Mere Ownership of Agricultural Land Insufficient to Prove Agri Income: ITAT Upholds 50% Addition as Unexplained u/s 68 [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) dismissed the appeals for Assessment Years (AY) 2018-19 and 2019-20, upholding the addition of 50% of the agricultural income as unexplained for failure to substantiate genuine agricultural activities.

The assessee, Padam Kumar had filed his return of income on 31.10.2018 declaring total income of ₹18,32,240, which included agricultural income of ₹8,37,020. Subsequently, a search was carried out at his premises on 01.11.2018, and a notice under Section 153A of the Income Tax Act, 1961 was issued.

In response, he reiterated the same income as declared earlier. The Assessing Officer (AO) noted the claim of agricultural income and called upon the assessee to prove it by furnishing supporting evidence.

The assessee submitted that his family possessed about 47 acres of wet and dry agricultural land and filed certain documents to that effect. However, the AO found that the assessee failed to furnish copies of land records, details of agricultural expenditure, or particulars of parties to whom the produce was sold.

The AO held that the assessee had not proved the genuineness of the income claimed from agricultural activities and treated the entire amount of ₹8,37,020 as unexplained credit under Section 68 of the Act.

On appeal, the CIT(A) observed that since the return for AY 2018–19 had been filed before the date of search and the time for issue of notice under Section 143(2) was still available, the assessment stood abated under Section 153A. The CIT(A) held that the AO was thus empowered to assess the total income, including any material unearthed during the search as well as that disclosed in the return.

Examining the claim of agricultural income, the CIT(A) found that the assessee had submitted only copies of Patta in the name of himself and his family members but had not produced Chitta, Adangal, or other documents to verify whether any crop was actually cultivated.

The CIT(A) concluded that in the absence of relevant documentary proof, the claim could not be accepted in full. As a reasonable measure, he accepted 50% of the income as agricultural and confirmed the remaining ₹4,18,510 as unexplained.

Before the Tribunal, the assessee could not produce any further evidence to substantiate that the income had been derived from agricultural operations.

The Bench Comprising Aby T. Varkey (Judicial Member) and S.R. Raghunatha (Accountant Member) observed that even though the assessee owned extensive land, mere ownership of agricultural land cannot by itself establish that agricultural activities were carried out.

The Tribunal held that in the absence of supporting material such as bills, records, or evidence of sale or expenditure, the claim of agricultural income could not be verified.

The Tribunal found no infirmity in sustaining 50% of the agricultural income as unexplained. It accordingly dismissed both appeals, holding that the grounds raised by the assessee were devoid of merit.

For the following year, AY 2019–20, where the assessee had declared ₹4,36,520 as agricultural income, the same reasoning was applied, and 50% was again upheld as unexplained. The ITAT thus affirmed the CIT(A)’s orders for both years, concluding that without documentary proof of cultivation or sale, agricultural income cannot be presumed merely on account of land ownership.

The assessee was represented by Hitesh, along with D. Anand, while E.Pavuna Sundari appeared for the Revenue.

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