Income Tax Appellate Tribunal - Hyderabad
Shri G Raghavendra Rao,, Hyderabad vs Department Of Income Tax on 24 September, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH "B", HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER Sl.No. ITA No. AY Appellant Respondent 01 431/H/13 2009-10 Income-tax Officer, Shri G. Ward - 11(3), Raghavendra Rao, Hyderabad Hyderabad PAN - ACWPG4994K 02 432/H/13 2008-09 -do- Smt. G. Rama Devi, Hyderabad PAN-AEPG 5756 B 03 433/H/13 2009-10 -do- Smt. G. Rama Devi, Hyderabad PAN - AEGPG5756B 04 434/H/13 2008-09 -do- Shri G. Simha Rao, Hyderabad PAN - AHTPG 7968B 05 435/H/13 2009-10 -do- -do-
06 436/H/13 2008-09 -do- Shri G. Sarvotham Rao, Hyderabad PAN - BGTPS2080L 07 437/H/13 2008-09 -do- -do-
08 438/H/13 2008-09 -do- Shri G. Mahendra Rao, Hyderabad PAN - ANRPM6938K 09 439/H/13 2009-10 -do- -do-
10 875/H/13 2008-09 Shri G. Income-tax Officer, Ward
Raghavendra Rao, - 11(3), Hyderabad
Hyderabad
PAN- ACWPG4994K
11 876/H/13 2009-10 -do- -do-
12 877/H/13 2008-09 Smt. G. Rama Devi, -do-
Hyderabad
PAN-AEPG 5756 B
13 878/H/13 2009-10 -do- -do-
14 879/H/13 2008-09 Shri G. Simha Rao, -do-
Hyderabad
PAN- AHTPG 7968B
15 880/H/13 2009-10 -do- -do-
16 881/H/13 2008-09 Shri G. Sarvotham -do-
Rao, Hyderabad
PAN - BGTPS2080L
17 882/H/13 2009-10 -do- -do-
18 883/H/13 2009-10 Shri G. Mahendra -do-
Rao, Hyderabad
PAN - ANRPM6938K
19 884/H/13 2008-09 -do- -do-
2
ITA Nos. 431 to 439/Hyd/20 13 &
ITA Nos. 875 to 884/Hyd/20 13
Shri G. Ragh avend ra Rao an d others
Revenue by Shri Solgy Jose T. Kottaram
Assessee by Shri K.C. Devdas
Date of hearing 31-07-2014
Date of pronouncement 24-09-2014
O RDE R
PER BENCH:
These bunch of 19 appeals both by the department as well as by different assessees are against separate orders of CIT(A)-VI, Hyderabad pertaining to AYs. 2008-09 and 2009-10. Since common issues are involved in all these appeals, they were clubbed and heard together and, therefore, we find it convenient to dispose of the same by way of this consolidated order.
431/Hyd/13 by the department in case of Shri G. Raghavendra Rao
2. Department has raised seven grounds. Ground No. 1 & 7 being general in nature are not required to be adjudicated upon. Ground Nos. 2 to 5 are in respect of assessment of capital gain on sale of land at Maqta Mehaboobpet by AO but deleted by CIT(A).
3. Briefly the facts relating to the aforesaid issue are, assessee is an individual. For the AY under consideration, assessee filed his return of income on 07/05/10 admitting total income of Rs. 9,82,040 besides agricultural income of Rs. 5,25,480. As appears from record, survey operations u/s 133A were conducted in case of assessee, his wife Smt. G. Rama Devi, Shri G. Simha Rao, Shri G. Mahendra Rao and Shri G. Sarvotham Rao on 09/03/10. During the survey operation, as stated by AO, assessee admitted that six acres of land situated at Maqta Mehoobpet village, Serilingampalli, RR District was sold to M/s 3 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others Marlas Developers Pvt. Ltd. for a consideration of Rs. 4.5 crore per acre by himself and other family members in the FYs 2007-08 and 2008-09. AO on examining the agreement of sale-cum-irrevocable power of attorney executed by assessee and other family members, noted that assessee and other family members have entered into the following sale transactions:
Date of Deed No. Name of the seller Extent/ Sale transaction Survey No. Consideratio n (in Rs.) 21/01/2008 381/2008 Sri G. 1 acre.02 4,72,50,000 Raghavender Rao guntas S.No. 73 & 91 21/01/2008 382/2008 Smt. G. Rama 0.19 guntas 2,13,75,000 Devi S.No. 76 21/01/2008 594/2008 Sri G. Simha Rao0.16 ½ 1,85,62,500 guntas, 88AA, 112/1, 88/AA 21/01/2008 383/2008 Sri G. Mahender 0.30 guntas, 3,37,50,000 Rao 87 & 89 21/01/2008 380/2008 Sri G. Sarvotham 0.24 guntas, 2,70,00,000 Rao 89 & 90 31/07/2008 6017/2008 Sri G. 1 acre.24 7,14,37,500 Raghavender Rao guntas, S.No. 83 & 84, 91, 94, 95 & 110 31/07/2008 6020/2008 Smt. G. Rama 0.176 1,91,25,000 Devi guntas, S.No. 78 31/07/2008 6018/2008 Sri G. Simha Rao 0.14 acres, 45,00,000 S.No. 82 31/07/2008 6019/2008 Sri G. Mahender 0.13 guntas, 1,46,25,000 Rao S.No. 72 31/07/2008 6021/2008 Sri G. Sarvotham 0.14 guntas, 1,91,25,000 Rao S. No. 79 4 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others The AO observed that as the lands are located in close proximity to nearest municipality, they cannot be treated as agricultural land as defined u/s 2(14) of the IT Act. Further, the AO observed that during the assessment proceeding, assessee has stated that part of the transactions entered into through agreement to sale-cum-GPA with M/s Marlas Developers Pvt. Ltd. was subsequently cancelled as per cancellation deeds dated 20/04/10 because that part of the transaction did not materialize. The AO, however, observed that the transaction in fact has taken place in terms with the agreement of sale-cum-GPA and there is transfer of capital asset within the meaning of section 2(47) as possession over land also passed during the previous year relevant to AY under consideration. AO observed that as all ingredients of transfer as defined in section 2(47) as well as section 45 are satisfied capital gain has accrued in the AY 2009-10. Further, AO observed that assessee tried to change the entire character of transaction by entering into cancellation of agreement of sale-cum-GPA just after survey operation to avoid payment of tax arising from the sale of lands. AO observed that out of the consideration received from the sale of aforesaid capital asset, assessee has invested in the construction of a commercial building at Kukatpalli given on lease to an educational institution as well as other properties being lands and building etc. He further observed that investments were also made by assessee and others in the group in sister concerns of M/s Marlas Developers Pvt Ltd. in the form of share application money, AO relying upon a decision of AAR in case of Jasbeer Singh Sarkaria held that when the entire sale consideration was paid by way of cheque as noted in the agreement of sale-cum-
GPA and when the possession has also been handed over the transfer is complete in all respects. Accordingly, AO proceeded to compute the capital gain from sale of land at Rs. 7,14,37,500. Being aggrieved of the addition made by AO, assessee preferred appeal before CIT(A).
5ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
4. In course of hearing of appeal, assessee submitted that as per the agreement of sale-cum-GPA dated 31/07/08 with M/s Marlas Developers P. Ltd. (MDPL) the proposal was for sale of land admeasuring acres 1.235 guntas in survey Nos. 83/AA, 84, 91, 94, 95 and 110 at Maqta Mehboobpet Village for a consideration of Rs. 7,14,37,500. It was submitted that as differences cropped up between the assessee and MDPL due to the fact that MDPL failed to pay the agreed consideration of Rs. 7,14,37,500 though, mentioned in the agreement of sale-cum-GPA, assessee did not handover the possession of land to MDPL and because of the continuing dispute ultimately agreement of sale-cum-GPA was cancelled vide registered cancellation deed dated 20/04/10. Referring to the cancellation deed, it was submitted by assessee that the said cancellation deed clearly mentioned that the consideration of Rs. 7,14,37,500 was never paid by the purchaser and the seller did not deliver the possession of land. Thus, it was submitted that as neither consideration has passed between assessee and MDPL nor assessee has delivered the physical possession of land there is no transfer of land during the year. Further, it was submitted that as agreement of sale-cum-GPA was ultimately cancelled vide cancellation deed dated 20/04/10, the position was restored back as it stood prior to entering into agreement of sale-cum-GPA and assessee's ownership over the land remain unaffected for all purposes. In this context, assessee also submitted an encumbrance certificate dated 14/12/11 obtained from SRO showing assessee as owner of the property. Referring to section 54 of TP Act, assessee submitted that transfer can only take place when there is money consideration. It was submitted that although money consideration was mentioned in the agreement of sale-cum- GPA dated 31/07/08 but actually no consideration passed between the parties as the cheque for Rs. 7,14,37,500 mentioned in agreement of sale-cum-GPA neither was paid nor realized as the same was never presented in the bank even after lapse of nearly two years. In 6 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others this context, assessee submitted a confirmation letter dated 06/09/12 of MDPL confirming that the cheque was not honored by them. It was submitted that even though all these facts were brought to the notice of AO, however, AO without taking cognizance of them, has arbitrarily concluded that there is sale of land by assessee to MDPL. Assessee submitted that as per the evidences available on record since no transfer took place by way of sale, no charge can be created u/s 45. Assessee analyzing the difference between sale and agreement to sale submitted that the transaction entered into by assessee by way of agreement of sale-cum-GPA has ultimately not been converted to sale so as to constitute transfer. Further cancellation of agreement of sale also puts an end to the agreement of sale. So far as the observation of AO that assessee has invested in construction of commercial building and other assets out of the sale consideration received it was submitted by assessee that such investments were out of the sale proceeds of land in AY 2008-09. Thus, in sum and substance assessee submitted that none of the ingredients of transfer as envisaged u/s 2(47) having been satisfied no capital gain accrues to assessee.
5. The CIT(A) after considering the submissions of assessee, vis- à-vis the facts and materials on record, noted that though assessee had entered into agreement of sale-cum-GPA for sale of land to the extent of acre 1.235 guntas to MDPL for a consideration of Rs. 7,14,37,500, but, ultimately the said agreement of sale-cum-GPA was cancelled vide registration cancellation deed dated 20/04/10. CIT(A) noted that AO brought the entire sale consideration of Rs. 7,14,37,500 as capital gain by inferring that transaction of sale was complete by virtue of agreement of sale-cum-GPA 31/07/08 notwithstanding the fact, the agreement of sale-cum-GPA was followed by a cancellation deed and the proof that the sale consideration mentioned in the agreement of sale-cum-GPA was not 7 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others realized. Further, CIT(A) observed that though AO wanted to put the said transaction through the matrix of provisions of section 2(47) by applying the doctrine of part performance holding that the transaction was complete vide agreement of sale-cum-GPA dated 31/07/08 with the possession given to the vendee on receipt of sale consideration, however, such fact was not conclusively proved by AO. CIT(A) noted that the presumptions of AO was rebutted by assessee by bringing evidence on record to indicate that neither possession over the land was delivered to vendee nor the sale consideration alleged to have been paid through cheque was encashed by assessee. Thus on consideration of the aforesaid fact, learned CIT(A) concluded that as there is no transfer of capital asset under the agreement of sale-cum- GPA dated 31/07/08 there is no scope for charging capital based on such agreement. Accordingly, he deleted the addition of Rs. 7,14,37,500.
6. The learned DR relying upon the reasoning of AO submitted that assessee having entered into an agreement of sale-cum- irrevocable power of attorney for sale of land to the extent of acre 1.235 to MDPL during the PY relevant to AY under consideration against consideration received, as mentioned in the said agreement, there is a transfer of capital asset within the meaning of section 2(47) resulting in capital gain. Learned DR submitted that the subsequent deed of cancellation after the survey operation is only an afterthought to escape from capital gains tax.
7. The learned AR, on the other hand, strongly supporting the conclusions drawn by CIT(A) submitted that none of the ingredients of sale having been fulfilled there cannot be a transfer u/s 2(47) of the Act. Learned AR submitted that simply entering into an agreement of sale-cum-GPA does not result in transfer of capital asset until the agreement of sale-cum-GPA culminates in a sale deed. It was 8 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others submitted that in the present case since there is no sale deed executed between the parties transferring the land in question no capital gain arises. Learned AR submitted that further since there is no delivery of possession of the property to the vendee nor any consideration received by assessee towards sale of property there cannot be any transfer u/s 54 of the TP Act.
8. We have considered the submissions of the parties, perused the orders of revenue authorities and other materials on record. It is clear from the Assessment order that AO has come to a conclusion that there is transfer of capital asset i.e. land admeasuring acre 1.235 guntas by assessee to MDPL by solely relying upon the agreement of sale-cum-GPA dated 31/07/08. However, from the facts and materials on record, it becomes absolutely clear that though assessee had entered into agreement of sale-cum-GPA but it never received the consideration of Rs. 7,14,37,500 as mentioned in the agreement of sale-cum-GPA. Nothing has been brought on record by AO during the assessment proceeding or even by the learned DR before us to controvert the fact that the cheque No. 600873 dated 31/07/08 of HDFC Bank, Banjara Hills as mentioned in the agreement of sale- cum-GPA was never handed over to assessee nor encashed by assessee. There is also no evidence brought on record by AO to prove that the aforesaid sale consideration was paid by the MPDL to assessee through any other mode. Further, on a perusal of the agreement of sale-cum-GPA dated 31/07/08, a copy of which is placed at page 29 of the assessee's paper book and more particularly clause 3.1 of the said document, clearly brings out the fact that until registration of a regular sale deed in favour of vendee, the vendor shall take care of the outgoings of the scheduled property by way of property tax, ground rent, land revenue, etc., this clearly shows that until registration of sale deed the vendor will be in possession of the property. Further, clause 4.1 of agreement of sale-cum-GPA provides 9 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others that the vendor shall execute registered sale deed or any other deed of conveyance in favour of vendee conveying the right title and interest in respect of the scheduled property. Further, reading of the agreement of sale-cum-GPA as a whole, nowhere indicates that the possession of the property was handed over to the vendee i.e. MPDL. Therefore, when two of the most important ingredients of sale/ transfer viz., receipt of sale consideration and delivery of possession are missing, there cannot be a transfer of capital asset either under the TP Act or under section 2(47) of the IT Act. Further, as would be evident from facts on record the vendor and vendee through a registered agreement dated 20/04/10 have agreed to cancel the agreement of sale-cum-GPA dated 31/07/08. Therefore, when the existence of agreement of sale-cum-GPA dated 31/07/08 have been obliterated by the parties through the cancellation deed dated 20/04/10, which is also a registered document, it cannot be said that there is transfer of capital in terms with the agreement of sale-cum- GPA dated 31/07/08. Entering into an agreement of sale-cum-GPA by itself will not result in sale/transfer unless and until a registered sale deed is executed and there is passing of consideration between the parties as well as delivery of possession of the property to the vendee. By entering into agreement of sale the vendee only acquires a right to sue the vendor for specific performance. However, in the present case, since the vendor as well as vendee have agreed to cancel the agreement of sale-cum-GPA by entering into a registered cancellation deed even that situation does not arise. Further, it would be evident from record that there is no other documentary evidence brought on record which could conclusively prove that the property in question stands transferred to the vendee during the relevant PY. On the contrary, as noted by learned CIT(A) assessee has produced a encumbrance certificate from SRO, which clearly indicates that assessee is owner of property. In these circumstances, the inference drawn by AO that assessee has sold the property resulting in capital 10 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others gain cannot be upheld. Accordingly, we uphold the order of learned CIT(A) on this issue. It will be pertinent to mention here that though in one of the grounds the department has raised the issue of consideration of fresh evidence in violation of rule 46A by CIT(A) but at the time of hearing neither the learned DR made any substantive argument on this issue or brought to our notice the exact nature of evidences considered by CIT(A) in violation of rule 46A. In these circumstances, the claim of the department that CIT(A) has considered fresh evidence in violation of rule 46A cannot be entertained. Accordingly, ground 2 to 5 are dismissed.
9. The next issue as raised in Ground No. 6 is in respect of deletion of addition made on account of capital gain on sale of land at Kistareddypet.
10. Briefly the facts are, during the assessment proceeding on the basis of information available on record, AO found that during the relevant PY assessee has sold land admeasuring acre 1.35 guntas in survey Nos. 51,38 & 354 at Kistareddypet village but has not shown capital gain by claiming it as agricultural land. AO by observing that assessee has not furnished any evidence with regard to distance from the municipality as well as cost of acquisition treated the entire sale consideration of Rs. 20,16,400 as capital gain of the assessee. Being aggrieved of such addition made on account of capital gain, assessee preferred appeal before the CIT(A).
11. In course of hearing of appeal before the first appellate authority, it was submitted by assessee that the said land at Kistareddypet Village was acquired by the outer ring road authorities under the Land Acquisition Act and compensation of Rs. 20.16,400 was paid to assessee vide cheque No. 3645573 dated 07/05/08. It was submitted by assessee that not only the land was classified as an 11 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others agricultural land in the records maintained by the State Govt. but assessee was also carrying on agricultural operation therein. Further it was submitted by assessee that the land acquired by the State Govt. was also beyond eight kilometers from the limits of nearest municipality notified by the central govt. In this context, it was submitted by assessee that Patancheru Mandal where the lands were situated became part of Greater Hyderabad Municipal Corporation (GHMC) vide notification dated 16/04/2007. Prior to that Patancheru was an independent municipality but not notified by the central govt. Further, by the time government issued notification dated 18/12/2006 acquiring the land Patancheru Mandal was not part of GHMC. It was submitted that though Kistareddypet Panchayat was located outside the municipal limit even assuming that it is part of Patancheru municipality, it cannot be treated as capital asset as it is not a notified municipality by the central govt. The nearest notified municipality being HMC and the distance between HMC and Kistareddypet Village being more than eight kilometers, agricultural land sold by assessee cannot be considered as capital asset u/s 2(14) of the Act. The CIT(A) after considering the submissions of assessee vis-a-vis the facts on record, observed that in the certificate issued by the land acquisition officer while acquiring the land of the assessee it was classified as agricultural land and for that reason also separate rate of compensation was awarded to assessee. Further, the learned CIT(A) found that the land is situated in Patancheru Mandal but not in patancheru municipality which became part of GHMC w.e.f. 16/04/2007. However, it was observed by CIT(A) neither Patancheru Municipality nor newly formed GHMC are notified by CBDT. Therefore, even assuming that the lands were falling within erstwhile Patancheru municipality it cannot be treated as capital asset as it is not within eight kilometers of a municipality notified by central govt. The CIT(A) noted that even otherwise also the merger of Kistareddypet Village with GHMC became effective from 16/04/2007 12 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others whereas notification for acquisition of land was issued on 18/12/2006. Hence, under any circumstances, the land in question cannot be considered to be coming under the category of capital assets as not only because they are classified as agricultural land and also it is situated beyond eight kilometers from a notified municipality. So far as carrying on of agricultural operation on the said land is concerned, learned CIT(A) observed that not only the certificate issued by the land acquisition officer classify the land as agricultural land but the assessee was actually carrying on agricultural operation on such land which is evident from the agricultural income shown by assessee. Accordingly, CIT(A) held that there will be no capital gain on transfer of such land as it is not a capital asset. Being aggrieved of the aforesaid finding of CIT(A), the Department is in appeal before us.
12. We have considered rival contentions and perused the orders of the revenue authorities as well as other materials on record. As can be seen from the assessment order, AO has rejected assessee's claim of exemption from capital gain on sale of land by simply observing that assessee has not brought any evidence to show that the land is situated beyond eight kilometers from the limit of nearest municipality. Whereas, CIT(A) has given a categorical finding that not only the land is classified as agricultural land but it is beyond eight kilometers from the limits of nearest notified municipality. In this context, the learned CIT(A) has observed that the land which is situated in Patancheru Mandal is outside the limits of Patancheru municipality which is also not a notified municipality. Further, though Patancheru municipality became part of GHMC vide notification dated 16/04/2007 but the subject land was acquired prior to that date and even GHMC was not a notified municipality. However, on perusal of GOM No. 14 dated 18/12/2006 it is not clear whether land of assessee was actually acquired on that date or subsequently.
13ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others Reading clause IV and V of para 10 of the aforesaid GOM gives an impression that land was not acquired on 18/12/2006. Nothing has been brought on record to indicate the actual date of acquisition of land. In case land was acquired after 16/04/2007 i.e. formation of GHMC, then, CIT(A)'s finding to the effect that acquisition of land was prior to GHMC will become erroneous. Further, actual date of acquisition assumes importance considering the fact that assessee himself has shown the income in the impugned assessment year. Further, no material has been brought either by the assessee or by the department to indicate the exact distance of land from the limits of a nearest notified municipality. W ithout ascertaining these facts it cannot be decided whether the land acquired is a capital asset as defined u/s 2(14) of the Act. As necessary facts for deciding the issue has not been brought on record, we consider it appropriate to remit this to the file of the AO for deciding afresh after affording a reasonable opportunity of being heard to the assessee. Before parting we need to mention, as per section 2(47)(iii) compulsory acquisition is one of the mode of transfer. Therefore, if the subject land was acquired prior to formation of GHMC or if on verification it is found that land is classified as an agricultural land and is situated beyond eight kilometers of notified municipality on the date of transfer, it cannot be considered as a capital asset so as to attract capital gain.
13. In the result, appeal in ITA No. 431/Hyd/13 is partly allowed for statistical purposes.
ITA No. 433/H/13 in case of Smt G. Rama Devi for AY 2009-10ITA No. 434 & 435/H/13 in case of Shri G. Simha Rao for AY 2008-09 and 2009-10 ITA No. 437/H/13 in case of Shri G. Sarvotham Rao for AY 2009-10 ITA No. 439/H/13 in case of Sri G. Mahendra Rao for AY 2009-10 14 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
14. Two issues arise out of the grounds raised by the department in the aforesaid appeals. The first issue is in respect of assessment of capital gain on sale of land at Maqta Mehaboobpet made by AO but deleted by CIT(A) and second issue is in respect of assessment of capital gain on sale of land at Kistareddypet made by AO but deleted by CIT(A).
15. These issues are materially identical to the issues raised in ITA No. 431/Hyd/13 in case of Shri G. Raghavendra Rao. Therefore, following the conclusions drawn in that appeal vide para No. 8 in ITA No. 431/H/13 (supra), the issue in respect of assessment of capital gain on sale of land at Maqta Mehaboobpet raised by department, is dismissed by upholding the orders of CIT(A) in all the appeals of the revenue. Similarly, the issue in respect of deletion of addition made on account of capital gain on sale of land at Kistareddypet is concerned, following the conclusions drawn in ITA No. 431/Hyd/13 vide para No. 12, we restore it back to the AO for deciding in accordance with our direction therein.
16. In the result, appeals by the department in ITA Nos. 433, 434, 435, 437 & 439/H/13 are partly allowed for statistical purposes.
ITA No. 432/Hyd/13 by the department in case of Smt. G. Rama Devi17. The department has raised four grounds. Ground No. 1 & 4 being general in nature are not required to be adjudicated.
18. Ground No. 2 with its sub-grounds are in respect of allowance of assessee's claim u/s 54F by the learned CIT(A).
19. Briefly the facts are, assessee is an individual. For the AY under consideration assessee filed her return of income 0n 07/05/10 15 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others declaring income of Rs. 33,30,970 besides agricultural income of Rs. 4,91,260. During the assessment proceeding, AO noticed that during the relevant PY assessee has sold land admeasuring 0.19 guntas in survey no. 76 situated at Maqta Mehoob pet Village, Serilingampalli, RR Dist. to M/s Marlas Developers Pvt. Ltd. (MDPL) for a consideration of Rs. 2,13,75,000 under registered sale deed no. 382/2008 dated 21/01/2008. However, in the computation of income filed along with return of income, assessee admitted capital gain of Rs. 33,30,970 after claiming exemption of an amount of Rs. 1,73,01,173 u/s 54F. When the AO called upon assessee to substantiate her claim u/s 54F, assessee stated that she has invested the amount of Rs. 1,73,01,173 in construction of a residential building at plot No. 312 and 313, VV Nagar, Kukatpalli. In support of such claim, assessee submitted a report from a registered valuer and copy of the municipal assessment/notice demanding Rs. 17,300 towards arrear and current tax. AO observed that though assessee had stated that the construction of new residential house was made between March 2007 to June 2008, but, the assessee has not provided any other information to substantiate such claim. It was noted by AO that the original asset was sold by assessee on 21/01/08 and the sale consideration was received by assessee through two cheques of HDFC Bank, Banjara Hills both dated 18/01/08 for Rs. 1,00,00,000 and Rs. 1,13,75,000. AO further observed that from the account maintained by assessee in Dhanlaxmi Bank it was found that the cheque of Rs. 1,13,75,000 was encashed on 28/02/08 whereas no details with regard to encashment of other cheque was not furnished by assessee. From the aforesaid fact, AO concluded that assessee has not utilized the sale consideration of the original asset for construction of the new asset. Accordingly, he concluded that assessee is not entitled for exemption u/s 54F of the Act. Being aggrieved of the rejection of claim u/s 54F assessee preferred appeal before CIT(A).
16ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
20. Before the CIT(A), assessee challenging the finding of AO on the following issues:
"a) The AO did not deny that the construction period of building was between March, 2007 and June, 2008
b) The AO did not reject the claim of investment of Rs. 1,75,00,000
c) The AO did not deny the sale of land and receipt of sale consideration in January, 2008.
d) The AO did not prove that the investments made are exclusively out of other funds.
e) The AO did not deny the investments in house property which is supported by an approved valuers report
f) As held by various judicial decisions, it is not a relevant factor whether the assessee utilizes the sale proceeds or other own funds for construction of house property, for the purpose of claiming deduction u/s 54F of IT Act."
21. The CIT(A) after considering the submissions of assessee and examining the materials on record found that the investment in construction of new asset as per the valuation report was made by assessee during the period March 2007 to June 2008. Further, the bank account of assessee indicates that the amount available from sale consideration deposited therein was utilized by assessee in construction of new asset. Therefore, the observation by the AO that investments in new house was made before the sale of original asset is merely on presumption without having any basis. It was also observed by learned CIT(A) that even the municipal receipt relied upon by AO relate to the old structure standing on the existing plot which was subsequently demolished by assessee before starting construction of new house. The CIT(A) therefore held, as the assessee has invested the gain from the sale of original asset in construction of a new residential house within the prescribed time limit, assessee will be eligible for claim u/s 54F. However, CIT(A) noted that as per the valuation report of the registered valuer, the cost of construction is Rs. 1,62,28,600. He, therefore, directed the AO to restrict the claim u/s 54F to Rs. 1,62,28,600.
17ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
22. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. On a perusal of the assessment order, it is apparent that AO has denied claim of exemption u/s 54F for two reasons i.e., construction of the new property was prior to the date of sale of original asset and secondly, the sale consideration received by assessee was not utilized for construction of the new asset. From the aforesaid finding of the AO, it is clear that he has no dispute with regard to the nature of the new asset i.e. a residential house. Now reverting back to the observations made by AO, as can be seen from the facts and materials on record, assessee has not only claimed that the construction of the new residential house was started in March 2007 and continued up to June 2008 but has also submitted a report from registered valuer in support of such claim. The bank statement also indicate the fact that not only the sale consideration of the original asset was deposited in bank account but there are substantial withdrawals from the bank account thereafter which gives credence to the assessee's claim that the sale consideration was utilized for construction of the new asset. Further, there is no dispute to the fact that the assessee has invested in construction of the new asset within the time limit prescribed u/s 54F of the Act. Therefore, in absence of any evidence brought on record by AO to contradict assessee's claim of investment in construction of new house by utilizing the sale proceeds of the original asset the addition made on the basis of presumptions and surmises cannot be sustained. In our view, for the aforesaid reasons the CIT(A) was justified in allowing the claim of assessee u/s 54F. Ground raised by the department is dismissed.
23. The next issue as raised in Ground No. 3 is in respect of allowance of cost of acquisition claimed by assessee at Rs. 2,42,853 by the CIT(A).
18ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
24. During the assessment proceeding, AO noticed that assessee while computing capital gain has reduced an amount of Rs. 2,42,853 towards cost of acquisition. AO however disallowed the claim of assessee by observing that assessee has not furnished proof of cost of acquisition of the asset sold. CIT(A), however, allowed assessee's claim having verified the sale deed and found that assessee has incurred the expenses of Rs. 2,42,853.
25. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as material on record. As can be seen from the finding of the CIT(A) in para 6.3 of his order, on verifying the sale deed he found that assessee has incurred expenses of Rs. 2,42,853 towards cost of acquisition of property in the year 2004. That being the case, the finding of CIT(A) cannot be disturbed. The claim of the department that the CIT(A) has allowed the benefit by considering information which was not filed before the AO is devoid of merit. When there is documentary evidence which clearly establish the claim of assessee the CIT(A) was justified in allowing such claim on the basis of material on record. The ground raised is therefore dismissed.
26. In the result, appeal in ITA No. 432/H/13 is dismissed.
ITA No. 436/H/13 by the revenue in case of Shri G. Sarvotham Rao27. Department has raised six grounds. Ground No. 1 & 6 are general grounds, hence, not required to be adjudicated.
28. Ground No. 2 to 4 relates to the common issue of acceptance of assessee's claim of exemption u/s 54F by the CIT(A).
19ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
29. Briefly the facts are, during the assessment proceeding, AO noticed that while computing capital gain arising out of sale of land at Mqta Mehboobpet village for a total consideration of Rs. 2,70,00,000, assessee has claimed deduction of Rs. 98,83,399 u/s 54F of the Act, towards investment in construction of the property at plot No. 161 & 162, Kukatpally along with his brother. AO while completing assessment however disallowed the claim of exemption u/s 54F for the following reasons:
"a. The property where the reinvestment of capital gains was made, cannot be considered as residential property since the same has been put to use for the purpose of other than residential i.e. as hostel accommodation, as such the property so constructed is not falling under category of the property termed as 'residential' in common usage.
b. Assessee failed to furnish any supporting evidence on municipal assessment, showing it as residential property, in fact such property was not assessed to property tax, even as per the information in the FY 2008-09.
c. Assessee failed to furnish the information to show whether he owned any other residential property at the time of transfer of property and fulfillment of other conditions as regard to the claim of deduction u/s 54F.
d. With the property of the dimensions of the order of 23000 sft. had been let out to a college, the assessee has constructed building with an intent to put to use the same in commercial way.
e. Relevant evidence/information, on the time period of completion of construction of property not provded."
30. Being aggrieved of disallowance of claim of exemption u/s 54F, assessee preferred appeal before the CIT(A).
31. Before the CIT(A), assessee contesting the findings of AO submitted that the term 'residential house' is not defined in the Act. Hence, it is to be understood, in the parlance of common usage. It was submitted generally a dwelling unit is a place where a person can stay and carry on his day today activities like sleeping, cooking, dining etc. It was submitted that the property in question/investment in which claimed as deduction u/s 54F is a residential house let out to 20 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others Narayana Junior College for use as a hostel where activities like sleeping, cooking etc. is carried out. It was submitted that a commercial space would not have normal facilities for sleeping, cooking, dining etc. and cannot be used as a dwelling unit. It was submitted by the assessee that for claiming exemption u/s 54F, the two conditions which are required to be fulfilled are, 1) the building must be a residential one not only at the time of construction but also subsequent to the construction. 2) It is not at all necessary to what use ultimately the building is put to till the nature and character of the building remains as residential. It was submitted that if the building is constructed as a residential unit, subsequent use of the building for non-residential purposes would not disentitle the assessee from claiming deduction u/s 54F. In this context, assessee relied upon a decision of Delhi Bench in case of Mahavir Prasad Gupta Vs. JCIT, ITA No. 1822/Del/01. With regard to AO's observation that assessee could not produce proof for municipal assessment of property as a residential house, it was submitted that as the assessee has not obtained any such certificate from municipal authority, the same could not be produced before the AO. However, that itself, would not be a criteria for determining the claim u/s 54F. So far as the observation of the AO that the size of the structure and dimensions of the building would not make it a residential building, assessee submitted that size of structures will have no impact on the issue whether a property is residential or commercial. As long as the structure is used as dwelling unit size and dimensions will have no impact on the nature of building. Responding to the allegation made by AO that relevant information with regard to date of commencement and completion of building and investment account was not furnished, assessee submitted that as no regular books of account were maintained, assessee could not furnish the details. However, assessee got the property valued through an approved valuer wherein details of cost and period of construction has been mentioned. So far as source of 21 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others investment is concerned, it was submitted that AO never suspected the genuineness and adequacy of source for investment, hence, it will not have a vital role in deciding assessee's eligibility u/s 54F. So far as AO's allegation regarding lack of information on possession of other residential house at the time of transfer of the capital asset, it was submitted as the relevant information could not be furnished at the time of assessment proceeding, it is being produced before the first appellate authority. Further, assessee submitted that the residential building is constructed on a land admeasuring 598 sq.yds. having four floors and pent house which has been valued by the approved valuer at Rs. 1,70,41,001 and out of the total investment, assessee has invested Rs. 1 crore and balance investment was made by his brother Mr. Mahendra Rao.
32. CIT(A) after considering the submissions of the assessee in the context of facts and materials on record observed that as "residential house" has not been defined under the Income-tax Act, the nature of the property has to be decided as per the use of the property. CIT(A) observed that as the building was used for a hostel of a college as dwelling unit for students, it can be considered as a residential property, but, certainly cannot be a commercial property. CIT(A) observed that as the property in question can neither be considered as a residential property or a commercial property as per the records of the municipal authorities, since no permissions were obtained by assessee, the test for treating the same as residential property can be decided by its usage alone. Therefore, it was observed by CIT(A) that as the property is used as dwelling unit for students, it may be termed as residential house since a commercial property may not have the characteristics of a dwelling unit having provisions such as kitchen, dining, sleeping facilities etc. The CIT(A) on an analysis of the provision contained u/s 54F, observed that the admissibility of benefit u/s 54F would depend upon the factual aspect as to whether 22 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others the new asset can be considered as a residential house. The CIT(A) observed that the building constructed by assessee has four floors with a pent house and each of the floor comprised of living rooms, provision for cots to the students along with provisions for dining, bathing, etc. which are the normal facilities required for a residential building whereas a commercial building will not have all these facilities. Relying upon decision of ITAT as referred to in para 7.5 of his order, CIT(A) inferred that the actual use of the building by assessee may be a determining factor to decide whether a building is a residential unit or not. CIT(A) observed that only because the building is used as hostel by some educational institute benefit u/s 54F cannot be denied to assessee solely on that ground. Further, it was observed that if the building as per its design and construction is made and if it is capable of being put to use as residential unit or dwelling unit by the owner or tenant it can be considered as a residential unit. CIT(A) opined that as section 54F has been enacted for giving incentive for development of the housing industry it requires liberal interpretation. On the basis of the aforesaid facts, CIT(A) ultimately concluded that the building constructed by assessee being used as a dwelling unit even though it may not have constructed as residential house as per the norms of the municipal authorities it cannot be considered as a commercial property and as such it has to be treated as residential property for the purpose of claiming deduction u/s 54F. Having held so, CIT observed that though assessee has claimed deduction of Rs. 98,83,299, however, the property being a joint property with equal share between the two brothers and the value of the property having been determined by the approved valuer at Rs. 1,70,41,000, assessee would be entitled for deduction of an amount of Rs. 85,20,500 u/s 54F.
33. The learned DR submitted before us that there is no dispute to the fact that the entire building has been let out to an educational 23 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others institution to be used as a hostel. Hence, it cannot be considered as a residential unit as it is not only constructed for a commercial purpose of being used as a hostel but actually it is used as a hostel of a educational institution. Therefore, it cannot be considered as a residential house and consequentially benefit u/s 54F cannot be granted. It was submitted by the learned DR that if CIT(A)'s logic that a building having facility for sleeping, dining and cooking can be considered as a residential house is accepted, then, every hotel/resorts can also be termed as residential house as they provide such facilities.
34. Learned AR, on the other hand, strongly supporting the finding of CIT(A) submitted that the assessee has constructed the building as a dwelling unit with all the facilities of being used as such. Further, as the building is used as a hostel for students having facility for cooking, dining, sleeping etc., it is nothing but a residential house as a commercial property will not have all these facilities. It was, therefore, submitted that the CIT(A) was justified in allowing assessee's claim u/s 54F. In support of such contention, learned AR relied upon a decision in case of Dr. J.V. Desai Vs. CIT, [1985] 154 ITR 828 (A.P.).
35. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other material on record. While the AO has rejected assessee's claim u/s 54F for the reason that the building having been let out to an educational institution for use as a students hostel, hence, is a commercial property. CIT(A) has observed that as the building is used as a dwelling unit for students and is having facilities for sleeping, cooking, dining etc., it is a residential house and as such assessee is entitled for deduction u/s 54F. In our view, neither AO nor CIT(A) have examined the primary facts before coming to their conclusion.
24ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others AO was not justified in rejecting assessee's claim by simply observing that as the building is used as a hostel it is commercial property. Only because the property is let out to a educational institution for being used as a students hostel that by itself will not be a reason to hold that it is not a residential building. Similarly, the finding of CIT(A) is also conflicting and contradictory. While in one breath, learned CIT(A) observes that dual test for use of the property at the time of construction as well as subsequent period cannot be applied, however, in the same breath he observes that as the property can neither be taken as residential or commercial user test has to be applied. In our view, the nature of a property whether residential or commercial cannot be determined by solely applying the user test. In many instances, a purely residential house is used for commercial purpose, like school, office, etc. However, for that reason alone the property cannot lose its character of a residential house. Further, it is not understood how such a big building having four floors and pent house could be constructed without an approved plan and permission from the municipal authorities. No attempt has been made either by AO or by CIT(A) to ascertain the true nature of the property by examining the construction plan or approval given by municipal authorities, or through physical verification. In absence of these basic facts, the exact nature of property constructed and assessee's eligibility to section 54F cannot be decided conclusively on presumptions. In the aforesaid view of the matter, we are inclined to remit the issue back to the file of the AO for deciding afresh after conducting necessary enquiry. AO must afford reasonable opportunity to assessee to establish his claim by producing necessary evidence to show that the property constructed is a residential house. The ground raised is allowed for statistical purposes.
36. The next issue as raised in ground No. 5 is in respect of allowance of assessee's claim of exemption u/s 54B by the CIT(A).
25ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
37. Briefly the facts are while computing his income for the impugned assessment year, assessee claimed exemption u/s 54B of the Act in respect of gain arising from sale of agricultural land during the relevant PY. During the assessment proceeding, AO noticed that during the year assessee has sold certain assets in the nature of agricultural land and claimed exemption of the gain derived therefrom on the plea that he has invested the sale proceeds in purchase of agricultural land. AO rejected assessee's claim on the following reasons:
"ii) proof of agricultural activity was not furnished as defined u/s 2 of the IT Act, 1961.
iii) the details of payments and the investments routed to the respective bank a/c and the flow of the funds from the sale consideration to the application of the funds in the so called agricultural land. The date of sale is 21/01/2008 and the dates of acquisition of the new asset is shown as 06/08/2007 and 08/05/2008. The relevant proof was not also filed as discussed.
iv) Further, the said lands purchased by the assessee are proximate to the nearest municipality within urban limit.
Assessee challenged the aforesaid finding of AO in appeal before the CIT(A).
38. The CIT(A) after considering the submissions of the assessee vis-à-vis the facts and materials available on record, allowed assessee's claim with the following observations:
"8.3 Perused the submissions of the appellant alongwith the observations of the AO in the assessment order. As per the information brought on the record, the appellant invested the following amounts in agricultural lands, by purchasing the same:
Date of Document Amount of
Extent and location of land
consideration
1.30.11.2007 Acres 0.05 guntas at Kistareddypet Rs. 82,125/-
2.1.02.2008 Acre 0.17 guntas at Sultanpur Rs.6,98,165/-
3. 12.2.2008 Acre 0.15 guntas at Sultanpur Rs 4,10,825/-
26
ITA Nos. 431 to 439/Hyd/20 13 &
ITA Nos. 875 to 884/Hyd/20 13
Shri G. Ragh avend ra Rao an d others
Acre 0.12 quntas at Kistareddypet
4. 18.3.2008 Rs.1,98,100/-
5.7.5.2008 Acre 1.25 guntas at Sultanpur Rs. 17,75,575/ -
Total Rs.31,68,790/-
The documents associated with such transactions indicate that the same are dry lands and measured in terms of acres for stamp duty purpose, with the nature of the lands clearly indicated as agricultural lands. The certificate issued by therevenue authorities in this regard also clearly indicate that the agricultural activities are carried on such lands and the said lands are agricultural lands in nature. Further, agricultural income was shown to have raised on such lands which has been offered for Income-tax as per the return of income. Based on the facts and the supportive documents, it makes amply clear that the lands under reference are agricultural lands irrespective of the fact that the same are located within the proximity of municipality or urban limits. Further, as long as the purchases are supported by a valid document wherein the payment of sale consideration is indicated, it may not be relevant to refer to the source of such acquisition as observed by the AO. Further, as contended by the appellant this questions were never raised during the assessment proceedings as such the said ground cannot be considered as a ground for making the disallowance under section 54B. Regarding the reasons for not considering the lands as . agricultural lands by virtue of their location in the proximity of municipality or urban limits the argument of the appellant was that what is required to be considered is the nature of the lands and their usage but not the proximity to the municipality or the urban area and this argument of the appellant appears reasonable and supported by the judicial decisions as relied upon by the appellant (supra) in this regard. It is also relevant to mention that such lands were already certified by the revenue authorities as agricultural lands indicating further that agricultural activities were carried on such lands. Further, as per the ratios of the judicial decisions, the nature of the land is determined by the nature of usage and nature of activities carried on such land irrespective of their location. For the said reasons I have no hesitation in accepting the submissions of the appellant that the lands under reference are agricultural lands as supported by the facts of the case, as well as the judiciaI decisions. Further the acquisition of the lands were explained by the documents wherein the nature of the lands were clearly indicated and supported by the certificates issued by the revenue authorities. It is also a fact that the agricultural incomes raised on such lands were not disputed by the assessing officer except disbelieving the quantum of income raised on them. Under the circumstances, i am of the considered view that the lands under reference are qualified as agricultural lands and the. investment therein would entitle the assessee for claiming deduction u/s. 54B of the Income-tax Act. Accordingly, the AD is directed to allow the deduction claimed u/s. 548. This ground of appeal is 27 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others treated as allowed."
39. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. As can be seen from the facts on record, assessee derived gain from sale of agricultural land to the tune of Rs. 31,68,790 which was claimed as exempt having been invested in purchase of agricultural land. On a perusal of the finding of the CIT(A) extracted hereinabove, it is absolutely clear that the land purchased at Kistareddypet and Sultanpur Village in Patancheru Mandal are classified as agricultural land not only as per the registration deed, pattadar pass book, etc., but, has also been certified by revenue authorities as agricultural land. On careful reading of section 54B of the Act, it becomes clear that the only requirement for claiming deduction is the capital gain arising from transfer of agricultural land if is invested in purchase of any other land for being used for agricultural purposes, then, assessee would be eligible for deduction. In the facts of the present case, the documentary evidences submitted by assessee clearly prove that the land purchased are in the nature of agricultural land. Therefore, the intention of assessee in purchasing the land for being used for agricultural purposes is evident. There is no restriction u/s 54B regarding the proximity of the land to urban area. Only requirement as per section 54B is the land purchased is for the purpose of being used as agricultural land. As in case of the assessee, the aforesaid condition is satisfied, the assessee is eligible for claiming deduction u/s 54B of the Act. Even otherwise also department has not brought any material to show that land is estimated within the prescribed limits of any notified municipality. Therefore, we do not find any infirmity in the order of CIT(A) which is accordingly upheld. Ground raised by Department is dismissed.
28ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
40. In the result, appeal in ITA No. 436/H/13 is partly allowed for statistical purposes.
ITA No. 438/Hyd/2013 by the department in case of Shri G. MahenderRao
41. Department has raised six grounds. Ground No. 1 & 6 are general grounds, hence, not required to be adjudicated.
42. Ground No. 2 to 4 relates to the common issue of acceptance of assessee's claim of exemption u/s 54F by the CIT(A).
43. Similar issue has been decided by us in ITA No. 436/Hyd/13 vide paras 28 to 35 of this order (supra). As the issue under consideration is materially identical to the issue raised in ITA No. 436/Hyd/13, following our decision therein, we remit this issue to the file of AO for deciding afresh. This ground is allowed for statistical purposes.
44. The next issue as raised in ground No. 5 is in respect of allowance of assessee's claim of exemption u/s 54B by the CIT(A). As the issue is also materially identical to the issue raised in ITA No. 436/Hyd/13, following our decision vide para 39 (supra), this ground is dismissed.
45. In the result, appeal in ITA No. 438/H/13 is partly allowed for statistical purposes.
Now we will deal with assessees appeals in ITA Nos. 875 to 884/Hyd/2013.
46. The effective grounds raised by the assessees' which are common in all the appeals are as under:
29ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others "2. The Hon'ble CIT(A) ought not to have upheld the decision of the AO in treating part of agriculture income as income from other sources without bringing any material on record.
3. The Hon'ble CIT(A) ought to have observed that the action of the AO in treating part of agriculture income as income from other sources is erroneous in law and therefore the addition under the head income from other sources is liable to be deleted."
47. Briefly the facts are, in the return of income filed for the assessment years 2008-09 and 2009-10 assessees' disclosed certain agricultural income. During the assessment proceeding, AO after examining the claim of assessee, though, accepted the extent of agricultural land owned by assessee, but, he was of the view that assessee has shown the income from agriculture on the higher side. Accordingly, AO restricted the income from agriculture to Rs. 20,000 per acre and in this process while allowing part of the agricultural income shown by assessee treated the other part as 'income from other sources'. The CIT(A) also approved the view of the AO by sustaining the addition made towards 'income from other sources'.
48. The learned AR submitted before us that the AO neither disputed the extent of agricultural land owned by each of the assessees nor has disbelieved the earning of agricultural income. However, without any basis AO has restricted the agricultural income by applying the rate of Rs. 20,000 per acre. The learned AR submitted that from the preceding assessment years assessees are showing agricultural income from the agricultural activities, which is accepted by the department. Therefore, there is no reason to disallow part of the agricultural income in these assessment years.
49. The learned DR on the other hand relied on the orders of the revenue authorities.
30ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others
50. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. It is evident from record, the AO does not dispute the fact that assessees have substantial agricultural land holding. As per the details submitted before the revenue authorities and which is part of the record, agricultural land holding of the assessees are as under:
S.No. Name of the assessee Agricultural land holding
1. G. Raghavender Rao Acre 13 and 24 guntas 2008-09 2009-10 2 G. Simha Rao Acres 13 and 11 guntas 2008-09 2009-10
3. G. Rama Devi Acres 6 and 12 guntas 2008-09 2009-10
4. G. Mahender Rao Acres 11 and 33 guntas 2008-09 2009-10
5. G. Sarvotham Rao Acres 8 and 7 guntas 2008-09 2009-10 The agricultural income shown by the assessees from such land holding during the assessment years 2008-09 and 2009-10 are as under:
S.No. Name of the Agricultural income
assessee disclosed
1. G. Raghavender Rao 2008-09 - 5,04,580
2009-10 - 4,73,400
2 G. Simha Rao 2008-09 - 5,12,450
2009-10 - 5,78,400
3. G. Rama Devi 2008-09 - 4,91,260
2009-10 - 4,73,400
4. G. Mahender Rao 2008-09 - 4,21,300
2009-10 - 4,73,400
5. G. Sarvotham Rao 2008-09 - 3,41,200
2009-10 - 3,41,200
Further, it is also seen from record that in the preceding assessment years agricultural income shown by assessees are as under:31
ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others S.No. Name of Agriculture income disclosed for past assessee assessment years 2005-06 2006-07 2007-08 1 G. 3,85,800 - 4,92,300 Raghavender Rao
2. G. Simha Rao 3,55,650 4,23,900 4,76,000
3. G. Sarvotham - 2,34,650 2,86,400 Rao
4. G. Mahender 2,42,500 3,24,800 3,65,750 Rao
5. G. Rama Devi 2,07,600 3,53,500 4,23,540
51. There is also no dispute to the fact that the agricultural income shown by assessees in the preceding assessment years have been accepted by the department. On comparative analysis of the agricultural income shown in the preceding assessment years with the agricultural income shown in the impugned assessment years it appears there is no abnormal increase in the agricultural income shown by assessees. In the aforesaid facts and circumstances, agricultural income shown by assessees in the impugned assessment years cannot be considered to be high or unreasonable. Further, there is absolutely no basis for estimating the agricultural income at Rs. 20,000 per acre. AO has not given any reasons how he has adopted this figure. On the contrary, assessees have produced before the revenue authorities certificate from VRO certifying the agricultural income earned by them. In the aforesaid facts and circumstances, when the agricultural income disclosed by the assessees are commensurate with the extent of land holding and similar income declared in the preceding assessment years, the agricultural income shown by assessee has to be accepted, more so, when there is no basis shown by AO for restricting it to Rs. 20,000 per acre. We, therefore, direct the AO to accept the agricultural income shown by assessees in the respective assessment years vi.z., 2008-09 and 32 ITA Nos. 431 to 439/Hyd/20 13 & ITA Nos. 875 to 884/Hyd/20 13 Shri G. Ragh avend ra Rao an d others 2009-10 and delete the additions made under the head 'income from other sources'.
52. In the result, all the appeals filed by assessees are allowed.
53. To sum up departmental appeals in ITA Nos.431, 433, 434, 436, 437, 438 & 439/Hyd/2013 are partly allowed for statistical purposes and ITA No. 432/Hyd/2013 is dismissed. Assessees appeals in ITA Nos. 875 to 884/Hyd/2013 are allowed.
Pronounced in the open court on 24/09/2014.
Sd/- Sd/-
(B. RAMAKOTAIAH) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 24 th September, 2014
kv
Copy to:- 19 copies of Xerox to be taken
1.Shri G. Raghavendra Rao,
Hyderabad
2. Smt. G. Rama Devi, Hyderabad B. Narsing Rao & Co., CAs., Plot
3. Smt. G. Rama Devi, Hyderabad No. 554, Road No. 92, Jubilee
4. Shri G. Simha Rao, Hyderaba Hills, Hyderabad - 500 096
5. Shri G. Sarvotham Rao, Hyderaba
6. Shri G. Mahendra Rao, Hyderabad
7. ITO, Ward - 11 (3), Hyderabad
8. CIT(A)-VI, Hyderabad
9. CIT-V, Hyderabad
10. The Departmental Representative, I.T.A.T., Hyderabad.