2015 (2) TMI 537 - AT - Income Tax

Agricultural Income - absence of reliable books - CIT(A) accepting the entire income declared as Agricultural Income - DR submitted that the additions were made on the basis of documents which were found at the time of survey operations - Held that - Except for the order of the CIT(A) wherein he mentions about the partners, nowhere it is find as to what is the constitution of the firm. Also do not find from any record as to which partner of the firm owned how much land. We also do not find as to when the agricultural land was purchased and what was there in the sale agreement. All these documents are important and primary, without which it would be difficult to proceed. Revenue authorities have independently proceeded to pass the orders without reference and elaboration of these primary facts. In the light of the above, we deem it fit that the orders of both the revenue authorities be set aside and direct the AO to pass fresh order after taking into consideration all the material as mentioned here above - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Acceptance of Agricultural Income
2. Unexplained Investment in Farm Structures

Detailed Analysis:

1. Acceptance of Agricultural Income

Facts and Arguments:
- The department filed appeals against the CIT(A) orders for multiple assessment years, challenging the acceptance of the entire income declared as agricultural income by the assessee.
- The AO disallowed the claim of agricultural income and expenses incurred, bringing the entire income of Rs. 96,96,725/- to tax.
- The AO found that the books of account were not reliable as they were not found at either the Mumbai office or the farm.
- The partnership deed showed land belonging to partners, but some land was owned by employees shown as cultivators, raising questions about the inclusion of this income in the assessee's hands.
- The CIT(A) deleted the addition, noting that the assessee had provided 7/12 extracts, details of ownership, sales bills, and expenses, proving genuine agricultural activities.

Tribunal's Observations:
- The Tribunal found that the revenue authorities had not properly examined the primary facts, such as the constitution of the firm, ownership details, and sale agreements.
- The Tribunal noted that the CIT(A) had considered various documents, including APEDA certificates, subsidy receipts, and previous assessment orders, to conclude the genuineness of agricultural activities.
- The Tribunal directed the AO to pass a fresh order after considering all relevant material and providing adequate opportunity for the assessee to be heard.

2. Unexplained Investment in Farm Structures

Facts and Arguments:
- The AO added Rs. 1,00,00,000/- u/s 69 of the Act for unexplained investment in a swimming pool, bungalow, outhouse, and stable for horses, which were not shown in the books.
- The CIT(A) deleted this addition, stating that the structures existed before the partners purchased the land, and there was no evidence of construction by the assessee.
- The CIT(A) criticized the AO for making an arbitrary estimation without proper inquiry.

Tribunal's Observations:
- The Tribunal agreed with the CIT(A) that the AO's estimation was arbitrary and lacked a factual basis.
- The Tribunal emphasized the need for proper inquiry and documentation before making such additions.
- The Tribunal set aside the orders of both the revenue authorities and directed the AO to re-examine the issue with adequate opportunity for the assessee to present its case.

Conclusion:

The Tribunal allowed the appeals for statistical purposes, directing the AO to re-assess both the agricultural income and the unexplained investment in farm structures after considering all relevant documents and providing the assessee a reasonable opportunity to be heard. The Tribunal emphasized the importance of proper inquiry and documentation in such cases.