Smt. S. Vijayalakshmi,, Hyderabad vs Assessee

Smt. S. Vijayalakshmi, vs. Asst. Commissioner of Income-

Hyderabad. tax, Central Circle - 6, PAN - AEYPV2614P Hyderabad.

(Appellant) (Respondent)

Assessee by : Shri A.V. Raghuram Revenue by : Smt. Pallavi Agarwal

Date of hearing 23-06-2015 Date of pronouncement 26-06-2015

O RDE R PER SAKTIJIT DEY:

This appeal of the assessee is directed against order dated 17/02/2013 of ld. CIT(A)-I, Hyderabad pertaining to AY 2008-09.

2. The only effective ground raised by the assessee is as follows:

"2. The CIT(A) erred in giving a finding that the land sold cannot be held to be agricultural land on incorrect presumption that the assessee's husband is in real estate business and surmises that the value paid by the purchaser does not justify the cost of agricultural land though they are not relevant factors to decide whether the land falls within the definition of section 2(14) agricultural land".

4. Briefly the facts relating to this issue in dispute are, assessee is an individual. A search and seizure operation u/s 132 of the Act was conducted in the residential premises of assessee on 22/02/2008. Pursuance to the search and seizure operation, notices u/s 153A were issued to assessee requiring her to submit return of income for AY 2003-04 to 2008-09. In response to the noticed issued u/s 53A, assessee filed her return of income on 17/08/2010 declaring total 2 ITA No. 774 /Hyd/2014 Smt. S. Vijayalakshmi

income of Rs. 1,64,530. In course of assessment proceeding, AO found that during search and seizure operation, department obtained information that assessee has purchased a land admeasuring 1.09 acres at Kuntlur Village, Hayatnagar Mandal in two tranches one land admeasuring 0.16 guntas from Sri T. Chandrasekhar for a consideration of Rs. 79,500 in the year 2003 and another land admeasuring 0.33 guntas from Sri V. Aravinda Reddy for a consideration of Rs. 9,90,000 in the year 2007. Thus, total consideration paid by assessee for the entire 1.09 acres of land was to the tune of Rs. 10,69,500. It was noticed that the entire land of 1.09 acre was sold by assessee during the PY relevant to AY under dispute to M/s Sri Andal Educational & Cultural Society represented by its Chairman Sri G. Rajender Reddy on a consideration of Rs. 24,50,000. When assessee was called upon to explain the reason for not showing capital gain, assessee stated that she will admit the same in her return of income and pay the capital gain tax. However, in the return filed for the impugned AY, since assessee did not declare any capital gain, AO proceeded to compute long and short term capital gains at Rs. 8,00,000 and Rs. 16,50,000 respectively and made addition of a total amount of Rs. 24,50,000. Being aggrieved of such addition, assessee preferred appeal before ld. CIT(A).

5. Before ld. CIT(A), it was submitted by assessee that the land sold being agricultural in nature and located beyond the prescribed limit of the nearest notified municipality, it cannot be treated as capital asset u/s 2(14), hence, not subject to capital gain. It was further submitted by assessee that without verifying the nature and character of land from the sale deeds and other documents submitted by assessee, AO could not have computed capital gain solely relying upon assessee's statement recorded at the time of search wherein she stated to disclose capital gain in the return of income. Ld. CIT(A), however, did not find merit in the submissions of assessee. She confirmed the view of AO in subjecting the transaction relating to sale 3 ITA No. 774 /Hyd/2014 Smt. S. Vijayalakshmi

of land by assessee to capital gain. However, accepting assessee's alternative claim, she directed AO to allow deduction on account of cost of acquisition and cost of improvement. Being aggrieved of the order of ld. CIT(A), assessee is before us.

6. Ld. AR strongly contesting the finding of ld. CIT(A) that assessee has not produced sale deeds to indicate the nature of land sold by assessee, submitted that not only information relating to sale of land was part of seized material but assessee in course of assessment proceeding also did submit copies of sale deeds which clearly indicate the nature and character of land as agricultural. Ld. AR submitted that at the relevant point of time when the land was sold, it was beyond the prescribed limit of the nearest notified municipality, hence, cannot be considered as capital asset in terms of section 2(14) as the nature of land is agricultural. Ld. AR submitted that during the relevant point of time, the village where the land was situated i.e. Kuntlur village at Hayatnagar Mandal was not merged with GHMC. Therefore, the nature and character of land being agricultural and location of the land being beyond the prescribed limit of the nearest notified municipality it is not a capital asset in terms of section 2(14). To demonstrate that at the relevant point of time when the land was sold it was not part of GHMC, ld. AR submitted certain govt. orders and also a certificate from Office of Director, Planning, HMDA, Ghatkesar Zone along with a petition supported by an affidavit praying for admission of the documents as additional evidence. The reasons for which evidences could not be submitted before AO and ld. CIT(A) was also mentioned in the affidavit. Thus, ld. AR requested for remitting the matter to AO for verifying assessee's claim and deciding the issue after examining the additional evidence produced by assessee.

7. Ld. DR objecting to submission of additional evidence by assessee at this stage of the proceeding, submitted that assessee having failed to submit additional evidence before AO and ld. CIT(A), 4 ITA No. 774 /Hyd/2014 Smt. S. Vijayalakshmi

cannot be allowed to submit the same at this stage. She further submitted that assessee having failed to establish the fact that land sold is agricultural land and situated beyond the prescribed limit of the nearest notified municipality, capital gain charged on sale of land is justified.

8. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other material on record. It is evident from the assessment order that only relying upon the statement of assessee recorded at the time of search operation wherein she stated that capital gain on sale of land will be shown in the return of income, AO has proceeded to compute capital gain on the entire amount of sale consideration received by assessee. From the assessment order, it is not forthcoming whether any enquiry was made with regard to nature and character of land sold. However, as it appears, before ld. CIT(A) assessee took a specific plea that the land sold being in the nature of agricultural land situated beyond the prescribed limit of the nearest notified municipality is not subject to capital gain as it cannot be treated as capital asset as per section 2(14). To demonstrate this fact assessee has submitted certain documentary evidence by way of additional evidence before this forum and had prayed for considering the same. After perusing the additional evidences submitted before us, we are of the view that they are required to be taken on record as they are germane and vital for deciding the claim of the assessee that land sold being agricultural land and situated beyond the prescribed limit of the nearest notified municipality is not a capital asset. However, since these evidences were not submitted either before AO or before ld. CIT(A) and as they did not have any occasion to go through these documents while deciding assessee's claim, we are inclined to set aside the order of ld. CIT(A) and remit the matter back to the file of AO to decide the same afresh after taking into consideration the additional evidences produced by assessee before this forum along with other necessary 5 ITA No. 774 /Hyd/2014 Smt. S. Vijayalakshmi

and relevant documents already available on record. AO must consider assessee's claim that land sold being in the nature of agricultural land and situated beyond the prescribed limit of the nearest notified municipality is not subject to capital gain and decide the issue after verifying evidences brought on record and in accordance with law.

9. In the result, appeal of assessee is allowed for statistical purposes.

Pronounced in the open court on 26 th June, 2015.

Sd/- Sd/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 26 th June, 2015 kv

Copy to:-

1) Smt. S. Vijayalakshmi, C/o K. Vasantkumar & A.V. Raghuram, Advocates, 610, 6 th Floor, Babhukhan Estate, Basheerbagh, Hyderabad.

2) ACIT, Central Circle - 6, Hyderabad.

3 CIT(A)-I, Hyderabad

4) CIT(Central), Hyderabad

5) The Departmental Representative, I.T.A.T., Hyderabad.