BOMMAKANTI PRAGNYA RANI,KARIMNAGAR vs. ITO, WARD-2, KARIMNAGAR

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘SMC‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 739/Hyd/2026 (िनधा�रण वष�/Assessment Year: 2017-18) Smt. Bommakanti Pragnya Vs. ITO Rani, Karimnagar Ward-2 PAN: AYOPB1406H Karimnagar (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Advocate S. Sandhya राज� व �ारा/Revenue by: Shri Vamshi Krishna, Sr. AR सुनवाई की तारीख/Date of hearing: 09/06/2026 घोषणा की तारीख/Pronouncement: 17/06/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by Smt. Bommakanti Pragnya Rani (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT(A) Panaji, (“Ld. First Appellate Authority”) dated 13.02.2026 for the A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal: “1) The order of the learned CIT (A) is erroneous both on facts and in law; 2) The learned CIT (A) is not justified in confirming the action of the Assessing Officer in adopting Rs.1/- per Sq.yd. as on 01.04.1981;

2 3) The learned CIT (A) is not justified in not considering the cost of improvements by converting the agricultural land to the nonagricultural use and rejecting the claim for deduction for arriving at the capital gain; 4) The learned CIT (A) erred in confirming the determination of the capital gain at Rs.19,02,247/- 5) Any other ground/grounds that may be urged at the time of hearing”. 3. The assessee has raised the following additional ground of appeal: “The Ld. A.O erred in making addition on account of Long Term Capital Gains, which is beyond the scope of limited scrutiny, without converting the case into complete scrutiny in accordance with law”. 4. The Learned Authorized Representative (“Ld. AR”) submitted that additional ground so filed is admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) also did not raise any objection for admission of the additional ground. The prayer for admission of additional ground noted above which is not in memorandum of appeal is being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objection raised in additional ground is legal in nature for which relevant facts are stated to be emanating from the existing records.

3 assessment under section 143(3) of the Income Tax Act, 1961 (“the Act”) vide order dated 28.11.2019 making an addition of Rs.19,02,217/- on account of long-term capital gains and assessed the total income of the assessee at Rs.21,96,777/-.

4 proceeds of an immovable property sold during the relevant previous year. The Ld. DR submitted that while examining the source of cash deposits, which was the very reason for selection of the case under limited scrutiny, the Ld. AO found that though the assessee had sold an immovable property and deposited the sale proceeds into the bank account, no capital gain arising from such transaction had been offered to tax in the return of income. Therefore, according to the Ld. DR, the addition on account of long-term capital gain arose directly from and was intrinsically connected with the verification of the source of cash deposits. Hence, there was no enlargement of the scope of limited scrutiny by the Ld. AO.

7 10. On perusal of the above, it is evident that during the course of assessment proceedings, the assessee explained that the source of such cash deposits was the sale consideration received on transfer of an immovable property. Thus, the source of the cash deposits itself became the subject matter of verification before the Ld. AO. We further find that it was only while examining the explanation furnished by the assessee regarding the source of cash deposits that the Ld. AO came to know that the assessee had sold an immovable property during the relevant year and that the resultant capital gains had not been offered to tax in the return of income. Therefore, the issue of capital gains did not arise independently or dehors the issue for which the case was selected under limited scrutiny. Rather, it emerged directly from the verification of the source of cash deposits, which formed the very basis of the limited scrutiny proceedings. In our considered opinion, when the assessee herself explains the cash deposits by linking them to a particular transaction, namely the sale of an immovable property, the Ld. AO is duty- bound to verify the correctness and tax implications of such transaction. The consequential examination of the taxability of the sale proceeds and the computation of capital gains cannot be regarded as an issue unconnected with the subject matter of limited scrutiny. Therefore, the action of the Ld. AO in examining the capital gains arising from the sale of the property cannot be said to be an expansion of the scope of limited scrutiny. In view of the present facts and circumstances, we hold that the Ld. AO has not exceeded the scope of limited scrutiny and the assessment order cannot be said to be without jurisdiction. Accordingly, the additional

8 ground raised by the assessee challenging the validity of the assessment is dismissed. 11. In the alternative, the Ld. AR invited our attention to page no. 6 of the impugned order of the Ld. First Appellate Authority and submitted that the assessee had raised an additional ground during the course of appellate proceedings before the Ld. First Appellate Authority. The Ld. AR submitted that although the Ld. First Appellate Authority has reproduced the additional ground in the impugned order, the same has not been adjudicated while disposing of the appeal. It was therefore submitted that the matter may be restored to the file of the Ld. First Appellate Authority with a direction to adjudicate the additional ground raised by the assessee in accordance with law. 12. Per contra, the Ld. DR fairly conceded that the additional ground raised by the assessee before the Ld. First Appellate Authority has not been adjudicated in the impugned order. Accordingly, the Revenue has no objection if the issue is remanded to the file of Ld. First Appellate Authority for the limited purpose of adjudication of the said additional ground. 13. We have heard the rival submissions and perused the material available on record. We have gone through page nos. 5 to 7 of the impugned order of the Ld. First Appellate Authority wherein the Ld. First Appellate Authority has reproduced the additional ground raised by the assessee before him during the appellate proceedings, which is to the following effect:

12 of the appeal and deprives the assessee of a decision on an issue specifically raised before the appellate authority. Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it appropriate to set aside the impugned order of the Ld. First Appellate Authority on this limited issue and restore the matter to his file with a direction to adjudicate the additional ground raised by the assessee after providing adequate opportunity of being heard to the assessee. The assessee shall be at liberty to place all relevant material and submissions in support of the additional ground before the Ld. First Appellate Authority, who shall thereafter decide the same by way of a speaking order in accordance with law. Accordingly, this issue is restored to the file of the Ld. First Appellate Authority for fresh adjudication in terms of the aforesaid directions. 15. In the result, the appeal of the assessee is allowed for statistical purposes in terms of our above observations. Order pronounced in the Open Court on 17th June, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 17th June, 2026. Vinodan/sps Copy to: S.No Addresses 1 Smt. BOMMAKANTI PRAGNYA RANI 2-29/4 ,SEETHARAMPUR KARIMNAGAR KARIMNAGAR 505001 ,Telangana 2 Income Tax Officer Ward-2, Karimnagar 3 Pr. CIT –, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order

VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO Date: 2026.06.17 RAO 17:16:04 +05'30'