KAMAN SRINIVASA GUPTA SUNIL GUPTA,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 822/Bang/2025 Assessment Year:2016-17

Shri Kaman Srinivasa Gupta Sunil Gupta, The Deputy Commissioner of S-711, Manipal Centre, Income Tax, Dickenson Road, M.G. Road, Central Circle – 2(2), Vs. Bengaluru – 560 042. Bengaluru. PAN: ABYPS1801N APPELLANT RESPONDENT

: Smt. Suman Lunkar AR Assessee by Revenue by : Sri Shivanad Kalakeri – CIT DR

Date of Hearing : 25-03-2026 Date of Pronouncement : 15-06-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. ITA No. 822/Bangalore/2025 for assessment year 2016 – 17 is filed by KAMAN Srinivasa Gupta Sunil Gupta [ assessee/appellant ] against the appellate order passed by Commissioner of income tax (appeals) – 15, Bangalore (the learned CIT – A) wherein the appeal filed by the assessee against the assessment order passed by the Deputy Commissioner of income tax, Central Circle – 2 (2), Bangalore (the learned AO) under section 143 (3) of the income tax act 1961 (the act) dated 28 December 2018 determining the total income of the assessee at ₹ 93,861,960/– was dismissed.

ITA No.822/Bang/2025 Page 2 of 9 2. Aggrieved with the appellate order of the assessee has raised following grounds of appeal: – 1. The learned Commissioner of income tax (appeals) has erred in confirming the assessment order passed under section 143 (3) of the act. The order passed by the CIT – A and by the assessing officer being bad in law are liable to be quashed. 2. In any case and without prejudice, the learned CIT – A has erred in confirming the action of the assessing officer in assessing the sum of ₹ 6 crores under a compromise deed as income in the hands of the appellant under the head income from other sources. On proper appreciation of facts and the law applicable, the sum of ₹ 6 crores not belonging to the appellant cannot be assessed as income in the hence of the appellant and the addition is made/confirmed is to be deleted. 3. In any case the learned CIT – A has erred in confirming the addition made by the assessing officer in the hands of the appellant by holding that sum received under this compromise deed is not for the landowners but for the appellant. The learned CIT – A has further erred in holding that the appellant was having absolute possession of the land and irrevocable general power of attorney and therefore the owner of the land and the addition is made/confirmed is contrary to the facts and evidence available in the law applicable is to be deleted. 4. Without further prejudice, the authorities below have erred in not appreciating the fact that there being no income element in the amount received, same is not assessable to tax under the provisions of the income tax act. 5. In any case without further prejudice, the amount incurred by the appellant on the property being more than the amount received, no amount would be taxable in the hence of the appellant.

ITA No.822/Bang/2025 Page 3 of 9 6. Assuming and without considering if at all the amounts received are taxable in the hence of the appellant that, it should be under the head capital gains after considering the cost incurred by the appellant. The action of the AO/CIT – A in assessing the gross amount under the head income from other sources being wholly erroneous both on facts and in law applicable is to be negated. 7. In any case the levy of tax at special rate under section 115BBDE of the act is wholly erroneous and same is to be deleted. 8. The appellant also denies the liability to pay interest under section 234A, 234B and 234C and 234D of the act. The interest having been levied erroneously are to be deleted.

ITA No.822/Bang/2025 Page 4 of 9 December 2015. Accordingly, a notice was issued requiring the assessee to explain the tax treatment of the ₹ 6 crores received. 5. The assessee submitted that, as a real estate investor, the amounts paid to the landowners under the agreement to sell, together with further payments and expenses incurred for perfecting title, were recorded as advances towards the land and classified under current assets as loans and advances. As on 31 March 2016, the total advances paid towards the land amounted to ₹ 117,796,210. The assessee therefore claimed that the amount received was treated as an advance receipt against the property and shown as a current liability. Since the receipt had not attained finality due to litigation pending before the Hon’ble High Court, the assessee did not offer the said sum as income. 6. The learned Assessing Officer rejected the assessee’s contention and added ₹ 6 crores as income from other sources under section 69A of the Act. He held that the appellant had received the amount pursuant to a memorandum of settlement relating to the land transaction, and that the memorandum did not state that the amount was to be treated as an advance for land. Accordingly, the assessment order was passed under section 143(3) of the Act on 28 December 2018, determining the assessee’s total income at ₹ 93,861,960 as against the returned income of ₹ 33,861,960, with the sole addition being ₹ 6 crores. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The substance of the assessee’s submissions, recorded in paragraph 6.1 of the appellate order, was that he had entered into agreements to purchase land admeasuring 14.3 acres from Shri Munir Raju, his family members and others, paid ₹ 117,796,210, and obtained a registered general power of attorney in his favour. In respect of 8 acres out of the said land, litigation had arisen with Shri Campanna, Shri Sanjay Bhat and others. Since the dispute reached the Hon’ble Karnataka High Court, the parties entered into a compromise, under which the assessee received ₹ 6 crores. The assessee contended that, as related matters were still pending before the courts, the said amount was shown as a liability in his balance sheet and was received only in

ITA No.822/Bang/2025 Page 5 of 9 his capacity as power of attorney holder on behalf of the landowners. He also submitted that he had invested more than ₹ 11 crores in the land, which should be treated as its cost. On examining the sale agreements, power of attorney documents and compromise deed, the learned CIT(A) noted that the assessee had paid amounts to the landowners and to an earlier agreement holder, Shri Narayanaswamy, and that the claim of ₹ 3.17 crores included security expenses, legal fees, travel expenses and other payments. Excluding such other expenses, the compensation for the land worked out to ₹ 6 crores, at ₹ 42 lakhs per acre for 14.3 acres. The assessee had also added ₹ 39,132,845 as interest to arrive at the total claimed cost of ₹ 11.77 crores. The learned CIT(A), after considering paragraphs 13 and 14 of the compromise deed, held that the landowners and the assessee had been compensated separately: five landowners received ₹ 20 lakhs each, while the assessee received ₹ 6 crores. He further observed that the landowners had expressly stated before the Hon’ble High Court that they had no dues or claim over the land covered by the general power of attorney or over the ₹ 6 crores paid to the assessee. The learned CIT(A) also found that the land covered by the sale agreement and general power of attorney was different from the land for which compensation was received. He noted that the general power of attorney conferred extensive rights on the assessee, including possession, sale, gift and joint development rights, and had been executed after the landowners received consideration. Accordingly, he concluded that the assessee was in absolute possession of 14.13 acres, that the ₹ 6 crores was received by the assessee in his own right and not on behalf of the landowners, and that no liability existed towards them. He therefore treated the amount as income from other sources. The alternative plea that the cost of land and related expenditure should be adjusted against the compensation was also rejected, as the compensation related only to 8 acres, whereas the general power of attorney covered 14.13 acres, and the compromise deed showed that the schedule of property therein differed from the property described in the general power of attorney. The appeal was accordingly dismissed.

ITA No.822/Bang/2025 Page 6 of 9 8. Aggrieved by the above findings, the assessee is in appeal before us. The learned AR, Smt. Suman Lunkar, CA, filed a paper book comprising pages 41 to 277, along with a reconciliation chart showing the extent of land referred to in the agreements to sell, the general power of attorney and the memorandum of settlement dated 1 April 2015. She reiterated the facts submitted before the learned CIT(A), which are placed at pages 42 to 48 of the paper book, and referred to copies of the various agreements, the decision of the Hon’ble Karnataka High Court, the agreements to sell dated 14 July 2005 and 7 July 2007, and the compromise deed. She submitted that the assessee had shown the sum of ₹ 6 crores as a liability, though the learned Assessing Officer added it as income on the ground that, in the statement recorded under section 131 of the Act on 1 March 2016, the assessee had agreed to offer the amount to tax. It was contended that the amount was not shown as income because, although received from Mr. Sanjay Bhat, it was received by the assessee as power of attorney holder on behalf of the landowners and, therefore, did not constitute his income. The amount was accordingly reflected in the annual accounts as a current liability. Without prejudice, she submitted that, if the amount is treated as the assessee’s income, it should be assessed as capital gains, with deduction allowed for the proportionate cost attributable to the land. 9. The learned Departmental Representative strongly supported the orders of the lower authorities. He submitted that the assessee had received ₹ 6 crores, which was rightly taxed as income from other sources, since no capital asset had been transferred by the assessee and, therefore, no question of capital gains arose. He further contended that the amount was taxable in the assessee’s hands notwithstanding the assessee’s claim that it was received on behalf of the landowners. According to him, once the assessee held an irrevocable general power of attorney, the amount could not be regarded as having been received on behalf of the landowners. He also submitted that, under the compromise deed, a total sum of ₹ 7 crores was payable, of which ₹ 1 crore was paid to the landowners and ₹ 6 crores to the assessee, the latter being taxable as the assessee’s income from other sources. He therefore argued that there was no infirmity in the orders of the lower authorities.

ITA No.822/Bang/2025 Page 7 of 9 10. We have carefully considered the rival contentions and perused the orders of the lower authorities. Briefly stated, certain persons owned 14.3 acres of land in Survey No. 115 at Bengaluru. The assessee entered into an agreement to purchase the said land and paid ₹ 46,931,084 to the eight landowners. He further paid ₹ 31,732,281 to the family members and towards related expenses, and claimed ₹ 39,132,845 as interest. Thus, according to the assessee, the total amount paid towards the land was ₹ 117,796,210. The landowners thereafter executed a general power of attorney in favour of the assessee. Out of the total land parcel of 14.3 acres, a dispute arose in respect to 8 acres involving Mr. Sanjay Bhat and others. The parties ultimately entered into a compromise, under which Mr. Sanjay Bhat and others agreed to pay ₹ 7 crores to the landowners and the assessee. Of this amount, ₹ 1 crore was paid to the landowners and ₹ 6 crores to the assessee. The assessee did not offer the said amount to tax, despite his statement under section 131 of the Act, and instead disclosed it as a liability in his balance sheet on the ground that related litigation was still pending. The learned Assessing Officer treated the amount as the assessee’s income under section 69A. The learned CIT(A), however, directed that it be assessed as income from other sources, holding that no liability existed towards the landowners. The learned CIT(A) also rejected the assessee’s claim for deduction of the cost of land and related expenditure, observing that the compensation related only to 8 acres whereas the general power of attorney covered 14.13 acres. He further noted that the property schedule in the compromise deed differed from the property described in the general power of attorney. 11. We have carefully considered whether the sum of ₹ 6 crores received by the assessee is chargeable to tax. In our view, the amount represents a capital receipt arising from the transfer or surrender of the assessee’s rights in 8 acres of land under the compromise deed. It is therefore taxable and cannot be treated merely as an advance shown under current liabilities, as claimed by the assessee. Accordingly, we hold that the sum of ₹ 6 crores constitutes income in the hands of the assessee.

ITA No.822/Bang/2025 Page 8 of 9 12. Having considered the rival submissions and having already held that the sum of ₹ 6 crores received by the assessee is taxable in his hands, the remaining issue is whether it is assessable as income from other sources or as capital gains. The amount was received under the compromise memorandum, pursuant to which the assessee relinquished his rights over 8 acres out of the total land parcel of 14.3 acres. Therefore, although the assessee had incurred acquisition costs for the entire 14.3 acres, he is entitled to deduction only to the extent of the cost attributable to the 8 acres covered by the compromise. 13. The assessee surrendered the rights acquired under the general power of attorney in respect of 8 acres of land for a consideration of ₹ 6 crores. The amount received, therefore, cannot be treated as income from other sources; it represents consideration for transfer or surrender of the assessee’s rights in the said land. Accordingly, the sum of ₹ 6 crores is chargeable to tax as capital gains under section 45 of the Act, and the assessee is entitled to deduction of the cost of acquisition of the asset transferred. 14. The deduction allowable towards the cost of acquisition or improvement of the asset is not clear from the record before the lower authorities. The assessee claims to have incurred ₹ 46,931,084 as actual cost paid to 28 different entities for 14.3 acres of land, besides further payments of ₹ 31,732,281 to family members and towards related expenses, and interest of ₹ 39,132,845, aggregating to ₹ 117,796,210. However, the details necessary to determine the cost attributable to the 8 acres covered by the compromise are not available on record. Therefore, in the interest of justice and for proper computation of capital gains, we restore this issue to the file of the learned Assessing Officer. The assessee shall substantiate the extent to which the total claimed cost of ₹ 117,796,210 relates to the 8 acres transferred. The assessee shall also explain how the further payment of ₹ 31,732,281 and the interest component of ₹ 39,132,845 are allowable, proportionately or otherwise, as cost of acquisition or cost of improvement of the asset transferred. 15. The learned Assessing Officer shall examine the claim and verify whether the cost of ₹ 37,032,281 and the interest component of ₹ 39,132,845 can be treated as cost of acquisition or cost of improvement of the asset. After considering the

ITA No.822/Bang/2025 Page 9 of 9 assessee’s explanation, the Assessing Officer shall decide the issue afresh and compute the capital gains chargeable to tax. 16. Ground No. 1 of the appeal is general in nature and therefore same is dismissed. 17. Ground Nos. 2 to 5 are decided against the assessee. The sum of ₹ 6 crores is held to be income chargeable to tax in the assessee’s hands under the head “capital gains”, as it arose from the surrender of rights in 8 acres of land under the compromise deed. Accordingly, Ground Nos. 2 to 5 are dismissed. 18. Ground No. 6 of the appeal is allowed holding that a sum of ₹ 6 crores received by the assessee is chargeable to tax under the head capital gains and assessee deserves a proper deduction of the cost of acquisition and cost of improvement incurred for surrender of 8 acres of the land as per the compromise deed. 19. Ground No. 7 is with respect to the levy of tax is a specified rate under section 115BBE is allowed as the amount of addition under section 69A does not stand. 20. Ground No. 8 is with respect to the charging of interest which is general and consequential in nature and hence dismissed. 21. Accordingly, appeal filed by the assessee is partly allowed as indicated above. Order pronounced in the open court on 15th June, 2026.

Sd/- Sd/- (SOUNDARARAJAN K.) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 15th June, 2026. Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore