ITAT Ahmedabad Says Agricultural Income Cannot Be Taxed Without Proper Basis

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has recently granted a major relief to a farmer named Jivrajbhai Dhanjibhai Patel in a dispute concerning taxability of his agricultural income for Assessment Year 2017-18.

The assessee, Jivrajbhai Dhanjibhai Patel, had declared exempt total agriculture income amounting to Rs 20.49 lakh in its income tax return (ITR) for the assessment year 2017-18. However, the claim for the same was rejected by the tax authorities, and they treated the entire exempted income as taxable under the head ‘Income from Other Sources‘ on the grounds that the “assessee allegedly failed to have discharged his onus of substantiating his claim of having earned agricultural income to the said extent”.

The present appeal was filed 360 days late by the assessee; hence, the assessee had sought condonation of delay, explaining that he is an illiterate farmer who depended on his tax consultant and, due to the mistake of this consultant, he was unaware of the appellate order passed earlier. Finding the reason genuine, the tribunal condoned the delay and agreed to hear the appeal on merit.

Before the Tribunal, the assessee argued that the estimation made by the CIT(A) was arbitrary and unsupported by law. The Tribunal observed that the assessee had furnished all relevant evidence, such as sale bills of agricultural produce worth Rs 26.77 lakh and purchase bills for seeds and fertilisers amounting to Rs 13.44 lakh. These documents proved that the assessee was genuinely engaged in agricultural activities.

The ITAT held that there was no proper basis for estimating agricultural income at a fixed rate per hectare. Since the agricultural operations and supporting records were accepted, the Tribunal allowed the assessee’s full claim of agricultural income and deleted the addition of Rs 11.47 lakh.