Kamaksi Finance (P) Ltd, v. DCIT circle I,

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI C.L.SETHI JM AND SHRI B.C.MEENA AM ITA NO.2092/DEL/2008 ASSESSMENT YEAR : 1989-90 M/S KAMAKSHI FINANCE (P) LTD. G-43 PREET VIHAR NEW DELHI. PAN/GIR NO.K-2. VS. DY.COMMISSIONER OF INCOME TAX CIRCLE-1 GHAZIABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K.BINDAL ADVOCATE. RESPONDENT BY : SHRI RAVI RAMCHANDRAN SR.DR. ORDER PER C.L.SETHI JM : THE ASSESSEE IS IN APPEAL AGAINST THE CIT(A)S ORDER IN CONFIRMING THE PENALTY OF `1 29 600/- U/S 271(1)(C) PERTAINING TO THE AY 198 9-90. ITA-2092/DEL/2008 2 2. THE BACKGROUND UNDER WHICH THE AO HAS TREATED THE AGRICULTURAL INCOME TO THE EXTENT OF `2 LAKHS TO BE IN THE NATURE OF INCOME FRO M OTHER SOURCES OUT OF THE TOTAL AGRICULTURAL INCOME SHOWN BY THE ASSES SEE AT `4 78 665/- HAS BEEN DISCUSSED BY THE LEARNED CIT(A) IN PARA 2 OF HIS ORDER DATED 25.1.2000 PASSED AGAINST THE FRESH ASSESSMENT ORDER MADE B Y THE AO U/S 143(3)/254 OF THE IT ACT WHICH READS AS UNDER:- 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN AGRICULTURAL OPERATIONS ON THE AGRICULTURE LAND TAKEN ON RENT FROM THE FARMERS. IT FILED RETURN SHOWING INCOME OF RS.4 87 070/- ON 27.3.91. THE INCOME AS SHOWN AS TREATED AS INCOME FROM OTHER SOURCES IN THE ORIGINAL ASSESSMENT FRAMED ON 27.3.91. THIS ASSESSMENT WAS CONFIRMED BY THE LD.CIT(A) MUZAFFARNAGAR VIDE ORDER DATED 23.10.91. TH E ASSESSEE WENT IN FURTHER APPEAL BEFORE THE HONBLE TRIBUNAL DELHI WHO VIDE ITS ORDER DATED 6.12.96 SET-ASIDE THE ORDER OF THE ASSESSMENT BACK TO THE AO WITH CERTAIN DIRECTIONS. THE ASSESSEE COMPANY HAD TAKEN AGRICULTURAL LAND ON RENT FROM 12 FARMERS AND AT THE TIME OF ORIGINAL ASSESSMENT STATEMENT OF TWO FARMERS WERE RECORDED WHO DENIED TO HAVE GIVEN LAND ON RENT TO THE ASSESSEE COMPANY AND ON THAT BASIS THE ENTIRE INCOME WAS TREATED AS INCOME FROM OTHER SOURCES AND FURTHER CONFIRMED IN FIRST APPEAL. HOWEVER THE HONBLE TRIBUNAL OBSERVED THAT ONLY TWO OF THE 12 FARMERS WERE EXAMINED BY THE AO AND ON THAT BASIS DID NOT ACCEPT THE AGRICULTURE INCOME AS A WHOLE WAS NOT PROPER ESPECIALLY WHEN ASSESSEE WAS NOT GIVEN THE RIGHT FOR RE- EXAMINATION. THE HONBLE TRIBUNAL THUS DIRECTED THE AO TO RE- EXAMINE THE WHOLE ISSUE AFTER GIVING PROPER OPPORTUNITY OF BEING ITA-2092/DEL/2008 3 HEARD TO THE ASSESSEE. ACCORDINGLY THE CASE WAS REFIXED BY THE PRESENT AO AND ASKED THE ASSESSEE TO PRODUCE THE FARMERS AS WELL AS THE THEN PRADHAN OF THE VILLAGE WHO HAS WITNESSED THE LEASE DEED AGREEMENTS. DURING THESE ASSESSMENT PROCEEDINGS S/SRI KALE SINGH HIRA SINGH RAM RIKH AND RAJA RAM FARMERS FROM WHOM THE LANDS WERE TAKEN ON LEASE WERE PRODUCED ALONGWITH THE THEN VILLAGE PRADHAN SRI MUNSI. THE AO RECORDED THEIR STATEMENTS. THE AO ALSO DEPUTED HIS INSPECTOR TO MAKE FURTHER ENQUIRIES FROM THE VILLAGERS REGARDING AGRICULTURAL ACTIVITIES. ON THE BASIS OF THIS MATERIAL ON RECORD THE AO DID NOT DISPUTE THE CLAIM OF THE ASSESSEE THAT IT HAS TAKEN ON LEASE 94 PAKKA BIGHA OF AGRICULTURE LAND FROM THE FARMERS AND ON THIS LAND FOLLOWING CROPS WERE GROWN:- CROP WEIGHT IN KGS. BARLEY 15 699 WHEAT 1 65 980 JAI 25 886 PEES 8 061 MUSTARD 1 546 GUWAR 14 291 THE ASSESSEE ALSO STATED THAT THESE CROPS WERE SOLD THROUGH KRISHI UTPADAK MANDI SAMITI DADRI. THE ASSESSEE DECLARED THE TOTAL SALE PROCEEDS AT RS.5 81 341/- AND AFTER DEBITING EXPENSES AT RS.1 02 676/- WORKED OUT NET AGRICULTURE INCOME AT RS.4 78 665/-. THE AO CONSIDERED THESE FACTS AND OBSERVED THAT IN THE KHARIF SEASON ONLY JWAR WAS RAISED WHILE IN THE RABI SEASON OTHER CROPS WERE RAISED. THE AO REFERRED TO THE BOOK MODERN TECHNIQUE OF RAISING FIELD CROPS WRITTEN BY DR.CHIDDA SINGH ITA-2092/DEL/2008 4 PROFESSOR G.B.PANT UNIVERSITY PANT NAGAR AND FOUND THAT PEAS AND MUSTARD OF ABOUT 25-30 QUINTALS WERE GROWN PER HECTARE AND SIMILARLY WHEAT BARLEY AND JAI CAN BE RAISED 50 QTLS. PER HECTARE. THE AO THUS COMPUTED THE AGRICULTURE LAND UNDER CULTIVATION FOR MUSTARD AND PEAS @ 30 QTL. PER HECTARE AT 3.2 HECTARE AND THE BALANCE AGRICULTURE LAND 20.58 HECTARE WAS THUS TAKEN FOR WHEAT BARLEY AND JAI. TAKING YIELD AT 50 QTL. PER HECTARE THE AO HELD THE WHEAT BARLEY AND JAI TO THE EXTENT OF 1029 QTLS. CAN BE RAISED AS AGAINST SHOWN AT 2075 QTLS. THUS T HE ASSESSEE WAS HELD TO HAVE SHOWN EXCESS PRODUCTION OF SUCH CROP. THIS WAS VALUED AT RS.199690/- ROUNDED OFF TO RS.2 00 000/-. THIS WAS TAKEN TO BE AS INCOME FROM OTHER SOURCES. THE AO FURTHER OBSERVED THAT ALMOST 50% EXPENSES HAVE TO BE INCURRED OUT OF THE AGRICULTURE INCOME AND THUS DEDUCTING 50% EXPENSES AGRICULTURE INCOME COMES TO RS.2 90 670/- AS AGAINST SHOWN AT RS.4 78 665/- AND THUS EXCESS INCOME OF RS.1 87 994/- WAS SHOWN. THE AO OBSERVED THAT TH IS EXCESS INCOME IS NEAR ABOUT RS.2 LACS AS COMPUTED HERE-IN- ABOVE. THE AO THUS HELD THE ASSESSEE HAS INTRODUCED ITS UNACCOUNTED MONEY IN THE SHAPE OF AGRICULTURE INCOME WHEREBY THE AGRICULTURE INCOME HAS BEEN SHOWN IN EXCESS OF RS.2 LACS. THE AO THUS HELD THAT RS.2 00 000/- SHOULD BE TREATED AS INCOM E FROM OTHER SOURCES OUT OF THE TOTAL AGRICULTURE INCOME OF RS.4 78 665/-. THE AO THUS COMPUTED THE INCOME AT RS.2 05 000/- AFTER INCLUDING INCOME SHOWN AT RS.5000/-. HE ALSO TOOK AGRICULTURE INCOME AT RS.2 78 665/-. THE ASSESSEE BEING AGGRIEVED HAS FILED THIS APPEAL. 3. ON AN APPEAL AGAINST THE ASSESSMENT ORDER THE LEARNED CIT(A) HELD THAT THE AGRICULTURAL INCOME SHOULD BE TAKEN AT `4 78 665/- AND HE THEREFORE ITA-2092/DEL/2008 5 DELETED THE ADDITION OF `2 LAKHS TREATED BY THE AO AS INCOME FROM OTH ER SOURCES VIDE HIS ORDER DATED 25.1.2000. 4. AGAINST THE ORDER OF CIT(A) IN THE QUANTUM MATTER THE DEPART MENT PREFERRED AN APPEAL BEFORE THE TRIBUNAL WHERE THE TRIBUNAL RESTORED THE ORDER OF THE AO CONFIRMING THE ADDITION OF `2 LAKHS BY TREATING THE AMOUN T TO BE IN THE NATURE OF INCOME FROM OTHER SOURCES. 5. AFTER THE AMOUNT OF `2 LAKHS WAS UPHELD BY THE TRIBUNAL THE AO GRANTED OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS TO WHY PENALT Y U/S 271(1)(C) SHOULD NOT BE LEVIED IN RESPECT OF THE ADDITION OF `2 LAKHS ULTIMATELY CONFIRMED BY THE TRIBUNAL. AFTER HEARING THE ASSESSEE THE AO LEVIED T HE PENALTY TO THE EXTENT OF 100% OF THE TAX SOUGHT TO BE EVADED ON THE AMOUNT OF `2 LAKHS. ON FURTHER APPEAL THE CIT(A) HAS UPHELD THE ORDER OF THE AO IN LEVYING THE PENALTY. THE ORDER OF CIT(A) DATED 16.4.2008 CONFIR MING THE PENALTY RUNS AS UNDER:- THE SUBMISSION OF THE LEARNED AR HAS BEEN CONSIDERED ALONG WITH THE FACTS BROUGHT OUT BY THE AO IN THE PENALTY ORDER. AS PER THE FACTS ON RECORD THE APPELLANT FURNISHED NO EVIDENCE TO PROVE THE INCOME SHOWN FROM AGRICULTURE WHEREAS THE AO HAS GIVEN THE REASONING ON THE BASIS OF WHICH HE HAS TREATED THE SUM OF RS.2 00 000/- OUT OF THE TOTAL AGRICULTURAL INCOME SH OWN ITA-2092/DEL/2008 6 AS INCOME FROM OTHER SOURCES. THE AO HAS CLEARLY ESTABLISHED THAT THE APPELLANT HAS CONCEALED ITS TAXABLE INCOME TO THE EXTENT OF RS.2 00 000/- BY SHOWING THE SAME AS INCOME FROM AGRICULTURE. AFTER CONSIDERING THE FACTS BROUGHT OUT BY THE A O IN THE PENALTY ORDER IT IS HELD THAT THE AO WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND ALSO CONCEALED ITS TAXABLE INCOME OF RS.2 00 000/- BY SHOWING THE SAME AS INCOME FROM AGRICULTURE. THE PENALTY LEVIED BY THE AO AT RS.1 29 600/- U/S 271(1)(C) IS THEREFORE HEREBY CONFIRM ED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE IT WAS ULTIMATELY FOUND THAT THE ASSESSEE HAS TAKEN ON LEASE 94 PAKKA BIGHA OF LAND FROM THE FARMERS AND ON THESE LANDS VARIOU S CROPS WERE GROWN. THE ASSESSEE SOLD THESE CROPS GROWN ON THE AGRICULT URAL LAND AND WERE ULTIMATELY SOLD THROUGH KRISHI UTPADAK MANDI SAMITI DADRI. THE ASSESSEE HAS SHOWN SALE PROCEEDS AT `5 81 341/- AND CLAIMED EXPENSES OF `1 02 676/-. THE ASSESSEE HAD THUS SHOWN AGRICULTURAL INCOME AT `4 78 665/-. AO ESTIMATED THE AGRICULTURAL INCOME BY MAKING REFERENCE TO THE BOOK (MODERN TECHNIQUES OF RAISING FIELD CROPS) WRITTEN BY DR.CHHADDA SINGH PROFESSOR OF G.B.PANT UNIVERSITY PANT NAGAR. THE AO FOUND TH AT PEAS AND MUSTARD OF ABOUT 25 TO 30 QTLS. WERE GROWN PER HECTARE AND S IMILARLY MAXIMUM YIELD OF WHEAT BARLEY AND JAI UNDER MODERN TECHNIQUE CAN BE AROUND 50 QTLS. PER HECTARE. AO THUS COMPUTED AGRICULTURAL LAND UNDER CULTIVATION FOR MUSTARD AND PEAS AT 30 QTLS. PER HECTARE IN THE LAND AREA OF ITA-2092/DEL/2008 7 3.202 HECTARE. BALANCE AGRICULTURAL LAND OF 20.580 HECTARE WAS TAK EN FOR WHEAT BARLEY AND JAI. THE AO HAS TAKEN YIELD OF WHEAT BARLEY AND JAI AT 50 QTLS. PER HECTARE. AO THEREFORE HELD THAT THE WHEAT BARLEY AND JAI TO THE EXTENT OF 1029 QTLS. COULD BE RAISED AS AGAINST 2075 QTLS. SHOWN BY THE ASSESSEE. FROM THIS ORDER OF THE AO WHICH HAS BEEN UPHELD BY THE T RIBUNAL IT IS CLEAR THAT PRODUCTION OF VARIOUS CROPS HAS BEEN ESTIMATED WITH REFERENCE TO THE STANDARD PRESCRIBED IN A BOOK. THEREFORE HERE THE AGRICU LTURAL INCOME HAS BEEN COMPUTED ON THE BASIS OF ESTIMATION BASED ON CERTAIN OBSER VATIONS MADE IN THE BOOK. THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED `5 81 34 1/- THROUGH KRISHI UTPADAK MANDI SAMITI WHICH IS NOT FOUND TO BE FALS E. THEREFORE THE ADDITION UPHELD IN THE PRESENT CASE IS BECAUSE OF DIFF ERENCE OF OPINION AND ON ESTIMATED BASIS. IT IS NOT IN DISPUTE THAT ASSESSEE H AS NOT BEEN ABLE TO SUBSTANTIATE THAT THE ASSESSEE HAS EARNED THE AGRICULTURAL INCOME TO THE EXTENT OF `4 78 665/- BUT HIS CLAIM CANNOT BE SAID TO BE FALSE AND MALA-FIDE SO AS TO ATTRACT PENALTY U/S 271(1)(C) OF THE AC T. ANY CLAIM IN ITSELF CANNOT BE SAID TO BE FALSE WHEN THE QUANTUM OF THE CLAIM H AS BEEN ESTIMATED ON LOWER SIDE AS COMPARED TO THE AMOUNT SHOWN BY THE AS SESSEE. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THIS CASE IS NO T FIT WHERE PENALTY U/S 271(1)(C) CAN BE IMPOSED IN RESPECT OF THE REDUCTION OF AGRICULTURAL INCOME FROM `4 78 665/- TO `2 78 665/- BY TREATING THE BALANCE SUM OF `2 LAKHS AS INCOME FROM OTHER SOURCES. IT IS WELL-SETTLED THAT MERELY ITA-2092/DEL/2008 8 BECAUSE ADDITION HAS BEEN CONFIRMED IN THE QUANTUM APPEAL THAT BY ITSELF IS NOT SUFFICIENT FOR LEVYING PENALTY U/S 271(1)(C) OF THE AC T. IN THE PRESENT CASE THE ASSESSEE HAS BEEN ABLE TO FURNISH ALL THE DETAILS AND PARTICULARS ABOUT T HE LAND TAKEN ON LEASE AND THE VARIOUS CROPS RAISED ON THE LAND. THE ASS ESSEE HAS ALSO FURNISHED THE QUANTITY OF CROPS RAISED ON THE LAND AS WELL AS THE SALE PROCEEDS THEREOF. THEREFORE IT IS NOT A CASE WHERE ASSESSEE HAS FAILED T O FURNISH ALL THE PARTICULARS RELATING TO ITS CLAIM OF AGRICULTURAL INCOME. SINCE THE ASSESSEES CLAIM HAS BEEN ACCEPTED IN PART THE CLAIM CANNOT BE SAID TO BE ALSO FALSE IN THE EYES OF LAW SO AS TO ATTRACT PENALTY U/S 271(1)(C ) OF THE ACT. WE THEREFORE DELETE THE PENALTY ON THE FACTS OF THE PRESENT CASE. THE DECISION RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. ECS LTD. (2010) 194 TAXMAN 311 (DELHI) IS NOT APPLI CABLE TO THE PRESENT CASE AS IN THAT CASE THE CLAIM WAS TOTALLY FOUND TO BE NOT MAINTAINABLE BEING MADE IN CONTRADICTION TO THE DECISION OF THE HIGH COURT WITH REGARD TO CLAIM OF DEDUCTION U/S 80-O. FURTHER IN THAT CAS E THE ASSESSEE DID NOT FURNISH ANY DETAILS OF THE EXPENDITURE INCURRED IN IND IA FOR EARNING FOREIGN EXCHANGE AND THEREFORE THE NET INCOME WAS ESTIMATED BY THE AO. IN THE PRESENT CASE BEFORE US THE ASSESSEE HAS FURNISHED FULL D ETAILS ABOUT THE AREA OF LAND TAKEN ON LEASE AND THE VARIOUS CROPS RAISED THEREU PON. THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF THE RECEIPTS AND EXPENSES. IN THAT DECISION IN THE CASE OF ECS LTD. (SUPRA) THE HONBLE HIGH COUR T HAS ITA-2092/DEL/2008 9 OBSERVED THAT THINGS WOULD HAVE BEEN DIFFERENT HAD THE ASSESSEE FU RNISHED THE DETAILS BUT FOR SOME REASON THE ASSESSING OFFICER HAD ADOPTED AN OTHER YARDSTICK. THIS WAS NOT THE SITUATION IN THAT CASE. HOWEVER T HE SITUATION IN THE PRESENT CASE BEFORE US IS THAT THE AO HAS REDUCED THE QUANTUM OF AGRICULTURAL INCOME OF THE ASSESSEE BY APPLYING OR ADOPTING DIFFERENT YARDSTICK BASED ON SOME OPINIONS OF AN AUTHOR OF A BOOK. WE THEREFOR E HOLD THAT DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ECS LTD. (SUPRA) WOULD NOT BE OF ANY HELP TO THE REVENUES STAND. IN THE RESULT WE DELETE THE PENALTY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 25 FEBRUARY 2011. SD/- SD/- (B.C.MEENA) (C.L.SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25.02.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ITA-2092/DEL/2008 10 5. DR ITAT ASSISTANT REGISTRAR