ASSISTANT COMMISSIONER OF INCOME TAX ,CIRCLE-1(1) , TIRUPATI vs. VENKATA SWAMY RAVURI , CHITTOOR

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आयकर अपीलीय अधिकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘ DB-B ‘ Bench, Hyderabad
श्री विजय पाल राि, उपाध् यक्ष एिं श्री मिुसूदन सािडिया, लेखा सदस् य के समक्ष ।

Before Shri Vijay Pal Rao, Vice-President
A N D
Shri Madhusudan Sawdia, Accountant Member

आ.अपी.सं /ITA No.257/Hyd/2022
(निर्धारण वर्ा/Assessment Year: 2017-18)
PAN:AFOPR4868Q
(Appellant)

(Respondent)

निर्धाररती द्वधरध/Assessee by: Advocate Sashank Dundu
रधजस् व द्वधरध/Revenue by:: Dr. Sachin Kumar, Sr. DR

सुिवधई की तधरीख/Date of hearing: 09/10/2025
घोर्णध की तधरीख/Pronouncement: 17/10/2025

आदेश/ORDER
Per Madhusudan Sawdia, A.M.:

This appeal is filed by the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax
(Appeals), National Faceless Appeal Centre (NFAC) Delhi (“Ld.
CIT(A)"), dated 25.04.2022 for the A.Y 2017-18. 2. The Revenue has raised the following grounds of appeal:
“1. The order of the Commissioner of Income Tax (Appeals) is erroneous both on the facts of the case and in law.

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143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 22.09.2019. After considering the submissions of the assessee, the Learned Assessing Officer (“Ld. AO”) made various additions aggregating to Rs.3,83,66,099/- and completed the assessment under section 143(3) of the Act on 03.12.2019, determining total income of the assessee at Rs.4,88,14,039/-.
4. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee. Aggrieved by the relief granted by the Ld.CIT(A), the Revenue is in appeal before this Tribunal.
5. Ground Nos.1 and 7 of the Revenue are general in nature and hence dismissed as not pressed. Ground No.2 of the Revenue pertains to the deletion of addition of Rs.10,25,104/- made by the Ld. AO under section 68 of the Act in respect of repayment of loan by the assessee. In this regard, the Learned
Departmental Representative (“Ld. DR”) strongly supported the order of the Ld. AO and submitted that the assessee had repaid a loan of Rs.12,00,000/- to M/s. Religare Finvest Ltd. on 30.06.2016 in cash. During the assessment proceedings, the assessee had explained only Rs.1,74,896/- as sourced from sale of property and failed to explain the balance amount of Rs.10,25,104/-. Consequently, the Ld. AO rightly treated the said sum as unexplained cash credit under section 68 of the Act. The Ld. DR further submitted that before the Ld. CIT(A), the assessee furnished an entirely new explanation regarding availability of business cash balance and bank withdrawals, along with supporting bank statements. These documents and explanations constituted additional evidence within the meaning of Rule 46A of ITA no 257 of 2022 Venkata Swamy Ravuri

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the Income Tax Rules, 1962 (“Rules”). However, no application under Rule 46A was filed by the assessee before the Ld. CIT (A), nor did the Ld. CIT(A) call for any remand report or comments from the Ld. AO before accepting such evidences. It was thus contended that the Ld. CIT(A) admitted additional evidence in violation of Rule 46A and the principles of natural justice. The Ld.
DR prayed that the order of the Ld. CIT(A) be set aside and the matter restored to the file of the Ld. AO for verification of the assessee’s explanation regarding source of repayment of loan from bank withdrawals and cash balances.
6. Per contra, the Learned Authorised Representative (Ld.
AR) supported the order of the Ld. CIT(A) and submitted that the assessee had sufficient cash in hand out of its business receipts and had also withdrawal cash from Bank to justify the loan repayment. The Ld. AR invited our attention to page no. 5 of the order of the Ld. CIT(A), wherein the Ld. CIT(A) had specifically noted that the assessee had withdrawn Rs.3,72,500/- from the State Bank of India and Rs.3,20,000/- from the Bank of Baroda
(business account). The Ld. AR further invited our attention to the bank statements placed at page nos. 5 to 9 of the paper book, evidencing cash withdrawals from bank. It was submitted that the educational institution of the assessee regularly handled cash receipts and withdrawals as part of its business operations, and hence the source of repayment was genuine and verifiable from the books of account. The Ld. AR thus submitted that the Ld.
CIT(A) had examined all relevant details, found the explanation satisfactory, and rightly deleted the addition. Accordingly, it was prayed that the order of the Ld. CIT(A) be upheld and the appeal of the Revenue be dismissed qua ground no.2 of the Revenue.

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transaction and accepted the explanation. However, it is evident from record that such explanation regarding source of repayment from business cash balance and bank withdrawals was produced for the first time before the Ld. CIT(A). The Ld. CIT(A), while accepting the same, has not called for a remand report from the Ld. AO to verify the correctness of these details. Further, on perusal of the bank statements placed at page no.5 to 9 of the paper book, we notice that there were cash deposits of Rs.8,00,000/- on 20.05.2016 (page no.7 of the paper book),
Rs.1,04,000/- on 19.04.2016 (page no.8 of the paper book) and Rs.1,96,631/- on 13.06.2016 (page no.8 of the paper book), along with several smaller deposits in the assessee’s business bank account. Hence it is observed that the cash deposited in the bank account are more than the cash withdrawal by the assessee during the year under consideration. Therefore, the explanation of the assessee that the loan has been repaid out of cash withdrawal from bank is apparently not acceptable. The Ld. CIT(A) has considered only the withdrawals but not given any findings with respect to the nature and source of these cash deposits, nor verified their nexus with the repayment of loan. Thus, the availability of cash in hand, the nature of cash deposits, and their linkage with the repayment transaction require detailed examination from the books of account and bank records of the assessee. Since these evidences were produced for the first time before the Ld. CIT(A) without opportunity to the Ld. AO to examine them, there is a clear procedural violation of Rule 46A. Therefore, in the interest of justice, we deem it appropriate to set aside the issue to the file of the Ld. AO for de novo verification of the assessee’s explanation regarding source of repayment of loan. The ITA no 257 of 2022 Venkata Swamy Ravuri

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Ld. AO shall examine the cash withdrawals, cash deposits, and availability of business cash balance and decide the issue afresh in accordance with law after affording due opportunity to the assessee. Accordingly, Ground No.2 raised by the Revenue is allowed for statistical purposes, with the issue restored to the file of the Ld. AO for verification.
8. Ground Nos.3 and 4 raised by the Revenue pertain to the deletion of addition of Rs.5,50,280/- made by Ld. AO by treating the agricultural income as income from other sources.
During the course of assessment proceedings, the Ld. AO observed that the assessee had shown agricultural income of Rs.5,50,280/-.
In the absence of any supporting bills, vouchers, or sale receipts for agricultural produce, the Ld. AO held that the assessee failed to substantiate the claim of having earned such agricultural income and, therefore, treated the said amount as income from other sources. The Ld. CIT(A) deleted the addition by holding that the assessee owned 12 acres of agricultural land, as evidenced by Form
1B, and accepted the assessee’s claim of earning agricultural income. Aggrieved by the relief granted, the Revenue is in appeal before us.
9. The Ld. DR supported the order of the Ld. AO and submitted that the assessee had not furnished any documentary evidence such as sale bills, vouchers, or details of agricultural produce sold either before the Ld. AO or before the Ld. CIT(A). The only document furnished was Form 1B, showing holding of 12
acres of land. It was contended that except for this document, there was no evidence of actual agricultural operations having been carried out during the year. The Ld. DR submitted that the ITA no 257 of 2022 Venkata Swamy Ravuri

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Ld. CIT(A), solely on the basis of Form 1B, which merely establishes ownership of land and not cultivation, deleted the addition without any verification of the nature of land or agricultural activity. The Ld. DR further submitted that the document itself describes the land as dry land, implying absence of irrigation facility, and therefore, it was imperative for the assessee to demonstrate, with supporting evidence, that agricultural activity was indeed undertaken on such land. In the absence of such proof, the deletion of the addition is erroneous.
Accordingly, the Ld. DR prayed that the order of the Ld. CIT(A) be set aside and the matter restored to the file of the Ld. AO for fresh verification of whether agricultural operations were actually carried out and the income claimed was genuine.
10. Per contra, the Ld. AR supported the order of the Ld.
CIT(A) and submitted that the assessee is the owner of 12 acres of agricultural land, as evidenced by Form 1B placed at page no.11
of the paper book. It was further submitted that the assessee had disclosed agricultural receipts of Rs.12,10,560/- from sale of sugarcane, paddy, and ground nut cultivated on the said land and incurred agricultural expenditure of Rs.6,60,280/-, resulting in net agricultural income of Rs.5,50,280/-. The Ld. AR contended that it is not practical for a small farmer earning a modest income of around Rs.5.5 lakhs to maintain detailed bills or vouchers for agricultural produce sold in rural markets. The Ld. AR further submitted that it is not a new claim, the assessee has consistently disclosed agricultural income in earlier and subsequent assessment years. In support of their contention, the Ld. AR invited our attention to capital account of the assessee as on 31.03.2016 placed at page no.30 of the paper book and ITA no 257 of 2022 Venkata Swamy Ravuri

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demonstrated that during the financial year 2015-16, the assessee had shown agriculture income of Rs.5,31,410/-. He further submitted that the Revenue has accepted the same without any adverse inference. Therefore, the Revenue’s action in disputing the agricultural income in the current year alone, without any change in facts, is arbitrary and contrary to the principle of consistency. It was, therefore, prayed that the order of the Ld. CIT(A) be upheld.
11. We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that the assessee has furnished Form 1B evidencing ownership of 12 acres of land. On perusal of the said Form 1B placed at page no.11 of the paper book, we find that the land is classified as dry land, which indicates that there is no irrigation facility available on such land. In such circumstances, the onus lies upon the assessee to demonstrate, with some credible evidence, that agricultural activities were actually carried out on the said land and that the income earned was genuinely derived from such operations. We have gone through the submission of the assessee before the Ld.AO placed at page no.34 of the paper book which is to the following effect:
11.1
On perusal of the above, we find that during the course of assessment proceedings, the assessee had submitted that he earned gross agricultural receipts of Rs.12,10,560/- from sale of sugarcane, paddy, and groundnut grown on two crops taken during the year and incurred agricultural expenses of Rs.6,60,280/-, resulting in net agricultural income of Rs.5,50,280/-. We have also gone through para no.7 of the order of the Ld.AO which is to the following effect:

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receipts claimed. In our considered view, ownership of agricultural land by itself does not conclusively establish that agricultural operations were actually carried out or that the income was derived therefrom. The possibility of agricultural activity on dry land, the nature of crops claimed, and the absence of irrigation facility require verification from factual records. Accordingly, we are of the considered opinion that the issue requires fresh examination by the Ld. AO to verify whether any agricultural activity was actually carried out on the said land; whether the claimed agricultural income and expenditure are supported by any evidence; and whether such income is consistent with the type and extent of landholding (dry land). Therefore, we set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the Ld. AO for de novo verification. The assessee shall be afforded adequate opportunity to furnish necessary evidence to substantiate his claim of having carried out agricultural activity.
Accordingly, the ground nos.3 and 4 raised by the Revenue are allowed for statistical purposes, with the issue restored to the file of the Ld. AO for verification in accordance with law.
12. Ground No.5 raised by the Revenue pertains to the deletion of addition on account of long-term capital gain of Rs.1,35,61,158/- made by the Ld. AO. During the course of assessment proceedings, the Ld. AO observed that the assessee had sold a property for a total consideration of Rs.5,23,55,680/-, consisting of Rs.2.40 crores towards sale consideration of land and Rs.2,83,55,680/- towards sale consideration of building. The addition under dispute in ground no.5 of the Revenue relates to the long-term capital gain arising from sale of land. The assessee claimed the cost of acquisition of land at Rs.1,55,000/- and cost

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of improvement at Rs.35,29,170/-. The Ld. AO, however, on verification of the registered sale deed dated 04.11.1992, found that the total cost of land measuring 2,699.51 sq. yds. was Rs.1,19,880/-, whereas the assessee had sold only 2,399.51 sq.
yds. of land. Accordingly, the Ld. AO determined the proportionate cost of acquisition at Rs.1,06,557/- instead of Rs.1,55,000/- claimed by the assessee. Further, since the assessee did not furnish any documentary evidence in support of cost of improvement, the Ld. AO disallowed the same and computed the long-term capital gain accordingly. On appeal, the Ld. CIT(A) accepted the assessee’s contention and allowed both the full cost of acquisition at Rs.1,55,000/- and the cost of improvement of Rs.35,29,170/-, thereby deleting the addition. Aggrieved, the Revenue is in appeal before this Tribunal.
13. The Ld. DR invited our attention to para no.8 of the order of the Ld. AO and submitted that during the year under consideration, the assessee sold land measuring 2,399.51 sq. yds.
out of total land of 2,699.51 sq. yds. purchased under sale deed dated 04.11.1992. Hence, the Ld. AO rightly adopted the proportionate cost of acquisition at Rs.1,06,557/- as against
Rs.1,55,000/- claimed by the assessee. The Ld. DR further submitted that the Ld. CIT(A) has erred in allowing the entire cost of Rs.1,55,000/- without verifying whether the entire land or only part of the land was sold. As regards the cost of improvement of Rs.35,29,170/-, the Ld. DR pointed out that the assessee failed to furnish any supporting evidence such as bills, vouchers, or proof of expenditure. It was further submitted that the details of year- wise improvement costs were furnished for the first time before the Ld. CIT(A), who accepted the same without calling for any ITA no 257 of 2022 Venkata Swamy Ravuri

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remand report from the Ld. AO, which amounts to violation of the principles of natural justice. The Ld. DR emphasized that the Ld.
CIT(A) ought to have verified whether such expenditure was actually incurred and recorded in the books of account before allowing the claim. Accordingly, the Ld. DR prayed that the order of the Ld. CIT(A) be set aside and the issue restored to the file of the Ld. AO for proper verification.
14. Per contra, the Ld. AR submitted that the finding of the Ld. AO that only part of the land was sold is factually incorrect and that the entire land purchased under the registered deed was sold during the year. As regards the cost of improvement, the Ld.
AR submitted that the assessee had incurred site development expenditure on levelling and filling during the financial years
1994–95, 1995–96, and 1997–98. These costs were duly recorded in the books of account and reflected in the fixed asset schedule year after year. The Ld. AR invited our attention to page no. 27 of the paper book showing the fixed asset schedule, where the item at serial no.6 titled “Site at Hyderabad” shows the total value of Rs.36,84,170/-, forming part of the fixed assets of the assessee. It was contended that such figures have been accepted by the Revenue in earlier years and that, after such a long lapse of time, the assessee cannot be expected to produce bills and vouchers for expenses incurred more than two decades ago. Accordingly, it was prayed that the order of the Ld. CIT(A) be upheld.
15. We have considered the rival submissions and perused the record. We have gone through the para no. 8 of the ITA no 257 of 2022 Venkata Swamy Ravuri

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assessment order of the Ld.AO which is to the following effect:

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and restore the matter to the file of the Ld. AO for de novo adjudication after examining (i) the actual area of land sold, (ii) the proportionate cost of acquisition, (iii) the genuineness of improvement cost, and (iv) reconciliation of fixed asset figures. The Ld. AO shall afford due opportunity to the assessee to substantiate his claim with relevant evidence. Hence, ground No.5
raised by the Revenue is allowed for statistical purposes, and the issue is restored to the file of the Ld. AO for verification and fresh adjudication in accordance with law.
16. Ground No.6 raised by the Revenue relates to the deletion of addition of Rs.1,95,91,540/-, being short-term capital gain, made by the Ld. AO and deleted by the Ld. CIT(A). As pointed out under Ground No.5 of the Revenue, the assessee had sold a property for a total consideration of Rs.5,23,55,680/-, consisting of Rs.2.40 crores towards sale consideration of land and Rs.2,83,55,680/- towards sale consideration of building. On the sale of building, the Ld. AO computed short-term capital gain of Rs.1,95,91,540/-. The said building appears at serial number
15 of the fixed asset schedule placed at page no. 27 of the paper book. The Ld. AO, after verifying the sale consideration and written down value of the building, made the addition. However, the Ld. CIT(A) deleted the same by accepting the assessee’s explanation that the gain was not taxable in the manner computed by the Ld. AO. Aggrieved by the relief granted, the Revenue has raised this ground.
17. We have gone through the orders of the lower authorities and perused the relevant material placed on record. It is noted that the short-term capital gain of Rs.1,95,91,540/- arises from the sale of a building which is reflected at serial

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number 15 of the fixed asset schedule placed at page no. 27 of the paper book. While exam ining Ground No.5 of the Revenue, we have already observed that there exist mismatches in the value of fixed assets as reflected in the records. The value shown in the fixed asset schedule at page no. 27 of the paper book, the balance sheet as on 31.03.2016 at page no.30 of the paper book and the figures reported in the ITR at page no.39 of the paper book do not tally. These discrepancies also impact the computation of the short-term capital gain under consideration. We have gone through para no.5 of the order of the Ld. CIT (A) which is to the following effect:

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“Building (Block-1) – Business” and has been consistently showing the same as a business asset in its fixed asset schedule forming part of the balance sheet. The assessee has claimed that the entire building was sold during the year; however, the fixed asset schedule reflects a closing balance of Rs.83,25,933/-as on 31.03.2017 under the same head. This clearly indicates that either only part of the building was sold or that the closing figures were not reconciled after the sale. Such inconsistencies raise questions not only regarding the classification of the asset as residential or business, but also regarding the computation of short term capital gain. It appears that the Ld. CIT(A) accepted the claim of the assessee without carrying out any factual verification or reconciliation of the closing balances. In our considered view, these discrepancies in the fixed asset figures, the inconsistent treatment of the building (residential vs. business), and the existence of a closing balance despite the claim of total sale, all require detailed examination and reconciliation at the assessment stage. The Ld. AO is the competent authority to verify the factual matrix, examine the classification of the asset, and re-compute the gain after considering the correct accounting position.
Accordingly, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the issue to the file of the Ld. AO for de novo adjudication. The Ld. AO shall verify whether the asset sold is a business asset forming part of the block of assets or a residential property, examine whether the entire building or only part thereof was sold during the year, reconcile the closing balance of Rs.83,25,933/- shown in the fixed asset schedule as on 31.03.2017 and ensure consistency of fixed asset figures appearing in the fixed asset schedule, balance sheet, and ITR. The ITA no 257 of 2022 Venkata Swamy Ravuri

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assessee shall be afforded due opportunity to furnish necessary evidence and explanations to substantiate its claim. Accordingly,
Ground No.6 raised by the Revenue is allowed for statistical purposes, and the issue is restored to the file of the Ld. AO for verification and fresh adjudication in accordance with law.
18. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 17th October, 2025. (VIJAY PAL RAO)
VICE PRESIDENT
Hyderabad, dated 17th October, 2025
* Reddy gp/sps
Copy to:
S.No Addresses
1
ACIT Circle 1(1) Room No.306, 2nd Floor, Aayakar Bhavan, KT
Road, Tirupati 517501
2
Shri Venkata Swamy Ravuri, R.V.S. Nagar, Tirupati Road,
Chittoor, 517127
3
Pr. CIT - Tirupati
4
DR, ITAT Hyderabad Benches
5
Guard File

By Order