PARVATHANENI PRAVEEN,KHAMMAM vs. INCOME TAX OFFICER, WARD-1, KHAMMAM

4 ITA.No.1271/Hyd./2025 4. We have considered the rival submissions and carefully perused the affidavit filed by the assessee as well as by the Chartered Accountant to explain the delay of 159 days. The relevant part of the affidavit filed by the assessee is as under:

“The assessment order for Asst. Year 2021-22 raising a demand of Rs.56,28,703/-was received on 23.12.2022. Immediately I contacted a chartered accountant at Hyderabad and he got the first appeal filed on 20.01.2023 through a tax consultant. Subsequently due to my financial difficulties I moved away from my native place Khammam, to a small private employment at Vijayawada I engaged a tax practitioner at Vijayawada to file my regular returns. I have no knowledge in operating the mails. Subsequently in the month of July 2025 my tax consultant at Hyderabad enquired me regarding proceedings before the Commissioner of income tax. He also informed that he wanted to verify the portal of my case and he could not approach it since the login credentials were changed. After obtaining the present login password from the consultant at Vijayawada I forwarded the same to my chartered accountant and he downloaded the CIT order and informed that the CIT has given notices to the mail ID "praveeneni@gmail.com" and dismissed the appeal in the absence of any proper reply. Immediately my chartered accountant at Hyderabad approached the consultant who filed the first appeal and got the appeal filed before the Hon'ble Income Tax Appellate Tribunal on 06.08.2025 causing a delay of 159 days.

5 ITA.No.1271/Hyd./2025 I am humbly submit that the entire delay is on account of lack of knowledge in operating the mail ID and the change of the password in between. Thus the delay is on account of unintentional and unavoidable circumstances.”

4.1. The reasons explained by the assessee in the affidavit are also corroborated by the Chartered Accountant who was handling the matter before the learned CIT(A) by filing his affidavit. Accordingly, in the facts and circumstances of the case and in the interest of justice the delay of 159 days in filing the present appeal is condoned.

5. The assessee has raised the following grounds of appeal:

3. The Learned CIT(A) is not justified in confirming the addition of Rs. 96,86,686/- towards long-term capital gains, as computed by the Assessing Officer by adopting the deemed consideration under Section 50C of the Income-tax Act, without appreciating that the land was agricultural in nature and the actual consideration received was only Rs. 25,00,000/-, 4. The Leamed CIT(A) is not justified in confirming the addition made by the Assessing officer towards Cash deposits made in the bank 6 ITA.No.1271/Hyd./2025 account of Rs.25,29,300/- as unexplained money u/s 69A, without appreciating the fact that these were made out of the agricultural income of the appellant's wife.

5. The Learned CIT(A) is not justified in confirming the addition made by the Assessing officer towards Other credits in the bank account of Rs.1,61,227/- as unexplained credits u/s 69A without appreciating the fact that these are received from his relatives and friends and are completely explainable.

6. The appellant craves, leave to add amend or alter any of the grounds at the time of the hearing of the appeal.”

6. Ground nos.1 and 2 are general in nature and does not require any specific adjudication.

7 ITA.No.1271/Hyd./2025 cannot be invoked for making the addition. The learned Authorised Representative of the Assessee referred to the submissions of the assessee before the Assessing Officer and submitted that the assessee produced the photograph to show that the mango, orchid grown on the said land evidencing that agricultural activities were going on there during the year 2020-2021 relevant to the assessment year under consideration and also approached the Agricultural Officer for obtaining a Certificate regarding the status and nature of the land during the relevant period. Therefore, once the agricultural land was used for agricultural activity no other agricultural activities were carried out, then, the valuation u/sec.50C of the Act ought to have been considered for agricultural land and not for non-agricultural land. Thus, the learned Authorised Representative of the Assessee has submitted that once the land in question is not a capital asset as per the provisions of sec.2(14) of the Act, then, the capital gain assessed by the Assessing Officer is highly arbitrary and not sustainable.

8 ITA.No.1271/Hyd./2025 9. On the other hand, the learned DR has submitted that there is no dispute that prior to sale of the land in question vide sale deed dated 17.07.2020 the assessee got converted these lands to non-agriculture use and therefore, at the time of transfer of the land the land was no more agricultural land and therefore, it was rightly valued by the Stamp Duty Authority and assessed to tax by the Assessing Officer. He has referred to the finding of the Assessing Officer and submitted that the assessee himself has converted the agricultural land into non-agriculture land and the Sub- Registrar has considered the stamp duty value of the property considering the status of the land as non-agricultural land then, the profit arising from the sale of the said land is assessable to tax under the Head “Capital Gain” and the same is not falling in the exception Clause of Sec.2(14) of the Act. Hence, the Assessing Officer has rightly assessed the long-term capital gains as per the provisions of sec.50C of the Act. He has relied upon the Orders of the authorities below.

10 ITA.No.1271/Hyd./2025 “Further, the relevant part submission filed by the assessee in respect of the above issue is reproduced as under: a) “I purchased a piece of agricultural land on 25.03.2013 vide document no. 1041 of 2013 for a consideration of Rs.5,81,000/- from Mr. V Kumaraswamy Naidu. The extent of land is 5.00 acres and the land is situated 1KM away from the village Madhavamala (about a population less than 1,000), Yerpedu Mandal, Tirupati District, Andhra Pradesh. b) I was not getting any net income from this agricultural land since the expense is almost equal to the sale proceeds of the produce. Therefore, I thought of doing something else to get income form this land. I applied for conversion of this land into non-agriculture. However, couldn't proceed further for my own reasons and I was continuing the agriculture activity to keep the known labour engaged. c) Finally I sold my land to the original owner (who sold the land to me) for a total consideration of Rs.25,00,000/- by two separate sale deeds on 17.07.2020. I sold the land for profit. The SRO applied the rates of non-agricultural land and demanded the payment of excess stamp duty. Myself and the purchaser, to avoid the delay in registration, made the payment and got the documents registered. In fact, the land even as on today is recorded as agricultural land only. A copy of Form-1B & Adangal in the name of Mr. V Kumaraswamy Naidu (latest owner) downloaded from the website is enclosed (Enclosure-3). Also, copy of Pattadharu Passbook in my name during my ownership enclosed (Enclosure-4). As per these documents the land is 'Nanja' (Wet Agriculture Land i.e., with water source). There is a big well attached to the land and 1/3 11 ITA.No.1271/Hyd./2025 cost of the well was also included in the consideration as can be seen from the sale deed. d) It is submitted that the land was an agriculture land when it was purchased and it continued to be agricultural land even on today. The mere application for conversion and sanction thereof cannot be treated as a real conversion into non-agriculture land since the land continued to be used for agriculture purpose only. e) It is therefore, submitted that the gain from the transfer of this land cannot be treated as capital gain under section 45 of Income Tax Act. And it is prayed that the proposal to tax the gain be dropped.

12 ITA.No.1271/Hyd./2025 response. The relevant reply of the assessee is reproduced as under: 1) Issue-01: Long Term Capital Gain: a) With regard to the transfer of Agricultural land, I invite your attention to my previous reply dated 07.12.2022, stating that I was not getting any net income from this agricultural land. However, I was continuing the agriculture activity to keep the known labour engaged. Therefore. I didn't show any agricultural income in my return of income filed for the respective years. b) I herewith enclose the latest photographs (Encl-1) of the mango orchids on the said land which evidences that agricultural activities were going on there during the year 2020-21 also. I have approached the Village Agriculture Officer (VAO) of the village where the land is located to give a certificate furnishing the status and nature of the relevant land during the relevant period whether there have been any agricultural activities or any other/commercial activities, on the relevant land. I will submit the certificate as and when it is received. c) I submit that the relevant land is clearly an agricultural land and is, therefore, not a capital asset, attracting capital gains. d) Since said land is agricultural land, it is submitted, it is not a capital asset and, therefore, I was not required to show any capital gain in the return of income. e) I cited in my earlier submissions, the decision of the Kamataka High Court in support of my claim (Sn. K.M. Bopanna (HUF) Vs DCIT, of 2017 of Honorable High Court of Karnataka). I once again submit that the relevant land was used for agricultural purposes at the time of purchase as well as at the time of sale and even now

13 ITA.No.1271/Hyd./2025 continued to be used for agricultural purposes only. It is, therefore, prayed that the Assessing Officer be pleased to consider my submission that the said land is not a capital asset, being an agricultural land, and drop the further proceedings towards addition under the head capital gains. f) As stated in my earlier submissions, I am working with a Private Organization located at Vijayawada and my family stays at Khammam, about 135 Kms distance from my work place. My working hours are very much more than a regular employee and my job requires always travelling to different places. I didn't check up my mails properly. In these circumstances I didn't see the earlier mails and couldn't respond to the earlier notices.” 10.1. Thus, the assessee claimed that though the land was converted into non-agricultural land, however, the assessee continue to carry out the agricultural operations on the said land and therefore, the assessee claimed that the land in question does not fall in the definition of “capital asset” as per the provisions of sec.2(14) of the Act. The Assessing Officer did not accept this explanation and contention of the assessee and given his findings at Page no.13 to 15 of the assessment order as under:

“The submissions made by the assessee are carefully perused. However, the same are not acceptable for the reasons discussed as under:

14 ITA.No.1271/Hyd./2025  There is no dispute that the assessee himself has converted the agricultural land into non-agricultural land. Also, the Sub Registrar has considered the Stamp Duty Value of the property considering the land as non-agricultural land. Therefore, the immovable property is in the nature & character of non-agricultural land only.  The assessee has paid the stamp duty value considering the land as non-agricultural land only. Further, the assessee has not submitted any evidences which show that assessee raised any dispute before Stamp Valuation Authority against charging of Stamp Duty considering the land as non- agricultural land.  The assessee has not submitted evidences in support whether any agricultural activities were commenced by the assessee on such property during the year under consideration or before the sale of property.  The assessee has not shown any exempt income in his return of income filed related to above transaction even considering the said land as agricultural land.  The assessee has not claimed any exemption & deduction against capital gain in his return of income filed.  The assessee has not shown any agricultural income in his return of income filed for AY 2021-22, AY 2020-21, AY 2018- 19 etc.  The assessee has not even disclosed the transaction in his return of income filed.  The assessee has not shown any agricultural income even for tax rate/slab rate purpose.  The assessee has not submitted any documentary evidences in support of receipt of agricultural income and 15 ITA.No.1271/Hyd./2025 has not submitted any evidences in support of agricultural expenditure incurred.  No materials has been produced by assessee to show that he was carrying on agricultural activities in land except producing Chitta and Adangal for relevant year and moreover, relevant columns in Adangal with regard to crop and extent were left blank.  The definition of capital asset is defined in section 2(14) of Income tax Act wherein, sub section (iii) specifically excludes the agricultural land in India from the definition of capital asset. The provisions of section 2(14)(iii) of IT Act, starts with words 'agricultural land in India ....... Nowhere in section 2(14) it is mentioned that non-agricultural land is not a capital asset. Therefore, non-agricultural land in India is nothing but a capital asset.  The facts of the present case are distinguishable with the case law relied upon by the assessee.  The Honble High Court of Gujrat in the case of Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608 (Guj.) had held that whether land is agricultural land or not cannot depend on the fluctuating or ambulatory intention of the owner of the land. The criterion must be something more definite, something more objective, something related to the nature or character of the land and not varying with the intention of the owner as to the use to which he wants to put the land at a particular point of time.  The Hon'ble Supreme Court in case of CWT v. Officer-in- Charge (Court of Wards) [1976] 105 ITR 133 (SC) have held that 'Agricultural land' is only a species of land. Simply because it has not been defined in the Wealth-tax Act, it is not correct to give the expression as wide a meaning as 16 ITA.No.1271/Hyd./2025 possible, since widest possible connotation, if given, will include all land, even that covered by buildings, as 'agricultural land'. The object of Wealth-tax Act is to tax surplus wealth. It is clear that all land is not excluded from the definition of 'assets'. It is only 'agricultural land' which can be exempted. Therefore, it is imperative to give reasonable limits to the scope of the 'agricultural land'. Accordingly, if there is neither anything in its condition nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be 'agricultural land for the purpose of earning an exemption under the Act. In view of the above, the claim of the assessee that the gain from the transfer of this land cannot be treated as capital gain under section 45 of Income Tax Act, is not acceptable. Accordingly, the LTCG on sale of such non-agricultural land is worked out as under: Full value of Sale consideration of land sold vide Sale Deed No. 1949/2020 & 1950/2020 dated Rs.98,69,000 17.07.2022, as per 50C of IT Act (Rs.63,45,000+ Rs.35,24,000) Less: Indexed Cost of acquisition of part land sold Rs. 1,82,314 (Rs.5,81,000 (2.36/5.00)*(200/301) Long term capital gains Rs.96,86,686

In view of the above, Long-Term Capital gain of Rs.96,86,686/- on sale on non-agricultural land is hereby added back to the total of the assessee. Penalty proceedings u/s 270A of the IT Act is initiated for under- reporting and misreporting of income as the assessee has failed to 17 ITA.No.1271/Hyd./2025 declare the LTCG which has resulted in increase of assessed income to such extent and also, the assessee has misrepresented or suppressed the fact by way of not showing any transactions in his ITR filed.”

10.2. The learned Authorised Representative of the Assessee has reiterated the contention as raised before the Assessing Officer. However, we find that once the land was converted into non-agricultural land by the assessee himself before the transfer of the lands in question, then, the land lost its character of agricultural land. Even otherwise for the purpose of transferring the land, the value and price is paid by the buyer as per the potential use of the land and not for the activities which were carried out by the assessee before the transfer of the land. Merely carrying out the agricultural activity on a non-agricultural land would not change the character of the land as agricultural land. Therefore, once the land was undisputedly converted into non-agricultural land before transfer by the assessee, then, the same would not fall in the exception Clause of definition of capital asset under sec.2(14) of the Act. For ready reference, sec.2(14)(iii) is reproduced as under:

18 ITA.No.1271/Hyd./2025

“Capital Asset means- (iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or (b) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.”

10.3. Therefore, as per the definition of the “capital asset” even an agricultural land if situated in the area and jurisdiction of a municipality, municipal corporation, notified area committee, town area committee, town committee, or a cantonment board is also considered as capital asset.

19 ITA.No.1271/Hyd./2025 Further, agricultural land situated in an area within a distance from 2 KM to 8 KM from the local limits of any municipality or cantonment board is also considered as capital asset despite being agricultural land. Therefore, there is no scope of non-agricultural land not falling in the definition of “capital asset” as per sec.2(14)(iii) of the Act. Even otherwise, this sec.2(14) does not provide any such condition for agricultural land but it provides the definition of a “capital asset” excluding the agricultural land satisfying the conditions provided therein. Therefore, the meaning of agricultural land will be taken as it is understood by a man of ordinary prudence and therefore, after conversion of an agricultural land to non-agricultural land it would not be considered as agricultural land and hence, the same would not fall in the exception Clause of ‘capital asset’ u/sec.2(14)(iii) of the Act. Accordingly, we do not find any substance or merit in ground no.3 of assessee’s appeal. The same is dismissed.

20 ITA.No.1271/Hyd./2025 11. Ground no.4 is regarding the addition made u/sec.69A of the Act on account of cash deposit in the bank account of the assessee.

21 ITA.No.1271/Hyd./2025 13. Before the Tribunal, the learned Authorised Representative of the Assessee has reiterated his contentions that the cash was deposited as it was available with the wife of the assessee being agricultural income from the agricultural lands to the extent of 18.24 acres at Nelakondapalli (V) of Khammam District, State of Telangana. He has further submitted that the copies of pattadar passbook were filed before the Assessing Officer to show the agricultural operations on these lands. Thus, the learned Authorised Representative of the Assessee has submitted that ignoring the documentary evidence, the addition made by the Assessing Officer is highly arbitrary and unjustified.

“(A) As can be seen above in Table-1, it is noticed that the assessee had deposited cash of Rs.24,79,300/- into SBI Bank a/c 32934049607 as against Rs.29,79,300/- reported in Form-61A and deposited cash of Rs.50,000/- into Union Bank a/c

23 ITA.No.1271/Hyd./2025 150410100076541. As discussed above in detail, multiple opportunities were given to the assessee to explain the sources of cash deposited into bank accounts. However, the assessee had failed to substantiate the sources of cash deposits into his bank accounts. Further the cash withdrawal cannot be considered as sources of such cash deposited as assessee require cash for its day to day & routine household expenses also. Since, the assessee has filed the return of income in Form-ITR-1 Sahaj and has not maintained any books of account, said unexplained cash deposits into bank account totalling to Rs.25,29,300/- was proposed to be added back to the total income of the assessee as unexplained money u/s 69A r.w.s. 115BBE of the IT Act. Accordingly, Show Cause Notice u/s 1448(1)(xii)(b) of the IT Act was issued to the assessee on 11.12.2022 requesting the assessee to submit response on or before 18.12.2022. In response, the assessee submitted his reply on 17.12.2022. The relevant part of the reply is reproduced as under: These deposits were made out of cash available with my wife, Mrs. R Bhavani Devi. In fact, these amounts were transferred to our close relatives. My wife has fertile agricultural land to the extent of 18.240 Acres at Nelakondapalli Village, Khammam District, Andhra Pradesh. Copies of passbooks are enclosed (Encl-6). Agricultural operations on these lands are being done under our own supervision." The reply furnished by the assessee is carefully perused. However, the same is not acceptable for the following reasons:  The assessee has submitted only some passbook of his wife but the assessee has not submitted any documentary

24 ITA.No.1271/Hyd./2025 evidences which prove that his wife has offered the agricultural income in her ITR filed.  The assessee has not submitted any documentary evidences to prove that her wife has given the cash to him without depositing the same into her own bank account. The assessee has not submitted bank account statements of her wife to strengthen such facts.  The assessee has not given any documentary evidences or any confirmation that he or his wife has transferred the amount to relatives and received back. In view of the above, it is concluded that the assessee has failed to substantiate the sources of cash deposits into his bank account to the extent of Rs.25,29,300/-. Therefore, said unexplained cash deposits into bank account totalling to Rs.25,29,300/- is hereby added back to the total income of the assessee as unexplained money u/s 69A r.w.s. 115BBE of the IT Act. Penalty proceedings u/s 271AAC of the IT Act is initiated in respect of income determined of Rs.25,29,300/- under section 69A of the IT Act read with section 115BBE of the IT Act, as discussed above in detail.”

15.1. Thus, it is clear that the Assessing Officer has considered the total deposits in the bank account of the assessee and also given reasons for not accepting the source of the said cash as explained by the assessee for want of relevant documentary evidence to substantiate the claim. Before the learned CIT(A) the assessee did not participate as 25 ITA.No.1271/Hyd./2025 no compliance was made in response to the various notices issued by the learned CIT(A). Even before the Tribunal, the assessee did not produce any documentary evidence to show that the wife of the assessee has actually earned agricultural income and the same was not utilized or deposited other than in the bank account of the assessee. The Assessing Officer has specifically raised the question about the non-production of documentary evidence in the shape of the bank account statement of the wife of the assessee as well as other documentary evidence in respect of agricultural income earned by the wife of the assessee. In the absence of any documentary evidence even before us, we do not find any reason to interfere with the Orders of the authorities below. Accordingly, the addition made by the Assessing Officer is confirmed.

26 ITA.No.1271/Hyd./2025 to Rs.1,61,227/- being transfer from friends and relatives towards hand loan obtained and repayment of loans obtained earlier by them. The assessee was not able to reconcile these transactions during the assessment proceedings. However, the assessee may be given one more opportunity to explain these credits in the bank account.

“(B) As can be seen above in Table-1, the total credits into both the bank accounts of the assessee is totalling to Rs.70,35,280/-, After reducing sale consideration of immovable property received into bank a/c, Salary credited to bank a/c, Cash Deposits into bank a/c, LIC & GIC receipts into bank a/c, Interest and Balance B/f, it is noticed that still the other credits to the extent of Rs.1,61,227/- is not getting reconciled. As discussed above in detail, multiple opportunities were given to the assessee to explain

27 ITA.No.1271/Hyd./2025 the other credits into bank accounts. However, the assessee had failed to substantiate the sources of other credits into his bank accounts. Since, the assessee has filed the return of income in Form-ITR-1 Sahaj and has not maintained any books of account, said unexplained other credits into bank account totalling to Rs.1,61,227/- was proposed to be added back to the total income of the assessee as unexplained money u/s 69A r.w.s. 115BBE of the IT Act. Accordingly, Show Cause Notice u/s 144B(1)(xii)(b) of the IT Act was issued to the assessee on 11.12.2022 requesting the assessee to submit response on or before 18.12.2022. In response, the assessee has submitted his reply on 17.12.2022. The relevant part of the reply is reproduced as under: *.....there were some other credits to the extent of Rs.1,61,227/- which you have stated that these were not getting reconciled. All these credits were made through banking channel only. Many of them are receipts or transfers from friends and relatives towards hand loans obtained or repayment of loans obtained earlier by them. I couldn't immediately identify and reconcile some of the transactions. I will try to gather the details and submit the reconciliation statement." The reply furnished by the assessee is carefully perused. However, the same is not supporting the sources of aforesaid other credits. The assessee has not submitted any confirmation from any of his friends & relative for receipt of such amount into his bank account. Hence, it is concluded that the assessee has failed to substantiate the sources of other credits into his bank account to the extent of Rs.1,61,227/-. Therefore, said unexplained other credits into bank account totalling to Rs.1,61,227/- is hereby added back to the total

28 ITA.No.1271/Hyd./2025 income of the assessee as unexplained money u/s 69A r.w.s. 115BBE of the IT Act. Penalty proceedings u/s 271AAC of the IT Act is initiated in respect of income determined of Rs.1,61,227/- under section 69A of the IT Act read with section 115BBE of the IT Act, as discussed above in detail.”

19.1. Thus, it is clear that the assessee could not explain and reconcile these transactions during the assessment proceedings resulting in the addition made by the Assessing Officer. Even before us, the assessee has not furnished any details or other explanation to reconcile these transactions as well as nature of these transactions. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the Order of the Assessing Officer qua this issue. The same is upheld.