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Facts
The assessee, engaged in manufacturing and trading apparel, claimed substantial agricultural income for AY 2018-19. The AO disallowed a significant portion of this income, adding it back as income from other sources and under section 68. The First Appellate Authority (FAA) passed an ex-parte order confirming the AO's additions due to the assessee's non-compliance.
Held
The Tribunal noted that while the FAA's order was ex-parte due to the assessee's lack of response, the AO had allowed a similar agricultural income claim in the preceding year with only a minor ad-hoc disallowance. In the interest of justice and fair play, the Tribunal decided to restore the issue to the FAA for fresh adjudication.
Key Issues
Whether the disallowance of agricultural income for AY 2018-19 was justified, especially in light of acceptance in the preceding year, and whether the ex-parte order by the FAA was appropriate.
Sections Cited
250, 143(3), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 02.09.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2 -: 2. At the very outset, we notice that the order passed by the First Appellate Authority (FAA) is ex-parte, since there was no compliance from the assessee to five notices issued from the office of the First Appellate Authority.
The Ld.AR submitted that the assessee is an individual engaged in the business of manufacturing and trading wearing apparels under the name and style of ‘Hallmark Knit Fabs’. For the assessment year 2018-19, assessee filed his return of income declaring total income Rs.13,70,490/- after claiming exemption of agricultural income of Rs.56,40,500/-. The return was selected for limited scrutiny. During the course of assessment proceedings, assessee was directed to submit the details/evidences with regard to the claim of agricultural income. In response the assessee submitted written submissions along with details of agricultural income. However, the AO completed the assessment u/s.143(3)of the Act vide order dated 12.03.2021 assessing the total income at Rs.53,52,020/- after making addition of agricultural income of Rs.15,13,128/- under the head ‘Income from other sources’ and Rs.24,68,400/- u/s.68 of the Act.
3 -: 4. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). Since the assessee has not responded to various notices issued from the office of the FAA, the FAA passed ex-parte order confirming the additions made by the AO stating that assessee has not filed any evidence to controvert the findings made by the AO.
Aggrieved assessee filed appeal before the Tribunal. The Ld.AR submitted that assessee during the course of assessment proceedings, the assessee had submitted all details with regard to the claim of agricultural income. However, the AO disallowed the assessee’s claim and added the entire agricultural income as ‘income from other sources’. The Ld.AR submitted that for the immediately preceding year i.e., AY 2017-18, the assessee has claimed agricultural income of Rs.54,10,000/-. During the scrutiny assessment proceedings, the AO had accepted the agricultural income only by making an adhoc disallowance of 10% (Rs.5,41,000/-) of agricultural income disclosed in the return of income and completed the assessment. The relevant findings of the AO in assessment year 2017-18 reads as under:- “In connection with agriculture income, Inspector of this office was deputed for field visit and cause enquiries regarding agricultural activities of the assessee and he submitted his report along with 4 -: photographs of the lands. The assessee is doing agricultural activities in the lands owned by him. In support of his claim, he also submitted the certificate from the Assistant Director of Agriculture, Pongalur. The main crops are coconut(tender coconut) and onion. The assessee has uploaded supporting documents for land holdings, crops cultivated along with photographs. The assessee has replied that due to high yield and better market price, he cultivated the above crops. However, the agriculture income shown is on higher side compared to nearby lands. Considering the area of the land, irrigation facilities, yield and rate of the crops cultivated, 10% of agriculture income amounting to Rs.5,41,000/- is disallowed and added back to the income returned.”
However, in the relevant assessment year, the AO has disbelieved part of the agricultural income and added aggregate sum of Rs.49,81,528/-. Therefore, it was submitted that one more opportunity may be provided to the assessee to represent his case before the FAA.
The Ld.DR submitted that adequate opportunities were provided from the offices of the FAA and there is no violation of principles of natural justice. Therefore, it was prayed the appeal of the assessee may be dismissed.
We have heard the rival submissions and perused the material available on record. It is observed that the proceedings before the FAA were conducted ex-parte as the assessee failed to respond to the various notices issued by the office of the FAA. We strongly deprecate the nonchalant attitude of the assessee in not 5 -: responding to the notices issued by the FAA. However, we also note that for the year under consideration, the AO has disallowed the substantial agricultural income claimed by the assessee, whereas in the immediately preceding assessment year 2017–18, the AO had accepted the agricultural income disclosed by the assessee subject only to an adhoc disallowance of 10% of agricultural income disclosed by the assessee. Considering the facts and circumstances of the case, and in the interest of justice and fair play, we deem it appropriate to restore the issue to the file of the FAA. Accordingly, the matter is remitted to the files of the FAA for fresh adjudication. The FAA shall afford reasonable opportunity of hearing to the assessee. The assessee is directed to co-operate with the Revenue and shall not seek unnecessary adjournment. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 6th March, 2026 at Chennai. Sd/- Sd/- (एस.आर. रघुनाथा) (जॉज� जॉज� के) (S.R. RAGHUNATHA) (GEORGE GEORGE K) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 6th March, 2026