MORESHAVAR JANU VAITI, Mumbai v. DY CIT CIR 28(2), Mumbai

ITA 4701/MUM/2003 | 1998-1999
Pronouncement Date: 14-05-2010 | Result: Allowed

Appeal Details

RSA Number 470119914 RSA 2003
Bench Mumbai
Appeal Number ITA 4701/MUM/2003
Duration Of Justice 6 year(s) 10 month(s) 27 day(s)
Appellant MORESHAVAR JANU VAITI, Mumbai
Respondent DY CIT CIR 28(2), Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 14-05-2010
Date Of Final Hearing 22-12-2009
Next Hearing Date 22-12-2009
Assessment Year 1998-1999
Appeal Filed On 17-06-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI. BEFORE S/SHRI R.V.EASWAR SR. V.P. & J.SUDHAKAR RED DY AM I.T.A NO.4701MUM/2003 ASSESSMENT YEAR: 1998-99 MORESHWAR JANU VAITY V. THE DCIT CIRCLE 28(2) MATRU BHAVAN MALWANI CHURCH C-13 R.NO.506 PRA TYAKSHAKAR MAREVE ROAD MALAD(W) MUMBAI. BHAVAN B.K.COMPLE X BANDRA MUMBAI. I.T.A. NO.2667/MUM/2003 ASSESSMENT YEAR: 1998-99 THE DCIT CIRCLE 28(2) V. MORESHWAR JANU VAITY MUMBAI. MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SAMER DALAL RESPONDENT BY : SHRI VIKRAM GAUR O R D E R PER R.V.EASWAR SR. V.P. THESE ARE CROSS APPEALS RELATING TO THE ASSESSMENT YEAR 1998-99. THE ASSESSEE IS AN INDIVIDUAL ACTING AS AGENT FOR SELLING FISH ON C OMMISSION BASIS. THE APPEALS ARISE OUT OF THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE I. T.ACT 1961 ON 28.2.2001. 2. WE WILL FIRST TAKE UP THE APPEAL FILED BY THE DE PARTMENT IN ITA NO.2667/M/2003 . 3. THE FIRST GROUND IS THAT THE CIT (A) ERRED IN A LLOWING EXPENSES OF RS.1 98 094/- DISALLOWED BY THE ASSESSING OFFICER. I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 2 4. BRIEF FACTS IN CONNECTION WITH THIS GROUND ARE T HAT IN THE PROFIT AND LOSS ACCOUNT RELATING TO FISH BUSINESS THE ASSESSEE SHOWED INCO ME OF RS.3 61 925/- AND AFTER DEDUCTING THE DIRECT EXPENSES AND INDIRECT EXPENSES THE LOSS OF RS.94 632/- WAS SHOWN. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF THE BUSINESS AND IN RESPONSE TO THE SAME THE ASSESSEE STATED THAT HE WAS ACTING AS AGENT SELLING FISH ON COMMISSION BASIS AND FOR EARNING THE INCOME HE HAD TO INCUR E XPENSES ON ICE LABOUR CHARGES LICENSE FEE TELEPHONE EXPENSES RENT RATES AND TAXES ETC RESULTING IN A NET PROFIT OF RS.94 791/- WHICH AFTER CLAIMING DEPRECIATION AND INTEREST ON VEHICLE LOAN RESULTED IN A NET LOSS. THE ASSESSING OFFICER NOTICED THAT THE MAJOR EXPENSES W ERE INTEREST OF RS.1 92 918/- DEPRECIATION OF RS.1 11 741/- MUNICIPAL TAXES AND RENTS AND TAXES. HE NOTED FROM THE BALANCE SHEET THAT NO LOANS WERE TAKEN BY THE ASSES SEE FOR THE PURPOSES OF FISH BUSINESS. HE FURTHER NOTICED FROM THE CASH BOOK THAT CASH REC EIPTS IN LUMP SUM WERE SHOWN WITHOUT ANY DETAILS. THE ASSESSEE DID NOT ALSO FUR NISH THE DETAILS OF PURCHASES AND SALES ON COMMISSION BASIS. IT WAS FURTHER GATHERED BY TH E AO THAT THE ASSESSEE ALSO OWNED OTHER BUSINESS SUCH AS HOTEL AND WINE MART AS ALSO RESORT. FROM THE FACTS MADE AVAILABLE TO HIM HE CAME TO THE CONCLUSION THAT TH ERE IS NO EVIDENCE TO SHOW ANY FISH BUSINESS. HE WAS OF THE VIEW THAT DEPRECIATION WHI CH CONSTITUTED A MAJOR COMPONENT RELATED TO VEHICLES SHOWN AS FIXED ASSETS BUT AT TH E SAME TIME HE NOTED THAT NO VEHICLES WERE SHOWN. IN SUPPORT OF THE CLAIM OF EXPENSES T HE ASSESSEE SUBMITTED THE CASH BOOKS BEFORE THE AO WITHOUT ANY SUPPORTING VOUCHERS. FRO M THESE FACTS THE AO CAME TO THE CONCLUSION THAT THE INCOME FROM FISH BUSINESS WAS A RUSE TO INTRODUCE THE ASSESSEES UNACCOUNTED INCOME INTO THE BOOKS AND THAT THE CLAI M OF EXPENSES WAS MADE ONLY TO GIVE CREDIBILITY TO THE BUSINESS. IN THESE CIRCUMSTANCE S THE AO TOOK THE INCOME OF RS.3 61 925/- SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE FISH BUSINESS AS THE MISCELLANEOUS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) AND MADE DETAILED SUBMISSIONS. TAKING NOTE OF THE SAME AND TAKING A PRIMA FACIE VIEW THAT THE AOS CONCLUSION IS BASED ON VAGUE OBSERVATIONS AND WITHOUT CONFRONTING THE A SSESSEE PROPERLY WITH THE MATERIAL THE CIT (A) CALLED FOR A REMAND REPORT FROM THE ASS ESSING OFFICER. WHILE CALLING FOR I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 3 THE REMAND REPORT THE CIT (A) OBSERVED THAT THE AO HAD NOT BROUGHT ANY EVIDENCE TO PROVE HIS ALLEGATION THAT THE ASSESSEE HAD MAJOR SH ARES IN HOTEL AND RESORT. HE DIRECTED THE AO TO REEXAMINE THE ASSESSEES CLAIM THAT HE WA S IN RECEIPT OF INCOME FROM FISH BUSINESS AND TO LOOK INTO THE BOOKS OF ACCOUNT AND OTHER EVIDENCES TO ASCERTAIN THE EXACT INCOME FROM THE SAID BUSINESS AND ALSO INDICATE THE EXTENT OF EXPENSES WHICH ARE ALLOWABLE AGAINST THE FISH INCOME. THE AO WAS ALSO DIRECTED TO STATE THE EVIDENCE ON THE BASIS OF WHICH HE CONCLUDED THAT THE ASSESSEE OWNE D RESORT NEAR MUMBAI AND HAD SHARE IN SOME HOTEL BUSINESS. 6. THE ASSESSING OFFICER SUBMITTED THE REMAND REPOR T ON 17 TH DECEMBER 2002 NARRATING THE NUMBER OF OPPORTUNITIES WHICH THE ASS ESSEE WAS GIVEN BEFORE COMPLETING THE ASSESSMENT. HE REFERRED TO THE LETTER DATED 30 .9.2002 ISSUED TO THE ASSESSEE ASKING HIM TO FURNISH THE DETAILS OF FISH INCOME SUCH AS B ILLS FOR PURCHASE OF ICE LABOUR CHARGES DETAILS OF PERSONS FROM WHOM PURCHASES AND SALES OF FISH WERE MADE. THE AO STATED THAT IN THIS LETTER THE ASSESSEE WAS ASKED TO EXPLAIN H IS ASSOCIATION WITH M/S. CHIMNEY HOTEL & ROAPWAY PVT LTD. AND M/S. MORESHWAR WINE MART. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE STATED THAT HE WAS THE MANAGI NG DIRECTOR OF M/S. CHIMNEY HOTEL AND ROPEWAY PVT LTD. AND WAS ALSO A PARTNER IN MOR ESHWAR WINE MART. HE HAD SUBMITTED SOME BILLS FOR PURCHASE OF ICE BUT NO EVI DENCE WAS ADDUCED IN RESPECT OF OTHER EXPENSES. THE AO ALSO STATED IN THE REMAND REPORT THAT THE LOANS BORROWED BY THE ASSESSEE WERE INVESTED IN FIXED ASSETS AND OTHER IN VESTMENTS BUT WERE NOT UTILIZED FOR FISH BUSINESS AND ACCORDINGLY THE INTEREST CLAIMED OF RS.1 92 918/- WAS NOT ALLOWABLE EXPENDITURE. HE CONCLUDED THE REMAND REPORT BY SAY ING THAT THE ASSESSEE IS DIVERTING FUNDS FROM SOMEWHERE-ELSE IN THE GUISE OF INCOME FR OM FISH BUSINESS WHICH CANNOT BE ACCEPTED. 7. THE CIT(A) WOULD APPEAR TO HAVE CALLED UPON THE ASSESSEE TO SUBMIT A REJOINDER TO THE REMAND REPORT FILED BY THE ASSESSING OFFICER . ACCORDINGLY IN HIS WRITTEN SUBMISSIONS DATED 2.1.2003 THE ASSESSEE SUBMITTED THAT HE WAS A FISHERMAN BY OCCUPATION FOR THE LAST 50 YEARS AND IS WELL KNOWN AND RESPECTED IN THE COMMUNITY. HE I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 4 ALSO POINTED OUT THAT THE INCOME FROM FISH BUSINESS HAS BEEN ACCEPTED BY THE DEPARTMENT YEAR AFTER YEAR INCLUDING IN THE SCRUTINY ASSESSM ENT FOR THE ASSESSMENT YEAR 1996-97. THE ASSESSEE ALSO EXPLAINED THE FISH BUSINESS CARRI ED ON BY HIM AND THE MODUS OPERANDI ADOPTED AND SUBMITTED THAT HE HAD TO INCUR THE FOLL OWING EXPENSES AGGREGATING TO RS.1 98 094/- WHILE EARNING THE FISH INCOME: A. FUEL AND MAINTENANCE : RS. 22 400 B. TRAVELING AND CONVEYANCE : RS. 1 350 C. MISC EXPENSES : RS. 1 845 D. BANK CHARGES : RS. 25 E. BANK INT. ON VEHICLE LOAN : RS. 14 052 F. LICENCE FEES : RS. 1 200 G. TELEPHONE EXPENSES : RS. 8 000 H. DEPRECIATION : RS.1 11 742 I. RENT RATES & TAXES : RS. 37 480 TOTAL: RS.1 98 094 IT WAS SUBMITTED THAT THE AFORESAID EXPENSES WERE I NCURRED BY THE ASSESSEE TO EARN FISH INCOME AND THE AO WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES WHICH AMOUNTS TO TAXING THE GROSS RECEIPTS WHICH IS UNTENABLE. THE ASSESSEE ALSO SUBMITTED THAT THE INTEREST EXPENSES OF RS.1 92 918/- SHOULD BE ALLOWE D AND EXPLAINED HOW THE LOANS WERE USED FOR THE PURPOSE OF BUSINESS. HE POINTED OUT T HAT THE EXPENSES WERE BEING ALLOWED YEAR AFTER YEAR. 8. AFTER TAKING INTO ACCOUNT THE REMAND REPORT OF T HE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE THE CIT (A) HELD THAT THE GROSS RECEIPTS FROM THE FISH BUSINESS SHOULD NOT BE BROUGHT TO TAX AND EXPENSES INCURRED TO EARN THE INCOME SHOULD BE ALLOWED. HE FOUND THAT EXPENSES AGGREGATING TO RS. 1 98 094/- SHOULD BE ALLOWED AGAINST THE RECEIPTS OF RS.3 61 925/- WHICH WILL GIVE NET INCOME OF RS.1 63 831/-. HOWEVER HE FOUND NO JUSTIFICATION FOR THE CLAIM OF INTEREST EX PENSES OF RS.1 92 918/-. HE FOUND THAT THE ASSESSEES CLAIM WAS THAT INTEREST EXPENSES SHO ULD BE DEDUCTED FROM HIS SHARE OF PROFIT AND SALARY RECEIVED FROM M/S. MORESHWAR WINE MART IN WHICH HE WAS A PARTNER I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 5 ALONG-WITH HIS SON. ACCORDING TO THE CIT (A) THE INTEREST EXPENSES WERE DEDUCTIBLE ONLY FROM THE INCOME OF THE FIRM AND NOT AGAINST THE SAL ARY AND SHARE OF PROFIT RECEIVED BY THE ASSESSEE FROM THE FIRM. ACCORDINGLY HE SUSTAINED THE DISALLOWANCE OF INTEREST EXPENSES. 9. THE DEPARTMENT IS IN APPEAL QUESTIONING THE ALLO WANCE OF EXPENSES AGGREGATING TO RS.1 98 094/-. 10. THE LD SR. DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THERE WAS NO DISPUTE THAT THE ASSESSEE WAS EARNING COMMISSION INCOME FOR ACTI NG AS AGENT FOR SELLING FISH AND THAT THE ONLY ISSUE IS WHETHER ANY EXPENSES ARE ALLOWABL E AGAINST THE SAME. HE SUBMITTED THAT THE COMMISSION AGENT IS NOT REQUIRED TO USE VEHICLE S FOR CARRYING FISH AND HE ONLY ARRANGES FOR SALE BY BRINGING THE SELLERS AND PURCH ASERS TOGETHER FOR WHICH HE EARNED COMMISSION. IT IS THEREFORE CONTENDED THAT THE C LAIM OF DEPRECIATION OF RS.1 11 742/- WHICH CONSTITUTED A MAJOR ITEM OF RS.1 98 094 CAN NOT BE ALLOWED. IN THIS BEHALF IT IS POINTED OUT THAT THE ASSESSEE HAS NOT DEBITED ANY E XPENSES ON THE VEHICLES AND THEREFORE IT IS NOT KNOWN AS TO HOW THE DEPRECIATION CAN BE A LLOWED. IT IS FURTHER CONTENDED THAT THE CIT (A) HAS NOT GIVEN ANY REASONS FOR HIS DECISION. 11. ON THE OTHER HAND LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS IN THE FISH BUSINESS FOR A VERY LONG TIME AND THE DEPA RTMENTAL AUTHORITIES HAVE ACCEPTED THAT THE ASSESSEE CARRIES ON FISH BUSINESS IN THEIR ASSE SSMENT ORDERS FOR THE ASSESSMENT YEAR 1996-97 AND EVEN IN A.Y. 2005-06 WHICH IS A LATER ASSESSMENT YEAR. COPIES OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06 WE RE FILED IN WHICH THE AO HAS MENTIONED THAT THE ASSESSEE IS CARRYING ON FISH BUS INESS. IN FACT HE HAS ENHANCED THE INCOME TO RS.75 000/- AS AGAINST RS.55 190/- WHICH WAS SHOWN BY THE ASSESSEE. IT IS THEREFORE CONTENDED THAT IT CANNOT BE DISPUTED THA T THE ASSESSEE WAS CARRYING ON FISH BUSINESS. IT IS THEN SUBMITTED THAT THE BUSINESS C ANNOT BE CARRIED ON WITHOUT ANY EXPENDITURE. IT IS POINTED OUT THAT ALL THE EXPENS ES CLAIMED BY THE ASSESSEE ARE INCIDENTAL TO THE BUSINESS AND SHOULD BE ALLOWED. STRONG RELI ANCE WAS PLACED ON THE CONCLUSION OF THE CIT (A). I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 6 12. ON A CAREFUL CONSIDERATION OF THE RIVAL CONTENT IONS WE ARE OF THE VIEW THAT THE ASSESSEE EVEN ACCORDING TO THE DEPARTMENTAL AUTHOR ITIES WAS CARRYING ON FISH BUSINESS ON COMMISSION BASIS AND THIS POSITION HAS BEEN ACCEPTE D BY THE DEPARTMENT FOR THE ASSESSMENT YEARS 1996-97 AND 2005-06. THE DEPARTME NT IN ITS GROUND HAS NOT QUESTIONED THE DECISION OF THE CIT (A) THAT THE ASSESSEE DID C ARRY ON FISH BUSINESS BUT HAS ONLY QUESTIONED THE ALLOWANCE OF EXPENDITURE OF RS.1 98 094/-. THE MAJOR COMPONENTS OF THE EXPENSES IS THE DEPRECIATION OF RS.1 11 742/-. IT IS NOT CLEAR AS TO ON WHAT ASSETS THE DEPRECIATION HAS BEEN CLAIMED. THE ASSESSEE HAS FI LED THE COMPUTATION OF INCOME AS WELL AS PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. PAGE 6 OF ASSESSEES PAPER BOOK CONTAINS THE DETAILS OF FIXED ASSETS AND THE DEPRECIATION CL AIMED. HERE ALSO THE CLAIM IS ON FURNITURE AND FIXTURES AND VEHICLE. IN THE CASE OF FURNITURE AND FIXTURES THE DEPRECIATION CLAIMED IS RS.1 658.50 AND IN THE CASE OF VEHICLES THE CLAIM IS RS.1 10 083.40. IT IS POSSIBLE THAT SOME FURNITURE AND FIXTURES ARE REQUI RED FOR THE USE OF THE ASSESSEE IN THE PLACE OF BUSINESS AND ACCORDINGLY THE DEPRECIATIO N OF RS.1 658.50- IS HELD TO BE ALLOWABLE. HOWEVER WITH REGARD TO DEPRECIATION ON VEHICLES THERE IS NO EVIDENCE ADDUCED EITHER BEFORE THE ASSESSING OFFICER OR BEFO RE THE CIT (A) TO SHOW THE NATURE OF VEHICLES AND TO PROVE THEIR USE FOR THE PURPOSE OF ASSESSEES BUSINESS. IT SHOULD BE REMEMBERED THAT THE ASSESSEE HAS TO PROVE NOT ONLY THE OWNERSHIP OF THE VEHICLES BUT ALSO THAT THEY WERE USED FOR THE PURPOSE OF BUSINESS AS REQUIRED BY SECTION 32. IT IS WELL SETTLED THAT THE ONUS IS ON THE ASSESSEE TO SUPPORT THE CLAIM OF EXPENDITURE BY ADDUCING EVIDENCE. DESPITE SEVERAL OPPORTUNITIES GIVEN BY T HE ASSESSING OFFICER TO THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF EXPENSES THE ASSESSEE DO ES NOT APPEAR TO HAVE TAKEN PAINS TO SUPPORT THE CLAIM OF DEPRECIATION WITH PROPER DETAI LS AND IN TERMS OF SECTION 32. THEREFORE THE DEPRECIATION OF RS.1 10 083.40 CLAIM ED IN RESPECT OF VEHICLES CANNOT BE ALLOWED AND THE DECISION OF THE CIT (A) IS REVERSED TO THIS EXTENT. 13. THE OTHER EXPENSES APPEAR TO US TO BE NORMAL BU SINESS EXPENSES EXCEPT THE BANK INTEREST OF RS.14 052/- ON VEHICLE LOAN. SO FAR AS THIS IS CONCERNED THE SAME REASONING AS IN THE CASE OF DEPRECIATION ON VEHICLES WILL APPLY. THE ASSESSEE COULD NOT PROVE THAT THE I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 7 VEHICLES WERE USED FOR THE PURPOSES OF BUSINESS IN FISH AND THEREFORE THE BANK INTEREST ALSO CANNOT BE ALLOWED. THE DECISION OF THE CIT (A ) IS ALSO REVERSED ON THIS ASPECT. THIS GROUND OF DEPARTMENT IS THUS PARTLY ALLOWED. 14. THE SECOND GROUND IS THAT THE CIT (A) ERRED IN DIRECTING THE AO TO TREAT THE ASSESSEES AGRICULTURAL INCOME OF RS.4 58 600/- AS GENUINE AGRICULTURAL INCOME. 15. IN THE RETURN OF INCOME THE ASSESSEE DECLARED NET AGRICULTURAL INCOME OF RS.4 58 600/-. THIS WAS ARRIVED AT BY DEDUCTING TH E AGRICULTURAL EXPENSES OF RS.2 53 311/- FROM GROSS AGRICULTURAL INCOME OF RS. 7 11 911/-. THE ASSESSEE WAS ASKED BY THE AO TO FILE THE DETAILS OF AGRICULTURAL LAND HELD BY HIM SUCH AS AREA LOCATION NATURE OF CROPS QUANTITATIVE DETAILS OF PRODUCE ETC. THE ASSESSEE REPLIED IN A LINE SAYING THAT WE PRODUCE VEGETABLE RICE TADI FROM TAD AND MAD E TC SALE IS DONE TO LOCAL MARKET BY BASKETS OR GUNNY BAGS ONLY THE ASSESSEE WAS AGAIN ASKED TO GIVE THE EXACT D ETAILS OF CROPS EXPENSES ETC. SOME DETAILS APPEAR TO HAVE BEEN FURNISHED ON 24.1.2001. THEREAFTER THE ASSESSEES SON WAS SUPPOSED TO FURN ISH FURTHER DETAILS BUT THEY WERE NOT FILED. THE ASSESSING OFFICER GAINED THE IMPRESSION THAT THE ASSESSEE WAS DELAYING THE PROCEEDINGS. WHEN FINALLY THE DETAILS CALLED FOR W ERE NOT FORTHCOMING THE AO HELD THAT MERE OWNERSHIP OF LAND CANNOT PROVE THE RECEIPT OF AGRICULTURAL INCOME AND IT WAS NECESSARY FOR THE ASSESSEE TO PROVE THE AGRICULTURA L OPERATIONS WITH PROPER EVIDENCE AND ALSO TO FURNISH THE DETAILS AND EVIDENCE OF EXPENSE S. NO RECORDS OF THE EXPENSES OR THE CROP YIELD OR THE SALES WERE PRODUCED. FROM THE CA SH BOOK OF THE ASSESSEE THE AO FURTHER NOTICED THAT THE CASH WAS BEING INTRODUCED AS AGRICULTURAL INCOME AT THE END OF EACH MONTH WHICH HE CONSIDERED TO BE PECULIAR. THE AO MADE PRELIMINARY ENQUIRY ABOUT THE LAND IN THE MANORI VILLAGE WHICH REVEALED THAT FEW VEGETABLES ARE GROWN IN THIS AREA BUT THE YIELDS ARE NOT THAT HIGH TO FETCH THE INCOME OF SUCH MAGNITUDE AS SHOWN BY THE ASSESSEE. IN THIS VIEW OF THE MATTER THE NET AGRICULTURAL INCOME OF RS.4 58 600/- WAS ASSESSED AS MISCELLANEOUS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 8 16. ON APPEAL BEFORE THE CIT (A) THE CIT (A) CALL ED FOR REMAND REPORT FROM THE ASSESSING OFFICER WITH REGARD TO ASSESSEES CLAIM OF AGRICULTURAL IN COME. IN HIS REMAND REPORT THE AO STATED THAT DESPITE REPEATED OPPORTU NITIES THE ASSESSEE DID NOT SUBMIT ANY DETAILS OF THE CROPS GROWN EXPENSES INCURRED DETA ILS OF ACRES OF LAND FOR EACH OF THE CROPS GROWN ETC. ACCORDING TO THE AO THE ASSESSE E ONLY SUBMITTED THE PAPERS RELATING TO PURCHASE OF LAND WITHOUT ANY DETAILS REGARDING EXPE NSES. WHEN THE REMAND REPORT WAS PUT TO THE ASSESSEE FOR HIS REJOINDER THE ASSESSEE FURNISHED DETAILS OF LAND HOLDING BEFORE THE CIT (A) AND COPIES OF THE AGREEMENT FOR PURCHAS E OF LAND. HE CLAIMED THAT ACCORDING THE LAW ONLY AN AGRICULTURIST CAN PURCHASE AGRICUL TURAL LAND AND THIS ITSELF PROVED THAT THE ASSESSEE WAS AN AGRICULTURIST. HE REFERRED TO THE PAST ASSESSMENTS IN WHICH THE AGRICULTURAL INCOME WAS SHOWN IN THE RETURNS AND WA S ACCEPTED BY THE DEPARTMENT. A CERTIFICATE FROM THE LOCAL AUTHORITY CERTIFYING THA T THE ASSESSEE WAS AN AGRICULTURIST WAS ALSO FILED BEFORE THE CIT (A). THE ASSESSEE THEREA FTER WENT ON TO STATE WHAT CROPS WERE BEING SOLD AND EXPLAINED IN GENERAL HOW THE AGRICUL TURAL ACTIVITIES WERE CARRIED ON BY HIM. HE STATED THAT TADY WAS SOLD LOCALLY IN ORDER TO SAVE EXPENSES OF TRANSPORTATION COMMISSION TO BROKERS ETC AND SO WAS THE CASE WITH VEGETABLES WHICH WERE SOLD NEAR RAILWAY STATION. IT WAS SUBMITTED THAT THE TOTAL A GRICULTURAL LAND WAS 16 ACRES FROM WHICH EARNING OF NET INCOME OF RS.4 58 600/- WAS R EASONABLE. 17. AFTER TAKING INTO ACCOUNT THE RIVAL SUBMISSIONS THE CIT(A) HELD THAT THE ASSESSEE HAS PROVED HIS CASE WITH DOCUMENTARY EVIDENCE REGAR DING HOLDING OF AGRICULTURAL LAND AND CULTIVATION DONE THEREON. HE OBSERVED THAT FAI LURE OF THE ASSESSEE TO SUBMIT DOCUMENTARY EVIDENCE IN RESPECT OF EXPENSES CANNOT BE SUFFICIENT GROUND FOR TREATING THE AGRICULTURAL INCOME AS INCOME FROM UNDISCLOSED SOUR CES. HE HELD THAT THE ASSESSEE WAS HOLDING 16 ACRES OF AGRICULTURAL LAND SHOWING INCOM E OF RS.4 58 600/- WHICH CAME TO AN AVERAGE OF ONLY RS.28 662/- PER ACRE WHICH IS VERY REASONABLE. HE ALSO REFERRED TO THE ASSESSMENT ORDER WHERE ACCORDING TO HIM THE AO H AS ACCEPTED THAT VEGETABLES WERE GROWN IN THE LAND OWNED BY THE ASSESSEE. IN THIS V IEW OF THE MATTER HE DIRECTED THE AO TO ACCEPT THE AGRICULTURAL INCOME DECLARED BY THE A SSESSEE TO BE GENUINE. I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 9 18. THE REVENUE IS IN APPEAL TO CONTEND THAT THE OR DER OF THE CIT (A) IS WHOLLY UNJUSTIFIED AND HIS CONCLUSIONS WERE NOT BASED ON A NY EVIDENCE OR PROOF ADDUCED BY THE ASSESSEE. IT WAS VEHEMENTLY SUBMITTED THAT MERE OW NERSHIP OF AGRICULTURAL LAND WAS NOT PROOF FOR EARNING AGRICULTURAL INCOME WHICH IS TO BE PROVED BY THE ASSESSEE BY ADDUCING EVIDENCE FOR HAVING CARRIED OUT AGRICULTURAL OPERAT IONS ON THE LAND SHOWING THE DETAILS OF CROPS GROWN PROOF OF EXPENDITURE FOR PURCHASE OF F ERTILIZER AND SEEDS ETC AND ALSO ESTABLISHING THE CLAIM OF LABOUR CHARGES AND FURTHE R BY ADDUCING EVIDENCE FOR THE SALES BY PRODUCING SALES BILLS AND SO ON AND NONE OF THESE W ERE PROVIDED BY THE ASSESSEE AND THAT THE CIT (A) WAS NOT JUSTIFIED IN SAYING THAT THE AS SESSEE HAS PROVED HIS CASE WITH DOCUMENTARY EVIDENCE NOT ONLY FOR LAND HOLDING BUT ALSO FOR CULTIVATION DONE THEREON. IT IS SUBMITTED THAT WHATEVER MAY HAVE HAPPENED IN EAR LIER YEARS SO FAR AS THIS YEAR IS CONCERNED IT WAS THE ASSESSEES DUTY TO PROVE THE EARNING OF AGRICULTURAL INCOME ESPECIALLY WHEN SEVERAL OPPORTUNITIES WERE GIVEN TO HIM AND HAVING FAILED TO DO SO THE CIT (A) WAS NOT RIGHT IN DIRECTING THE AO TO ACCEPT THE ASSESSEES CLAIM. 19. ON THE OTHER HAND LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FINDINGS OF THE CIT (A) HAVE TO BE DISLODGED BY THE DEPARTMENT BUT IT WAS NOT DONE SO. IT WAS SUBMITTED THAT THE AO NOT HAVING DISPUTED THE LANDHOLDING AND HAVING ENQUIRED FROM THE VILLAGE FROM WHICH HE CAME TO KNOW THAT VEGETABLES WERE GR OWN IN THIS AREA HE OUGHT TO HAVE ACCEPTED THE ASSESSEES CLAIM ESPECIALLY WHEN IT WA S ACCEPTED IN THE EARLIER YEARS. HE THUS PLEADED THAT THE ORDER OF THE CIT (A) SHOULD BE UPHELD. 20. WE HAVE CAREFULLY CONSIDERED THE FACTS AND RIVA L CONTENTIONS. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSES CASE INIT IALLY WAS THAT HE PRODUCED VEGETABLES RICE TADI ETC AND THESE WERE SOLD IN THE LOCAL MA RKET BY BASKETS OR GUNNY BAGS. WHEN THE ASSESSING OFFICER WANTED TO EXAMINE THE MATTER FURT HER THE ASSESSEE DID NOT SUBMIT THE REQUIRED DETAILS DESPITE SEVERAL OPPORTUNITIES. TH E ASSESSING OFFICER DID NOT DISPUTE THE FACT THAT THE ASSESSEE OWNED AGRICULTURAL LAND AND WHAT HE WANTED WAS PROOF OF AGRICULTURAL OPERATION SO THAT THE CLAIM THAT THE A SSESSEE WAS IN RECEIPT OF AGRICULTURAL INCOME IS ESTABLISHED. BECAUSE OF THE INACTION ON THE PART OF THE ASSESSEE THE AO HIMSELF I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 10 MADE PRELIMINARY ENQUIRIES IN MANORI VILLAGE WHERE THE LAND WAS SITUATED AND CAME TO KNOW THAT VEGETABLES WERE GROWN IN THAT AREA BUT TH E YIELD IS NOT THAT HIGH TO FETCH THE AGRICULTURAL INCOME OF SUCH MAGNITUDE AS CLAIMED BY THE ASSESSEE. HE THEREFORE TREATED THE ENTIRE AGRICULTURAL INCOME AS TAXABLE INCOME. WHEN THE MATTER REACHED THE CIT (A) THE ASSESSEE FILED A CERTIFICATE FROM THE LOCAL AUT HORITY TO THE EFFECT THAT HE IS AN AGRICULTURIST. EVEN BEFORE THE CIT (A) THE ASSESS EE DOES NOT APPEAR TO HAVE ADDUCED ANY FRESH EVIDENCE IN SUPPORT OF HIS CLAIM. WE FIND FRO M THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT (A) WHICH ARE REPRODUCED IN PARA 8 OF HIS ORDER THAT THE ASSESSEE HAS INDULGED IN GENERAL STATEMENTS ABOUT HOW THE AG RICULTURAL OPERATIONS ARE CARRIED ON HOW THE LABOURERS ARE PAID HOW THE PRODUCE IS SOLD ETC. THERE WAS NO EVIDENCE ADDUCED BEFORE THE CIT (A) IN SUPPORT OF THESE SUBMISSIONS . THE CIT (A) HOWEVER HAS STATED THAT THE ASSESSEE HAS PROVED HIS CASE WITH DOCUMENT ARY EVIDENCE. WE CAN ONLY SURMISE THAT THE DOCUMENTARY EVIDENCE REFERS TO THE CERTIFI CATE OF LOCAL AUTHORITY AND LAND HOLDING BECAUSE NO OTHER DOCUMENTARY EVIDENCE WOULD APPEAR TO HAVE FILED BEFORE THE CIT (A). THE ONLY REASON GIVEN BY THE CIT (A) TO ACCEPT THE ASSESSEES CLAIM IS THAT THE INCOME OF RS.28 662/- PER ACRE SHOWN BY THE ASSESSEE IS VERY REASONABLE AND THAT THE AO HIMSELF HAS VERIFIED FROM THE VILLAGE AS TO THE CORRECTNESS OF THE CLAIM THAT THE ASSESSEE GROWN VEGETABLES. WE ARE UNABLE TO UPHOLD THE REASONING OF THE CIT(A) IN TOTO. THERE IS NO DOUBT THAT THE ASSESSEE HELD 16 ACRES OF AGRICULTUR AL LAND. WE MAY ALSO TAKE IT THAT HE WAS AN AGRICULTURIST WHICH IS SUPPORTED BY A CERTIFICAT E OF LOCAL AUTHORITY FILED BEFORE THE CIT (A). HOWEVER THE ASSESSEE HAS NOT DISCHARGED HIS BURDEN TO SHOW DESPITE SEVERAL OPPORTUNITIES THAT AGRICULTURAL OPERATIONS WERE CA RRIED ON IN THE LAND. HE HAS FAILED TO SUBMIT ANY EVIDENCE REGARDING CARRYING ON THE AGRIC ULTURAL OPERATION PAYMENTS TO LABOURERS PURCHASE OF FERTILIZERS SEEDS ETC PRO OF OF SALES OF PRODUCE PROOF AS TO WHAT PRODUCE WAS GROWN AND IN WHAT EXTENT OF LAND ETC. THERE ARE ONLY GENERAL SUBMISSIONS MADE BEFORE THE CIT (A) AS TO HOW THE OPERATIONS WE RE CARRIED ON. MERELY BECAUSE THE NET INCOME PER ACRE SHOWN BY THE ASSESSEE IS REASON ABLE IT DOES NOT FOLLOW THAT THE ASSESSEE CAN BE RELIEVED OF THE BURDEN OF ESTABLISH ING THAT HE IN FACT CARRIED OUT AGRICULTURAL OPERATION ON THE LAND AND SOLD THE PRO DUCE TO IDENTIFIABLE PERSONS. THE ASSESSING OFFICER NO DOUBT VERIFIED FROM MANORI VIL LAGE BUT THE ENQUIRY ONLY REVEALED I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 11 THAT VEGETABLES WERE GROWN IN THAT AREA. THE ENQUI RY DID NOT REVEAL THAT ANY OTHER PRODUCE SUCH AS RICE TADI ETC WERE GROWN IN THAT AREA. THIS ASPECT HAS NOT BEEN KEPT IN VIEW BY THE CITA). HOWEVER IT IS ALSO A FACT THAT IN THE EARLIER YEARS THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME WHICH WAS ACCEPTED BY THE DEPARTMENTAL AUTHORITIES. THUS TAKING ALL THESE ASPECTS INTO CONSIDERATION IT IS JUST POSSIBLE THAT THE ASSESSEE WAS IN RECEIPT OF SOME AGRICULTURAL INCOME THOUGH NOT TO T HE EXTENT CLAIMED BY HIM. THERE IS NO INFORMATION AS TO WHAT WAS THE AGRICULTURAL INCOME DECLARED BY HIM IN THE EARLIER YEARS AND ACCEPTED BY THE DEPARTMENTAL AUTHORITIES. IN T HIS SITUATION WE CAN ONLY INDULGE IN AN ESTIMATE OF THE NET AGRICULTURAL INCOME RECEIVED BY THE ASSESSEE. IN OUR OPINION THE NET AGRICULTURAL INCOME OF RS.10 000/- PER ACRE WOULD B E REASONABLE. ACCORDINGLY FOR 16 ACRES OF AGRICULTURAL LAND AGRICULTURAL INCOME CAN BE ESTIMATED AT RS.1 60 000/- AS AGAINST RS.4 58 600/- CLAIMED BY THE ASSESSEE. WE DIRECT A CCORDINGLY AND ALLOW THIS GROUND OF THE DEPARTMENT IN PART. 21. WE NOW TAKE UP THE ASSESSEES APPEAL WHICH IS D IRECTED AGAINST THE DISALLOWANCE OF INTEREST OF RS.1 92 915/-. 22. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E INTEREST EXPENDITURE WAS CLAIMED AGAINST THE INCOME FROM FISH BUSINESS AND WAS DEBIT ED TO THE PROFIT AND LOSS ACCOUNT RELATING TO THE SAID BUSINESS. THE ASSESSING OFFIC ER DISALLOWED THE INTEREST ON THE GROUND THAT BALANCE SHEET DID NOT SHOW ANY LOANS BORROWED FOR THE PURPOSE OF FISH BUSINESS. HE ALSO PERUSED THE DAY BOOK OF THE ASSESSEE AND FOUND CASH RECEIPTS IN LUMPSUM AMOUNTS WERE ENTERED THEREIN WITHOUT ANY DETAILS AS TO FROM WHOM THEY WERE RECEIVED. HE THEREFORE DISALLOWED THE ASSESSEES CLAIM THAT HE WAS CARRYING ON FISH BUSINESS AND TREATED THE NET INCOME FROM THE SAID BUSINESS AS IN COME FROM UNDISCLOSED SOURCES. 23. ON APPEAL THE ASSESSEE REFERRED SPECIFICALLY T O THE INTEREST EXPENDITURE IN HIS WRITTEN SUBMISSIONS DATED 2.1.2003 FILED BEFORE THE CIT (A). IN THE WRITTEN SUBMISSIONS IT WAS STATED BY THE ASSESSEE THAT AS AGREED WITH T HE OTHER PARTNER OF MORESHWAR WINE MART THE ASSESSEE WAS REQUIRED TO ARRANGE FOR FUND S FOR THE SAID BUSINESS. THE OTHER I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 12 PARTNER MR VIJAY M VAITY WAS TO LOOK AFTER THE DAY TODAY RUNNING OF THE BUSINESS AND THE ASSESSEE WAS TO HELP HIM FOR A FEW HOURS EVERYDAY. THE ASSESSEE UNDER THE AGREEMENT WITH THE OTHER PARTNER WAS ALSO TO BEAR THE INTERE ST PAID ON THE LOANS TAKEN FOR WINE MART BUSINESS. THE ASSESSEE ENCLOSED THE DETAILS OF PAR TIES TO WHOM INTEREST WAS PAID ALONG- WITH WRITTEN SUBMISSIONS. IT WAS STATED FURTHER TH AT THE LOANS WERE APPEARING IN THE BOOKS OF M/S. MORESHWAR WINE MART AND THE INTEREST WAS DE BITED YEAR AFTER YEAR IN THE ASSESSEES BOOKS AS IT WAS HIS RESPONSIBILITY TO AR RANGE FUNDS AND ALSO BEAR THE INTEREST. IT WAS EXPLAINED THAT FOR THESE REASONS THE ASSESSEE CLAIMED DEDUCTION FOR THE INTEREST AGAINST THE SHARE INCOME EARNED FROM MORESHWAR WINE MART. IT WAS FURTHER POINTED OUT THAT THE ASSESSEE IN ADDITION TO THE SHARE INCOME WAS ALSO IN RECEIPT OF SALARY FROM THE FIRM OF MORESHWAR WINE MART WHICH WAS TAXABLE AS BU SINESS INCOME U/S.28(V) OF THE ACT. THE ASSESSEE THUS STATED THAT INTEREST WAS PAID TO EARN BUSINESS INCOME AND THEREFORE THE SAME IS ALLOWABLE U/S.36(1)(III) OF THE ACT. THE ASSESSEE ALSO CLAIMED THAT THE INTEREST EXPENDITURE WAS BEING ALLOWED BY THE D EPARTMENT YEAR AFTER YEAR AND THE COMPUTATION OF INCOME FOR A.Y. 1996-97 WAS ALSO FIL ED BEFORE THE CIT (A). 24. THE CIT (A) AS NOTED EARLIER DID NOT AGREE WI TH THE ASSESSEES SUBMISSIONS AND HELD THAT IF THE LOANS WERE RAISED BY THE ASSESSEE FOR THE BUSINESS OF THE FIRM AND IF THEY WERE BEING USED BY THE FIRM FOR ITS BUSINESS IT WA S THE FIRM WHICH SHOULD CLAIM THE INTEREST EXPENDITURE AND NOT THE ASSESSEE. HE ACC ORDINGLY UPHELD THE DISALLOWANCE. 25. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TR IBUNAL. THE ASSESSEE HAS FILED THE COMPUTATION OF INCOME FOR THE YEAR UNDER APPEAL AT PAGE 1 OF THE PAPER BOOK FROM WHICH WE FIND THAT THE INTEREST HAS BEEN CLAIMED T HEREIN AGAINST THE NET INCOME FROM FISH BUSINESS. A PERUSAL OF THE ASSESSMENT ORDER DOES N OT SHOW THAT THE ASSESSEE REVISED ITS CLAIM TO STATE THAT THE INTEREST WAS TO BE ALLOWED AGAINST THE SALARY RECEIVED BY HIM FROM THE PARTNERSHIP FIRM IN WHICH HE IS A PARTNER WHIC H BY SECTION 28(V) IS ASSESSABLE AS BUSINESS INCOME. HOWEVER BEFORE THE CIT (A) HE R EVISED HIS CLAIM TO THE ABOVE EFFECT AND ALSO EXPLAINED THE REASONS FOR THE SAME IN HIS WRITTEN SUBMISSIONS. THE CIT (A) DID NOT DISPUTE THE FACTUAL AVERMENTS MADE IN THE WRITT EN SUBMISSIONS BUT TOOK THE VIEW THAT I.T.A NO.4701MUM/2003 I.T.A. NO.2667/MUM/2003 MORESHWAR JANU VAITY 13 THE INTEREST WAS NOT ALLOWABLE AGAINST THE SALARY I NCOME. THE LEGAL POSITION AS HELD BY THE MUMBAI BENCHES OF THE TRIBUNAL HOWEVER IS THAT AF TER THE AMENDMENT OF THE LAW RELATING TO THE ASSESSMENT OF PARTNERSHIP FIRM FROM A.Y. 1993-94 THE SALARY RECEIVED BY A PARTNER FROM THE FIRM IS ASSESSABLE AS BUSINESS INC OME UNDER SECTION 28(V) AND THE REASON FOR THIS IS THAT THE LAW TREATS WHAT IS PAID TO A PARTNER AS SALARY AS REALLY A SHARE OF PROFITS PAID TO HIM. TWO DECISIONS OF THE MUMBAI BENCHES O F THE TRIBUNAL HAVE BEEN PLACED BEFORE US ON THIS ISSUE -1) SANTOSH KUMAR AGARWAL V ACIT [2001]78 ITD 394((MUM)(SMC) AND 2) SUDHIR DATTARAM PATIL V. DCIT [2005] 2 SOT 678 (MUM). IN THESE ORDERS IT HAS BEEN HELD THAT SINCE THE SALAR Y RECEIVED BY A PARTNER FROM THE FIRM IS ASSESSED AS PROFITS OF THE BUSINESS U/S.28(V) ON T HE FOOTING THAT IT IS NOTHING BUT RETURN OF PROFITS THE PARTNER WOULD BE ENTITLED TO THE DEDUC TION OF THE INTEREST PAID BY HIM IN RESPECT OF MONIES BORROWED FOR THE PURPOSES OF THE FIRMS BUSINESS. RESPECTFULLY FOLLOWING THE ORDERS OF THE MUMBAI BENCHES OF THE T RIBUNAL (SUPRA) WE UPHOLD THE ASSESSEES CLAIM AND DIRECT THE AO TO ALLOW THE INT EREST EXPENDITURE AS DEDUCTION. 26. IN THE RESULT ASSESSEES APPEAL IS ALLOWED AND THE DEPARTMENTS APPEAL IS PARTLY ALLOWED. PRONOUNCED ON THE OPEN COURT ON 14 TH MAY 2010 SD/- (J.SUDHAKAR REDDY) (ACCOUNTANT MEMBER) SD/- (R.V.EASWAR) (SR. VICE PRESIDENT) MUMBAI DATED 14 TH MAY 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-AXXIV MUM BAI 4. COMMISSIONER OF INCOME TAX CITY XXIV- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI