Rajbala Chaudhry Vs ITO (ITAT Chandigarh)
A Spelling Mistake Cannot Uproot a Eucalyptus Sale — Suspicion Is No Substitute for Enquiry
The Chandigarh Bench of the ITAT has held that agricultural income arising from the sale of eucalyptus trees cannot be treated as “Income from other sources” merely because the sale invoice contains a spelling mistake or the purchaser’s confirmation does not mention its PAN and email address. Once the assessee produces prima facie evidence of the transaction, the AO must conduct an independent enquiry before rejecting it as bogus. The Tribunal’s reasoning centred on the absence of any effective verification from the purchaser under u/s 133(6).
The assessee, Rajbala Chaudhry, had declared agricultural income of ₹38.54 lakh for AY 2018-19. This included sale proceeds of ₹21.81 lakh from eucalyptus trees sold to M/s SKS Contractors. In support of the sale, the assessee furnished the relevant invoice/receipt and a confirmation from the purchaser.
The AO rejected the agricultural income claim. He noticed that the confirmation did not mention the purchaser’s PAN and email address. Further, the purchaser’s name was incorrectly written in the invoice as “SKS Constractions” instead of “SKS Contractors”. The AO also noted that the purchaser was described as a “Government Contractor and Supplier” and entertained doubts as to why such a person would purchase eucalyptus trees. The fact that the sale was made in cash also weighed against the assessee. On the basis of these discrepancies, the AO treated the confirmation as bogus and assessed the entire agricultural income of ₹38.54 lakh under the head “Income from other sources”.
In appeal, the CIT(A) accepted the assessee’s agricultural income arising from the sale of wheat and paddy. That portion of the addition was consequently deleted and was not in dispute before the Tribunal. However, the CIT(A) sustained the addition of ₹21.81 lakh relating to the cash sale of eucalyptus trees.
Significantly, the CIT(A) accepted that the assessee’s ownership and extent of agricultural land were not in dispute. The assessee had also been regularly declaring agricultural income in earlier years, and such income had been accepted by the Department. A similar claim had reportedly been accepted even in a scrutiny assessment for AY 2012-13.
The assessee was an elderly widow aged about 70 years and depended upon other persons to undertake agricultural activities and maintain the related records. The CIT(A) agreed that the absence of individual vouchers for expenditure on labour, diesel, manure, fertilisers and irrigation could not, by itself, establish that no agricultural activity had been carried on. Nevertheless, the CIT(A) considered the circumstantial evidence surrounding the cash sale of trees to be insufficient and sustained the addition.
Before the Tribunal, the limited controversy was whether the sale proceeds of eucalyptus trees amounting to ₹21.81 lakh could be rejected as non-genuine merely on account of imperfections in the invoice and confirmation. The Tribunal observed that the assessee had furnished the sale invoice/receipt and the purchaser’s confirmation. These documents constituted prima facie evidence supporting the transaction. Once this initial evidence was furnished, the onus shifted to the AO to disprove it through an appropriate enquiry.
However, the AO did not issue any notice u/s 133(6) to M/s SKS Contractors. He neither examined the purchaser nor brought any independent material on record to demonstrate that the concern was fictitious. There was also no finding that eucalyptus trees were not standing on the assessee’s agricultural land or that no such trees had actually been sold.
The Tribunal held that a mere spelling mistake in an invoice cannot render the underlying transaction bogus. Human errors and clerical mistakes in commercial documents are not uncommon. What matters is whether the identity of the purchaser and the substance of the transaction can otherwise be established. Similarly, the absence of the purchaser’s PAN or email address in the confirmation could not automatically make the confirmation bogus. If the AO doubted its genuineness, he possessed sufficient statutory powers to verify the transaction directly from the purchaser.
The Tribunal also rejected the inference drawn from the purchaser’s description as a Government contractor and supplier. A contractor engaged in construction or supply activities may purchase timber or eucalyptus trees for different commercial purposes. The AO had brought no evidence to show that the nature of the purchaser’s business was incompatible with the purchase.
Regarding the absence of detailed expenditure vouchers, the Tribunal observed that agricultural activities involving standing trees may extend over a substantial period. Expenditure may be incurred through local labourers and suppliers who do not always issue formal invoices. The absence of complete vouchers may justify an estimation or closer verification of net agricultural income, but it cannot automatically establish that the sale proceeds represent income from an undisclosed non-agricultural source.
Most importantly, the Department had not identified any alternative source from which the assessee allegedly received ₹21.81 lakh. No adverse statement from the purchaser was obtained, and no investigation established that the sale was fictitious. The Tribunal held that suspicion, however strong, could not take the place of evidence and that rejection of prima facie evidence must ultimately rest upon material rather than conjecture. The addition was accordingly deleted and the appeal was allowed.
Author’s Comments
The ruling reiterates a fundamental principle of assessment: suspicion may justify an enquiry, but it cannot become the conclusion of that enquiry. Once ownership of agricultural land, agricultural activity and past agricultural income are accepted, a particular sale cannot be rejected solely because “Contractors” was misspelt as “Constractions”.
The AO had a simple and effective remedy. He could have issued a notice u/s 133(6), called for the purchaser’s books and bank records, verified its business requirements or recorded its statement. Having failed to undertake that enquiry, the AO could not convert documentary imperfections into positive evidence of undisclosed income.
Cash transactions may legitimately invite closer scrutiny, but a cash sale is not synonymous with a bogus sale. This is especially relevant in agriculture, where transactions with local contractors, traders and labourers may not always be documented with the precision expected in organised corporate business.
The decision does not mean that age, widowhood or lack of records automatically proves agricultural income. The Tribunal rightly noted that age cannot dispense with statutory requirements. These circumstances merely explain why perfect documentation may not be available. The decisive factors were the ownership of land, the history of agricultural activity, the evidence of sale and, above all, the Department’s failure to rebut that evidence.
The legal principle is refreshingly straightforward: a defective document may call for verification; it does not, without enquiry, prove a defective transaction.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 06.03.2026 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 144B of the Act on 22.04.2021. The sole grievance of the assessee is confirmation of addition of agricultural income for Rs.21,81,875/-.
Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
2. The assessee declared agricultural income of Rs.38.54 Lacs. The Ld. AO, after due examination of assessee’s reply, rejected the aforesaid claim of the assessee. The assessee had sold eucalyptus trees to M/s SKS Contractors and furnished confirmation of that entity. However, Ld. AO found discrepancy in the confirmation i.e., email and PAN not mentioned therein. Therefore, the genuineness of sale of agricultural products could not be ascertained. The confirmation was held to be bogus. Finally, entire amount of Rs.38.54 Lacs was added as ‘income from other sources’. However, the addition on account of sale of wheat / paddy stood deleted by Ld. CIT(A) and the addition, to that extent, is not subject matter of present appeal before us. The subject matter is limited to sale of eucalyptus tree for Rs.21.81 Lacs.
3. The Ld. CIT(A) noted that Ld. AO doubted the sale of trees to M/s SKS Contractors only because the spelling on the alleged invoice were written as ‘SKS Constractions’. It was also been pointed out by Ld. AO that the purchaser firm was a ‘Government Contractor and supplier’. These facts led to the conclusion that the invoice was bogus and the same when coupled with the fact that cash sales have been made to this extent, resulted in adverse inference of Ld. AO. It was contended that for various assessment years, agricultural income of the assessee stood accepted particularly in AY 2012-13 when the case was scrutinized and similar claim was accepted. With respect to sale of Eucalyptus trees, it was further contended that mere spelling mistake in the invoice could not make the transaction non-genuine.
The Ld. CIT(A) concurred that the ownership and the extent of land was not in question. The agricultural income was suspected to be bogus for two reasons, firstly for assessee’s inability to produce the evidences of expense for earning such income and secondly, for certain infirmities in the bills produced as an evidence for cash sales. On the other hand, the assessee had consistently been claiming that while a portion of the sales was through banking channels, the sale through cash invoice could not be questioned merely because of the stated defects. The Ld. CIT(A) concurred that mere non-availability of the documentary evidences of the relevant expenses such as lease rent, diesel, manure, fertilizers, irrigation and labor etc. could not result in disallowing of agricultural income. The assessee was around 70 years old widow who could not keep the details and documents as she depends on others’ assistance in undertaking the activities. Moreover, the invoice pertaining to the sale of the Eucalyptus trees does not lose the evidentiary value because the facts could have been verified by issuance of notice u/s 133(6) by the AO. It was noted that the alleged sale of Eucalyptus trees was made in cash and not faultlessly supported by evidence. Finally, the circumstantial evidences for cash sale of trees were held to be against the assessee. However, the sale of paddy / wheat was accepted. In other words, the appeal was partly allowed. Aggrieved, the assessee is in further appeal before us.
Our findings and Adjudication
4. The short point that fall for our consideration is assessee’s claim of sale of trees for Rs.21.81 Lacs. From the enumerated facts, it emerges that the assessee has declared total agricultural income of Rs.38.54 Lacs which include sale proceeds of eucalyptus trees for Rs.21.81 Lacs. In support of the transaction, the assessee has furnished the relevant sale invoice / receipt and confirmation from M/s SKS Contractors (the purchaser). Pertinently, the veracity of this document has not ascertained by Ld. AO by issuing any notice u/s 133(6) to the purchaser rather the claim has been denied merely by observing certain discrepancy in the confirmation. On the basis of these observations, the sale has been held to be non-genuine. The Ld. AO has rejected the claim primarily on the ground that certain particulars, including email address and PAN was not mentioned in the confirmation and that there was a discrepancy in the name of the purchaser in the invoice (i.e., the name was mentioned as “SKS Constractions”).
5. It is the observation of Ld. CIT(A) that the ownership and extent of agricultural land was not in dispute. The assessee has consistently been declaring agricultural income in the past which stood accepted also. It is another observation of Ld. CIT(A) the assessee being an elderly widow of about 70 years, was dependent upon others for carrying out agricultural operations and maintaining records. Therefore, non-availability of individual supporting documents for expenditure incurred on labour, diesel, manure, fertilizers, irrigation, etc., could not be treated as evidence that the agricultural activity or the corresponding sale was fictitious. On these facts, Ld. CIT(A) has partly accepted the claim of the assessee to the extent of sale of paddy / wheat. The undisputed fact that emerges is that the existence of agricultural activity and the assessee’s capacity to undertake such activity has not been disproved. There is no material on record to establish that the assessee did not have eucalyptus trees standing on her agricultural land. The assessee has furnished evidence of sale in the form of confirmation from M/s SKS Contractors which, in the first instance, is sufficient enough to establish her claim. The initial onus of the assessee stood discharged and it was the onus of Ld. AO to disprove the same. However, Ld. AO has not brought on record any independent material to establish that the purchaser was fictitious or that no eucalyptus trees were sold or that the impugned amount of Rs.21.81 Lacs represents income from an undisclosed non-agricultural source. Mere spelling mistake, by itself, could not render the underlying transaction as bogus one. Human errors and clerical mistakes in invoices are not uncommon. What is material is whether the identity of the purchaser and the substance of the transaction can otherwise be established. We also find force in the assessee’s contention that if Ld. AO entertained doubts regarding the purchaser, the same could have been verified independently by issuing a notice u/s 133(6) of the Income-tax Act. The assessment record does not demonstrate that any effective enquiry was conducted by Ld. AO from the purchaser before the impugned transaction was rejected. The absence of PAN or email address in the confirmation also cannot, without further enquiry, lead to the conclusion that the confirmation is bogus. The evidentiary value of a document has to be examined in the context of the entire material available on record. The revenue cannot disregard substantive evidence merely because certain ancillary particulars are absent. The description of the purchaser as a “Government Contractor and Supplier” does not make the transaction inherently improbable. A contractor engaged in construction or supply activities may purchase timber or eucalyptus trees for various purposes. No material has been brought on record to demonstrate that the nature of the purchaser’s business was incompatible with the purchases made from the assessee. There is also no finding, based upon any independent investigation, that the cash was actually received from some undisclosed source or that the sale of eucalyptus trees was non-existent. The Ld. AO has also placed emphasis upon the alleged absence of evidence regarding expenditure incurred in earning agricultural income. In our view, this aspect cannot doubt the genuineness of the sale itself. Agricultural activities, particularly those involving standing trees, may extend over a substantial period and the expenditure may be incurred through local labour and suppliers from whom formal invoices may not always be maintained. The absence of complete expenditure vouchers may affect estimation or verification of net agricultural income in a suitable case, but it does not automatically establish that the sale receipts are non-agricultural income. The fact that the assessee is an elderly widow and was dependent upon others for undertaking agricultural operations is also a relevant surrounding circumstance. While age by itself cannot dispense with the statutory requirements, the explanation furnished by the assessee regarding maintenance of agricultural records cannot be rejected without examining the substantive evidence placed on record. Most importantly, the sustained addition rests substantially on inferences drawn from documentary imperfections rather than positive evidence against the assessee. The Ld. AO has not demonstrated through any independent investigation that M/s SKS Contractors did not purchase the eucalyptus trees. No adverse statement of the alleged purchaser has been brought on record. No material has been cited to show that the assessee had received the impugned amount from any other source. It is a settled principle of assessment that suspicion, however strong, cannot take the place of evidence. Where an assessee produces prima facie evidence in support of a transaction, the revenue is entitled to investigate and rebut such evidence; however, the rejection of the explanation must ultimately rest upon material and not merely upon conjecture. On these facts, the impugned addition could not be sustained in law. We order so.
6. In the result, the appeal of the assessee is allowed.
Order pronounced on 10th September, 2026
