THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), VIJAYAWADA vs. SRI JASTI SRIDHAR BABU, KESARAPALLI

PER N.K. CHOUDHRY, JUDICIAL MEMBER

This appeal has been preferred by the Revenue Department against the order dated 12/07/2019 impugned herein passed by the ld.Commissioner of Income Tax (Appeals) [for short, “ld.Commissioner”], Vijayawada u/sec. 250(6) of the Income Tax Act, 1961 (hereinafter referred to as "Act") for the A.Y. 2015-16.

2 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) the long term capital gain of Rs. 2,07,95,515/- was also admitted by claiming exemption u/sec. 54B of the Act to the tune of Rs. 49,24,850/- towards purchase of agricultural land and Rs.1,08,72,088/- towards investment in house property of Rs. 1,10,00,000/-. The said return was processed by the AO and during the course of assessment proceedings, the Assessee has filed a revised computation of income on dated 29/07/2017 claiming deduction u/sec. 54F of Rs. 29,63,738/- for investment in house property i.e. one residential flat of Rs. 30,00,000/-, which includes additional work i.e. power connection charges, power deposit, woodwork, interior works, electrical fittings, corpus fund and internal painting etc.

The AO ultimately considered the sale amount received by the Assessee to the tune of Rs. 3,70,22,969/- and while subtracting the indexed cost at Rs. 4,30,515/- made the addition of 3,65,92,453/- . Further allowed the deduction Rs. 15,92,153/- as against the claim of 1,08,72,088/- and 29,10,250/- made u/sec. 54F of the Act by Assessee and finally computed the long term capital gain of Rs. 3,50,00,300/- and added to the income of the Assessee . The AO also disallowed deduction of Rs. 92,79,935/- as claimed u/sec. 54B of the Act and to the tune of Rs. 45,000/- claimed exempted qua agricultural income by the Assessee.

“1. Copy of the Adangal extract obtained from the Mee-Bhumi portal evidencing that the Land situated in RS No.65/12 & 65/8, Kesarapali is an agricultural land and is useful for cultivation.

3 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) 2 Certificate of VRO, Kesarapalli Village stating that the Land situated in RS No.65/12 & 65/8, Kesarapalli is Agricultural land and agricultural activity was carried out in the said lands upto for the month of December 2014. 3. Certificate of the Addl. Assistant Engineer, APSPDCL, Gannavararn stating that Agricultural Power Connection was available in the name of the Assessee for the land situated in RS No.65/12, Kesarapalli. 4. Proceedings of the Sub-Collector, Nuzvid imposing penalty on the builder for conversion of Agricultural land into Non- Agricultural land without obtaining permission as required u/s.3 of the Andhra Pradesh Agricultural Land (conversion for non-agricultural purposes) Act, 2006 and for non- payment of conversion fees.” 3.1 The Assessee before the Ld. Commissioner also raised the following additional grounds of appeal on dated 28/01/2019:-

“1. Taking congnizance of the fact that the land of Accounts. 2.00 which is under consideration is situated between Kesarapalli and Vijayawada the aerial distance of which is beyond 8.00 KM (viz 10.20 KM) the same may not be construed as a capital asset within the meaning of section 2(14) of the Act, and thereby the same may be exempted u/sec. 10(1) of the Act. 2. The ld. AO has wrongly assessed the agricultural income received by the Assessee as income from other sources without considering the fact that the land situated in Kesarapalli Village is an agricultural land and is in cultivation till the current financial year. The Assessee has also declared agricultural income of Rs. 60,000/- in his return of income for the assessment year 2008-09 and a copy of the return of income is also enclosed hereto for your kind consideration.” 3.2 The Assessee by raising the additional grounds, totally changed his stand as taken while filing the return of income wherein the Assessee has claimed long term capital gain, whereas by additional grounds, the Assessee claimed that the consideration amount received

4 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) for sale on land is not liable for any tax as the land sold was an agricultural and exempted as per provision of section 2(14) of the Act.

3.3 The ld. Commissioner forwarded the said additional evidences which have been filed by the Assessee in support of its additional grounds of appeal, to the AO for furnishing remand report, in pursuance to which the AO carried out the field enquiry and submitted the remand report which is as under:-

“2. Originally Assessee is the owner of the agricultural land to the extent of 4 acres 65 cents located in Survey No. 65/7 to 65/12. The Assessee has entered into a development agreement on 21.10.2014 with Hema Durga Realtors for development of said land into flats. However, at the time of handing over the land to the developer the so called agricultural land was not converted for the purpose of non- agricultural activities. 3. As per the information furnished by the Assessee before the CIT(A), Vijayawada and also before the undersigned, the Sub-Collector vide order in Rc.G.1052/1/2016 dated 30-04 - 2016 has passed an order, stating that the above said lands were deemed to have been converted into non-agricultural purpose and levied conversion fee of Rs.60,76,620/- and penalty of Rs.30,38,310/-. Later on, the builder Hema Durga Realtors has paid an amount of Rs.26,33.202/-. Also during the scrutiny remand proceedings, the Assessee filed a copy of the Adangal evidencing that the land owned by the assessed is agricultural land at the time of entering into development agreement. 4. Hence, from the above it is clear that the said land was converted into non-agricultural purpose from the date entering into development agreement.” 3.4 The ld. Commissioner while admitting the additional grounds of appeal and accepted the fresh claim of the Assessee by holding that the transfer of the said land is not chargeable to tax under the head Income from capital gains. Relevant part of the order is reproduced herein for ready reference.

5 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) “26. In view of the ratio laid down by the Hon'ble Bombay High Court in the Above mentioned case by relying on the decision of the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. VS CIT [1991] 187 ITR 688 and having regard to the facts of the case, the fresh claim made by the Assessee in the additional ground of appeal no.1 has been admitted for adjudication. The new claim made by the Assessee in the said additional ground of appeal is that the land transferred during the year did not constitute a capital asset within the meaning of Sec 2(14) of the Act and consequently, no capital gains income is chargeable to tax in respect of the said transfer of the land. As per the provisions of Sec 2(14), an agricultural land which is situated beyond an aerial distance of 8 kilometres from the limits of a municipality does not constitute a capital asset. In the present case, the claim of the Assessee that the land transferred by him was in the nature of an agricultural land is supported by the following evidence: “1. Copy of the Adangal extract obtained from the Mee-Bhumi portal evidencing that the Land situated in RS No.65/12 & 65/8, Kesarapali is an agricultural land and is useful for cultivation. 2 Certificate of VRO, Kesarapalli Village stating that the Land situated in RS No.65/12 & 65/8, Kesarapalli is Agricultural land and agricultural activity was carried out in the said lands upto for the month of December 2014. 3. Certificate of the Addl. Assistant Engineer, APSPDCL, Gannavararn stating that Agricultural Power Connection was available in the name of the Assessee for the land situated in RS No.65/12, Kesarapalli. 4. Proceedings of the Sub-Collector, Nuzvid imposing penalty on the builder for conversion of Agricultural land into Non- Agricultural land without obtaining permission as required u/s.3 of the Andhra Pradesh Agricultural Land (conversion for non-agricultural purposes) Act, 2006 and for non- payment of conversion fees.” 27. The above mentioned evidences were furnished as additional evidence in support of the additional ground of appeal and the same were forwarded to the AO for the purpose of furnishing the remand report After considering the said evidences, the AO has also stated in his remand report that the land given on development by the Assessee were agricultural land. Though it was stated by the AO that the Assessee did not furnish any evidence that he carried out agricultural activities in the said land prior to transfer of the land, it is seen that the said observation of the AO is contrary to the evidence

6 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) furnished by the Assessee by way of certificate of the VRO, wherein it was clearly mentioned that agricultural activities were carried out in the said land upto the month of December, 2014. In view of the above mentioned evidences, it is held that the land transferred by the Assessee constituted agricultural land. 28. As regards the location of the said land, it has been reported by the AO in the remand report based on the enquiries caused by him through his inspector that the said land is located at an aerial distance of 925 kilometres from the limits of the Vijayawada Municipal Corporation. Thus, it is seen that the land transferred by the Assessee satisfied both the conditions in order to be excluded from the purview of a “capital asset” u/sec. 2(14) of the Act i.e., it is an agricultural land and it is situated beyond an aerial distance of 8 kilometres from the municipal limits. In view of this, it is held the transfer of the said land is not chargeable to tax under the head Income from capital gains. The additional ground No.1 of appeal is therefore allowed.” 3.5 The ld. Commissioner also deleted the addition of Rs. 45,000/- made by AO qua „income from other sources‟.

“1. The order of the CIT(A) is erroneous both on facts and in Law. 2. The CIT(A) is not justified in deleting the long term capital gains of Rs.3,50,00,300/-. 3. The CIT(A) is not justified in deleting the addition of Rs.45,000/- made under the head 'other sources'. 4. The ld.CIT(A) ought to have appreciated that the provisions of sec. 143(2) provide for service of notice for scrutiny assessment for ensuring that the total income shown in the return of income is not understated, but are not meant to take care of a situation where the Assessee feels that he has overstated the income. 5. The ld.CIT(A) is not justified in admitting the fresh contention of the Assessee that he is not liable to Long Term Capital Gains as the Assessee himself has paid advance tax and self assessment tax and also filed return of income showing the Long Term capital Gains to the extent of Rs.2.07 crores. 6. The ld. CIT(A) erred in relying upon the decision of the Bombay High Court in the case of Pruthvi Brokers & Share holders reported in 23 Taxmann.com 23(Bombay) for the reason that the same is distinguishable. 7. The ld.CIT(A) ought to have appreciated that the contention

7 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) made before him for the first time that the land is agricultural land and hence does not come under the definition of capital asset is not a claim for deduction but a total turnaround from the stand taken by it in the return of income. 8. The ld.CIT(A) is not justified in putting the Revenue in a worse position than in a situation where either the return was not taken up for scrutiny or where the income returned was accepted in the scrutiny assessment. 9. The ld.CIT(A) has overlooked the fact that in the Joint Development Agreement dated 27.10.2014 and in the supplementary agreement dated 06.04.2017, the land under consideration was mentioned as 'nivesana sthalam' meaning house site but not as agricultural land. Without prejudice to the above, the following grounds are also made:

8 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) was used for agricultural purposes at the time of transfer. 17. The ld. CIT(A) is not justified in ignoring the enquiry made by the Assessing Officer during the course of assessment proceedings which revealed that the land under consideration was not used for agricultural purposes in the preceding three years (page 7 of the assessment order). 18. The appellant craves for leave to add, delete or modify any ground at the time of hearing.”

4.1 The Revenue Department later on filed the following revised grounds of appeal which requires adjudication.

9 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) nature and ground No.6 is with regard to deletion of addition of Rs. 45,000/- which was made by the AO under the head „other sources‟.

5.1 In the instant case only two issues are involved. First issue with regard to treatment of sale amount of the land sold by the Assessee and the second issue relates to deletion of addition of Rs. 45,000/- by the ld. Commissioner. Even the ld. DR emphasised/focused on two issues only. Let us to decide this appeal by issue wise.

6.1 Ld. DR vehemently argued that law does not permit to change the stand which has taken at the initial stage and new claim cannot be entertained without revising the original return of income. Ld. DR in support of his contention also relied upon the judgment of the Hon'ble Apex Court in the case of Goetze (India) Ltd. Vs. CIT [(2006) 284 ITR 323] and submitted that according to the judgment of the Hon'ble Apex Court, it is clear that the Assessee cannot be allowed to make a claim for deduction other than by filing a revised return.

6.2 On the contrary, ld. AR submitted that the decision qua admission of additional ground/new claim is not only based upon the legal positions settled by the Hon'ble Apex Court and the High Courts, but also based upon cogent reasons and consideration of relevant material available on record.

10 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) 7. Having heard the parties and perused the material available on record. Foremost question arise as to whether the additional grounds can be allowed to be raised at the appellate stage.

7.1 The ld. Commissioner while considering the additional grounds of appeal and/or revised claim of the Assessee, gave opportunity to the Assessing Officer and sought remand report and while allowing the same, relied upon the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders [(2012) 23 taxmann.com 23 (Bom.)]. The crux of the judgment is reproduced herein below for brevity and clarity:-

“10. A long line of authorities establish clearly that an Assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 /[1990] 53 Taxman 85 . The second submission is based on a judgment of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 . 11. (A) In Jute Corpn. of India Ltd. (supra) for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the Assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is

11 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under :- "5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) "If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do." (emphasis supplied)

12 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) of assessment passed by the Income Tax Officer." [Emphasis supplied] (B) It is clear, therefore, that an Assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction.

7.2. In the aforesaid judgment as relied upon by the ld. Commissioner for adjudicating the issue, the Hon'ble Bombay High Court has also considered the judgments of the Hon'ble Apex Court in the case of Jute Corporation of India Ltd. (187 ITR 688), Kanpur Coal Syndicate (supra) [(1964) 53 ITR 225)] and Goetze (India) Ltd case [2006] 157 Taxman 1

7.3 The Hon'ble Supreme Court in the case of NTPC Ltd. Vs. CIT [(1998) 229 ITR 383] clearly held that the raising of additional legal ground during the appellate stage/proceedings is not barred by law. Further, the Hon'ble Apex Court in the case of Jute Corporation of India Ltd. Vs. CIT & Another (supra) also held that the Appellate Assistant Commissioner has jurisdiction to permit the appellant to raise the additional ground. The Hon'ble Apex Court in the case of CIT Vs. Kanpur Coal Syndicate (supra) has held that Appellate Assistant Commissioner also has co-terminus power with that of the Income- tax Officer and if that so there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the ITO. The Hon'ble Apex Court further held that in absence of any statutory provision, the appellate authority is vested with all the plenary powers which sub- ordinate authority may have in the matter.

13 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) 7.4 The Ld. DR specifically relied upon Goetze (India) Ltd. Case (supra). Even the Hon'ble Apex Court in that case clarified that “the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax authority u/sec. 254 of the Act”. Meaning thereby, as per the Apex Court, the Assessee cannot make a claim before assessing officer for deduction other than filing of revised return, however the appellate authorities are not restricted to do so in entertaining the fresh claim for deduction even without revising the return of income.

7.5 The Apex Court in the case of D.I.T Vs. Pooran Mall & Sons, 96 ITR, p.390 (SC) held that a person cannot be taxed on the principle of estoppel. Further Article 265 of the Constitution of India prescribes that no tax shall be levied except when authorized by law.

7.6 The Hon‟ble Allahabad high Court in the case of Pt. Sheo Nath Prasad Sharma Vs. C.I.T., 66 ITR, p.647 (All.) reminded that the law empowers the Income-tax Officer to assess the income of an Assessee and determine the tax payable thereon in accordance with law. The Hon‟ble Court further observed that just because the Assessee has shown the receipt as income in his return, it does not make him liable to tax thereon. If the Income-tax Officer assesses an Assessee upon a receipt, which is not taxable in law, it is always open to the Assessee to take the case in appeal or in revision thereafter. Further the Assessee is within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to tax a receipt which, though admitted by him, is not taxable in law. This judgement of Hon‟ble Court is squarely applicable to the facts of instant case as in this case the Assessee in its return of income shown the long term capital gain, however before the first appellate authority by realizing his misconception change the stand and claimed the capital gain as exempt

14 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) u/s 2(14) of the Act. Relevant part of the judgement is reproduced herein for ready reference:-

“ That it is the duty of the A.O. to determine whether a particular receipt is taxable as income or not. Just because the Assessee has shown the receipt as income in his return, it does not make him liable to tax thereon. The Hon’ble Court further observed that the Assessee may have committed a mistake in treating a certain receipt as taxable. The mere circumstance that he has shown that receipt, as income in his return does not make him liable to tax thereon. An Assessee is liable to tax only upon such receipt as can be included in his total income and is assessable under the Income-tax Act. The law empowers the Income-tax Officer to assess the income of an Assessee and determine the tax payable thereon. In doing so, he may proceed on the basis that, where an Assessee discloses that a certain sum of money has been received by him, the fact of that receipt may be accepted without anything more as constituting an admission on the part of the Assessee. That would be an admission as to a state of fact. But whether the receipt can be considered as taxable income is quite another matter, and consideration of that question leads into the realm of law. If the Income-tax Officer assesses an Assessee upon a receipt, which is not taxable in law, it is always open to the Assessee to take the case in appeal or in revision thereafter. It is then for Appellate Assistant Commissioner or the Commissioner of Income-tax, as the case may be, to examine the matter and determine whether, although the money has been received by the Assessee, it is taxable in law. The Assessee is then within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to tax a receipt which, though admitted by him, is not taxable in law”.

7.7 From the aforesaid analyzations and the verdicts of the Apex Court and High Courts, it is clear that the very purpose of income tax proceedings is to correctly assess the tax liability of an Assessee in accordance with law, may be the Assessee has not revised it return of income and/or claimed mistakenly and/or inadvertently as happened in this case. Further the legal as well as factual additional/new ground(s) and fresh claim can be raised at any time before the appellate authorities and the appellate authorities are empowered to decide the additional/new ground(s) and fresh claim, raised by the parties during

15 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) the course of appellate proceedings for the just and proper decision of a case.

7.8 There is no such embargo applicable to the appellate authorities, as claimed by the ld. DR to the effect that the additional/new claim cannot be made and/or the claim already filed in the income tax return cannot be allowed to be converted to a new one, without amending the original return of income. Hence, we are inclined, not to interfere with the decision of the ld. Commissioner for allowing the fresh/amended claim made by the Assessee by way of raising the additional ground No.1 and admission of the same for adjudication.

“1. Copy of the Adangal extract obtained from the Mee-Bhumi portal evidencing that the Land situated in RS No.65/12 & 65/8, Kesarapali is an agricultural land and is useful for cultivation. 2 Certificate of VRO, Kesarapalli Village stating that the Land situated in RS No.65/12 & 65/8, Kesarapalli is Agricultural land and agricultural activity was carried out in the said lands upto for the month of December 2014. 3. Certificate of the Addl. Assistant Engineer, APSPDCL, Gannavararn stating that Agricultural Power Connection was available in the name of the Assessee for the land situated in RS No.65/12, Kesarapalli. 4. Proceedings of the Sub-Collector, Nuzvid imposing penalty on the builder for conversion of Agricultural land into Non- Agricultural land without obtaining permission as required u/s.3 of the Andhra Pradesh Agricultural Land (conversion for non-agricultural purposes) Act, 2006 and for non- payment of conversion fees.” “1. Taking congnizance of the fact that the land of Accounts. 2.00 which is under consideration is situated

16 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) between Kesarapalli and Vijayawada the aerial distance of which is beyond 8.00 KM (viz 10.20 KM) the same may not be construed as a capital asset within the meaning of section 2(14) of the Act, and thereby the same may be exempted u/sec. 10(1) of the Act. 2. The ld. AO has wrongly assessed the agricultural income received by the Assessee as income from other sources without considering the fact that the land situated in Kesarapalli Village is an agricultural land and is in cultivation till the current financial year. The Assessee has also declared agricultural income of Rs. 60,000/- in his return of income for the assessment year 2008-09 and a copy of the return of income is also enclosed hereto for your kind consideration.” 8.1 It is a matter of fact that the additional evidences and a new claim of the Assessee by raising additional grounds of appeal have been forwarded to the AO for the purpose of furnishing the remand report. It is un-disputed fact that the proper opportunity was afforded to the Assessing Officer qua additional ground and new claim raised by the Assessee and the AO himself has admitted on the basis of his own inquiry caused through IT Inspector that the land in dispute is located at an aerial distance of 9.25 km. from the limits of the Vijayawada Municipal Corporation. For ready reference section 2(14) of the act, is reproduced as under:-

2(14) "capital asset" means— (a) xxxx (b) xxxx but does not include— (i) xxxx (ii) xxxx (iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

17 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) (b) in any area within the distance, measured aerially,—

(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.—For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

8.2 As per section 2(14) if the land falls more than 8 km. from the local limits of any municipality or cantonment board to in item (a) and which has a population of more than ten lakh cannot be considered as capital asset. In the instant case, admittedly the land situated at an aerial distance of 9.2 km. and it is also admitted fact by the AO that the land sold by the Assessee was an agricultural land prior to sale and as per VRO, the agricultural activities were carried out in the said land upto the month of December 2014. From Adangal extract obtained from the Mee-Bhumi portal, the land has been described as an agricultural land and is useful for cultivation. Further, from the certificate of the Addl. Assistant Engineer, APSPDCL, Gannavaram, it clearly reflects that agricultural power connection was also available in the name of the Assessee for the land in dispute. Even from the proceedings of the Sub-Collector, Nuzvid whereby imposed the penalty on the builder for conversion of agricultural land into non-agricultural land without obtaining permission as required u/sec. 3 of the Andhra Pradesh

18 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) Agricultural Land (conversion for non-agricultural purposes) Act, 2006 and for non-payment of conversion fees, it goes to show that the land under dispute was agricultural land only. The aforesaid facts have been duly considered by the ld. Commissioner while admitting the claim of the Assessee and holding that the land under dispute was an agricultural land and therefore exempt u/sec. 2(14) of the Act and cannot be subjected to tax.

8.3 On the aforesaid analyzations, we are of the considered view that the ld. Commissioner thoroughly considered all the aspects of the case and evidences available on record and proceeded in right and legal direction and came to the logical conclusion for just decision of the case.

9 Now coming to the second issue with regard to making of addition of Rs. 45,000/- by the AO on the ground that the Assessee could not substantiate with any evidence for carrying out the agricultural activities during the year on the land given for development and as per local enquiries conducted through ITI there was no agricultural activity in the said land during the last 2 or 3 years. The ld. Commissioner, on appeal, clearly held that the issue of whether the land owned by the Assessee at Kesarapalli village represented agricultural land and whether agricultural activities were carried out on the said land by the Assessee prior to transfer of the land during the year, has already been discussed and adjudicated earlier in its order and it was held that the said land constitute agricultural land and that the Assessee carried out agricultural activities in the said land prior to the transfer of the land during the year. The ld. Commissioner finally held that in view of the said finding of the fact, it is held that the action of the AO in not accepting the claim of agricultural income of the Assessee and treating the same as „income from other sources‟ is not sustainable. In our view, the ld. Commissioner thoroughly examined the issue and held

19 ITA No. 604/VIZ/2019 (Jasti Sridhar Babu) that the land under dispute as agricultural land and the Assessee cultivated the land up to transfer of the same, therefore disallowance to the extent of Rs. 45,000/- as claimed by the Assessee as agricultural income, in any way, does not entail any interference . Consequently, we are inclined not to interfere with the decision of the ld. Commissioner on this issue as well.

Order Pronounced in open Court on this 07th day of April, 2021.

Sd/- sd/- (D.S. SUNDER SINGH) (N.K. CHOUDHRY) Accountant Member Judicial Member

Dated: 07th April, 2021. vr/- Copy to: 1. The Assessee - Jasti Sridhar Babu, D.No. 12-121, Main Road, Kesarapalli, Gannavaram Mandal, Krishna District. 2. The Revenue – ACIT, Circle-3(1), Vijayawada. 3. The Pr.CIT, Vijayawada. 4. The CIT(A), Vijayawada. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.