The Nagpur Bench of Income Tax Appellate Tribunal ( ITAT ) deleted an addition of Rs. 5,30,252 made by the Assessing Officer (AO), holding that agricultural income could not be determined based on assumptions.

Sanjay Deokisan Lakhotiya, appellant-assessee, reported agricultural income of Rs. 21,33,000 in his income tax return and claimed it as exempt under section 10(1) of the Act. The AO, after conducting investigations, local enquiries, and obtaining reports from the Agricultural Department of Maharashtra, held that the exempt income claimed exceeded the actual income earned.

Accordingly, the AO disallowed Rs. 5,30,252 and treated it as unexplained cash credit under section 68. The assessee challenged the addition before the Commissioner of Income Tax (Appeals)[CIT(A)], but the appeal was dismissed, and the AO’s addition was upheld. Aggrieved by this, the assessee filed the present appeal before the tribunal.

A single member bench Narender Kumar Choudhry (Judicial Member) heard the parties and reviewed the records. It observed that the AO, before making the addition of Rs. 5,30,252, relied on average orange production for F.Y. 2013-14 reported by the Taluka Krishi Adhikari, Chandur Bazar, which ranged from 9 to 14 metric tonnes per hectare, and also referred to the report of the Taluka Agriculture Officer, Warud, assuming the highest selling price from Warud as the assessee’s sale consideration.

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The appellate tribunal noted that the appellant had submitted comprehensive evidence, including details of agricultural income and expenditure, land holding documents, land revenue receipts, extracts of 7/12, sale receipts for grains and oranges, a letter from the Taluka Agriculture Officer, Chandur Bazar specifying orange production of 10 to 17 metric tonnes per hectare, a report dated 03.06.2016 from the Taluka Agriculture Officer, and statements from local agriculturists to support his claim.

The tribunal held that the AO had ignored this evidence and based his addition on mere assumptions. It further recognized that agricultural production could not be assessed through a fixed formula, as it depended on factors like seed quality, soil, weather, irrigation, and care. In view of these factors, the ITAT deleted the addition.

Accordingly, the appeal was allowed.

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