Madras High Court
B.Ramachandhiran vs Commissioner Of Income Tax on 11 November, 2013
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 11.11.2013 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Appeal) No.262 of 2009 --- B.Ramachandhiran (Director, Great Citi Club Time Ltd.,), No.4, 42nd Street, VI Avenue, Ashok Nagar, Chennai 600 083. ... Appellant -vs- Commissioner of Income Tax, Chennai 600 034. ... Respondent Tax Case (Appeal) filed under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Bench 'A', Chennai, I.T.A.No.240/Mds/2008, for the assessment year 2001-02, dated 17.07.2008. For petitioner : Mr.T.V.Lakshmanan For Respondent : Mr.M.Swaminathan ORDER
(The Order of the Court was made by CHITRA VENKATARAMAN, J.) The assessee is on Tax Case (Appeal) as against the order of the Income Tax Appellate Tribunal (Tribunal), relating to the assessment year 2001-02.
2. The assessee is an individual having income from business of purchase and sale of petrol, diesel etc and business of plying truck, leasing goods carriage. The assessee had agricultural income to the tune of Rs.6,75,000/-. Since the assessee did not disclose any evidence to prove the receipt of the income as agricultural income and the nature of the operations done therein to earn the income, the said income was assessed under the head of 'income from other sources'. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals) VIII, Chennai.
3. Before the Commissioner of Income Tax (Appeals), it was contended by the assessee that the assessee had been in receipt of agricultural income right from 1997-98 and the inclusion of the income under the head 'income from other sources' was unsustainable. In the light of the submissions made, the Commissioner of Income Tax (Appeals) called for a remand report from the Assessing Officer. In paragraph 5.1 of the order, the remand report from the officer was extracted. A reading of the remand report dated 25.01.2006 shows that the assessee had not produced any evidence as regards the receipt of agricultural income, the assessee had filed Village Administrative Officer's (VAO) certificate stating that the assessee owned agricultural land of 14.44 hectares in Anukkampattu village in Cuddalore Taluk and the said VAO certified that the assessee derived income at Rs.6,75,000/- from the land. The Assessing Officer pointed out that the VAO was not authorised to certify the income from the land. Further, the Assessing Officer pointed out that the assessee had not disclosed any evidence like land adangal register, nature of crop cultivated, expenses incurred, to whom the agricultural produce was sold, who cultivated the land and how the income was derived. In the absence of any material produced to substantiate the receipt as agricultural income, the Officer held that the assessee's claim could not be accepted. However, considering the fact that the assessee owned 14.44 hectares of land, agricultural income could be estimated at Rs.1,50,000/- and the balance be considered as 'income from other sources'.
4. The First Appellate Authority found that the Assessing Officer pointed out the details given by the assessee viz., the capital introduced from the year under consideration was only Rs.2,13,140/- and it was claimed to be out of salary income of Rs.1,20,000/- and rental income of Rs.16,800/-, which was offered in the return of income; thus, the balance amount credited in the capital account was less than Rs.1,00,000/-, and the Assessing Officer himself accepted the agricultural income to the extent of Rs.1,50,000/-in his remand report; the assessee had admitted the drawings of Rs.1,18,970/- separately in the capital account; hence, the amount of Rs.6,75,000/- was not credited in the capital account of the assessee during the year. The Commissioner of Income Tax (Appeals) further found that the Assessing Officer had not examined the assets held by the assessee outside the balance sheet and did not bring on record that there was unexplained investment or expenditure, which was explained by the assessee as out of agricultural income. In the circumstances, the Commissioner of Income Tax (Appeals) allowed the assessee's claim in this regard. Aggrieved by this, the Revenue went on appeal before the Income Tax Appellate Tribunal.
5. The Income Tax Appellate Tribunal pointed out that when the assessee had disclosed agricultural income in his return of income, it was his duty to satisfy the Assessing Officer that the income arose out of agricultural operations. The fact that the assessee had not made any investment by him, would not absolve the assessee from the duty of producing evidence in support of his claim, that the receipt of income was agricultural income. Since the computation of agricultural income was very much part and parcel of the computation and that the agricultural income was considered only for the rate purposes and otherwise forming part of the income and capital account of the assessee, it was necessary that the Assessing Officer had to examine the veracity of the claim of the assessee, the assessee had the onus on showing that the income was agricultural income. The Income Tax Appellate Tribunal pointed out that the assessee had not produced any materials as regards the receipt of this income as from the agricultural operation. Thus, when the assessee had not shown any materials as to the extent of agricultural income earned, the claim of the assessee could not be considered in toto. At the same time, the Income Tax Appellate Tribunal pointed out that the assessee had been showing agricultural income in his return consistently for the earlier assessment years and the Department had also accepted the claim of the assessee for the earlier assessment years. In the circumstances, the Income Tax Appellate Tribunal thought it fit not to treat the entire amount of Rs.6,75,000/- as agricultural income; instead the Income Tax Appellate Tribunal held that a sum of Rs.4,00,000/- be treated as 'agricultural income' and balance of Rs.2,75,000/- be treated as 'income from other sources'. Aggrieved by this, the present appeal has been filed by the assessee.
6. Learned counsel appearing for the assessee submitted that the Income Tax Appellate Tribunal erred in holding that a sum of Rs.4,00,000/- alone as 'agricultural income' and holding the balance amount of Rs.2,75,000/- as 'income from other sources'. The assessee contended that the findings of the Tribunal was perverse, considering the finding that the assessee was in receipt of income in the earlier years too. Learned counsel for the assessee submitted that the Tribunal committed a serious error for restricting the agricultural income at Rs.4,00,000/-. In support of his contentions, learned counsel placed reliance on the decisions in the cases of K.T.Thomas vs.Agricultural Income-Tax Officer & Ors., reported in 184 ITR 561 and The Commissioner of Income Tax, Rajahmundry vs. M/s.R.Narayanarao & Ors., reported in CDJ 2011 APHC 805.
7. We perused the order of the Assessing Officer as well as the First Appellate Authority and Income Tax Appellate Tribunal's order. It is not denied by the assessee that he had not produced any materials whatsoever as to the nature of crop grown and the nature of agricultural operation and the expenditure incurred thereof. When the onus on the earning of agricultural income entirely lies on the assessee to prove that the receipt of income was out of agricultural operation, in the absence of any material produced to discharge the onus in the manner known to law, the Assessing Officer rightly rejected the assessee's claim for granting exemption for receipt of agricultural income.
8. As far as the appeal before the First Appellate Authority is concerned, in the remand report, the Assessing Officer pointed out that in the absence of sufficient materials, the agricultural income shown at Rs.6,75,000/- could not be accepted. The Commissioner of Income Tax (Appeals) held that the Assessing Officer had not established that there was any unexplained investment or expenditure by the assessee. We do not find any ground to uphold this line of reasoning on the admitted fact that the assessee had not produced any materials before the Assessing Officer nor the Commissioner of Income Tax (Appeals), the Revenue rightly went on appeal before the Tribunal questioning the order of the Commissioner. Even before the Tribunal, the assessee had not produced any materials; however, taking note of the fact that the assessee was stated to have shown certain extent of land and he had also shown the receipt of agricultural income in the earlier years, the Tribunal thought it fit to restrict the income at Rs.4,00,000/- as agricultural income and the balance of Rs.2,75,000/- as income from other sources. Thus, on the admitted fact that the assessee had not properly explained his receipt of income at Rs.6,50,000/- as agricultural income, the Tribunal rightly restricted the agricultural income at Rs.4,00,000/-.
9. As far as the reliance on the decision of the Kerala High Court in the case of K.T.Thomas vs.Agricultural Income-Tax Officer & Ors., reported in 184 ITR 561, is concerned, we find from the reading of the judgment that the Agricultural Income Tax Officer estimated the agricultural income from tea as equal to the taxable turnover on sale of tea as per sales tax assessment orders for the relevant assessment years and set aside the said assessment. The Kerala High Court pointed out that when the revisional authority had not even perused the orders of assessment on sales tax for the different years in question, and when the revisional authority was vested with jurisdiction to make necessary enquiries, the orders of the assessment could not be applied. The Kerala High Court further pointed out that the assessee was not given time to file objections to the proposals contained in the pre-assessment notice and the assessment orders were passed even before the expiry of the time allowed to file objections; hence there was a denial of fair opportunity to the petitioner therein. The Kerala High Court pointed out that the Agricultural Income Tax Officer had no jurisdiction to levy tax on that portion of income from the sale of tea which, as per Rule 8 of the Income Tax Rules, was to be treated as income for the purpose of levy of tax under the Income Tax Act. Thus, on the valid claim made by the assessee and finding that there was no proper enquiry, the Kerala High Court thought it fit to set aside the order.
10. As far as the decision of the Andhra Pradesh High Court in the case of The Commissioner of Income Tax, Rajahmundry vs. M/s.R.Narayanarao & Ors., reported in CDJ 2011 APHC 805, is concerned, we find from the facts that the Assessing Officer disallowed the expenditure made/claimed by the assessee and computed gross profit at 40% of purchase price of arrack. The Andhra Pradesh High Court set aside the computation of the gross profit at 40% and pointed out that there was no worthwhile material or fact brought on record justifying the estimation of gross profit at 40% of the purchase price and thereby disallowing the expenditure. The Andhra Pradesh High Court further pointed out that the Revenue did not choose to file an appeal against the consolidated order passed by the Tribunal in the case of another vendor. Thus, the estimation of net profit at 1% in arrack business as held by the Tribunal, was held on the lower side which required to be re-estimated. The High Court further pointed out the facts relating to sale of arrack and the relevant rules guiding thereon and accepting the total sale price at eight times of the purchase price and held that it would be appropriate to hold that 2% of the estimated sale value as net profit would be reasonable. Therefore, estimating the net profit at 2% of the estimated sales or 16% of the purchase price was held as a reasonable estimation. We find both the decisions have no relevance, since they rested on facts peculiar to the case.
11. As far as the present case is concerned, while in the case of the decision of the Kerala High Court in K.T.Thomas vs.Agricultural Income-Tax Officer & Ors., reported in 184 ITR 561, the decision rested on the facts therein including the flaw in observing of principles of natural justice, as far as the Andhra Pradesh High Court decision is concerned, the same rested on the gross profit estimated by the Officer, when the purchase and sale were guided by the price fixed by the Government and comparable date therein was also available.
12. As far as the present case is concerned, if the assessee had any agricultural operation and earned income, certainly, it was always open to the assessee to bring any such material to substantiate the facts. The facts, therefore, ought to have been brought before the Assessing Officer or before the First Appellate Authority to substantiate the case of the assessee, that he had been in receipt of the income earned out of agricultural operation. In the absence of any materials shown or onus discharged in the manner known to law, we do not agree with the assessee's contention based on the decisions cited. In the circumstances, we have no hesitation in rejecting the Tax Case (Appeals) and thereby in confirming the order of the Tribunal. Consequently, the Tax Case (Appeals) stands dismissed. No costs.
(C.V.,J) (T.S.S.,J) 11.11.2013 Index :No Internet :Yes pbn CHITRA VENKATARAMAN, J. and T.S.SIVAGNANAM, J. pbn To 1.The Commissioner of Income Tax (Appeals) VIII, Chennai. 2.The Income Tax Appellate Tribunal Bench 'A', Chennai 3.The Deputy Commissioner of Income Tax Co., Cir II(2), Chennai -34. Tax Case (Appeal) No.262 of 2009 11.11.2013