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TMI Blog2003 (9) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... gh v. ITO [ 1995 (6) TMI 72 - ITAT JAIPUR] . Thus, it is held that activities carried out by the assessee amounted to agricultural operations and consequently, the income derived from such operations was agricultural income not liable to tax under Section 10. However, we find from the reply of the assessee dt. 29th March, 2001, that assessee had purchased certain plants for sale (para 2). Since no basic operations were carried out with reference to such plants, the profits on sale thereof would be trading profits even though such plants were maintained in the nursery for some time. Particulars of such purchase and sale are not available on record and, therefore, requires verification. The order of the CIT(A) is, therefore, set aside and the AO is directed to restrict the addition only with reference to the profits arising from the sale of plants which was purchased by the assessee. In the result, appeal of the assessee is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... shifted in pots and matured in controlled environment, hence the immediate and effective source of income is not land. The development of land is possible in multistoried complex with controlled environment. Development of Bonsai plant, Centctus etc. does not require the use of land at all and are developed in pots. Certain other methods employed by firm for developing plants are not required the use of land at all. For example, in the process "Gootying" a branch of mother plant is slit and that to that portion harmones are applied and covered with manure and soil and wrapped with jute/polythene. Roots emerged from that point and when sufficient roots come out these are planted on pots and kept at controlled environment. In this process land is seldomly used, hence, income from sale of plant developed by this process cannot be considered as agricultural income. In the case of CIT v. Raja Benoy Kumar Suhas Roy (supra), it has been held that it is essential to carry some basic primary operations prior to germination of produce involving expenditure of human skill and labour on the land itself and not on the growth. Subsequent post germination operation would not constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee drew our attention to pp. 38 to 65 of the paper book containing the computation of income, statement of accounts and acknowledgement of income-tax returns pertaining to asst. yrs. 1993-94 to 1998-99 to point out that the claim of the assessee regarding agricultural income has always been accepted by the AO and, therefore, considering the rule of consistency, the claim of the assessee could not be rejected. He relied on the decision of Supreme Court in the case of Radha Saomi Satsang v. CIT (1992) 193 ITR 321 (SC). When assessee's counsel was asked to file the copies of the assessment order, it was stated by him that all assessments were completed under Section 143(1), A query was raised from the Bench as to whether rule of consistency could be applied where assessments are not completed under Section 143(3). In response to the same, it was submitted that intimation under Section 143(1) amounts to assessment order as held by the Punjab & Haryana High Court in the case of Vipin Khanna v. CIT (2002) 255 ITR 220 (P&H). He has also relied on two decisions of the Tribunal reported as Fisons Ispat Ltd. v. Asstt. CIT (1992) 42 ITD 365 (Del) and Puranmall Narayan Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is not arbitrary or perverse, if it had been arrived at after due enquiry, if no fresh facts are placed before the IT authority giving the later decision and if the IT authority giving the earlier decision has taken into consideration all material evidence. This view is fortified by the judgment of Hon'ble Bombay High Court in the case of H.A. Shah & Co. v. CIT & EPT (1956) 30 ITR 618 (Bom) wherein their Lordships observed as under : "As a general rule the principles of res judicata is not applicable to decisions of IT authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the Department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigations arising out of the IT Act, and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since then returns were being filed declaring the entire income as agricultural income and claiming exemption under Section 10. However, admittedly no assessment was ever made under Section 143(3) in respect of either of the preceding assessment years. Even the copies of the intimation under Section 143(1) are not placed in the paper book, The claim of the assessee is that such returns are deemed to have been accepted in the absence of notices under Section 143(2). In our opinion, it cannot be said that any conscious decision has been taken by the Department in assessee's case. The issue was examined in detail only in the year under consideration. At the best it can be said that the returns for the earlier years were processed by the AO under Section 143(1), without examining any material, in conformity with Board Circular which provided not to make any scrutiny in most of the cases. The question whether the assessee is carrying on agricultural activity or not can be answered only after taking into consideration various materials and evidences on the record which should stand to the test laid down by the Hon'ble Supreme Court in the case of Raja Binoy Kumar Suhas Rai (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough technically no assessment is framed in such a case, yet the proceedings for assessment stands terminated". These observations clearly show that no assessment is actually made where return is processed under Section 143(1). Hence, in our opinion, intimation under Section 143(1) does not conclude a matter as far as past years are concerned and consequently, rule of consistency would not be applicable in such cases. 9. The learned counsel for the assessee has also relied on the judgment of Hon'ble Delhi High Court in the case of Rajiv Grinding Mills (supra). We have gone through that judgment and find the same to be distinguishable on facts. In that case, the assessment year involved was asst. yr. 1993-94. It was found by the Tribunal that similar issue was decided by the first appellate authority in , respect of two earlier assessment years i.e., 1991-92 and 1992-93. Therefore, in that case, assessments were completed in the earlier years after examining the issue in detail. But in the present case, no such assessment was framed. Hence, that decision does not advance the case of the assessee. 10. Coming to the merits of the case, the learned counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Cactus, etc. does not require use of land at all and can be developed in pots, in any case, is not the subject-matter of dispute in the instant case and is besides the issue. 8. That the case law relied upon by the lower authorities were distinguishable on facts. 9. That the judgment of Hon'ble Supreme Court in the case of Raja Binoy Kumar Suhas Roy (supra) covers the issue before the Tribunal. Particular attention was drawn to pp. 482, 484, 510 and 511. 10. That the land of the assessee was visited by the Inspector of Income-tax and nothing adverse to the assessee was found. 11. That it was never the case of the assessee that plants were grown in conditioned or controlled atmosphere. No such expenses were debited to P&L a/c. The finding of the AO in this regard is merely based on suspicion. Further, mere putting the plants in shades is not adverse to agricultural activity. Similarly, transferring of plant from soil beds to the pots is nothing but continuation of agricultural operation adjunct to the basic operation. In view of the above arguments, it was prayed that the income from nursery be declared to be agricultural income. 11 On the other hand, the learned Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso from depredation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market, would all be agricultural operations when taken in conjunction with the basic operations. The human labour and skill spent in the performance of these subsequent operations cannot be said to have been spent on the land itself. The mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations, would not be enough to characterise them as agricultural operations; in order to invest them with the character of agricultural operations these subsequent operations must necessarily be in conjunction with and in continuation of the basic operations which are the effective cause of the products being raised from the land. The subsequent operations divorced from the basic operations cannot constitute by themselves agricultural operations. Only if this integrated activity which constitutes agriculture is undertaken and performed in regard to any land can that land be said to have been used for 'agricultural purposes' and the income derived therefrom be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclares that the nature of the product is irrelevant. The agricultural product would not only include products for sustenance of human being but also products of utility for a trade and commerce. 14. In view of the above legal position, let us now adjudicate the issue in the light of the facts of the case. The AO has rejected the claim of the assessee merely on the ground that activity carried on by the assessee does not amount to agriculture. It would be appropriate at this stage to go through the activities carried out by the assessee. The assessee, vide letter dt. 29th March 2001 has referred to in detail about the activities carried out by it. The same are being reproduced as under : "1. That process of growing plants has been explanded in brief to you in our several submissions and in detail to your inspector on his visit to the nursery of the assessee. However, for your fresh consideration the same is explained hereunder : (i) Preparation of soil beds. For preparation and growth of plants, land has to be prepared. Soil is softened by tilling of soil and after soil so dugged is dried so that insects below the soil level are killed by sunheat. Manure of various kinds, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the quality of rose from which cut and the new plant is of good quality rose. In other process, seedlings prepared in soil bed which are transferred to pots are taken to the mother trees for inarching i.e., a branch of mother plant is bent and tied with the seedling after both branches are slit. The slit branches are tied with jute/coconut fibre. That portion is watered regularly and the new plant is separated after 3 to 4 months. The plant so prepared is of the same species that of mother plant irrespective of the quality of the seedling. (f) There are few plants in which sprouting takes place from its root level, For such purposes harmones and special manures are provided to such plans for better development of such process. Sprouts so generated are taken out, in the month of July and/or February only, by losening the roots of mother plant and such small sprouts are separated from mother plant to become new plant. In the process of propagation mortality rate of plants is very high. 2. That at no place it has been stated that plants purchased during the year have been grown in conditional atmosphere for their onward sale only. Plants have been purchased for the requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land were shifted to plots and, therefore, the same could not be considered as agricultural operations. This contention of the Department cannot be accepted in view of the Madras High Court judgment in the case of Soundarya Nursery (supra) wherein on similar facts it was held as under : "All the products of the land which have some utility either for some consumption or for trade or commerce if they are based on land would be agricultural products. If the plants sold in pots were the result of basic operations on the land expending human skill and labour thereon and if after performance of the basic operations on land the resultant product grown or such part thereof was suitable for being nurtured in a pot with water or by placing them in the green house or in shade or after performing several operations such as weeding, watering, manuring, etc., and are made ready for sale, all these operations are agricultural operations and the plants are products of agriculture," 15. The CIT(A) has decided the issue against the assessee for the reasons that activity of the assessee was by way of business. In our opinion, the claim of the assessee cannot be rejected on this gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was disallowed on the ground that the land was not assessable to land revenue while in the present case it is nobody's case that the land in question was not assessed to land revenue. 18. The decision of Madras High Court in the case of Stanes Amalgamated Estates (P) Ltd. (supra) relied upon by the CIT(A) is also distinguishable on facts. In that case, the question was whether the income derived from the sale of oil extracted from the leaves of eucalyptus trees was agricultural income. That was a case of post agricultural activity. It was held by the Court that the trees by itself had a commercial market and, therefore, it could not be said that the process of extraction of oil was necessary to make the agricultural produce fit for marketing. We are not concerned with such a case and, therefore, the same is clearly distinguishable. 19. In view of the above discussion, it is held that activities carried out by the assessee amounted to agricultural operations and consequently, the income derived from such operations was agricultural income not liable to tax under Section 10. However, we find from the reply of the assessee dt. 29th March, 2001, that assessee had purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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