Subhash Krishnappa Vs DCIT (ITAT Bangalore)
Vegetable Exports Are Not Automatically Agricultural Income: ITAT Sends ₹5.67 Crore Case Back for Proof
A person exports vegetables and receives ₹5.67 crore. Does that fact alone make the receipts exempt agricultural income? In Subhash Krishnappa v. DCIT, the Bangalore Tribunal gave the assessee an opportunity to establish his claim, but did not grant the exemption outright. It set aside the orders below and sent the matter back to the AO to examine the documents that had not been produced during the earlier proceedings.
The entire export receipt prompted reassessment
Subhash Krishnappa described himself as an agriculturist. He had not filed a return for AY 2019–20. The Department received information that he had received ₹5,66,95,814 in connection with exports during FY 2018–19 and issued a notice under section 148.
The assessee did not respond to that notice or to the notice under section 142(1), although the notices were sent to his registered email address. The AO then issued a show-cause notice proposing to treat the amount received as business turnover and estimate income at 12% of the receipts. There was no response to that notice either. The AO consequently completed the assessment on that basis.
The assessee appealed, but he did not respond to the CIT(A)’s hearing notices. The first appeal was dismissed. By the time the matter reached the Tribunal, neither authority had examined the records on which his agricultural-income claim depended.
The assessee’s claim before the Tribunal
At the Tribunal hearing, the assessee submitted that the receipts arose from exports of vegetables and represented income from agricultural activity. He said that he possessed the relevant records but had failed to place them before the AO or CIT(A). He requested a fresh opportunity to produce the documents and explain the transactions.
He also produced an assessment order dated 15 February 2025 for AY 2020–21, together with a rental agreement. According to his representative, he had participated in the later year’s assessment, supplied details of the vegetable exports, and the AO had accepted the income examined there as agricultural income.
The Revenue opposed relief, pointing out that the assessee had ignored the proceedings before both lower authorities. The Tribunal acknowledged those defaults. Nevertheless, it considered the later assessment order and the assessee’s offer to produce the underlying documents sufficient reason to allow a fresh examination for AY 2019–20.
What the Tribunal actually decided
The Tribunal set aside the orders of the lower authorities and restored the issue to the AO. The AO must consider the documents the assessee produces and decide the matter afresh. The order states that, if the assessee demonstrates that the income arose from the vegetable exports in the manner claimed, it could be entitled to exemption.
This is a remand for verification, not a finding that the entire ₹5.67 crore receipt is exempt. The AY 2020–21 assessment was relevant support for granting another opportunity, but the Tribunal did not treat it as conclusive proof of the nature of the receipts in AY 2019–20. Each year’s transactions and records still require examination. The appeal was therefore allowed for statistical purposes.
The important distinction: cultivation and trading
The expression “vegetable exports” describes what was sold and where it went. It does not, on its own, establish the source of the vegetables. Under section 2(1A), the statutory definition includes income from the sale by a cultivator of produce raised by him, subject to the conditions concerning processing of that produce. Section 10(1) exempts agricultural income. The distinction between selling one’s own agricultural produce and buying vegetables for resale is therefore central to the claim.
This is also why the size of the export receipt cannot be equated with taxable income. If the activity was trading, the AO’s enquiry would concern the proper taxable income from that activity, with the relevant purchases and expenses considered under law. If the activity was cultivation and sale of the assessee’s own qualifying produce, the agricultural-income claim would require proof linking the cultivation to the produce sold. The Tribunal left that factual determination open.
The assessee’s description as an agriculturist and the favourable treatment said to have been given in AY 2020–21 may assist him, but records for FY 2018–19 must establish the position for this year. The rental agreement placed before the Tribunal, for example, would need to be considered alongside evidence showing the land cultivated, crop grown, quantity harvested and vegetables exported.
Author’s comments
The most useful feature of this order is its careful procedural outcome. Despite repeated non-compliance, the Tribunal did not let an assessment based on an untested assumption become final when the assessee offered to produce material and pointed to a later assessment concerning similar activity. At the same time, it did not convert that opportunity into an automatic exemption.
For the fresh proceedings, the decisive reconciliation will be between agricultural operations, harvested produce and export consignments. Land records or lease documents alone may show access to land; export invoices alone may show sales. The claim becomes persuasive when the records connect what was grown with what was exported, and distinguish any produce purchased from others.
The heading of the case should therefore remain precise: the Tribunal restored the vegetable-export receipts for verification. It did not hold that all income from exporting vegetables is agricultural income, nor did it finally approve the AO’s 12% estimate. Both the character and correct tax treatment of the receipts now depend on the evidence produced before the AO.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 23/09/2025 in respect of the A.Y. 2019-20.
2. The brief facts of the case are that the assessee is an agriculturist and not filed his return of income. Based on the information received by the Department that the assessee had received an amount of Rs. 5,66,95,814/- for the bill of entry for the export during the F.Y. 2018-19, notice u/s. 148 was issued. The assessee had not responded to the notice issued u/s. 148 as well as to the notice issued u/s. 142(1) even though the notices were sent to the registered email. Therefore, a show cause notice was issued treating the said amount received as the total turnover of his business and estimated the income at 12% of the total amount received. The assessee had not responded to the said show cause notice and therefore the AO had confirmed the addition.
3. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had issued several hearing notices but the assessee had not responded to the said notice and therefore, the Ld.CIT(A) had dismissed the appeal.
4. As against the said order, the assessee filed this present appeal before this Tribunal.
5. At the time of hearing, the Ld.AR submitted that the assessee is exporting vegetables and the income earned are out of the said exports and therefore they are not liable to be taxed under the provisions of the Act. The Ld.AR submitted that since the said income is from agricultural activities, the assessee had not filed his return of income. The Ld.AR further submitted that in support of the said contention, the assessee is in possession of all the details but unfortunately, the said details could not be placed before the authorities and therefore prayed an opportunity to appear and produce the said documents before the authority. The Ld.AR also filed the copy of the assessment order dated 15/02/2025 in respect of the A.Y. 2020-21 and also the rental agreement executed by the assessee with the landlord and submitted that the assessee had participated in the assessment proceedings for the A.Y. 2020-21 and filed all the details about the income earned through the export which was also verified by the AO and the AO had accepted the said income as agricultural income and not subjected the said amount to tax under the provisions of the Act. The Ld.AR therefore prayed that this appeal may also be remitted to the AO for verifying the details and thereafter complete the assessment in accordance with law.
6. The Ld.DR submitted that the assessee has neither appeared before the AO nor before the Ld.CIT(A) and therefore, no leniency could be shown to him and prayed to dismiss the appeal.
7. We have heard the arguments of both sides and perused the materials available on record.
8. No doubt, the assessee had not appeared before the AO as well as before the Ld.CIT(A) but the submission made by the assessee is that all the export income are out of the export of vegetables and therefore, the said income is not taxable under the provisions of the Act. In support of his submission, the assessee had also furnished the assessment order for the A.Y. 2020-21 in which the assessee had participated in the assessment and produced the records and got the relief. In this appeal, the details were not produced before the authorities and therefore, the assessment has been made by treating the said income as business income. We have also considered the submission made by the assessee that the details would be produced before the authority if an opportunity is granted.
9. Considering the facts involved in this appeal, we are inclined to set aside the order of the lower authorities and remitted the issue to the file of the AO for considering the issue afresh based on the documents to be produced by the assessee and if the assessee is able to demonstrate that the income is from the exports of vegetables, the same could be entitled for exemption.
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th September, 2026.
