TDS compliance and genuine agricultural receipts defeated disallowance and unexplained-income addition under the Income-tax Act.

Disallowance under section 40(a)(ia) could not survive where the assessee produced the ledger, TDS return and Form 26AS showing deduction and deposit of tax on the payment, as those documents established compliance and removed the basis for disallowance. Addition of apple-sale agricultural income as unexplained income under section 69A was also unsustainable because ownership of 7,500 apple trees was supported by the will and land records, the Revenue did not dispute that ownership, and the declared income matched earlier accepted years; in the absence of contrary corroborative material, the receipts could not be treated as unexplained. Both additions were deleted.

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Issues: (i) Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was sustainable where tax was deducted at source and reflected in the recipient's Form 26AS; (ii) whether the addition treating agricultural income from apple sales as unexplained income under section 69A of the Income-tax Act, 1961 was justified.

Issue (i): Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was sustainable where tax was deducted at source and reflected in the recipient's Form 26AS.

Analysis: The assessee produced the ledger account, TDS return and the recipient's Form 26AS showing deduction and deposit of tax on the interest payment. These materials established compliance with the tax deduction and deposit requirement and removed the basis for the disallowance.

Conclusion: The disallowance under section 40(a)(ia) was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the addition treating agricultural income from apple sales as unexplained income under section 69A of the Income-tax Act, 1961 was justified.

Analysis: The assessee substantiated ownership of 7,500 apple trees through the will and related land records, and the Revenue did not dispute that ownership. The declared agricultural income was also consistent with earlier accepted years, and no corroborative material was brought to show that the receipts were unexplained or non-genuine.

Conclusion: The addition treating the agricultural income as unexplained income was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both substantive issues, and the tax additions in dispute did not survive.

Ratio Decidendi: A disallowance or addition cannot be sustained merely on suspicion when the assessee produces primary documentary evidence establishing TDS compliance or the genuineness of agricultural receipts, and the Revenue brings no contrary corroborative material.

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