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TMI Blog2021 (8) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... tural produce, i.e., as attributable to the standing crops, is though inferable, and toward which, therefore, further expenditure, as imputed on the basis of the reported profit rate, is adopted. The balance income of ₹ 2.58 lacs, i.e., the agricultural income returned over ₹ 26.84 lacs, would continue to be assessed as income from other sources, for assessment under which head of income there is ample authority, including the decisions relied upon by the Revenue in the instant case. Before parting with this order, it is deemed proper to dilate on an aspect of the matter. The assessment in the instant case was subject to revision on the ground that the AO had not initiated penalty proceedings u/s. 271(1)(c) while completing the assessment. The matter, in further appeal, was set aside by the Tribunal directing the Administrative Commissioner (CIT) to review afresh after allowing proper opportunity of hearing to the assessee. The revision order dated 29/3/2011 is not on record. It is thus not clear as to how could under section 263 proceedings the ld. CIT drop the disallowance of deduction u/s. 80- JJA, made in assessment, more so as the same was deemed erroneous and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... background facts of the case, he explained that the assessment in this case was originally made u/s. 143(3) on 26/12/2008 (APB pgs. 46-51), making two adjustments to the assessee s returned income, being: a). denial of exemption u/s.10(1) in respect of income returned as agricultural income on account of it being unproved to the extent of ₹ 28.56 lacs; and b). denial of deduction u/s. 80-JJA on the profits and gains of the business of sale of biofertilizer and biological agent, at ₹ 10.69 lacs. The same was subject to revision u/s. 263 of the Act by the Commissioner of Income Tax-II, Jabalpur ( CIT for short) on the ground that penalty u/s. 271(1)(c) had not been initiated by the Assessing Officer (AO) while completing the assessment, which was also directed to be framed afresh. The matter, in further appeal, was set aside by the Tribunal (in ITA 186/Jab/2009, dated 26/10/2009) to the file of the ld. CIT, who, in the set aside proceedings, vide order dated 29/3/2011, dropped the proceedings u/s. 263 qua the deduction u/s. 80-JJA, and remitted the matter back to the AO for fresh examination on the issue of denial of exemption u/s. 10(1). The AO, vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een worked out by the AO on proportionate basis, accepting the sale proceeds received thus as genuine. In doing so, it, as for AY 2005-06, relies on the following case law, emphasizing the trite law that the burden to prove a claim qua an exemption or deduction is on the person claiming the same, i.e., the assessee: CIT v. R. Venkataswamy Naidu [1956] 29 ITR 529 (SC); CIT v. Ramakrishna Deo [1959] 35 ITR 312 (SC); Ridhkarandas Poonamchand Bhura v. CIT [1998] 231 ITR 604 (MP); and Gopi Ram Lila v. CIT [1997] 225 ITR 320 (Raj). The burden would include both, the nature as well as the volume of the income subject to exemption/deduction, as well as the quantum of the latter. 3.2 The principle of law is well-settled, and admits of no two views. In all cases in which receipt is sought to be taxed as income, the burden is upon the Department to prove that it is within the taxing provision. Where, however, as in the instant case, the receipt is in the nature of income, the burden of proving that it is not taxable, because it falls within the exemption provided by the Act, lies on the assessee (Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SC)). As noted by it with reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Tribunal for that year would obtain and apply for the current year as well. 3.4 The matter is, thus, principally factual. On facts, it is observed that the assessee has, for the current year, not produced the books of account and the bills and vouchers for the expenditure claimed to be incurred on agricultural activity, as well as the sale bills, as stated emphatically at pgs.3-4 of the assessment order dated 28/12/2011. The non-production of the sale bills, stated to be on account of the same being impounded by the Addl. CIT, Range-I, Jabalpur, would though be to no moment considering the Revenue s case, i.e., the non-verifiability of the sale of agricultural produce which is almost wholly in cash, in view of the non-mention of the buyers particulars on the sale bills, an admitted position. No value, then, can be attached to the Revenues objection qua non-production of cash sale bills. Qua the non-production of the books of account and agricultural expenditure bills/vouchers during assessment proceedings, particularly considering that the matter was, in revision, remitted for fresh consideration, Sh. Usrethe, on being questioned by the Bench during hearing, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale price of Musli for the two years, a similar per unit cost of production for the current year should result in a much lower profit (or profit ratio) for the current year. The Profit Loss (P L) Accounts for financial years 2004-05 to 2006-07 were furnished in response (copy on record). Per written submissions the disclosed profit was sought to be explained in terms of the sale quantity/s and sale rate/s. Khasra Nakal (for the current year) was not submitted, though, on asking, stated by Sh. Usrethe, with reference to the assessment order, to have been furnished during the course of the assessment proceedings. 3.5 The issues arising for adjudication, thus, are: a). if the undertaking of agricultural activity during the current year has been proved and, if so, to what extent; and b). without prejudice, the extent of income, if any, that can be said to be derived from agriculture for the current year. Even though holding of agricultural land or even proving the agricultural activity would not by itself prove agricultural income, much less to the extent stated, in the instant case the said activity itself, wholly a matter of fact, cannot be said to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derance of probabilities weighs heavily in favour of the realization of the agricultural produce of the immediately preceding previous year, quantity of which as at the year-end is not in dispute. Why would not, one may ask, any prudent or reasonable person, who has in fact established himself in the market, sell his standing crops, realizing their value as well as his earnings therefrom? No impeding circumstance has been stated, much less shown by the Revenue. In fact, the same principle finds application by the Tribunal for AY 2005-06. The agricultural activity being proved, Musli was taken as sold at the going market rates, i.e., as recorded in books, despite the non-specification of the buyers. The only question that would survive is the extent of such earning. The P L A/cs for the previous years ending 31/3/2005 31/3/2006 reflect the closing stock of standing crop of Musli at 34,520 kg. (valued at ₹ 12,82,034) and it s sale for the current year at ₹ 40.35 lacs respectively, which figures also find mention in the Tribunal s order dated 20/3/2020 (for AY 2005-06) (paras 21, 28). The said sale, on the basis of the average sale rate of ₹ 131/kg., implies a q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the total cost at ₹ 0.88 lacs, which, at 37.18% of sale, makes for a sale value of ₹ 2.37 lacs. Even if, therefore, the entire opening stock is regarded as sold, so that no part of it is used for cultivation, its sale would be at ₹ 2.37 lacs. That would give a total agricultural sale for the year at Rs.₹ 42.72 lacs (i.e., ₹ 40.35 lacs + ₹ 2.37 lacs), yielding a profit of ₹ 26.84 lacs, being 62.82% of ₹ 42.72 lacs. Income to that extent is to be, accordingly, regarded as agricultural income. The exemption u/s. 10(1), thus, would stand to be allowed at ₹ 26.84 lacs, as against at ₹ 0.86 lacs by the Revenue, which, needless to add, would get subsumed therein. I am conscious that the cost of sale of the agricultural produce, imputed on the basis of the profit/profit ratio disclosed for the current year, i.e., at ₹ 15.88 lacs (i.e., ₹ 42.72 lacs - ₹ 26.84 lacs), exceeds the opening stock of standing crops for the year (₹ 13.57 lacs), so that the difference (₹ 2.31 lacs), being expenditure on agricultural activity, is a tacit admission of the said activity having been undertaken during the year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed was agricultural income. It was not for the Revenue to prove that it was not agricultural income. The sale of agricultural produce, i.e., as attributable to the standing crops, is though inferable, and toward which, therefore, further expenditure, as imputed on the basis of the reported profit rate, is adopted. The balance income of ₹ 2.58 lacs, i.e., the agricultural income returned over ₹ 26.84 lacs, would continue to be assessed as income from other sources, for assessment under which head of income there is ample authority, including the decisions relied upon by the Revenue in the instant case. Before parting with this order, it is deemed proper to dilate on an aspect of the matter. The assessment in the instant case was subject to revision on the ground that the AO had not initiated penalty proceedings u/s. 271(1)(c) while completing the assessment. The matter, in further appeal, was set aside by the Tribunal directing the Administrative Commissioner (CIT) to review afresh after allowing proper opportunity of hearing to the assessee. The revision order dated 29/3/2011 is not on record. It is thus not clear as to how could under section 263 proceedings t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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