ITAT Rajkot Reduces Agricultural Income Addition to Ad-hoc Amount on Assessee's Consent
The Income Tax Appellate Tribunal, Rajkot Bench, has delivered a significant ruling in the matter of Samir Sarmanbhai Maru Vs ITO, wherein the tribunal substantially scaled down the addition made by the tax authorities on account of disputed agricultural income. The case pertains to Assessment Year 2017-18 and highlights important principles regarding the estimation of agricultural income and the applicability of academic data to individual cases.
Background of the Case
The dispute arose when an individual assessee filed an electronic return declaring total income of Rs.4,27,700/- along with agricultural income amounting to Rs.5,67,240/- on 29th March 2018. The assessee earned income from multiple sources including partnership remuneration and interest from M/s Radhe Developers, house property income, and other sources. The return was subsequently picked up for limited scrutiny through the Computer Assisted Scrutiny Selection (CASS) mechanism.
The tax officer initiated proceedings by issuing e-notice under section 143(2) of the Income Tax Act 1961 dated 17th August 2018, which was duly served through electronic mode as well as through registered post. Subsequently, multiple notices under section 142(1) were issued on various dates including 7th May 2019, 9th July 2019, 29th August 2019, 17th September 2019, 4th October 2019, and 24th October 2019.
In response to these communications, the assessee submitted e-responses and furnished profit and loss account, balance sheet, capital account statement, and cash book for the relevant financial year. Upon examination of these documents, the tax officer observed that the assessee had received gross agricultural income of Rs.8,14,000/- in cash and claimed agricultural expenses of Rs.2,46,760/-, which represented 30% of the gross agricultural receipts.
Position Taken by the Assessing Officer
The Assessing Officer conducted a detailed examination of the agricultural income claimed by the assessee. The assessee's total landholding was recorded as 1-24-45 hectare, equivalent to 7.69 Vigha. During the year under consideration, the assessee claimed cultivation of winter crops consisting of wheat in an area of 3.31 vigha and coriander in 2.74 vigha.
To verify the reasonableness of the claimed agricultural income, the Assessing Officer collected data from Agriculture University, Junagadh. According to this academic data, the highest production of wheat per vigha in the Junagadh District region was estimated at 1100 Kg (equivalent to 55 Man), while coriander production was estimated at 350 Kg (equivalent to 17.50 Man) per Vigha.
Based on these figures and the area under cultivation, the Assessing Officer computed maximum possible production as follows:
- Wheat production: 3640 Kg
- Coriander production: 960 Kg
The Assessing Officer further obtained average sale price data from Agriculture University, Junagadh, which indicated that the average sale price of wheat was Rs.347 per man and coriander was Rs.1,250/- per man during Financial Year 2016-17.
Computation of Agricultural Income by AO
The Assessing Officer computed the expected agricultural receipts as follows:
Wheat: 3640 kg multiplied by average sale price of Rs.17.35 per Kg = Rs.63,154/-
Coriander: 960 kg multiplied by average sale price of Rs.62.50 per Kg = Rs.60,000/-
Total gross agricultural receipt: Rs.1,23,154/-
Less: Agriculture expenses: Rs.36,950/-
Net Agriculture income: Rs.86,204/-
Consequently, the Assessing Officer concluded that the net agricultural income should be only Rs.86,204/-. The excess amount of Rs.4,81,036/- (calculated as Rs.5,67,240/- minus Rs.86,204/-) was treated as income from undisclosed sources. This addition was made in the hands of the assessee under section 68 of the Income Tax Act 1961, and the assessment was completed under section 143(3) on 16th December 2019.
First Appellate Authority's Decision
Dissatisfied with the assessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The appellate authority upheld the decision of the Assessing Officer. The CIT(A) noted that the assessee had sold agricultural land located at village Choki, Taluko and District Junagarh, and had deposited aggregate cash of Rs.39,65,600/- in his bank account.
When questioned about the source of these cash deposits, the assessee claimed gross agricultural income of Rs.8,14,000/- in cash with 30% expenses. The assessee maintained that he cultivated intercrops of wheat in 3.31 vigha and coriander in 2.74 vigha.
The CIT(A) concurred with the Assessing Officer's methodology of relying on agriculture university data for the Junagadh region and accepted the computation resulting in net income of Rs.86,204/-. Consequently, the excess income of Rs.4,81,036/- from agriculture was confirmed as income from undisclosed sources. The order was passed on 20th August 2025 under section 250 of the Income Tax Act 1961.