Sri. P. Srinivasalu Yadav,, Hyderabad vs Assessee

ITA Nos.196 & 187 of 2012P Srinivasulu Yadav, Penukonda, Mahaboobnagar

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad 'A' Bench, Hyderabad

Before Shri P.M. Jagtap, Accountant Member and Shri Saktijit Dey, Judicial Member

ITA No.196/Hyd/2012 (Assessment year: 2008-09)

Sri P. Srinivasalu Yadav, 1- Vs. Income Tax Officer 4-134/16/c Mettugadda Ward-1 Mahaboobnagar Mahaboobnagar PAN: AMWPP 6154 G (Appellant) (Respondent)

ITA No.187.Hyd/2012 (A.Y 2008-09)

Income Tax Officer Vs. Sri P. Srinivasalu Yadav, Ward-1 1-4-134/16/c Mettugadda Mahaboobnagar Mahaboobnagar PAN: AMWPP 6154 G (Appellant) (Respondent)

Assessee by: Shri Mohd. Afzal, Advocate Department by: Smt. Suman Malik, (DR)

Date of Hearing: 22/01/2015 Date of Pronouncement: 28/01/2015

ORDER

Per Saktijit Dey, J.M.

These cross appeals filed by the assessee and the Revenue are directed against the order dated 14.11.2011 of CIT (A)-V Hyderabad pertaining to the A.Y 2008-09. The grounds raised by the assessee and the Revenue in the memorandum of appeal are as under:

Grounds raised by the assessee in ITA No.196/Hyd/2012 "1. The ld CIT (A) is against law and probabilities of case.

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2. The ld CIT (A) ought to have held that the subject land on which capital gains are determined are Inam Lands as observed by the AO, (Para C), therefore, not liable for capital gains tax as there is no element of cost of acquisition in the transaction".

Grounds raised by the Revenue in ITA No.187/Hyd/2012:

"1. The CIT (A)-V, Hyderabad has erred in allowing the relief taking base year as 1981 instead of 2002-03 as the assessee was not having full rights of ownership over the agricultural land as he was having only inamdar right for cultivation only.

2. The CIT (A)-V Hyderabad has erred in allowing the relief on account of Development Expenses of 20%, which is very reasonable".

2. As can be seen from the grounds raised by both the parties, the issue in dispute in both the appeals is in relation to charging of capital gain. Brief facts of the issue relating to the dispute are, the assessee is an individual. For the A.Y under consideration, the assessee originally filed its return declaring total income of Rs.1,58,690/- from wine business. During a survey operation u/s 133A conducted in the business premises of the assessee on 23.08.2009, it came to the notice of the Department that assessee has sold immovable property giving rise to long term capital gain. As a result of survey, the assessee filed a revised return on 22.03.2010 declaring long term capital gain of Rs.86,41,400/-. In course of the scrutiny assessment proceedings, the AO noticed that the assessee during the relevant financial year has sold land to the extent of 3728 sq.yards at Rs.100/- per sq. yard as on 1.4.1981. Accordingly the assessee claimed the cost of plot on the date of sale at Rs.20.00 lakhs. The AO however, observed that on verification with the registration authorities of the State Govt. it was found

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that the value of the land as on 1.4.81 is Rs.30,000/- per acre, as the land was agricultural in nature. He also observed that as per the sale deed submitted by the assessee, the ancestors of the assessee were inamdars of the land having right of cultivation and enjoyment. Accordingly, he was of the view that the cost of plot could not be taken at Rs.100/- per sq. yard as claimed by the assessee. The AO ultimately adopted the indexed cost of acquisition of the land at Rs.8,15,400/- as against the cost adopted by the assessee at Rs.20.00 lakhs. He also made disallowance on estimate from the development expenses claimed to have been incurred by the assessee on the plot sold. The AO also interfered with the exemption claimed u/s 54F by the assessee. As a result, the net long term capital gain was determined at Rs.1,11,71,000/-. Being aggrieved with the assessment order, assessee preferred appeal before the first appellate authority. The ld CIT (A) after considering the submissions of the assessee in the context of materials available on record disposed of the appeal by granting partial relief to the assessee. Being aggrieved of the aforesaid order of the ld CIT (A), both the assessee and the Revenue are in appeal before us.

3. As can be seen from the grounds raised, assessee has raised an issue that the nature of land being inam land, there is no cost of acquisition to the assessee, hence capital gain cannot be computed. However, as borne out from the facts and materials on record, this issue was never raised by the assessee either before the AO or before the ld CIT (A). When this fact was pointed out to the ld AR, in course of hearing of appeal before us, the ld AR though, admitted the fact that the issue is being raised for the first time, but he nevertheless requested to treat the ground raised by the assessee on the issue as additional ground.

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In this regard he also filed a petition praying for admission of the additional ground. The ld AR also filed a separate petition seeking permission to file additional evidences in support of the ground raised. The ld AR further submitted, the fact that the land sold was inam land is borne out from the record as the AO on examination of the sale deed has observed that the land was received by the ancestors of the assessee as inam land. Therefore, the primary facts for deciding the issue raised by the assessee are already on record. The ld AR submitted that since the land in question was received as inam by the ancestors of the assessee, the land has no cost of acquisition. Accordingly, in absence of cost of acquisition, capital gain cannot be computed. In support of such contention, the ld AR relied upon a number of decisions.

4. The ld DR while objecting to the additional ground raised by the assessee for the first time submitted that the assessee's claim that the land sold being an inam land, there is no cost of acquisition, hence capital gain cannot be computed is not acceptable in view of the decision of the Hon'ble Punjab & Haryana High Court in case of CIT vs. Raja Malwinder Singh (334 ITR 48).

5. We have considered the submissions of the parties and perused the materials on record as well as the orders of the Revenue authorities. Undisputedly, the issue in dispute has been raised by assessee for the first time before the Tribunal and it was never raised either before the AO, nor was a subject matter of appeal before the first appellate authority. Therefore, the ground raised by the assessee is to be treated as an

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additional ground. However, there is no doubt the issue raised by the assessee in the additional ground is purely a legal issue. The contention of the assessee that the primary facts relating to the aforesaid issue are also on record, to some extent appears to be true. As can be seen from the assessment order, the AO on examining the sale deed has observed that the land sold was received as inam land by the ancestors of the assessee for cultivation. Therefore, considering the fact that the issue raised is purely a legal issue going to the root of the matter as it questions the very assessability of capital gain and since the primary fact that it is an inam land is also before the AO, in our considered view, the ground raised by the assessee has to be admitted as an additional ground. In this regard we rely upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation vs. CIT (229 ITR 383). However, since the issue has been raised for the first time before us and neither the AO, nor the first appellate authority have examined the issue, we cannot decide this issue, either way at this stage without giving a fair opportunity to the department. In that view of the matter, we are inclined to remit this issue to the file of the AO for deciding afresh after giving due opportunity to the assessee. We further direct the AO to consider the additional evidences produced before us while taking a decision on the matter. The AO should also examine applicability of the ratio laid down in the decisions which may be relied upon by the assessee and also the decision relied upon by the ld DR referred to herein before. After considering all aspects of the issue and keeping in view the ratio laid down in the decisions, the AO must decide the issue after affording reasonable opportunity of being heard to the assessee.

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6. As the issues raised in department's appeal depend upon the final outcome of the decision, the AO is going to take while deciding the issue raised by the assessee, we deem it proper to remit the grounds raised by the department to the file of the AO for deciding afresh, if warranted.

7. In the result, both the appeals are allowed for statistical purposes.

Order pronounced in the Open Court on 28th January, 2015.

Sd/- Sd/- (P.M. Jagtap) (Saktijit Dey) Accountant Member Judicial Member

Hyderabad, dated 28th January, 2015.

Vnodan/sps Copy to:

1. Shri Mohd. Afzal, Advocate, 11-5-465, Flat No.402, Sherson's Residency, Criminal Court Road, Red Hills, Hyderabad

2. Income Tax Officer Ward-1 Mahaboobnagar

3. The CIT(A)-V Hyderabad

4. The CIT Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

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