DCIT, Bangalore v. Shri D.M. Purnesh, Bangalore

ITA 408/BANG/2009 | 2004-2005
Pronouncement Date: 16-04-2010 | Result: Dismissed

Appeal Details

RSA Number 40821114 RSA 2009
Assessee PAN EMBER2006T
Bench Bangalore
Appeal Number ITA 408/BANG/2009
Duration Of Justice 11 month(s) 16 day(s)
Appellant DCIT, Bangalore
Respondent Shri D.M. Purnesh, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 16-04-2010
Date Of Final Hearing 06-01-2010
Next Hearing Date 06-01-2010
Assessment Year 2004-2005
Appeal Filed On 30-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI A. MOHAN ALANKAMONY AM ITA NO.408(BANG.)/2009 (ASSESSMENT YEAR : 2004-05) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-8(1) BANGALORE. APPELLANT VS SHRI D.M.PURNESH 6/1 CONNAUGHT ROAD BANGALORE RESPONDENT AND ITA NO.433(B)/2009 (ASSESSMENT YEAR : 2004-05) SHRI D.M.PURNESH 6/1 CONNAUGHT ROAD BANGALORE APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-8(1) BANGALORE. RESPONDENT REVENUE BY : SMT. PREETI GARG ASSESSEE BY : SHRI S.R.KIRON O R D E R PER SHAILENDRA KUMAR YADAV JM : BOTH THESE CROSS APPEALS ARE ARISING FROM THE SAME ORDER OF CIT(A)-II BANGALORE DATED 16-02-2009 FOR THE ASSES SMENT YEARS 2004- 05 SO THEY ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY AS UNDER. ITA NO.408(B)/2009(AY: 2004-05) THE REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) RAISING THE FOLLOWING GROUNDS; ITA NOS.408 & 433(B)/09 2 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N MADE TO THE EXTENT OF RS.25 12.918/- OUT OF THE TOTAL DISALLOWANCE OF RS.39 86 424/- ON THE ISSUE OF JOIN T DEVELOPMENT OF SITES ON THE GROUND THAT THE PROFIT MARGIN ADOPTED BY THE AO IS HIGHLY EXCESSIVE AND TH AT THE AO HAS NOT ADOPTED PRACTICAL APPROACH. THE CIT (A) HAS FAILED TO NOTE THAT THE ASSESSEE HAS NOT PRODUC ED ANY PROOF IN RESPECT OF THE EXPENSES CLAIMED BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE CIT(A) TO JUSTIFY THE DELETION. 2. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FAC T THAT INSPITE OF SEVERAL OPPORTUNITIES PROVIDED TO THE AS SESSEE AS COULD BE VERIFIED FROM THE ASSESSMENT RECORD TH E ASSESSEE HAS NOT PRODUCED ANY BILLS AND VOUCHERS IN RESPECT OF EXPENSES INCURRED FOR DEVELOPMENT OF SIT ES MANAGEMENT FEES AND ADMINISTRATIVE FEES ETC. PAID. HENCE THE ADDITION OF RS.39 86 424/- BY THE AO IS RIGHTLY MADE AND NEEDS TO BE CONFIRMED. 3. THE LD. CIT(A)HAS FAILED TO NOT THAT AS PER THE AGREEMENT WITH M/S AMALGAMATED PROPERTY DEVELOPERS ENTERED INTO BY THE ASSESSEE AND TWO OTHER OWNERS M/S AMALGAMATED PROPERTY DEVELOPERS WILL SELL THE SITES AND AFTER DEDUCTING THEIR SHARE OF COSTS AND EXPENDITUR E FOR THE PROJECT WILL HAND OVER THE SALE PROCEEDS TO THE THREE OWNERS. HENCE THE EXPENSES CLAIMED BY THE ASSESSE E ARE NOT GENUINE. 4. THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDIT ION MADE ON ACCOUNT OF LONG-TERM CAPITAL GAINS MOUNTING TO RS.2 94 26 000/-ON TRANSFER OF LAND AT RAISANDRA DEVANAHALLI BY THE ASSESSEE TO HIS WIFE THROUGH GI FT WHICH WAS IN TURN TRANSFERRED TO A FIRM TO FORM SIT ES AND SELL THE SAME WITHIN NINE MONTHS FROM THE DATE OF GIFT. SINE AS PER THE LETTER OF CHIEF OFFICER DEV ANAHALLI TOWN MUNICIPALITY DATED 18-11-2006 HE LAND IS SITUATED WITHIN A DISTANCE OF 8 KMS FROM THE ITA NOS.408 & 433(B)/09 3 DEVANAHALLI TOWN MUNICIPALITY AND HENCE IT CANNOT B E HELD TO BE AN AGRICULTURAL LAND ON THE DATE OF TRAN SFER. 5. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT FROM THE DATE OF THE CENTRAL GOVERNMENT NOTIFICATION IN DECEMBER 1999 TILL THE DATE OF TRANSFER DUE TO TH E RAPID GROWTH IN THIS PART MANY AGRICULTURAL LANDS WERE CONVERTED INTO SITES AND SOLD AT HIGHER PRICES DURI NG THE LAST 8-9 YEARS. HENCE THERE WERE LOT OF AGRICULTUR AL LANDS CONVERTED INTO SITES BY THE DEVELOPERS IN AND AROUND DEVANAHALLI. THE LETTER ISSUED BY THE CHIEF OFFICER OF THE DEVANAHALI TOWN MUNICIPALITY IS SUFF ICIENT PROOF FOR THIS FACT. HENCE THE LAND IN QUESTION CA NNOT BE HELD AS AGRICULTURAL LAND. 6. FURTHER THE CIT(A) HAS FAILED TO NOTE THAT THE I NCOME ON SALE OF SITES ON TRANSFER TO THE PARTNERSHIP FIR M HAS NEITHER BEEN OFFERED IN THE HANDS OF SHRI D.M.PURNE SH NOR IN THE HANDS OF HIS WIFE SMT.ANITHA PURNESH. HENCE THE AO RIGHTLY INVOKED THE PROVISIONS OF SEC.64(1)(IV) AND SEC.2(14) IN RELATION TO THIS TRA NSACTION IN THE HANDS OF SHRI D.M.PURNESH AND THE ADDITION MADE ON ACCOUNT OF LONG TERM CAPITAL GAINS OF RS.2 94 26 600/- NEEDS TO BE CONFIRMED. 7. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N BASED ON THE LETTER PRODUCED BY THE ASSESSEES AR DURING APPEAL ISSUED BY THE COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR TO THE EFFECT THAT THE ASSES SEE HAS BEEN REQUESTED TO ATTEND THE CONFERENCE AT BOSTON. THE CIT(A) HIMSELF HAS VERIFIED THE P & L ACCOUNT OF TH E COMPANY WHEREIN THE AMOUNT IS DEBITED TOWARDS BUSINESS PROMOTION EXPENSES WHICH INCLUDES FOREIGN TRAVEL EXPENSE. HENCE THE CLAIM OF FOREIGN TRAVEL EXPENSES BY THE ASSESSEE IS FALSE AND BOGUS SINCE THE SAME HAS BEEN PAID THE COMPANY. THEREFORE THE ADDITION MADE BY THE AO IS IN ORDER AND DESERVES TO BE CONFIRMED. ITA NOS.408 & 433(B)/09 4 8. THE CIT(A) HAS ERRED IN DELETING THE ADDITION MA DE OF RS.37 31 000/- ON ACCOUNT OF NON-EXISTING LIABILITY BY RELYING ON THE STATEMENT OF WEALTH FILED ALONG WITH THE RETURN OF INCOME WHEREIN THE OPENING BALANCE AND CLOSING BALANCE ARE SHOWN SINCE IT IS NOT KNOWN WHETHER ANY RETURN OF INCOME HAS BEEN FILED IN RESP ECT OF THE HUF FROM WHICH THIS LIABILITY IS SHOWN. THE CIT(A) HAS FAILED TO VERIFY THE CORRECTNESS OF THE OPENING BALANCE OF RS.35 96 000/- IN THE ABSENCE ANY DOCUMENTARY PROOF OR EVIDENCE PRODUCED BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE CIT(A). HENCE THE STAND TAKEN BY THE AO THAT THE ASSESSEE HAS NOT DISCHARGED HIS RESPONSIBILITY AND ONUS OF ROVIN G THE LIABILITY AS GENUINE AND EXISTING IS CORRECT AND NE EDS TO BE UPHELD. 9. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS.42 09 420/- UNDER CASH DEFICIT ON THE GROUND THA T THE SAME HAS TO BE PROVED BY UNEXPLAINED INVESTMENT OR EXPENDITURE. THE ADDITION MADE IS ON ACCOUNT OF CASH DEFICIT UNDER THE HEAD INCOME FROM OTHER SOUR CES AND NOT U/S 69. HENCE THE QUESTION OF UNEXPLAINED INVESTMENT DOES NOT ARISE. 10. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT IN SPITE OF UMPTEEN NUMBER OF OPPORTUNITIES PROVIDED TO THE ASSESSEE FROM JANUARY 2006 TO DECEMBER 2006 TO FIL E ASH FLOW STATEMENT TO PRODUCE COPY OF BANK PASS BOO KS THE ASSESSEE HAS TOTALLY FAILED TO DO TILL DECEMBER 2006. HENCE THE QUESTION OF NOT AFFORDING OPPORTUNITY TO THE ASSESSEE ON THIS ISSUE DOES NOT ARISE AT ALL. THE ADDITION MADE BY THE AO IS ROPER AND VALID AND IT I S PRAYED THAT THE SAME MAY BE CONFIRMED. 11. THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE OF RS.84 61 055/- MADE ON ACCOUNT OF ADDITION MADE OF AMOUNTS DEPOSITED BY CHEQUES WITHOUT ANY DOCUMENTARY PROOF PRODUCED BY THE ASSESSEE BEFORE T HE AO OR BEFORE THE CIT(A). SINCE THE DEPOSITS MADE BY ITA NOS.408 & 433(B)/09 5 CHEQUES ARE NOT SATISFACTORILY EXPLAINED IT IS PRA YED THAT THE ADDITION MAY BE CONFIRMED. 12. THE LD CIT(A) HAS ERRED IN DELETING THE ADDITIO N MADE OF RS.9 45 000/- ON ACCOUNT OF EXCESS PAYMENT FOR THE PURPOSE OF PROPERLY KNOWN AS HAREY ESTATE BASED ON THE WRITTEN SUBMISSION MADE BY THE ASSESSE E THAT ALL THE PAYMENTS ARE MADE BY CHEQUES AND THERE IS DIFFERENCE IN CARRY FORWARD OF THE AMOUNT PAID TILL THE END OF THE FY. SINCE ONLY SOME OF THE PAYMENTS MADE TO HARLEY ESTATE I.E MADE TO SHRI RAVINDRANATH ARE TALLYING AS VERIFIED FRO THE STATEMENT OF ACCOUNTS OF ING VYSYA BANK AND CORPORATION BANK THE FACT IS NOT CLEARLY ESTABLISHED. FURTHER HUGE CASH DEPOSIT ON THE DAYS PRIOR TO THE ISSUE OF CHEQUES TO SHRI RAVINDRA NATH THE SOURCES OF WHICH ARE NOT EXPLAINED. 2. THE FIRST ISSUE IS WITH REGARDS TO ADDITION OF R S.25 12 918/-. THE ASSESSEE AND TWO OTHER JOINTLY ENTERED INTO AN AGREEMENT WITH M/S AMALGAMATED PROPERTY DEVELOPERS A PARTNERSHIP FIRM . ACCORDINGLY M/S AMALGAMATED PROPERTY DEVELOPERS WAS TO DEVELOP THE AGRICULTURAL LANDS AFTER CONVERTED THEM INTO SITES MANAGE THE PROJECT SELL THE SITES AND HANDOVER THE PROCEEDS THEREOF AFTER DEDUCTING THEIR COSTS AND EXPENDITURE INCURRED ON THIS PROJECT. ACCORDINGLY M/S AMALGAMATED PROPERTY DEVELOPERS EXECUTED THE PROJECT ON AN EXTE NT OF 3.5 ACRES AND RENDERED THE STATEMENT OF ACCOUNTS. THIS COPY OF THE STATEMENTS OF ACCOUNTS WAS PLACED BEFORE THE ASSESSING OFFICER. T HE ASSESSING OFFICER AT HIS OWN WORKED OUT THE PROFIT FROM THE PROJECT B Y GIVING DEDUCTION ONLY FOR A) COST OF LAND (3 ACRES) AND B) CONVERSIO N CHARGES AND ARRIVED AT A PROFIT OF RS.1 19 59 273/- FROM THE PROJECT. THE ASSESSEES 1/3 RD SHARE OF THIS PROFIT WORKS OUT TO RS.39 86 324/- AS AGAINST RS.6 53 507/- DECLARED. WHILE DOING THIS THE ASSE SSING OFFICER ITA NOS.408 & 433(B)/09 6 COMPLETELY DISALLOWED ALL OTHER EXPENDITURE INCURRE D TO THE TUNE OF RS.67 61 697/-. THE ASSESSING OFFICER DID NOT ACCEP T THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS.39 86 424/- WH ICH WAS AGITATED BEFORE THE CIT(A). 2.1 IN APPEAL THE CIT(A) AFTER CONSIDERING THE CON TENTION ON BEHALF OF ASSESSEE AND CONCLUDED THAT THERE IS NO D ISPUTE REGARDING THE SALE OF SITES AND THE DISPUTE ARISES ONLY ON VARIOU S EXPENSES AS UNDER; PARTICULARS AS PER APPELLANT(RS.) AS PER AO(RS.) COST OF LAND-COMMISSIONER 75 63 841 41 58 560 CONVERSION CHARGES - 1 63 517 DEVELOPMENT CHARGES 52 55 999 - ADMINISTRATIVE CHARGES 7 55 693 - MANAGEMENT FEES 7 50 00 - TOTAL 1 43 25 538 43 22 077 THE ASSESSING OFFICER HAD ALLOWED THE COST OF LAND AND CONVERSION CHARGES OF ONLY RS.41 58 560/- AS AGAINST RS.75 63 8541/- CLAIMED BY THE ASSESSEE. THE EXPENSES CLAIMED TOWARDS DEVELOPM ENT CHARGES ADMINISTRATIVE CHARGES AND MANAGEMENT FEES HAVE BEE N TOTALLY IGNORED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ALL OWED A SUM OF RS.1 63 517/- BEING CONVERSION CHARGES WHICH WAS NO T CLAIMED BY THE ASSESSEE. THUS THE TOTAL EXPENSES DISALLOWED WAS RS.1 00 03 461/- AND THE NET PROFIT ARRIVED AT WAS TO THE EXTENT OF RS.1 19 59 273/-. ACCORDINGLY 1/3 RD SHARE OF THE ASSESSEE WORKED OUT TO RS.39 86 424/- . IN THIS BACKGROUND THE CIT(A) OBSERVED THAT THE AS SESSING OFFICER HAS NOT ADOPTED PRACTICAL APPROACH FOR THE REASON THAT THE TOTAL SALE CONSIDERATION OF SITE DISCLOSED WAS AT RS.1 62 81 3 50/- AND AFTER ITA NOS.408 & 433(B)/09 7 MAKING THE DISALLOWANCE THE PROFIT WAS WORKED OUT AT RS.1 19 59 273/- WHICH COMES TO 73% OF SALE CONSIDERATION AND 150% O F COST VALUE OF THE SITES. THEREFORE THE PROFIT MARGIN WAS FOUND HIGH LY EXCESSIVE BY CIT(A). IN FACT THE ASSESSING OFFICER DID NOT EXAMINE PROP ERLY EXPENSES IN RESPECT OF THE DEVELOPMENT CHARGES ADMINISTRATIVE CHARGES AND MANAGEMENT FEES. UNLESS INFLATION OF EXPENSES OR F ALSE CLAIM OF EXPENSES IS PROVED THERE IS NO GROUND TO DISALLOW THE SAME. WHILE THE ASSESSEE HAS SUBMITTED ALL DETAILS WITH REGARD TO P URCHASE AND SALE OF THE PROPERTY IN QUESTION. THE CIT(A) AFTER ANALYZI NG DIFFERENT HEADS OF INCOME OBSERVED THAT COST OF LAND IS RS.18.00 LAKHS AS PER COLUMN-5 IN PURCHASE AGREEMENT DATED 11-03-2002. THE VENDOR HA S PAID TAXES CESS AND OTHER CHARGES AND THERE ARE NO OUTSTANDING DUES WHATSOEVER ON THE DATE OF SALE. THERE WAS NOTHING ON RECORD W ITH REGARDS TO DE- NOTIFICATION CHARGES. OUT OF ADMINISTRATIVE CHARGES ADDITION OF RS.6 60 000/- OUT OF TOTAL DISALLOWANCE TO THE EXTE NT OF RS.24 60 000/- WAS UPHELD ON SPECIFIC FINDING AND NO SUPPORTING EV IDENCE WAS PRODUCED. ACCORDINGLY THE TOTAL PROFIT WAS FOUND TO BE RS.44 20 520/- AND 1/3 RD ASSESSEES SHARE WOULD BE OF RS.14 73 506/- THEREB Y THE ASSESSEE GOT RELIEF OF RS.25 12 918/-. UNDER THE F ACTS AND CIRCUMSTANCES OF THE REASON FINDINGS OF CIT(A NEED S NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. THE NEXT ISSUE IS WITH REGARDS TO LONG TERM CAP ITAL GAINS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS ACQUI RED LANDS KNOWN AS DEVAGIRI FARMS IN SURVEY NO.36 SURVEY NO.38 AND S URVEY NO.39 ON 28-11-1979 12-03-1979 AND 26-11-1987 RESPECTIVELY ALL AGGREGATING 52 ACRES 37 GUNTAS. HE GIFTED THESE LANDS TO HIS WIFE SMT.ANITHA PURNESH ON 20-01-2003. THE ASSESSING OFFICER FURTHER NOTED THAT HIS WIFE IN ITA NOS.408 & 433(B)/09 8 TURN TRANSFERRED ALL THESE LANDS AS HER CAPITAL TO THE FIRM KNOWN AS DEVAGIRI FARMS WHICH WAS CONSTITUTED BY A PARTNERSH IP DEED ON 28-09- 2003 FOR DEVELOPING THE LAND. IT WAS FOUND THAT TH E EXTENT OF LAND TRANSFERRED MEASURED 53 ACRES AND 19 GUNTAS. IT WAS ALSO OBSERVED THAT THE LAND TO THE EXTENT OF 9 ACRES AND 3 GUNTAS IN S URVEY NO.37/2 AND 36 PREVIOUSLY BELONGED TO SMT.KALA SHANKAR A PARTNE R IN THE SAID FIRM WHICH WAS VALUED AT RS.6.00 CRORES AND THAT THE CLO SING BALANCE SHOWED THE WORK-IN-PROGRESS AT RS.6 07 03 279/-. T HE ASSESSING OFFICER FURTHER OBSERVED THAT THE LAND IS SITUATED AT A DISTANCE OF ABOUT 3 KMS I.E. WELL WITHIN THE LIMITS OF 8 KMS FROM THE DEVANAHALLI TON MUNICIPALITY AS EVIDENCED BY THE LETTER DATED 18-11 -206 OBTAINED FROM THE CHIEF OFFICER DEVANAHALLI TOWN MUNICIPALITY. T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS IN A POSSESSION OF T HESE PROPERTIES FOR MORE THAN 36 MONTHS AND THAT SINCE THE TRANSFER OF THESE LANDS BY THE ASSESSEE TO THE FIRM DEVAGIRI FARMS WAS MADE BY SMT .ANITHA PURNESH WITHIN NINE MONTHS FROM THE DATE ON WHICH SHE HAD R ECEIVED THEM BY WAY OF GIFT FROM THE ASSESSEE. THE ASSESSEE HAD IN FACT INDIRECTLY TRANSFERRED THE LANDS TO THE SAID FIRM WHICH GAVE RISE TO INCOME FROM LONG TERM CAPITAL GAINS. IT WAS FURTHER OBSERVED B Y HIM FROM THE STATEMENTS OF ACCOUNTS RELATING TO THE FIRM THAT A SUM OF RS.1.50 CRORES IS CREDITED IN HER CAPITA ACCOUNT TOWARDS THE COST OF THE LAND (65 ACRES) BROUGHT IN BY HER. THE ASSESSING OFFICER ALSO FOUND THAT A FURTHER CREDIT IN THE JOINT ACCOUNT OF SMT.KALA & ANITHA WAS MADE ON 28-09-2003 THROUGH A MEMORANDUM OF UNDERSTANDING IN WHICH THE SHARE OF ASSESSEES WIFE WAS 50% I.E.RS.1.5 CRORES AND FROM THE STATEMENTS GIVEN BY THE ASSESSEE AND ON EXAMINATION OF SMT. AN ITHA PURNESH IT WAS FOUND THAT THE AMOUNT POOLED BY MRS.KALA SHANKA R AND SMT. ITA NOS.408 & 433(B)/09 9 ANITHA PURNESH AND CONTRIBUTED TO THE FIRM AMOUNTED TO RS.6.0 00 CRORES AND THAT 50% THEREOF I.E RS.3.00 CRORES BELO NGED TO SMT ANITHA PURNESH. IN THIS BACKGROUND HE OBSERVED THAT SINC E THE CONTRIBUTION OF THE ASSETS MADE BY SMT.ANITHA PURNESH CAME FROM THE ASSESSEE THROUGH A GIFT THE INVESTMENT MADE BY HER COMES WI THIN THE MISCHIEF OF SEC.64(1)(IV) OF THE ACT AND SINCE THE TRANSFER REL ATES TO CAPITAL ASSETS IT COMES WITHIN THE PURVIEW OF SEC.45(3) OF THE ACT AN D THAT THE SAID TRANSFER RESULTS IN LONG TERM CAPITAL GAINS. CONSI DERATION RELATING TO THE TRANSFER OF CAPITAL ASSET AT RS.3.00 CRORES(I.E. VA LUE OF THE CONTRIBUTION MADE BY SMT. ANITHA PURNESH) AND GIVING CREDIT FOR DEDUCTIONS SUCH AS INDEXED COST OF ACQUISITION AS ON 01-04-1981 WITH R EFERENCE TO PROPERTIES ACQUIRED IN 1979 AND THE ACTUAL COST OF ACQUISITION OF THE PROPERTY ACQUIRED ON 26-11-1987. THE ASSESSING OFFI CER COMPUTED THE LONG TERM CAPITAL GAINS AT RS.2 94 26 600/- AND BRO UGHT THE SAME TO TAX. 3.1 IN APPEAL THE CIT(A) AFTER CONSIDERING THE CON TENTION RAISED ON BEHALF OF THE ASSESSEE OBSERVED THAT THE ASSESSE E GIFTED THE AGRICULTURAL LAND IN QUESTION TO HIS WIFE SMT.ANITH A WERE AGRICULTURAL LAND WHEN SHE TRANSFERRED A PORTION OF IT TO THE FI RM DEVAGIRI FARMS. THE ASSET DID NOT CHANGE ITS CHARACTER AS AGRICULTU RAL LAND. THE AGRICULTURAL LAND IS SITUATED OUTSIDE THE MUNICIPAL LIMITS OF DEVANAHALLI TOWN AND HENCE OUTSIDE THE LIMITS SPECIFIED IN SEC. 2(14)(III) (A). THIS LOCATION IS EVIDENCED BY A CERTIFICATE ISSUED BY TH E MUNICIPAL AUTHORITIES OF DEVANAHALLI TOWN. FURTHER IT IS STATED THAT DEV ANAHALLI IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF SEC.2(14)(III)(B) OF THE ACT AND THE COPY OF THE NOTIFICATION NO.SO.302 DATED 28-12-1999 FILED IN SUPPORT OF THE CONTENTION. THE CIT(A) OBSE RVED THAT THE LAND IN ITA NOS.408 & 433(B)/09 10 QUESTION WAS TRANSFERRED AS AGRICULTURAL LAND EVEN AFTER INTRODUCING THEM AS CAPITAL IN THE PARTNERSHIP FIRM AND THE NAT URE OF LANDS REMAIN AGRICULTURAL LAND. THE RECORDS AVAILABLE SUGGEST T HAT NEITHER THE ASSESSEE NOR HIS SPOUSE SMT.ANITHA HAS APPLIED FOR CONVERSION OF LAND. FROM THE AVAILABLE MATERIAL IT IS OBSERVED THAT THE LAND WAS REGISTERED AS AGRICULTURAL AND IN THE RELEVANT REVENUE RECORD TILL IT WAS TRANSFERRED TO THE PARTNERSHIP FIRM; THE LAND REVENUE WAS BEING PAID THEREON TILL THE DATE OF TRANSFER EVEN AFTER THE TRANSFER ALSO; THE LAND WAS UNDER ACTUAL CULTIVATION TILL IT WAS INTRODUCED AS HER CAPITAL A S EVIDENCED BY PAHANI PATRAS; THE LAND IS SURROUNDED BY THE AGRICULTURAL LANDS IT WAS NEVER PUT TO ANY AGRICULTURAL USE ; THE ASSESSEE HAD DERI VED INCOME FROM AGRICULTURAL LAND. 3.2 THE MERE FACT THT THE LAND WAS SITUATED WITHIN THE MUNICIPAL LIMITS OR WITHIN 8 KMS FROM THE LIMIT IS OF NO CONS EQUENCE IN AS MUCH AS CULTIVATION CAN BE DONE EVEN ON LANDS SITUATED W ITHIN 8 KMS FROM MUNICIPAL LIMITS. APPLYING THE RATIO OF THE HONBL E HIGH COURT IN THE CASE OF CIT VS SIDDARTH J DESAI (139 ITR 628) T HE SAID LAND IN QUESTION WAS TO BE HELD AS AGRICULTURAL LAND ON THE DATE OF ITS TRANSFER. 3.3 BY VIRTUE OF THE FINANCE ACT 1970 WITH EFFECT FROM 01-04- 1970 IT MAY BE MENTIONED THAT AGRICULTURAL LANDS S ITUATED WITHIN THE JURISDICTION OF MUNICIPALITIES AS MAY BE SPECIFIED IN THAT BEHALF BY THE CENTRAL GOVERNMENT (SUB-CLAUSE (A) AND (B) IN CLAUS E (III) OF THE DEFINITION OF THE CAPITAL ASSETS IN SEC.2(140 OF TH E ACT) WERE EXCLUDED FROM THE PURVIEW OF THE AGRICULTURAL LAND. THE NOT IFICATION ISSUED BY THE CENTRAL GOVERNMENT VIDE NO.SO.10(E) DATED 06-01 -1994 AS AMENDED BY NOTIFICATION NO.SO.1302 DATED 28-12-1999 DEVANA HALLI IS NOT INCLUDED AS NOTIFIED AREA EVEN THOUGH DEVANAHALLI T ALUK IS NOTIFIED AS ITA NOS.408 & 433(B)/09 11 MUNICIPALITY/CORPORATION BY THE STATE GOVERNMENT OF KARNATAKA. THE LANDS IN QUESTION RE AGRICULTURAL LANDS AND NOT ELI GIBLE TO CAPITAL GAINS TAX. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE IN THIS REGARD. IN THIS BACKGROUND THE CI TA) WAS JUSTIFIED IN HOLDING THAT THERE WAS NO CAPITAL GAINS AS PER RELE VANT LAW SO THERE IS NO QUESTION OF CAPITAL GAINS WHEN THERE IS NO CAPI TAL ASSET AS SUCH. ACCORDINGLY CLUBBING OF GAINS IN TERMS OF SEC.64(1 )(IV)ARE NOT JUSTIFIED. THE CIT(A) ALSO DERIVED STRENGTH BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SMT. SARIFA BIBI MOHAMED IBRA HIM & OTHERS VS CIT (204 ITR 631) WHEREIN IT WAS HELD THAT FOR ASCE RTAINING WHETHER THE LAND IS AGRICULTURE CUMULATIVE EFFECT OF AL THE RE LEVANT FACTS FOR AND AGAINST THE ASSESSEE MUST BE CONSIDERED. IN THIS B ACKGROUND IT WAS RIGHTLY OBSERVED BY THE CITA) THAT THE ASSESSING OF FICER WAS NOT JUSTIFIED IN HOLDING THAT THE LANDS IN QUESTION WERE CAPITAL ASSETS AND TRANSFER OF THESE LANDS AMOUNT TO CAPITAL GAINS. ACCORDINGLY T HE ADDITION OF RS.2 94 26 60/- WAS RIGHTLY DELETED BY THE CIT(A). WE UPHOLD THE SAME. 4. THE NEXT ISSUE IS WITH REGARDS TO ADDITION OF F OREIGN TRAVEL EXPENSES OF RS.1 12 475/-. THE ASSESSING OFFICER O N EXAMINATION OF THE ASSESSEES PASSPORT OBSERVED THAT HE HAD GONE ABROA D AND CLAIMED THAT THE EXPENSES OF RS.1 12 475/- BEING INCURRED BY M/S CLASSIC COFFEE & SPICES (P)LTD OF WHICH HE IS THE DIRECTOR AND DID NOT PRODUCE ANY RELIABLE EVIDENCE IN THIS REGARD SO BROUGHT THE SA ME TO TAX AS ASSESSEES INCOME FROM OTHER SOURCES WHICH WAS DEL ETED BY THE CIT(A). 4.1 IN APPEAL THE CITA) OBSERVED THAT THE ASSESSEE SUBMITTED A COPY OF THE CERTIFICATE ISSUE BY THE DIRECTOR OF M/ S CLASSIC COFFEE & SPICES (P)LTD WHICH IS AS UNDER; ITA NOS.408 & 433(B)/09 12 THIS IS TO STATE THAT SHRI D.M.PURNESH DIRECTOR WAS REQUESTED TO REPRESENT THE COMPANY AND OTHER SPECIA LTY COFFEE ASSOCIATION OF AMERICAS TRADE SHOW AND CONFERENCE AT BOSTON USA IN APRIL 2003. FOR THIS OCCASION US DOLLARS WERE PURCHASED ON 10-04-2003 FO R A SUM OF RS.1 12 475/- (ONE LAKH TWELVE THOUSAND FOUR HUNDRED & SEVENTY FIVE ONLY). THIS AMOUNT HAS BEEN POSTED UNDER THE HEAD OF ACCOUNT BUSINESS PROMOTION EXPENSES OF THE COMPANY IN SUPPORT OF HIS CLAIM A COPY OF PROFIT & LOSS A CCOUNT OF THE COMPANY WAS ALSO FILED AND FROM THE VERIFICATION IT WAS FOUND THAT THE TOTAL BUSINESS PROMOTION EXPENSES ARE SHOWN AT RS.1 15 408/- WHICH INCLUDES FOREIGN TRAVELING EXPENSES OF RS.1 12 475/ - IN THE REMAND REPORT THE ASSESSING OFFICER HAS STATED THAT THE A RGUMENTS OF THE ASSESSEE MAY BE ACCEPTED. IN THIS BACKGROUND THE CIT(A) RIGHTLY DELETED THE ADDITION IN QUESTION. WE UP HOLD THE SAME. 5. THE NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS .37 31 000/- ON ACCOUNT OF NON-EXISTING LIABILITY TO THE HUF. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED LIABILITY OF RS.37 31 000/-DUE TO THE HUF OF SHRI D.M.SHANKAR AND D.M.PURNESH WHICH CONSI STED OF THE PAST LIABILITY OF RS.35 96 000/- AND RS.1 35 000/- BORRO WED BY HIM DURING THE YEAR UNDER CONSIDERATION. HE OBSERVED THAT MERE LY BECAUSE A LIABILITY HAD BEEN BROUGHT FORWARD FROM THE PAST AN D HAD BEEN ACCEPTED IN THE INTIMATIONS GIVEN U/S 143(1) IN DOES NOT MEA N THAT THE LIABILITY IS GENUINE AND THE ASSESSEE WAS BOUND TO EXPLAIN THE G ENUINENESS OF THE LIABILITY. SINCE THE ASSESSEE DID NOT COME FORWARD WITH ANY VALID AND RELIABLE EXPLANATION THE ASSESSING OFFICER DISALLO WED THE CLAIM OF ITA NOS.408 & 433(B)/09 13 LIABILITY OF RS.37 31 000/- AND BROUGHT THE SAME TO TAX WHICH WAS DELETED BY THE CIT(A). 5.1. IN APPEAL THE CIT(A) OBSERVED THAT THE STATE MENT OF WEALTH AND OTHER DETAILS REVEALED THAT THE OPENING BALANCE OF LIABILITY SHOWN AS ON 01-04-2004 STOOD AT RS.35 96 000/- AND THE CLOSI NG BALANCE APPEARS AT RS.37 31 000/-. THUS THE LIABILITY RAISE D DURING THE YEAR IS A SUM OF RS.1 35 000/-RAISED TO THE EXTENT OF RS.35 9 6 000/- PERTAINS TO EARLIER YEARS AND THE SAME IS TO BE CONSIDERED IN T HE EARLIER YEARS IF ANY. THE LIABILITY TO THE EXTENT OF RS.1 35 000/- CLAIMED TO HAVE BEEN WITHDRAWN FROM HUF ACCOUNTS. IN THE REMAND REPORT THE ASSESSING OFFICER HAS STATED THAT IN RESPECT OF THE LIABILITY OF RS.1 35 000/- THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE. EVEN AT THE TIME OF APPEAL HEARING NO EVIDENCE WAS PRODUCED IN THIS REGARD. THEREFORE THE ADDITION OF RS.1 35 000/- WAS FOUND TO BE UNEXP LAINED AND THE SAME WERE UPHELD. HOWEVER IN THE BACKGROUND CIT(A ) WAS JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE AS DISCUSSED ABOVE WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UP HOLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARDS TO ADDITION MADE ON ACCOUNT OF CASH DEFICIT OF RS.42 09 420/-. DURING THE ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER CALLED FOR STATEMENT OF AFFAIRS CASH FLOW STATEMENT ETC. APART FROM THE BANK ACCOUNTS. THE ASSESSING OFFICER INDEPENDENTLY ORDERED VERIFICATION OF THE ASSESSEES BANK ACCOUNT S. THE ASSESSING OFFICER WORKED OUT THE CASH FLOW STATEMENT FROM THE DETAILS AVAILABLE IN THE STATEMENT OF AFFAIRS FILED BY THE ASSESSEE AND THE ASSESSEES BANK ACCOUNTS VERIFIED BY HIM AND AFTER DETAILED ANALYSI S HE FOUND THT THE CASH DEFICIT OF RS.42 09 420/- WHICH WAS ADDED TO A SSESSEES INCOME ITA NOS.408 & 433(B)/09 14 UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WA S DELETED BY THE CIT(A). 6.1 IN APPEAL THE CIT(A) OBSERVED THAT THERE IS NO DISCUSSION THAT THE WORKING OF THE CASH DEFICIT WAS PROVIDED TO ASS ESSEE AND AN OPPORTUNITY OF BEING HEARD WAS GIVEN TO HIM. THE A SSESSING OFFICER HAS WORKED OUT CASH DEFICIT ON THE BASIS OF BANK ACCOUN TS IN ING VYSYA BANK A/C NO.20101000583 AND CORPORATION BANK A/C NO .13920 AND ONLY CASH DEPOSIT AS WELL AS CASH WITHDRAWALS FOR T HE YEAR HAS BEEN TAKEN INTO ACCOUNT AND ACCORDINGLY CASH DEFICIT WA S WORKED OUT AT RS.42 09 420/-. THERE WAS SEVERAL DEPOSITS AND WITH DRAWALS IN CHEQUES ALSO WHICH WAS TOTALLY IGNORED. IF THERE IS ANY DEF ICIENCY OR DIFFERENCE AN ADVERSE INFERENCE CAN BE DRAWN. THE ASSESSING OFFI CER DID NOT BRING ON RECORD THAT THE CASH DEFICIT REPRESENTS UNEXPLAINED INVESTMENT OR MERELY BECAUSE THERE WAS DEFICIT OF CASH IT DOES NO T RENDER IT CONCEALMENT OF INCOME. ON THE OTHER HAND THE ASSE SSEE EXPLAINED THAT THE AGRICULTURAL INCOME FROM COFFEE ESTATE OF RS.38 .00 LAKHS AND WITHDRAWAL FROM HUF ACCOUNT OF RS.1 35 000/-AND IF THESE ARE CONSIDERED THERE WOULD BE NEGLIGIBLE DIFFERENCE. I N THE REMAND REPORT DATED 02-02-2009 THE ASSESSING OFFICER DID NOT THR OW MUCH LIGHT AND ONLY STATED THAT THE AGRICULTURAL INCOME OF RS.64 2 0 000/-IS NOT SUPPORTED BY EVIDENCE AND THE SAME BE CONSIDERED ON MERIT. IN THIS BACKGROUND THE CIT(A) RIGHTLY HELD THAT THE AGRICU LTURAL INCOME OF RS.38.00 LAKHS HAS BEEN DISCUSSED IN PRECEDING PARA S WHERE THE CIT(A) WAS JUSTIFIED THE CASH DEFICIT OF RS.42 09 420/- CO ULD NOT BE SUSTAINED AND THE SAME WAS RIGHTLY DIRECTED TO BE DELETED . W E UP HOLD THE SAME. 7. THE NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS .84 61 055/- MADE ON ACCOUNT OF AMOUNTS DEPOSITED BY CHEQUES. T HE ASSESSING ITA NOS.408 & 433(B)/09 15 OFFICER FOUND THAT THE ASSESSEE HAS DEPOSITED CHEQU E FOR RS.69 22 195/- AND RS.15 38 860/- IN HIS BANK ACCOU NT WITH THE CORPORATION BANK AND ING VYSYA BANK FOR WHICH THE A SSESSEE DID NOT PRODUCE ANY DETAILS INSPITE OF BEING ASKED TO FILE CASH FLOW STATEMENT ETC. SO THE ASSESSING OFFICER BROUGHT TO TAX THE A GGREGATE OF THESE AMOUNTS I.E RS.84 61 055/- UNDER THE HEAD INCOME OT HER SOURCES WHICH WAS DELETED BY THE CIT(A). 7.1 IN APPEAL THE CIT(A) FOUND THAT THE SOURCE OF INCOME OF ASSESSEE WERE FROM SALARY AND REAL ESTATE BUSINESS. AS PER WORKING THE ASSESSING OFFICER HAS CONSIDERED THE ENTIRE AMOUNT DEPOSITED THROUGH CHEQUES DURING THE PREVIOUS YEAR RELEVANT TO AY: 20 04-05 INTO CORPORATION BANK AND ING VYSYA BANK WAS CONCEALED I NCOME AND MADE ADDITION AS INCOME FROM OTHER SOURCES. THERE W AS NO INDEPENDENT FINDING TO JUSTIFY THE ADDITION IN QUESTION. THE R ECORD SUGGESTS THAT NO FURTHER ENQUIRIES WERE CONDUCTED TO ASCERTAIN THE N ATURE AND SOURCES OF DEPOSITS MORE PARTICULARLY WHETHER THE DEPOSITS WE RE MADE THROUGH THE CHEQUES AND WHETHER SUCH MOVEMENT OF TRANSACTION WA S IDENTIFIABLE/TRACEABLE. MERELY BECAUSE THE ASSESSE E DID NOT FURNISH THE BANK STATEMENT AND TRANSACTION DETAILS THE ENTIRE DEPOSITS CANNOT BE CHARACTERIZED AS INCOME OF THE ASSESSEE. UNDER TH E FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION IN QUESTION. WE UP HOLD THE SAME. 8. THE NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS .9 45 000/-. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD A N ORAL AGREEMENT FOR THE PURCHASE OF PROPERTY KNOWN AS HARLEY ESTATE M EASURING 218 ACRES IN RESPECT OF WHICH ON 27-04-2004 PAID RS.71 20 000 /- BY TWO CHEQUES IN OCTOBER 2003 HE HAD MADE PAYMENT THROUGH CHEQUES FOR A TOTAL ITA NOS.408 & 433(B)/09 16 AMOUNT OF RS.70 00 000/- AND THAT THE AGGREGATE OF SUCH PAYMENT CAME TO RS.1 41 20 000/- WHEREAS IN THE RETURN OF I NCOME THE ASSESSEE HAD ACCOUNTED FOR PAYMENT OF RS.1 3 75 000/- WHICH INDICATED THAT THE ASSESSEE HAD MADE EXCESS PAYMENT OF RS.9 45 00/- WH ICH WAS ADDED BY THE ASSESSING OFFICER. IN APPEAL THE SAME WAS DEL ETED BY THE CIT(A). 8.1 IN APPEAL THE CIT(A) OBSERVED THAT THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER ADDED A SUM OF RS.9 45 000/- AS UN EXPLAINED INVESTMENT U/S 69 OF THE IT ACT. HE HAS WORKED OUT THE TOTAL ADVANCE TOWARDS HARLEY ESTATE FOR PURCHASE OF THE SAME WHI CH IS SUMMARIZED AS UNDER; TOTAL AMOUNT OF ADVANCE PAID TILL 31-03-2004 RS.1 41 20 000 TOTAL AMOUNT OF ADVANCE AS PER STATEMENT RS.1 31 75 000 ENCLOSED WITH RETURN OF INCOME DIFFERENCE RS. 9 45 000 BEFORE THE CIT(A) THE ASSESSEE FURNISHED A BANK ST ATEMENT FOR ADVANCE PAYMENT WHICH IS RE-PRODUCED IN PARA-5H.3. FURTHE R THE ASSESSEE POINTED OUT WHILE MAKING ADVANCE PAYMENT UPTO 31-0 3-2003 AMOUNTING TO RS.64 80 000/- WAS NOT TAKEN INTO ACCO UNT CORRECTLY. THEREFORE THE DIFFERENCE COMES TO RS.9 45 000/- IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT OFFERED ANY COMMENT BUT HAS SIMPLY REMARKED THAT THE ASSESSEES SUBMISSION MAY BE ACCE PTED. THE ASSESSING OFFICER HAS NOT VERIFIED THE STATEMENT FU RNISHED AND IT WAS FOUND THAT THE ADVANCE WAS PAID THROUGH BANK ACCOUN T AND THERE WAS NO OMISSION IN THE STATEMENT OF WEALTH. SINCE THE ASSESSEE HAS EXPLAINED THE PAYMENT PROPERLY THERE WAS NO JUSTIF ICATION FOR MAKING THE ADDITION IN QUESTION. THE SAME WAS RIGHTLY DEL ETED BY THE CIT(A). WE UPHOLD THE SAME. ITA NOS.408 & 433(B)/09 17 ITA NO.433(B)/2009(AY: 2004-05) 9. THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) RAISING VARIOUS GROUNDS; 1. THE LD. AUTHORITIES BLOW ERRED IN TREATING THE AGRICULTURAL INCOME OF RS.8.20 000/- DERIVED FROM T HE MANGO ORCHARDS CALLED DEVAGIRI FARMS AS INCOME FROM OTHER SOURCES AND TAXING THE SAME. THE FAILED TO APPROPRIATE THAT THE EXTENT OF LAND AND THE CROPS G ROWN THEREIN COULD FAIRLY GENERATE THE AMOUNT OF RS.8 20 000/- OUT OF SALE OF FRUITS BETWEEN APRIL 2 003 TO JULY 2003 BEFORE THE ASSESSEES WIFE TRANSFERRED PA RT OF HER INTEREST IN DEVAGIRI FARMS IN SEPTEMBER 2003. THEY FURTHER FAILED TO APPRECIATE THAT THE IMMEDIATE SOU RCE SHOULD BE LAND AND IT IS NOT NECESSARY THAT THE PER SON WHO EARNS SUCH INCOME SHOULD BE THE OWNER. THEY EVE N FAILED TO ESTIMATE THE AGRICULTURAL INCOME. UNDER T HESE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION O F RS.8 20 000/-AS INCOME FROM OTHER SOURCES DESERVES TO E DELETED. 2. THE LD. AUTHORITIES BELOW ERRED IN TREATING THE SUM OF RS.18.00 LACS DEPLOYED BY THE ASSESSEE DURING TH E YEAR FROM THE AGRICULTURAL INCOME OF THE HUF AS INC OME FROM OTHER SOURCES AND SUBJECTED THE SAME TO TAX. T HEY FAILED TO APPRECIATE THE NATURE AND EXTENT OF THE C OFFEE LANDS UNDER FULL CULTIVATION IN CHIKKAMAGALUR DISTR ICT OF THE HUF OF WHICH THE ASSESSEE IS A CO-PARCENER. TH E ABSENCE OF DOCUMENTARY EVIDENCE CANNOT TRUMP THE SOLID CIRCUMSTANTIAL EVIDENCE OF THE EXISTENCE OF F ULLY DEVELOPED ESTATES KALLADEVAPURA ESTATE. THEY EVEN FAILED TO ESTIMATE THE AGRICULTURAL INCOME. UNDER T HE FACTS AND CIRCUMSTANCES TREATING THE DEPLOYMENT F F UNDS DURING THE YEAR OF THE INCOME OF THE HUF TO THE EXT ENT OF RS.18 00 000/- IS HIGHLY UNJUSTIFIED AND DESERVE S TO BE DELETED. ITA NOS.408 & 433(B)/09 18 3. THE LD. AUTHORITIES BELOW ERRED IN REJECTING TH E ASSESSEES PLEA THAT RS.3 60 000/- WAS UTILIZED FOR PERSONAL EXPENSES FROM OUT OF THE AGRICULTURAL INC OME OF THE ASSESSEE AND BRINGING TO TAX RS.3 60 000/-AS INCOME OTHER SOURCES. THEY FAILED TO APPRECIATE THE EXTENT AND INCOME POTENTIAL OF THE FULLY CULTIVATED AGRICULTURAL LANDS OWNED BY THE ASSESSEE HIS WIFE AND HUF. 4. THE LD. AO ERRED IN TREATING THE LIABILITY TO T HE HUF OF RS.37 31 000/- AS INCOME FROM OTHER SOURCES. AT THE TIME OF 1 ST APPEAL ONLY THE APPROPRIATION DURING THE YEAR WAS SUSTAINED. UNFORTUNATELY THE LD. AUTHORITIES B ELOW FAILED TO APPRECIATE THAT THERE IS NO BORROWINGS AS SUCH BUT ONLY A CONSENSUAL APPROPRIATION AND HENCE NO LO AN DOCUMENTS. UNDER THESE FACTS AND CIRCUMSTANCES OF T HE CASE THE ADDITION OF A LIABILITY OF RS.1 35 000/- D URING THE YEAR DESERVES TO BE DELETED. 5. THE LD. AUTHORITIES BELOW ERRED IN ENHANCING AN D SUSTAINING THE DEPRECIATION ON VEHICLES ATTRIBUTABL E TO PERSONAL USE FROM 30% TO 50%. THEY FAILED TO APPRECIATE THAT SUCH ENHANCEMENT WAS NOT CALLED FOR AS 30% ITSELF WAS ON THE HIGHER SIDE. 6. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER W ITH THE HONBLE CCIT/DG THE ASSESSEE DENIED ITSELF LIAB LE TO BE CHARGED TO INTEREST U/S 234A 234B AND 234C OF T HE IT ACT. 10. THE FIRST ISSUE IS WITH REGARDS TO RS.8 20 000 /-. THE ASSESSEE HAD DECLARED SUM OF RS.8 20 000/- AS INCOME EARNED FROM AGRICULTURAL LAND ARISING FROM CULTIVATION AND SALE OF MANGOES RAGI AND OTHER PRODUCE. THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE HAD GIFTED ABOUT 53 ACRES AND 19 GUNTAS UNDER VARIOUS SURVEY NOS. IN DEVANAHALLI TALUK TO HIS WIFE SMT. ANITHA PURNESH ON 20-01-2003 DURIN G THE RELEVANT ASSESSMENT YEAR 2003-04 AND SHE IN TURN CONTRIBUTED THE SAME AS ITA NOS.408 & 433(B)/09 19 CAPITAL IN A PARTNERSHIP FIRM DEVAGIRI FARMS WHIC H CAME INTO EXISTENCE ON 28-9-2003. SUBSEQUENTLY THE ASSESSEE PRODUCED COPIES OF RTC FROM THE TALUK OFFICE FOR HAVING EARNED AGRICULTURAL INC OME. THE ASSESSING OFFICER NOTED THAT THE RTC CERTIFICATE PRODUCED IN FACT ONLY INDICATE THE EXISTENCE OF TREES OR CROPS ON LANDS AND DO NOT CER TIFY THAT THE ASSESSEE HAS EARNED INCOME FROM AGRICULTURE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAD FURNISHED DOCUMENTARY IN SUPP ORT OF HAVING EARNED INCOME FROM AGRICULTURE AND COULD NOT CITE R ETURNS OF INCOME FILED FOR THE PREVIOUS YEARS IN THIS REGARD. IN THIS BAC KGROUND THE ASSESSING OFFICER HELD THAT THE AMOUNT OF RS.8 20 000/- CLAIM ED BY THE ASSESSEE AS AGRICULTURAL INCOME AND BROUGHT THE SAME TO TAX W HICH WAS CONFIRMED BY THE CIT(A). THE ASSESSEE IS NOT SUPPOSED TO DECI DE INCOME FROM AGRICULTURAL HOLDINGS WHICH HAS BEEN CLAIMED BY THE ASSESSEE SO ADDITION IN QUESTION ARE JUSTIFIED. 11. THE NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.18.00 LACS. THE ASSESSEE CLAIMED IN THE STATEMENT OF ACCOUNT TH AT HE HAD UTILIZED A SUM OF RS.18.00 LACS RECEIVED FROM A COFFEE ESTATE KNOWN AS KALADEVAPURA ESTATE IN CHIKKAMAGALUR DISTRICT BY HIS HUF FOR MAKING INVESTMENTS IN M/S CLASSIC COFFEE AND SPICES (P) LT D. AND M/S CLASSIC DISTRIBUTORS COMPANY IN WHICH HE WAS A DIRECTOR AND A PARTNER RESPECTIVELY. IN RESPONSE TO A QUERY HE HAD STATE D THAT SUCH INFORMATION WAS GIVEN BY WAY OF A NOTE ONLY TO INDICATE THAT FU NDS WERE AVAILABLE WITH HIM FOR MAKING THE INVESTMENTS AND THAT HE ON 19-12 -2006 HE HAD STATED ON OATH THAT HIS FAMILY HAD BEEN INTO THIS B USINESS FROM COFFEE PLANTATION FOR FOUR GENERATIONS. THE ASSESSING OF FICER NOTED THAT THE COPIES OF FORM NO.23 FILED BY HIM WITH THE AGRICULT URAL INCOME TAX AUTHORITIES FROM THE STATE GOVERNMENT IN PROOF OF H IS CONTENTION OF ITA NOS.408 & 433(B)/09 20 HAVING FUNDS TO THE TUNE OF RS.18.00 LACS RELATING TO FINANCIAL YEAR OTHER THAN THE ONE FOR THE YEAR ENDED 20-03-2004. OBSERV ING THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY PROOF OF HAVING RECEIVED INCOME TO THE EXTENT OF RS.18.00 LACS THROUGH HIS HUF. THE ASS ESSING OFFICER BROUGHT THE SAME TO TAX AS ASSESSEES INCOME FROM OTHER SOU RCES WHICH WAS CONFIRMED Y THE CIT(A). THE STAND OF THE ASSESSEE IS THAT THE HUF WHERE THE ASSESSEE IS A CO-PARCENER OWNS 40.18 ACRE S O FULLY DEVELOPED COFFEE ESTATE CALLED KALLADEVAPURA ESTATE AND ALSO THE HARLEY ESTATE. THE TRADERS COME TO THE ESTATE AND BUY COFFEE BEANS AND SPICES BY PAYING CASH ON THE SPOT. THE ABSENCE OF DOCUMENTARY PROOF IN THIS REGARD SHOULD NOT BE IGNORED AGAINST THE ASSESSEE. ACCORD ING TO US HE HIMSELF MANAGES THE CO-PARCENERY PROPERTY. HE IS FULLY ENTI TLED TO DEPLOY THE INCOME FROM THIS PROPERTY FROM TIME TO TIME. DURING THE YEAR ENDING 31- 3-2004 HE HAS DEPLOYED 18.00 LACS FROM THIS SOURCE. THE ASSESSEE HAS FURNISHED DETAILS OF YIELD OF COFFEE AND ITS REALIZ ATION. AS PER THE WORKING WORKING OF AGRICULTURAL INCOME THE TOTAL YIELD OF COFFEE WAS 12 TONNES DURING THE RELEVANT YEAR FROM COFFEE ESTATE AT KAIM ARA CHIKKAMAGALUR OUT OF 40 ACRES OF LAND. THE SALE PROCEEDS RECEIV ED FROM THE SALE OF 12 TONNES OF COFFEE OF RS.12.00 LACS AND AFTER ADJUSTI NG THE EXPENSES NET PROFIT SHOWN IS RS.6.00 LACS INCOME FROM OTHER PROD UCE SUCH AS CARDAMOM PEPPERS ETC WAS AT RS.2.00 LACS. THUS T HE TOTAL INCOME EARNED WAS RS.8.00 LACS SIMILARLY THE YIELD FROM HARLEY ESTATE WAS 125 TONNES AND ON SALE OF THESE PRODUCE THE AMOUNT RECE IVED WAS RS.1.5 CRORES AND THE NET PROFIT SHOWS WAR RS.50.00 LACS. THE NET INCOME FROM OTHER PRODUCE WAS RS.10.00 LACS. THUS THE TOTAL I NCOME DERIVED FROM HARLEY ESTATE WAS RS.60.00 LACS. THE ASSESSEES SH ARE WOULD BE RS.30.00 LACS. THUS AS PER THE WORKING FROM THE LARGE QUA NTITY OF YIELD OF COFFEE ITA NOS.408 & 433(B)/09 21 INCOME WAS REALIZED. IT SHOWS THAT SALE WAS MADE T O ESTABLISHED AND KNOWN TRADERS WHO ARE ENGAGED IN THIS LINE OF BUSIN ESS. ACCORDING TO ASSESSEE HE HAD NO DIFFICULTY TO GIVE THE NAME AND ADDRESS OF THE PERSONS TO WHOM THE PRODUCTS WERE SOLD AND MADE OF RECEIVING SALE PROCEEDS. ACCORDINGLY THE CIT(A) CONFIRMED THE AD DITION IN QUESTION. SAME HAS BEEN OPPOSED BEFORE US. 11.1 WE FIND THAT THE HUF HOLDING OF THE AFORESAID LAND AGRICULTURAL LAND OF THE ASSESSEE HAS NOT BEEN DISP UTED WITH COGENT REASONS. WHEREAS THE HUF HAS LAND HOLDING BUT THE QUESTION ARISING THAT HUF ACCOUNTED FOR THE SAME IN AGRICULTURAL INC OME-TAX ACT OR NOT. INCASE EVEN IF IT IS NOT ACCOUNTED FOR RELEVANT AGR ICULTURAL INCOME-TAX ACT IT DOES NOT MEAN THAT THE ASSESSEE HAS NOT EARNED T HE INCOME. APPROPRIATE ACTION MAY BE TAKEN AGAINST HUF FOR VIO LATION OF RELEVANT PROVISIONS IN THAT REGARD. BUT THE FACT REMAINS TH AT THE AGRICULTURAL INCOME FROM SAID HOLDING BY HUF CANNOT BE DISPUTED. NOW THE QUESTION WHETHER THE AGRICULTURAL INCOME ARISING FROM THE HU F HOLDING HA BEEN PARTITIONED AMONG CO-PARCENER THERE OR NOT. SO THE MATTER IS RESTORED TO ASSESSING OFFICER TO DECIDE THE ISSUE AT HAND IN TH E LIGHT OF THE ABOVE OBSERVATION AFTER PROVIDING DUE OPPORTUNITY OF HEA RING TO THE ASSESSEE. 12. THE NEXT ISSUE IS WITH REGARD TO RS.3 60 000/- . THIS ISSUE IS ALSO RELATED WITH THE AGRICULTURAL INCOME FROM THE SAID LAND HELD BY HIS WIFE AND HUF. THIS ISSUE IS ALSO RESTORED TO ASSE SSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AS PER FACTS AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 13. THE NEXT ISSUE IS WITH REGARDS TO TREATING THE LIABILITY OF HUF OF RS.37 31 000/-. THIS ISSUE HAS BEEN TAKEN CARE OF BY OUR FINDING IN PARA- 5 OF THIS ORDER. THE ASSESSING OFFICER IS D IRECTED ACCORDINGLY. ITA NOS.408 & 433(B)/09 22 14. THE NEXT ISSUE IS WITH REGARDS TO DEPRECIATION ON VEHICLES O ACCOUNT OF PERSONAL USE FROM 30% TO 50%. UNDER THE FACTS AND CIRCUMSTANCES THIS ADDITION IS DIRECTED TO BE DELE TED BECAUSE THE ASSESSEE HAS OFFERED 30% ON ACCOUNT OF PERSONAL USE OF VEHICLES. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THE NEXT ISSUE IS WITH REGARDS TO INTEREST U/S 234A 234B AND 234C WHICH IS CONSEQ UENTIAL TO THE GROUNDS DISCUSSED EARLIER. THE ASSESSING OFFICER I S DIRECTED ACCORDINGLY. 15. IN THE RESULT THE REVENUES APPEAL IS DISMISS ED AND THE ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED A BOVE. PRONOUNCED IN THE OPEN COURT ON THE 16 TH APRIL 2010. (A. MOHAN ALANKAMONY) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED: 16-04-2010 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR ITAT BANGALORE