MR. GUJJARAIAH LAKSHMINARAYANA,BANGALORE vs. INCOME TAX OFFICER, WARD-7(2)(4), BANGALORE

We heard the parties and perused the record. The A.O. of the assessees herein received information from Joint Director of Income Tax (Intelligence & Criminal Investigation, Bengaluru that these assessees along with other family members have sold a property situated at Chunchanakuppa village, Tavarekere Hobli, Bangalore South Taluk. It was noticed that the said property was an agricultural land and these parties have converted the land and sold it on 9.2.2010. These assessees received a to 2713/Bang/2018 Mr. Chikkaveerayya Chikkanna and others, Bangalore sum of Rs.70 lakhs each as their share in sale of property. Since these assessees have not filed return of income, the A.O. issued a notice u/s 148 of the Income-tax Act,1961 ['the Act' for short]. Thereafter, the A.O. issued notice u/s 142(1) of the Act asking the assessee to file return of income. Since there was no response from the assessees, the A.O. concluded assessment in the hands of each of the assessees by assessing the amount of Rs.70 lakhs.

Before Ld. CIT(A), the assessees furnished documents in support of the receipt of Rs.70 lakhs each, but the Ld. CIT(A) refused to admit these evidences by citing Rule 46A of the Income tax Rules. Accordingly, he confirmed the addition made by the A.O. in the hands of each of the assessees. Aggrieved, the assessees have filed these appeals before us.

The Ld. A.R. submitted that these assessees have sold agricultural land and hence they did not file return of income. However, the A.O. has concluded the assessment by assessing entire sale consideration, even though he was aware that the land sold by the assessees was agricultural land. In any case, the AO has not allowed deduction towards indexed cost of land. These assessees have invested the amounts in purchase of residential property and hence, even if the claim of exemption is to 2713/Bang/2018 Mr. Chikkaveerayya Chikkanna and others, Bangalore denied, they are eligible for deduction u/s 54F of the Act. Accordingly, he submitted that the additional evidences furnished by the assessees before Ld. CIT(A) may be admitted and the matters may be restored to the file of the A.O. for examining it afresh.

The Ld. D.R., on the contrary, submitted that these assessees have not co-operated before the A.O. and did not file returns of income also. Hence Ld. CIT(A) has refused to admit additional evidences. Accordingly she opposed the prayer of the Ld A.R.

Having heard the rival contentions, we are of the view that, in the interest of natural justice, these assessees should be given an opportunity to present their case before the A.O. Since the assessments have been done u/s 144 of the Act, there was no opportunity for these assessees as well as for the AO to complete the assessment on the basis of correct facts. As rightly pointed out by the Ld A.R, the A.O. has assessed the entire sale consideration, even though he is aware of the fact that the sale consideration was received on sale of a land. Though the character of land is in dispute, yet the A.O. should have computed capital gain instead of assessing entire sale consideration if he has not accepted the character of land as agricultural land. The assessees to 2713/Bang/2018 Mr. Chikkaveerayya Chikkanna and others, Bangalore are also making an alternative plea for deduction u/s 54F of the Act. We notice that none of these factual aspects could be examined by the A.O. Accordingly, we set aside the order passed by Ld. CIT(A) in the hands of the assessees herein and restore all the issues to the file of the A.O. for examining them afresh in accordance with law. The assessees are also directed to fully cooperate with the A.O. by furnishing all the information and explanations that may be called for by the A.O.

In the result, the appeals filed by the assessees are treated as allowed for statistical purposes.