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2017 (2) TMI 1112 - AT - Income TaxEstimation of agricultural income in the hands of the assessee - Held that - The assessee s land holding is large and the family members of the Bagwan group are engaged in cultivation of vegetables and flowers and in some cases in fruits on the said land. Majorly the agricultural land holding is cultivated with vegetables and flowers. The assessee is not maintaining the books of account regularly. As we have already held that there is need for estimation for agricultural income in the hands of the assessee. The Ld. Authorised Representative for the assessee before us agreed to the proposition that 80% of the standard yield reported by ICAR in the case of Vegetable yield be adopted to work out the income from Vegetables and flowers in the hands of the assessee on the basis of individual land holdings. Accordingly, we hold so. Necessary evidence would be furnished in this regard by the assessee. The Assessing Officer shall give reasonable opportunity of hearing to the assessee. In case there is yield from fruits, then 80% of the standard yield reported by NHB should be adopted to work out the income in the hands of the assessee based on their land holding. However, in case the assessee has already shown the yield below 80% of the standard yield reported by the above said Government bodies, then the Assessing Officer is directed not to disturb the same and accept it. Expenses on contractual factor - Held that - While estimating the agricultural income the Assessing Officer/Commissioner of Income Tax (Appeals) had taken note of the facts of Shri Badshah Bagwan, wherein the statement of one person was recorded who stated that for carrying on the agricultural activities on part of the land, he was getting batai @50% of the receipts. The said statement was withdrawn on a later stage. However, the said fact was adopted by the Assessing Officer and the Commissioner of Income Tax (Appeals) in order to estimate the income in the hands of the assessee. We have already decided the issue of estimation in the hands of the assessee in the paras hereinabove with our directions. We further hold that no further deduction is to be made on account of contractual farming factor @50%. The basis for the said estimation is pursuant to the facts of Shri Badshah Bagwan and where the statement of the said person was never confronted to the assessee nor the information supplied to the assessee, the said information cannot be applied to decide the issue against the assessee. In any case, in the facts of the case, the assessee has claimed that it has grown vegetables on its agricultural land holding and he pleads that the said vegetables are not grown on sharing system basis. We find merit in the plea of the assessee in this regard and accordingly we hold so. Estimation of agricultural income in the hands of the assessee is on account of sugarcane wherein part of the land was under the crop of sugarcane from A.Y. 2001-02 onwards - Held that - No merit in deducting any amount towards batai expenses in respect of the estimation of income arising from sugarcane plantation. We direct the Assessing Officer to apply 80% of the rates available to the surgarcane produce as sugarcane is sold to Mills. Necessary evidence would be furnished by the assessee to establish its case. The Assessing Officer shall give reasonable opportunity of hearing to the assessee before adjudicating the issue of income arising from sugarcane produce and also as held in the case of vegetables and flowers. Unexplained investments - Held that - Once the amount has been so assessed, i.e. on account of agricultural income and/or on account of income from other sources then the source of the aforesaid assets found during the course of the search, stand explained. However, we have already adjudicated the issue of estimation of agricultural income in the hands of the assessee in the respective years in the paras hereinabove and the Assessing Officer is directed to verify as to where the said agricultural income assessed in the hands of the assessee justifies the source of acquisition of the assets found during the course of search. Once the income is estimated in the hands of the assessee the same is presumably held to have been utilized for the acquisition of the assets and there is no merit in any other addition in the hands of the assessee on account of unexplained investment in assets found during the course of search. We hold so Addition made towards investment in benami FDRs and interest charged - Held that - Where the addition on account of unexplained deposits has already been made in the hands of Pat Sanstha there is no merit in making any further addition in the hands of the assessee on account of same FDRs. Accordingly, we uphold the order of the CIT(A) in this regard and dismiss the grounds of appeal raised by the revenue. Consequently no addition is warranted on account of interest chargeable on the said FDRs. The revenue has failed to address the issue raised by way of grounds of appeal Nos.9 to 11 and also in the absence of any addition made by the Assessing Officer on any other account except non acceptance of agricultural income and the addition on account of FDRs there is no merit in the other grounds of appeal raised and the same are dismissed. Entitlment to deduction u/s.80P - Held that - As in Shri Mahavir Nagari Sahakari Pat Sanstha Ltd. Vs. DCIT 2000 (2) TMI 234 - ITAT PUNE as held that cash credits on account of various deposits in benami/bogus names, even if, taxed, would be considered as income of the same business, i.e. providing credit facilities to its members and accordingly would be entitled to deduction u/s.80P of the Act. Following the same proposition as laid down by the Pune Bench of the Tribunal in various cases we hold that the assessee is entitled to claim deduction u/s.80P of the Act on the aforesaid addition made under section 68 of the Act even if certain errors were found in the explanation of the assessee. Accordingly we uphold the order of the CIT(A) and dismiss the grounds of appeal raised by the revenue.
Issues Involved:
1. Acceptance of book results for agricultural income. 2. Estimation of agricultural income from sugarcane and vegetables/fruits. 3. Deduction for agricultural expenses and contractual farming. 4. Unexplained investments and assets found during search. 5. Benami Fixed Deposit Receipts (FDRs) and related interest. 6. Deduction under section 80P(2)(a)(i) on unexplained FDRs. Issue-Wise Detailed Analysis: 1. Acceptance of Book Results for Agricultural Income: The assessee contested the CIT(A)'s rejection of the book results for agricultural income, arguing that no documents were found to substantiate the claim of contractual farming (Batai). The CIT(A) relied on the case of Badshah Bagwan and applied a 54% deduction for sugarcane and 50% for vegetables/fruits, which the assessee argued was based on assumptions and should be disapproved. 2. Estimation of Agricultural Income from Sugarcane and Vegetables/Fruits: The Revenue challenged the CIT(A)'s partial acceptance of the assessee's agricultural income, arguing that the assessee failed to provide documentary evidence for the source of assets found during the search. The CIT(A) estimated agricultural income by considering the land holdings, infrastructure, and scientific methods employed by the assessee, but the Revenue argued that the estimation was too low compared to the actual yield. 3. Deduction for Agricultural Expenses and Contractual Farming: The CIT(A) adopted a methodology for estimating agricultural income by deducting 50% for expenses and contractual farming, based on the case of Badshah Bagwan. The assessee argued that vegetables are not typically grown on a sharing system, and the deduction was unjustified. The Tribunal directed the Assessing Officer to apply 80% of the standard yield reported by ICAR for vegetables and NHB for fruits, without further deductions for contractual farming. 4. Unexplained Investments and Assets Found During Search: The Assessing Officer added unexplained investments found during the search to the taxable income, arguing that the assessee inflated agricultural income to explain these assets. The CIT(A) held that once agricultural income is estimated, it should be presumed to have been used for acquiring assets, and no further addition for unexplained investments is warranted. 5. Benami Fixed Deposit Receipts (FDRs) and Related Interest: The Assessing Officer added unexplained FDRs found during the search to the taxable income, arguing that the assessee failed to explain their source. The CIT(A) deleted the addition, holding that the primary responsibility to prove the deposits lay with the Pat Sanstha or Cooperative Banks where the deposits were found. The Tribunal upheld the CIT(A)'s decision, noting that the FDRs were already added in the hands of the Pat Sanstha. 6. Deduction under Section 80P(2)(a)(i) on Unexplained FDRs: The Revenue contested the CIT(A)'s decision to allow deduction under section 80P(2)(a)(i) on unexplained FDRs, arguing that such income is not eligible for the deduction. The Tribunal upheld the CIT(A)'s decision, following the precedent set by the Pune Bench of the Tribunal, which held that cash credits taxed as income from providing credit facilities to members are eligible for deduction under section 80P. Conclusion: The Tribunal partially allowed the assessee's appeals and dismissed the Revenue's appeals, directing the Assessing Officer to estimate agricultural income based on 80% of the standard yield reported by ICAR and NHB, without further deductions for contractual farming. The Tribunal also upheld the CIT(A)'s decision to delete additions for unexplained FDRs and allow deductions under section 80P(2)(a)(i).
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