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TMI Blog2019 (2) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not stop merely on finding that the order is erroneous but also has to establish that the order of AO is prejudicial to the interests of revenue. Only missing link is the verification of lease agreement with the farmers and activities whether it is similar to the Prabhat Agri Biotech or not. This could also be verified by CIT and established that it is prejudicial to the interests of revenue. CIT has failed in this aspect. This is in line with the decision in the case of Malabar Industrial co. Ltd.(2000 (2) TMI 10 - SUPREME COURT) and CIT Vs. Green World Corporation (2009 (5) TMI 14 - SUPREME COURT OF INDIA). Therefore, no doubt, the assessment order is erroneous but not prejudicial to the revenue considering the case law submitted before us. Seeds cannot be produced without basic agricultural activities. The assessee has sold the seeds and must have carried out the agricultural activities in order to produce the seeds. Hence, we set aside the order of CIT passed u/s 263 of the Act and the order of the AO is restored. Accordingly, ground raised by the assessee are allowed. - ITA No. 667/Hyd/2017 - - - Dated:- 30-1-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri S. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e could still be claimed as agriculture. Further, he observed that he did not even call for the details of contracts to examine their nature or any other details to examine that the activities undertaken by the assessee were identical to those that of any farmer would carry in his own land. In view of the above observations, the CIT set aside the order of AO and directed to redo the assessment after duly examining the above issue, reiterating the reason that the AO passed the order without making enquiries or verification as should have been made to examine the claim in respect of agricultural relief made u/s 10(1) of the Act. 6. Aggrieved by the order of CIT, the assessee is in appeal before us raising the following grounds of appeal: 1. The order of the Learned Commissioner of Income tax is against law, weight of evidence and probabilities of the case. 2. The learned Commissioner of Income Tax erred in holding that the assessment order passed u/s 143(3) of the Income-tax Act, 1961 in the case of the assessee for Assessment Year 2012-2013 is erroneous in so far as it is prejudicial to the interests of revenue. 3. The learned Commissioner of Income Tax having appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fertilizer application, internal cultivation, irrigation, weeding ploughing and pollination. iv) Inspection of fields by production staff v) Harvesting and produce supply to processing units (own or third party units) vi) Seed quality testing, drying, ginning, delinting, chemical coating, packing including labelling as per the Seed Act,1966. vii) Packed seed distribution and sales. 9.1 It was the submissions of the assessee that since seeds are derived from mother plants grown on land, they are considered as agricultural produce, hence, the production of seeds by farming is an agricultural activity of the company. Further, since the company gets cultivation done under its supervision and at its own cost and risks as stated above, the company can be said to be a grower of agricultural produce and hence is considered as an agriculturist . Since the risk and rewards associated with the agricultural operations lies with the company and are borne by the Company and the company has an insurable interest on the farm produce, the activities carried on by the company was in the nature of agricultural activities and the sale of the agricultural produce falls within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case, we find that the assessee claimed for exemption under Section 10(1) of the Income Tax Act, 1961 treating the income generated from the sale of basic/foundation seeds as agricultural income. Therefore, the question is whether the income arising from out of the sale of seeds can be treated to be income otherwise than the agricultural income. No one can dispute that the seed is the product of agricultural activity and the seeds cannot be sold commercially, unless it is produced by agricultural activity. 9.7. Though the order of AO is cryptic, but, after obtaining the information from the assessee and relying on the decision of the Hon ble AP High Court in assessee s sister concern, the AO allowed the claim of the assessee u/s 10(1) of the Act. Hence, the findings of the CIT that the AO allowed relief u/s 10(1) without making inquiries or verification. are not proper. 9.8. As regards ld. DR s reference to Explanation 2 to section 263(1), we rely on the decision of of the Mumbai Benches of ITAT in the case of Shri Anil L. Todarwal Vs. Pr. CIT in ITA No. 3498/Mum/2017 vide order dated 2nd January, 2018 wherein the coordinate Bench has held as under: 9. We are not ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y inquiries or verifications for leading to the conclusion that the claim of the assessee as regards the payment of foreign commission on the export sales was in order, were made by the A.O, therefore, it can safely be concluded that the order passed by him was not without making inquiries or verifications which should have been made. Still further, as regards the payment of local commission of ₹ 33,000/- , we have perused the material which was furnished by the assessee during the course of the assessment proceedings, as well as his reply to the notice under Sec.133(6). We find that the assessee had through out been claiming that the amount of ₹ 33,000/- was paid to Shri Pratap Singh towards supervision charges and formed part of his salary. We have given a thoughtful consideration to the aforesaid facts in the backdrop of the material available on record and are of the considered view that the A.O only after necessary deliberations on the aforesaid claim of the assessee had accepted the same. We are of the considered view that now when the A.O after necessary deliberations had accepted that the payment made to Sh. Pratap Singh was by of salary, therefore, the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgments of the Hon'ble High Court of Bombay in the case of CIT Vs. Fine Jewellery (India) ltd. (2015) 372 ITR 303 (Bom), Commissioner of Income-tax Vs. Gabrial India Ltd.(1993) 203 ITR 108 (Bom) and MOIL Ltd. Vs. CIT-1, Nagpur (2017) 396 ITR 244 (Bom). We thus in the backdrop of our aforesaid observations are of a strong conviction that the Principal CIT had traversed beyond the scope of his jurisdiction and revised the order passed by the A.O under Sec. 143(3), dated 29.01.2015, which as observed by us hereinabove, was passed by the A.O after making the necessary inquiries and verifications in respect of the issues under consideration. 9.9. In view of the above discussion, we notice that the assessee has submitted the written submissions on agricultural activities and filed the case law claiming that the activities of the assessee are exactly similar to M/s Prabhat Agri Biotech Ltd. (supra). This was not disputed by ld. CIT. Further, assessee brought to our notice that AO has asked for various details including the lease details on the date of hearing (email sent by the AR to the company after hearing with the AO on 06/01/2015). In our considered view, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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