2020 (10) TMI 1276 - AT - Income Tax

Denying exemption u/s 10 (1) in respect of agricultural income from contract farming - 90% deduction granted by this Tribunal as agricultural income earned by assessee from contract land and issue raised by assessee before Hon ble High Court was in respect of disallowance of 10% of such income earned from contrace land as business income - HELD THAT - The issue considered by Ld.CIT(A) for invoking section 151 was never alleged by assessee in first round of appeal, before Ld.CIT(A) or by revenue before this Tribunal. Admitedly, assessee should not have filed appeal before Ld.CIT(A) against Ld.AO s OGE to order passed by Hon ble High Court. Entire confusion arose only because of the appeal filed by assessee, before Ld.CIT(A), against OGE passed by Ld.AO to order passed by Hon ble High Court. In our opinion, assessee suffered for its own fault. Assessee in appeal filed before us against the impugned order, has not restricted its issue that arises out of the impugned order. We record our strong dismay to such recourse taken by assessee. In our view, Ld.CIT(A) and assessee erred by initiating protracted litigation which is not in accordance with the procedure laid down by the Act. We do not find any infirmity in taxable income computed by Ld.AO in OGE to Hon ble High Court on 21/03/2012. We also hold that enhancement by Ld.CIT(A) is invalid as it is on an issue that does not arise out of order passed by Hon ble High Court. Accordingly Ground2-3 stands allowed.

Summary

Issues Involved:
1. Jurisdiction of CIT(A) under section 251(1)(c) of the Act.
2. Treatment of agricultural income as business income.
3. Deduction eligibility under section 8011B of the I.T. Act.
4. Interest levied under sections 234B, 234D, and 220(2) of the I.T. Act.

Detailed Analysis:

1. Jurisdiction of CIT(A) under section 251(1)(c) of the Act:
The appeal arose from an order passed by the Ld.CIT(A)-5, Bangalore for the assessment year 2001-02. The appellant contended that the CIT(A) erred in enhancing the assessment under section 251(1)(c) of the Act without proper jurisdiction. The appellant argued that the CIT(A) wrongly treated the agricultural income, which was not in dispute and allowed by the Assessing Officer, as business income. The tribunal found that the CIT(A) exceeded its jurisdiction by enhancing the income on an issue that was not raised before the CIT(A) or the tribunal. The tribunal held that the enhancement made by the CIT(A) was invalid as it did not arise from the order passed by the Hon’ble High Court.

2. Treatment of agricultural income as business income:
The dispute centered around the treatment of income derived from contract farming as either agricultural or business income. The Hon’ble High Court held that the entire income earned by the assessee should be treated as business income. The tribunal observed that the revenue’s appeal before the High Court was regarding the apportioned income from contract land, while the assessee’s appeal concerned the disallowance of a portion of that income as business income. The tribunal concluded that the CIT(A) did not have the jurisdiction to issue an enhancement notice on an issue that was not raised before it or the tribunal.

3. Deduction eligibility under section 8011B of the I.T. Act:
The appellant contended that the business income was eligible for deduction under section 8011B of the I.T. Act. However, the authorities below did not accept this claim, citing the absence of specific directions from the High Court and failure to claim the deduction in the return of income. The tribunal found that the conclusion drawn by the authorities was contrary to applicable law and facts. The tribunal held that suitable relief in accordance with the law should be granted.

4. Interest levied under sections 234B, 234D, and 220(2) of the I.T. Act:
The appellant denied liability to pay interest under sections 234B, 234D, and 220(2) of the I.T. Act, contending that the interest was erroneously levied and should be deleted. The tribunal noted that the calculation of interest was excessive and held that the interest levied erroneously should be deleted.

In conclusion, the tribunal partly allowed the appeal, holding that the enhancement made by the CIT(A) was invalid as it was on an issue that did not arise from the order passed by the Hon’ble High Court. The tribunal found no infirmity in the taxable income computed by the Assessing Officer in giving effect to the Hon’ble High Court's order. The tribunal expressed dismay at the protracted litigation initiated by the CIT(A) and the appellant, emphasizing the need to adhere to the procedural requirements laid down by the Act.