CH VEERRAJU CO,RAJAHMUNDRY vs. DCIT, CIRCLE-1, RAJAHMUNDRY

As is discernible from the record, the assessee firm in compliance to the aforesaid directions of the AO had filed before him a copy of receipt of Andhra Pradesh State Electricity Board in respect of amount of Rs.7,87,668/- that was received for damage of crops during 220KV and receipt on sale of raw cashew. Although, the AO had afforded the assessee firm sufficient opportunity to substantiate its claim of having derived agricultural income by placing on record supporting documentary evidence as had been referred by us herein above, but it had failed to comply with the directions and even did not furnish the bare minimum information which would evidence that it owned agricultural land that was being exploited for cultivation purposes. As regards the assessee’s claim of having been compensated for damage of crop, the AO observed that it had failed to substantiate that the agricultural land belonged to it and agricultural activities were being carried out on the said land. Apart from that, the AO observed that while framing the assessment in the case of the assessee firm for the preceding year, i.e., AY 2014-15 it was observed that on most of the lands owned by the assessee, no agricultural operations were carried out as the same were non-agricultural and dry lands. Accordingly, the AO based on his aforesaid observations rejected the claim of the assessee of having derived agricultural income and held the entire amount that it had disclosed under the said head as its income from other sources.

Aggrieved, the assessee firm carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under: “4. Decision: I have carefully considered the relevant and material facts on record, in respect of this ground of appeal

We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record.

Smt. K. Aruna, Advocate, the Learned Authorized Representative (for short, “Ld. AR”) for the assessee firm, at the threshold of hearing of the appeal submitted that both the authorities below had grossly erred in recharacterizing the agricultural income of the assessee firm as its income from other sources. Elaborating on her contention, the Ld. AR submitted that the assessee firm had in the preceding years, i.e., AY 2014-15 to 2017-18 disclosed the agricultural income in its return of income. The Ld. AR submitted that the AO while framing the assessment in the case of the assessee firm for the AY 2015-16, vide his order under section 143(3) of the Act, dated 29/07/2016 had observed that though the assessee firm in its Profit & Loss Account for the said year had disclosed agricultural income of Rs.34,73,391/-, but thereafter in its computation of total income restricted the same at Rs. 25 lakhs. The Ld. AR submitted that the AO after necessary deliberations had substituted the assessee’s claim of having derived agricultural income of Rs. 25 lakhs (approx.) to an amount of Rs.7 lakhs. Elaborating on her contention, the Ld. AR submitted that the AO while framing the assessment for the preceding year, i.e., AY 2014-15 had also called upon the assessee firm to substantiate its claim of having derived agricultural income by furnishing the requisite details, i.e., proof of land holding, crops raised, nature of crops grown, expenditure incurred etc., and in response to the same, the assessee firm had submitted before him that it owned more than 135 acres of agricultural land and in support thereof had furnished copies of documents pertaining to 118 acres. The Ld. AR submitted that as the assessee firm in the earlier years also had not maintained any detailed account for agricultural operations, therefore, no other details were submitted before the AO. The Ld. AR further submitted that the AO taking cognizance of the fact that on most of the lands owned by the assessee, no agricultural operations were carried on as the same were non-agricultural lands and dry lands, had thus, after considering the land holding of the assessee accepted its claim of having derived agricultural income of Rs.7 lakhs (out of Rs. 25 lakhs) and had treated the balance amount of Rs.18 lakhs as his non- agricultural income. Carrying her contention further, the Ld. AR submitted that considering the past record that the assessee, its claim of agricultural income could not have been summarily rejected as had been so done during the year under consideration.

Per contra, Dr. Aparna Villuri, the Learned Senior Departmental Representative (for short, “Ld. Sr. DR”) relied upon the orders of the lower authorities. It was submitted by her that as the assessee firm had failed to place on record any documentary evidence to substantiate its claim of having derived agricultural income during the subject year, therefore, the AO had rightly disallowed the same and held it as its income from other sources.

We have thoughtfully considered the facts involved in the present case the backdrop of the orders of the authorities below.

Admittedly, it is a matter of fact borne from the record that the assessee firm in the course of the assessment proceedings had failed to substantiate its claim of having derived agricultural income by placing on record the bare minimum details that were specifically called for by the AO. Ostensibly, the assessee firm had even failed to furnish before the AO any material which would irrefutably evidence his land holding and the factum of having derived agricultural income during the subject year. Also, we find that even in the course of the proceedings before the CIT(A) the assessee firm had not filed any documentary evidence which would substantiate its claim of having derived agricultural income.

Considering the aforesaid facts, we though are of a firm conviction that no infirmity emanates from the orders of the orders of the authorities below, who in the absence of any supporting documentary evidence had declined the assessee’s claim of having derived agricultural income and held the same as its income from other sources, but at the same time cannot remain oblivion of the fact that the AO after duly scrutinizing the case of the assessee firm for AY 2014-15 had under identical set of circumstances, i.e., after observing that on most of the lands owned by the assessee no agricultural operations were carried on as the same were non-agricultural and dry lands had accepted his agricultural income considering his land holding to the extent of Rs.7 lakhs (out of Rs.25 lakhs). We are of the considered view that in the totality of the facts involved in the present case, the claim of the assessee firm of having derived agricultural income during the subject year on a similar footing can safely be accepted to the extent of Rs.7 lakhs. Accordingly, we herein restrict the addition made by the AO by rejecting the assessee’s claim of having derived agricultural income of Rs.22,67,968/- by an amount of Rs.15,67,968/-.

Resultantly, the appeal of the assessee is partly allowed in terms of our aforesaid observations. Order pronounced in the open court on 21st November, 2025.