The Income Tax Appellate Tribunal (ITAT) Bangalore has dismissed the Income Tax Department’s appeal against farmer and landowner Mr Kanana, ruling that the assessing officer (AO) acted on assumptions, online articles and unverifiable data to raise a tax demand of Rs 1.2 crore. The Tribunal upheld the affidavits produced by the farmer and confirmed that the AO failed to challenge or disprove the evidence submitted.
This significant ruling, delivered on October 31, 2025, reaffirms that agricultural income, when supported by credible and unrebutted documents such as affidavits, cannot be arbitrarily questioned or replaced with estimation based on general market reports.
Background: Case flagged for scrutiny due to high agricultural income
According to case records, Mr Kanana owned 22.24 acres of agricultural land in Manchuru village, Chittoor district, Andhra Pradesh, where he cultivated mangoes and other fruits. For AY 2020–21, he filed his ITR declaring a total income of Rs 48.58 lakh and agricultural income of Rs 1.44 crore.
Since the agricultural income was high, the return was flagged for limited scrutiny under CASS on grounds of “large agricultural income”.
During assessment, the farmer submitted:
- Land ownership documents
- Deeds related to 23.78 acres under cultivation (including land in his children’s names)
- Details of mango sales
- Affidavits from four contractors who purchased mango produce at the flowering stage
- Evidence of earnings totalling Rs 1.85 crore from mangoes and other fruits
These affidavits confirmed payments of Rs 82.79 lakh received during FY 2019–20.
AO relies on internet data, questions income
The AO sought verification from the Income Tax Verification Unit, which confirmed that agricultural activities were indeed conducted on the land. However, it gave indicative production metrics—3 to 4 tonnes per acre at Rs 7,000 to Rs 10,000 per tonne.
The AO then:
- Consulted internet articles about mango yield and pricing.
- Averaged publicly available mango prices (Rs 30,000–70,000 per tonne).
- Estimated mango turnover at Rs 43.20 lakh.
- Allowed 50% as expenditure and computed net agricultural income at Rs 21.60 lakh.
- Treated the remaining Rs 1.20 crore as unexplained cash credit under Section 68, invoking Section 115BBE.
A show-cause notice was issued in September 2022.
CIT(A) strikes down the addition
The Commissioner of Income Tax (Appeals) found serious weaknesses in the AO’s assessment, observing:
- Mango pricing varies by year, variety, quality and demand.
- Estimation is unreliable without specific data on type of mango, yield, and actual price realised.
- The farmer had submitted complete documentation, including sworn affidavits.
- The AO failed to examine or cross-verify the buyers.
CIT(A) therefore deleted the entire addition.
Revenue approaches ITAT; Tribunal upholds CIT(A)’s order
The Income Tax Department appealed to ITAT Bangalore. The Tribunal, however, made critical observations:
1. Affidavits are valid evidence
ITAT noted that the four affidavits remained unchallenged and uncontroverted.
Citing Mehta Parikh & Co. v. CIT (1956), the Tribunal stressed that such affidavits must be accepted unless disproved.
2. AO ignored core verification requirements
The AO did not:
- Issue summons to contractors
- Seek confirmations
- Verify creditworthiness or genuineness
- Challenge the produce-sale agreements
Instead, the AO relied only on estimation and internet sources.
3. Estimation cannot override factual documents
The Tribunal stated that internet-based market rates cannot be used to override actual, sworn evidence submitted by the taxpayer.
4. Agricultural expenditure exceeded AO’s estimate
Kanana claimed Rs 41.02 lakh as expenditure—much higher than the AO’s arbitrary estimate of Rs 21.60 lakh, further invalidating the AO’s logic.
Verdict
The ITAT dismissed the Revenue’s appeal:
“We find no infirmity in the CIT(A)’s order. The AO proceeded on presumptions without disproving the assessee’s documents.”
Key lessons for taxpayers
1. Sworn affidavits are powerful evidence
Unchallenged affidavits hold significant weight and can protect taxpayers from arbitrary additions.
2. Documentation is critical
Details of buyers, pricing, agreements and payment records strengthen a taxpayer’s defence.
3. Tax officers must verify, not assume
Additions cannot be made based on generic data, market trends or online reports without factual verification.
4. Section 68 requires proof of identity, creditworthiness and genuineness
When all three tests are met, additions become unsustainable.
Conclusion
The ITAT Bangalore ruling is another reminder that agricultural income, a critical livelihood source for millions of Indians, cannot be questioned based on assumptions or internet averages. The judgement reinforces the importance of taxpayer documentation, while restraining arbitrary additions made without proper enquiry.