2025 (9) TMI 1627 - AT - Income Tax

Assessment reduced: Nursery agricultural income accepted at Rs.1,00,000 per acre for 20 acres; only Rs.2,26,289 added

ITAT held the AO's estimation of agricultural income lacked basis and accepted the assessee's agricultural income certificate, directing the AO to ... Addition u/s 69A - treating the agricultural income as unexplained money - HELD THAT:- Rate of agricultural income estimated by the Ld. AO has no basis, and, in contrast, the assessee has placed on record an agricultural income certificate in support of its contention that it earned Rs. 1,00,000/- per acre of agricultural income. Therefore, we find substance in the submissions of the assessee, and accordingly, we direct the Ld.AO to estimate the agricultural income of the assessee at Rs. 1,00,000/- per acre from nursery operations. As the assessee had the total area of 20 acres in which he was having the nursery operations, therefore, considering the aforesaid estimate, we are of the considered view that in the absence of any other documentary evidence regarding the expenditure incurred by the assessee towards its operation Rs. 20,00,000/- can be attributed towards agricultural income from Nursery. Thus, the addition is restricted to the balance amount of Rs. 2,26,289/- in view of the facts and circumstances as noted above. Accordingly, the grounds raised by the assessee are partly allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether agricultural income legitimately earned from nursery operations can be treated as unexplained money and added to income under section 69A when the assessee fails to produce books, bills and vouchers for expenditure. 2. Whether an assessing authority may estimate agricultural income per acre in absence of supporting documentary evidence, and on what basis such estimation can be revised on appeal. 3. Whether an income certificate issued by the Revenue Department and other documentary material can rebut the assessing officer's estimate and the consequent addition under section 69A. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Treatment of agricultural income as unexplained money under section 69A where taxpayer has not produced books/bills. Legal framework: Section 69A permits addition to income where amount is found from books or documents and the assessee cannot satisfactorily explain it. Agricultural income is otherwise exempt but may be assessable to additions if claimed receipts/exempt income are not satisfactorily explained. Precedent Treatment: The Court considered the statutory standard that unexplained money under section 69A requires inability to satisfactorily explain the source or nature of amounts shown in books/documents. No contrary precedent was overruled; the Tribunal applied established principle that absence of vouchers permits estimation, but the burden to justify claimed exempt income remains on the assessee. Interpretation and reasoning: The Tribunal accepted that absence of books/bills weakens the assessee's position, but emphasized that the legal test under section 69A is whether the assessing authority could be satisfied, on available material, that the amounts were unexplained. The Tribunal examined the assessee's submissions, sales figures, computation of income and an agricultural income certificate produced before the AO. It concluded that non-production of expenditure vouchers did not automatically render all claimed agricultural receipts as unexplained money when other documentary evidence (income certificate, bank statements, licences, land records) supported the claim. Ratio vs. Obiter: Ratio - Section 69A addition cannot be mechanically applied where supporting non-book documentary evidence rebuts the assessing officer's disbelief; absence of vouchers is a factor, not an absolute bar. Obiter - Observations on comparative per-acre yields of nurseries versus traditional crops are explanatory and contextual. Conclusion: The AO's blanket addition under section 69A was not sustainable to the full extent; a portion of the claimed agricultural income could be accepted where corroborative documentary evidence existed, reducing the unexplained amount. Issue 2: Validity and basis of estimating agricultural income per acre in absence of documentary evidence and appellate revision. Legal framework: Assessing authorities may estimate income where records are inadequate, but estimates must be based on relevant material or sound basis. Appellate authorities may revise estimates if assessing officer's basis is arbitrary or contradicted by available evidence. Precedent Treatment: The Tribunal applied the established principle that an AO's estimate must have basis on record and cannot be arbitrary; appellate authority must substitute a reasonable estimate when record supports it. No precedent was expressly followed, distinguished or overruled beyond this application. Interpretation and reasoning: The AO estimated agricultural income at Rs. 60,000 per acre without a recorded basis; the Tribunal found this figure to be without foundation on the record. Conversely, the assessee had placed on record an agricultural income certificate indicating Rs. 1,00,000 per acre, bank statements showing year-round sales, nursery licences and land records. The Tribunal held that where the AO's estimate lacks basis and the assessee furnishes a plausible alternative supported by official certificate and other documents, the appellate authority can and should direct a revised estimate grounded on those materials. The Tribunal thus directed estimation at Rs. 1,00,000 per acre for 20 acres, resulting in agricultural income of Rs. 20,00,000. Ratio vs. Obiter: Ratio - An AO's per-acre estimate must be grounded on record; appellate authorities may correct arbitrary estimates by adopting a reasonable figure supported by documentary evidence such as an income certificate. Obiter - Comparative comments regarding typical yields for paddy/wheat versus nursery operations are illustrative, not binding. Conclusion: The AO's estimate at Rs. 60,000 per acre was arbitrary and replaced with Rs. 1,00,000 per acre based on the agricultural income certificate and other documents, leading to a reduced addition. Issue 3: Evidentiary value of an agricultural income certificate and other non-voucher documents to rebut additions under section 69A. Legal framework: Documentary evidence other than detailed bills/vouchers - such as official income certificates, bank statements, licences and land records - can be relevant to satisfy the assessing authority about the genuineness of claimed receipts, though the weight accorded depends on the total record. Precedent Treatment: The Tribunal treated the agricultural income certificate and ancillary documents as admissible and relevant corroboration. The approach follows the principle that sufficiency is context-driven; no precedent was overruled. Interpretation and reasoning: The Tribunal observed that the assessee produced an income certificate issued by the Revenue Department, bank statements evidencing year-round receipts, nursery licences and Pattadar passbook and lease details. The AO had noted receipt of the income certificate but recorded no adverse finding about its genuineness. Given absence of contrary findings and AO's lack of basis for a lower estimate, the Tribunal found the certificate and documents sufficient to justify revising the estimate. The Tribunal also recognized that nursery operations differ from seasonal crops and may yield higher, year-round receipts - a factual consideration supported by bank records and licences. Ratio vs. Obiter: Ratio - Official income certificates and corroborative non-voucher documentary material can rebut an AO's scepticism and justify revision of an arbitrary estimate under section 69A. Obiter - The general characterization of nursery activities as intensive and not wholly weather-dependent is fact-specific and illustrative. Conclusion: The agricultural income certificate and other documents had sufficient probative value to justify acceptance of a higher per-acre estimate and to restrict the addition under section 69A to the balance amount of Rs. 2,26,289. Cross-references and overall conclusion The issues are interrelated: the legal standard under section 69A (Issue 1) governs the permissibility of additions; the validity of the AO's estimate (Issue 2) depends on whether it is based on record; and the evidentiary weight of the agricultural income certificate and other documents (Issue 3) determines whether the AO's estimate can be successfully challenged. Applying these principles, The Court reduced the AO's addition by substituting a reasoned estimate supported by the assessee's income certificate and ancillary documents, allowing the appeal in part and restricting the addition to Rs. 2,26,289.