2017 (8) TMI 655 - AT - Income Tax

Assessment u/s 153A - Estimation of income from fish tanks - cultivation of the fish ponds - Estimation of water spread area and the bund area - The Fisheries Dept. estimated the income of the assessee @ 22, 000/- per acre - assessee had offered 3, 43, 270/- as income from fish tanks - Held that - As per the board circular the estimated income per acre was 4000/- on water spread area of 70% of the Fish pond for the year 1993-94 and the same cannot be said to be reasonable for the assessment year 2006-07 which is after 13 years. However with regard to water spread area of 70% remained unchanged. The Ld. CIT(A) confirmed the estimation of income @ 22, 000/- per acre inclusive of bunds and 13, 300/- for 70% of water spread area since the assessee is not maintaining the books of accounts. The Ld. A.R did not place any evidence to disprove the estimation confirmed by the Ld. CIT(A). The revenue also did not place any evidence to show that the estimation of income @ 13, 300/- is not reasonable. Therefore in the absence of books of accounts we hold that 13, 300/- per acre of water spread area appears to be reasonable and accordingly we uphold the order of the Ld. CIT(A). The estimation of water spread area and the bund area is in accordance with the circular issued by the CBDT. Accordingly we uphold the order of the Ld. CIT(A) and the revenue s appeal on this ground is dismissed. Additions made u/s 40A(3) - income estimated - Held that - In this case the assessing officer completed the assessment estimating the income @ 22, 000/- per acre. The assessee has not maintained the books of accounts which fact was accepted by both the parties. The purchases were made by Shri Radha Krishna but there is no evidence to show that the expenditure was debited to the P&L account and claimed as a deduction in the hands of the assessee. Therefore we are of the view that the revenue has not placed sufficient evidence to prove that the expenditure was debited by the assessee and attract the disallowance u/s 40A(3) of I.T. Act. Further the assessment in this case was completed by estimation and once the income is estimated the entire deductions or additions from section 30 to 43D of the Act deemed to have taken care of and no further disallowance or addition required to be made. See Dabros Industrial Company Private Limited Vs. CIT 1975 (7) TMI 21 - CALCUTTA High Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Estimation of income per acre for aqua culture activities.
2. Exclusion of bund area in the estimation of income.
3. Additions made under Section 40A(3) of the Income Tax Act for cash purchases.

Issue-wise Detailed Analysis:

1. Estimation of Income Per Acre for Aqua Culture Activities:
The primary issue was the estimation of the income per acre from the assessee's aqua culture activities. The Assessing Officer (A.O.) estimated the income at ?22,000 per acre for the entire cultivated area of 86.47 acres, based on information from the Fisheries Department. The Fisheries Department's estimation included all expenses related to fish farming. The assessee had declared a significantly lower income of ?3,970 per acre. The A.O.'s estimation was based on the net income provided by the Fisheries Department, which was ?22,000 per acre.

2. Exclusion of Bund Area in the Estimation of Income:
The assessee appealed against the A.O.'s estimation, arguing that the bund area should be excluded from the total landholding under cultivation. The Commissioner of Income Tax (Appeals) [CIT(A)] directed the A.O. to estimate the income at ?13,300 per acre for the water spread area and exclude the bund area, based on a CBDT circular that specified 30% of the land as bund area and 70% as water spread area. The CIT(A) found that the A.O. had not considered this circular, which was binding on him.

3. Additions Made Under Section 40A(3) of the Income Tax Act:
For the assessment years 2007-08 to 2011-12, the A.O. made additions under Section 40A(3) for cash purchases of fish feed. During the search, documents revealed that purchases were made in cash, exceeding ?20,000 per transaction, thus attracting disallowance under Section 40A(3). The CIT(A) deleted these additions, reasoning that once income is estimated, no further additions are warranted under Section 40A(3). This view was supported by several case laws, including CIT Vs Banwari Lal Banshidhar and CIT Vs Smt. Santosh Jain.

Judgment:
The Tribunal upheld the CIT(A)'s order on both issues. It confirmed the estimation of income at ?13,300 per acre for the water spread area, excluding the bund area, as per the CBDT circular. The Tribunal also upheld the deletion of additions under Section 40A(3), agreeing that once income is estimated, no further disallowances are required. The Tribunal emphasized that the A.O. had not provided sufficient evidence to justify the higher estimation or the applicability of Section 40A(3) disallowances. Consequently, the appeals filed by the revenue were dismissed.