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TMI Blog2011 (2) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, observing that the same was a highly perishable item which would have resulted in prospective loss in absence of marketability for the same. - Decided in favor of assessee. Shares - genuineness of transaction -s per the material on record, in spite of the sale of shares having taken place in the year 1998, the payment thereof was made to the assessee in the next assessment year - no explanation, much less a plausible explanation had been furnished by the assessee as to why the payment was delayed for about one year and three months - Held that: - transaction of purchase and sale of shares of M/s. Rassi Cement Ltd. was not a genuine transaction. - Decided against the assessee. - 396 of 2005 - - - Dated:- 3-2-2011 - MR. JUSTICE ADARSH KUMAR GOEL, MR. JUSTICE AJAY KUMAR MITTAL, JJ. Ms. Urvashi Dhugga, Standing Counsel for the appellant-Revenue. Mr. Akshay Bhan, Advocate for the respondent. AJAY KUMAR MITTAL, J. By this order, seven appeals, i.e. Income Tax Appeal Nos. 396 of 2005, 92 and 93 of 2006, 195 and 525 of 2007, 582 of 2008 and 74 of 2010 are being disposed of as learned counsel for the parties are agreed that identical questions of law are invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculations before the Assessing Officer on 9.6.2000 has himself worked out the incremental profits. 5. In Income Tax Appeal No. 74 of 2010, in addition to the aforesaid questions, the following substantial question of law has also been claimed: (iv) Whether on the facts and circumstances of the case and in law, the Hon ble ITAT was justified in deleting the addition of Rs. 39,60,875/- made by the AO on account of bogus capital formation and directing the AO to tax Rs. 25,04,762/- as short term capital gain on sale of shares, whereas the assessee had comprehensively failed to prove the genuineness of the transaction? 6. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee was, inter alia, engaged in cultivating and growing raw peas and also in the process of converting them in to pea seeds so as to render them fit for sale and also selling the processed seeds in the market and to various growers. The assessee filed its return of income for the assessment year under reference, on 11.9.1997, declaring income of Rs.4,800/-. The assessee was, thus, having non-agricultural income as well as the income from sale of proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Rajasthan and others v. Rajasthan Agriculture Input Dealers Association and others, (1996) 5 Supreme Court Cases 479; Seth Banarasi Das Gupta vs. Commissioner of Income Tax, Delhi (Central) (1977) 106 ITR 804, Commissioner of Income Tax vs. Relish Foods, (1999) 237 ITR 59 (S.C.) and Commissioner of Income Tax v. Jalna Seeds Processing and Refrigeration Co. Ltd. (2000) 246 ITR 156 (Bombay). Controvering the aforesaid contentions, learned counsel for the assessee on the strength of principles enunciated in Commissioner of Income Tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy, (1957) XXXII ITR 466 (S.C.), urged that the Tribunal had correctly appreciated the legal position and the income derived by the assessee was agricultural income. 13. We have given our thoughtful consideration to the submissions made by the counsel for the parties. 14. It would be advantageous to refer to the principle of law culled out by the Apex Court in Raja Benoy Kumar Sahas Roy s case (supra). The Supreme Court defined the scope of the term agriculture in following terms: As we have noted above, the primary sense in which the term agriculture is understood is agar field and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts being raised from the land. It is only if the products are raised from the land by the performance of these basic operations that the subsequent operations attach themselves to the products of the land and acquire the characteristic of agricultural operations. The cultivation of the land does not comprise merely of raising the products of the land in the narrower sense of the term like tilling of the land, sowing of the seeds, planting, and similar work done on the land but also includes the subsequent operations set out above all of which operations, basic as well as subsequent, from the integrated activity of the agriculturist and the term agriculture has got to be understood as connoting this integrated activity of the agriculturist. One cannot dissociate the basic operations from the subsequent operations and say that the subsequent operations even though they are divorced from the basic operations can constitute agricultural operations by themselves. If this integrated activity which constitutes agriculture is undertaken and performed in regard to any land that land can be said to have been used for agricultural purposes and the income derived there from can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling market rate was also accepted by the AO at Rs. 7/- per kg to raw pea seed is taken into consideration, then it is apparent that the assessee had no incremental profit to be taxed as non-agricultural income u/s 7(1) and 7(2). 9.4 We, therefore, based on above facts and circumstances of the case and considering the totality of facts of the present case, various judgment of the courts, orders for subsequent assessment years, the calculation made by the AO and the CIT(A) while working out nonagricultural income in the hands of the assessee, find that such addition/disallowance in the hands of the assessee on account of non-agricultural income is not justified, as the conversion of raw seeds into pea seeds cannot be held as non-agricultural merely on the ground that there was a complete change from raw seeds into pea seeds which was not justified keeping in view the fact that the assessee changed such raw seeds into pea seeds, observing that the same was a highly perishable item which would have resulted in prospective loss in absence of marketability for the same. 9.5 So far as observations of the AO in treating such sale of pea seeds as non-agricultural income is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chanism used by him for conversion of raw peas into pea seeds. Hence, in our considered view, the AO as well as the CIT(A) were not justified in treating such sale of pea seeds by the assessee as non-agricultural income in view of the facts that the assessee only employed ordinary procedure for converting his product raw peas into pea seeds keeping in view the marketability of the same. Hence, we feel that the assessee was entitled for claim of agricultural income u/s 2(1A)(b)(ii) of the Act. 9.6 We also do not find any justification in the order of the CIT(A) in sustaining 30% of sale of pea seeds by invoking rule 7(1) and 7(2), keeping in view the above discussion and considering the fact that the calculation made by the AO was not correct and if correct calculation would have been done, there was no incremental profit available to the assessee and hence the CIT(A) was not justified in sustaining the order of the AO to the extent of 30% sale of pea seeds. We, therefore, delete the addition sustained by the CIT(A) on account of non-agricultural income and accept the grounds raised by the assessee and reject the sole ground raised by the revenue in this regard. 16. A perus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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