2016 (2) TMI 409 - HC - Income Tax

Addition on account of coffee income and pepper income - Held that - It is clear that the assessee owns 84.12 acres of coffee in Belagodu area of Sakaleshpur Taluk, Hassan District. The Assessing Officer taking into consideration the climatic conditions and the season coupled with the average yield of the previous three seasons in an area of 84.12 acres in a zone known for high coffee yield, determined the income from coffee. It is also noticed by the Assessing Officer that the assessee actually received the coffee income of ₹ 13,53,275/- relating to the season 2006-07 during the period under assessment. Neither cash book nor other subsidiary registers and documents are produced to cross verify the payment particulars. Accordingly, the income declared could not be cross verified with the expenditure incurred. Rejecting EB-2 register, income of coffee was assessed at ₹ 47,70,525/- as against ₹ 32,79,536/- declared by the assessee. This best judgment assessment made by the Assessing Officer is confirmed by the First Appellate Authority and the Tribunal after extensively considering the arguments of the assessee in the light of the Judgments relied on by the assessee. As regards the estimate of income from Pepper, it has come to the notice of the Assessing Officer only during his visit to the estate of the appellant on 19.11.2008. Though subsequent to the crop year, presence of the yielding Pepper Vines numbering 2000, is not disputed by the assessee. The only argument advanced by the learned counsel on this issue is that the Pepper Vines were not ripe for yielding during the relevant assessment year, the Assessing Officer visiting the estate in the subsequent year, cannot be a basis to assess the income of Pepper unless there is adequate material to establish that the Pepper Vines were yielding during the relevant assessment year, which is not forth coming in the orders passed by the authorities. It is pertinent to note that the Assessing Officer was assisted by the Managing Partner of the assessees at the time of his visit to the estate and gathered information regarding the yielding Pepper Vines and it is only thereafter, determined that 20% of the Pepper Vines would be given allowance as being affected by yellow disease and arrived at ₹ 5,60,000/- estimating 5 kgs to each vine and valued the same at ₹ 70/- per kg i.e., 1600 Pepper Vines out of 2000. The said assessment in our opinion is reasonable, based on the information given by the Managing Partner of the assessee. It would be significant to notice that Rule 9-A of the Rules specifies the method of account to be followed by the assessee. The assessee has admitted that he has not furnished any accounts other than EB-2 register. EB-2 register is not the relevant account required to be maintained as per the Rules. Even the contents of the EB-2 register maintained by the assessee would fulfill the requirement of Sub-clause (IV) of Rule 9-A, that itself would not be suffice to accept the claim of the assessee regarding the yield of coffee unless the corresponding expenditure towards the labour and other expenses are shown in the account books to substantiate the yield declared. Decision rendered on the factual matrix by the fact finding authorities cannot be disturbed at this stage. - Decided against assessee

Summary

Issues:
Assessment of coffee income and pepper income under the Karnataka Agricultural Income Tax Act, 1957.

Assessment of Coffee Income:
The petitioner, a coffee planter, filed a return declaring coffee income for the assessment year 2007-08. The Assessing Officer made additions to the declared income based on yield examination, increasing the coffee income. The petitioner challenged this in appeals, but the Tribunal upheld the additions. The petitioner contended that the EB-2 register maintained by them should have been considered as it disclosed the coffee yield, and the Assessing Officer's reliance on previous season's average yield was not justified. The petitioner argued that the yield of coffee is influenced by various factors, making best judgment assessments necessary. However, the revenue argued that the revised return filed by the petitioner after verification indicated income suppression, and the EB-2 register lacked credibility under the current rules. The revenue supported the Assessing Officer's assessment based on average yield and lack of material evidence from the petitioner to substantiate their declared yield. The High Court upheld the Tribunal's decision, emphasizing the importance of maintaining proper accounts as per Rule 9-A and dismissed the petitioner's arguments.

Assessment of Pepper Income:
Regarding the estimation of pepper income, the Assessing Officer visited the estate and observed yielding pepper vines, estimating the income based on the information provided by the Managing Partner of the petitioner. The petitioner argued that the pepper vines were not ready for yielding during the relevant assessment year and challenged the estimation process. However, the revenue defended the assessment, stating that the information gathered during the visit was reliable and justified the estimation made. The High Court found the assessment reasonable, considering the information provided by the Managing Partner and upheld the estimation of pepper income. The Court highlighted the importance of having adequate material to support claims and the relevance of information provided during assessments.

Judgment Summary:
The High Court dismissed the Civil Revision Petition challenging the Karnataka Appellate Tribunal's order on the addition of coffee and pepper income. The Court found no fault in the Tribunal's decision, emphasizing the necessity of maintaining proper accounts, the validity of assessments based on average yield, and the importance of providing material evidence to substantiate income claims. The Court upheld the assessments made by the authorities and concluded that no substantial question of law warranted interference with the Tribunal's order.