KOTESWARA RAO MALLEBOYINA,ANDHRA PRADESH vs. INCOME TAX OFFICER, WARD-2, ONGOLE

(निर्धारण वर्ा/Assessment Year:2016-17) Shri Koteswara Rao Malleboyina, Income Tax Officer, Vs. Ward-2, Ongole. Andhra Pradesh. PAN: ANGPM7416D (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Ms. Jyothisri Vankina, Advocate रधजस् व द्वधरध/Revenue by: Ms. Vishnu Priya, SR-DR सुिवधई की तधरीख/Date of hearing: 05/03/2025 घोर्णध की तधरीख/Pronouncement: 11/03/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Koteswara Rao Malleboyina (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 22.11.2024 for the A.Y. 2016-17.

2.1 After hearing the Learned Department Representative (“Ld. DR”) and pursuing the reason submitted by the assessee, we are of the opinion that there was reasonable cause behind the delay in filing of the appeal before ITAT. Therefore, we do condone the delay of 8 days and admit the appeal for adjudication.

4. The brief facts of the case are that, the assessee is an individual deriving income from sale of agriculture produce. The assessee has not filed any Return of Income (“ROI”) for the year under consideration. On the basis of information available, the Learned Assessing Officer (“Ld. AO”) came to know that the assessee had acquired an immovable property for Rs.26,23,000/- on 10.06.2015. As the assessee had not filed any ROI, the Ld. AO reopened the case of the assessee u/s.147 of the Income Tax Act, 1961 (“the Act”) and issued notice to the assessee u/s.148 of the Act. In response to the notice issued u/s.148 of the Act, the assessee filed his ROI on 02.12.2018 declaring net agriculture income of Rs.27,26,493/- and interest income from bank of Rs.2,147/-. After filing of ROI by the assessee, the Ld. AO issued notice u/s.143(2) of the Act and finally completed the assessment u/s.143(3) r.w.s. 147 of the Act on 27.12.2019 making addition of Rs.12,43,750/- on account of Short Term Capital Gain (“STCG”) on sale of immovable property.

5. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of the assessee.

6. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld. AR submitted that, the assessee had purchased one immovable property from Dabbugottu Srinivasulu (“seller”) on 10.06.2015 for Rs.26,23,000/-. On the same property, one civil suit was going on between the seller and Shri Chandra Shiva Shankar. The seller had entered into an agreement to sale with Shri Chandra Shiva Shankar for the same property prior to date of purchase by the assessee. For the settlement of the dispute between the seller and Shri Chandra Shiva Shankar, the assessee had to pay settlement amount of Rs.10 lakhs to Shri Chandra Shiva Shankar. In support of their submission, the Ld. AR invited our attention to the court documents placed at page nos.4 & 5 of the order of Ld. AO and further submitted that, it has been clearly mentioned in the court case status record that, the suit for specific performance filed by Shri Chandra Shiva Shankar has been dismissed due to settlement made outside the court. The Ld. AR further submitted that, as the assessee had to pay Rs.10 lakhs for the settlement and clear title of the immovable property, the same should be considered as a cost of acquisition. Further, the assessee had incurred Rs.2,50,000/- towards litigation expenses. Accordingly, the total cost of the immovable property to the assessee was Rs.40,06,250/-, the details of which are captured at page no.3 of the order of Ld. AO as under :

6.1 The Ld. AR further submitted that, the assessee had sold the same immovable property on 25.01.2016 for Rs.40 lakhs. Accordingly, the assessee claimed a loss of Rs.6,250/- before the Ld. AO on account of sale of immovable property. However, the Ld. AO did not allow the claim of Rs.10 lakhs and Rs2,50,000/- on account of settlement amount paid to Shri Chandra Shiva Shankar and litigation expenses respectively, due to the reason that the immovable property was registered on 10.06.2015, however, the settlement amount was paid on 24.06.2015 i.e. after the date of purchase of immovable property. Accordingly, the Ld. AO calculated the STCG at Rs.12,43,750/-. The Ld. AR further submitted that, the assessee had filed receipt of Rs.10 lakhs from Shri Chandra Shiva Shankar before the Ld. AO. However, without considering the same, the Ld. AO did not allow the same. The Ld. AR further submitted that, all the details were filed before the Ld. AO on 19.12.2019 and after their submission, without calling any explanation from the assessee, the Ld. AO passed the order on 27.12.2019. Accordingly, without providing any final opportunity, the addition has been made by the Ld. AO. Finally, consolidating all their grounds, the Ld. AR requested before the bench to remand the issue to the file of Ld. AO so that the assessee can explain their case before the Ld. AO and prosecute the same on merits.

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---Space left intentionally-- 8.1 On perusal of above, we found that, it is not in dispute that litigation was going on with regard to the property. We also found that, a court case was there between Shri Chandra Shiva Shankar (to whom settlement amount was paid) and the seller. It is also found, that the court has dismissed the suit on account of settlement outside the court. Therefore, it cannot be denied that there was a dispute and the same was got settled outside the court. We also found that, the Ld. AO has mentioned at para no.3.3 (d) and (e) that, the details of Shri Chandra Shiva Shankar and the details on account of litigation expenses has not been furnished by the assessee. In the absence of the said details, the Ld. AO has made the additions in the hands of the assessee. However, the assessee is ready to furnish the necessary details / evidence before the Ld. AO to prosecute their case on merits, for which he could not get adequate opportunity. Therefore, in the interest of justice, we remand the issue back to the file of Ld. AO with a direction to call and verify all the relevant documents / evidences from the assessee and decide the issue as per law. The assessee is also required to submit all the necessary documents / evidences before the Ld.

AO without seeking any adjournment. The grounds of the assessee are disposed of accordingly.