Marudhar Services Ltd., New Delhi vs Department Of Income Tax

ITO, Ward 6 (2), vs. M/s. Marudhar Services Limited, New Delhi. 4, Community Centre, East of Kailash, New Delhi - 110 065.

(APPELLANT) (RESPONDENT)

ASSESSEE BY : None REVENUE by : Shri P. Dam Kanunjha, Senior DR

DATE OF HEARING : 23.02.2015 DATE OF PRONOUNCEMENT : .02.2015

ORDER

PER B.C. MEENA, ACCOUNTANT MEMBER :

This appeal filed by the revenue emanates from the order of the CIT (Appeals)-

IX, New Delhi dated 22.07.2013 for the assessment year 1996-97.

2. The return of income was filed on 24.02.1998 declaring a loss of Rs.8,45,240/-.

The CIT (A) has granted the relief to the assessee. Now, the revenue is in appeal by

taking the following grounds :-

"1. Whether in the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the entire addition of Rs.16,35,636/- made by the A.O. by treating the agricultural income claimed by the assessee of Rs.24,80,876/- as income from other sources, by following the order of the Hon'ble ITAT in the case of assessee itself for the A.Y. 1993-94 and 1994-95 (ITA No. 2983 & 2984, dated 23.11.2007) whereas the hon'ble ITAT allowed only part relief to the assessee in the above order by 2 ITA NO.5380/Del/2013

holding Rs.4,70,000/- out of Rs. 10,15,000/- claimed as agricultural income, and Rs.5,10,000/- , out of Rs.21,85,184/- claimed as agricultural income, respectively for the A.Y. 19993-94 and 1994-95, and directed the A.O. to treat the balance amount as income from other sources?

2. Whether in the facts and circumstances of the case, the order of Ld. CIT(A) is perverse in nature in confirming the decision of the AO to reject the revised return filed on 16.03.1999 returning the agnculturaI1ncome at Rs.80,876/- only but accepted the same at the time of passing the appellate order?

3. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.

4. That the grounds of appeal are without prejudice to each other.

5. That the appellant craves leave to add, alter, amend or forgo and ground(s) of the appeal raised above at the time of the hearing."

3. Ground Nos.3 to 5 are general in nature and do not require any adjudication.

4. Ground No.1 is against the deletion of addition of Rs.16,35,636/- made by the

Assessing Officer by treating the agricultural income claimed by the assessee of

Rs.24,80,876/- as income from other sources following the order of the ITAT in the

case of assessee for assessment years 1993-94 and 1994-95. Ground No.2 is

regarding accepting the revised return.

5. The CIT (A) has granted the relief on these issues as under :-

"3. Brief facts and background of the case The assessed did not file return of income for the AY 1996-97. Therefore the AO issued notice U/S 142 (1) calling for the return of income. Accordingly the appellant filed return of income on 24.02.1998 declaring a loss of Rs.8,45,24/-. Another return was filed on 16.03.99 declaring loss of Rs.41,4801-. On the basis of decision in the case of Kumar Jagadish Chandra Sin ha Vs CIT (1996) 220 ITR 67 (SC) the AO ignored the revised return and completed the assessment based on the financial statements filed along with the return of income. In the return of income the appellant claimed agricultural income of Rs.16,35,365/- and expenses of Rs.8,45,240/-. Stating that the assessed did not file any evidences regarding agricultural income and the expenses, the AO added back the entire amount as the income from other sources and after 3 ITA NO.5380/Del/2013

adjustment of declared loss of Rs.8,45,250/- arrived at total taxable income of Rs.16,35,636/-.

4. Aggrieved by the additions made to declared taxable income, the appeal is filed. On behalf of appellant, Shri. Anil Sharma, Advocate, appeared and written and oral submission were made. The issues that came up for consideration are discussed hereunder.

5. The first Ground of appeal is of general nature on which no specific submissions have been made by the appellant and hence no adjudication is required thereon. The Grounds 5 & 6 are not specific and adjudication of other Grounds will automatically address these Grounds. The assessment order was received by the appellant on 06.04.99 and accordingly the last date for filling the appeal before the CIT (A) was 05.05.99 as provided U/S 249(2). However the appeal was filed on 10.05.99. The appellant applied for condonation of delay on the Ground that the requisite fee was deposited on 05.05.99 itself but appeal could not be filed due to non availability of staff in the office of the CIT(A). But my Ld. predecessor CIT (A) rejected the plea of the appellant holding that there was no sufficient cause for such delay and dismissed the appeal. The appellant contested the order of the CIT (A) before the Hon'ble ITAT Delhi.

The Hon'ble ITAT, Delhi vide order dated 16.02.2005 in the appellant's case ITA NO. 2715 and 2716/0e1l2001 directed the CIT (A) "to decide the appeal of the assessee on merit after condoning the delay in filing the same". The Hon'ble ITAT observed that the delay is only 5 days that too including a Saturday and a Sunday. Since the assessee deposited the requisite fee on 05.05.99 there is no benefit for assessee by filling the appeal after 5 days. In view of the direction of the Hon'ble ITAT, the delay of 5 days is hereby condoned and appeal is considered as valid for discussion and decision.

6. While examining the case on merit the following issues emerges

Whether the revised return of income filed on 16.03.99 is a valid return?

Whether the financial statements furnished along with the return filed on 16.03.99 as claimed by the appellant as revised return and final balance sheet and profit and loss account and documents filed before the AO to claim agricultural income can be considered to examine the claim of the appellant?

Whether the lease rent received by the appellant from leasing out of land is agricultural income or to be treated as income from other source?

4 ITA NO.5380/Del/2013

7. In the second and the third Grounds of appeal the appellant submitted that the revised return was filed on 16.03.9~ i.e. before the completion of the assessment proceedings and hence valid. The appellant submitted that the original return was based on the provisional financial statements and filed with unsigned balance sheet and P&L accounts. The provisional lease rent receivable of Rs.24,00,000/- was erroneously taken into income and when it was noticed. the financial statements were finalized with correct income and expenditure. The appellant relied on several judicial pronouncements. Citing the case of Dhampur Sugar Mills Ltd. Vs CIT (1973) 90 ITR 240 (All) appellant's argue that if the assessee files an application for correcting a return already filed or making some amendments there in, it would not mean that he has filed a revised return.

The AO mentioned in the remand report that since the assessee filed the original return U/S 139(4), it has lost the privilege to file the revise return. For relevant AY, the due date for assessee to file the return of income was 31.10.1997. But no return was filed. Later on in response to the notice of AO U/S 142(1) of the Act the assessee file the return on 24.02.1998. In the remand report the AO relied on the decision of the Apex court in the case of Kumar Jagadish Chandra Sinha Vs CIT (1996) 220 ITR 67 (SC). In this case the Hon'ble court held that "no revised return can be filed under sub-section (5) of section 139 in a case where the return is filed under section 139(4). Once this is so, the revised returns filed by the assessee for both the said assessment years were not valid in law and could not have been treated and acted upon as revised returns contemplated by sub-section (5) of section 139, which means that section 153(1)(c) was not attracted in instant case." Hence, as per the provisions of the Act as well as the decision of Hon'ble Supreme Court, the return has to be treated as non-est return. Since the assessee did not file voluntary return and the return filed on 24.02.1998 was in response to the notices issued by the AO calling for the return of income, the revised return is not acceptable. Hence, the decision of the AO to reject the return filed on 16.03.99 is confirmed.

8. In the fourth Ground of appeal, the appellant raise the issue of agricultural income.

The assessee owns agricultural land and earns rent through Sanjha Scheme signed with the farmers. This income clubbed with some small income from sale of agricultural produce and scrub is declared as the income from operations and claims as agricultural income for exemption under the Income Tax Act. The appellant argues that the lease rent received from farmers is the main activity and hence cannot be treated as income from other sources. This issue has been dealt with in the case of appellant in the earlier years also. In the case of the appellant, for the AY 5 ITA NO.5380/Del/2013

93-94 and AY 94-95, this issue has been dealt with. The AO treated the income as the 'income from other source' denying the exemption of Income Tax. However, Hon'ble ITAT, Delhi in the case of the appellant vide order dated 23.11.2007 in ITA Nos. 2983 & 2984 (Del) 2004 have decided that the lease rent received is agricultural income. In these two assessments the AO treated the income as the income from other source mainly due to non production of evidence in support of the claim. The appellant contested these orders before the CIT(A) and the CIT(A) accepted the evidences under Rule 46A of the IT Rule as the assessment was completed in 14 days and assessee was not given sufficient time to produce the evidence. The Ld. CIT(A) accepted the Girdawari of the land produced by the appellant that proved the crops grown on the land owned by the appellant company as evidence of agricultural activity. As per the direction of the my predecessor Ld. CIT(A), the AO conducted inquiry by field visit and statement of the three major cultivators Shri Santraj, Sh. Badam Singh and Sh. Jairaj was taken. The AO reported that the claim regarding agricultural income was established. But the Ld. CIT(A) did not accept the report of the AO and held that the income from leasing is not agricultural income. Against the orders Ld. CIT (A) for AY 93-94 and AY 94-95 the Hon'ble ITAT has given the decision in favor of the assessee after considering following evidences.

(a) Evidence regarding ownership of agricultural land.

(b) Evidence in the shape of Girdawari showing that some crop has been grown in the said land.

(c) Sanjha agreement with various persons giving right to the other persons to cultivate the land and specifying that certain amount was receivable by the assessee on account of sharing of the crop.

Based on the verification made by the AO and on the basis of the evidences mentioned above the Hon'ble ITAT held that "The assessee was receiving certain income being agricultural income but the fact that how much income is earned cannot be ascertained in the absence of certain details."

Since the facts of the case remaining same for this year also, following the decision of the Hon'ble ITAT, the income from lease rent received from farmers is to be treated as agricultural income.

9. During the year under consideration the assessee claimed expenses of Rs.8,45,240/- and declared agricultural income of Rs.16,35,635/-. The AO disallowed the exemption of Rs.16,35,635/- as agricultural income and taxed it as income from other source. The AO also disallowed entire expense of Rs.8,45,240/- as non verifiable and assessed the total income at Rs.24,80,876/-. But again AO reduced the loss declared by the assessee in the return of income to the tune of Rs.8,45,2401- which is nothing but the expenses claimed by the assessee 6 ITA NO.5380/Del/2013

in the original return itself. Thus, as per the assessment order of the AO the taxable income is Rs.16,35,635/- which is nothing but the agricultural income declared by the assessee in the original return itself. Thus following the decision of the Hon'ble ITAT in the case of assessee for the AY 93-94 and AY 94-95, the fact of agricultural income is established and the amount of income arrived by AO has to be deleted. The AO has allowed the expenses claimed by the assessed to the tune of Rs.8,54,240/- by allowing the loss claimed in the return of income. The balance Rs.16,35,635/- is disallowed by AO treating as income from other source and rejecting the claim of assessee as it is agricultural income. In view of the decision of the Hon'ble ITAT in the case of assessee in the earlier years, this amount is to be treated as agricultural income and hence not liable to Income Tax. Hence, addition of Rs.16,35,635/- is deleted.

11. In the relevant year, e appellant furnished two sets of financial statements before the AO. One is with the original return of income that the assessee claims as the unaudited, unsigned and provisional. The other set is with the return of income filed subsequently after removing the mistakes crept into the earlier one. The main difference between the two sets of documents are that in the provisional statement, lease rent receivable is taken at Rs.24,00,000/- and that is included in the income. Along with this amount, an amount of Rs.80,876/- is added as income out of actual lease money received Rs.35,000/- and sale of Scrub Rs.45,876/-.

In the second set of financial statement, the assessee has taken out the provisional receivable lease rent of Rs.24,00,000/- from the balance sheet and the P&L account as this was a mistake and there was no such rent receivable by the assessee. At no stage of assessment and subsequent inquiry or examination by my predecessor Ld. CIT(A) there was any finding that such rent is receivable by the assessee during the relevant AY. Thus, appellant's submission finds some substance. Secondly, in the second set of statements the expense of Rs.7,99,744/- invested in Marudhar Farm Project has been capitalized and taken to the balance sheet. The balance amount is shown as administrative expenses. Thus assessee submits in the computation of income an income of Rs.35,000/- as lease money and Rs.45,876/- as the sale of scrub. For acceptance of the second set of documents as the revised claim of the assessee made before the AO during the assessment the appellant relied upon the decision of the Hon'ble High Court of Delhi in the case of Mohan Makin Ltd. Vs CIT (2012) 348 ITR 109 (Delhi) wherein the principle laid down by the Hon'ble Supreme Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) is followed. In this case, it was held that 7 ITA NO.5380/Del/2013

"The right of the assessee to relief was not restricted to the pleas raised by him before the departmental authorities or before the Tribunal. It was held that if for reasons recorded for the departmental authorities in respect of the contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief."

Thus, in the absence of any evidence on record to establish that assessee had receivable income of Rs.24,00,000/- or received subsequently and in view of the judicial pronouncements mentioned above the revise claim of assessee has to be accepted."

6. None attended on behalf of the assessee. Ld. DR relied on the order of the

Assessing Officer.

7. We have heard ld. DR, gone through the orders of the lower authorities and

material available on record. After considering all the relevant aspects, we do not find

any infirmity in the order of the CIT (A) and upheld the same on these issued.

Accordingly, these grounds are dismissed.

8. In the result, the appeal of the revenue is dismissed.

Order pronounced in open court on this 25TH day of February, 2015.

SD/- SD/- (GEORGE GEORGE K) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated the 25TH day of February, 2015 TS

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-IX, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.