2025 (11) TMI 1842 - AT - Income Tax

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. ... Disallowance on account of agricultural income - assessee is having approximately aggregating to total 10 acres of agricultural land vide patta and not for non-production of any receipt nor invoice in support of agricultural income and expenses, disallowed the said claim by treating the same as non-agricultural income - AO restricted addition being the difference in sugarcane yield at 60 metric tonnes per acre HELD THAT:- We find that there is no dispute with regard to accepting the returned income with the claim of agricultural income for AY 2018-19 and 2019-20. Further, for AY 2020-21, though it is selected for scrutiny on the basis of large agricultural income, the Revenue accepted the returned income with a claim of agricultural income, which is evident from the order dated 07.07.2022 for AY 2020-21 placed on record vide exhibit 3. Therefore, we find force in the arguments of the ld. AR that all along the Revenue is accepting the claim of agricultural income in the hands of the assessee, but, however, not accepted for the year under consideration only on the reason that no receipts supporting the agricultural activities were furnished before the AO. Admittedly, there is no dispute with reference to having holding of agricultural land by the assessee in the year under consideration and in our opinion, rejecting the claim of agricultural income for non-submission of receipts and invoice for expenditure in support of agricultural activities, confirmed by the CIT(A) is not justified and the addition made thereon is deleted. Thus, the ground raised by the assessee is allowed. 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.