PRAMOD REDDY TEKULA,HYDERABAD vs. DCIT, CENTRAL CIRCLE-1(1), HYDERABAD

आदेश / O R D E R PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals), Hyderabad-11, dated

11.10.2025, and pertains to assessment year 2016-17.

filed return of income (RoI) for AY 2016-17 on 01.10.2016 admitting total

income of Rs.3,22,910/-. A search and seizure operation u/s.132 of the :: 2 :: Income Tax Act, 1961 (in short “the Act“) was conducted in the case of

M/s. Giridhari Constructions Group on 26.04.2018. During the course of

search operation, certain loose-sheets were found and seized in the

residential premises of Sri Allam Raja Reddy, which includes a General

Power of Attorney (GPA) executed on 27.06.2015 among the assessees

along with four others and developers for a total consideration of

Rs.6,48,08,000/-. Consequent to search, the assessement has been

completed u/s.143(3) r.w.s.153C of the Act on 30.04.2021 and made

addition of Rs.32,14,976/- towards ‘Shrot Term Capital Gains’ (STCG)

derived from transfer of property in pursuant to development agreement.

Accordingly, a show cause notice u/s.274 r.w.s.271(1)(c) of the Act dated

30.04.2021 was issued for levy penalty for concealment of particulars of

income u/s.271(1)(c) of the Act. Aggrieved by the assessement order,

the assessee preferred an appeal before the Ld.CIT(A) and the additions

made by the AO has been confirmed by the order of the Ld.CIT(A). The

assessee preferred further appeal before the Tribunal and the ITAT,

Hyderabad ‘A’ Bench in ITA No.611/Hyd/2022 order dated 22.10.2024

confirmed the additions made by the AO towards STCG derived from

transfer of property in pursuant to development agreement.

was issued to the assessee and called upon the assessee to explain ‘as to

why’ penalty should not be levied for concealment of particulars of

income. In response, the assessee has filed submissions and argued that :: 3 :: he has not concealed particulars of income in respect of STCG computed

by the AO, because, the transfer as defined u/s.2(47)(v) r.w.s.53A of the

Transfer Pricing Act, 1882 was not completed during the financial year

relevant to AY 2016-17. Further, because, although the assessee had

entered into development agreement, but the Hyderabad Metropolitan

Development Authority (HMDA) issued permission for construction of

building on 05.01.2021 i.e. in the FY 2020-21 relevant to AY 2021-22 and

therefore, the assessee not offered capital gains for AY 2016-17. Further,

merely for the reasons of addition to capital gains, it can’t be said that the

assessee concealed particulars of income. The AO after considering the

relevant submissions of the assessee observed that the additions made

towards capital gains of Rs.32,14,976/- has been finally confirmed by the

Tribunal and from the above, it is clear that the assessee concealed

particulars of income which attracts penalty u/s.271(1)(c) of the Act.

Therefore, levied penalty of Rs.9,05,448/- u/s.271(1)(c) of the Act which

is equivalent to 100% of tax said to be evaded.

before the Ld.CIT(A). Before the Ld.CIT(A), the assessee reiterated its

submissions before the AO and argued that STCG derived from transfer of

property in pursuant to development agreement is a debatable issue and

there are divergent decisions on this issue and because of which, the

assessee has not declared any capital gains for the year under

consideration. However, the assessee has explained the reasons to the :: 4 :: satisfaction of the AO and therefore, the question of levy of penalty

u/s.271(1)(c) of the Act doesn’t arise.

assessee and also taken note of the order passed by the ITAT in ITA

No.611/Hyd/2022 observed that the ITAT after examining the facts of the

case and submissions made by the assessee held that there is a transfer

as defined u/s.2(47) r.w.s.53A of the Transfer of Property Act, because

as per the development agreement, the assessee has handed over the

possession to the developer at the time of development agreement-cum-

GPA. Therefore, the transfer as defined u/s.2(47) of the Act took place

and the assessee has not declared the capital gains in the RoI filed for the

year under consideration including return filed in response to notice

issued u/s.153C of the Act. Therefore, by taking relevant facts upheld the

penalty levied u/s.271(1)(c) of the Act.

appeal before this Tribunal.

although the additions made by the AO towards capital gains

forRs.32,14,976/- has been finally confirmed by the Tribunal, but fact

remains that mere confirmation of addition in quantum proceedings is not

sufficient to hold that the assessee has concealed income. The Ld.

Counsel for the assessee further submitted that, no doubt assessee has :: 5 :: not declared capital gains in respect of transfer of property in pursuant to

development agreement-cum-GPA. However, fact remains that due to

divergent views expressed by various Courts including jurisdictional High

Court of Andhra Pradesh & Telangana in the case of Potla Nageswara Rao

[in ITTA No.245 of 2014 dated 09.04.2014] and also the decision of the

Hon’ble Telangana High Court in the case of Smt. Shantha Vidyasagar

Annam reported in 2025 Latest Caselaw 868 Tel, the issue is highly

debatable and due to this, the assessee has not offered any capital gains

in the RoI. However, the same can’t be considered as concealment of

income for levy of penalty u/s.271(1)(c) of the Act. Therefore, he

submitted that penalty levied by the AO should be deleted.

of the Ld.CIT(A) submitted that the entire transaction of transfer of

property was not disclosed in the RoI filed by the assessee unless the

search was taken place, the income pertains to capital gains was

unnoticed. Further, the additions made by the AO has been finally upheld

by the Tribunal after considering relevant explanation of the assessee

including the decision of the Hon’ble Supreme Court in the case of

Seshasayee Steels (P) Lted v. ACIT reported in 421 ITR 0046 (2020) and

the decision of the Hon’ble Jurisdictional High Court in the case of Smt.

Shantha Vidyasagar Annam (supra). Therefore, it can’t be said that it is

not a case of concealment of income. The AO after considering relevant

facts has rightly levied penalty and the Ld.CIT(A) after considering :: 6 :: relevant facts and also by following the decision of the ITAT Hyderabad

Benches, rightly upheld the penalty levied u/s.271(1)(c) of the Act.

Therefore, she submitted that the order of the Ld.CIT(A) should be

upheld.

record and had gone through orders of the authorities below. We have

also carefully gone through the relevant orders passed by the Tribunal in

quantum proceedings while upholding the addition made towards capital

gains in respect of transfer of property in pursuant to development

agreement. There is no dispute with regard to the fact that the ITAT

Hyderabad Benches confirmed the addition made towards STCGs by

following the decision of the Hon’ble Supreme Court in the case of CIT v.

Balbir Singh Maini reported in [2018] 12 SCC 354 and also the decision

of jurisdictional High Court in the case of Potla Nageswara Rao (supra)

and held that once development agreement has been registered and

possession has been handed over to the developer, the ingredients of

transfer defined u/s.2(47) r.w.s.53A of the Transfer of Property Act are

satisfied and the assessee is liable to compute capital gains in pursuant to

development agreement. The AO on the basis of the decision of ITAT

Hyderabad Bench and the jurisdictional High Court of Andhra Pradesh &

Telangana in the case of Potla Nageswara Rao (supra) held that, the

assessee has concealed particulars of income in respect of capital gains

derived from transfer of property in pursuant to development agreement :: 7 :: and levied penalty u/s.271(1)(c) of the Act. Therefore, it is necessary for

us to examine levy of penalty in light of above facts and arguments

advanced by the Counsel for the assessee and the Ld. Sr.AR for the

Revenue.

development agreement is highly debatable at relevant point of time

going by divergent views expressed by various Courts including the

jurisdictional High Court of Andhra Pradesh & Telangana. The Hon’ble AP

High Court in the case of Potla Nageswara Rao (supra) has held that the

year of computation of capital gains is year of execution of development

agreement coupled with consideration received for said agreement and

physical possession of the property. However, in the subsequent

decisions, the Hon’ble High Court in the case of Smt. Shantha Vidyasagar

Annam (supra) by taking note of the earlier decision in the case of Potla

Nageswara Rao very clearly held that in order to satisfy the conditions

specified u/s.2(47) r.w.s.53A of the Transfer of Property Act, there should

be a real transfer of property coupled with consideration and physical

possession and the same should be ascertainable from facts of each case

depending upon terms and conditions and other parameters required for

verifying whether transfer has been taken place or not. From the above,

it is clear that at the relevant point of time, when the assessee has

furnished RoI for the year under consideration there was no clarity with

regard to assessement of capital gains in pursuant to development :: 8 :: agreement i.e. whether it is on the date of development agreement or on

the date when the developer has performed his part of duties or at the

time of completion of construction and handed over possession of

completed building to the land owner. Therefore, in our considered view

going by the legal position prevailing at that point of time on the basis of

various judicial precedents, in the present case, it can’t be said that the

assessee has concealed particulars income in respect of development

agreement for the year under consideration. Since, the issue is highly

debatable at the relevant point of time, in our considered view, merely for

the reason of addition confirmed by the Tribunal, penalty u/s.271(1)(c) of

the Act can’t be levied. The AO without appreciating relevant facts,

simply levied penalty u/s.271(1)(c) of the Act. The Ld.CIT(A) without

appreciating relevant facts sustained the penalty levied by the AO.

Therefore, we set aside the order of the Ld.CIT(A) and direct the AO to

delete the penalty levied u/s.271(1)(c) of the Act.

Order pronounced on the 12th day of June, 2026, in Hyderabad.

Sd/- Sd/- (िवजय पाल राव) (मंजूनाथा. जी) (VIJAY PAL RAO) (MANJUNATHA.G) उपा�� /VICE-PRESIDENT लेखा सद�/ACCOUNTANT MEMBER

Hyderabad, dated 12.06.2026. TLN

आदेशकी �ितिलिप अ�ेिषत/ Copy of the order forwarded to:

िनधा�रती/The 1 : Pramod Reddy Tekula, 16-1-24/2/7, Beside 88/2RT Saidabad Colony, Hyderabad-500 059. Assessee राज�/ The Revenue 2 : The DCIT, Central Circle-1(1), Hyderabad.

3 The Principal Commissioner of Income Tax, Hyderabad. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT Hyderabad. 4 गाड�फ़ाईल / Guard file 5

आदेशानुसार / BY ORDER

Digitally signed by TUMMALACHARLA TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.06.12 11:37:25 +05'30'

Sr. Private Secretary ITAT, Hyderabad