Facts of the Case

The assessee filed his return declaring total income of ₹6,37,740 and agricultural income of ₹68,42,904 claimed as exempt. The case was selected for limited scrutiny to examine the claim of agricultural income.

The Assessing Officer noted that, apart from land details and copies of land records, no documentary evidence such as receipts, expenditure details, cash flow statements, or bank statements was furnished to substantiate the claim. Consequently, the agricultural income was treated as income from other sources and taxed accordingly.

The CIT(A), NFAC dismissed the appeal for non-prosecution, stating that no material was available to accept the assessee’s contentions.

Issues Involved

  1. Whether agricultural income can be taxed as income from other sources solely due to absence of formal documentary evidence.
  2. Whether maintenance of books of account is mandatory for agricultural operations.
  3. Whether dismissal of appeal for non-prosecution without examining available records is sustainable.

Petitioner’s Arguments

The assessee contended that the income arose from sale of Eucalyptus trees grown on his agricultural land, planted in earlier years. Details of land holdings and land records had been furnished during assessment proceedings.

It was further argued that the assessment order was passed ex parte without providing adequate opportunity to submit additional evidence, which resulted in inability to substantiate the claim fully.

Respondent’s Arguments

The Revenue submitted that the assessee had failed to comply with notices and did not produce verifiable evidence demonstrating that the claimed amount represented agricultural income. Therefore, the addition was justified.

Court Order / Findings (ITAT Allahabad)

The Tribunal rejected the contention that the assessment was invalid under section 144B, noting that the proceedings had been conducted in a faceless manner in accordance with statutory provisions.

On Claim of Agricultural Income

The Tribunal observed that the assessee had furnished land records and details of agricultural holdings, which were not adequately examined by the Assessing Officer.

It emphasized that:

  • There is no statutory requirement for agriculturists to maintain books of account
  • Agricultural produce may legitimately be sold in cash
  • Expecting business-style documentation from agricultural activities is unreasonable

Once land ownership was established, the Assessing Officer should have conducted independent enquiries with revenue authorities rather than rejecting the claim solely for lack of formal records.

Direction for Fresh Assessment

The Tribunal restored the matter to the Assessing Officer with directions to:

  • Consider land records and extent of agricultural holdings
  • Examine evidence relating to sale of Eucalyptus trees
  • Conduct further enquiries as necessary
  • Provide adequate opportunity to the assessee

 Important Clarification

The Tribunal clarified that absence of formal accounting records does not automatically negate a claim of agricultural income. Authorities must consider the nature of agricultural activities and verify claims through appropriate enquiries before reclassifying income as taxable.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771066127_RAMESHCHANDRADWIVEDIALLAHABADVS.ITOWARD21ALLAHABAD.pdf

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