DEENAMANI PRABHAKAR,UDUPI vs. ITO WARD- 1, UDUPI

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal filed by the assessee is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereafter the Act) by the office of the Commissioner of Income Tax Appeal, ADDL/JCIT(A)-2, Coimbatore (hereafter the Ld. CIT(A)), for A.Y. 2009-10, bearing DIN & Order No: ITBA/APL/S/250/2025-26/1084725752(1)

3.1 The assessee submitted that coconut was the main commercial crop grown, along with mango, cashew nut and other crops, which were also grown on the lands. It was also stated that the crops were maintained through labourers, the expenses were incurred in cash and the agricultural produce was sold locally. The sale proceeds were also stated to have been received in cash and deposited in the bank from time to time.

3.2 The AO, however, was not satisfied with the explanation. The AO observed that the assessee had not produced sufficient evidence to establish the agricultural operations and the income claimed. The AO also noted that proper details of agricultural expenses, purchasers of the produce and complete sale records were not furnished. According to the AO, the cash deposits were also not properly correlated with the alleged agricultural sales.

3.3 Hence, the AO treated the agricultural income of Rs. 12,12,690/- as income from other sources. Without prejudice, he also estimated possible agricultural income from coconut cultivation at about Rs. 3,93,880/-, based on the extent of land, number of trees, yield and estimated expenses. But still, the AO disallowed the entire claim of agricultural income of Rs. 12,12,690/- and added it to the total income.

4.1 The assessee further submitted that tender coconuts were sold in the open market and it was not always possible to obtain details of every purchaser. It was contended that the AO had not independently verified the agricultural operations. The assessee also objected to the AO's alternative estimate of agricultural income. According to the assessee, the number of coconut trees per acre and the sale price adopted by the AO were not correct. It was submitted that the actual number of trees was between 150 and 175 per acre and that the average sale price should have been taken at Rs. 12 per coconut. On this basis, the assessee requested that the agricultural income declared in the ROI be accepted.

4.2 During the appellate proceedings, the assessee also filed additional evidence relating to crop cultivation. The Ld. CIT(A) called for a remand report. In the remand proceedings, field verification was carried out in respect of the agricultural properties. The Inspector reported that grown-up coconut trees yielding coconuts were found at the Malpe property. The AO, in the remand report, accepted that the assessee's claim of carrying on agricultural activity was valid. However, the AO stated that the exact agricultural income for F.Y. 2008-09 could not be verified. The sale of agricultural produce in cash was also considered acceptable, since cash was the normal mode of transaction among local farmers during the relevant period.

5.1 The Ld. CIT(A) also upheld the method adopted by the AO for estimating agricultural income. It was observed that the AO had considered about 100 coconut trees per acre, the expected yield and a sale price of Rs. 9 per coconut. According to the Ld. CIT(A), the agricultural income declared by the assessee was substantially higher than the income that could reasonably be generated from the land. In the absence of further evidence to support the higher claim, the Ld. CIT(A) held that the estimation made by the AO was reasonable. Accordingly, the addition of Rs. 12,12,690/- as income from other sources was confirmed.

6.1 The Ld. AR before us has filed a paper book running from page Nos. 1 to 58 and a written submission running into 5 pages. The assessee submitted that the lower authorities were not justified in treating the agricultural income of Rs. 12,12,690 as income from other sources. It was submitted that the ownership of substantial agricultural land and carrying out of agricultural activities were not in dispute. Further, during the remand proceedings, after field verification by the Income Tax Inspector, the AO accepted that the assessee's claim of income from agricultural activities was valid and also accepted that cash sales of agricultural produce were common among local farmers during the relevant period.

6.2 The Ld. AR further submitted that sufficient evidence was furnished in support of the agricultural activities, including 7/12 extracts, land agreements, a month-wise statement of agricultural income, a cash summary, and a notebook maintained in Kannada containing details of agricultural expenses. It was contended that the agricultural produce was sold in the open market to local purchasers and, therefore, it was not practically possible to obtain sale bills or details of every purchaser.

6.3 The Ld. AR further submitted that agricultural income had been consistently disclosed in earlier and subsequent assessment years, and the Department had accepted the same. Reliance was placed on the decision of the Hon'ble Supreme Court in Radhasoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 on the principle of consistency.

6.4 The assessee also relied upon the decision of the Coordinate Bench in Erki Krishnamurthy HUF v. ITO, ITA No. 104/Bang/2026, dated 17.03.2026, and submitted that once the ownership of agricultural land and carrying out of agricultural operations are accepted, the balance agricultural income cannot be treated as income from other sources merely on the basis of estimation without any cogent material or comparable data. Accordingly, the assessee prayed that the addition sustained by the Ld. CIT(A) be deleted.

8.1 It is not in dispute that the assessee was holding substantial agricultural land. The assessee had furnished the land records and other details before the lower authorities. Even during the remand proceedings, the existence of agricultural land and agricultural activity was verified. In respect of the Malpe property, the Inspector found grown-up coconut trees yielding coconuts. The AO, in the remand report, also accepted that the assessee's claim of carrying on agricultural activities was valid. The only reservation of the AO was that the exact quantum of agricultural income for the year could not be verified.

8.2 We also find that the assessee had consistently explained that the agricultural produce was sold locally and the sale proceeds were received in cash. This explanation was also examined during the remand proceedings. Significantly, the AO himself accepted in the remand report that sale of agricultural produce in cash was acceptable since cash was the main mode of transaction among local farmers during the relevant period. Therefore, the claim of the assessee cannot be rejected merely because the agricultural sale proceeds were received in cash and there was no sale bill.

8.3 The Ld. CIT(A) nevertheless confirmed the addition mainly on the ground that the assessee had not produced crop-wise yield records, sale bills or confirmations from purchasers. It was also observed that the bank deposits were not properly correlated with the agricultural cycles. In our view, these deficiencies have to be considered in the light of the nature of the activity carried on by the assessee. The agricultural produce was stated to have been sold in the local market. The transactions were largely in cash. The remand report itself accepts that cash transactions were common among local farmers during the relevant period. Therefore, the absence of formal sale bills or purchaser confirmations, by itself, cannot lead to a conclusion that the agricultural income declared by the assessee was not earned.

8.4 Another important fact is the consistency of the agricultural income declared by the assessee. The assessee had declared agricultural income not only in the year under consideration but also in the earlier and subsequent years. In the immediately preceding year, agricultural income of Rs. 8,11,526/- was declared. In the immediately subsequent year, agricultural income of Rs. 14,74,690/- was declared. Against this background, the agricultural income of Rs. 12,12,690/- declared during the year under consideration falls within the range of agricultural income shown in the adjoining years. Therefore, the amount declared during the year cannot be said to be abnormal or excessive merely on the basis of an estimated working.

8.5 We further notice that the AO had estimated agricultural income by adopting certain assumptions regarding the number of coconut trees per acre, yield per tree and sale price. The Ld. CIT(A) accepted this methodology and observed that approximately 100 coconut trees could be planted per acre and that the sale price of Rs. 9/- per coconut adopted by the AO was reasonable. The assessee was admittedly holding agricultural land. The remand report accepted agricultural activity itself. Sale of agricultural produce in cash was also accepted. Further, the assessee consistently declared agricultural income in the adjoining years. In these circumstances, we also draw support from the decision of the Coordinate Bench of this Tribunal in Erki Krishnamurthy HUF v. ITO, ITA No. 104/Bang/2026, order dated 17.03.2026. In that case, the assessee also held substantial agricultural land and declared agricultural income. The AO accepted the agricultural activity but restricted the agricultural income by applying an estimated per-acre amount. The Coordinate Bench observed that once it accepted the agricultural operations and landholding, it could not sustain an estimate made without comparable data or any scientific basis. The Bench also considered the agricultural income declared in earlier years and held that, in the absence of contrary material brought by the Revenue, part of the agricultural income could not be treated as income from other sources merely on an estimated basis. The relevant finding of the Tribunal for ready reference is extracted as under:

10.5 Coming to the merits of the addition, we find that the AO has not brought any material on record to establish that the agricultural activities claimed by the assessee were not carried out. The AO himself has accepted that the assessee owns substantial agricultural land and that crops are reflected in the RTC records. The AO has also accepted agricultural income to a substantial extent by estimating the income at Rs. 60,000 per acre. Having accepted that agricultural operations were indeed carried out, the further estimation made by the AO without any comparable data or scientific basis appears to be purely arbitrary. The estimation adopted by the AO does not take into account the nature of crops grown such as arecanut and coconut which are capable of generating higher agricultural income depending upon yield and market conditions. Moreover, the assessee had also explained that part of the sale proceeds were received through banking channels from traders, which was verifiable from the bank statements. 10.6 In the absence of any contrary materials brought on record by the Revenue to demonstrate that the agricultural income declared by the assessee was not genuine, we are of the considered view that the addition made by the AO purely on estimation cannot be sustained. The learned CIT(A) also failed to examine these aspects and simply dismissed the appeal without any adjudication on merits.

8.6 The above principle applies to the facts before us. In the present case also, the Revenue does not dispute the agricultural landholding. The remand report accepts the agricultural activity. It also accepts that cash was the normal mode of transaction among local farmers. The assessee has further demonstrated that agricultural income was declared in the preceding and subsequent years. Therefore, there should be some cogent material before treating part of the agricultural income as income from other sources. Mere estimation based on assumed yield, number of trees and sale price is not sufficient

8.7 We also find that the field verification was carried out much later during the remand proceedings. In respect of one of the properties, it was noticed that the land had subsequently been converted into housing sites and other uses. However, even the remand report states that the exact nature of agricultural activities during F.Y. 2008-09 could not be ascertained from the present condition of that property. Therefore, the subsequent condition of the land cannot, by itself, be used to deny agricultural activity carried on in the relevant previous year.

8.8 The material on record, therefore, establishes three important facts. First, the assessee was holding agricultural land. Second, the remand proceedings accepted that the assessee carried on agricultural activity. Third, the receipt of agricultural sale proceeds in cash was also accepted. Once these facts are accepted, the dispute essentially remains only with regard to the quantum of agricultural income.

8.9 Considering the extent of agricultural land held by the assessee, the nature of crops stated to have been cultivated, the findings in the remand report and the agricultural income declared in the immediately preceding and subsequent years, we are of the view that the agricultural income of Rs. 12,12,690/- declared by the assessee for the year under consideration is reasonable. The Revenue has brought no material on record to show that the said amount represented income from any other source.

8.10 In view of the above, we are unable to sustain the finding of the Ld. CIT(A). Accordingly, we direct the AO to accept the agricultural income of Rs. 12,12,690/- declared by the assessee and delete the addition made by treating it as income from other sources. The ground raised by the assessee is allowed.

Order pronounced in the open court on 5th October, 2026.

Sd/- Sd/- KESHAV DUBEY WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 5th October, 2026 Vms Copy to: DEENAMANI PRABHAKAR, 7-81, DINAMANI ESTATE, THOTTAM KODAVOOR VILLAGE, TENKANIDYOOR , 1 THOTTAM B.O, UDUPI, KARNATAKA- 576108, UDUPI-576108, KARNATAKA

ITO WARD- 1, 2 UDUPI, KARNATAKA-576108, UDUPI, UDUPI-576108, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE

By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

P G Digitally signed by P G RAJANI RAJANI Date: 2026.10.21 12:20:58 +05'30'