Disallowance of Agricultural Income in Revisionary Proceedings: ITAT Deletes Addition, Confirms 88.62 Acres under Cultivation Including Eucalyptus Trees [Read Order]

The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) deleted the disallowance of agricultural income in revisionary proceedings under Section 263 of the Income Tax Act, 1961, and ruled that the assessee had adequately proven ownership and cultivation of 88.62 acres of land, including eucalyptus trees, with no adverse findings by the Assessing Officer.

Rajeswar Thakur (assessee) filed returns of income for Assessment Years (AY) 2012-13 and 2014-15, declaring agricultural income from cultivation, including sale of eucalyptus trees. The assessment was reopened by treating the agricultural income as unexplained, citing lack of details on crop quantity, sales registers, and vouchers.

For AY 2014-15, the original assessment under Section 143(3) was revised under Section 263, directing thorough enquiry into the agricultural income claim and low drawings, leading to full disallowance of the agricultural income.

The Assessing Officer (AO) disallowed the agricultural income in both years, alleging insufficient evidence of land ownership, cultivation details, and genuineness of sales, despite prior acceptance in original assessments and earlier years.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the disallowances observing the AO's findings on lack of proof for agricultural operations and ownership.

Aggrieved by the CIT(A)’s orders, the assessee appealed to the ITAT. The assessee’s counsel argued that for AY 2012-13, the reopening was invalid as it constituted a mere change of opinion, with no fresh evidence, and the original assessment had accepted the agricultural income after due verification.

The counsel relied on a remand report from AY 2009-10, which confirmed 88.62 acres of land under cultivation, including 45 acres for eucalyptus trees, based on an Inspector's site visit. It was submitted that similar income had been accepted in prior years without reopening, and the assessee had provided explanations, including cash and cheque receipts from sales.

The two-member bench, comprising George Mathan (Judicial Member) and Rajesh Kumar (Accountant Member), observed that for AY 2012-13, the reopening was based on a change of opinion, as the original assessment had examined and accepted the agricultural income, including sources from eucalyptus sales.

The bench noted the remand report from AY 2009-10, which explicitly confirmed the assessee's ownership of 88.62 acres, with active cultivation including eucalyptus plantation. The bench highlighted that earlier assessments accepting similar income remained undisturbed, and the AO failed to bring any adverse material on record to disprove the claim.

The bench held that the disallowance in revisionary proceedings was unsustainable. The bench concluded that the agricultural income was genuine and adequately supported by evidence. The appeals of the assessee were allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates