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2019 (6) TMI 591 - AT - Income TaxCharging of Interest u/s 234B and 234C - HELD THAT - The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT therefore uphold the action of the AO in charging the assessee the aforesaid interest u/s 234B and 234C Recategorization of Agricultural income as Non-Agricultural income under the head Income from Other Sources - JDA was entered into and the agricultural lands were converted for non-agricultural purposes - assessee is a HUF comprising of 13 members from agricultural backgrounds owning agricultural lands of approx. 28 acres; with 17 acres being ancestral lands and approx. 11 acres of agricultural lands purchased by the HUF over a period of time - HELD THAT - It is not in dispute that the assessee HUF owned agricultural lands in the year under consideration. AO was of the view that the assessee had entered into a joint development agreement (JDA) and converted for non-agricultural purposes the CIT(A) was of the view that the entire analysis of the AO is based on the evidence produced by the assessee regarding the carrying out of agricultural activities and sale of agricultural produce. CIT(A) was also of the view that the AO has not based his / her conclusions on the fact that any agricultural operations carried out on such land could not be considered agricultural activity. This finding of the CIT(A) has not been disputed by Revenue. Therefore the fact that the JDA was entered into and the agricultural lands were converted for non-agricultural purposes has no relevance in the case on hand Whether the assessee HUF carried out agricultural operations during the year ? - The notice issued by the AO copy of reports given by the Village Accountant Revenue Inspector and translated copies thereof on appraisal thereof in the period relevant to Assessment Year 2014-15 the assessee HUF was growing various crops and fruits like ragi mangoes bananas vegetables coconut etc. and thereby derived agricultural income. In these factual circumstances the very basis of the AO to hold that the assessee HUF did not carry on agricultural operations during the year is factually incorrect; being contrary to the facts on record. In respect of agricultural income from cultivation / sale of bananas and sericulture the AO has estimated the income expenditure etc. on the basis of enquiries made with Senior Assistant Director Horticulture Department and Sericulture Extension Officer. However it is an undisputed fact as per the material on record that the assessee was carrying on agricultural operations during the year under consideration as per the reports of the Village Accountant and Revenue Inspector submitted in response to information called for by the AO under section 133(6) of the Act. AO was not correct in estimating the agricultural income and expenditure incurred to earn the same; to make the impugned additions. As fairly conceded by the learned AR income from sale of cocoons cannot be regarded as agricultural income in view of the decision in the case of K. Lakshmanan Co. Vs. CIT ( 1998 (2) TMI 10 - SUPREME COURT wherein it was held that income derived by the assessee from sale of cocoons raised by it by feeding mulberry leaves to silkworms is not agricultural income. As already been held in this order that the AO was not correct in estimating both the agricultural income as well as the expenditure thereon when the facts on record establish that the assessee HUF had carried on agricultural operations; including the growing of Mulberry plants and sericulture; during the year under consideration. As the income from sericulture as declared by the assessee amounting to 15, 42, 199/- is to be accepted and 50% thereof amounting to 7, 71, 100/- is held to be attributable to the sale of cocoons which is chargeable to tax. - Decided partly in favour of assessee.
Issues Involved:
1. General Ground challenging the assessment order. 2. Re-categorization of agricultural income as non-agricultural income under "Income from Other Sources". 3. Charging of interest under sections 234B and 234C of the Income Tax Act. Detailed Analysis: 1. General Ground: - The assessee contended that the assessment order passed under section 143(3) of the Income Tax Act, 1961, and confirmed by the CIT(A), was erroneous and should be quashed. However, the tribunal did not find it necessary to adjudicate on this general ground. 2. Re-categorization of Agricultural Income: - Facts and Submissions: - The assessee, a Hindu Undivided Family (HUF) engaged in agricultural operations, declared a total income of ?6,16,570 and net agricultural income of ?37,50,000 for the Assessment Year 2014-15. - The Assessing Officer (AO) re-categorized ?29,52,250 of the declared agricultural income as income from other sources, reducing the agricultural income to ?7,97,750. - The assessee argued that the RTC (Record of Rights, Tenancy, and Crops) was not updated and did not reflect the actual agricultural activities. It was also contended that the RTC is not conclusive proof of agricultural activities. - The assessee provided bills and receipts for the sale of crops to support their claim of agricultural income and argued that the rates at which the produce was sold were reasonable. - Tribunal's Findings: - The tribunal noted that the AO conducted inquiries with the Village Accountant and obtained reports confirming agricultural activities on the assessee's land. - It was established that the assessee owned approximately 28 acres of agricultural land and had carried out agricultural operations, including the cultivation of various crops and fruits. - The tribunal found the AO's basis for reducing the agricultural income to be factually incorrect, as the reports from the Village Accountant and Revenue Inspector confirmed the agricultural activities. - The tribunal also noted that the agricultural income declared for the year under consideration was only marginally higher than in previous years, which had been accepted by the AO in earlier assessments. - Income from Sericulture: - The AO had estimated the income and expenditure from sericulture based on inquiries with the Horticulture Department and Sericulture Extension Officer. - The tribunal, referencing the Hon'ble Supreme Court's decision in K. Lakshmanan & Co. Vs. CIT, held that income from the sale of cocoons is not agricultural income. However, it accepted the assessee's declared income from sericulture, attributing 50% of it to agricultural activities (growing mulberry plants) and the remaining 50% to the sale of cocoons, which is taxable. - Conclusion: - The tribunal sustained the addition of ?7,71,100 (50% of the sericulture income) as non-agricultural income. - The balance addition of ?21,81,150 was deleted, accepting the assessee's claim of agricultural income. 3. Charging of Interest under Sections 234B and 234C: - The tribunal upheld the AO's action of charging interest under sections 234B and 234C, citing the Hon'ble Supreme Court's decision in Anjum H. Ghaswala, which states that charging interest under these sections is consequential and mandatory. However, the AO was directed to re-compute the interest chargeable while giving effect to the tribunal's order. Judgment: - The appeal was partly allowed. The tribunal directed the AO to sustain the addition of ?7,71,100 as non-agricultural income and delete the balance addition of ?21,81,150. The AO was also directed to re-compute the interest under sections 234B and 234C accordingly. Pronouncement: - The judgment was pronounced in open court on 17th May 2019.
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