Case Law Details
Tattaruparambil Mathew Joseph Vs ITO (ITAT Bangalore)
Reasonable Agricultural Income Cannot Be Denied Altogether- Bangalore ITAT Gives Relief in Rubber Plantation Case, Sends ₹20 Lakh Lease Receipt Back for Verification
The Bangalore ITAT granted partial relief to an assessee whose agricultural income from rubber plantation was treated entirely as “Income from Other Sources” by the AO and NFAC. The Tribunal held that once the ownership of agricultural land and existence of agricultural activities are accepted, the department cannot completely deny agricultural income merely because exhaustive details were not furnished.
The assessee had declared agricultural income of ₹28.12 lakh from 8.01 acres of rural agricultural land containing rubber plantation. The income comprised ₹20 lakh lease receipts from leasing the plantation land for rubber extraction and around ₹8.12 lakh from sale of natural rubber/latex. The AO doubted the sudden increase in agricultural income compared to earlier years and rejected the claim on the ground that proper quantitative details, sale bills, cultivation expenses and supporting evidence were not produced. The AO also questioned the validity of the lease agreement and treated the entire amount as income from other sources.
Before the Tribunal, the assessee produced additional evidence including PAN, Aadhaar and bank details of the lessee to support the ₹20 lakh lease receipt. The ITAT observed that these documents went to the root of the matter and therefore restored the limited issue of lease receipts back to the AO for fresh verification after granting opportunity to the assessee.
However, the Tribunal strongly disagreed with the total rejection of the remaining agricultural income. It noted that the assessee had consistently shown agricultural income in earlier years and the Revenue had not brought any positive material to establish that the receipts arose from non-agricultural activities. The Bench observed that mere suspicion arising from increase in agricultural income cannot justify taxing the entire receipts as non-agricultural income. Accordingly, the ITAT directed the AO to accept agricultural income of ₹8.12 lakh relating to rubber/latex sales and granted partial relief to the assessee.
.FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal has been instituted by the assessee against the order of the NFAC, Delhi passed u/s 250 of the Act dated 08.12.2025 relevant to AY 2020-21.
2. The effective issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of agricultural income 28,12,700.00.
The facts in brief are that the assessee is an individual who filed return of income for A.Y. 2020-21 declaring total income of Rs. 2,80,580/- and agricultural income of Rs. 28,12,700/- only. The case was selected for limited scrutiny under CASS for the specific reason of substantial increase in agricultural income as compared to earlier years. The AO noted that the assessee had shown agricultural income of Rs. 3,85,530/- in A.Y. 2017 18, Nil income in A.Y. 2018-19 and Rs. 1,75,650/- in A.Y. 2019-20, whereas during the year under consideration agricultural income of Rs. 28,12,700/- was declared. During the assessment proceedings, the assessee submitted that the agricultural income was derived from leasing out rural agricultural land measuring about 8.01 acres having rubber cultivation and from sale of rubber latex. The assessee furnished a copy of alleged lease deed and claimed that advance lease rent of Rs. 20 lakhs were received out of total lease rent of Rs. 48.02 lakhs for a period of four years. The assessee also furnished copy of bank statement showing receipt of Rs. 20 lakhs.
3. However, the AO was not satisfied with the explanation furnished by the assessee. The AO observed that despite repeated notices issued u/s 142(1) of the Act, the assessee failed to furnish complete details and supporting evidences regarding agricultural operations, sale of agricultural produce, quantitative details of rubber cultivated and sold, expenses incurred for cultivation, details of rubber latex sold and bifurcation of agricultural income between lease rent and sale of latex. The AO further observed that the assessee had merely disclosed net agricultural income in Schedule EI without furnishing details of gross receipts and expenditure incurred.
3.1 The AO also observed that the alleged lease deed produced by the assessee did not contain basic ingredients of a valid lease agreement such as complete identity details, PAN and Aadhaar details of parties. According to the AO, the document filed by the assessee appeared to be merely a receipt for lease agreement and not a proper lease deed. The AO further held that the bank statement furnished by the assessee was incomplete and not supported by confirmation, identity proof and details of creditworthiness of the paying party. Accordingly, the AO held that the assessee failed to establish the genuineness, nature and source of the agricultural income of Rs. 28,12,700/- only. Therefore, the AO rejected the claim of exempt agricultural income and treated the same as income from other sources while completing assessment u/s 143(3) of the Act.
4. The aggrieved assessee preferred an appeal before the learned CIT(A).
5. Before the learned CIT(A), the assessee submitted that the AO wrongly treated the agricultural income of Rs. 28,12,700/- as income from other sources. The assessee argued that during the assessment proceedings, copy of lease agreement, bank statement and details relating to sale of natural rubber were already furnished before the AO. However, the AO ignored these documents and rejected the claim only on assumptions and suspicion without bringing any contrary evidence on record.
5.1 The assessee further submitted that agricultural income is exempt u/s 10(1) of the Act and therefore cannot be taxed as part of total income. It was argued that the AO failed to prove that the impugned receipts were from any non-agricultural activity. According to the assessee, mere doubt or suspicion cannot be the basis for making addition.
5.2 The assessee explained that about 8.01 acres of rural agricultural land having rubber plantation was given on lease to one Mr. Rajesha for extraction of rubber latex and removal of trees during the lease period. Out of the agreed lease amount, Rs. 20 lakhs was received during the year under consideration. Therefore, according to the assessee, there was no need to furnish quantitative details of rubber yield in respect of lease income.
5.3 The assessee also submitted that income earned from leasing agricultural land for agricultural purposes falls within the definition of agricultural income u/s 2(1A) of the Act. Apart from lease income, the assessee had also earned income from sale of natural rubber amounting to Rs. 8,16,975/- only.
5.4 Regarding the objection of the AO on validity of lease agreement, the assessee submitted that the document clearly mentioned the names of parties, details of land, lease period and lease amount. Therefore, according to the assessee, it was a valid lease arrangement and there is no prescribed format under the law for such agreement.
5.5 However, the learned CIT(A) after considering the assessment order, written submissions and documents filed by the assessee, upheld the action of the AO in denying exemption of agricultural income of Rs. 28,12,700/- only. The learned CIT(A) observed that despite several opportunities granted during assessment proceedings, the assessee failed to furnish proper supporting evidence regarding quantity of rubber produced, latex extracted, details of agricultural operations carried out, expenditure incurred on cultivation, labour charges and inputs used for agricultural activities. The learned CIT(A) further noted that the assessee had not produced any verifiable sale bills, transport details or proof regarding actual sale of rubber during the year under consideration.
5.6 The learned CIT(A) also observed that there was a substantial increase in agricultural income during the year under consideration as compared to earlier years. While the assessee had shown agricultural income of only Rs. 1,75,650/- in the immediately preceding year, the agricultural income for the year under appeal was declared at Rs. 28,12,700/-. According to learned CIT(A), the assessee failed to provide any satisfactory explanation or supporting evidence for such huge increase in agricultural income.
5.7 Regarding the lease agreement relied upon by the assessee, the learned CIT(A) held that the document produced was merely a receipt acknowledging payment of Rs. 20 lakhs and not a proper legally enforceable lease deed. The learned CIT(A) observed that the document was not registered despite being for a period of four years and lacked important details such as proper identity proof, PAN and Aadhaar details of the lessee, bank statement of the lessee and other commercial terms generally found in rubber plantation lease agreements.
5.8 The learned CIT(A) further observed that the assessee failed to establish the identity, capacity and genuineness of the alleged lessee and therefore the lease document could not be relied upon to establish agricultural income. The learned CIT(A) held that the burden to prove genuineness of agricultural income was entirely upon the assessee and the assessee failed to discharge the said burden with cogent evidence. Accordingly, the learned CIT(A) confirmed the action of the AO in treating the amount of Rs. 28,12,700/- as income from other sources and dismissed the grounds raised by the assessee.
9. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
10. The learned AR file additional evidences with respect to lease agreements which included PAN, Adhar and bank statement of the lessee. The learned AR submitted that the authorities below erred in treating the agricultural income as income from other sources without properly appreciating the evidences placed on record. It was contended that the assessee owned 8.01 acres of agricultural land having rubber plantation and had consistently disclosed agricultural income in earlier years. The learned AR submitted that lease receipts of Rs. 20 lakhs were supported by lease agreement, bank statement and additional evidences including PAN, Aadhaar and bank details of the lessee. It was further argued that income from leasing agricultural land for agricultural purposes squarely falls within agricultural income exempt under the Act.
11. The learned DR supported the orders of the AO and the learned CIT(A). It was submitted that the assessee failed to furnish proper supporting evidence regarding agricultural operations, quantity of rubber produced, sale bills and expenditure incurred for cultivation. The learned DR contended that the alleged lease agreement lacked essential particulars and was not supported by proper evidence regarding identity and capacity of the lessee. According to the learned DR, the huge increase in agricultural income compared to earlier years remained unexplained. However, the learned DR fairly submitted that the additional evidences filed before the Tribunal may be verified by the AO.
12. We have carefully considered the rival submissions and perused the materials available on record. The issue involved in the present appeal relates to taxability of agricultural income declared by the assessee amounting to Rs. 28,12,700/-, which has been treated by the Revenue authorities as income from other sources.
12.1 At the outset, we note that there is no dispute regarding ownership and possession of agricultural land by the assessee. The material available on record clearly demonstrates that the assessee was holding about 8.01 acres of rural agricultural land having rubber plantation. It is also not in dispute that in the earlier assessment years also the assessee had consistently disclosed agricultural income from the said land, though to a lower extent. Thus, the existence of agricultural land and agricultural activities carried on by the assessee cannot be doubted in entirety.
12.2 We further notice that the agricultural income declared by the assessee during the year under consideration consisted of two components, namely lease receipt of Rs. 20 lakhs in relation to agricultural land having rubber plantation and remaining agricultural income arising from sale of natural rubber/latex. The AO as well as the learned CIT(A) rejected the entire claim mainly on the ground that complete details and evidences were not furnished during the assessment proceedings.
12.3 During the course of hearing before us, the learned AR furnished additional evidences in respect of the lease arrangement including PAN, Aadhaar details and bank statement of the lessee in support of lease receipt of Rs. 20 lakhs. In our considered opinion, these additional evidences go to the root of the matter for examining the genuineness and nature of the lease transaction. Since these documents were admittedly not examined by the AO or by the learned CIT(A), principles of natural justice require that the same should be verified at the level of the AO. Therefore, in the interest of justice and fair play, we deem it proper to restore the limited issue relating to lease receipt of Rs. 20 lakhs to the file of the AO for fresh examination in the light of additional evidences filed by the assessee. The AO shall examine the additional evidences and decide the issue afresh in accordance with law after affording reasonable opportunity of hearing to the assessee.
12.4 However, as regards the remaining agricultural income of Rs. 8,12,700/-, we find merit in the contention of the assessee. The Revenue authorities have completely rejected the claim of agricultural income without appreciating the surrounding facts and past history of the case. Once the ownership and existence of agricultural land with rubber plantation is accepted and the assessee has been consistently showing agricultural income from the same land in earlier years, complete denial of agricultural income cannot be justified merely because quantitative details or exhaustive supporting documents were not furnished.
12.5 We also notice that the amount of Rs. 8,12,700/- claimed towards sale of natural rubber/latex is broadly in line with agricultural income disclosed by the assessee in earlier years considering the nature of rubber cultivation activities. The Revenue has not brought any positive material on record to establish that the impugned receipts were from any non-agricultural source. Mere suspicion arising on account of increase in agricultural income cannot by itself justify treating the entire agricultural receipts as income from other sources.
12.6 In our considered opinion, once agricultural land ownership and agricultural activities are accepted, some reasonable agricultural income from the land cannot be denied altogether. The authorities below were therefore not justified in treating the entire agricultural income as non-agricultural income. Accordingly, we direct the AO to allow agricultural income to the extent of Rs. 8,12,700/- claimed by the assessee. The issue relating to lease receipt of Rs. 20 lakhs alone is restored to the file of the AO for fresh adjudication in the light of additional evidences filed before us. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes.
13. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in court on 21st day of May, 2026
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