Mr. Renwick Mascarenhas, Chickmagalur v. Addl. CIT, Hassan

ITA 1155/BANG/2010 | 2006-2007
Pronouncement Date: 17-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 115521114 RSA 2010
Bench Bangalore
Appeal Number ITA 1155/BANG/2010
Duration Of Justice 5 month(s) 3 day(s)
Appellant Mr. Renwick Mascarenhas, Chickmagalur
Respondent Addl. CIT, Hassan
Appeal Type Income Tax Appeal
Pronouncement Date 17-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 17-03-2011
Assessment Year 2006-2007
Appeal Filed On 14-10-2010
Judgment Text
ITA.1155/BANG/2010 P AGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B' BANGALORE BEFORE DR. O. K. NARAYANAN VICE PRESIDENT AND SMT. P. MADHAVI DEVI JUDICIAL MEMBER I.T.A NO.1155/BANG/2010 (ASSESSMENT YEAR : 2006-07) SHRI. RENWICK MASCARENHAS KOLARKHAN ESTATE SANGAMESHWARPET POST CHICKMAGALUR DISTRICT .. APPELLANT V. ADDITIONAL COMMISSIONER OF INCOME-TAX HASSAN RANGE HASSAN .. RESPONDENT APPELLANT BY : SHRI. S. VENKATESAN CA RESPONDENT BY : SHRI. HARSHA PRAKASH COMMISSIONER OF INCOME-TAX-II O R D E R PER DR. O. K. NARAYANAN VICE PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(A) AT MYSORE ON 06.09.20 10 AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S.143(3) OF THE I NCOME-TAX ACT 1961. 02. THE ASSESSEE BASICALLY IS A PLANTER AT CHICKMAG ALUR HAVING EXTENSIVE PLANTATION AREA. ACCORDINGLY ONE OF HIS MAIN SOURCES OF ITA.1155/BANG/2010 P AGE - 2 INCOME IS FROM AGRICULTURE. THE ASSESSEE HAS RETUR NED AN AGRICULTURAL INCOME OF ` .24 25 839/- FOR THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE ALSO HAD ENGAGED IN PRODUCTION OF FEATURE FILMS WHICH ULTIMATELY RESULTED IN A LOSS OF ` .61 61 496/-. THE ASSESSEE HAD ALSO SOLD A LAND IN SUB-URBAN BANGALORE DEVELOPED BY HIM FOR A SUM OF ` .11 46 78 000/- TO M/S. ADARSH DEVELOPERS RESULTING IN A PROFIT OF ` .8 28 26 197/-. 03. IN THE LIGHT OF THE ABOVE FACTORS THE ASSESSEE RETURNED A TOTAL INCOME OF ` .7 60 30 370/- FOR THE ASSESSMENT YEAR UNDER APPEAL . 04. WHILE EXAMINING THE ISSUE OF DEVELOPING OF LAND AND ULTIMATE SALE OF LAND TO M/S. ADARSH DEVELOPERS THE ASSESSI NG OFFICER HELD THAT THE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASS ESSEE BY WAY OF DEDUCTION TO THE TUNE OF ` .3 25 01 808/- HAS NOT BEEN FULLY PROVED. ACCORDING TO THE ASSESSING OFFICER THIS MATTER WAS INVESTIGATED IN THE CONTEXT OF A SEARCH CONDUCTED IN THE PREMISES OF M/ S. ADARSH DEVELOPERS AND THE CONSEQUENT TO THE MATERIALS AND INFORMATION COMING INTO THE HANDS OF THE ASSESSING AUTHORITY. THE ASSESSING OFFICER HAS EXAMINED CERTAIN PERSONS ENGAGED IN VAR IOUS ACTIVITIES OF THE DEVELOPMENT OF LAND AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAS IN FACT INFLATED THE DEVELOPMENT EXPENDITURE TO UNDER STATE THE ITA.1155/BANG/2010 P AGE - 3 PROFIT ARISING OUT OF THE SALE OF LAND. HE DISALLO WED AN AMOUNT OF ` .2 25 00 000/- FROM THE DEVELOPMENT EXPENSES CLAIME D BY THE ASSESSEE AND ADDED BACK TO THE INCOME. IN THE MATT ER OF AGRICULTURAL INCOME OF ` .24 25 839/- THE ASSESSING OFFICER HELD THAT INCOM E BY WAY OF SALE OF ARECANUT AMOUNTING TO ` .15 78 950/- DISCLOSED BY THE ASSESSEE IS BOGUS. HE CAME TO THIS CONCLUSION ON T HE GROUND THAT ONE SHRI. SHAUKAT DEALER OF ARECANUT HAS DEPOSED AGAIN ST THE ASSESSEE IN THIS REGARD. AS A RESULT THE ASSESSING OFFICER TR EATED ` .15 78 950/- AS NON-AGRICULTURAL INCOME AND ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO DISALLOWED THE EXPEN SES CLAIMED BY THE ASSESSEE AMOUNTING TO `. 61 61 496/- TOWARDS PRODUCTION OF FEATURE FILM. 05. WITH THESE EXERCISES OF ADDITIONS/DISALLOWANCES THE ASSESSING OFFICER HAS DETERMINED THE TOTAL INCOME OF THE ASSE SSEE AT ` .10 62 61 866/- AGAINST A TOTAL INCOME OF ` .7 60 30 370/- RETURNED BY THE ASSESSEE. 06. EVEN THOUGH THESE ADDITIONS/DISALLOWANCES WERE TAKEN IN FIRST APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(A) TH EY WERE CONFIRMED AND THE FIRST APPEAL WAS DISMISSED. THE ASSESSEE IS AGGRIEVED AND THEREFORE THE SECOND APPEAL BEFORE TH E TRIBUNAL. ITA.1155/BANG/2010 P AGE - 4 07. WE HEARD BOTH SIDES IN DETAIL AND PERUSED THE R ECORDS OF THE LOWER AUTHORITIES VARIOUS SUBMISSIONS MADE BY THE ASSESSEE AND THE PAPER BOOK FILED BY THE LEARNED CHARTERED ACCOUNTAN T FOR THE ASSESSEE BEFORE THE TRIBUNAL. 08. FIRST WE WILL CONSIDER THE ISSUE OF DISALLOWANC E OF ` .2 25 00 000/- MADE BY THE ASSESSING AUTHORITY AGAI NST PROPERTY DEVELOPMENT EXPENSES CLAIMED BY THE ASSESSEE. THE LAND SITUATED AT DEVARABISANAHALLI AT SUB-URBAN BANGALORE WAS PURCH ASED BY THE ASSESSEE ON 19.07.2004. THIS PROPERTY WAS PURCHASE D FOR A CONSIDERATION OF ` .84 19 166/-. ACCORDING TO THE ASSESSEE HE HAD SPE NT HUGE AMOUNT TO DEVELOP THE PROPERTY KEEPING IN MIND THE INTENTION OF THE ASSESSEE TO START A FILM STUDIO IN THE PROPERTY . THE OBJECT OF ESTABLISHING A FILM STUDIO WAS NOT SUCCESSFUL AND A S SUCH THE DEVELOPED PROPERTY WAS SOLD BY THE ASSESSEE TO M/S. ADARSH DEVELOPERS ON 19.12.2005. THE PROPERTY WAS SOLD FO R A SUM OF ` .11 47 78 000/-. WHILE COMPUTING THE NET GAINS ARI SING OUT OF THE SAID TRANSACTION THE ASSESSEE CLAIMED DEVELOPMENT E XPENSES AMOUNTING TO ` .3 25 01 803/-; THEREAFTER DECLARING A NET PROFIT OF ` .8 22 76 197/- FROM LAND DEVELOPMENT ACTIVITIES. ITA.1155/BANG/2010 P AGE - 5 09. MEANWHILE A SEARCH WAS CARRIED OUT BY THE DEPA RTMENT IN THE PREMISES OF M/S. ADARSH DEVELOPERS WHO HAS PURCHASE D THE PROPERTY FROM THE ASSESSEE. THE INVESTIGATIONS AND ENQUIRIE S WHICH FOLLOWED AS A RESULT OF THE SEARCH FINALLY REACHED TO THE DOOR S OF THE ASSESSEE ALSO AS THE DEPARTMENT WAS EXAMINING THE TRANSACTION MAD E BETWEEN M/S. ADARSH DEVELOPERS AND THE ASSESSEE REGARDING THE SU BJECT LAND PROPERTY. IT IS THE CASE OF THE ASSESSING AUTHORIT Y THAT THE ENQUIRIES MADE WITH REFERENCE TO THE ASSESSEE'S TRANSACTION H AVE BROUGHT TO LIGHT CERTAIN MATTERS GOING AGAINST THE GENUINENESS OF TH E CLAIM OF THE DEVELOPMENT EXPENDITURE MADE BY THE ASSESSEE. THE ASSESSING AUTHORITY HAS MADE UP HIS MIND AGAINST THE GENUINEN ESS OF THE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASSESSEE ON THE BASIS OF THE STATEMENTS GIVEN BY THE FOLLOWING PERSONS WHO HAVE BEEN EXAMINED BY THE AUTHORITIES : (I) SHRI. RENWICK MASCARENHAS ASSESSEE HIMSELF : ACCORDING TO THE ASSESSING AUTHORITY AS PER ASSESS EE'S OWN VERSION HE HAD NOT CARRIED OUT ANY DEVELOPMENTAL A CTIVITIES EXCEPT THE ACTIVITIES OF CONSTRUCTING OF FENCE AND GATE TO THE PROPERTY ; (II) SHRI. RUDOLPH MASCARENHAS ASSESSEE'S FATHER : ACCORDING TO THE ASSESSING OFFICER THE DETAILS FUR NISHED BY ASSESSEE'S FATHER IN HIS STATEMENT HAVE MADE OUT A CASE THAT THE DEVELOPMENT ACTIVITIES IN THE PROPERTY WERE COM PLETED BEFORE MARCH 2005 AND NEGOTIATIONS FOR SALE OF THE PROPERTY TO M/S. ADARSH DEVELOPERS HAD ALSO STARTED IN THE M ONTH OF ITA.1155/BANG/2010 P AGE - 6 MARCH 2005 FOLLOWED BY RECEIPT OF ADVANCE AMOUNT. ACCORDING TO THE ASSESSING AUTHORITY THE DEVELOPME NT ACTIVITIES WERE CARRIED OUT DURING THE PERIOD 01.04 .2005 TO 19.12.2005 WHICH WENT AGAINST THE STATEMENT GIVEN B Y THE ASSESSEE ; (III) AS THERE IS A CONTRADICTION BETWEEN THE STATE MENTS GIVEN BY THE ASSESSEE AND HIS FATHER WHO IS ALSO A GPA HOLDER OF THE ASSESSEE THE ASSESSING AUTHORITY EXA MINED ONE SHRI. Y. BAYAPPA REDDY OF M/S. THANDUR PROPERTIES WHO HAD CONDUCTED A SURVEY OF THE LAND. AS PER THE STATEME NTS FURNISHED BY SHRI. BAYAPPA REDDY THE ASSESSING OFF ICER CAME TO THE CONCLUSION THAT THERE WERE NO DEVELOPME NT ACTIVITIES CARRIED OUT IN THE PROPERTY. (IV) THE ASSESSING OFFICER RECORDED A STATEMENT FRO M SHRI. M. R. DEEPAK AN INTERIOR DESIGNER WHO HAD UNDERTA KEN THE INTERIOR DECORATION WORK OF THE PROJECT PROPOSED BY THE ASSESSEE. HE SUBMITTED BEFORE THE ASSESSING AUTHOR ITY THAT THE WORK WAS ACTUALLY CARRIED OUT IN KOLARKHAN ESTA TE AND NOT ON THE SAID PROPERTY SITUATED AT DEVARABISANAHA LLI. HE HAD STATED THAT THE WORK WAS CARRIED OUT FOR THE AS SESSEE BUT THE WORK WAS CARRIED OUT IN HIS ESTATE AND NOT IN T HE SAID PROPERTY. 10. IN THE LIGHT OF THE STATEMENTS FURNISHED BY THE ABOVE FOUR PERSONS AND A COMPARATIVE STUDY OF THOSE STATEMENTS THE ASSESSING OFFICER CAME TO A FINAL CONCLUSION THAT THE DEVELOP MENT EXPENDITURE ITA.1155/BANG/2010 P AGE - 7 WAS EXAGGERATED IN HIS ACCOUNTS. ACCORDINGLY AS A LREADY STATED ABOVE THE ASSESSING OFFICER DISALLOWED AN AMOUNT O F ` .2 25 00 000/- IN THE CLAIM MADE BY THE ASSESSEE. 11. ON GOING THROUGH THE PARTICULARS OF ALL THE INV ESTIGATIONS SUFFICIENTLY ELABORATED BY THE ASSESSING OFFICER IN HIS ORDER AND SUPPORTED BY THE STATEMENTS OF THE CONCERNED PERSON S ATTACHED TO THE ASSESSMENT ORDER AS ANNEXURES WE FIND THAT WHAT TH E ASSESSING OFFICER HAD MADE OUT WAS A SMOKE-SCREEN OF SUSPICIO N. IT IS TRUE THAT THE ASSESSEE AND HIS FATHER SO ALSO THE SURVEYOR SHRI. BAYAPPA REDDY AND SHRI. DEEPAK THE INTERIOR DESIGNER WERE EXAMIN ED AND THEY WERE ALSO CROSS-EXAMINED BY THE ASSESSEE'S REPRESENTATIV E. BUT WHAT IS RELEVANT IN THIS CASE IS THE EVIDENTIARY VALUE OF T HE STATEMENTS FURNISHED BY THE PERSONS. THE ASSESSEE HIMSELF HAS STATED THAT HE HAD SPENT MONEY IN CONSTRUCTING COMPOUND WALL AND GATE TO THE PROPERTY. THE PROPERTY IS NOT A SMALL ONE BUT A LARGE AND EX TENSIVE AREA OF LAND. CONSTRUCTION OF COMPOUND WALL AND GATE BY THEMSELVE S WOULD COST A HIGH AMOUNT. IT IS TO BE FURTHER SEEN THAT ASSESSE E'S FATHER WAS ASSESSEE'S GPA HOLDER AND HE WAS IN FACT SUPERVISIN G THE ACTIVITIES CARRIED OUT IN THE SAID PROPERTY OWNED BY THE ASSES SEE. THEREFORE INSTEAD OF LOOKING FOR DISCREPANCIES IN THE STATEME NT OF THE ASSESSEE AND HIS FATHER THE ASSESSING OFFICER SHOULD HAVE A LSO EXAMINED THE ITA.1155/BANG/2010 P AGE - 8 STATEMENTS TOGETHER AND TO SEE WHETHER DEVELOPMENT ACTIVITIES WERE CARRIED OUT IN THE PROPERTY OR NOT. THE REAL TRUTH OF THE MATTER CANNOT BE FOUND OUT BY FAULT FINDING EXERCISES ALONE. TH E QUESTION IS NOT WHETHER THE ASSESSEE AND HIS FATHER HAVE GIVEN ANAL OGOUS STATEMENTS BEFORE THE ASSESSING OFFICER OR NOT. THE QUESTION IS TO SEE WHETHER THESE STATEMENTS WHEN PUT TOGETHER DEVELOPMENT ACT IVITIES WERE CARRIED OUT IN THE SUBJECT PROPERTY OF THE ASSESSEE OR NOT. ON READING THE STATEMENTS TOGETHER IT IS BROUGHT OUT BEYOND A NY DOUBT THAT THE ASSESSEE HAD UNDERTAKEN SUBSTANTIAL DEVELOPMENT ACT IVITIES IN THE SAID PROPERTY. THERE ARE A NUMBER OF LAPSES AND CONTRAD ICTIONS IN THE STATEMENTS GIVEN BY THESE TWO PERSONS. BUT AS FAR AS THE MATTER IS CONCERNED THEY ARE ALL JUST PERIPHERAL. 12. NOW COMING TO THE STATEMENT GIVEN BY SHRI. Y. B AYAPPA REDDY IT IS TO BE SEEN THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE POINT OF TIME WHEN THE SURVEY WAS CARRIED OUT AND THE POI NT OF TIME AT WHICH THE DEVELOPMENT ACTIVITIES WERE ALMOST COMPLETED. IT IS ALSO TO BE SEEN THAT EVEN THE ASSESSEE HAD NO CASE TO CLAIM TH AT HE HAD CONSTRUCTED HUGE STRUCTURES IN THE PROPERTY. DEVEL OPMENT OF PROPERTY DOES NOT MEAN CONSTRUCTING HUGE STRUCTURES ALONE. DEVELOPMENT OF PROPERTY INCLUDES CONSTRUCTION OF COMPOUND WALLS L AYING ROADS OUTSIDE AND INSIDE THE PROPERTY CONTOURING THE PRO PERTY PROTECTING ITA.1155/BANG/2010 P AGE - 9 AND LAYING WATER WAYS IN THE PROPERTY AND SO MANY O THER ACTIVITIES NECESSARY TO MAKE IT READY FOR FURTHER TAKE OFF. T HE SURVEYOR HAS NOT DRAWN ANY LIGHT ON THIS BASIC CHARACTER OF DEVELOPM ENT ACTIVITIES CARRIED ON BY THE ASSESSEE IN HIS PROPERTY. 13. IN THE STATEMENT GIVEN BY SHRI. M. R. DEEPAK I NTERIOR DESIGNER WE FIND THAT HE HIMSELF HAS ADMITTED IN HIS DEPOSIT ION THAT HE HAD MENTIONED THE PLACE OF SERVICE AS DEVARABISANAHALLI IN THE BILL ISSUED TO THE ASSESSEE AND IT WAS A MISTAKE AND IN FACT TH E WORK WAS DONE IN ASSESSEE'S ESTATE AND NOT IN THE SUBJECT PROPERTY. SINCE THAT IS A VERY CRUCIAL MATTER THE ASSESSING OFFICER SHOULD HAVE E XAMINED WHY SHRI. DEEPAK HAD COMMITTED SUCH A GRAVE MISTAKE IN THE BI LLS ISSUED. 14. EVEN THOUGH THE ASSESSING OFFICER HAD COLLECTED THE STATEMENTS FROM DIFFERENT PERSONS WHO HAD ONLY PLAYED SOME NOM INAL ROLES IN THE ENTIRE EPISODE HE HAS NOT ENQUIRED THE TRUTH OF TH E ISSUE FROM THE BUYERS OF THE PROPERTY M/S. ADARSH DEVELOPERS. TH E PROPERTY WAS IN FACT PURCHASED BY M/S. ADARSH DEVELOPERS AND THEY W OULD BE HAVING A CLEAR IDEA ABOUT THE STATE OF THE PROPERTY AT THE T IME WHEN IT WAS PURCHASED BY THEM. THEY WERE NOT ROPED IN THE INVE STIGATIONS STATED TO BE CARRIED OUT BY THE ASSESSING OFFICER. ITA.1155/BANG/2010 P AGE - 10 15. WHEN WE SEE THE ISSUE AS A WHOLE WE FIND THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT IN SUPPORT OF T HE PURCHASE OF THE PROPERTY AND ITS SUBSEQUENT DEVELOPMENT. THE ASSES SING OFFICER HAS NOT FOUND OUT A SINGLE CASE WHERE THE EXPENSES AND THE PAYMENTS WERE RECORDED IN THE ACCOUNTS WERE BOGUS. IT SHOWS THAT THE QUANTUM OF EXPENSES INCURRED AND CLAIMED BY THE ASSESSEE ARE T RUE AND GENUINE. THE ONLY CASE OF THE ASSESSING OFFICER IS THAT MANY OF THE DEVELOPMENT ACTIVITIES STATED TO BE DONE BY THE ASS ESSEE WERE NOT IN FACT DONE IN DEVARABISANAHALLI BUT ELSEWHERE IN AS SESSEE'S OTHER PROPERTY. BUT THESE ALLEGATIONS HAVE NOT BEEN BROU GHT TO A LOGICAL CONCLUSION BY THE ASSESSING AUTHORITY BY CONDUCTING ANY INVESTIGATIONS OR VERIFICATIONS IN RESPECT OF THOSE PROPERTIES WHE RE THE ASSESSING OFFICER HAS ALLEGED THAT THE ASSESSEE HAD CARRIED O N DEVELOPMENT ACTIVITIES. 16. IT IS FOR THE ABOVE REASONS THAT AT THE BEGINNI NG OF THE DISCUSSION WE HAVE STATED THAT THE ASSESSING OFFICER HAS ESTAB LISHED ONLY A SMOKE-SCREEN AND NOTHING MORE. THIS POSITION IS AG AIN CLEAR IN THE ORDER OF THE ASSESSING AUTHORITY. IF WE LOOK INTO THE FACT THAT THE ASSESSING OFFICER WAS CONCLUDING AN EVERY ISSUE ONL Y ON THE GROUND OF 'IMPROBABILITY'. THE ASSESSING OFFICER IS FINDI NG EVERYTHING AGAINST THE ASSESSEE BY MAKING A GENERAL STATEMENT THAT IT IS ITA.1155/BANG/2010 P AGE - 11 IMPROBABLE IT IS IMPROBABLE ETC. THIS OVER DEPE NDENCE ON THE IMPROBABILITY OF EVENTS CLEARLY BRINGS OUT THE FACT THAT THE FINDINGS ARRIVED AT BY THE ASSESSING OFFICER ARE MAINLY ON T HE BASIS OF HIS OWN PRESUMPTIONS. 17. THE MOST INTERESTING ASPECT OF THIS ISSUE IS TH AT THE ASSESSING OFFICER NEVER APPLIED HIS MIND TO THINK FOR A MOMEN T THAT HOW THE ASSESSEE COULD SELL A PROPERTY FOR AN ASTOUNDING SU M OF ` .11 47 78 000/- AGAINST THE PURCHASE COST OF ` .84 19 166/- WITHIN A PERIOD OF JUST SEVENTEEN MONTHS. THE PROPERTY WAS SOLD FOR ` .11 47 78 000/- GENERATING A GROSS MARGIN OF ` .10 63 58 834/- WHICH WORKS OUT TO A WHOPPING INCREASE IN VALUE BY 1200%. WHEN A PROPERTY HAS BROUGHT SUCH A HUGE MARGIN IT IS PRIM A FACIE A STRONG EVIDENCE TO SHOW THAT THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL DEVELOPMENT WORK TO MAKE THE PROPERTY MORE ATTRACTI VE IN THE MARKET. THEREFORE UNLESS THE CLAIM OF THE ASSESSEE IS REBU TTED WITH DIRECT EVIDENCES IT IS NOT POSSIBLE TO HOLD AGAINST THE A SSESSEE THAT HE HAS NOT SPENT MONEY IN DEVELOPING THE PROPERTY. 18 THEREFORE WE DO NOT APPROVE THE WHOLESOME DISA LLOWANCE OF ` .2 25 00 000/- MADE BY THE ASSESSING AUTHORITY FROM THE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASSESSEE. THAT AMOUNT H AS TO BE DELETED. ITA.1155/BANG/2010 P AGE - 12 BUT AT THE SAME TIME THERE ARE SOME GREY AREAS WHE RE THE ASSESSEE COULD NOT THROW LIGHT IN SPITE OF OPPORTUNITIES GIV EN TO HIM. ONE SUCH GREY AREA IS THE STATEMENT OF SHRI. DEEPAK INTERIO R DESIGNER REGARDING THE WORK STATED TO BE CARRIED OUT BY HIM . THE ASSESSEE ALSO HAD NOT GIVEN A FULL PICTURE OF THE ACTIVITIES CARR IED OUT BY HIM IN THE NEW PROPERTY. THEREFORE IN THE FACTS AND CIRCUMST ANCES OF THE CASE WE ARE ALSO NOT ABLE TO GIVE A CLEAN-CHIT TO THE AS SESSEE AS FAR AS THIS ISSUE IS CONCERNED. ACCORDINGLY IT IS OUR CONSIDE RED OPINION THAT A REASONABLE AMOUNT OF DISALLOWANCE IS CALLED FOR WIT H REFERENCE TO THE DEVELOPMENT EXPENSES CLAIMED BY THE ASSESSEE AS A D EDUCTION. 19. TAKING INTO ALL ASPECTS OF THE CASE AND THE PRO BATIVE VALUE OF THE STATEMENTS BY VARIOUS PERSONS WE SUSTAIN A DISALL OWANCE OF ` .15 LAKHS AGAINST THE DEVELOPMENT EXPENDITURE CLAIMED B Y THE ASSESSEE. IN SHORT THE ADDITION OF ` .2 25 00 000/- IS REDUCED TO A SUM OF ` .15 LAKHS. 20. NEXT WE WILL CONSIDER THE DISALLOWANCE OF ` .15 78 950/- MADE BY THE ASSESSING OFFICER TOWARDS AGRICULTURAL INCOM E. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD PRODUCED B ILLS AND VOUCHERS ISSUED BY LOCAL PARTIES FROM DIFFERENT AREAS LIKE BALEHONNUR KARKALA ITA.1155/BANG/2010 P AGE - 13 ETC. ONE SHRI. SHAUKATH PROPERTIER : RA AGENCIES MAI ROAD BALEHONNUR HAD ALSO ISSUED SUCH BILLS AND VOUCHERS TO THE ASSESSEE TO SUPPORT THE SALE OF ARECANUT BY THE ASSESSEE. SHRI . SHAUKATH HAS STATED THAT HE HAS GIVEN BILLS FOR PURCHASE OF ARECANUT FR OM THE ASSESSEE FOR ` 15 78 950/- AGAINST PAYMENT OF CASH. THE ASSESSING OFFICER HAD EXAMINED SHRI. SHAUKATH. HE STATED THAT HE DID NOT PURCHASE ANY AGRICULTURAL PRODUCE FROM THE ASSESSEE AND DID NOT PAY ANY SUCH CASH TO THE ASSESSEE. BUT HE CONFIRMED BEFORE THE ASSES SING OFFICER THAT HE HAD MADE ARRANGEMENTS TO SELL THAT MUCH WORTH ARECA NUT BY THE ASSESSEE TO A BUYER WHO CAME FROM KANPUR. HE HAD A LSO STATED THAT HIS LORRIES WERE USED BY THE ASSESSEE FOR TRANSPORT ATION OF AGRICULTURAL PRODUCE FROM THE ESTATES OF THE ASSESSEE AND HE HAD MADE ARRANGEMENTS FOR SELLING THE AGRICULTURAL PRODUCE T O BOMBAY PARTIES. IN THE CASE OF ARECANUT SALE POINTED OUT BY THE ASS ESSING AUTHORITY SHRI. SHAUKATH HAS CLEARLY STATED THAT THE SALE OF ARECANUT WAS MADE TO KANPUR PARTY. IT IS ON THE BASIS OF THE ABOVE STAT EMENT OF SHRI. SHAUKATH THAT THE ASSESSING OFFICER HAD TREATED A S UM OF ` .15 78 950/- AS NON-AGRICULTURAL INCOME. 21. WE CONSIDERED THIS ISSUE. THE FIRST AND FOREMO ST QUESTION TO BE CONSIDERED IS WHETHER THE ASSESSEE HAD OBTAINED SUF FICIENT QUANTITY OF ARECANUT YIELD AND WHETHER HE HAD IN FACT SOLD AREC ANUT FOR ITA.1155/BANG/2010 P AGE - 14 ` .15 78 950/-. THE ANSWER IS YES. EVEN THE HOSTILE WITNESS SHRI. SHAUKATH HAS STATED BEFORE THE ASSESSING OFFICER TH AT THE ASSESSEE HAD SOLD ARECANUT TO A KANPUR PARTY AND HE HAD MADE ALL ARRANGEMENTS FOR THE TRANSPORTATION. WHAT SHRI. SHAUKATH HAD DENIED WAS NOT THE FACTUM OF SALE OF ARECANUT BUT THE CASE THAT HE HAD PURCHASED THE ARECANUT FROM THE ASSESSEE. THE ACTUAL SALE OF ARE CANUT IS ONE ISSUE AND TO WHOM IT WAS SOLD IS ANOTHER ISSUE. AS FAR A S THE FIRST ISSUE IS CONCERNED THERE IS NO INDICTMENT IN THE STATEMENT OF SHRI. SHAUKATH AGAINST THE ASSESSEE. HE HAS ENDORSED THE ARGUMENT OF THE ASSESSMENT THAT HE HAD SOLD ARECANUT FOR ` .15 78 950/-. THE DISPUTE WAS WHETHER THE SALE WAS MADE TO SHRI. SHAUKATH AS PER THE BILL S AND VOUCHERS PRODUCED BY THE ASSESSEE OR TO ANYBODY ELSE. AT TH IS POINT ANOTHER CRUCIAL ASPECT IS THAT SHRI. SHAUKATH DECLINED TO D ISCLOSE THE IDENTITY OF KANPUR PARTY WHO HAD ACCORDING TO HIM PURCHASED A RECANUT FROM THE ASSESSEE. SHRI. SHAUKATH HAD WITHHELD A VERY CRUCIA L INFORMATION FROM THE ASSESSING AUTHORITY. STILL THE ASSESSING OFFIC ER OPTED TO PREFER THE STATEMENT OF SHRI. SHAUKATH TO THE ACCOUNTS OF THE ASSESSEE. WHAT IS THE CREDIBILITY OF THAT WITNESS ? HE HAS ACCOMPLIS HED HIMSELF AS A TRADER IN AGRICULTURAL PRODUCE. BY STATING THAT HE HAD ARRANGED PARTIES FROM BOMBAY TO PURCHASE AGRICULTURAL PRODUCE FROM T HE ASSESSEE AND ALSO ARRANGED THE SALE OF ARECANUT TO A KANPUR PART Y IT IS VERY CLEAR THAT SHRI. SHAUKATH WAS ACTING ATLEAST AS A COMMISS ION AGENT IN THE ITA.1155/BANG/2010 P AGE - 15 SALE AND PURCHASE OF AGRICULTURAL PRODUCE. WHETHER SHRI. SHAUKATH HAS MAINTAINED BOOKS OF ACCOUNT ? WHAT IS THE VOLU ME OF THE BUSINESS CARRIED ON BY SHRI. SHAUKATH ? IS HE AN ASSESSEE T O INCOME-TAX ? NO SUCH VALID QUESTION HAS BEEN RAISED AND EXAMINED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER BLINDLY ACTED UPON THE STATEMENT OF SHRI. SHAUKATH. SHRI. SHAUKATH NOT ONLY WITHHELD A N IMPORTANT INFORMATION IN HIS STATEMENT REGARDING THE IDENTITY OF THE KANPUR PURCHASER BUT ALSO NOT COME FORWARD WITH THE DETAI LS OF HIS BUSINESS AND PARTICULARS OF INCOME-TAX STATUS ETC. THIS IS VERY CRUCIAL WHEN WE FIND THAT THE SALE OF ARECANUT HAS ALREADY BEEN EST ABLISHED. THE ASSESSEE HAS ALSO MAINTAINED BOOKS OF ACCOUNT. THE RE IS NO DISPUTE ON THE EXTENT OF LAND. THERE IS NO DISPUTE ON THE QUA NTUM OF YIELD. ALL THESE BASIC FACTORS STOOD PROVED; BUT THE ENTIRE P ICTURE HAS BEEN OVER- TURNED BY THE ASSESSING OFFICER ONLY ON THE BASIS O F THE HALF-BAKED STATEMENT OF SHRI. SHAUKATH WHOSE CREDIBILITY IS L EFT OPEN TO ANYBODY'S IMAGINATION. THE ASSESSING OFFICER HAS D ISBELIEVED THE ACCOUNTS AND STATEMENTS OF THE ASSESSEE WHO IS A RE GULAR INCOME-TAX ASSESSEE HAVING SUBSTANTIAL SOURCE OF INCOME WHO H AS OFFERED A TAXABLE INCOME OF ` .7 60 30 370/- FOR THE IMPUGNED ASSESSMENT YEAR. BUT THE ASSESSING OFFICER HAS BELIEVED THE IRRESPON SIBLE STATEMENT OF AN UNCREDITWORTHY WITNESS. THE ASSESSING OFFICER C OULD BELIEVE ANYBODY TO DISCREDIT THE ACCOUNTS OF AN ASSESSEE WH O HAS RETURNED ITA.1155/BANG/2010 P AGE - 16 SUBSTANTIAL VOLUME OF TAXABLE INCOME. THIS APPROAC H OF THE ASSESSING OFFICER IS NOT FAIR. 22. IT IS NOT NECESSARY TO EXPLAIN FURTHER. THE AS SESSING OFFICER HAS GROSSLY ERRED IN RELYING ON THE DEPOSITION OF SHRI. SHAUKATH WHOSE CREDIBILITY IS NOT ACCEPTABLE. THEREFORE WE FIND THAT THE ASSESSING OFFICER HAS ERRED IN DISALLOWING A PORTION OF THE A GRICULTURAL INCOME OF THE ASSESSEE AND THEREBY MAKING AN ADDITION OF ` .15 70 000/-. THE SAID ADDITION IS DELETED. 23. THE THIRD ISSUE IS REGARDING THE DISALLOWANCE O F FILM PRODUCTION EXPENDITURE. THIS GROUND IS DISMISSED AS NOT PRESS ED. 24. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY THE 17TH DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (SMT. P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT ITA.1155/BANG/2010 P AGE - 17