Sri Y.Ravi Prasad,, Hyderabad vs Department Of Income Tax

This is an appeal by the Department against the order dated 25-09-2013 passed by Ld. Commissioner of Income Tax(Appeals)-V, Hyderabad for the Assessment Year (AY) 2009-10. The only effective ground raised by the Department is as under:

"2. The Hon'ble CIT(A) ought to have confronted the additional evidence of documents about lands not falling in jurisdiction of municipal areas with population below 10,000 to the Assessing Officer before entertaining the additional evidence".

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2. Briefly, the facts relating to issue in dispute are the assessee an individual filed his return of income on 30-09-2009 declaring total income of Rs. 29,68,880/-. In the course of assessment proceedings, Assessing Officer (AO) on verifying the materials available on record noticed that during the relevant previous year though assessee has sold certain lands for a total consideration of Rs. 1,60,87,500/- but in the return of income filed for the impugned assessment year, he has not disclosed any income relating to the sale transactions. He further proceeded to treat the profit derived from sale of the aforesaid lands amounting to Rs. 87,96,350/- as 'business income'. Being aggrieved of such addition, assessee preferred appeal before the Ld.CIT(A). In the course of hearing of appeal, as it appears, the assessee took a stand that the land sold being agricultural land situated beyond prescribed limit of the nearest municipality is not covered under the definition of capital asset u/s. 2(14)(iii) of the Income Tax Act (Act), hence, cannot be subjected to tax either as business income or as capital gain. In support of such contention, the assessee before the First Appellate Authority submitted certain government orders of the State Government indicating the population of the village as well as the distance from the municipal limits. Relying upon such submissions and evidences produced by the assessee Ld.CIT(A) held that the land sold being agricultural in nature and situated beyond prescribed limit of a nearest municipality or Cantonment Board is not subject to capital gain tax.

3. We have considered the submissions of the parties and perused the materials on record. The limited grievance of the department, as could be gathered from the ground raised and the submissions made by Ld. DR, is Ld.CIT(A) considering certain additional evidences has accepted assessee's plea that the land sold being of agricultural nature and situated beyond 8 Kms., from the limit of a nearest municipality is I.T.A. No. 1880/Hyd/2013 :- 3 -: Sri Y. Ravi Prasad

not subject to capital gain. However, while relying on those evidences, CIT(A) never gave an opportunity to the AO to verify the same. The Ld. AR however, supported the order of Ld.CIT(A). Having considered the submissions of the parties and perused the orders of the Ld.CIT(A), we are of the view that CIT(A) was not justified in accepting assessee's claim of exemption from capital gain on the plea that the land sold is an agricultural land without giving an opportunity to the AO to verify this aspect. As it appears from the discussions made in the assessment order, the assessee never took a plea before the AO that the land in question being an agricultural land and situated beyond the prescribed limit of a nearest municipality cannot be considered as a capital asset. Only before the First Appellate Authority, for the first time the assessee relying upon certain GOMs of the State Government claimed that the land sold being in the nature of agricultural land and situated beyond the prescribed limit of a nearest municipality cannot be subjected to capital gain. Since this submission along with the evidences were placed by the assessee for the first time before the Ld.CIT(A), it would have been just and proper on the part of Ld.CIT(A) to allow an opportunity to the AO to verify assessee's claim on the basis of the documentary evidences submitted by the assessee. The Ld.CIT(A) having not done so, there is a violation of the provisions contained under Rule 46(A) of I.T.Rules. In view of the above, we are inclined to set aside the impugned order of CIT(A) and remit the matter back to the file of AO with a direction to decide the issue afresh after considering all the facts and materials available on record including additional evidences submitted by the assessee in support of his claim that the land sold being agricultural land and situated beyond prescribed limit of municipality is not subject to capital gain. The AO must afford reasonable opportunity of being heard to the assessee before deciding the issue.

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4. In the result, Departmental appeal is allowed for statistical purposes.

Order pronounced in open Court on 29th April, 2015.

Sd/- Sd/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated 29th April, 2015

TNMM

Copy to :

1. The Deputy Commissioner of Income Tax, Circle-6(1), 7th Floor, 'D' Block, I.T. Towers, A.C. Guards, Hyderabad.

2. Sri Y. Ravi Prasad, 207, Mayuri Apartments, Punjagutta Colony, Hyderabad.

3. CIT(Appeals)-V, Hyderabad

4. CIT-VI, Hyderabad

5. D.R. ITAT, Hyderabad