-»- HIGH COURT OF CHHATTiSGARH AT BILASPUR Tax Case N0,42 of2010 APPELLANT: income Tax Officer, Ward -1(1), Raipur Versus RESPONDENT: M/s Durga Krishi Farm, 14, Recreation Marg, Choubey Colony, Raipur Present: Shri Raj'eev Shrivastava with Smt. V. Shradha Rao, counsel for the appeliant. Division Bench: Hon'ble Shri Dhirendra Mishra & Hon'bie Shri R.N. Chandrakar, JJ. ORAL JUD6MENT The following j J. (5-4-2010) gment of the Court was delivered by i. The matter is listed on defaujt as pointed out vide office note dated 8-2- 2010. The default is condoned. 2. The appeilant/revenue has preferred this appeal under Sectlon 260-A of the Income Tax Act, 1961 (for short 'the Act') against the order of the tncome Tax Appeltate Tribunal, Biiaspur Bench (for short 'the Tribunal') ^ on foliowing substantial question of law:- • Whether on the facts and in the circumstances, the ITAT was legally justified in conflrming the order of ClT(A) who has ignored the materiai facts of the case broyght on record by the A.O.? 3. Briefly stated facts of the case, as projected In the memo of appeal, are that the assessee filed income tax return for the assessment year ,2005-06 showing agricuitura! income at Rs.75,43,812/- and claiming exemption under Section 10 of the Act. After rejecting books of account under Section 145(3), the A.O. estimated cultivated land at the rate of 94.50 acres as against 230 acres shown by the assessee and estimated agricultural income at Rs.1 ,25,000/- per acre. Accordingly, the total sales were estimated at Rs.1,18,12,500/-. Further estimating agricultural expenses of Rs.1,06,60,2147-, the net agricultural income was worked out toRs.11,52.286/- as agalnst Rs.75,43,812/- shown in the return and difference of Rs.63,91,526/- was treated as income from other sources and not from agriculfure and the income was brought to tax. 4. On appea! by the assessee, the CIT (Appeals) deleted the above addition by observing that most of the observations made by the A.O. in his assessment order are general in nature and not supported by any positive material. The A.O. has rejected booRs result and estimated gross sa!e proceeds of agricutture produce at Rs.1,25,000/- per acre but he has not brought anything on record to support this estimate. After rejecting the books resuit, the A.O. ought to have considered past assessment of the assessee when assessee's income of Rs.56,000/- per acre for a period of 8 months has been accepted in the earlier year, which is equivalent to Rs.84,000/- acre for the'whole . year. There is nothing on record to show that the assessee has any other business activity apart from agriculture or had any other source of income. The inconsistencies pointed out in the statement of one of the Directors and Supervisors are genera! and the assessee's purchases do not become bogus simply because creditors do not account for some of the bills issued by them, The A.O. has not ^ disputed the agriculturat produce, but he has expressed only suspicion that the income shown by the assessee is excessive though there is no material on record for holding the same. With these observations, the addition made by the A.O. of Rs-63,91,526/- has been deleted. 5. The appeal preferred by the Revenue has been further dismissed by the Tribunal and it has been held that the firm is engaged in agricultural activitie? and the agricuiture is the only source of income of the assessee firm. The income shown by the assessee in the past was also substantial and he was assessed for agricultural income only. In the year under conslderation, there was a substantial increase in the quantum of receipt which has infiuenced the A.O. for taking such view. The gross profit ratio and net profit ratio in the year under consideration are least as compared to the past 3 years. The quantum of production, the sale rate and area under cultivation has not been controverted. The A.O. has adopted the figure of Rs.1.25 lakhs per acre after rejecting the books of account, however, claim of expenses shown in the account books has been accepted. Once the A.O. rejected the books of account, in that case, he ought to have estimated agricultural income based upon some reasonable material. The A.O. ought to have considered the pattern of crop of last year and of this year and thereafter should have worked out the quantum of agricultural income. It is common knowledge that how the market operations take place in respect of sale and purchase of agriculturai produce and the brokers/ third parties do not come forward before the revenue authorities. The evidence produced by the assessee has not been found to be false or self aenerated and, therefore, no adverse inference can be drawn ^ .r^-.^ ''". /f~^.% K -ti '^SiSFfsKSEl:'i^ <? against the assessee for non-compliance of notice by such parties. The sale of fruits has been accepted by the A.O. in the past years and subsequent years as agricultural income, however, the A.O. has not considered that the case of the assessee was sale of Papita and Banana which could not be setf grown. Accepting the explanation of the assessee, learned CIT (Appeals) disregarded the discrepancies in the statements of partners of the firm/supervisors, however, the A.O. has not considered the explanation and thus accepting reasons assigned by the CIT (Appeals), the appeal preferred by the revenue has been dismissed. 6. Shri Rajiv Shrivastava, learned counsel for the appellanfrevenue vehemently argued that both the appellate forums have not considered the well reasoned order of the Assessing Officer based on information gathered during eniquiry from the concerned Halka Patwari under Section 133 (6) of the Act. From the replies filed by the assessee, it would be evident that the assessee did not have correct facts and figure of area where vegetables were grown and the replies are contradictory with each other. The explanation of the assessee for abnormal increase in the sales has been rejected as there was substantial reduction in area under agricultural activities of vegetabies and fruits. The explanation that good technique of farming and use of improved seeds and fertilizers gave record production has been disbelieved. The brokers through whom produces have been soid have not been produced for examination. Dealing with various other aspects, it has been finally held that sales of vegetable and fruits shown in the books of the assessee and purchase expenses are not I reliable and the book results are rejected under Section 145 (3) ofthe Act. 7. He further argued that the Tribunal in para-8 ofthe impugned order has held that if the A.O. desired to reject the books of account, then, he should have estimated the agriculturai Income based upon some reasonable material so as to justify such estimation. However, the Tribunal even after recording the above finding did not remand the matter to the A.O. for fresh assessment after setting aside the order of the CIT (Appeals) and confirmed the order passed by the Commissioner (Appeals). In these circumstances, the order of the Tribunal confirming the order ofthe CIT (Appeals) cannot be sustained and the same deserves to be set aside and the A.O. may be directed for fresh assessment in the light ofthe observations ofthe Tribunal. Relying upon the decision of the Supreme Court in the matter of Commissioner of Income Tax Vs. Ramakrishna Deo {(1959) 35 ITR 312 (SC)}, it was argued that the law is weli settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption claimed is under the IT Act. Since the assessee was claiming exemption on the ground that it was an agricultural income, the burden of proof was upon the assessee to establish that he derived income only from agricuiture. Further relying upon the decision in the matter of Commissioner of income Tax Vs. R. Venkataswamy Naidu {(1956) 29 ITR 529 (SC)}, it was argued that in order to claim an exemption from payment of income-tax in respect of what the assessee considered agricuitura! income, the assessee had to put before the IT Authorities proper ^^'^^•i:\^:^^!^'^}^^.^^^i^^-^ w materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural income. It was not for the IT Authorities to prove that it was not agriculturai income. In the matter of Jugal Kishore Arora Vs. Deputy Commissioner of Income Tax {(2004) 192 CTR (Ail) 174 : (2004) 269 iTR 133 (All) : (2004) 141 TAXMAN 187}, the Hlgh Court ofAHahabad confirmed the order of the Tribunal whereby the matter was remanded to the A.O. So bring on record the nature of operations performed by the assessee in growing plants in nursery viz. primary as well as secondary on the specific iand area, and thereafter apply the law laid down by various Courts to the facts of the case to determine whether the Income from nursery is agricultural income. 8. Heard learned counsel for the appellant. Perused the orders in origina! as also orders passed by the appellate forums. s. indisputably, both the appellate forums, after eiaborately considering the reasons assigned by the A.O. for rejecting books of account and not accepting explanation of the assessee for substantial increase in production of agricultural produce, have set aside the order of the A.O. and recorded a finding of fact that the A.O. did not foliow the proper • procedure after rejecting the books of account to estimate net receipt and expenditure incurred by the assessee. Further by considering the assessment for the preceding years and the gross profrt ratio and net proflt ratio, it has been observed that ratio was least in the year under consideration. l^ io. It is true that in the case of agricultural income it is the burden of the person who claims exemption under fhe head agricultural income, however, in the instantcase, both the appellate forums have set aside the order of the Assessing Officer by accepting books of account furnished by the assessee and his explanation for the inconsistencies in the statements of partners of firm/sypervisors and non appearance of the brokers summoned by the Department. In our considered view, the question whether income derived by an assessee is an agricultural income, whether agricultural income shown by the assessee is just and proper or it is excessive and whether explanation offered by the assessee regarding inconsistency in the version of partners of the firm/supervisors is a question of fact and the same has been decided by the CIT (Appeals) in favour of the assessee which has been subsequentiy confirmed by the Tribunal. ll.On the basis of aforesaid dlscussion, we are of the view that no substantial question of !aw, as proposed, arises for adjudication of this appeal. The appeal is accordingly dismissed. > Ban/e Sdf- Dhirendra Mishra Judge Sd/- R.N. Chandrakar Judge