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Facts
The assessee claimed exemption for capital gains on land acquired by NHAI under Section 10(37) and also questioned the computation of capital gains. Additionally, the assessee disputed additions made on account of unexplained cash deposits and sought a deduction under Section 80C for tuition fees.
Held
The Tribunal held that the assessee had a legitimate claim for exemption regarding capital gains, but the facts needed verification. The Tribunal also restored the issues of capital gains computation, unexplained cash deposits, and Section 80C deduction back to the Assessing Officer for fresh adjudication.
Key Issues
Whether capital gains from agricultural land acquired by NHAI are exempt. Whether the computation of capital gains, additions for unexplained cash deposits, and denial of Section 80C deduction were justified.
Sections Cited
10(37), 80C, 250
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SMT. ANNAPURNA GUPTA, AM vk;dj vihy la-@ITA No.877/JPR/2025
fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke Tejpal Singh, Income Tax Officer , Vs. Village Post Bhopatpura, Ward Neem Ka Thana Via Reengus, Jaipur Road, Sikar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHVPS 3117 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Vedant Gupta, Advocate jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 23/12/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31/12/2025 vkns'k@ ORDER PER: ANNAPURNA GUPTA, AM
The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax, Appeal (ld. CIT(A)), ADDL/JCIT (A), Aurangabad, under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “Act”).
Ground No.1 raised by the assessee reads as under:-
On the facts and circumstances of the case and in law also Ld. Lower authorities grossly erred in making and confirming addition of Rs 99,977/- under the head income from Long Term Capital.
The issue raised in the above ground pertains to addition made to the income of the assessee under the head ‘long term capital gain’ amounting to Rs.99,977/-. The impugned capital gain was computed with respect to three plots of land measuring 260 per sq. meters which were acquired by National Highway Authority and compensation amounting to Rs.5,89,563/- received by the assessee during the impugned assessment year. Learned counsel for the assessee contended before me that the capital gain earned on this land acquired by NHAI was exempt in terms of provision Section 10 sub-Section (37) of the Act. He drew my attention to the relevant provision of Section 10(37) of the Act as under:-
Incomes not included in total income.
In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— ……………………………. (37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where— (i) …………………….. (ii) ………………… (iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; (iv) …………………………….
He contended that the AO had recorded as a matter of fact that the land was compulsorily acquired by NHAI. In this regard he drew my attention to para 4 of the assessment order recording the said fact. He further contended that the assessee had filed copies of purchase deeds of these lands reflecting the same to be agricultural lands. He drew my attention to Page 1 to 12 of the paper book filed before me being the copy of purchase deeds reflecting lands as agricultural lands. He contended that in the light of the provision Section 10(37) and the fact of the assessee having complied with these conditions on record the assessee was entitled to claim the entire income as exempt. He fairly pointed out that this claim had never been raised by the assessee to the authorities below and was being raised for the first time before me but he contended that the facts already being on record the assessee was entitled to raise the claim as per law.
The ld. DR objected to the contention of the learned counsel for the assessee stating that the claim had been raised for the first time before me but he fairly conceded that all facts relating to the claim as pleaded by the assessee were on record and he stated that the matter may be restored back to the file of AO for reconsideration in the light of the pleadings made by the Ld. Counsel for the assessee ,after verifying all facts.
Having considered the rival contentions the claim of the learned counsel for the assessee before me is that the capital gain earned by the assessee during the impugned year was on account of sale of land which was compulsorily acquired by the Government and was an agricultural land. The entire capital gain earned on the same being eligible for exemption u/s. 10(37) of the Act.
The position of law, as pointed out by the learned counsel for the assessee before me, of exemption of capital gains earned on compulsorily acquisition of agricultural land in terms of provision Section 10(37) of the Act, is not disputed by the ld. DR.
The fact of the land having been acquired compulsorily by the Government has been pointed out to have been noted by the AO. The learned counsel for the assessee has also pointed out that he had placed copies of purchase deed reflecting the land to be agricultural in nature.
In the light of the same, I agree with the learned counsel for the assessee that he had a legitimate claim for exemption of the impugned income, but at the same time, the facts relating to the issue need verification at the end of the AO, since they have not been examined by him in the light of the present pleading made by the assessee.
In view of the same I restore the issue back to the file of the AO with the direction to examine the eligibility of the assessee’s claim to exemption of the capital gains earned by it u/s. 10(37) of the Act. I may add that the assessee be granted due opportunity of hearing.
10. The assessee has raised another contention before me stating that in the alternate, the computation of capital gains by the AO was incorrect. He drew my attention to the computation of capital gains by AO reproduced at para 2 of the assessment order:-
He pointed out that the AO had estimated the cost of construction on the plots of land at 350 per sq. feet without any basis at all. He contended that before the ld. CIT(A) the assessee had pleaded that as per the PWD rates, the rate of construction should be taken at 500 per sq feet. He drew my attention to the submissions made in this regard to the ld. CIT(A) reproduced at page 8 of the ld. CIT(A) order as under:-
‘Sir we are submitting herewith the copy of PWD Standing order No. X-3/2006. (At paper book page 17 to 20) According to this circular for RCC frame structure, the rates of ground floor without basement construction is Rs. 4000/- per sq meter and if addition is made @3.5% for electric installation, @7% for sanitary fitting, @3% for water supply and @ 5% for flooring, the rates comes to Rs.4740/- per sq meter i.e. (4740/10.764) Rs.440.36/- per sq feet and it does not include wooden work for doors and window etc. Therefore the rate of construction should be taken @ Rs. 500/-per sq. feet’
He pointed out that ld. CIT(A) had completely ignored the contention of the assessee and pleaded that on this aspect also the matter be restored back to the file of the AO. The ld. DR fairly conceded to the facts as pleaded by the learned counsel for the assessee before me.
In the light of the above, the alternate argument of the assessee, that the cost of construction having been incorrectly computed by the AO, the said issue is also restored back to the file of the AO to be considered afresh in the light of the contentions raised by the learned counsel for the assessee.
In view of the above, the issue of addition made and confirmed in the income of the assessee on account of long term capital gains, is restored back to the file of the AO to be re-determined in the light of the directions as above.
Hence, ground of appeal No.1 raised by the assessee is allowed for statistical purposes.
Ground of Appeal No.2 reads as under:-
2. On the facts and circumstances of the case and in law also Ld. Lower authorities grossly erred in making and confirming addition of Rs 3,32,600/- on account of cash deposits in bank account.
16. The issue raised in the above ground relates to addition made to the income of the assessee on account of cash found deposited in his bank account, source of which remained unexplained, amounting to Rs.3,32,600/-. Learned counsel for the assessee pointed out that during the impugned year cash deposit in his saving bank account with SBI was Rs.10.70 lacs out of which the AO had made addition of Rs.3,32,600/- being the peak credit in the said account after giving benefit for household withdrawals and on the basis of alleged admission of the assessee to the same. He drew my attention to para 5.2 of the assessment order noting as above.
5.2 To verify the submission of the assessee, on being asked, the assessee could not furnish details of the persons to whom the sum was claimed to have been given as advance/ loan, etc. Further, the transactions in his bank accounts were perused and it was noticed that the assessee had withdrawals during last 4-5 months of FY 2012-13 and several other withdrawals from SB a/c held with SBI and BOB. Hence, taking into account the house hold drawings @ Rs. 14,000/- per month as agreed to by the assessee himself and found satisfactory looking to the status of the assessee, peak credit in the SBI a/c No. 30667190668 was worked out which stood at Rs. 3,32,600/-. The assessee was apprised that the said amount is liable to be added as his income from unexplained sources. The assessee after discussion, agreed with the said addition by way signing on the note sheet as well as by writing with own hand in this regard on the note sheet with the request not to initiate penalty proceedings as he wanted to avoid any litigation and to purchase peace of mind.
The ld. CIT(A), he pointed out rejected the peak credit theory, but at the same time confirmed the order of the AO. He drew my attention to para 8.3 of the ld. CIT(A) order as under:-
‘8.3 Further, the appellant had raised the ground that Assessing Officer had erred in making addition of Rs.3,32,600/- on account of income from unexplained sources. On going through the submission of the appellant and assessment order, it is crystal clear that appellant is Government Employee and has salary income where salary is credited into the bank account. Therefore, the source of generation of cash is not possible. On going through the bank account statement No.3066719066/-maintained with State Bank of India for the year under consideration, it is seen that appellant had made cash deposit of Rs.10.70 Lakh in saving bank account. The Assessing Officer had gone through the submission of the appellant furnished during the course of assessment proceedings and considered all withdrawal and came to conclusion that amount Rs.3,32,600/- is without any prove. Further, on going through the bank account statement, it is apparent that appellant is continuously withdrawing cash from bank account and depositing more amounts after 2-3 days. In support of this extract of copy of bank account of SBI is incorporated as under:
From the above extract, it is clear that appellant is self depositing cash in the bank account. The appellant had failed to produce source of such cash generation during the course of assessment proceedings and now appellate proceedings. The claim of the appellant that the cash deposited is out of previous withdrawal is without any documentary evidence as Assessing Officer has already given the credit of such cash flow statement. In view of the facts, the ground of appellant is devoid of any merit. In the light of the facts, the action of the Assessing Officer does not warrant any interference. Hence, the same is confirmed.
Learned counsel for the assessee pleaded that, it was pointed out to ld. CIT(A) that the calculation of peak credit in the case of assessee was completely incorrect and he had filed a fresh cash flow statement pointing out that no addition was warranted on account of cash deposits in his bank account even after applying the peak credit theory. He further contended that it had been pleaded that there was no admission or agreement by the assessee on the addition to be made on this aspect. In this regard, he drew my attention to the submissions made before the ld. CIT(A) reproduced at page 8 and 9 of the order as under:-
G.O.A. NO. 2 & 5:- UNLAWFUL ADDITION OF RS. 3,32,600/-ON ACCOUNT OF INCOME FROM UNEXPLAINED SOURCE:- Sir, Ld Assessing Officer has also made the addition of Rs. 3,32,600/- on account of unexplained cash deposits in the bank. As per him the total cash deposit was of Rs. 10.70 lacs in the saving bank account no. 30667190668 with SBI.
At the very outset this information is factually incorrect as the actual cash deposit was of Rs. 9.55 lacs only. Moreover the cash deposits were made out of withdrawals made either from same account or from the account of Bank of Baroda, where salary payments are received by the assessee.
Sir, the assessee is in Govt service since last more than 25 years and is filling income tax return in time. We are submitting a cash flow statement at paper book page 14 to 16 along with copy of bank account with SBI & Bank of Baroda at paper book page 1 to 13.
Sir, all these documents will satisfy your honour that even if the withdrawals made from March 2012 to June 2013 are considered and household expenses @of Rs. 14000/- per month as estimated by Ld Assessing Officer are deducted out of cash withdrawals from bank accounts, the cash balance available with the assessee as on Ist of July 2013 comes to Rs. 3,90,000/-which covers the alleged deposit of Rs 3,32,6001/-
Sir, thereafter we have submitted a cash flow statement, where all the deposits in bank account have been reduced and cash withdrawals made out of bank account have been added at paper book page 14 & 15. Perusal of these papers will satisfy yourhonour that the entire deposit in the bank account have been made out of cash withdrawals from the salary account of the assessee
Sir, it is unfortunate that Ld Assessing Officer did not give the credit of the fact that a salaried person of having track of more than 25 year of service can save a sum of Rs. 3,32,600/- In the name of agreed addition, the addition has been made unlawfully because no such agreement was made by the assessee and alleged signature were taken on blank paper without explaining any details, nature and quantum of addition Sir, even the addition which are not permitted in law and are not fit on facts of the case cannot and should not be made, simply in the name of agreed additions. Moreover Ld Assessing Officer himself has mentioned that the alleged agreement was subject to request not to initiate penalty proceedings and Ld Assessing Officer has initiated penalty proceeding. Therefore also the alleged agreement is bad in law and is not binding upon the assessee. Assessee also filed the appeal accordingly.
Learned counsel for the assessee has contended that ld. CIT(A) had completely ignored contentions of the assessee and had also confirmed the order of the AO despite having rejected the peak credit theory applied by the AO. He pleaded the issue to be restored back to the file of the AO for reconsideration in the light of the factual submissions made before the ld. CIT(A) regarding the source of cash deposit in the bank account of the assessee being fully explained and no addition being warranted even after applying the peak credit theory.
The ld. DR though relied on the order of ld. CIT(A), but he was unable to controvert the contention of the learned counsel for the assessee that the pleadings of the assessee before the ld. CIT(A) were not considered by him at all and that he had confirmed the order of the AO despite having rejected the peak credit theory applied by him.
In the light of the above, I agree with the learned counsel for the assessee that the ld. CIT(A) has not adjudicated the issue in the proper light of the facts before him. I, therefore, restore this issue also back to the file of the AO to be reconsidered afresh after giving due opportunity of hearing to the assessee.
Ground of appeal No.2 stands allowed for statistical purposes.
Ground of appeal No.3 reads as under:-
3. On the facts and circumstances of the case and in law also Ld. Lower authorities grossly erred in not allowing deduction of Rs 11020/-under section 80C of the Act.
The issue relates to denial of grant of deduction u/s. 80C of the Act amounting to Rs.11,020/-. Orders of the authorities below reveal that the deduction had been claimed on account of tuition fees of the assessee’s children paid by him. The deduction had been denied for want of evidence. Learned counsel for the assessee pleaded before me that,the assessee was a salaried employee working with the Department of Agriculture as a Supervisor and as evidence of payment of tuition fees of his children, he had furnished Form No.16 of the employer, wherein the assessee had been given deduction on account of this payment u/s. 80C of the Act, while determining the tax to be deducted at source on the income earned by the assessee. He contended that the assessee was unable to procure evidence of payment of tuition fees from the school itself, despite repeated efforts made by him, and the grant of claim of deduction by the employer of the assessee was sufficient evidence of having paid the tuition fees of the children.
Ld. DR on the other hand, relied on the orders of the authorities below stating that the onus was on the assessee to prove the genuineness of claim of tuition fees paid by the assessee for claim deduction u/s. 80C of the Act and having failed to discharge the same the deduction had been rightly denied by the ld. CIT(A).
I have considered the rival submission and I am of the view, that this issue also needs reconsideration at the end of the AO. It is not denied that in the TDS Certificate furnished to the assessee by his employer, the employer had noted the assessee to have paid tuition fees for granting him deduction u/s. 80C of the Act. The assessee has pleaded that he was unable to gather any other direct evidence in this regard. In the light of the same, I am of the view that the AO ought to have conduct inquiries from the employer regarding the basis on which the deduction had been granted to the assessee, and only thereafter, ought to have proceeded to decide the issue. In the light of the same, this issue is also restored back to the file of the AO to make necessary inquiries regarding the claim of deduction u/s. 80C of the Act and thereafter, adjudicate the issue in accordance with law.
Ground of appeal No.3 is allowed for statistical purposes.
In effect appeal of the assessee is allowed for statistical purposes.
The order to be pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice Board.