VENKATESAN RAMAIAH,CHENNAI vs. ITO, NCW-10(5), CHENNAI

Assessment Years: 2016-17 Venkatesan Ramaiah, Income Tax Officer, No.1, Rajammal Street, Non-Corp Ward-10(5), Shenoy Nagar, Chennai. Chennai-600 030. [PAN: AABPV0386M] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr.Anandd Babunath, C.A, प्रत्यर्थी की ओर से /Revenue by : Ms.Gouthami Manivasagam, JCIT सुनवाई की तारीख/Date of Hearing : 03.11.2025 घोषणा की तारीख /Date of Pronouncement : 05.12.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1073099683(1) dated 10.02.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment year 2016-17. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.

2.0 The Ld.Counsel for the assessee submitted that this is the second round of litigation before this tribunal and the only issue which is being contested by it through its grounds of appeals, is the action of the Ld.AO making additions of Rs.4,32,51,282/- vide order u/s 143(3). The brief factual matrix of the case as discerned from written submissions of the Ld.Sr.(DR) are that the assessee filed his return of income on 20.07.2016, declaring a total income of Rs. 10,25,610/- and agricultural income of Rs. 2,05,000/-. The case was selected for limited scrutiny under CASS to verify the deduction claimed under section 54B of the Act. The assessee sold lands in Ayalcheri and Pudukkuppam villages, Thiruvallur Taluk, for a total consideration of Rs. 5,62,26,666/- vide five sale documents during the Financial Year 2015-16. The capital gains computed after indexed cost of acquisition amounted to Rs. 1,98,85,289/, for which the assessee claimed a deduction under section 54B by alleging the purchase of agricultural lands and deposit in the Capital Gains Account Scheme. The Assessing Officer (AO) completed the assessment under section 143(3) on 14.12.2018, determining the taxable income at Rs. 4,42,76,892/, including long-term capital gains of Rs. 4,32,51,282-, after partially disallowing the deduction under section 54B. The AO relied on the sworn statement of the Village Administrative Officer (VAO) and Adangal extracts, which indicated that only certain survey numbers were used agricultural purposes in the two years Page - 2 - of 8 preceding the sale, while others were classified Chamber Kalam (Brick Kiln lands) or Karambu (lands unfit for agriculture). Subsequently, the assessee filed a petition under section 154, claiming a deduction of Rs. 3,85,00,000/- under section 54F for the deposit in the Capital Gains Account Scheme, which was inadvertently not considered during the original assessment. The AO allowed this claim vide rectification order dated 27.01.2020, reducing the taxable capital gains to Rs. 47,51,282/- and the assessed income to Rs. 58,72,190 /-. The assessee appealed the assessment order before the CIT(A), NFAC, Delhi. The CIT(A), vide order dated 29.05.2023, dismissed the appeal, upholding the AO's additions due to the assessee's failure to furnish documentary evidence to rebut the AO's findings. This tribunal, vide order dated 23.01.2024 in set aside the CIT(A)'s order for violating principles of natural justice, as the assessee's written submissions filed on 29.05.2023 were not considered. The matter was restored to the CIT(A), who, vide order dated 10.02.2025, again dismissed the appeal on merits, except for allowing the ground on interest under section 234A for statistical purposes. Aggrieved by the CIT(A)'s order dated 10.02.2025, the assessee has filed the present appeal before us, raising grounds challenging the AO's and CIT(A)'s findings on the classification of lands, the disallowance of the section 54B deduction, and the denial of exemption under section 10(1) read with section 2(14) (i) (b) of the Act. Page - 3 - of 8 3.0 The Ld.Counsel for the assessee argued that this is the second round of litigation and that the lower authorities have merely repeated their conclusions arrived in earlier proceedings. The Ld.Counsel argued that the issue involves determination of long-term capital gains in the hands of the assessee. The single point of contest raised by the appellant assessee is that the Ld.AO has included part and parcel of land holdings which ought not to have been included for calculation of long- term capital gains. It was contended that the Ld.AO has either not considered the details and evidences placed before it or as incorrectly understood the facts which has led to the erroneous conclusion. In support of its contentions, the Ld.Counsel placed on records a voluminous paper book, inter-alia, tables and charts so as to allude as to which part and parcel of the land are to be included or excluded by the Ld.AO for his determination of income. It was accordingly requested that the matter may be considered for adjudication de novo by the Ld.AO after considering the documents placed by it in its paper book. 4.0 Per contra, the Ld.DR relied upon the order of lower authorities. It was argued that no infirmity is existing in the order of lower authorities and the same be confirmed. The Ld.DR further argued that the information like survey number wise computation of longtime capital gains presented by the assessee in page no.35 to 39 of his paperbook were not available before the Ld.AO. Page - 4 - of 8 5.0 We have heard the rival submissions in the light of material available on records. We have noted the following observations of the Ld.CIT(A) in his order dated 10.02.2025, assailed by the assessee. “….. “…..7.3 I have gone through the grounds of appeal

, assessment order and the submission of the appellant. The appellant argued that the lands that were subject matter of the assessment order covered under this appeal which are being agricultural lands situated beyond 8 kilometers from the city limits of the Chennai Corporation and is not a capital asset as per the provisions of sec. 2(14)(iiib) of the I T Act, 1961. The appellant's submissions are forwarded to the Assessing officer during the assessment proceedings and the Assessing officer has elaborately discussed this issue in the assessment order. It is held by the AO that the submissions of the assessee are ill founded and contrary to facts. Accordingly, the contentions of the appellant are rejected and capital gains are recomputed by restricting the claim of deduction u/s. 54 B to the extent of lands sold in survey No. 5, 20/1B, 3B, 4 & 6B and 22/1B, 2 &

3. The lands sold in respect of remaining survey numbers are ineligible for deduction u/s. 54B. The AO further held that the lands sold in respect of other survey numbers were either chamber Kalam (Brick Kiln lands) or Karambu the land which is not fit for agricultural purposes as per the Adangal Register maintained by the State Revenue Department. As a natural corollary the lands sold in the remaining survey numbers by the assessee were not used for the purpose of agriculture in the immediately preceding two years prior to sale. 7.3.1 Alternatively, the appellant argued that immediately after the sale of the said land which is subject matter of this appeal, had deposited a considerable sum of Rs. 385 lakhs into the Capital gains account scheme, which is common for all sections claiming exemption of long term capital gains under the said chapter of the Act. However, the appellant has not submitted any documentary evidence in this regard. In the appellate proceedings, burden of proof lies on the assessee to prove that facts and findings of the AO are incorrect. Under the circumstances and in view of the above facts, since the appellant failed to furnish the documentary evidence for the deposit made in the capital gains account scheme, the alternative plea of the appellant is not maintainable and hence the addition of Rs. 4,32,51,282/- made by the AO is upheld. All the grounds raised in this appeal are dismissed. Ground No. 8 is with regard to the charging of interest u/s. 234A of the I T Act. It is submitted that the appellant had filed his valid return of income before the due date under sec. 139(1) of the | T Act. The AO is directed to verify the submissions of the appellant and if the valid return was filed within due date the interest levied u/s. 234A may be deleted. This ground of appeal is allowed for statistical purpose….”

Page - 5 - of 8 6.0 We have also noted that a Hon’ble Coordinate bench of this tribunal in assessee’s own case vide its order dated 23.01.2024, ordered as under:

“…..8. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that although the ld. CIT(A) has fixed the appeal for hearing on 29.05.2023, but passed order on very same day i.e., on 29.05.2023 at 3:26 PM, without considering written submissions filed by the assessee on 29.05.2023, which is evident from e- proceedings Response Acknowledgment filed by the assessee. In our considered view, the ld. CIT(A) has disposed off appeal filed by the assessee without considering written submissions, in violation of principle of natural justice. Therefore, we are of the considered view that the issue needs go back to the file of the ld. CIT(A) to give another opportunity of hearing to the assessee. Thus, we set aside the order passed by the ld. CIT(A) and restore the issue to the file of the ld. CIT(A) with a direction to reconsider the issue after providing reasonable opportunity of hearing to the assessee. Needless to say, the assessee shall appear before the ld. CIT(A) and file necessary details without seeking further adjournments.

7.0 Upon consideration of the directions of the Hon’ble Coordinate bench and the facts of the case, we are, from the perusal of the order of Ld.CIT(A), of the considered view that true facts of the case have not been considered and evidences have not been properly marshalled and brought on record before determining taxable income of the assessee. It is trite law that Revenue authorities as quasi-judicial authority who are required to investigate the matter thoroughly, bring proper evidence on records and then draw their conclusion. In the present case no such action is evident from the order of Ld.AO and the Ld.First Appellate Authority. A pure case of non-application of mind is evident from the Page - 6 - of 8 appellate order. He has merely relied upon half-baked findings of the Ld.AO. Be that as it may be, we are of the view that the matter concerning determination of long-term capital gains in the hands of the assessee after carefully and objectively identifying and segregating different agriculture and non-agriculture lands have not been objectively and comprehensively analyzed by the lower authorities. We are of the view that ends of justice would be met if the assessee is given one last opportunity to present its case and filed supporting evidences before the Ld.AO. We are conscious that the matter is quite old and two rounds have already passed. Nonetheless, a finality of the issue deserves to be achieved. The decision to remit it back to the Ld. AO is taken in view of the fact that an Assessing Officer is the fulcrum of assessment proceedings. He possesses the first right and responsibilities to examine facts of a case before arriving at his decision qua determination of taxable income in a particular case. Without prejudice it has also been noted that in this case the Ld. AO did not have adequate opportunities to examine the varied facts seminal therein at least w.r.t. couple of details / evidences produced before us. We have noted with respectful deference the decision of Hon’ble Apex Court in the case of TIN box 249 ITR 216 on the subject matter. We therefore set aside the order of lower authorities and remit the issue of addition of Rs.4,32,51,282/- made by the Ld. AO which have been contested by the assessee through grounds of appeal Page - 7 - of 8 back to the Ld. AO for fresh adjudication de novo by passing a speaking order in accordance with law. The Ld. AO shall give opportunities of being heard to the assessee and it shall be bounden upon the assessee to comply with the notices issued by the Ld. AO. Any non-compliance on the part of the assessee can be adversely viewed. The assessee is at liberty to produce all the evidences filed through its paper book before us including any other evidences deemed relevant in support of its claims before the Ld. AO during the readjudication proceedings. Accordingly, the grounds of appeal Nos. 1 to 5 raised by the assessee are therefore allowed for statistical purposes. 8.0 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 5th , December-2025 at Chennai. Sd/- Sd/- (यस यस धवश्वनेत्र रधव) (अधमताभ शुक्ला) (SS VISWANETHRA RAVI) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 5th , December -2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF

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