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TMI Blog2019 (6) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dated 27.12.2016, wherein the assessee's income was determined at ₹ 35,68,820/-; by treating agricultural income declared, to the extent of ₹ 29,52,250/-, as income from other sources. The assessee's appeal was dismissed by the CIT(A)-3, Bangalore, vide order dated 01.01.2019. 3. Aggrieved by the order of CIT(A)-3, Bangalore, dated 01.01.2019 for Assessment Year 2014-15, the assessee has preferred this appeal wherein it has raised the following grounds: 1. General Ground 1.1. The learned Income Tax Officer, Ward- 1, Ramanagar ('A0') has erred in passing the assessment order under section 143(3) of the Income Tax Act, 1961 ('the Act') in the manner passed by her and the Commissioner of Income Tax-(Appeals)-3 ('CIT(A)') has erred in confirming the said assessment order. The said order being bad in law is liable to be quashed. 2. Re-categorization of agricultural income as non- agricultural income chargeable under the head Income from other Sources - Tax effect - Rs. 8,85,675 2.1 The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in concluding that in relation to sericulture activity that since the license is in the name of the Karta of the HUF who represents the entire family, being the eldest male member of the HUF no other person has carried out the sericulture activity. 2.10. The learned CIT(A) has erred in relying on the letter of the sericulture extension officer and concluding that no sericulture activity was carried on land beyond the land area measuring acer and 5 guntas and the appellant would he buying and selling cocoons (trading) in so far as the remaining income is concerned. 2.11. The learned CIT(A) has erred in law and facts to the extent of concluding that the income from sericulture activity as partially agricultural in so far as being related to cultivation of mulberry leaves on an ad hoc basis. 2.12.The learned CIT(A) has erred in concluding that expenses upto•40 percent to 50 percent are incurred in earning income from sericulture activities, without any basis and further concluding that no such income can be earned without the help of labour. 2.13. The learned CIT(A) has erred in not appreciating that income from sale of coconuts did not entail any expenses as a res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that, compared to the agricultural income of earlier years; i.e., Assessment Year 2012-13 amounting to ₹ 32 lakhs and for Assessment Year 2013-14 of ₹ 36 lakhs, which has been accepted by the Assessing Officer (AO) in scrutiny orders of assessment passed under section 143(3) of the Act for these years, the agricultural income of the year under consideration is ₹ 37,50,000/-; i.e., only a marginal increase of ₹ 1.5 lakhs. The learned AR placed reliance on the decision of the Hon'ble Karnataka High Court in the case of S. L. Basavaraj Vs. ACIT (2015) 61 taxmann.com 67 (Karn) to contend that the agricultural income declared by the assessee cannot be rejected if there is only a marginal increase in the said income during the relevant year as compared to earlier years. Reliance was also placed on the decision of the Hon'ble Allahabad High Court in the case of CIT Vs. Landmark Innovation (P) Ltd., (2013) 38 taxmann.com 217 (Allahabad) to contend that where agricultural activities on land was accepted for earlier years, same could not be doubted in the subsequent year in the absence of cogent evidence. 6.1.2 The learned AR, referring to the details filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions put forth and have perused the material on record; including the judicial pronouncements cited. It is not in dispute that the assessee HUF owned agricultural lands in the year under consideration. The 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) at para 4.8 of his order 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. The 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. 6.4 The next issue for consideration is whether the assessee HUF carried out agricultural operations during the year. In this regard, it is seen that the AO, in the course of assessment proceedings, conducted en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income in view of the decision of the Hon'ble Apex Court in the case of K. Lakshmanan & Co. Vs. CIT (2000) 108 Taxman 167 (SC); 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. In the case on hand, the AO has considered income from sericulture at ₹ 1,92,240/- and 50% thereof viz., ₹ 96,120/- as income derived from cultivation of mulberry plants. It has 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. In the facts and circumstances of the case, as discussed above, on this issue, 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. 7.3 Thus, out of the total addition of ₹ 29,52,250/- made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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