by the assessee during the two relevant previous years. In the case of Dhakeshwari Cotton Mills Ltd v. CIT (supra) the Hon'ble Supreme Court has held that in making an assessment, the AO is not fettered by any technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in Court of law, but the AO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be some thing more than bare suspicion to support an order of assessment. In the case of Shiv Prakash v. CIT (supra) the Hon'ble Jammu and Kashmir High Court has held that an Income-tax Inspector does not have power to record the statement and that such a statement cannot constitute material which can be used by the AO while framing an order of assessment. In the light of the above judicial pronouncements and considering the facts and circumstances of the case, we are of the view that the order of the CIT(A) does not call for any interference. The same is confirmed and these appeals of the Revenue are dismissed.
9. The learned counsel for the assessee further submitted that there is no order to charge interest under Sections 234A, 234B and 234C of the IT Act, 1961 in the orders of assessment and, therefore, relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Ranchi Club Ltd (2001) 247 ITR 209 (SC), he submitted that the AO should be directed not to charge interest under Sections 234A, 234B and 234C. He submitted that even in the absence of the cross-objection being filed by the assessee, such a relief can be granted by the Tribunal and he relied on the decision of the Jodhpur Bench of the Tribunal in the case of ITO v. Madan Lal (2003) 78 TTJ (Jd) 573 in this regard.
10. We have perused the judgment relied upon by the learned counsel for the assessee. We are of the view that the question decided by the Jodhpur Bench of the Tribunal was as to the validity of the levy of penalty in appeal by the Department against the order of the CIT(A) cancelling the levy of penalty. In such circumstances, the assessee was given a right of challenging the levy of penalty on technical ground and without filing a cross-objection and without such a technical ground having been considered and decided by the CIT(A). In the said decision, the issue involved being the levy of penalty, the Tribunal thought it fit to allow the assessee to raise all objections with regard to the levy of penalty. The facts in the present case are totally different. The levy of interest having not been challenged by way of an appeal or a cross-objection by the assessee cannot be sought to be raised by a mere argument at the time of hearing of the appeal of the Revenue wherein there is no ground of appeal regarding charging of interest under Sections 234A, 234B and 234C. We are, therefore, of the view that the assessee should not be permitted to raise this question before us. The request of the learned counsel for the assessee is accordingly rejected.
11. In the result, both the appeals by the Revenue are dismissed.