Agricultural income from nursery activity accepted where records supported cultivation and past assessments had approved the claim.

Documentary evidence such as sales and purchase records supported the assessee's nursery activity of growing grass, plants and saplings for landscaping projects, and the revenue did not dislodge that factual basis. The activity was also consistent with earlier accepted assessment years. On those facts, the receipts were treated as agricultural income within Explanation 3 to section 2(1A) of the Income-tax Act, rather than income from undisclosed sources, and the addition was held unsustainable.

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Issues: Whether the addition made by treating 30% of the receipts from grass, plants, saplings and nursery activity as income from undisclosed sources, instead of agricultural income, was justified.

Analysis: The assessee's activity of growing plants, grass and saplings for landscaping and similar projects was supported by documentary material, including sales and purchase records, and the revenue did not establish that the agricultural activity was exaggerated or unsupported. The claim had also been accepted in earlier assessment years. The activity was held to fall within the scope of agricultural income under Explanation 3 of Section 2(1A) of the Income-tax Act, 1961.

Conclusion: The addition was not sustainable and the assessee's claim of agricultural income was accepted.

Ratio Decidendi: Where agricultural activity is supported by evidence and is consistent with past accepted assessments, income arising therefrom cannot be treated as income from undisclosed sources without a factual basis dislodging the claim.

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