2026 (1) TMI 943 - AT - Income Tax

Sufficiency of evidence for claimed agricultural income - disclosures rejected as unsupported; matter remitted for fresh AO inquiry

Dominant issue - sufficiency of evidence to support claimed agricultural income: ITAT held that the assessee bore the onus to prove cultivation and ... Estimation of Agricultural income - Contention of the assessee is that the entire land holding was cultivated by the assessee only and accordingly he had disclosed the entire agricultural income in his hands - HELD THAT:- Contention of the assessee is that the entire land holding was cultivated by the assessee only and accordingly he had disclosed the entire agricultural income in his hands. However, no evidence has been brought on record to establish that the other co-owners did not disclose any agricultural income. Apart from Sundhiyu, other crops such as “Sargawan”, “Cotton”, “Juwar”, “Paddy”, “Castor” etc. were also grown on the land. Even if contention of the assessee that Sundhiyu was purchased by the shepherds at the site is accepted, the assessee should have brought on record the evidence of sale of other crops viz. cotton, juwar, paddy, castor etc. Merely because the agricultural income disclosed by the assessee in the past was accepted by the Department that cannot be a reason to accept the agricultural income disclosed by the assessee in the current year as correct. The onus was on the assessee to establish that he had earned agricultural income during the year by bringing on record proper evidences in this regard. It is also found that most of the land was non-irrigated. Therefore, the correctness of the agricultural income disclosed by the assessee was required to be critically examined. Further, no documentary evidence in respect of agricultural expense incurred by the assessee was brought on record. At the same time, Assessing Officer was not correct in treating the entire agricultural income as unexplained. Considering the fact that the assessee had disclosed agricultural income in past in his return and had brought on record the evidence for land holding of 58.48 acres (in joint ownership), the action of the Assessing Officer in disallowing the entire agricultural income as unexplained, also can’t be upheld. We deem it proper to set aside the matter to the file of the Jurisdictional Assessing Officer with a direction to allow another opportunity to the assessee to explain the agricultural income disclosed by the assessee. The Assessing Officer is also directed to examine the land holding owned by the assessee and examine the correctness of the agricultural income derived therefrom. It should also be enquired whether any agricultural income was disclosed by the other co-owners of land. Appeal of the assessee is allowed for statistical purpose. Issues: (i) Whether the reassessment by the Assessing Officer/CIT(A) rejecting the assessee's claim of agricultural income of Rs. 51,43,825/- and treating it as unexplained should be sustained; (ii) Whether the Assessing Officer and CIT(A) were justified in treating the agricultural income as unexplained under Section 68 and taxing it under Section 115BBE.Issue (i): Whether the rejection of the claim of agricultural income of Rs. 51,43,825/- is sustainable.Analysis: The Tribunal examined the evidence on record including land-holding documents and past acceptance of agricultural income, and noted absence of documentary proof of sales/expenses for several crops and uncertainty over joint ownership disclosures. The Tribunal found that while the Assessing Officer erred in disallowing the entire agricultural income as unexplained without further enquiry, the assessee bore the onus to substantiate the claimed agricultural income by producing required documents and explanations. The Tribunal directed a further opportunity and specific factual verification by the Jurisdictional Assessing Officer including examination of land holdings and whether co-owners disclosed income.Conclusion: The rejection of the agricultural income claim is not sustained; the matter is set aside for fresh enquiry and the assessee must be given opportunity to produce evidence in support of the agricultural income.Issue (ii): Whether treating the agricultural income as unexplained under Section 68 and taxing it under Section 115BBE was justified.Analysis: The Tribunal considered the conversion of claimed agricultural income into unexplained income and taxation under special sections, noting that the Assessing Officer proceeded without completing necessary factual enquiries and without giving the assessee adequate opportunity to prove the claim. In absence of conclusive material on record warranting treatment under Section 68/Section 115BBE, the appropriate course was to remit the matter for further investigation rather than confirm special taxation.Conclusion: The treatment of the agricultural income as unexplained and taxation under Section 115BBE is not upheld at this stage; the matter is remitted to the Assessing Officer for fresh examination.Final Conclusion: The Tribunal has remitted the matter to the Jurisdictional Assessing Officer for de novo factual examination and directed that the assessee be afforded an opportunity to produce evidence; consequently the appeal is allowed for statistical purposes and the assessment conclusions under challenge are set aside for fresh disposal in accordance with directions.Ratio Decidendi: Where an assessee claims agricultural income, the onus to substantiate such claim rests on the assessee and, if the record is inconclusive, the proper remedy is to remit the matter to the assessing authority for further factual enquiry rather than mechanically treating the income as unexplained or applying special taxation provisions.