When agricultural income could be taxed as income from undisclosed sources?.

We all know that agricultural income is exempt from tax . However,there are instances where the tax officers resort to verify whether the quantum of agricultural income is real or not. In Vijay Kumar Sharma & Ors v. CIT (2010)44 DTR(P&H)88 similar such issue was discussed and decided.

In this case the the AO estimated the agriculture income and added the agriculture income admitted by the assessee less the same income estimated by him as 'income from undisclosed sources'. The tribunal held that the addition on account of inflated agriculture income is possible only if the assessee had taken credit for the said amount in explaining any expenditure or investment out of the said amount or had taken any credit in the balance sheet. The tribunal accordingly restored the matter to AO for fresh decision by looking in to these aspects.

The court upheld the view of the tribunal and declined to interfere. Thus the decision was in favour of the assessee. It is therefore possible for us to understand that agriculural income if opined as exaggerated or inflated by the assessee, no tax consequence would follow if such agri income is not used for proving any expenditure or investment or taken credit in any balance sheet.