INCOME TAX OFFICER, WARD- 4(2)(2), BANGALORE vs. SHRI. NEKKUNDI KRISHNAPPA CHANDRASHEKAR, BENGALURU

The Revenue has filed all this appeals challenging the order dated 17/9/2019 passed by ld.CIT(A)-IV, Bengaluru and it relates to the assessment year 2015-16.

The Revenue is aggrieved by the decision of ld.CIT(A) in holding that the profit earned on sale of plots should be considered as capital gains in the hands of the assessee and not as business income.

The ld.AR submitted that the assessee along with his brother inherited an agricultural land and sold them by converting into several plots. However, the assessee did not file return of income for the year under consideration and hence, the AO reopened the assessment. The assessee submitted that he has earned long term capital gains and also constructed a house property. Accordingly, he submitted that no income is chargeable to tax. However, the AO treated the profit earned on sale of plots as business income. Further, though the assessee held only 60% of the right in the land, yet the AO assessed entire sale proceeds in the hands of the assessee. While computing the business income, the Assessing Officer stated that he has allowing deduction of Rs.14,79,400/- against the sale proceeds. However, instead of deducting the above said amount, the AO added the same to the sale proceeds. The computation of total income made by the AO is extracted below.

In the appellate proceedings, the ld.CIT(A) accepted the claim of the assessee that the land has been sold in smaller size by plotting of it and hence the profit arising there on is capital gain. Accordingly, the ld.CIT(A) allowed the appeal of the assessee. The Revenue has filed this appeal challenging the order of ld.CIT(A).

The ld.AR submitted that the expense Rs.14,79,400/- was wrongly added by the AO instead of deducting the same. If it is deducted, then the total income would be Rs.1,48,97,886/-. The tax effect there on will be less than 50 lakhs. Accordingly, the ld.AR submitted that the Revenue is precluded from perusing this appeal.

The ld.DR, on the contrary, submitted that the mistake pointed by the assessee has not been rectified by the AO and hence on record, the tax demand exceeds Rs.50 lakhs.

We heard the parties and perused the record. Admittedly, there is an error in the computation of the income made by the AO. If the said error is rectified, the tax effect would be less than 50 lakhs. The CBDT vide its Circular No.17/2019 dated 8/8/2019 has directed the tax authorities not to pursue the appeals filed by them if the tax effect involved on the disputed issues agitated before ITAT is less than Rs.50 lakhs. Accordingly, considering the objective of the Circular and also to avoid multiplicity of proceedings, we are of the view that the Revenue is precluded from pursing this appeal, since the real tax effect is less than Rs.50.00 lakhs. Accordingly, we dismiss this appeal of the revenue in limine.

In the result, all the appeal of the Revenue is dismissed.