Rs. 87.72 Lakh Agricultural Income Addition Sent Back for Fresh Hearing: Chennai ITAT

Background of the agricultural income dispute

For assessment year 2020-21, the assessee filed his return on 30 January 2021 declaring taxable income of Rs. 1,42,210 and exempt agricultural income of Rs. 87,72,287.

The return was selected for scrutiny. During assessment, the assessee furnished Chitta and Adangal land records, but the Assessing Officer found that complete evidence concerning cultivation, agricultural operations, sale proceeds and related expenditure had not been produced.

The Assessing Officer treated the entire agricultural-income claim as unexplained money under Section 69A and assessed total income at Rs. 89,14,500.

CIT(A) confirmed the addition

The assessee appealed before the National Faceless Appeal Centre. The CIT(A) recorded that the appeal had not been effectively pursued and that supporting submissions and documents were not furnished despite opportunities.

On the available record, the CIT(A) found no sufficient evidence to establish the exemption claimed under Section 10(1) or the connected agricultural expenditure. The addition of Rs. 87,72,287 was therefore confirmed.

A similar ex parte appellate order was passed for assessment year 2021-22. Both matters then reached the Chennai ITAT.

Assessee requested one effective opportunity

Before the Tribunal, the assessee argued that sufficient cause had prevented him from producing the necessary evidence before the CIT(A). He requested restoration of the appeals so the agricultural-income claim could be supported with documents.

The Revenue supported the lower authorities' orders but submitted that the issue could be decided according to law.

The central question before the Tribunal was procedural. It had to decide whether the additions should remain confirmed without a fresh opportunity to present the relevant evidence.

Chennai ITAT restored both appeals

For assessment year 2020-21, the Tribunal observed that the CIT(A) had substantially dismissed the appeal for non-prosecution and confirmed the addition without examining the claim with supporting evidence.

Considering natural justice, the Tribunal set aside the CIT(A) order and restored the appeal for fresh adjudication. The CIT(A) must provide a reasonable opportunity of hearing and decide the matter according to law.

The same direction was applied to assessment year 2021-22 because that appeal had also been disposed of ex parte. Both appeals were allowed for statistical purposes.

The addition was not finally deleted

The order is a remand, not a final finding that the entire amount represents genuine agricultural income. The assessee must still prove the nature, source and amount of the receipts before the CIT(A).

Likewise, the Tribunal did not finally uphold the Section 69A addition. The earlier appellate orders were removed so that the evidence could be considered after an effective hearing.

The final tax result will depend on the evidence produced and the findings recorded in the fresh appellate proceedings.

Evidence normally required to prove agricultural income

• Ownership or lawful possession documents for agricultural land.
• Chitta, Adangal, 7/12 extracts, khasra records or equivalent land records.
• Details of crop cultivated, acreage, sowing season and harvesting cycle.
• Bills for seeds, fertilisers, pesticides, labour, irrigation and machinery.
• Evidence of water source and electricity used for agricultural operations.
• Sale bills, mandi receipts, purchaser confirmations and weighment slips.
• Bank statements showing receipt of agricultural sale proceeds.
• Transport records for movement of produce.
• A crop-wise statement of gross receipts, expenses and net agricultural income.
• Evidence of agricultural income accepted in earlier or later assessment years, where relevant.

Why land records alone may not be enough

Land ownership or cultivation records establish an important part of the claim, but they may not prove the precise income declared in the return.

Where the amount is substantial, the taxpayer should connect the landholding with the crop yield, prevailing market rate, actual sale, expenses and receipt of money. The evidence should form one consistent transaction trail.

If cash sales are claimed, contemporaneous sale records and a reasonable explanation of cash handling become especially important.

Duties during the fresh CIT(A) proceeding

• File a complete written submission within the time allowed.
• Prepare an indexed evidence set instead of sending unorganised documents.
• Reconcile the agricultural-income figure in the return with books, bank entries and sale records.
• Explain any cash deposits separately and connect them to verified agricultural sales.
• Respond to every notice and attend scheduled hearings.
• Request admission of additional evidence with a proper explanation where required.
• Maintain proof of every online filing and acknowledgement.
• Avoid relying only on the remand order, because the claim must still be proved on facts.

Key takeaways

• The appeals were ITA Nos. 994 and 995/Chny/2026.
• The order was pronounced on 31 July 2026.
• The disputes concerned assessment years 2020-21 and 2021-22.
• For assessment year 2020-21, exempt agricultural income of Rs. 87,72,287 was treated as unexplained money under Section 69A.
• Chitta and Adangal records had been filed, but complete supporting evidence was found missing.
• The CIT(A) orders were set aside because the claims required a fresh hearing with an effective opportunity.
• The assessee must cooperate and furnish all relevant evidence.
• The agricultural-income claim has not yet been finally accepted or rejected on merits.

Conclusion

Venkatachalam Elangovan v. ITO confirms that a substantial agricultural-income claim should be decided after an effective opportunity to present the supporting record. The Chennai ITAT restored both appeals because the earlier appellate decisions did not examine the claims with complete evidence.

The relief is procedural and conditional. During the fresh proceedings, the assessee must establish the agricultural activity, expenditure, sales and receipt of income through a coherent documentary trail. Taxpayers should therefore treat the decision as a reminder that land records are the starting point, not the complete proof of agricultural income.