MS. DIVYA CHOUDHARY ,MUMBAI vs. ITO (INT. TAX) WARD 2(1)(1), MUMBAI

आदेश / ORDER PER SMT. BEENA PILLAI, JUDICIAL MEMBER:

This appeal by the assessee is directed against the final assessment order dated 09/10/2025 passed by the Ld.AO u/s 143(3) r.w.s. 144C(13) of the Act for A.Y. 2023-24.

The assessee is an individual and a non-resident for the year under consideration. She filed her return of income declaring total income of Rs.2,99,202/-. During the relevant previous year, the assessee sold an

ITA 8696/MUM/2025 MS. DIVYA CHOUDHARY immovable property for a consideration of Rs.5,17,15,000/-. The property devolved on the assessee through inheritance from her predecessors.During the assessment proceedings, the assessee contended that, the subject property was originally agricultural land inherited from her ancestors and that the same was subsequently converted into non-agricultural land. The assessee also claimed the cost of acquisition with reference to the value of the property as on 01/04/2001, having regard to the provisions governing property acquired through inheritance.

2.1. The Ld.AO, however, observed that adequate documentary evidence regarding the nature of the land, its acquisition through inheritance and the valuation thereof as on 01/04/2001 had not been furnished. The Ld.AO accordingly treated the cost of acquisition as Nil and brought the sale consideration of Rs.5,17,15,000/- to tax as long-term capital gain.

The assesseefiled objections before the DRP.

2.2.The DRP, considering the material then available on record, upheld the action of the Ld.AO substantially on the ground that sufficient documentary evidence had not been produced to establish assessee's claim regarding the nature of the land and the cost of acquisition.

Pursuant thereto, the impugned final assessment order came to be passed.

3.1.The Ld. AR submitted that the subject land was agricultural land and that agricultural activities were actually being carried out on the land during the relevant period, including around the time of its transfer in the year 2022. It was submitted that, additional evidence, including the relevant land/revenue records and other supporting material, goes to the root of the

ITA 8696/MUM/2025 MS. DIVYA CHOUDHARY issue as to whether the subject land constituted a “capital asset” within the meaning of section 2(14) of the Act at all.

3.2. The Ld.AR further submitted that the assessee could not place complete material before the Ld. AO/DRP during the original proceedings and that the evidence now produced is necessary for a proper determination of the character of the land and consequential taxability of the transaction.

3.3.The assessee relied upon the principles laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) in support of admission of the additional grounds. Reference has also been made to SarifabibiMohmed Ibrahim &Ors. v. CIT [1993] 204 ITR 631 (SC) in relation to the factors relevant for determining the agricultural character of land.

We have perused the submissions advanced by both sides in light of the record placed before us.

4.1.It is settled that the Tribunal is competent to entertain an additional ground where the same is necessary for correctly determining the tax liability of the assessee, particularly when it concerns a question of law arising from the facts relevant to the assessment.

Respectfully following the principles laid down in National Thermal Power Co. Ltd. (supra) and Jute Corporation of India Ltd. (supra), we admit the additional grounds for adjudication.

4.2. Insofar as the additional documents are concerned, we find that they have been produced with a specific plea that the subject land continued to

ITA 8696/MUM/2025 MS. DIVYA CHOUDHARY bear an agricultural character and was subjected to agricultural operations during the relevant period. Such evidence has direct bearing on the fundamental issue whether, at the point of transfer, the land constituted agricultural land falling outside the ambit of “capital asset” u/s 2(14) of the Act.

4.3. We further notice that the claim of the assessee has hitherto been rejected principally for want of adequate supporting evidence regarding the nature and character of the land. The evidence presently placed before us was admittedly not examined by the Ld. AO while framing the assessment and, therefore, a factual verification thereof is necessary before the issue can be adjudicated conclusively.

4.4. Whether a particular parcel of land can be regarded as agricultural land cannot be determined merely from nomenclature or a solitary circumstance. The actual character and user of the land, revenue records, agricultural operations carried on thereon, nature of crops, surrounding circumstances, the effect and date of any conversion order, geographical location of the land and the statutory requirements of section 2(14)(iii), wherever applicable, are relevant considerations which require verification from the primary record.

4.5. In the present case, the additional evidence is stated to demonstrate that agricultural activities were being undertaken on the subject land during the relevant period when the property was sold in the year 2022. Since these documents go to the root of the matter and were not examined by the Ld. AO, in the interest of substantial justice, we deem it appropriate to admit the additional evidence and restore the matter to the file of the Ld. AO for a fresh examination.

• the true nature and character of the land at the time of transfer;

ITA 8696/MUM/2025 MS. DIVYA CHOUDHARY • whether agricultural operations were actually carried on upon the land during the relevant period;

• the relevant revenue and land records and the effect thereof;

• the date and legal effect of conversion, if any, of the land from agricultural to non-agricultural use;

• whether the subject land satisfies the requirements for exclusion from the definition of “capital asset” u/s 2(14) of the Act; and

• if the land is ultimately held to constitute a capital asset, the assessee's alternative claim regarding the correct cost of acquisition/FMV as on 01/04/2001 and the provisions applicable to property acquired by inheritance.

5.1. The Ld. AO shall be at liberty to call for the original records and make necessary verification from the concerned revenue/land authorities, if considered necessary. The assessee shall also furnish all requisite documents and details as may be called for and shall extend full cooperation in the proceedings.Needless to state, the Ld. AO shall afford reasonable opportunity of being heard to the assessee and shall decide the issue afresh in accordance with law, uninfluenced by the observations contained in the earlier assessment order or the directions of the DRP.

Accordingly, the findings of the Ld. AO are set aside and the matter is restored to the file of the Ld. AO for de novo adjudication.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 12.10.2026.

Sd/- Sd/- ARUN KHODPIA BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 12/10/2026. Shamik, Sr. P.S.