Agricultural income from sugarcane accepted as genuine; addition for alleged non-agri income deleted based on past consistency

ITAT Chennai allowed the assessee's appeal and deleted the addition made by the AO on account of alleged non-genuine agricultural income from sugarcane. The Tribunal noted that the assessee held about 10 acres of agricultural land and that the Revenue had consistently accepted the assessee's agricultural income in earlier and subsequent AYs, including scrutiny for AY 2020-21. It held that mere non-production of receipts or invoices for agricultural operations could not justify treating the income as non-agricultural, and the disallowance sustained by CIT(A) was unjustified.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether disallowance of the assessee's claim of agricultural income by treating it as non-agricultural income, on the ground of non-production of receipts and invoices, was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for disallowance of agricultural income

Legal framework (as discussed)

2.1 The Tribunal proceeded on the basis of factual examination of the assessee's agricultural income claim, the holding of agricultural land, and the Revenue's treatment of similar claims in preceding and subsequent assessment years.

Interpretation and reasoning

2.2 The Tribunal noted that the assessee owned about 10 acres of agricultural land, and there was no dispute regarding such holding in the relevant assessment year.

2.3 For the immediately preceding assessment year 2016-17, the assessee's agricultural income was largely accepted, with only a minor variation on account of the Assessing Officer restricting the sugarcane yield per acre to 60 metric tonnes; there was no outright disallowance of the agricultural activity itself.

2.4 For assessment years 2018-19 and 2019-20, though there were no scrutiny assessments, the Revenue accepted the returned income including substantial agricultural income, as evidenced by intimations.

2.5 For assessment year 2020-21, the case was selected for scrutiny specifically on the basis of large agricultural income, yet the Revenue accepted the returned income including the agricultural income claim in the scrutiny order.

2.6 The Tribunal found that, consistently across years, the Revenue had been accepting the existence of agricultural operations and the assessee's agricultural income, and that the impugned year stood out as a solitary departure.

2.7 The Tribunal observed that the disallowance in the year under appeal was made solely for non-production of receipts and invoices relating to agricultural income and expenditure, despite no dispute as to the fact of ownership of agricultural land and the ongoing pattern of accepted agricultural income in other years.

2.8 On these facts, the Tribunal considered the approach of rejecting the agricultural income claim entirely, merely for want of receipts and invoices, to be inconsistent with the accepted factual matrix in other years and not justified on the record.

Conclusions

2.9 The disallowance of the assessee's agricultural income by treating it as non-agricultural income, confirmed by the appellate authority, was held to be unjustified.

2.10 The addition made on account of disallowance of agricultural income was deleted, and the assessee's ground of appeal was allowed.

---