Income Tax Appellate Tribunal - Pune
Babulal L Malu, Kolhapur vs Assessee on 26 August, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench 'A', Pune
Before Shri I.C.Sudhir JM and
Shri D Karunakara Rao AM
1) ITA No. 241/PN/2009 - AY: 2001-02
2) ITA No. 242/PN/2009 - AY: 2002-03
3) ITA No. 243/PN/2009 - AY: 2006-07
Shri Babulal Laxminarayan Malu, ..... Appellant
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABNPM0069M
Vs.
Dy. CIT, Cen. Circle, Kolhapur .... Respondent
4) ITA No. 318/PN/2009 - AY: 2006-07
Dy. CIT, Cen. Circle, Kolhapur ... Appellant
Vs.
Shri Babulal Laxminarayan Malu, ... Respondent
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABNPM0069M
5) ITA No. 752/PN/2009 - AY: 2002-03
ACIT, Cen. Circle, Kolhapur ...... Appellant
Vs.
Smt. Ayodhya Babulal Malu, ..... Respondent
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABNPM6755F
6) ITA No. 244/PN/2009 - AY: 2000-01
7) ITA No. 245/PN/2009 - AY: 2001-02
8) ITA No. 246/PN/2009 - AY: 2002-03
9) ITA No. 247/PN/2009 - AY: 2003-04
10) ITA No. 248/PN/2009 - AY: 2004-05
11) ITA No. 249/PN/2009 - AY: 2005-06
12) ITA No. 250/PN/2009 - AY: 2006-07
Shri Rajendra Babulal Malu, ..... Appellant
2 ITAs. No 241, 242, 2432/PN/2009 etc.
Shri Babulal L. Malu, etc.,
A.Ys. 2001-02, 2002-03 etc.,
Page of 34
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABNPM0068L
Vs.
Dy. CIT, Cen. Circle, Kolhapur .... Respondent
13) ITA No. 316/PN/2009 - AY: 2005-06
14) ITA No. 317/PN/2009 - AY: 2006-07
Dy. CIT, Cen. Circle, Kolhapur ..... Appellant
Vs.
Shri Rajendra Babulal Malu, .... Respondent
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABNPM0068L
15) ITA No. 381/PN/2009 - AY: 2000-01 ,
16) ITA No. 382/PN/2009 - AY: 2001-02,
17) ITA No. 383/PN/2009 - AY: 2003-04,
18) ITA No. 384/PN/2009 - AY: 2005-06
Smt. Archana Rajendra Malu, ..... Appellant
Chandan,8th Lane, Azad Road,
Shirol, Dist. Kolhapur.
PAN ABEPM4622K
Vs.
Dy. CIT, Cen. Circle, Kolhapur .... Respondent
19) ITA No. 385/PN/2009 - AY: 2006-07
Shri. Venkateshwara Pan Masala Industries (P) Ltd. ..... Appellant
355 Sangli Kolhapur By Pass Rd,
Dharangutti,
Dist. Kolhapur.
PAN AACCS5553P
Vs.
Dy. CIT, Cen. Circle, Kolhapur .... Respondent
20) ITA No. 386/PN/2009 - AY: 2002-03
21) ITA No. 387/PN/2009 - AY: 2003-04
22) ITA No. 388/PN/2009 - AY: 2004-05
23) ITA No. 389/PN/2009 - AY: 2005-06
24) ITA No. 390/PN/2009 - AY: 2006-07
Shri. Venkateshwara Agricultural Farm, ..... Appellant
218, Azad Road, A/P. Jaysingpur,
Dist. Kolhapur.
PAN AAEFV5838L
Vs.
Dy. CIT, Cen. Circle, Kolhapur .... Respondent
25) ITA No. 753/PN/2009 - AY: 2000-01
3 ITAs. No 241, 242, 2432/PN/2009 etc.
Shri Babulal L. Malu, etc.,
A.Ys. 2001-02, 2002-03 etc.,
Page of 34
26) ITA No. 754/PN/2009 - AY: 2001-02
27) ITA No. 755/PN/2009 - AY: 2002-03
28) ITA No. 756/PN/2009 - AY: 2003-04
29) ITA No. 757/PN/2009 - AY: 2004-05
30) ITA No. 758/PN/2009 - AY: 2005-06
31) ITA No. 759/PN/2009 - AY: 2006-07
ACIT, Cen. Circle Kolhapur, ..... Appellant
Vs.
Shri. Venkateshwara Agricultural Farm, .....Respondent
218, Azad Road, A/P. Jaysingpur,
Dist. Kolhapur.
PAN AAEFV5838L
Assessee by : Shri. M.K. Kulkarni
Department : Shri Hareshwar Sharma
Date of Hearing : 26.8.2011
Date of Pronouncement :
ORDER
Per Bench ITA Nos. 241 to 243/PN/2009 In the appeals for A.Y. 2001 and 2002-03, the revenue has questioned first appellate order firstly on the ground that the Ld CIT(A) was not justified in not accepting the appeal of the assessee saying there is no provision to appeal against the protective assessment and sustained addition of Rs. 20,50,000/- in A.Y. 2001- 02, and Rs. 30,00,000/- in A.Y. 2002-03 on account of loan received from Shri K.H. Maniyar (Ground No.1) and secondly, the Ld CIT(A) was not justified in charging interest u/s. 234B and 234C of the Act (Ground No. 2).
Ground No. 1
2. The relevant facts are that during the A.Ys. 2001-02 and 2002-03, the assessee claimed to have taken unsecured loans of Rs.2,50,000/- and Rs. 30,00,000/- respectively from his brother-in-law Shri J.H. Maniyar of Nagpur. The 4 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 A.O doubted creditworthiness of Shri Maniyar and made the addition u/s. 68 of the Act on this account at Rs. 20,50,000/- in A.Y. 2001-02 and Rs. 30,00,000/- in A.Y. 2002-03. The Ld CIT(A) did not adjudicated upon the issue on the basis that first appeal is not maintainable against the addition made on protective basis since a decision on an addition of substantive basis would also be taken on the findings in the case of Shri Maniyar.
3. Before us, the Ld. A.R. pointed out that assessment in the case of Shri J.H. Maniyar was re-opened and it has now been ultimately decided by the Nagpur Bench of the Tribunal. The Ld. A.R. submitted that the income of Shri Maniyar has been assessed for all the years under appeal at Rs. 23.71 Crores as against amount advanvced to Malu family of Rs. 13.72 Crores. He submitted that Shri Maniyar remained financially capable of advancing of loan in question to the assessee group. There was no dispute about the identity of Shri Maniyar. The money advanced by him was through normal banking channels and he has affirmed the claimed advances made by him. The Ld. A.R. also cited decision of Hon'ble Kerala High Court in the case of Lata Chandi Vs. CIT (2003), 260 ITR 385 holding that appeal lies against the protective assessment.
4. The Ld. D.R. on the other hand tried to justify the orders of the authorities below. He pointed out that examination of the documents relating to the business conducted by Shri Maniyar showed number of discrepancy according to the A.O, due to which, his credit worthiness was doubted by him to deny the claimed loan by the assessee from him.
5. Considering the above submissions, we find that the A.O had denied the claimed unsecured loans in question to the assessee by Shri J.H. Maniyar on the basis that it was beyond his capacity to advance the loan in question. The A.O was of the view that Shri Maniyar had shown bogus income from export of software. He also noted that it was strange that loans of such heavy amounts were advanced 5 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 without charging interest. The contention of the assessee remained that the lender had confirmed the loans; loans were received by Demand Drafts and cheques and the credit worthiness of the lender was very high. It was also submitted that Shri Maniyar belonged to a well known family of Nagpur which has an industrial background. In support of his credit worthiness, copy of his income-tax return, his balance-sheet etc., were filed by Shri Maniyar. It was submitted that Shri Maniyar is also Managing Director of Hargovind Industry which had a paid up capital of Rs. 5 Crores. He had exported Software and received proceeds through regular banking channels. The Software developed and exported by him was surveyed by the Software Technology Park of India (STPL) established by the Government of India. Reiterating the submissions made before the authorities below, the Ld. A.R. also pointed out that order of the Nagpur Bench of the Tribunal in the case of Shri J.H. Maniyar has been passed in the meanwhile assessing his income for all the years under appeal at more than Rs. 23.71 Crores. He submitted that the order of the Nagpur Bench of the Tribunal in the case of Shri Maniyar was not available before the authorities below. Since Ld. A.R. has not made available the order of the Nagpur Bench of the Tribunal in the case of Shri J.H. Maniyar before the Tribunal, we set aside the matter to the file of the Ld CIT(A) to decide the issue afresh in the case of the assessee in view of the decision of Nagpur Bench of the Tribunal in the case of creditor Shri J.H. Maniyar after giving opportunity of being heard to the assessee to establish creditworthiness of the creditor and that the funds were available with him when it was advanced to the assessee and to the AO to rebut the same..
6. In view of the above developments, the contention of the assessee that first appeal lies also against protective assessment has turned academic only. Hence, it does not need adjudication. The Ground No. 1 is thus allowed for statistical purposes.
Ground No. 2
6 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
7. The charging of interest u/s. 234B and 234C of the I.T. Act is consequential in nature, hence does not need a separate adjudication. This ground is accordingly disposed off.
8. In result, appeals are allowed for statistical purposes. ITA No. 318/PN/2009
9. The Revenue has questioned first appellate order on the ground that the Ld CIT(A) has erred in deleting the addition of Rs. 1085091/- made on account of excess jewellery found at the residential premises of the assessee.
10. Having gone through the orders of the authorities below, we find the relevant facts that during the year, an addition of Rs. 1085091/- was made on account of unexplained jewellery found during the course of search. The A.O. did not agree with the explanation of the assessee that in his statements recorded u/s. 132(4), the assessee had mentioned that jewellery found includes that of Sanjay Malu family. The A.O disbelieved the explanation on the basis that Sanjay Malu does not stay in the same household. The assessee, on the other hand, submitted copy of the panchnama and inventory of cash and jewellery found during the course of search. It was pointed out that the valuation report of the jewellery mentions the names of the appellant, Rajendra Malu, Sanjay Malu, Ayodhya Malu, Archana Malu etc., . Sanjay Malu was also covered in the search on the residential premises of the assessee. Accepting these explanation of the assessee, the Ld CIT(A) has deleted the addition made on account of the excess jewellery.
11. Having gone through the orders of the authorities below, we find that the Ld CIT(A) has deleted the addition in the concluding para Nos. 18 and 19 of the first appellate order. The same are being reproduced hereunder :
7 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 "18. I have considered the submissions. Along with the inventory of jewellery, the inventory of cash found also includes cash found in the bed room of Sau. Anusaya S. Malu. It is clear from the cash inventory that Sanjay Malu's family was included in the appellant's family. The inventory of jewellery further makes it clear that the jewellery found in included jewellery of the Sanjay Malu family. According to the wealth tax statement of the family members, Sanjay Malu's family including Anusaya Malu, Sanjay Malu and Sanjay Malu (HUF) owns jewellery as under;
1) Gold Jewellery 1540.37 gms.
2) Silver 4,500 kg.
3) Diamonds 8 Carrot
19. The gold is valued at a rate of roughly at Rs.6000/- and silver at Rs.10500/- per kg. At this rate, 1540 gms of gold jewellery itself amounts to Rs.9,24,000/-. There is therefore, no reason for any addition on account of the excess jewellery."
In absence of rebuttal of above stated material findings of the ld CIT(A) by the Ld. D.R., we are not inclined to interfere with the first appellate order in this regard as the same is reasoned one. The same is upheld. The ground is accordingly rejected.
12. In result, appeal is dismissed.
ITA No. 752/PN/2009
13. The revenue has questioned first appellate order mainly on the ground that the Ld CIT(A) has erred in deleting the addition of Rs. 12,00,000/- made on account of cash donation giving to Tirupati Devasthan.
14. The relevant facts are that during the course of search, a bundle containing donor pass books of Tirupati Devasthan was found showing that the assessee had given donation in his name and in the name of other members of his family. It was explained that the donations were given out of agricultural income. The A.O did not accept the explanation of the assessee on the basis that the donation was not reflected in the capital account of the assessee in the books of Venkateshwara 8 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 Agricultural Farm which was the source of agricultural income. It was further observed that Venkateshwara Agricultural Farm did not earn sufficient income to enable the cash donation of the amount in question. The Ld CIT(A) has deleted the addition following the first appellate order in the case of Rajendra Malu for the A.Ys. 2001-02 to 2006-07.
15. The contention of the Ld. D.R. remained that the capital account of the assessee was not debited in the books of M/s. Venkateshwara Agricultural Farm. The assessee had given donation to Tirupati Devasthan in the month of July 2011. The Ld. CIT(A) failed to appreciate that the entire cash receipts on account of agricultural goods should not have been received prior to July 2011. He submitted further that the Ld CIT(A) has also failed to appreciate that the addition of Rs.12,00,000/- made in the case of the firm M/s. Venkateshwara Agricultural Farm on account of cash donation given to Tirupati Devasthan was on protective basis and the addition in the case was of substantive basis.
16. The ld. A.R., on the other hand, tried to justify the relief given by the Ld CIT(A).
17. Having gone through the orders of the authorities below, we find that the Ld CIT(A) has deleted the addition in question mainly on the basis that the entire income has to be taken for the purpose of cash flow, whether income is assessed as agricultural income or it is assessed as income from other sources. The Ld CIT(A) has followed the first appellate order on an identical issue in the case of another family member Shri Rajendra Malu for the A.Ys. 2001-02 to 2006-07. The facts are identical in that case, it was noted that instead of agricultural income declared at Rs.1854641/-, the agricultural income has been assessed at Rs.3,42,843/- and the remaining amount has been treated as income from other sources. Thus, without going into the nature of the income, on the merit of the addition in the case of Venkateswara Agricultural Farm, it was held that amount of 9 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 income was available for application for the purpose of donation. It was noted from the cash flow statement for the A.Y. 2002-03 that there was sufficient cash in the books to fund the donation. The donation is reflected in the books. Under these circumstances, the Ld CIT(A) has noted that during the year, Rs. 7,00,000/- was available with the assessee which covers the amount of Rs. 12,00,000/- in question shown to have been given in donation to Tirupati Devasthan. This material fact has not been rebutted by the revenue before us. We thus do not find reason to interfere with the first appellate order on the issue. The same is upheld. The ground is accordingly rejected.
18. In result, appeal is dismissed.
ITA Nos. 244, 245, 246, 247, 248, 249 & 250/PN/2009
19. In these appeals, the assessee has questioned first appellate order on different grounds..
20. In the A.Ys. 2000-01, 2002-03, 2004-05, 2005-06 and 2006-07, the assessee has questioned first appellate order on the ground that the Ld CIT(A) was not justified in sustaining the addition of Rs.4,05,019/- on account of difference in valuation of Mahableshwar Property ( A.Y. 2000-01), Rs. 3,25,158/- on account of difference in the valuation of Panhala property (A.Y. 2002-03), in not accepting the valuation of the property known as Hotel Shambhavee in A.Ys. 2004-05, 2005-06 and 2006-07.
21. The relevant facts are that the A.O made addition u/s. 69B of the Act on account of unexplained investment in purchase/construction of various properties. These are as under :
10 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 "A.Y. Farm House Land & Bldg. Hotel Factory Bldg.
Mahabaleshwar Panhala Sambhavi ---- --------------- --------------- ----------- ------------------ 99-00 629412 -- -- -- 00-01 -- -- -- 52655 02-03 -- 622430 -- -- 03-04 -- -- -- -- 04-05 -- -- 96868 -- 05-06 -- -- 1004576 -- 06-07 -- -- 1542938 "
The A.O has made addition of amount in difference between the value shown by assessee and that estimated by the DVO. The Ld CIT(A) after considering the submissions of the assessee has given part relief. Thus, the parties are in appeal before the Tribunal. The Ld CIT(A) has dealt with the issue in detail and has given following findings :
"18. I have considered the submissions. It has been held that in the case of Haripreet Hotels P. Ltd. (ITA 1156/PN/00) by the Pune Bench of the ITAT that the valuation made by the Departmental Valuation Officer are based on rates published by the CPWD, Govt. of India which are in turn based on the rates of material and labour prevailing in Delhi (Delhi Plinth Area Basis). The rates in smaller towns are bound to be lower. A difference upto 15% between the estimate of he Departmental Valuation Officer and the value declared by the appellant should be accepted as reasonable due to this factor. In the case of the factory building at MIDC, Shiroli, the total difference if only Rs. 58,626/- which is less than 10%. This difference would certainly be attributed to the difference in rates adopted by the DVO and various other factors. After all, the estimate done by the DVO remains only 11 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 an estimate and cannot be the absolute value of a particular property. The small difference in valuation can be due to good bargaining power of the assessee, time difference in the valuation, fluctuating material price etc. The addition of Rs. 58,626/- on account of unexplained investment in factory building at D-21, MIDC, Shiroli in A.Y. 2000-01 is therefore deleted.
19. As regards the value of hotel Sambhavee, the total value fixed by the Departmental Valuation Officer was Rs. 82,35,000/- whereas the total expenses or cost of construction over the period in the books of the appellant was Rs.82,93,564/- including furniture and electrical installations. The comparison is as under C) Hotel Sambhavee C.S.No. 1137 at Jaysingpur.
S.N. F.Y Valuation as Expenses as Total
per per books
Income tax
Construction Electric Furniture
1 03-04 354100.00 257232.00 -- -- 257232
2 04-05 3648048.00 2643472.00 -- -- 2643472
3 05-06 2676333.00 1938686.00 677728 501767 3118181.00
4 06-07 1556391.00 1167896.00 392380 714403 2274679.00
Total 8234872.00 6007286.00 1070108 1216170 8293564
R.Off 8235000.00 6007286.00 1070108 1216170 8293564
20. It is mentioned in the assessment order that valuation of the Departmental Valuation Officer did not include cost of land, cost of movable furniture, cost of electronic gazettes, electronic installation, transformers etc. The net difference has been worked out to Rs.26,64,851/- over a period of years. It is seen from the valuation report that the savings for self supervision has been worked out at 7.5% of Rs. 86,68,286/-. It has been decided in the case of Haripreet Hotels Pvt. Ltd., Aurangabad by the Pune Bench of the ITAT, ITA No. 1156 to 1160/PN/00 and accepted in number of other cases that the deduction on account of self supervision should be 10% instead of 7.5%. The deduction on this account should therefore be 12 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 Rs.8,66,828/- instead of Rs.6,50,121/-. The difference in value works out toRs.2,16,707/-.In the above decision of the Pune Tribunal it has also been held that the CBDT circular followed by the Departmental Valuation Officers refers to the Delhi Plinth Area rates as the base. These rates have to be suitably adjusted for smaller towns. In this case, the Tribunal held that an adjustment of @ 15% in the case of Aurangabad was fair and reasonable.
This decision of the Pune Tribunal has been followed by CIT(A), Kolhapur in the case of Ramchand K. Kuckreja, A.Y. 2005-06, appeal No. KOP/181/07-08, on the ground that the Kolhapur is equal to Aurangabad in terms of size, if not smaller. By applying this rate of 15% to the gross value obtained by the Departmental Valuation Officer, the value of the building would be reduced by Rs.13,00,242/-.
21. It may be stated that valuation made by two technical persons can differ on a host of factors, as stated above, including fluctuating of raw material rates, time difference, bargaining power of the buyers, use of old material etc. A difference of 10 - 15% between two estimates can easily be attributed to such factors. The Hon'ble Pune Bench perhaps had this aspect also in a mind while holding that local adjustment of 15% would serve interest of justice and make the valuation realistic. The appellant gets a relief of (Rs.13,00,242/- + 2,16,707 = ) Rs. 15,16,949, out of total addition made of Rs.22,64,851/- on account of unexplained investment in Hotel Sambhavee. The relief would be distributed over the period from 04-05 to 06-07 in proportion to the addition made in the respective years.
22. As regards Panhala and Mahabaleshwar properties, these are properties which have been purchased, not constructed by the appellant. The Mahabaleshwar property had been purchased from Shri Ajit Mutha, who had purchased it from Vitthal Shinde. The original owner of the property was Bhavani Devi Trust. While purchasing the property, Sh Mutha had not taken permission of the trust and charity Commissioner. Therefore, the purchase price for the property given to Mutha was lower than market value of the property. The appellant submitted that even till date his name has not been entered as owner in 7/12 extract. In other words, infirmity in the legal title which would result in a discounted value of property has not been considered by the Departmental Valuation Officer. The contention of the appellant has force. Needless to say that imperfection of title would result in serious discount to the value of the property.
13 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
23. The appellant however has not pointed out any serious defects in the valuation made by the Departmental Valuation Officer. However, due to the above imperfection in the title, deduction of 10% the value of land is considered sufficient.
24. As regards Panhala land and building, the difference in valuation works out to 17%. The property is also subject to certain disputes with Govt. According to the Govt., certain terms and conditions had not been followed by the property owners and therefore notices had been issued to the plot owners for the deposits of certain sums of money. The dispute was pending when the property was purchased. Since there were liabilities on the property, there would be some amount of discount on the market value. The contention of the appellant has force. However, the appellant has not given any details of the dispute which is pending and the sum of money which is liable to be paid to the Govt. The contention therefore cannot be accepted. It has been held in the case of valuation of other properties above, that a deduction of 15% on the Delhi Plinth Area rates adopted by the Departmental valuer is to be made to compensate for difference of rates between metros and smaller towns. In keeping with this decision, the value of the Mahabaleshwar and Panhala properties would be reduced as under:
Panhala Valuation of building 9,52,815/-
15% reduction 2,42,922/-
Mahabeleshar
Valuation of building 15,25,959/-
15% reduction 2,28,893/-
25. The valuation of the properties at Mahabaleshwar and Panhala reduced as under.
Panhala building 1,42,922/-
Panhala land (10%) 1,52,350/-
Mahabaleshwar building 2,28,893/-
The AO is directed accordingly."
14 ITAs. No 241, 242, 2432/PN/2009 etc.
Shri Babulal L. Malu, etc.,
A.Ys. 2001-02, 2002-03 etc.,
Page of 34
22. We have heard and considered the arguments advanced by the parties on the issue raised in the ground. The Ld. A.R. has given more stress on his pleading that difference between the value shown by the assessee and that estimated by the DVO of the properties in question was ranging between 10 to 15 %, hence Ld CIT(A) should have accepted the value of the properties shown by the assessee. He submitted that though the Ld CIT(A) has appreciated the submissions of the assessee made in this regard that there is always possibility of such difference between the estimation of two experts but he has not given full relief. Regarding the properties at Mahableshwar, Panhala Bunglow and Hotel Shambhavee, the Ld. A.R. submitted that A.O. should have rejected the books of account before referring the matter to the DVO, hence reference is invalid in view of the decision in the case of Sargam Cinema Vs. CIT, 328 ITR 513 (SC). The Ld. D.R., on the other hand, tried to justify the assessment order.
23. Considering the above submissions, we find that the Ld CIT(A) has already given the reasonable reduction from the value of the properties in question adopted by the A.O. considering the contentions of the assessee like local PWD rate, value of furnitures and fixtures, etc. It is very much apparent from the first appellate order, relevant extract whereof has been reproduced hereinabove. After taking into account those contentions, the Ld CIT(A) has already reduced 15% of the valuation in the valuation of construction and 10% reduction in the value of land in the case of Panhala bungalow against the valuation estimated by the DVO. Since the Ld CIT(A), in our view, has given sufficient relief taking into account the totality of the facts and circumstances of the case, we are not inclined to interfere therewith. So far as decision of Hon'ble Supreme Court in the case of Sargam Cinema Vs. CIT, 328 ITR 513 (Supra) cited by the Ld. A.R. is concerned, having gone through the 15 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 same, we find that in that case, there was specific finding of the Tribunal that the books of account were never rejected. Under these circumstances, the decision of the Tribunal was approved whereby it was held that the assessing authority could not have referred the matter to the DVO when the books of account were not rejected. It is an established proposition of law that there is no need for the A.O to write in specific wording that books of account are rejected in case it is not reliable to deduce the correct income of the assessee and even if the A.O mentions about the non-reliability of the books of account, it is sufficient to draw an inference that books of account have been rejected. In the present case before us, books of account of the assessee have not been found reliable by the A.O to deduce correct income of the assessee, hence the only inference is that books of account have been rejected by him. The ground is accordingly rejected.
24. In A.Ys. 2001-002, 2002-03, 2003-04, 2004-05, 2005-06 and 2006-07, the assessee has questioned the first appellate order firstly on the ground that the Ld CIT(A) was not justified in not accepting the appeal of the assessee on the basis that there is no provision to appeal against the protective assessment, and secondly, there cannot be any addition on protective basis u/s. 153A(b) of the Act and the Ld CIT(A) has erred in sustaining the addition of Rs.7,38,00,000/- in A.Y. 2001-02, Rs.1,88,40,000/- in A.Y. 2002-03, Rs. 1,40,30,000/- in A.Y. 2003-04, Rs.
5,50,00,000/- in A.Y. 2004-05, Rs. 25,00,000/- in A.Y. 2005-06 and Rs.2,60,00,000/- in A.Y. 2006-07 on account of loan received from Shri J.H. Maniyar.
25. The facts in brief are that the assessee during the A.Ys. under consideration had borrowed unsecured loans from his brother-in-law Shri J.H. Maniyar from Nagpur which have been treated by the A.O as unexplained cash credit on the basis that credit worthiness of Shri Maniyar was doubtful. The Ld CIT(A) has not given any relief to the assessee on the basis that the income in the hands of the assessee in this regard has been assessed protectively and a decision on an addition on 16 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 substantive basis would also depend on the findings in the case of the creditor Shri J.H. Maniyar.
We have already decided an identical issue under similar facts hereinabove in ground no. 1 in ITA Nos. 241 to 243/PN/2009. Following the decision taken therein we set aside the matter to the file of the ld. CIT(A) to decide the issue afresh in the case of the assessee in view of the decision of Nagpur Bench of the Tribunal in the case of the creditor Shri J.H. Maniyar after giving opportunity of being heard to the parties.
26. In the A.Y. 2006-07, the assessee has questioned first appellate order on one ground that the ld CIT(A) was not justified in sustaining the addition of Rs. 27,000/- made by A.O on account of education expenses.
27. After having gone through the orders of the authorities below, we find that disallowance of the claimed education expenses at Rs. 27,000/- has been made by the authorities below on the basis that personal capital account for the period does not show any debit on account of educational expenses or personal withdrawals which could have funded the educational expenses although there are debits with regard to LIC premium, municipal tax, PPF deposits, TDS payments and salary etc. In absence of any evidence in support or convincing explanation before us in this regard, we do not find reason to interfere with the orders of the authorities below on this ground. The same is upheld. The ground is accordingly rejected.
28. The last ground is common in all the A.Ys. under consideration whereby the assessee has questioned its liability to pay interest u/s. 234B and 234C of the Act.
29. The issue raised in the ground is consequential in nature, hence does not need adjudication. It is accordingly disposed of.
30. In result, ITA No. 244/PN/2009 is dismissed, and remaining appeals are partly allowed.
17 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 ITA No. 316 & 317/PN/2009
31. The revenue has questioned first appellate order firstly on the ground that the Ld CIT(A) has erred in deleting the addition of Rs. 8,28,611/- in A.Y. 2005-06 and Rs. 6,08,438/- in A.Y. 2006-07 made on account of unexplained investment in property (ground no. 1); and secondly, on the ground that the Ld CIT(A) has erred in deleting the addition of Rs. 15,934/- and Rs. 5000/- in A.Y. 2006-07 made on account of wrong claim of deduction u/s. 57 under the head "income from other sources" (ground no. 2).
Ground No.1
32. We have already dealt with the issue hereinabove in the case of appeals preferred by the assessee i.e. ITA Nos. 244 to 250/PN/2009 which includes appeals for A.Ys. under consideration as well. Following the decision taken therein, we do not find infirmity in the first appellate order in this regard as the same is comprehensive and reasoned one. The relief given by the Ld CIT(A) of Rs.8,28,611/- in A.Y. 2005-06 and of Rs. 6,08,438 in A.Y. 2006-07 towards the addition made on account of unexplained investment in property on the basis of possible difference due to local rate and opinions of two experts, etc., is thus upheld. The ground is accordingly rejected.
Ground No.2
33. The relevant facts are that in the A.Y. 2005-06 and 2006-07, addition of Rs. 15,934/- and Rs.5000/- respectively were made treating the same as wrong claim u/s. 57 of the Act. The A.O. has mentioned in the assessment order that above stated expenditure was claimed as deduction on account of consultation fees, professional tax and service tax u/s. 57 of the Act. The A.O did not allow the same on the basis that the expenses were not laid down for the purposes of earning 18 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 income from other sources vis. Interest, commission etc., The assessee admitted that the claim was made under the wrong head and it should have been claimed under the head of income from business or profession. The Ld CIT(A) has upheld the addition on the basis that the A.O has not disputed the genuineness of the expenditure or the fact that it is related to business of the assessee and that the expenditure should allowed either against income from other sources or income from business. The Ld CIT(A) has noted that assessee has substantial income from royalty, commission, interest, agriculture etc., other than the business income. He has further noted that the expenses on income tax consultation etc., are of general nature which is attributable to all sources of income and if the same expenditure is allowable u/s. 57, it will be allowable under income from business or atleast proportionately to different source of income. Certainly, it is not expenditure which is of capital or personal nature, hence we are of the view that the Ld CIT(A) has rightly deleted the additions in question. The same is upheld. The ground is accordingly rejected.
34. In result, appeals are dismissed.
ITA Nos. 381 to 384/PN/2009
35. The assessee has questioned first appellate order on several grounds.
36. In the A.Ys. 2000-01, 2001-02 & 2005-06, one of the common grounds is that the Ld CIT(A) was not justified in confirming the disallowance of the claim made u/s. 57 of the Act (of Rs. 1,07,379 in A.Y. 2000-01, Rs. 50, 931/- in A.Y. 2001- 02 and Rs. 2700/- in A.Y. 2005-06).
37. At the outset of hearing of the appeal, the Ld. A.R. pointed out that the assessee does not want to press this ground as she wishes to move application u/s. 154 of the Act in this regard before the A.O. The ground is, therefore, rejected as not pressed.
19 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
38. The other common ground raised in the A.Y. 2000-01 & 2001-02 is that Ld CIT(A) was not justified in confirming the addition of Rs. 80,740/- in A.Y. 2000-01 and Rs. 12000/- in A.Y. 2001-02 received on account of agricultural subsidy.
39. In support of this ground, the Ld. A.R. furnished certificates issued by Divisional Agricultural Officer, Jaisingpur, Dist. Kolhapur, issued on 20th July 2010. The Ld. D.R., on the other hand, relied upon the orders of the authorities below.
40. During the A.Ys. under consideration i.e. A.Y. 2000-01 and 2001-02, the assessee claimed agricultural subsidy as capital receipt, to which, A.O did not agree with and treated the same as revenue receipt. The A.O noted that the subsidy has been treated as a revenue receipt in one of the group cases . The A.O also noted that agricultural subsidy was given to offset the expenditure incurred by the assessee in the agriculture production. Since the assessee could not improve its case before the Ld CIT(A), he has upheld the disallowance. In the above given certificate before us, issued by Divisional Agricultural Officer, Jaisingpur, it has been mentioned as to under which scheme agricultural subsidy was given to the assessee. These certificates were not available before the authorities below as these have been issued later on. We thus admitting the certificates issued by State Government official as additional evidence set aside the matter to the file of Ld CIT(A) to decide the issue afresh considering the said additional evidence after affording opportunity of being heard to the assessee. The ground is thus set aside for statistical purposes.
41. In A.Ys. 2003-04 and 2005-06, the assessee has questioned first appellate order on the common ground that the ld CIT(A) was not justified in holding that the appeal of the assessee is not maintainable against protective assessment in which additions of Rs. 30,00,000/- in August 2003-04 and Rs. 5,00,000/- in A.Y. 2005-06 20 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 have been made as loans from Shri J.H. Maniyar and secondly, in holding that the assessee has circulated its own unexplained funds while confirming the additions.
42. Parties have adopted their respective arguments advanced by them on the identical issue hereinabove in the case of Shri Babulal Laxminarayan Malu, it ITA Nos. 241 to 243 and 318 & 752/PN/2009.
43. Following the decision taken on identical issue in above cited appeals in the case of Shri Babulal Laxminarayan Malu under similar facts and circumstances, we set aside the matter to the file of the ld. CIT(A) to decide the issue afresh in view of decision of the Nagpur Bench of the Tribunal in the case of the creditor Shri J.H. Maniyar after affording opportunity of being heard to the assessee to establish the credit worthiness of the creditor Shri J.H. Maniyar and to the A.O to rebut the same.. The ground is thus allowed for statistical purposes. So far as contention of the assessee that first appeal lies also against protective assessment is concerned, it has become academic only hence it does not need separate adjudication.
44. The last common ground in all these appeals is charging of interest u/s. 234A, 234B and 234C of the Act against the assessee. The same being in consequential nature, we are of the view that it does not need independent adjudication.
45. In result, ITA No. 381, 382 and 384/PN/2009 are partly allowed and 383/PN/2009 is allowed for statistical purposes.
ITA No. 385/PN/2009
46. The assessee has questioned first appellate order firstly on the ground that Ld CIT(A) was not justified in holding the appeal not maintainable against 21 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 protective assessment whereby addition of Rs. 13.50 lacs made on account of loan taken from Shri J.H. Maniyar by the A.O has been upheld. In the second ground, the levy of interest u/s. 234A, 234B and 234C has been questioned.
47. So far as issue raised in ground No. 1 questioning the sustenance of addition of Rs. 13.50 lakhs doubting the credit worthiness of the creditor Shri J.H. Maniyar is concerned, an identical issue under the similar facts of the case has been decided by us hereinabove in the case of Shri Babulal Laxminarayan Malu (Supra). Following the decision taken therein, the matter is set aside to the file of the Ld CIT(A) to decide the issue afresh in the case of the assessee in view of the decision of Nagpur Bench of the Tribunal in the case of creditor Shri J.H. Maniyar after affording opportunity of being heard to the assessee to establish the credit worthiness of Shri J.H. Maniyar and availability of fund during the period when the loan in question was given to the assessee by him and to the A.O to rebut the same.
48. So far as the contention of the Ld. A.R. that the first appeal lies also against protective assessment is concerned, the same has become academic only in view of the above decision of the setting aside of the issue. Hence, it does not need adjudication. The ground is accordingly allowed for statistical purposes.
49. The charging of interest u/s. 234A, 234B and 234C questioned in ground No. 2 is consequential in nature, hence it does not need independent adjudication.
50. In result, appeal is allowed for statistical purposes. ITA Nos. 386 to 390/PN/2009 22 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
51. In all these appeals, two grounds are common. Firstly, the ld CIT(A) was not justified in sustaining the addition under the head income from Dairy business, and secondly sustaining the charging of the interest u/s. 234A, 234B and 234C.
52. So far as sustaining of addition under the head income from dairy business is concerned, the relevant facts are that during assessment proceedings, the A.O noted that the assessee had not offered the dairy income for taxation. The assessee was asked to furnish details of dairy activity along with yield and expenditure. The working given by assessee showed loss in most of the years. The A.O noted that the loss was mostly on account of hypothetical figure of sale of fodder which, as per A.O was not actual expenditure. The A.O. observed further that production of milk was also shown at an average of 7 to 8 liters per day per cattle whereas as per her, the highbreed cattle as owned by the assessee gives normal 50 liters of milk per day per cow. The A.O. computed the production of milk at 17.72 litre per cattle in case of buffalo and 10.21 litre per cattle in case of cow and worked out dairy income accordingly, which was added to the total income of the assessee for each year. The A.O. rejected the claim for salary and wages expenses in absence of supporting documents. Considering the submissions of the assessee, the Ld CIT(A) has, however, given part relief. The assessee has questioned sustenance of addition in this regard by the ld CIT(A) before us.
53. In support of the ground, the ld. A.R. has basically reiterated the submissions made before the authorities below. He submitted that there was no systematic activity of dairy farming. Most of the milk produced was consumed by the family members and sold when it was in excess. He submitted that dairy farming was incidental to the main agricultural activity. The Ld. A.R. submitted that cattles were maintained for the purpose of activity of organic farming of various crops, for which, natural fertilizer was required. The excess milk supplied to the dairy and payments received from were duly accounted in the books . Even the milk supplied to family members was billed and accounted for. He submitted that the 23 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 A.O did not find any specific defects in the books of account and she has estimated the bill without any basis. The Ld. A.R. submitted further that the fodder of the cattles was a by-product of the agricultural activities carried out in the agricultural farm. It was billed separately since the assessee had admitted to separate dairy farming activity as a profit centre. Ld. A.R. submitted that the cows are purchased from the local market and therefore, they are hybreed and not pure breed of jersey or murah cows. He submitted that the assessee had also sold cattles and after estimating the receipt from the sale of milk based on the number of cows of a particular breed an arbitrary figure has been arrived at by the A.O to compute the net taxable income from the dairy business. Giving an example of assessment year of 2006-07, the Ld. A.R. pointed out that in the A.Y, the A.O has worked out total receipt of Rs. 5,57,340/- from the sale of milk of cows and Rs. 8,93,088/- from the sale of milk of buffalo. The total receipt has been worked out at Rs. 14,44,428/- and the net income has been computed at Rs. 10,68,041/- allowing an amount of Rs. 376378/- as expenses. The A.O has not given the details as to how the expenditure of dairy business has been computed. On the contrary, the assessee had furnished from his books, the details of expenditure at Rs. 8,45,649/-.
54. The Ld. D.R., on the other hand, placed reliance on the assessment order.
55. Considering the above submissions, we find substance in the contention of the Ld. A.R. to this extent that there should have been some basis with the A.O for working out the expenditure by her on dairy business. We also agree with the contention of Ld. A.R. that cattle fodder, an agricultural bi-product, has saleable value. General expenses such as salary and labour would also have to be attributed to the dairy business in order to bring out the actual profits from such business. Considering all these material aspects, we are of the view that the Ld CIT(A) has rightly decided the issue. The relevant para No. 22 of the order is being reproduced hereunder for a ready reference :
24 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 "22. I do not agree with the AO with regard to the disallowances of expenditure. In the appellant's books, the expenditure on dairy farm as well as agriculture operations are intermingled. The appellant has culled out expenditure from the books which relates to the dairy activity, such as medicines etc., Generally expenses such as salary and labour would also have to be attributed to the dairy business in order to bring out the actual profits from such business. The entire expenditure cannot be allowed only under the head of agricultural income. The fodder is an agricultural by-
product which has saleable value. Instead of selling it in the market, the appellant has used it for its own cattle. The expenditure therefore should be debited to have an accurate idea of the profits of the dairy business. The appellant had given a detailed chart showing average fodder consumption on the basis of which, the amount for sell fodder has been calculated. In the same manner as self fodder is debited to the account, the appellant has credited the dairy account with compost sale since this receipt is relatable to the dairy business. In my opinion, therefore, the expenditure which is claimed by the appellant should be allowed. The income from dairy business should therefore be computed as under;
A.Y. Receipts Expenditure Income
2002-03 454086 267020 187066
2003-04 689760 472397 217363
2004-05 765936 576040 189896
2005-06 1093356 751592 341764
2006-07 1444428 845649 598779
The AO is directed accordingly."
As discussed above, we find that the ld CIT(A) considering the totality of the fats on the issue has given a reasonable finding taking into account the needed expenditure as pointed out by the assessee. The first appellate order, in our view, is reasoned one, hence we are not inclined to interfere therewith. The same is upheld. The ground is, accordingly, rejected.
25 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
56. So far as charging of interest u/s. 234A, 234B and 234C is concerned, it is consequential in nature, hence it does not need independent adjudication.
57. In A.Ys. 2002-03 and 2003-04, the assessee has questioned the sustenance of addition of Rs. 20 lakhs in A.Y. 2002-003 and Rs. 15 lakhs in A.Y. 2003-04 on account of loan taken from Shri J.H. Maniyar and that the ld CIT(A) was not justified in holding that the appeal is not maintainable against protective assessment in which these additions have been made by the A.O.
58. Parties have adopted there respective arguments advanced by them on the identical issue hereinabove in the case of Shri Babulal Laxminarayan Malu, it ITA Nos. 241 to 243 and 318 & 752/PN/2009.
59. Following the decision taken on identical issue in above cited appeals in the case of Shri Babulal Laxminarayan Malu under similar facts and circumstances, set aside the matter to the file of the A.O to decide the issue afresh in view of decision of the Tribunal in the case of the creditor Shri J.H. Maniyar after affording opportunity of being heard to the assessee to establish the credit worthiness of the creditor Shri J.H. Maniyar, availability of funds with him when loan was given and to the A.O. to rebut the same. The ground is thus allowed for statistical purposes. So far as contention of the assessee that first appeal lies also against protective assessment is concerned, it has become academic only hence it does not need separate adjudication.
60. In A.Y . 2002-03, the assessee has questioned the sustenance of addition of Rs. 17 lakhs on account of donations made to Tirupati Devasthan out of unexplained sources and further that the ld CIT(A) was not justified in holding the appeal as not maintainable against protective assessment.
26 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
61. Having gone through the orders of the authorities below, we find that the Ld CIT(A) has not decided the issue on its merits on the basis that the appeal on the issue is not maintainable since addition in question in the hands of the assessee agriculture farm has been made on protective basis. He has, however, noted that substantive additions made on account of unexplained donation by different individual assessees of Malu family to Tirupati Devastan are subject matters of appeal in the respective cases. We have noted hereinabove in individual cases of members of Malu family on the issue that the Ld CIT(A) has deleted the additions made in the hands of respective members of Malu family on the basis of decision taken by the first appellate authority in the case of Rajendra Malu for the A.Y. 2002-
03. The assessee therein tried to explain the source of donation as income received from Venkateshwara Agriculture Farm. The addition therein has been deleted on the ground that without going into the nature of the income on the merit of the addition in the case of Venkateswara Agriculture Farm, the amount of income was available for application for the purpose of the donation. It was pointed out that the A.O had not accepted entire income shown from the agriculture which the assessee tried to explain the source for the donation. A portion of the income declared from agriculture was treated as income from other sources. Thus, it was held that whatever may be the nature of income or the source of income, the fact is that the amount was available for the expenditure by way of donation. The Ld CIT(A) held that the entire income has to be taken for the purposes of cash flow, whether income is assessed as agriculture income or assessed as income from other sources. We have upheld such finding of the ld CIT(A) in the case of Smt. Ayodhya B. Malu & Others discussed hereinabove. Following the same approach, even in the present appeal we are of the view that the Ld CIT(A) ought to have decided the issue on its merits. Since this aspect of the matter has not been examined as to whether if the entire income (whether income is assessed as agricultural income or assessed as income from other sources) is taken for the purpose of cash flow, was there 27 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 sufficient funds available with the assessee to donate the amount in question to Tirupati Devastan, we set aside the matter to the file of the Ld CIT(A) to examine this aspect of the matter in the case of the assessee and decide the issue afresh as discussed above after affording opportunity of being heard to the parties. The ground is thus allowed for statistical purposes.
62. In result, ITA Nos. 386 & 387/PN/2009 are partly allowed and ITA Nos. 388, 389 & 390/PN/2009 are dismissed.
ITA Nos. 753 to 759/PN/2009
63. In all these appeals, the revenue has questioned first appellate order on several grounds whereby the Ld CIT(A) has deleted the addition made by the A.O on account of agricultural sale treating the same as bogus. In same appeals ( A.Y. 2002-03, 2003-04, 2004-05, 2005-06 and 2006-07), the revenue has also questioned first appellate order on the ground that the Ld CIT(A) has erred in deleting the addition made on account of dairy business. Agricultural Income
64. In support of the ground, the Ld D.R. has basically placed reliance on the assessment order. He pointed out that while deleting the addition, made on account of bogus agricultural sales, the ld CIT(A) has failed to appreciate that A.O had made addition only after the failure on the part of the assessee to submit the third party proof in support of so called agricultural sale proceeds. He ought to have appreciated that agricultural sales which were properly billed was accepted by the A.O. He submitted that there was no evidence to support agricultural activities done by the assessee. There are other business also, besides agricultural income. The Ld. D.R submitted that no books of account was found during the course of 28 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 search or survey, hence, the books prepared and produced later on are not reliable. He submitted further that no 7/12 extracts was furnished before the A.O in support of the entire type of crops from which income has been claimed by the assessee. He submitted further that ignoring all these material facts, the ld CIT(A) was not justified in granting complete relief on account of agricultural income claimed by the assessee.
65. The Ld. A.R., on the other hand, submitted that the books of account were regularly maintained regarding the agricultural activities of the assessee on the basis of which, the assessee has been filing its return of income. He referred page Nos. 37 to 69 of the paper book i.e. copies of statement of accounts and returns of income filed for A.Ys. under consideration. He submitted further that copies of all 7/12 extracts made available at page Nos. 70 to 75 of the paper book, were furnished before the authorities below. The Ld. A.R. submitted that in the books of account for its agriculture activities maintained by the assessee, it has shown the agricultural production, sales, labour payment, plant purchases, seeds for green vegetables' purchases and dairy sales. He submitted that at the time of survey action, the books of account were very much there, but were not inventorized. The Ld. A.R. pointed out that the A.O in the assessment order for A.Y. 2002-03 has mentioned on page 6/7 that just because one is maintaining regular books of account and filing return does not mean that the income shown by the person is correct. The income has to be supported by some evidence. It shows that the assessee had maintained books of account. The Ld. A.R submitted that the A.O did not agree with the claim of the assessee regarding growing of different types of vegetable and fruits, only on the basis that in 7/12 extracts all these vegetables and fruits grown by the assessee were not mentioned. The Ld. A.R submitted that the concerned official generally does not bother to mention all the types of vegetables and fruits grown by the land holder in 7/12 extracts. Thus, 7/12 extracts cannot be made exclusive evidence to support the actual agricultural activities by a 29 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 cultivator. He submitted that in the paper book, copies of 7/12 extracts were submitted for 1 year i.e. F.Y. 1999-2000 only, however, at the time of hearing, the 7/12 extracts for other years were submitted showing such crops, fruits like mango, chikku, papaya, banana etc., and vegetables with respective cultivated areas. The original bills for purchases of fertilizers specifically required for growing the vegetables, the purchase of plants for cultivation of bringels - vegetables etc., labour charges paid etc., are still preserved which have been recorded in the books of account maintained. The bank account of the firm also finds incorporated in the books of account. The Ld. A.R. submitted further that the assessee is holding 74.32 acres of land and have grown fruits and vegetables, besides the crops which are very much possible to grow as per the report of National Housing Bank (NHB) and Indian Council of Agricultural Research (ICAR). The Ld. A.R. has furnished comparative chart of the produce grown by the assessee and the report of NHB and ICAR showing the possible yield per hectar of land in the area. The Ld. A.R. has also placed reliance on the following decisions :
1) ITO Vs. Rajendra Tiwari (2004), 82 TTJ (Nag.) 347
2) Kamal Kishore Chandak Vs. ITO, 130 TTJ 843 (Jodh.)
3) Sujan Singh Bundels Vs. ACIT, 350 ITR 491 (Agr.)
4) Late Shri S.M. Basheer V/s. ITO ( 13 TTJ (KAN) 236
5) CIT Vs. Ramkrishna Dev, 35 ITR 312 (SC)
6) CIT Vs. R. Venkateswami Naidu, 29 ITR 529 (SC)
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 30 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 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 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 31 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 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., 32 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 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 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 can not 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 33 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34 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
67. The issue has already been decided by us hereinabove in the case of appeals preferred by the assessee for the A.Ys. 2002-03 to 2006-07 in ITA Nos. 386 to 390/PN/2-009 wherein after dealing with the issue, we have ultimately upheld the first appellate order in this regard. Following the decision taken therein, we do not find substance in the ground raised on the issue in the present appeals preferred by the revenue. The same is accordingly rejected as the first appellate order in this regard is reasoned one, to which, we fully concur with.
68. In result, appeals are partly allowed.
68. In summary, ITA Nos. 241 to 243/PN/2009, 383/PN/2009, & 385/PN/2009 are allowed; ITA Nos. 245 to 250/PN/2009, 381, 382 & 384/PN/2009, 386 to 387/PN/2009 & 753 to 759/PN/2009 are partly allowed; and ITAs 318/PN/2009, 752/PN/2009, 316 to 317/PN/2009, 388 to 390/PN/2009 and 244/PN/2009 are dismissed.
34 ITAs. No 241, 242, 2432/PN/2009 etc. Shri Babulal L. Malu, etc., A.Ys. 2001-02, 2002-03 etc., Page of 34
69. Order pronounced in the open court on 23rd September, 2011.
Sd/- Sd/-
(D. KARUNAKARA RAO) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 23rd September, 2011
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - I/II, Kolhapur/ CIT (Central), Pune
4. The CIT(A)- , Kolhapur
5. The D.R. "B/A" Bench, Pune
6. Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune