ITO Vs Mohammed Farooq Kanana (ITAT Bangalore)
The Revenue filed an appeal before the ITAT Bangalore challenging the order of the CIT(A), who had deleted an addition of ₹1,20,16,900 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The dispute arose from the assessee’s declaration of ₹1,44,61,074 as agricultural income from the sale of mangoes grown on approximately 24 acres of land in Chittoor District, Andhra Pradesh. The case was selected for limited scrutiny to examine large agricultural income. The assessee owned most of the land, with the remaining portion in the names of his children. He had submitted sale deeds, details of agricultural expenditure, and affidavits from various buyers to support the agricultural receipts.
During assessment, the AO referred the matter to the Verification Unit to confirm agricultural activity and market rates. While the unit confirmed that cultivation occurred, it reported lower rates and average yields of 3–4 tons per acre, with typical prices ranging from ₹7,000 to ₹10,000 per ton. Relying on the verification report and generic internet data, the AO estimated the total turnover at ₹43,20,000, allowed 50% as expenditure, and determined net agricultural income at ₹21,60,000. The alleged excess of ₹1,20,16,900 was treated as unexplained cash credit under Section 68, applying Section 115BBE. The AO issued a show-cause notice, and during video conferencing, the assessee’s representative admitted lapses in producing certain contractor receipts but stated that mango prices fluctuate and 70% of the produce was export grade.
