High agricultural income cases often attract scrutiny, especially when the declared figures appear significantly higher than broad market estimates. But can the Revenue discard such income without disproving the evidence furnished by the taxpayer? The Bangalore ITAT addressed this question in ITO vs. Mohammed Farooq Kanana [ITA No. 1509/Bang/2025], involving a mango orchard owner who declared agricultural income of ₹1.44 crore.
This case offers two important insights:
(1) Primary evidence and affidavits hold strong value, and
(2) Estimation cannot substitute factual verification, especially in matters involving Section 68.
Background of the Case
The assessee owned about 24 acres of mango orchards. For the assessment year in question, he disclosed agricultural income of ₹1.44 crore. The produce was sold through four independent contractors. Each contractor executed an oral contract and later submitted sworn affidavits confirming the purchase consideration and payments made.
The Assessing Officer (AO), however, considered the receipts excessive. Relying primarily on the Verification Unit report and general internet-based data regarding average mango yield and market prices, he arrived at a much lower estimated income of ₹21.60 lakh. The balance ₹1.20 crore was treated as unexplained cash credits under Section 68 read with Section 115BBE.
The core issue for the Tribunal’s consideration was:
Whether agricultural income supported by affidavits and primary evidence can be rejected merely on estimation and online price data.
Assessee’s Arguments
The assessee defended the declared agricultural income on multiple grounds:
1. Variation in Mango Prices
Mango prices are influenced by variety, quality, season, export demand, and orchard practices. Approximately 70% of the produce was claimed to be of export quality, fetching premium rates during that season.
2. Industry Practice of Contractor-Based, Cash Sales
In many parts of Karnataka and Andhra Pradesh, mango orchards are sold through contractors who harvest, collect, and sell the produce. Cash payments are common for perishable goods. The assessee submitted:
- Buyer names
- Landholding proof
- Crop details
- Four affidavits from contractors confirming payments
The AO did not question any contractor, nor did he reject their identity or statements.
3. AO Relied on Assumptions
The assessee highlighted that the rejection was based on:
- Generic internet prices
- Broad yield estimates
- Verification-unit assumptions
No site inspection was done. No attempt was made to verify actual sale instances or compare with similar orchards in the region.
Revenue’s Arguments
The Revenue contended that the assessee failed to submit complete receipts, invoices, or sale bills. It argued that:
- The income was unusually high for 24 acres.
- No export invoices were submitted despite the claim of export-quality produce.
- Verification-unit estimates were realistic and aligned with average regional data.
- The affidavits alone were insufficient without corroborative sale documents.
Based on this, the Revenue argued that the addition under Section 68 was justified.
Findings of the Tribunal
The ITAT upheld the CIT(A)’s decision and deleted the entire ₹1.20 crore addition. The Revenue’s appeal was dismissed.
The Tribunal gave the following key reasons:
1. Assessee Submitted Comprehensive Primary Evidence
The assessee filed:
- Land documents
- Crop details
- Contractor identities
- Affidavits confirming payment
- Details of orchard operations
None of this evidence was disproved.
2. No Cross-Examination of Contractors
A crucial principle from Mehta Parikh & Co. (SC) applies:
If affidavits are filed and the Revenue does not cross-examine the deponents, the affidavits must be accepted.
The AO neither examined the contractors nor rebutted their statements.
3. Estimates Cannot Override Evidence
The Tribunal observed that the AO relied exclusively on online yield data, average prices, and generalized regional estimates. However, agricultural income varies significantly depending on local conditions, variety, and market fluctuations.
The Tribunal held that estimation, however logical, cannot replace concrete evidence, particularly in proceedings involving Section 68, where the burden on the Revenue is stricter.
4. Assessee Discharged the Burden Under Section 68
Once the assessee provided affidavits, land records, and buyer details, the initial burden shifted to the AO. The AO failed to:
- Examine the buyers
- Disprove the affidavits
- Conduct meaningful verification
- Bring contrary material on record
Therefore, the addition could not be sustained.
