Revanasiddappa Veerasiddappa Kore Vs ITO (ITAT Bangalore)
Bangalore ITAT Restores ₹23.23-Lakh Addition: Evidence of Agricultural Income Cannot Be Rejected Without Factual Verification
The assessee, owning 49 acres and 39 guntas of irrigated ancestral agricultural land, declared gross agricultural receipts of ₹39.40 lakh, agricultural expenses of ₹8.82 lakh and net agricultural income of ₹30.58 lakh.
During demonetisation, the assessee deposited ₹11 lakh in two bank accounts and explained that the money arose from the sale of sugarcane seeds, bananas and vegetables. The AO rejected the explanation due to inconsistencies and absence of supporting bills and added the deposits as unexplained income. The AO also estimated agricultural expenditure at 40% and separately brought ₹12.23 lakh to tax as income from other sources.
Before the CIT(A), the assessee produced additional evidence, including an affidavit and crop-cultivation records issued by the Village Accountant. The CIT(A), however, refused to admit the evidence under Rule 46A and confirmed the additions.
The Bangalore ITAT held that the source of the cash deposits and the genuineness of the agricultural income required proper factual verification of the documents produced by the assessee. It therefore set aside the appellate order and restored the entire matter to the jurisdictional AO for de novo adjudication after considering the additional evidence.
The assessee was permitted to furnish further supporting documents, and the AO was directed to grant a reasonable opportunity of hearing before deciding the matter afresh. Thus, the additions were not deleted on merits but remanded for verification.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. The assessee has filed the present appeal against the impugned order dated 12.09.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional/Joint Commissioner of Income Tax (Appeals) – 2, Coimbatore [“learned Addl./Joint CIT(A)”], for the assessment year 2017-18.
2. In this appeal, the assessee has raised the following grounds: –
1. The order of the learned Commissioner of Income Tax (Appeals) is opposed to aw, facts, and circumstances of the case.
2. The learned CIT(A) has erred in confirming the addition of ₹12,23,290/- made by the Assessing Officer under Section 69A read with Section 115BBE of the Income Tax Act, 1961, by treating the same as unexplained money, without properly appreciating the nature and source of such income.
3. The authorities below have failed to appreciate that the Appellant is engaged in genuine agricultural activities and had declared gross agricultural receipts of ₹39,40,322/- from the sale of sugarcane, banana, and vegetables, after claiming agricultural expenses of ₹8,82,096/-, resulting in net agricultural income of ₹30,58,226/-.
4. The Assessing Officer has erred in arbitrarily estimating agricultural expenditure at 40% of the net agricultural income and disallowing ₹12,23,290/-, without bringing any cogent material or comparable instances on record to justify such estimation.
5. The learned CIT(A) has erred in law and on facts in upholding the addition under Section 69A, ignoring that the said provision applies only to unexplained money, bullion, or valuable articles not recorded in the books of account. In the present case, the alleged addition is merely a disallowance of agricultural expenditure, which cannot be treated as “unexplained money” within the meaning of Section 69A.
6. The learned authorities have further erred in invoking the provisions of Section 115BBE and taxing the disallowed agricultural expenses at the special rate, without any legal or factual basis. The said section is not applicable to disallowances or estimated additions arising out of difference in computation of agricultural income.
7. The finding that the Appellant has not furnished supporting vouchers or bills for agricultural expenses is erroneous and contrary to agricultural realities. It is a well-accepted position that agriculturists generally do not maintain formal vouchers or receipts for labour, fertilizers, and harvesting expenses, which are incurred on a cash basis.
8. The authorities below have failed to appreciate that the agricultural operations and corresponding income were substantiated by landholding details, crop pattern, and sale proceeds, and therefore the genuineness of agricultural income cannot be doubted merely for want of documentary evidence of expenditure.
9. The disallowance of ₹12,23,290/- and its subsequent taxation under Sections 69A and 115BBE is arbitrary, unjustified, and contrary to the principles of natural justice, as no proper opportunity or reasonable basis for such estimation was provided.
10. Without prejudice the addition is excessive arbitrary and unreasonable and liable to be reduced substantially.
3. The solitary grievance of the assessee is against the addition on account of cash deposit during the demonetisation period.
4. We have considered the submission of both sides and perused the materials available on record. The brief facts of the case are that the assessee is an individual and for the year under consideration, filed its return of income on 10.06.2017, declaring a total income of Rs. 1,62,790/- and agricultural income of Rs. 30,58,226/-. The return filed by the assessee was selected for scrutiny under CASS on account of the agricultural income declared by the assessee. Accordingly, statutory notices under sections 143(2) and 142(1) of the Act were issued and served on the assessee. Further, details such as bank statements and details of agricultural income for the year under consideration were also sought from the assessee. In response, the assessee submitted that he is earning income purely from agriculture and his own ancestral land measuring 49 acres and 39 guntas. The assessee further submitted that the said land owned by him is fully irrigated and he has earned income only from agriculture. The assessee submitted that the income from the agriculture was to the tune of Rs. 39,40,322/-, which also includes expenses towards agricultural activities amounting to Rs. 8,82,096/-. From the perusal of the document submitted by the assessee, it was observed that the assessee has deposited cash amounting to Rs. 5,50,000/- in the Karnataka Vikas Grameena Bank Limited and Rs. 5,50,000/- in State Bank of India, Khedagi branch, during the demonetisation period. Further, it was observed that there was a cash withdrawal of Rs. 2,50,000/- and cheque issued of Rs. 10 lakh. It was noticed that the assessee has not furnished any bills for making expenditures such as labour charges, fertiliser bills, pesticides bills, etc. Thus, the agricultural expenses of Rs. 8,82,096/- claimed in the return of income remained unexplained. Vide its letter dated 14.11.2019, the assessee submitted that the amount of Rs. 10 lakh was on account of the sale of sugarcane seeds, bananas and vegetables from his farm. It was also submitted that for the assessment year 2015-16 and 2016-17, agricultural income was declared to an extent of Rs. 4,14,463/- and Rs. 89,172/- respectively.
5. The Assessing Officer (“AO”), vide order dated 27.11.2019 passed under section 143(3) of the Act, disagreed with the submissions of the assessee and held that the assessee has not given any bifurcation on sale of sugarcane seeds and other agricultural income in its return of income and their does not seem to be any sale of sugarcane seeds in the return of the earlier assessment years. The AO held that there is no consistency in the response of the assessee, and the same appears to be merely to mislead the Department. Accordingly, the deposits of Rs. 5,50,000/ – each in Karnataka Vikas Bank Limited and State Bank of India, i.e. totalling to Rs. 11 lakh deposited during the demonetisation period, were considered as unexplained and added to the total income of the assessee. Further, in the absence of any documentary evidence regarding the expenditure incurred towards the agriculture, the AO concluded that to cultivate agricultural products more than 40% expenditure is required for fertilisers, pesticides, labour charges, harvesting, etc. Accordingly, Rs. 12,23,290/- was brought to tax under the head “Income from Other Sources” and added to the total income of the assessee.
6. During the appellate proceedings, before the learned Addl./Joint CIT(A), the assessee filed additional evidence like an affidavit, a record of crop cultivation issued by the village accountant and requested admission of the same under Rule 46A of the Income Tax Rules, 1962. The learned Addl./Joint CIT(A), vide impugned order, rejected the application filed by the assessee seeking admission of additional evidence on the basis that the assessee has not brought out any instance which prevented him from producing these evidences before the AO. The learned Addl./Joint CIT(A) further held that the evidences which are not now produced by the assessee were not denied during the assessment proceedings. Further, the learned Addl./Joint CIT(A) held that the assessee has not submitted any evidence regarding the cultivation expenses. Accordingly, the learned Addl./Joint CIT(A) dismissed the appeal filed by the assessee and upheld the additions made by the AO. Being aggrieved, the assessee is in appeal before us.
7. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee is an agriculturist and has earned agriculture income in preceding as well as subsequent years from the agricultural operations. It was further submitted that the cash deposited in the bank account during the demonetisation period was also derived from agricultural operations, including the sale of sugarcane seeds, banana, and vegetables. The learned AR submitted that to substantiate its contentions, the assessee filed an application seeking admission of additional evidence before the learned Addl./Joint CIT(A), which was not admitted. Thus, resulting in the impugned addition being upheld by the learned Addl./Joint CIT(A).
8. On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the lower authorities.
9. Having considered the submissions of both sides and perused the materials available on record, it is evident that the entire addition was made as the AO was not satisfied with the contention of the assessee regarding the agricultural operations and income declared during the year. In order to substantiate its claim that the Rs. 11 lakh deposited in the bank account during the demonetisation period was from the agricultural income earned from the sale of agricultural produce, the assessee filed additional evidence before the learned Addl./Joint CIT(A). However, it is evident that the said evidence was not admitted. As the adjudication of the grounds raised by the assessee requires factual verification of the documents placed on record, we deem it appropriate to restore the matter to the file of the Jurisdictional AO for de novo adjudication after taking into consideration evidences filed by the assessee. We order accordingly. As the matter has been restored to the file of the AO for consideration afresh, the assessee shall be at liberty to furnish any other document in support of his claim and is also directed to furnish other details as may be sought by the AO for complete adjudication of the issue involved. Needless to mention, no order shall be passed without affording reasonable opportunity of hearing to the assessee. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.
10. In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 17-Aug-2026.
