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2013 (12) TMI 957 - AT - Income TaxSale of Prosopis Juliflora - Agricultural income or not - AO observed that the assessee could not specify the actual mode of cultivation, as initially it claimed that it had used the plants supplied by the Forest Department free of cost, and subsequently, on being required to furnish evidence from the forest depart. - as per AO the assessee was itself in doubt about the very basis of the cultivation contentedly carried out in 140 acres.. Held that - The facts brought on record show that the assessee has sold the crop to various persons after growing the said crop - The assessee filed details pertaining to the said crop viz., sales receipts etc. to the department - The department when recording his statement, the department not only to furnish the statement of the proprietor to the assessee but also an opportunity of cross-examination shall be given to the assessee and opportunity of such cross examination is one of the corner-stones of natural justice - The authorities cannot draw adverse inference on the basis of the statement of the Proprietor of M/s Raghavendra Seeds & Pesticides and the claim of the assessee has to be accepted on the basis of evidences on record brought by the assessee - Decided in favour of assessee.
Issues Involved:
1. Whether the income derived by the assessee from the sale of Prosopis Juliflora plants constitutes agricultural income. 2. The validity of the evidence provided by the assessee to substantiate the agricultural income claim. 3. The reliability of the statement made by the proprietor of M/s Raghavendra Seeds & Pesticides. 4. The treatment of the income as agricultural income versus income from other sources. Detailed Analysis: 1. Agricultural Income Claim: The assessee, a cooperative society, claimed an income of Rs. 50,70,000/- as agricultural income from the sale of Prosopis Juliflora plants grown on 140 acres of land. The Assessing Officer (AO) challenged this claim, arguing that the plants grew spontaneously without human intervention, thus not qualifying as agricultural income. The AO concluded that the income was from unknown sources and assessed it as income under the head "other sources." 2. Evidence Provided by the Assessee: The assessee provided various documents, including sales registers, sale bill books, and bank account statements to substantiate their claim. However, the AO found these documents insufficient and noted inconsistencies, such as the lack of proper records for cultivation expenses and conflicting statements regarding the source of seeds. 3. Statement by the Proprietor of M/s Raghavendra Seeds & Pesticides: The AO conducted an inquiry with the proprietor of M/s Raghavendra Seeds & Pesticides, who initially denied selling seeds to the assessee in 2001, stating that his business started in 2004. Later, the proprietor retracted his statement, claiming confusion and confirming the sale of seeds to the assessee. The AO and CIT(A) dismissed this retraction, viewing it as an attempt to support the assessee's claim. The tribunal, however, found the proprietor to be an unreliable witness and emphasized the need for cross-examination to test the truth of his statements. 4. Treatment of Income: The AO argued that the spontaneous growth of Prosopis Juliflora plants did not involve basic agricultural operations, thus disqualifying the income as agricultural. The CIT(A) upheld this view. The tribunal, however, noted that the assessee had provided sufficient evidence of sales and cultivation activities, despite the unreliable witness. The tribunal also referenced an assessment order for AY 2009-10, where part of the agricultural income was accepted by the AO. Conclusion: The tribunal concluded that the claim made by the assessee regarding agricultural income should be accepted based on the evidence provided. The tribunal set aside the order of the CIT(A) and allowed the assessee's claim of Rs. 50,70,000/- as agricultural income from the sale of Prosopis Juliflora crop. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the open Court on 27th September, 2013.
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