DCIT, Cental Circle-4, Hyderabad V. Potla Nishanth, Khammam, Bangalore

CO 80/HYD/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7026 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: T GANDHI
• Keywords: Capital asset; Gift; Search and seizure; Advance ruling; Cost of acquisition; Wrong claim; Non compliance
• Section: 143(3); 54F; 2(14); 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. / C.O.(IN ITA NO.) ASSESS- MENT YEAR APPELLANT/ CROSS OBJECTOR RESPONDENT NO.1519/H/2011 2003 - 04 SRI POTLA NAGESWARA RAO, KHAMMAM (PAN AGOPP 4882 H) THE DCIT, CC - 4, HYD. NO.1520/H/2011 2004 - 05 SRI POTLA NAGESWARA RAO, KHAMMAM THE DCIT, CC - 4, HYD. NO.1528/H/2011 2004 - 05 THE DCIT, CC - 4, HYD. SRIPOTLA NAGESWARA RAO, KHAMMAM CO.75/H/2011 (1528/H/2011) 2004 - 05 SRI POTLA NAGESWARA RAO, KHAMMAM THE DCIT, CC - 4, HYD. NO.1567/HY/11 2008 - 09 THE DCIT, CC - 4, HYD SRIPOTLA NAGESWARA RAO, KHAMMAM CO.79/H/2011 (1567/H/11) 2008 - 09 SRI POTLA NAGESWARA RAO, HYD THE DCIT, CC - 4, HYD NO. 1521/H/2011 2008 - 09 SRI POTLA NAGESWARA RAO, KHAMMAM THE DCIT, CC - 4, HYD. NO.1529/H/2011 2007 - 08 THE DCIT, CC - 4, HYD. KUM POTLA SHANTHI, KHAMMAM (PAN APEPP 2329 E) CO.76/H/2011 (1529/H/2011) 2007 - 08 POTLA SHANTHI (PAN APEPP 2329 E) THE DCIT, CC - 4 , HYD NO.1530/H/2011 2008 - 09 THE DCIT, CC - 4, HYDERABAD KUM. POTLA SHANTHI, KHAMMAM CO.77/H/2011 (1530/H/2011) 2008 - 09 POTLA SHANTHI, KHAMMAM THE DCIT, CC - 4, HYD. ITA.1523/H/2011 2008 - 09 KUM. POTLA SHANTHI, BANGALORE THE DCIT, CC - 4, HYDERABAD ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 2 NO.1568/ H/2011 2007 - 08 THE DCIT, CIRCLE 4, HYD SRI POTLA NISHANTH, KHAMMAM CO.80/H/2011 (1568/H/2011) 2007 - 08 SRI POTLA NISHANTH, KHAMMAM (PAN APEPP 2330 R) THE DCIT, CC - 4, HYDERABAD 1531/H/2011 2008 - 09 THE DCIT, CC - 4, HYDERABAD SRI POTLA NISHANTH, KHAMMAM CO.78/H/2011 (1531/H/2011) 2008 - 09 SRI POTLA NISHANTH, KHAMMAM THE DCIT, CC - 4, HYDERABAD NO.1522/H/2011 2008 - 09 SRI POTLA NISHANTH THE DCIT, CC - 4, HYD. REVENUE BY : SMT. K. MYTHILI RANI (DR) ASSESSEE BY : SHRI T. GANDHI (AR) DATE OF HEARING : 18.1.2012 DATE OF PRONOUNCEMENT : 22.3.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THESE APPEALS AND CROSS OBJECTIONS PREFERRED BY TH E ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINS T THE ORDER PASSED BY THE LEARNED CIT(A)VII, HYDERABAD AND THE Y ARE PERTAINING TO THE ASSESSMENT YEARS 2003-04, 2004-0 5 & 2008- 09. SINCE ISSUED INVOLVED IN THESE APPEALS ARE COMM ON IN NATURE, THEY ARE CLUBBED, HEARD AND DISPOSED OFF TO GETHER FOR THE SAKE OF CONVENIENCE. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 3 SRI. POTLA NAGESWARA RAO ITA NO. 1519/H/2011 ASST. YEAR: 2003-04 (ASSESSEES APPEAL): 2. THIS IS AN APPEAL FILED AGAINST THE ORDER OF TH E ASSESSING OFFICER WHICH IS PASSED UNDER SEC 143(3) R.W.S. 15 3A OF THE IT ACT 1961 BY DETERMINING THE TOTAL INCOME AT RS.22,6 2,230/- AGAINST THE INCOME RETURNED AT RS 1,54,000/- BY MA KING CERTAIN ADDITIONS. THE ONLY ISSUE IN APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION OF RS 18,51,300/- TOWARDS LONG TERM CAPITAL GAINS. 3. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 13 2 OF THE IT ACT 1961 CONDUCTED IN THE CASE OF ASSESSEE ON 6. 1.2009 WHEREIN CERTAIN DOCUMENTS WERE FOUND AND SEIZED. CO NSEQUENT TO THE SEARCH OPERATION THE ASSESSEES CASE IS NOTI FIED WITH DCIT CENTRAL CIRCLE 4 HYDERABAD. THE ASSESSEE ALSO HAPP ENED TO BE A DIRECTOR OF M/S CROWN BEER INTERNATIONAL LIMITED FO R THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS COMPLETED ASSESSI NG OFFICER BASED ON THE MATERIAL AVAILABLE ON RECORD. 4. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S BHAVYA CONSTRUCTIONS PVT. LTD ON 7.3.2003. THE SAN CTION FOR THE BUILDING PLAN WAS OBTAINED FROM THE MUNICIPALIT Y ONLY ON 31.3.2003. THE ASSESSEE HAD RECEIVED ONLY SECURITY DEPOSIT OF RS 25,000 IN THE YEAR. UNDER THE AGREEMENT THE ASSE SSEE IS TO TRANSFER 590 SQ.YDS OF LAND TO M/S BHAVYA CONSTRUCT IONS PVT. LTD FOR DEVELOPMENT PURPOSE. IN RETURN THE ASSESSE E WOULD BE RECEIVING 40% OF THE BUILT UP AREA IN ALL THE FLOOR S AS CONSIDERATION. THE ASSESSEE HIMSELF HAD OFFERED 40% OF THE BUILT UP AREA OF DEVELOPED PROPERTY AT RS 8,85,000. AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS 13,753 A NET LONG TERM ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 4 CAPITAL GAINS THE ASSESSEE OFFERED AT RS 8,71,247 IN THE AY 2004-05. 5. THE ASSESSING OFFICER HOWEVER IS SEEN TO HAVE N OTICED THE VALUE IN THE CAPITAL ACCOUNT AT ABOUT RS. 24,68,400 TOWARDS 40% OF SHARE VALUE TO BE RECEIVED IN THE FORM OF FOUR F LATS. THE ASSESSING OFFICER HAS ALLOWED ONE FLAT AS EXEMPTION U/S 54F OF THE IT ACT 1961 AMOUNTING TO RS 617,100 AND THE BAL ANCE AMOUNT OF RS 18,51,300 (RS 24,68,400 RS 6,17,100) IS TREATED AS LONG TERM CAPITAL GAINS. 6. IT IS THE CONTENTION OF THE AUTHORIZED REPRESEN TATIVE THAT THE ASSESSING OFFICER HAS TREATED THE PROPERTY WHIC H HAS BEEN DEVELOPED AND HANDED OVER TO THE ASSESSEE AND THERE BY HE HAS ASSESSED THE CAPITAL GAINS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS ALSO MADE A SIMILAR ADDITION FOR ASSESSMENT YEAR 2004-05, THEREFORE THE ASSESSING OFFICER IS NOT JUSTIFIED TO ASSESS THE CAPITAL GAIN S IN ASSESSEES HAND FOR THE ASSESSMENT YEAR 2003-04 WHICH IS RELEVANT ASSESSMENT YEAR AND ALSO FOR THE ASSESSMENT YEAR 2004-05 . 7. THE CIT(A) DISMISSED THE ASSESSEES APPEAL ON T HIS ISSUE OBSERVING AS UNDER: THE SUBMISSION MADE BY THE AUTHORIZED REPRESEN TATIVE HAS BEEN CONSIDERED. THE DETAILS FURNISHED IN THIS REGA RD ARE ALSO PERUSED. HAVING VERIFIED THE FACTS AND CIRCUMSTAN CES OF THE CASE, IT APPEARS TO ME THAT THE ASSESSING OFFICER I S JUSTIFIED TO ASSESS THE PROPERTY TRANSFERRED TO M/S BHAVYA CONST RUCTIONS PVT. LTD FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. IT MAY BE FURTHER SEEN THAT THE DEED FOR THE DEVELOPMENT O F PROPERTY WAS ENTERED ON 7.3.2003 AND ASSESSEE ALSO HAD RECEI VED TOKEN ADVANCE AND THE SAID TRANSFER OF PROPERTY WAS TAKEN UP ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 5 BY THE DEVELOPERS FOR FURTHER ACTION INCLUDING GETT ING THE APPROVAL OF THE PLAN FOR CONSTRUCTION FROM THE MUN ICIPALITY. THEREFORE THE ASSESSEE ALMOST HAS COMPLETED THE TRA NSFER OF THE PROPERTY TO M/S BHAVYA CONSTRUCTIONS PVT. LTD., FOR A CONSIDERATION OF GETTING FOUR FLATS EQUIVALENT TO 4 0% OF VALUE OF PROPERTY TO BE CONSTRUCTED. HENCE I AM OF THE VIEW THAT THE ASSESSING OFFICER IS JUSTIFIED TO ASSESS THE ASSESS EES LONG TERM CAPITAL GAINS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS ALSO SEEN THAT THE ASSESSEE HA S NOT MADE ANY DISCLOSURE OF LONG TERM CAPITAL GAINS FOR THE A SSESSMENT YEAR 2004-05. THEREFORE IT IS JUSTIFIED ON THE PA RT OF THE ASSESSING OFFICER TO ASSESS THE CAPITAL GAINS FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO HAS RAISED THE OBJECTION THAT THE ASSESSMENT OFFICER HAS VALUED THE PROPERTY AS PER THE SUB REGI STRARS VALUATION. HOWEVER IT IS SEEN FROM THE OBSERVATION OF THE ASSESSING OFFICER THAT HE HAD ADOPTED THE CONSIDERA TION RECEIVED BY THE ASSESSEE AS PER THE CAPITAL ACCOUNT OF THE A SSESSEE WHEREIN THE VALUE OF THE SALES APPEARS TO HAVE BEEN SHOWN AT RS 24,68,400 THEREFORE THE OBJECTION RAISED BY THE ASS ESSEE CANNOT BE ACCEPTED. IN VIEW OF THE DISCUSSION MADE AS ABOVE, THE ADDITI ON MADE BY THE ASSESSING OFFICER IS CONFIRMED. THEREFORE THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 8. AGGRIEVED THE ASSESSEE IS ON APPEAL. FIRSTLY WE FIND THAT THE ASSESSEE HAD CONTENDED THAT THEY HAVE OFFERED T HE CAPITAL GAINS ON THE TRANSACTION FOR THE AY 2004-05. IN THE ASSESSMENT ORDER FOR AY 2004-05 IN THE CASE OF THE ASSESSEE (S UBMITTED AS PART OF THE APPEAL FOR THAT YEAR IN 1528/H/11), THE ASSESSMENT ORDER READS AS UNDER: ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 6 RETURNED INCOME 9,33,747/- (INCLUDING CAPITAL GAINS RS. 8,47,247/-) 9. IN THE INSTANT CASE, ON 7.3.2003 AN AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH M/S. BHAVYA CONST RUCTIONS PVT. LTD., AND THE PLAN OF THE BUILDING WAS APPROVE D ON 31.3.2003. THESE DATES FALL IN THE PREVIOUS YEAR 20 02-03, RELEVANT TO ASSESSMENT YEAR 2003-04. THUS, IN THIS CASE, THE LAND BEING CAPITAL ASSET WAS TRANSFERRED BY THE ASS ESSEE TO THE DEVELOPER DURING THE ASSESSMENT YEAR UNDER CONSIDER ATION, VIZ. 2003-04, FOR CONSTRUCTION AND IT IS ENOUGH IF THE A SSESSEE HAS RECEIVED THE RIGHT TO RECEIVE CONSIDERATION ON A LA TER DATE, SO AS TO ATTRACT EXIGIBILITY TO TAX ON CAPITAL GAINS DURI NG THE YEAR UNDER APPEAL. MERE ACCRUAL OF THE CONSIDERATION, AS IT I S TO BE RECEIVED IN THE SUBSEQUENT YEARS DOES NOT DEFER THE TAXABILI TY OF THE CAPITAL GAINS. THE ASSESSEE BEING OWNER OF THE C APITAL ASST, HAVING PARTED WITH THE POSSESSION OF THE LAND UNDER A JOINT DEVELOPMENT AGREEMENT, FOR CONSTRUCTION OF RESIDENT IAL FLATS/VILLAS AND HAVING HANDED OVER THE POSSESSION OF THE VACANT LAND TO THE DEVELOPER ON PROMISE TO BE HANDED OVER FOUR FLATS EQUIVALENT TO 40% OF THE VALUE OF THE PROPERTY TO B E CONSTRUCTED, IT WAS A CLEAR CASE OF TRANSFER BY EXCHANGE WITHIN THE MEANING OF S.2(47)(I) OF THE ACT. PROPERTY WAS HANDED OVER IN PART PERFORMANCE UNDER S.53A OF THE TRANSFER OF PROPERTY ACT, AND IT COULD NOT BE SAID THAT THE TRANSACTION WAS WITHOUT CONSIDERATION. THE POSSESSION OF THE LAND HAVING BEEN HANDED OVER TO THE DEVELOPER IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE TRANSFER TAKES PLACE IN THE ASSE SSMENT YEAR UNDER CONSIDERATION ONLY, AND CONSEQUENTLY THE ASSE SSEE IS LIABLE TO BE ASSESSED TO TAX IN RELATION TO THE CAP ITAL GAINS IN THE YEAR UNDER CONSIDERATION ITSELF. FOR THIS PURPOSE , WE PLACE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 7 RELIANCE ON THE DECISION OF THE COORDINATE BENCHES OF THIS TRIBUNAL IN SMT. MAYA SHENOY V/S. ACIT (2009)124 TT J(HYD) 692). WE ALSO FIND SUPPORT IN THIS BEHALF, FROM TH E JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATUR BHUJ DWARKADDAS KAPADIA V/S. CIT (260 ITR 491), WHEREIN IT HAS BEEN HELD THAT S.2(47)(V) READ WITH S.45 INDICATES THAT CAPITAL GAINS WAS TAXABLE IN THE YEAR IN WHICH SUCH TRANSAC TIONS WERE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROP ERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. WE A LSO PLACE RELIANCE IN THIS BEHALF ON THE RULING OF AUTHORITY FOR ADVANCE RULINGS IN JASBIR SINGH SARKARIA IN RE (294 ITR 196 (AAR), TO THE FOLLOWING EFFECT - IN ORDER TO BE TRANSFER WITHIN THE MEANING OF CL. (V) OFS.2(47), THERE MUST BE A TRANSACTION UNDER WHICH THE POSSESSION OF IMMOVABLE PROPERTY IS ALLOWED TO BE T AKEN OR ALLOWED TO BE RETAINED. SECONDLY, SUCH TAKING OR RE TENTION OF POSSESSION AS IS WELL KNOWN IS A FACET OF THE EQ UITABLE DOCTRINE OF PART PERFORMANCE OF CONTRACT FALLING WI THIN THE SCOPE OF S.53A OF THE TRANSFER OF PROPERTY ACT. THE LEGISLATURE ADVISEDLY REFERRED TO ANY TRANSACTION WITH A VIEW TO EMPHASIZE THAT IT IS NOT THE FACTUM OF ENTE RING INTO AGREEMENT OR FORMATION OF CONTRACT THAT MATERS, BUT IT IS THE DISTINCT TRANSACTION THAT GIVES RISE TO THE EVE NT OF ALLOWING THE CONTRACTEE TO ENTER INTO POSSESSION TH AT MATERS. THAT TRANSACTION IS IDENTIFIABLE BY THE TE RMS OF THE AGREEMENT ITSELF AND IT TAKES PLACE WITHIN THE FRAMEWORK OF THE AGREEMENT. WE MAY ALSO REFER IN THIS BEHALF TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S. DR.T .K.DAYALU (202 TAXMAN 531), WHEREIN IT HAS BEEN HELD THAT IT IS WELL SETTLED ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 8 POSITION BY NOW THAT THE DATE ON WHICH POSSESSION W AS HANDED OVER TO THE DEVELOPER IS RELEVANT FOR DETERMINATION OF THE YEAR IN WHICH THE CAPITAL GAINS ARE ASSESSABLE TO TAX. IN THIS VIEW OF THE MATTER, WE FIND NO MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THERE IS NO TAXABILITY OF CAPITAL GAINS IN THE YEAR UNDER APPEAL.. WE ACCORDINGLY REJECT THE GROUNDS OF THE ASSESSEE O N THIS ISSUE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO 1519/H/11 FOR ASSESSMENT YEAR 2003-04 IS DISMISSED. SRI POTLA NAGESWARA RAO, ASSESSEES APPEAL ITA NO. 1520/H/2011 ASST. YEAR: 2004-05 11. THIS IS AN APPEAL FILED AGAINST THE ORDER OF T HE ASSESSING OFFICER WHICH IS PASSED UNDER SEC 143(3) R.W.S.153A OF THE IT ACT 1961 BY DETERMINING THE TOTAL INCOME AT RS 44,23,74 7 AGAINST THE INCOME RETURNED AT RS 9,33,747 WHICH INCLUDES C APITAL GAINS OF RS 847,247. AGGRIEVED WITH THE ORDER OF THE ASS ESSING OFFICER THIS APPEAL HAS BEEN FILED BEFORE THE LEARNED CIT(A ). THE ASSESSING OFFICER HAD HELD THAT RS. 15,90,000/- BEI NG GIFTS RECEIVED BY SON SRI. POTAL NISHANTH AND RS. 19,00,0 00/- RECEIVED BY THE DAUGHTER KUM. POTLA SHANTHI AS NOT BEING PRO VED AND THEREFORE ADDED THE SAME AS UNDISCLOSED INCOME OF T HE FATHER, THE ASSESSEE HEREIN. 12. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 13 2 OF THE IT ACT 1961 CONDUCTED IN THE CASE OF ASSESSEE ON 6. 1.2009 WHEREIN CERTAIN DOCUMENTS WERE FOUND AND SEIZED. CO NSEQUENT TO THE SEARCH OPERATION THE ASSESSEES CASE IS NOTI FIED WITH DCIT CENTRAL CIRCLE 4 HYDERABAD. THE ASSESSEE ALSO HAPP ENED TO BE A DIRECTOR OF M/S CROWN BEER INTERNATIONAL LIMITED FO R THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER BASED ON THE MATERIAL AVAILABLE ON RECORD. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 9 13. WITH REGARD TO FIRST GROUND OF APPEAL IT IS THE SUBMISSION OF THE AUTHORIZED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS WRONGLY MADE AN ADDITION OF RS 15,90,000 TOWARDS UN EXPLAINED GIFTS WHICH IS ACTUALLY RECEIVED BY THE ASSESSEES MINOR SON P. NISHANTH. THE ASSESSING OFFICER ALSO IS SEEN TO HAV E ADDED RS 19,00,000 TOWARDS UNEXPLAINED GIFTS RECEIVED BY THE ASSESSEES MINOR DAUGHTER P. SHANTHI. THE ASSESSING OFFICER H AS TREATED THE ABOVE SAID GIFTS RECEIVED BY THE ASSESSEES MIN OR CHILDREN AS UNEXPLAINED AND TREATED AS UNEXPLAINED INCOME IN AS SESSEES HAND U/S 64(1) OF THE IT ACT 1961. 14. THE OBSERVATION OF THE ASSESSING OFFICER IS TH AT THE GIFTS RECEIVED BY P. NISHANTH AND P. SHANTHI ARE NOT ROUT ED THROUGH THEIR BANK ACCOUNTS. THE ASSESSING OFFICER ALSO HAS OBSERVED THAT THE FINANCIAL TRANSACTIONS PERTAINING TO MINOR CHILDREN ARE NOT REFLECTED IN THE CAPITAL ACCOUNTS OF THE ASSESS EE ENCLOSED ALONG WITH THE RETURN OF INCOME AND NO FINANCIAL TR ANSACTIONS PERTAINING TO ASSESSEES MINOR CHILDREN ARE APPEARI NG IN THE ASSESSEES RETURN OF INCOME. 15. IT IS ALSO THE OBSERVATION OF ASSESSING OFFICER THAT THE MONEY RECEIVED BY THE ASSESSEES MINOR CHILDREN AS GIFTS FROM BLOOD RELATION OF MINOR CHILDREN ARE INVESTED IN PU RCHASE OF LANDS IS ONLY AN AFTERTHOUGHT. THEREFORE THE ASSESS ING OFFICER HAS DISBELIEVED THE EXPLANATION OFFERED BY THE ASSESSEE WITH REGARD TO THE ALLEGED GIFTS SAID TO HAVE BEEN RECEIVED BY ASSESSEES MINOR CHILDREN. 16. IT IS THE CONTENTION OF THE AUTHORIZED REPRESE NTATIVE THAT THE ASSESSEES CHILDREN HAVE RECEIVED GIFTS FROM SR I. Y. VENKATESWAR RAO WHO IS A SOFTWARE ENGINEER AND WHO IS WELL SETTLED IN USA. IT IS ALSO CONTENDED THAT SRI. Y. VENKATESWARAR RAO HAD SENT 57,151.23 US$ WHICH WAS MORE THAN RS 2 6 LAKHS, ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 10 THEREFORE THE ASSESSING OFFICER SHOULD HAVE ACCEPTE D ASSESSEES INVESTMENT IN PURCHASE OF LANDS IN THE NAME OF HIS MINOR CHILDREN SRI.P. NISHANTH AND P. SHANTHI. FURTHER IT IS ALSO SUBMITTED THAT SMT.Y. VIMALA HAS GIFTED RS 4,90,000 TO P.NISHANTH AND RS 90,000 TO P.SHANTHI WHICH HAS BEE N UTILIZED FOR THE PURPOSE OF PURCHASING LANDS IN MINOR CHILDR ENS NAME, THEREFORE THE ASSESSING OFFICER SHOULD HAVE BELIEVE D THAT THE GIFTS GIVEN BY SMT. Y.VIMALA WHO WAS IS BLOOD RELATION (A UNT) OF THE MINOR CHILDREN ARE GENUINE. 17. IN THE LIGHT OF ABOVE EXPLANATION IT IS SUBMITT ED BY THE AUTHORIZED REPRESENTATIVE THAT SRI Y. VENKATESWARA RAO NRI SETTLED IN USA AND SMT. Y. VIMALA FROM KHAMMAM ARE RELATED TO ASSESSEE AND THEREFORE THE AMOUNTS RECEIVED FROM AB OVE TWO PERSONS AMOUNTING TO RS 34,90,000 HAS BEEN INVESTED IN PURCHASE OF LANDS IN THE NAME OF MINOR CHILDREN WHI CH IS SITUATED AT DUNDIGAL AND BOWRAMPET IN RANGA REDDY D ISTRICT. 18. THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATIO N ON THE GROUND THAT THE ASSESSEE HIMSELF IS WELL TO DO PERS ON THEREFORE THE INVESTMENT MADE BY THE ASSESSEE HIMSELF IN HIS CHILDRENS NAME BY PURCHASING PROPERTY HAS BEEN EXPLAINED AS O UT OF THE GIFTS RECEIVED FROM SRI Y. VENKATESWAR RAO AND SMT. Y. VIMALA ASSESSEES BLOOD RELATIVES CANNOT BE BELIEVED TO BE GENUINE. THE AUTHORIZED REPRESENTATIVE ALSO HAS FURNISHED CERTAI N BANK ACCOUNTS FOR HAVING RECEIVED THE MONEY FROM SRI. Y.VENKATESWARA RAO WHEREIN IT IS SHOWN THAT THE REM ITTANCES FROM SRI.Y.VENKATESWAR RAO IS AT RS.29,15,172 AND OUT OF WHICH IT IS CLAIMED THAT RS 26 LAKHS IS UTILIZED FO R PURCHASE OF PROPERTY. FURTHER IT IS SUBMITTED THAT THE GIFT GIV EN BY SMT. Y.VIMALA AT RS 90,000 TO P. SHANTHI AND RS. 4,90,0 00 TO P. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 11 NISHANTH ARE REFLECTED IN THE BANK STATEMENT OF SMT .Y.VIMALA THEREFORE THE ASSESSING OFFICER SHOULD HAVE BELIEVE D THAT ASSESSEES CHILDREN HAVE RECEIVED GIFTS FROM SRI. Y .VENKATESWAR RAO AND SMT.Y. VIMALA AS GIFTS WHICH HAS BEEN UTILI ZED FOR PURCHASE OF LANDS IN CHILDRENS NAME. 19. THE LD. CIT(A) OBSERVED THAT HAVING VERIFIED TH E FACTS AND CIRCUMSTANCES OF THE CASE IT APPEARS THAT THE ASSES SEE HAS NOT DISCLOSED THE FINANCIAL GIFTS RECEIVED BY HIS MINOR CHILDREN IN ANY RETURN OF INCOME FILED BY THE ASSESSEE SINCE THEY W ERE NOT INCOME RECEIPT. THE LD. CIT(A) THEREFORE POINTED OU T THAT AS OBSERVED BY THE ASSESSING OFFICER THE GIFTS RECEIV ED BY THE MINOR CHILDREN ARE NOT REFLECTED IN HIS STATEMENT OF ACCO UNTS. HOWEVER WITH REGARD TO THE OTHER FACTS OF THE CASE THE LD. CIT(A) THAT SRI.Y. VENKATESWAR RAO, NRI IS SEEN TO HAVE BE EN MAINTAINING ACCOUNT WITH ICICI BANK AND HE HAS REMI TTED US $ OF 64347.53 EQUIVALENT OF RS 29,15,172. AND IT IS THE CLAIM OF THE ASSESSEE THAT THE SAID AMOUNT HAD BEEN WITHDRAW N AND GIVEN AS GIFTS TO P. NISHANTH AND P. SHANTHI CHILDR EN OF SRI POTLA NAGESWARA RAO. FURTHER THE CIT(A) HELD THAT OUT OF THE SAID AMOUNTS ONLY RS 26,00,000 IS ACTUALLY WITHDRAWN EVE N THOUGH IT IS CLAIMED THAT RS. 29,10,000 WAS WITHDRAWN AND GIV EN TO THE ASSESSEES CHILDREN. THE LD. CIT(A) ALSO POINTED OU T THAT NOWHERE IT IS ESTABLISHED BY THE ASSESSING OFFICER THAT THE DONOR HAD NO CAPACITY TO GIVE GIFTS AND VERY REMITTANCE OF THE M ONEY IS A BOGUS CLAIM. THE LD. CIT(A) ALSO OBSERVED, THAT THE ONLY LINK MISSING ATTRIBUTED IS THAT THE SAID MONEY IS NOT ROUTED THR OUGH THE BANK ACCOUNTS OF THE DONEES OR THE PARENTS OF THE DONEES AND IT APPEARS THE MONEY IS CLAIMED TO HAVE BEEN WITHDRAWN FROM THE ACCOUNTS OF SRI. Y. VENKATESWARA RAO AND GIVEN TO T HE ASSESSEE, WHICH AMOUNT IS STATED TO HAVE BEEN INVESTED IN PUR CHASE OF LANDS IN THE NAME OF MINOR CHILDREN OF THE ASSESSEE . ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 12 20. THE LD. CIT(A) CONCLUDED THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IT APPEARS THAT THE GIFTS RECEIVED BY THE ASSESSEES CHILDREN CANNOT BE DISBELIEVED IN TO TAL. HOWEVER , THE LD. CIT(A) POINTED OUT THAT THE CLAIM IS MADE F OR RS 29,10,000 BUT ACTUAL WITHDRAWALS ARE SEEN ONLY AT R S. 26,00,000 AND THEREFORE AT MOST IT CAN BE BELIEVED THAT THERE IS A RECEIPT OF RS 26,00,000 ONLY BECAUSE THERE ARE WITHDRAWALS OF RS 26,00,000 FROM THE ACCOUNTS OF SRI. Y. VENKATESWAR RAO. THE CIT(A) FOR HELD THAT SINCE DONOR HAS CONFIRMED ABO UT GIVING GIFTS AND DONEES ALSO CLAIM TO HAVE RECEIVED GIFTS AND TH ERE ARE CERTAIN CIRCUMSTANTIAL FACTS LIKE RECEIPT OF MONEY AND WITHDRAWALS IN THE ACCOUNT OF DONOR, CIT(A) WAS INC LINED TO ACCEPT THAT THE DONEES HAVE RECEIVED GIFTS OF RS 26 ,00,000 ONLY AND THEREFORE THE BALANCE OF RS 3,10,000 FOR WHICH NO EVIDENCES LIKE MONEY HAVING BEEN WITHDRAWN AND GIVEN TO THE M INORS IS PROVED. HENCE OUT OF GIFTS CLAIMS OF RS 29,10,000 O NLY RS. 26,00,000 WAS TREATED AS EXPLAINED AND THE BALANCE RS 3,10,000 WAS CONFIRMED BY THE LD. CIT(A) AS UNEXPL AINED. 21. WITH REGARD TO GIFTS SAID TO HAVE BEEN RECEIVED FROM SMT. Y. VIMALA BY P, NISHANTH AND P. SHANTHI , THE LD. C IT(A) HELD THAT THE EXPLANATION OFFERED IS NOT SATISFACTORY, T HOUGH THERE ARE SOME WITHDRAWALS FROM THE ACCOUNTS OF SMT. Y. VIMAL A IT CANNOT BE STRICTLY RELATED WITH THE ISSUE OF GIFTS. THERE FORE THE ADDITION OF GIFTS OFF RS 5,80,000 (RS. 4,90,000 + RS 90,000) WERE CONFIRMED BY THE CIT(A). 22. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 23. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI T. GANDHI RELIED ON THE DECISION OF THE CIT VS. MAYAVATI (338 ITR 0 563) & HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAM DEV KUMAR CHITLANGIA (315 ITR 0435). ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 13 24. THE LD. COUNSEL FOR THE ASSESSEE SHRI. T. GAND HI SUBMITTED BEFORE US THAT THE CIT(A) ERRED IN CONFI RMING THE GIFTS SHOWN IN THE ACCOUNTS OF THE MINORS TO THE EXTENT O F RS. 8,90,000/- AS UNPROVED AND ADDING IT AS INCOME OF T HE FATHER VIZ., THE ASSESSEE HEREIN. 25. WE HEARD THE PARTIES ON THIS ISSUE AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD . CIT(A) CONCLUDED THAT CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE IT APPEARS THAT THE GIFTS RECEIVED BY THE ASSE SSEES CHILDREN CANNOT BE DISBELIEVED IN TOTAL. HE NOTED THAT EVEN THOUGH THE CLAIM OF THE ASSESSEE IS IN RELATION TO GIFTS AGGRE GATING TO RS 29,10,000, ACTUAL WITHDRAWALS ARE SEEN ONLY AT RS. 26,00,000. HE THEREFORE, HELD THAT AT THE MOST IT CAN BE BELIE VED THAT THERE WAS A RECEIPT OF GIFTS ONLY TO THE EXTENT OF RS 26, 00,000 ONLY BECAUSE THERE ARE WITHDRAWALS ONLY TO THE EXTENT OF RS 26,00,000 FROM THE ACCOUNTS OF SRI. Y. VENKATESWAR RAO. SINC E DONOR HAS CONFIRMED HAVING GIVEN GIFTS AND DONEES ALSO CLAIM TO HAVE RECEIVED GIFTS AND THERE ARE CERTAIN CIRCUMSTANTIAL FACTS, WHICH ARE NOT IN DISPUTE LIKE RECEIPT OF MONEY AND WITHDR AWALS IN THE ACCOUNT OF DONOR, THE CIT(A) ACCEPTED THAT THE DONE ES HAVE RECEIVED GIFTS OF RS 26,00,000 ONLY AND ACCORDINGLY CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER WITH REGARD TO BALANCE AMOUNT OF RS 3,10,000, FOR WHICH NO CORROBORATIVE E VIDENCE WAS FOUND. IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THE CLAIM WITH REGARD TO T HE BALANCE ADDITION ON ACCOUNT OF GIFTS OF RS.3,10,000, WE FIN D NO INFIRMITY IN THE ACTION OF THE CIT(A) ON THIS ISSUE. WE ACCO RDINGLY CONFIRM THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF T HE ASSESSEE ON THIS ASPECT. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 14 26. AS REGARDS THE BALANCE AMOUNT OF RS. 5,80,000/- SAID TO HAVE BEEN RECEIVED FROM SMT. Y. VIMALA BY P, NISHAN TH AND P. SHANTHI WE CONCUR WITH THE CIT(A) THAT THE EXPLANAT ION OFFERED IS NOT SATISFACTORY. THE CIT(A) HAS HELD THAT THOUGH THERE ARE SOME WITHDRAWALS FROM THE ACCOUNTS OF SMT. Y. VIMALA, I T CANNOT BE STRICTLY RELATED WITH THE ISSUE OF GIFTS. IN THE C IRCUMSTANCES WE CONFIRM THE ORDER OF THE CIT(A) TREATING THE GIFTS OFF RS 5,80,000 (RS. 4,90,000 + RS 90,000) AS NOT PROVED AND ADDING IT AS INCOME OF THE ASSESSEE. ASSESSEES GROUNDS ON THIS ASPECT ARE REJECTED. 27. IN THE RESULT THE APPEAL IN ITA NO.1520/H/2011 OF THE ASSESSEE IS DISMISSED. ITA NO 1528/H/11: APPEAL OF THE REVENUE FOR AY 2004 -05: 28. THE APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) ACCEPTING THE GIFTS MADE BY SRI. Y. VENKATESWAR RAO TO SRI. POTAL NISHANTH AND MS. POTLA SHANTHI TO THE EXTENT OF RS. 26,00,000/- THE DONOR, A RELATIVE OF THE DONEES, IS EMPLOYED I N USA. THE GIFTS WERE THROUGH BANKING CHANNEL. THE DONEE HAS CONFIRMED THE GIFT. THE DONOR HAS GIFTED ACTUALLY RS. 29,10,0 00/-. IN THE ASSESSEES APPEAL IN ITA NO 1520/H/11, SUPRA, WE HA VE ACCEPTED THE ENTIRE GIFT OF RS. 26,00,000/- MADE BY SRI. Y.VENKATESWARA RAO AS GENUINE. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE AGAINST THE CONFIRMATION OF T HE CIT(A) ACCEPTING THE GIFT OF RS. 26,00,000/- IS REJECTED. 29. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.1528/HYD/2011 IS DISMISSED. CO.75/HYD/2011(IN ITA NO.1528/HYD/2011) RAISED BY THE ASSESSEE : ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 15 30. THIS CROSS OBJECTION FILED BY THE ASSESSEE AG AINST SHRI NAGESWARA RAO IS IN SUPPORT OF THE CIT(A) ORDER DEC IDING THE ISSUE IN HIS FAVOUR. AS WE HAVE DISPOSED OFF THE AP PEAL BY THE REVENUE IN 1528/H/11 FOR THIS YEAR CONSIDERING ALL THE ARGUMENTS, THE CO FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS. 31. IN THE RESULT CO NO 75/H/2011 FILED BY THE ASSE SSEE IN THE REVENUES APPEAL ITA NO 1528/H/11 IS DISMISSED. ITA NO 1521/H/11- POTLA NGESWARA RAO- ASSESSEES AP PEAL FOR 2008-09- 32. THE ONLY GROUND IN THE ASSESSEES APPEAL IS AGA INST THE ORDER OF THE CIT(A) DETERMINING THE CAPITAL GAINS A RISING FROM DEVELOPMENT AGREEMENT BETWEEN THE ASSESSEE HEREIN A LONG WITH HIS SON AND DAUGHTER, THE OTHER CO-OWNERS OF THE LA ND, WITH M/S ADITHYA CONSTRUCTIONS, THEY ARE DISPOSED OF TOGETHE R. THE FACTS OF THE CASE ARE AS UNDER: 33. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE ALONG WITH HIS DAUGHTER P SHANTHI AND SON SRI POTLA NISHA NT, ENTERED INTO A DEVELOPMENT AGREEMENT ON 11 TH APRIL, 2007 WITH M/S ADITYA CONSTRUCTIONS, KHAMMAM, WHICH IS A PARTNERSH IP FIRM, REPRESENTED BY ITS MANAGING PARTNER SRI P NAGESWARA RAO, KHAMMAM, TO DEVELOP A PROJECT IN THE NAME AND STYLE OF PNR COLONY IN SURVEY NO.480, 491, 491/A, 491/AA IN KHA MMAM. 34. AS PER THE DEVELOPMENT AGREEMENT, IN THE INDIVI DUAL CAPACITY, SRI P NAGESWARA RAO, SRI P. NISHANT AND K UM. P. SHANTHI, WILL BE EACH HAVING 10% SHARE OF THE CONST RUCTED AREA. THE COMBINED SHARE OF 30% CONSTRUCTED AREA WORKS OU T TO 57,000 SQ. FEET APPROXIMATELY AND THE DEVELOPER HAV ING THE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 16 BALANCE 70% SHARE, WHICH WORKS OUT TO 1,33,000 SQ. FEET APPROXIMATELY. 35. TOTAL VALUE OF THE SAID PROPOSED PNR COLONY, TA KEN AS PER MARKET VALUE ADOPTED BY SUB REGISTER WHILE REGISTER ING THE SAID DOCUMENT, AMOUNTED TO RS.8,62,58,075/-. THE ABOVE SAID LANDOWNERS COMBINED SHARE OF 30% WORKED OUT TO RS.2,58,77,422/- AND EACH ONES SHARE IS WORKED OUT TO RS.86,25,807/-. HOWEVER, IT IS SEEN THAT THE ASSES SEE HAS NOT OFFERED ANY CAPITAL GAIN IN THE RETURN OF INCOME FI LED ARISING OUT OF THIS TRANSACTION. 36. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. IN RESPONSE TO THE SAME, THE ASSESSEE, IN HIS REPLY HAS STATED THAT THE AGREEMENT WITH M/S ADITYA CONSTRUCTIONS HAS CONDITI ONS OF TIME FRAME TO COMPLETE THE PROJECT AND LAPSED DUE TO NON PERFORMANCE. FURTHER, THE ASSESSEE HAS STATED THAT M/S ADITYA CONSTRUCTIONS HAS UTILISED SOME PORTION OF THE LAND AND SOLD 13 INDEPENDENT HOUSES, WHICH WERE REGISTERED IN THE NA ME OF THE BUYERS AND TWO HOUSES ARE YET TO BE REGISTERED. FU RTHER, THE ASSESSEE HAS STATED THAT, DUE TO NON COMPLIANCE OF THE TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT DATED 1 1 TH APRIL, 2007, THE ASSESSEE AND SRI P. SHANTHI AND P NISHANT H DECIDED TO CANCEL THE DEVELOPMENT AGREEMENT ENTERED WITH M/S A DITYA CONSTRUCTIONS, AND ACCORDINGLY CANCELLATION DEED WA S SIGNED ON 1 ST OCTOBER, 2010. THE ASSESSEE HAS STATED THAT, HE H AS NOT OFFERED ANY CAPITAL GAIN FOR THIS YEAR AND HE WILL OFFER CAPITAL GAIN TAX FOR THE ASSESSMENT YEAR 2001-12. 37. THE AO ASSESSED RS. 86,25,807/- AS ASSESSEES S HARE OF THE CAPITAL GAINS ARISING FROM THIS DEVELOPMENT AGR EEMENT FOR THE FOLLOWING REASONS: ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 17 38. AFTER CONSIDERING THE ASSESSEES EXPLANATION, O N THE CAPITAL GAIN, THE ISSUE WAS CONCLUDED AS UNDER BY AO: I) THE SAID AGREEMENT BETWEEN THE TWO PARTIES WAS DULY FULFILLED AND M/S ADITYA CONSTRUCTIONS HAS ALREADY COMPLETED CONSTRUCTION AND SOLD SOME HOUSES. II) AS PER SECTION 2(47) (V) OF THE ACT, TRANSFER I NCLUDES ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSIO N OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882). IN THE PRESENT CASE TRANSFER OF THE CAPITAL ASSET H AS TAKEN PLACE AND POSSESSION OF THE PROPERTY WAS HANDED OVER TO M /S ADITYA CONSTRUCTIONS ON 11.4.2007 HENCE CAPITAL GAIN WILL ARISE ON THE DATE OF TRANSFER. ACCORDINGLY, THE ASSESSEES SHARE WORKED OUT FOR TH E YEAR UNDER CONSIDERATION AMOUNTING TO RS.86,25,807/- IS TO BE TREATED AS LONG TERM CAPITAL GAINS AND ACCORDINGLY BROUGHT TO TAX. PENALTY U/S 271(1) (C ) AND 271AAA OF THE IT ACT INITIATED SEPARATELY. 39. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE CONTE NDED THAT THERE WAS NOT EVEN A PART PERFORMANCE OF THE CONTRA CT AS REFERRED IN SECTION 53A OF TRANSFER OF PROPERTY ACT AS SUCH THE SAID UNFINISHED TRANSACTION CANNOT COME UNDER SECTION 2 (47)(V) OF THE ACT, 1961 AND THEREFORE, THE ASSESSING OFFICER CANNOT TREAT THE SAID UNFINISHED TRANSACTION A TRANSFER OF PROPE RTY. THEREFORE, IT IS CONTENDED BY THE AR THAT THE ASSES SING OFFICER IS NOT JUSTIFIED TO COME TO CONCLUSION THAT THE PROPER TY WAS TRANSFERRED AND THEREBY SHARE OF THE ASSESSEE IS LI ABLE FOR CAPITAL GAINS PURPOSE. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 18 40. THE CIT(A) HAS GIVEN PARTIAL RELIEF TO THE ASSE SSEE BY OBSERVING AS UNDER: LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CAS E, I FIND THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE WIT H M/S ADITYA CONSTRUCTIONS IS NOT COMPLETE AND BY CANCELL ATION OF AGREEMENT, THE DEVELOPMENT WORK IS ABANDONED. HENC E, I FIND THAT THERE IS A PART TRANSFER OF PROPERTY TO A TTRACT CAPITAL GAINS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, AFTER PERUSING THE FACTS OF THE CASE, I FIND THAT THERE IS A PART PERFORMANCE OF THE AGREEMENT AS PER SECTION 2 (47) (V) OF THE IT ACT R.W.S. 53A OF TRANSFER OF PROPERTY ACT, 1882, HENCE THE ASSESSING OFFICER IS JUSTIFIED TO L EVY CAPITAL GAINS TAX. IT IS ALSO SEEN THAT THE ASSESSING OFFI CER HAS NOT COMPUTED THE CAPITAL GAINS CORRECTLY. THE PROPOSED CONSTRUCTION VALUE IS RS.7.79 CRORES AND THE SITE V ALUE IS AT RS.83,58,075/- THE ASSESSEE AND THE OTHER TWO OWNE RS ARE HAVING THE STAKE IN THE ABOVE SITE. FOR TRANSF ERRING 70% OF VALUE OF SITE, THE ASSESSEE AND THE OTHER TWO OW NERS GET 30% OF THE CONSTRUCTED VALUE AND THE ASSESSEE IS EN TITLED FOR 1/3 RD OF THE SAID CONSTRUCTED VALUE. 41. THE ASSESSING OFFICER HAS ADDED SITE VALUE OF RS.83,58,075/- TO THE PROPOSED CONSTRUCTION VALUE O F RS.7.79 CRORES. ACCORDINGLY, HE HAS TAKEN TOTAL VALUE AS R S.8,69,58,075 OUT OF WHICH 30% IS WORKED OUT AT RS.2,58,77,422 AN D ASSESSEES SHARE OF CONSTRUCTED PROPERTY TO BE RECE IVED IS TAKEN AT RS.86,25,807/- WHICH IS NOT CORRECT. 42. THEREFORE, THE ASSESSEE AND OTHERS ARE SURREND ERING 70% OF THE SITE VALUE OF RS.83,58,075/- TO RECEIVE 30% OF THE CONSTRUCTION VALUE OF RS.7.79 CRORES. IN OTHER WOR DS FOR SURRENDERING THE 70% OF THE LAND VALUE OF RS.58,50, 625/-. THE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 19 ASSESSEE AND OTHERS WOULD RECEIVE 30% OF THE CONSTR UCTION AREA WHICH IS WORTH OF RS.2,33,70,000. HENCE THE CAPITA L GAINS HAS TO BE AT RS.1,75,19,375/- AMONG THE THREE PERSONS I NCLUDING THE ASSESSEE. THEREFORE THE ASSESSEES SHARE OF CAPITA L GAIN WORKS OUT TO BE RS.58,39,792/-. 43. IT IS THE ARGUMENT OF THE AR THAT THE TRANSFERE E HAS NOT ADHERED TO THE ORIGINAL PLAN OF CONSTRUCTION AND RE TURNING 30% OF THE CONSTRUCTION AREA TO THE ASSESSEE, THEREFORE , IT IS NOT FAIR TO ASSUME THAT THE TRANSFEREE HAS COMPLETED THE CON TRACT AND RETURNED 30% OF THE CONSTRUCTION AREA. IT IS FURTH ER SUBMITTED THAT THE ASSESSEE AND OTHERS ONLY WOULD BE ENTITLED TO 30% OF THE 13 HOUSES CONSTRUCTED BY THE TRANSFEREE, THEREF ORE, IT IS NOT JUSTIFIED TO ASSUME THAT ASSESSEE AND OTHER TWO PAR TNERS HAVE RECEIVED 30% OF THE CONSTRUCTED AREA. 44. AS IT COULD BE SEEN FROM THE FACTS OF THE CASE THAT THE ASSESSEE AND OTHERS HAVE TRANSFERRED THE PROPERTY F OR CONSTRUCTION OF THE INDEPENDENT HOUSE IN LIEU OF RE CEIVING 30% OF CONSTRUCTED AREA, THEREFORE, THERE IS A TRANSFER OF PROPERTY, HENCE, THE CAPITAL GAINS HAS TO BE CHARGED IN CASE OF THE ASSESSEE AND OTHER PARTNERS. THEREFORE, THE ASSESS EE HAS TO BE CHARGED FOR CAPITAL GAINS OF RS.58,39,972/- INSTEAD OF RS.86,25,807/-. HENCE THE ASSESSEE GETS A RELIEF O F RS.27,86,015. THEREFORE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 45. AGGRIEVED BOTH THE ASSESSEE AS WELL AS THE DEPA RTMENT ARE IN APPEAL. THE MAIN CONTENTION OF THE ASSESSEE IS THAT AS THE DEVELOPMENT AGREEMENT WAS CANCELLED THERE WAS NO TR ANSFER OF PROPERTY AS CONTEMPLATED U/S 2(47) OF THE IT ACT RE AD WITH SEC 53A OF THE TRANSFER OF PROPERTY ACT. THEY HAD ALSO OBJECTED TO THE ADOPTION OF RS. 7,79,00,000/- AS CONSIDERATION TO B E RECEIVED BY THE ASSESSEE BEING THE VALUE OF THE BUILT UP AREA. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 20 46. WE HEARD THE PARTIES. IN THIS CASE, THE AGRE EMENT FOR DEVELOPMENT WITH M/S ADITHYA CONSTRUCTIONS ENVISAGE D THE ASSESSEE AND OTHER CO-OWNERS TO TRANSFER 70% INTERE ST IN THE LAND FOR 30% OF CONSTRUCTED AREA. ACCORDING TO TH E LEARNED COUNSEL, THE AGREEMENT WAS NOT FULLY GIVEN EFFECT T O AND IT WAS SUBSEQUENTLY CANCELLED. HOWEVER, WE FIND THAT AT THE SAME TIME, SOME LAND WAS UTILISED BY THE DEVELOPER WHO H AD CONSTRUCTED 13 HOUSES ON THE LAND. THEREFORE THE AS SESSEE IS LIABLE FOR TAX ON CAPITAL GAINS AS IF THE ENTIRE DE VELOPMENT AGREEMENT WAS GIVEN EFFECT TO, IN VIEW OF THE JUDGM ENT OF THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKAD AS KAPADIA (SUPRA). THE LEARNED COUNSEL FOR THE ASSESS EE RELIED ON THE FOLLOWING DECISIONS, WHICH, HOWEVER, DO NOT SUP PORT THE CASE OF THE ASSESSEE. 1. K RADHIKA VS. DCIT IN ITA NO.208/HYD/2011 2. ACIT VS. HOTEL HARBOUR VIEW (2 ITR (AT) 178) 3. GENERAL GAS COMPANY VS. DCIT (108 TTJ MUM) 854) 4. R. VIJAYALAKSHMI VS. APPU HOTELS P LTD. (257 ITR 4) SIMILAR ISSUE WE HAVE DECIDED WHILE DEALING WITH TH E CORRESPONDING GROUNDS OF THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2003-04. FOR THE DETAILED REASONS D ISCUSSED IN PARA 9 OF THIS ORDER WHILE DEALING THE APPEAL OF TH E ASSESSEE FOR THAT YEAR, WE DO NOT FIND MERIT IN THE GROUNDS OF T HE ASSESSEE ON THE ISSUE OF ASSESSABILITY OF CAPITAL GAINS IN THE YEAR UNDER APPEAL. HOWEVER, ON THE ASPECT OF ASSESSEES CLAIM FOR ALLOWABILITY OF EXEMPTION UNDER S.54F OF THE ACT, W E SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER TO THE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 21 FILE OF THE ASSESSING OFFICER, WITH A DIRECTION TO RE-EXAMINE THE SAME AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESS ING OFFICER MAY ALLOW THE CLAIM OF THE ASSESSEE FOR RELIEF UNDE R S.54F OF THE ACT, IF THE REQUISITE CONDITIONS FOR THE SAME HAVE BEEN COMPLIED WITH BY THE ASSESSEE. FOR THIS LIMITED PURPOSE, A SSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 47. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO 1521/H/11 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO 1567/H/11- POTLA NAGESWARA RAO- REVENUES AP PEAL FOR ASSESSMENT YEAR 2008-09- 48. THE FIRST GROUND IN REVENUES APPEAL IS AGAINST THE RECOMPUTATION OF CAPITAL GAINS ARISING FROM THE DEV ELOPMENT AGREEMENT BETWEEN THE ASSESSEE AND M/S ADARSH CONST RUCTION. THE MAIN GRIEVANCE OF THE REVENUE IS THAT THE CIT(A ) HAD NOT MADE SIMILAR ADJUSTMENTS IN THE CASE OF THE OTHER C OOWNER VIZ., KUM. POTLA SHANTHI. AS WE HAVE SET ASIDE THIS ISSUE TO THE FILES OF THE AO IN THE ASSESSEES APPEAL IN ITA NO 1521/H /11 SUPRA, THE REVENUES APPEAL ON THIS ISSUE IS ALSO SET ASID E TO THE FILES WITH THE SAME DIRECTIONS AS IN THE ASSESSEES APPEA L. 49. THE SECOND GROUND IN THE REVENUES APPEAL IS AG AINST THE ALLOWANCE OF RS. 1.00 LAKH CLAIMED BY THE ASSESSEE. 50. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D CONTESTED FOR MLC FROM LOCAL BODY SEGMENT OF KHAMMA M DISTRICT WHICH COVERS THE ENTIRE LOCAL BODIES IN TH E DISTRICT. HE ALSO NOTED THAT THE ASSESSEES EXPENDITURE ON ELECT ION IS NOT REASONABLE. IT IS ALSO OBSERVED BY THE ASSESSING O FFICER THAT SINCE THE ASSESSEE WOULD HAVE TRAVELLED THROUGH OUT THE DISTRICT AND HAD TO SPEND MONEY FOR CANVASSING, THEREFORE, T HE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 22 EXPENDITURE CLAIMED BY THE ASSESSEE AT RS.25,000 IS VERY MEAGRE, HENCE HE HAS MADE AN ADDITION OF RS.1 LAKH TOWARDS ALLEGED ELECTION EXPENDITURE. 51. ON APPEAL BEFORE THE CIT(A), IT WAS THE ARGU MENT OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD NO VALID REASON TO ESTIMATE THE ASSESSE ES ELECTION EXPENDITURE MORE THAN WHAT IS ADMITTED BY HIM. THE REFORE, WITHOUT BRINGING PROPER EVIDENCES, THE ASSESSING OF FICER COULD NOT HAVE ATTRIBUTED THE ASSESSEE TO HAVE SPENT MORE THAN WHAT IS ADMITTED IN RESPECT OF ELECTION. 52. THE CIT(A) HELD THAT HAVING VERIFIED THE FACT A ND CIRCUMSTANCES OF THE CASE, THAT THE ASSESSING OFFIC ER HAD NO MATERIAL TO GUESS ELECTION EXPENDITURE OF THE ASSES SEE, THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER, OBSERVI NG THAT ADDITION MADE ON ESTIMATION AND PRESUMPTION BASIS C ANNOT BE SUSTAINED. THEREFORE, THIS GROUND OF APPEAL WAS AL LOWED BY THE CIT(A). 53. AGGRIEVED THE REVENUE IS ON APPEAL. 54. WE HEARD THE PARTIES. AS OBSERVED BY THE CIT( A) THERE IS NO BASIS FOR THE ESTIMATION MADE BY THE AO. THE ASS ESSEE HAS STOOD FOR ELECTION AS MLC AND CERTAIN EXPENSES HAVE TO BE NECESSARILY INCURRED FOR CANVASSING PURPOSES. IN THE CIRCUMSTANCES WE GIVE THE BENEFIT OF DOUBT TO THE A SSESSEE AND UPHOLD THE ORDER OF THE CIT(A) DELETING THE ADDITIO N OF RS. 1,00,000/- MADE ON ESTIMATE BASIS TOWARDS UNEXPLAIN ED EXPENDITURE. 55. IN THE RESULT THE REVENUES APPEAL IN ITA NO 15 67/H/11 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 23 CO NO 79/H/11 IN ITA NO 1567/H/11 FOR AY 2008-09-CR OSS OBJECTION BY ASSESSEE : 56. THIS CROSS OBJECTION HAS BEEN FILED BY THE ASSE SSEE IN THE REVENUES APPEAL IN ITA NO 1567/H/11 AND IT IS MERE LY SUPPORTING THE ORDER OF THE CIT(A). AS WE HAVE DISP OSED OFF THE REVENUES APPEAL, WE DISMISS THIS CO OF THE ASSESSE E AS INFRUCTUOUS. 57. IN THE RESULT THE CO NO 79/H/11 FOR AY 2008-09 IS RAISED BY THE ASSESSEE IS DISMISSED. ITA NO. 1529/H/2011 REVENUES APPEAL FOR ASST. YEAR : 2007- 08 IN THE CASE KUM POTLA SHANTHI. 58. THE APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) HOLDING THAT THE LAND SOLD BY THE ASSESSEE IS AGRIC ULTURAL LAND WHICH IS NOT SITUATE WITHIN THE PRESCRIBED LIMITS O F ANY MUNICIPALITY AND HENCE IS NOT A CAPITAL ASSET U/S 2 (14) AND THEREFORE THE PROFIT ON SALE OF THE LANDS ARE IN TH E NATURE OF AGRICULTURAL INCOME AND HENCE IS NOT SUBJECT TO CAP ITAL GAINS TAX. 59. BRIEF FACTS OF THE CASE AS FOUND IN THE ASSESS MENT ORDER ARE: THE FATHER OF ASSESSEE SRI POTLA NAGESWARA RAO HAD PURCHASED 21.27 ACRES OF LAND AT BOWRAMPET DUNDIGAL VILLAGES OF QUTBULLAPUR MUNICIPALITY DURING THE FY 2003-04 I N THE NAME OF HIS SON POTLA NISHANTH AND DAUGHTER POTLA SHANTH I. OUT OF THIS LAND 13 ACRES WAS GIVEN FOR DEVELOPMENT TO M/S AMSRI DEVELOPERS IN THE YEAR 2007 AGAINST CONSIDERATION O F 35% OF CONSTRUCTED AREA. SRI POTLA NAGESWARA RAO FATHER OF THE ASSESSEE HAS SOLD 6.25 ACRES OF LAND TO M/S VARUN CONSTRUCTI ONS. 60. THE AO OBSERVED AS FOLLOWS: IT IS SEEN THAT THE ASSESSEE HAS SHOWN PROFIT ON SA LE OF 1.25 ACRES OF THIS LAND AT RS. 15591203 IN THE CAPITAL A CCOUNT. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 24 HOWEVER, NO CAPITAL GAINS WAS OFFERED CLAIMING IT T O BE AN AGRICULTURAL LAND. SINCE THE TRANSACTIONS OF HANDIN G OVER THE LAND FOR DEVELOPMENT AND SALE OF LAND TOOK PLACE IN THE SAME YEAR, AND OUT OF THE SAME STRETCH OF 21.27 ACR ES OF LAND, THE ASSESSEES ARGUMENT THAT THE LAND IS PART LY AGRICULTURAL AND PARTLY EXPLOITED FOR DEVELOPMENT O F RESIDENTIAL PURPOSE IS NOT AT ALL TENABLE. 61. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 1 32 OF THE IT ACT 1961 CONDUCTED IN THE CASE OF SRI POTLA NAGE SWARA RAO WHEREIN CERTAIN DOCUMENTS WERE FOUND AND SEIZED. CO NSEQUENT TO THE SEARCH OPERATION THE ASSESSEES CASE IS ALSO NOTIFIED WITH DCIT CENTRAL CIRCLE 4 HYDERABAD SINCE THE ASSESSEE HAPPENED TO BE A DAUGHTER OF SRI POTLA NAGESWARA RAO. THE ASSES SMENT WAS COMPLETED BY THE ASSESSING OFFICER BASED ON THE MAT ERIAL AVAILABLE ON RECORD. 62. AO HELD THAT SINCE FOR A PART OF THE LAND ASSE SSEE HAS ALREADY ENTERED INTO DEVELOPMENT AGREEMENT FOR RESI DENTIAL USE, SHE CANNOT CLAIM AGRICULTURAL STATUS FOR THE ADJAC ENT CHUNK OF LAND. HENCE AO DID NOT ACCEPT THE ASSESSEES ARGUM ENT AND SUBJECTED THE TRANSACTION TO CAPITAL GAINS TAX. AO HELD THAT ON A COMPLETE ANALYSIS OF ALL THE FACTS OF THE CASE AND CONDUCT OF THE ASSESSEE FROM THE TIME OF PURCHASE OF LAND TO ITS S ALE, IN THE LIGHT OF THE ECONOMIC SCENARIO OF THE HYDERABAD CITY DURI NG THE PERIOD IT IS CLEAR THAT THE ASSESSEE HAD NOT PURCHA SED THE LAND WITH AN INTENTION TO DO AGRICULTURE ON IT. INSTEAD THE LAND WAS PURCHASED WITH THE ONY INTENTION OF SELLING IT AT P ROFIT IN THE BOOMING ECONOMY OF HYDERABAD. THE AO TOOK THE SALE PROCEEDS AT RS 1.62 CRORES AND REDUCED THE COST OF ACQUISITI ON OF RS 4.80 LAKHS AND BALANCE AMOUNT OF RS 1,57,20,000 TREATED AS STCG FOR THE RELEVANT ASSESSMENT YEAR. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 25 63. AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). 64. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEES FATHER SRI POTLA NAGESWARA RAO HAD PURCH ASED 21.27 ACRES OF LAND AT BOWRAMPET, DUNDIGAL VILLAGE OF QUT BULLAHPUR MUNICIPALITY DURING THE FY 2003-04 IN THE NAME OF H IS SON POTLA NISHANTH AND DAUGHTER POTLA SHANTI. THE ASSESSEE HA D SOLD 1.25 ACRES OF LAND AT BOWRAMPET, QUTBULLAHUR MANDAL, RAN GA REDDY DISTRICT FOR A CONSIDERATION OF RS 1.62 CRORES TO M /S VARUN CONSTRUCTIONS, SECUNDERABAD. BEFORE THE CIT(A), TH E AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALSO SUBMITTED THAT THE LAND SOLD BY THE ASSESSEEIS AN AGRICULTURAL LAND THEREFORE TH E ASSESSING OFFICER HAD NO GROUND TO MAKE THE ADDITIONS. THE AU THORIZED REPRESENTATIVE ALSO HAS FURNISHED CERTIFICATE FROM REVENUE AUTHORITY DATED 4.2.2009 EXPLAINING THAT THE LAND S ITUATED AT BOWRAMPET, QUTBULLAHPUR MANDAL, RANGA REDDY DISTRIC T IS 12 KMS AWAY FROM QUTBULLAHPUR MUNICIPALITY LIMITS. THEREFORE IT IS CONTENDED THAT THE ASSESSING OFFICER IS NOT JUST IFIED TO TREAT THE LANDS SOLD BY THE ASSESSEE FOR SHORT TERM CAPIT AL GAINS PURPOSE HENCE PLEADED TO BE ALLOWED. THE AUTHORISE D REPRESENTATIVE ALSO HAS FURNISHED THE FOLLOWING SUB MISSION BEFORE THE CIT(A). 65. BEFORE THE CIT(A), IN SUPPORT OF THE ASSESSEE CLAIM. REFERENCE WAS MADE TO THE HONOURABLE PUNJAB AND H ARYANA HIGH COURT JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX VS LAL SINGH (2010) 325 ITR 0588 AND HONOURABLE IN COME TAX APPELLATE TRIBUNAL AMRITSAR IN THE CASE OF DEPUTY C OMMISIONER OF INCOME TAX VS CAPITAL LOCAL AREA BANK LTD (2010) 006 ITR (TRIB) 0314 WHERE IT WAS HELD THAT LAND CLASSIFIED IN REVENUE RECORDS AS AGRICULTURE AND IS SITUATED BEYOND 8 KMS OF LOCAL ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 26 LIMITS OF THE MUNICIPALITY SHALL NOT BE CONSIDERED CAPITAL ASSET AS LAND DOWN IN SEC 2(14) OF THE INCOME TAX ACT 1961. 66. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED ALL FACTS AS A WHOLE AND NOT PIECE MEAL AND HE RELIED UPON THE JUD GMENT OF HONOURABLE COCHIN HIGH COURT IN THE CASE OF ASSISTA NT COMMISSIONER OF INCOME TAX VIS HOTEL HARBOUR VIEW ( 2010) 002 ITR (TRIBUNAL) 0178. 67. HE SUBMITTED THAT AT THE RELEVANT TIME THE LAN D IN QUESTION HAD NOT CEASED TO BE PUT TO USE OTHER THAN FOR AGRICULTURAL PURPOSE. THE LAND WAS AGRICULTURAL LAN D WHEN IT HAD BEEN PURCHASED BY THE ASSESSEE AND IT WAS NOT PUT T O ANY ALTERNATIVE USE. THE LAND AS PROVED ON RECORD WAS A CTUALLY BEING USED FOR AGRICULTURE INVOLVING PLOUGHING AS WELL AS TILLING. THE ASSESSEE OWNER MEANT AND INTENDED TO USE IT AND IN FACT ACTUALLY USED IT FOR AGRICULTURAL PURPOSES. BESIDES IN CIT V S BORHAT TEA CO. LTD (1982) 138 ITR 783 (CAL) IT HAS BEEN HELD T HAT FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND ACTUAL AGRI CULTURAL OPERATIONS OR CULTIVATION OR TILLING THEREON IS NOT NECESSARY IF THE LAND IS OTHERWISE CAPABLE OF AGRICULTURAL OPERATION S BEING CARRIED ON THEREAT. 68. IT WAS POINTED OUT THAT NOWHERE THE AO HAS CON CLUDED THAT THE SUBJECT LAND IS NOT AGRICULTURAL LAND. ALL ALONG THE AO HAS TAKEN STAND THAT THE INVESTMENT WAS MADE KEEPIN G IN MIND THE FUTURE BONE OF HYDERABAD WHICH ARE IRRELEVANT A ND OUT OF CONTEXT SINCE PRESUMPTIONS AND ASSUMPTIONS CANNOT B E BASIS FOR TAXING THE GAIN ON SALE OF AGRICULTURAL LAND. F URTHER THE PROPOSED RING ROAD WAS DECIDED UPON BY THE GOVT. A UTHORITIES LONG AFTER PURCHASE OF LAND AND HENCE THE IDEA OF F UTURE GROWTH CANNOT BE IMPUTED TO THE ASSESSEE. AN IDENTICAL VI EW WAS ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 27 EXPRESSED IN THE CASE OF CIT VS E. UDAYAKUMAR (2006 ) 284 ITR 0511 HONBLE HIGH COURT OF MADRAS. 69. IT WAS SUBMITTED THAT THERE WAS NO PREVIOUS SA LE OF ANY PORTION OF THE LAND FOR NON AGRICULTURAL USE. THE L ANDS SURROUNDING THE LAND IN QUESTION WERE AGRICULTURAL LANDS. IN SUCH A SITUATION IT HAS BEEN HELD IN ADDL. CIT VS T ARACHAND JAIN 91980) 123 ITR 567 (PATNA) THAT THE PRESUMPTION IS IN FAVOUR OF THE ASSESSEE OF HIS LAND ALSO BEING OF AGRICULTURAL NATURE.IN CIT V O.RM. M.SP.SV.A. ANNAMALAI CHETTIAR (2005) 273 ITR 404(MAD) IT HAS BEEN HELD THAT THE FACT THAT THE LAND WAS LO CATED IN A LOCALITY WHERE DEVELOPMENT HAD TAKEN PLACE WAS NOT SUFFICIENT TO HOLD THE LAND TO BE NON AGRICULTURAL, EVEN IF THE L AND WAS USED FOR AGRICULTURE IN THE PAST BUT WAS LYING FALLOW IN THE RELEVANT ASSESSMENT YEAR. A SIMILAR VIEW IS ALSO TAKEN IN M. S. SRINIVASA NAIOTER V ITO (2007) 297 ITR 481(MAD) AND CWT VS E. UDAYAKUMAR (2006) 284 ITR 0511 (MAD) HELD THAT THE FACT THAT THERE WAS A HOSPITAL IN THE ADJACENT LAND (IN YOU R ASSESSEE CASE RING ROAD) WAS TOTALLY IRRELEVANT. 70. THEREFORE IN THE LIGHT OF ABOVE SUBMISSIONS IT IS THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE THAT TH E ASSESSING OFFICER HAD NO REASON TO TREAT THE LAND SITUATED AT BOWRAMPET FOR SHORT TERM CAPITAL GAINS PURPOSE. IT IS ALSO SUBMIT TED BY THE AUTHORIZED REPRESENTATIVE THAT THE SAID LAND WAS AG RICULTURAL LAND CULTIVATED FOR AGRICULTURAL PURPOSE AS APPEARI NG IN THE REVENUE RECORDS/ THEREFORE THE SAME COULD NOT HAVE BEEN TREATED FOR SHORT TERM CAPITAL GAINS PURPOSE. 71. THE AUTHORIZED REPRESENTATIVE ALSO RELIED UPON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF CIT LAL SINGH (2010) 325 ITR 588 WHEREIN THE ASSESSEE P RODUCED A CERTIFICATE FROM THE TASILDAR TO THE EFFECT THAT TH E LAND WHICH THE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 28 ASSESSEE HAD SOLD WAS SITUATED BEYOND 8 KILOMETERS FROM THE GURGAON MUNICIPAL LIMITS. THE ASSESSING OFFICER NO T ACCEPTING THE REPORT OF THE TASILDAR AND INSTEAD RELYING UPON THE REPORT GIVEN BY THE INSPECTOR DENIED THE ASSESSEE EXEMPTIO N UNDER SECTION 548 OF THE INCOME TAX ACT 1961. THE COMMISS IONER (A) SET ASIDE THE ORDER AND THIS WAS CONFIRMED BY THE T RIBUNAL. ON APPEAL TO THE HIGH COURT, IT WAS HELD, DISMISSING T HE APPEAL OF THE REVENUE, THAT THE COMMISSIONER (A) HAD RIGHTLY NOT ACCEPTED THE REPORT OF THE INSPECTOR. IN THE REPORT NEITHER THE KHASRA NUMBER OF THE LAND OF THE ASSESSEE WAS GIVEN NOR HA D IT BEEN EXPLAINED HOW THE DISTANCE OF THE LAND FROM THE MUN ICIPAL LIMITS WAS MEASURED. ON THE OTHER HAND THE COMMISSIONER ( A) HAS RIGHTLY RELIED UPON THE REPORT GIVEN BY THE TASHILD AR ON THE APPLICATION OF THE ASSESSING OFFICER HIMSELF AND IT COULD NOT BE DISCARDED. THEREFORE THERE WAS NO JUSTIFICATION FOR IGNORING THE REPORT. FURTHER EXCEPT THE REPORT GIVEN BY THE TASH ILDAR WHICH WAS RELIED UPON BY THE REVENUE TO SHOW THAT THE DIS TANCE OF THE LAND OF THE ASSESSEE FROM THE MUNICIPAL LIMITS WAS LESS THAN 8 KMS THERE WAS NO OTHER MATERIAL ON RECORD CONTRACTD ICT TO THE REPORT. THUS A PURE FINDING OF FACT HAD BEEN RECORD ED BY THE COMMISSIONER (A) AND THE TRIBUNAL ON THE ISSUE OF D ISTANCE AFTER CONSIDERING THE EVIDENCE AVAILABLE ON RECORD. THE FINDING COULD NOT BE SAID TO BE PERVERSE ILLEGAL OR CONTRARY TO T HE EVIDENCE AVAILABLE ON RECORD. THE AMOUNT WAS NOT ASSESSABLE AS CAPITAL GAINS. 72. THE ASSESSEE ALSO HAS FURNISHED THE CERTIFICAT E FROM DEPUTY COLLECTOR OF TAHSILDAR OF QUTHBULLAPUR MANDA L WHO HAD CERTIFIED THAT THE DUNDIGAL VILLAGE SITUATED IN QUT HBULLAPUR MANDAL, RANGA REDDY DISTRICT AND NEAREST MUNICIPALI TY IS QUTHBULLAPUR. THE DISTANCE FROM DUNDIGAL VILLAGE TO QUTHBULLPUR MUNICIPALITY LIMITS IS 13 KMS. THEREFOR E IN THE LIGHT ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 29 OF ABOVE CERTIFICATE FURNISHED IT WAS SUBMITTED BEF ORE THE CIT(A) THAT THE ASSESSEES LANDS ARE SITUATED AT DUNDIGAL WHICH IS AWAY FROM 13 KMS OF QUTHBULLAPUR MUNICIPAL LIMITS A ND THE SALE OF SAID LAND IS ONLY SALE OF AGRICULTURAL LAND HENC E NO CAPITAL GAINS ARE ATTRACTED UNDER INCOME TAX ACT 1961. 73. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER: THE SUBMISSION MADE BY THE AUTHORIZED REPRESENTATI VE HAS BEEN TAKEN INTO CONSIDERATION. THE CASE LAWS RELIED UPON BY THE AUTHORIZED REPRESENTATIVE ARE PERUSED. THE OBSE RVATION OF THE ASSESSING OFFICER ALSO HAS BEEN VERIFIED. HA VING VERIFIED THE FACTS AND CIRCUMSTANCES OF THE CASE AN D ALSO THE COPY OF REVENUE RECORDS AND REPORTS FURNISHED B Y THE ASSESSEE I AM OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE SALE OF AGRICULTURAL LAND FOR SHORT TERM CAPITAL GAIN PURPOSE CANNOT BE SUSTAINED , THEREFORE THIS GROUND OF APPEAL OF IS ALLOWED. 74. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 75. THE CONTENTION OF THE REVENUE IS THAT WHEN THE ASSESSEE HAD GIVEN THE LAND FOR DEVELOPING AN INTEGRATED RES IDENTIAL TOWNSHIP ON AN AREA OF 19.9 ACRES, THE LAND CANNOT BE SAID TO BE HELD FOR AGRICULTURAL PURPOSES. 76. THE REVENUE HAS ALSO RAISED AN ISSUE THAT FROM 16.4.2007, THE AREA HAS MERGED WITH GREATER HYDERABAD MUNICIPA L CORPORATION. 77. THE LEARNED DR SHRI SMT. MYTHILI RANI, RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SARIFABIBI MOHAMMED IBRAHIM & OTHERS VS. CIT (204 ITR 631) (SC ). ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 30 78. THE LD. COUNSEL FOR THE ASSESSEE SHRI GANDHI, STRONGLY SUPPORTING THE ORDER OF THE CIT(A), RELIED ON THE D ECISION OF THE HYDERABAD B BENCH IN THE CASE OF SRINIVAS PANDIT (H UF) VS. ITO IN ITA NO.56/H/2007, BESIDES THE FOLLOWING OTHER DE CISIONS- 1. THE TRIBUNAL, AMRISTER BENCH IN THE CASE OF DCI T VS. CAPITAL LOCAL AREA BANK LTD. (6 ITR (TRIB.) 314 ) 2. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAL SINGH (325 ITR 588). 79. HE LEARNED COUNSEL ALSO REITERATED THE WRITTEN SUBMISSIONS FURNISHED BEFORE THE CIT(A) AS UNDER: ADDITION OF SHORT TERM CAPITAL GAIN (AGRICULTURE LA NDS) OF RS.2,26,93,975/- 1. YOUR ASSESSEE SUBMITTED THAT THE ASSESSING OFFI CER HAS ERRED BY ESTIMATING NOTIONAL SHORT TERM CAPITAL GAI N ON THE BASIS OF DEVELOPMENT AGREEMENT FOR AGRICULTURE LAND S SITUATED AT RANGA REDDY DISTT. AWAY BY 13 KMS. FROM THE NEAREST MUNICIPALITY LIMITS AT RS.2,26,93,795/-. I N TOTAL VIOLATION OF THE LAW AND AGAINST THE FACTS AND THE ADDITION IS ERRONEOUS. 2. THE ASSESSING OFFICER HAS NOT DISPUTED WITH REG ARD TO BASIC CHARACTER OF AGRICULTURE LAND. 3. THE LAND REFERRED IN THE DEVELOPMENT AGREEMENT AREA AGRICULTURE LANDS ACQUIRED BY WAY OF SALE DEED DATE D 8 TH FEBRUARY 2005, AND YOUR ASSESSEE HEREWITH ENCLOSED LAND PASS BOOK NO.444079 UNDER PATTA NO.1973 AND PASS BO OK NO.44063, PATTA NO.1132 ISSUED BY THE DEPUTY COLLEC TION RR DISTRICT DATED 10.5.2005 ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 31 IN SUPPORT OF THE ABOVE THE COPY OF SALE DEED AND L AND PASS BOOKS ENCLOSED BY THE ASSESSEE IN ANNEXURE 1 I) THE ASSESSEE ENCLOSED HEREWITH COPY OF LAND REVE NUE RECORDS IN FORM NO.3 WHEREIN THE NATURE OF THE LAND I.E. METTA LAND AND THE ASSESSEE NAME BOTH UNDER THE KHATADAAR AND ANUBHODAR COLUMNS WHICH SHOWS THAT TH E LAND IS AGRICULTURE LAND AND CULTIVATED BY THE ASSE SSEE. COPY OF THE DOCUMENTS ENCLOSED IN ANNEXURE 2 THE ASSESSEE ALSO ENCLOSED THE CERTIFICATE ISSUED B Y THE VILLAGE REVENUE OFFICE FOR HAVING CARRIED ON AGRICU LTURE ACTIVITY AFTER DULY ENQUIRY CONDUCT BY THE OFFICER AND DETAILS OF THE CROPS RAISED DURING THE YEAR 2006-07. COPY OF CERTIFICATE WAS ENCLOSED BY THE ASSESSEE IN ANNEXURE-3: THE ASSESSEE ALSO ENCLOSED A CERTIFICATE THAT THE L AND IS SITUATED BEYOND 8 KMS. FROM THE NEAREST MUNICIPALIT Y LIMITS (13 KMS.) IN ANNEXURE 4 4. THERE IS NO TRANSFER INVOLVED AS CONTEMPLATED B Y THE ASSESSING OFFICER ON PAGE 4 OF THE ASSESSMENT ORDER SINCE: I) IT IS ONLY A DEVELOPMENT AGREEMENT AND NOT AND AGREEMENT TO SALE. II)NO MONEYS WERE EXCHANGED AS ON THE DATE OF DEVELOPMENT AGREEMENT OR ANY PERFORMANCE IS CARRIED OUT BY THE DEVELOPER. III) IT IS ONLY AN AGREEMENT TO DO CERTAIN WORKS WI THIN PERIOD OF 36 MONTHS AFTER OBTAINING REQUISITE PERMISSION F OR ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 32 CONSTRUCTION BY THE DEVELOPER AS SUCH NO CONSIDERAT ION WAS PASSED IN PART PERFORMANCE OF SAID AGREEMENT. IV) OBTAINING REQUISITE PERMISSIONS IS A PRE REQUIS ITE FOR PUTTING THE DEVELOPMENT AGREEMENT IN TO FORCE AND H ENCE CANNOT BE AN OPERATIVE TRANSFER. V) THE QUANTIFICATION OF CONSIDERATION IS A PRIME Q UO NON FOR ANY CONTRACT EFFECTING TRANSFER OF PROPERTY. THE PRESENT QUANTIFICATION OF FUTURE CONSIDERATION CANNOT BE COMPREHENDED AS THE VERY EXECUTION OF THE DEVELOPME NT AGREEMENT BY THE DEVELOPER IS VERY MUCH IN DOUBT. TO DATE EVEN THE CUSTOMARY BHUMIK POOJA WAS NOT CONDUCTED A ND NOT EVEN A GRAIN OF SAND WAS SHOVELLED. VI) THE VALUE OF SUB REGISTRAR AS ON THE DATE OF D EVELOPMENT AGREEMENT IS THE VALUE OF AGRICULTURE LAND AND THAT IS REFERRED ON ANNEXURE 1A OF THE SAID DEVELOPMENT AGREEMENT. 80. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNE D COUNSEL THAT A CAPITAL GAIN ON SALE OF AGRICULTURE LAND IS EXEMPT. THE JURISDICTIONAL TRIBUNAL IN THE CASE OF SRINIVAS PAN DIT (HUF) HAS HELD AS FOLLOWS: IN THIS CASE ALSO ADMITTEDLY, THE ENTIRE TRANSACTIO NS WAS MADE THROUGH RAJENDRA NAGAR REVENUE AUTHORITIES AND NOT THROUGH HYDERABAD REVENUE AUTHORITIES. THEREFORE, A S FOUND BY THE COORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF CAPITAL LOCAL AREA BANK LTD. (SUPRA) , THE JURISDIC TIONAL MUNICIPALITY IS RAJENDRA NAGAR MUNICIPALITY AND NOT THE HYDERABAD MUNICIPALITY. SINCE RAJENDRA NAGAR MUNICI PALITY IS NOT ADMITTEDLY NOTIFIED BY THE CENTRAL GOVERNMEN T, THE AGRICULTURAL LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 33 ASSET BY TAKING THE DISTANCE FROM THE LIMITS OF HYD ERABAD MUNICIPALITY. BY RESPECTFULLY FOLLOWING DECISIONS O F THE COORDINATE BENCH CITED SUPRA, WE HOLD THAT THE LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SEC. 2(14)(III)(B) OF THE IT ACT. ACCORD INGLY, ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. 81. HOWEVER, IN THE PRESENT CASE, IT IS NOT CLEA R AS TO WHETHER THE ASSESSEE HAS CONVERTED THE LAND FOR NON AGRICUL TURE PURPOSES . THE AO HAS OBSERVED THAT ORIGINALLY THE INTENTION OF THE ASSESSEE WAS TO DEVELOP THE LAND FOR COMMERCIAL PURPOSES AS THE OUTER RING ROAD WAS PASSING NEAR TO THE LAND. IT IS ALSO PERTINENT TO POINT OUT THAT A PART OF THE SAME LAND WAS GIVEN FOR DEVELOPMENT FOR CONSTRUCTION OF HOUSES AND THE OTHE R PART OF LAND WHICH HAS BEEN ENTERED INTO AGREEMENT WITH M/ .S AMSRI DEVELOPERS P LTD. HAS TO BE PROVED BEYOND DOUBT TO BE AGRICULTURE IN NATURE. 82. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SMT. GOUSIA BEGUM AND OTHERS, HAS HELD, VIDE ITS ORDER DATED 16.1.2012 IN ITA NO. 1024/HYD/201 AND OTHERS, AS FO LLOWS: 11. WE HEARD BOTH SIDES. THE CONTENTION OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS THAT T HE AGRICULTURAL OPERATIONS WERE CARRIED OUT IN THE AY UNDER CONSIDERATION. DURING THE COURSE OF PROCEEDINGS BE FORE THE ASSESSING OFFICER, THE ASSESSEE REQUESTED THE ASSES SING OFFICER TO INSPECT THE LANDS AT THAT STAGE. THE AS SESSEE ALSO FILED PAHANI PATRIKA FOR THE FINANCIAL YEAR 2006-07 , THE SLAB PASS-BOOK ISSUED BY THE ELECTRICITY BOARD BEFORE TH E LOWER AUTHORITIES. IT WAS ALSO SUBMITTED THAT THERE WAS A N OPEN WELL IN THE LAND AND WATER WAS SUPPLIED TO THE CROP THROUGH ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 34 ELECTRIC MOTOR PUMPING. EVEN AFTER THE REQUEST O F THE ASSESSEE THE ASSESSING OFFICER NOT CARRIED OUT ANY ENQUIRY AND DREW ADVERSE INFERENCE AGAINST THE ASSESSEE. F URTHER, THE LEARNED AR OF THE ASSESSEE STATED BEFORE US THA T THE ASSESSEE BEING AN AGRICULTURIST AND NOT CARRYING OU T ANY BUSINESS ACTIVITY AND NOT MAINTAINED ANY BOOKS OF A CCOUNT. THUS, THE ASSESSEE FAILED TO MAINTAIN SALE-BILLS, P URCHASE BILLS AND BILLS TOWARDS PURCHASE OF FERTILIZERS. FURTHER , IT WAS OBSERVED THAT THE ASSESSEE IN THE COURSE OF STATEME NT RECORDED UNDER SECTION 132(4) OF THE ACT STATED THA T THE PADDY AND THE VEGETABLES WERE GROWN AND THE SAME WA S USED FOR SELF CONSUMPTION. THE ASSESSING OFFICER W ITHOUT BRINGING ANY EVIDENCE AGAINST THE ASSESSEE, DISALLO WED THE CLAIM OF THE ASSESSEE. FURTHER, FOR DISBELIEVING TH E CONTENTION OF THE ASSESSED, THE LOWER AUTHORITIES RELIED ON THE PAHANI PATRIKA OBTAINED FROM DY. COLLECTOR AND TAHSILDAR. IT WAS MENTIONED THEREIN THAT THERE WAS NO CULTIVAT ION DURING THE FINANCIAL YEAR 2005-06. LATER, THERE WA S AN AFFIDAVIT FILED FROM THE VILLAGE REVENUE OFFICER, N ARSING VILLAGE WHO M ENTIONED THAT DUE TO PRESSURE OF WORK, HE DID NOT FILL THE COLUMNS OF CULTIVATION IN THE PAHANI PATRIKA DURING THE FINANCIAL YEAR 2005-06 FOR ALL THE LANDS IN THE ENTIRE VILLAGE. THIS FACT ALSO BROUGHT TO THE KNOW LEDGE OF THE LOWER AUTHORITIES. HOWEVER, NO ENQUIRIES WERE CARR IED OUT IN THIS REGARD. ON THE OTHER HAND, THERE WAS INFORMAT ION FROM THE DY. COLLECTOR THAT THE LAND WAS UNDER CULTIVATI ON FOR THE FINANCIAL YEAR 2006-07 AND 2004-05 AND IN EARLIER Y EARS. HOWEVER, THE AFFIDAVIT FILED BY THE VRO SHOWS THAT THE LAND WAS UNDER CULTIVATION IN THE ASST. YEAR UNDER CONSI DERATION ALSO. FURTHER, THE LOWER AUTHORITIES OBSERVED THA T THERE WAS A DISPUTE REGARDING THE OWNERSHIP OF THE AGRICULTUR AL LAND AND THERE CANNOT BE ANY AGRICULTURAL OPERATIONS. T HIS FINDING OF THE LOWER AUTHORITIES GOES AGAINST THE REVENUE R ECORDS ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 35 WHICH SHOW THAT THE LAND WAS UNDER CULTIVATION DURI NG THE FINANCIAL YEAR 2006-07 AND FOR 2004-05 AND ALSO AGA INST VROS CERTIFICATE. BEING SO, IN OUR OPINION, THE C ERTIFICATE ISSUED BY THE VRO, WHO IS CONCERNED REVENUE AUTHORI TY TO ISSUE THE SAID CERTIFICATE HAS TO BE RELIED UPON AN D IT IS NOT POSSIBLE TO REJECT THE SAME WITHOUT EXAMINING THE D EPONENT. IN THIS BEHALF, WE PLACE RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF MEHTA PARIKH & COMPANY VS. CIT (30 ITR 181) (SC) WHEREIN HELD THAT WHEN THE PE RSONS WHO GAVE THE AFFIDAVITS WERE NOT CROSS-EXAMINED, IT WAS NOT OPEN TO THE REVENUE TO CHALLENGE THE CORRECTNESS OF THE STATEMENT MADE IN THE AFFIDAVITS. IN VIEW OF THI S, WE ARE INCLINED TO HOLD THAT THE AGRICULTURAL INCOME DECLA RED BY THE ASSESSEE IS TO BE ACCEPTED AS AGRICULTURAL INCOME O NLY. ....... 12. THE NEXT EFFECTIVE GRIEVANCE OF THE ASSESSEE I N THIS APPEAL RELATES TO COMPUTATION OF CAPITAL GAINS , TREATING THE LAND SOLD BY THE ASSESSEE AS NON-AGRICULTURAL L AND. ............. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE DO NOT FIND MERIT IN THE CONTENTION OF THE ASSESSEE. T HE LAND IN QUESTION GIVING RISE TO CAPITAL GAIN WAS, IN FACT, URBAN LAND THOUGH AGRICULTURAL OPERATIONS HAVE BEEN CARRIED OU T ON THEM. THE ASSESSEE PLACED BEFORE THE LOWER AUTHORIT IES PAHANI PATRIKA, VROS CERTIFICATE AND DETAILS OF EL ECTRICITY BILL/SLAB PASS BOOK ETC. WE HAVE HELD ON THAT BASI S IN EARLIER PARAS THAT THE ASSESSEE DERIVED AGRICULTURAL INCOME . BUT, THE QUESTION STILL REMAINS WHETHER THE IMPUGNED LAND CO ME WITHIN THE MEANING OF CAPITAL ASSET. THE LAND IS SITUATED AT NARSING VILLAGE OF RAJENDRA NAGAR MANDAL, R.R. DIST RICT WHICH IS WITHIN THE MUNICIPAL LIMITS OF RAJENDRA NAGAR. ACCORDING ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 36 TO THE LEARNED COUNSEL FOR THE ASSESSEE, RAJENDRA MUNICIPALITY IS NOT NOTIFIED BY THE CENTRAL GOVERNM ENT AND THEREFORE THE AGRICULTURAL LANDS WHICH FALL UNDER T HE JURISDICTION OF THE RAJENDRA NAGAR MANDAL CANNOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE INCOME-TAX ACT. BUT, THE FACT IS THA T THIS IS URBAN LAND AKIN TO THE HYDERABAD MUNICIPALITY SITUA TED WITHIN 8 KM FROM THE LOCAL LIMITS OF HYDERABAD MUNI CIPAL CORPORATION. IN SIMILAR CIRCUMSTANCES, THE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. BOLA RAMAIAH (174 ITR 154) HELD THAT THE CAPITAL GAINS ARISING OUT OF SALE OF LAND SITUATED WITHIN 8 KM OF LOCAL LIMITS OF HYDERABAD MUNICIPAL ITY, IS LIABLE FOR TAX ON CAPITAL GAINS IRRESPECTIVE OF THE FACT WHETHER IT FALLS UNDER THE LIMITS OF RAJENDRA NAGAR MANDAL OR OTHERWISE. FURTHER, MERE FACT THAT THE LAND IN QUE STION WAS AGRICULTURAL LAND CANNOT BE A GROUND TO CLAIM FOR E XEMPTION UNDER SECTION 2(14) OF THE ACT AS THE LAND IS SITUA TED WITHIN THE LOCAL LIMITS OF HYDERABAD MUNICIPAL CORPORATION . FURTHER, IT WAS HELD RECENTLY BY THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. SMT. ANJANA SEHGAL (S UPRA) THAT THE EXPRESSION FROM THE LOCAL LIMITS OF ANY MUNICIPALITY USED IN SECTION 2(14)(III)(B) OF THE INCOME-TAX ACT DENOTES ANY MUNICIPALITY OR MUNICIPALITY OF THE DISTRICT I N WHICH THE LAND IS SITUATED . FURTHER, CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN MUNICIPAL OR OTHER URBAN AREAS OR NOTIFIED ADJOINING AREAS WILL BE LIA BLE TO INCOME-TAX. IN THIS VIEW OF THE MATTER, AND CONSID ERING THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, IN OUR CONSIDERED VIEW, THE LOWER AUTHORITIES ARE JUSTIFIE D IN DETERMINING THE LAND IN QUESTION, AS CAPITAL ASSET LIABLE FOR INCOME-TAX. WITH REGARD TO DETERMINATION OF COST OF ACQUISITION OF THE LAND DISPOSED OF, WE ARE OF THE OPINION THAT CONSIDERING THE PROXIMITY OF THE LAND TO THE CITY, IT IS ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 37 REASONABLE TO FIX THE VALUE OF AS ON 1.4.1981 AT RS .30,000 PER ACRE, INSTEAD OF RS.10,000 DETERMINED BY THE AS SESSING OFFICER, AS AGAINST RS.1,40,000 CLAIMED BY THE ASSE SSEE. ONE OF THE REASONS FOR WHICH THE CLAIM OF THE ASSES SEE FOR RELIEF UNDER S.54B WAS REJECTED BY THE ASSESSING OF FICER WAS THAT WHAT WAS PAID BY THE ASSESSEE WAS ONLY AN ADVA NCE FOR PURCHASE, AND UNLESS IT IS ACTUAL PURCHASE OF LAND, ASSESSEE WOULD NOT BE ENTITLED FOR RELIEF UNDER S.54B. THERE IS SOME MERIT IN THIS REASONING OF THE ASSESSING OFFICER. HOWEVER, IN TERMS OF S.54B OF THE ACT, ASSESSEE HAS TO PURCHASE THE AGRICULTURAL LAND WITHIN A PERIOD OF TWO YEARS. HE NCE, THOUGH MERE PAYMENT OF ADVANCE DOES NOT ENTITLE THE ASSESS EE FOR RELIEF UNDER S.54B OF THE ACT, IF ULTIMATELY WHOLE TRANSACTION OF PURCHASE OF LAND WAS COMPLETED WITHIN A PERIOD O F TWO YEARS AS CONTEMPLATED UNDER S.54B OF THE ACT, ASSES SEE IS ENTITLED FOR RELIEF UNDER S.54B OF THE ACT. IN THI S VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES, AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER FOR VERIFYING WHETHER THE ASSESSEE HAS PURCHASED THE AGRICULTURAL LANDS WITHIN A PERIOD OF TWO YEARS, SO AS TO QUALIFY FOR RELIEF UNDER S.54B OF THE ACT, AND ACCO RDINGLY RE- DECIDE THIS ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATI STICAL PURPOSE. 83. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO REST ORE THE ISSUE TO THE FILE OF THE AO FOR RE-EXAMINATION OF THE ENT IRE ISSUE AFRESH, IN THE LIGHT OF THE FINDINGS GIVEN IN THE CASE OF SMT. GHOUSIA BEGUM CITED SUPRA, AND AFTER GIVING REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE, DULY VERIFYING THE NATURE OF LAND I.E., ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 38 WHETHER THE LAND CAN BE CLASSIFIED AS AGRICULTURE LAND AND ALSO BEYOND 8 KMS. OF ANY MUNICIPALITY. 84. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO 1529/H/2011 FOR AY 2007-08 IS ALLOWED FOR STATISTIC AL PURPOSES. CO NO 76/H/2011 IN ITA 1529/H/11 FOR AY 2007-08 85. THIS CROSS OBJECTION FILED BY THE ASSESSEE MS. POTLA SHANTHI IS IN SUPPORT OF THE CIT(A) ORDER DECIDING THE ISSUE IN HER FAVOUR. AS WE HAVE SET ASIDE THE APPEAL BY THE REVENUE, IN 1529/H/11 FOR THIS YEAR, TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION, THIS CO FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY. 86. IN THE RESULT CO NO 76/H/2011 FILED BY THE ASS ESSEE IN THE REVENUES APPEAL ITA NO 1529/H/11 IS DISMISSED. ITA NO 1530/H/11 KUM POTLA SHANTHI- REVENUES APPEA L FOR AY 2008-09 87. THE ONLY GROUND OF APPEAL BY THE REVENUE IS AG AINST THE ORDER CIT(A) DELETING THE CAPITAL GAINS ARISING FRO M SALE OF LAND TO M/S AMSRI DEVELOPERS P LTD. IT IS THE CONTENTION OF THE ASSESSEE THAT THE LANDS SOLD WERE AGRICULTURAL LANDS, NOT FA LLING WITHIN THE NOTIFIED LIMITS OF MUNICIPALITY AND HENCE IS NOT EX IGIBLE TO CAPITAL GAINS. THE ISSUE INVOLVED IN THIS APPEAL IS SIMILA R TO THE ONE, WE HAVE ALREADY CONSIDERED IN THE CASE OF THIS VERY IS SUE IN ITA NO.1529/H/2011 FOR THE ASSESSMENT YEAR 2007-08. FA CTS AND CIRCUMSTANCES BEING IDENTICAL IN THIS YEAR AS WELL, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO T HE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION WITH DIREC TIONS SIMILAR TO THE ONES GIVEN FOR THE PRECEDING YEAR HEREINABOVE. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 39 88. IN THE RESULT THE REVENUES APPEAL IN ITA 1530 /H/11 IS ALLOWED FOR STATISTICAL PURPOSES. CO NO 77/H/11 IN ITA 1530/H/11 FOR AY 2008-09: CROS S OBJECTION BY ASSESSEE: 89. THIS CROSS OBJECTION FILED BY THE ASSESSEE MS . POTLA SHANTHI IS IN SUPPORT OF THE CIT(A) ORDER DECIDING THE ISSUE IN HER FAVOUR. AS WE HAVE SET ASIDE THE APPEAL BY THE REVENUE, IN 1530/H/11 FOR THIS YEAR, TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION, THIS CO FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY. 90. IN THE CO FIELD BY THE ASSESSEE IS DISMISSE D. ITA NO 1523/H/11 KUM POTLA SHANTHI- ASSESSEES APPE AL FOR AY 2008-09: 91. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ASSESSABILITY OF CAPITAL GAINS. THE FACTS INVOLVED IN THE APPEAL OF THE ASSESSEE ARE IDENTICAL WITH THOSE IN THE APPEAL OF HER FATHER SRI. POTLA NAGESWARA RAO IN ITA NO 1521/H/11. WE H AVE DEALT WITH THE CORRESPONDING GROUNDS OF THE ASSESSEES FA THER IN THAT CASE IN PARA 9 OF THIS ORDER HERE INABOVE FOR THE DETAILED REASONS DISCUSSED IN PARA 9 OF THIS ORDER WHILE DEA LING THE APPEAL OF THE ASSESSEES FATHER FOR THAT YEAR, WE D O NOT FIND MERIT IN THE GROUNDS OF THE ASSESSEE ON THE ISSUE OF ASSE SSABILITY OF CAPITAL GAINS IN THE YEAR UNDER APPEAL. HOWEVER, O N THE ASPECT OF ASSESSEES CLAIM FOR ALLOWABILITY OF EXEMPTION U NDER S.54F OF THE ACT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHO RITIES AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER, WITH A DIRECTION TO RE-EXAMINE THE SAME AFRESH IN ACCORDAN CE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSING OFFICER MAY ALLOW THE CLAI M OF THE ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 40 ASSESSEE FOR RELIEF UNDER S.54F OF THE ACT, IF THE REQUISITE CONDITIONS FOR THE SAME HAVE BEEN COMPLIED WITH BY THE ASSESSEE. FOR THIS LIMITED PURPOSE, ASSESSEES AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES. 92. IN THE RESULT THE ASSESSEES APPEAL IN ITA NO 1523/H/11 IS ALLOWED FOR STATISTICAL PURPOSES. I TA NO 1568/H/11 REVENUES APPEAL FOR AY 2007-08 IN THE CASE OF SHRI. POTLA NISHANTH: 93. THE FACTS OF THIS CASE ARE IDENTICAL WITH THE FACTS OF THE CASE OF ASSESSEES SISTER MS. POTLA SHANTHI IN THE REVENUES APPEAL IN ITA NO 1529/H/11 FOR THE SAME ASSESSMENT YEAR 2007-08. THE ASSESSEES FATHER SRI POTLA NAGESWARA RAO HAD PURCHASED 21.27 ACRES OF LAND AT BOWRAMPET, DUNDIGA L VILLAGE OF QUTBULLAHPUR MUNICIPALITY DURING THE FY 2003-04 IN THE NAME OF HIS SON POTLA NISHANTH AND DAUGHTER POTLA SHANTI . THE ASSESSEE HAD SOLD 5 ACRES OF LAND AT BOWRAMPET, QUT BULLAHUR MANDAL, RANGA REDDY DISTRICT FOR A CONSIDERATION OF RS 5 CRORES TO M/S VARUN CONSTRUCTIONS, SECUNDERABAD. THE ASSES SEE DID NOT OFFER THE GAIN ON SALE OF THE LAND TO TAX ON TH E GROUND THAT IT IS AGRICULTURAL LAND BEYOND THE PRESCRIBED LIMITS O F ANY MUNICIPALITY AND HENCE IS NOT `CAPITAL ASSETU/S 2( 14) AND THEREFORE THE PROFIT ON SALE OF THE LAND IS AGRICUL TURAL INCOME AND HENCE NOT ASSESSABLE AS CAPITAL GAINS. THE AO DID N OT ACCEPT THE CONTENTION OF THE ASSESSEE AND AFTER DEDUCTING COST OF ACQUISITION OF RS. 15 LAKHS ASSESSED THE BALANCE RS . 4.85 CRORES AS SHORT TERM CAPITAL GAINS. 94. ON APPEAL THE CIT(A) ACCEPTED THE CONTENTION O F THE ASSESSEE THAT THE LANDS WERE AGRICULTURAL LANDS AND HENCE THE SALE OF THE SAME WERE NOT SUBJECT TO CAPITAL GAINS, FOR THE SAME ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 41 REASONS AS HAS BEEN STATED IN THE CASE OF MS. POTLA SHANTHI REFERRED TO ABOVE. 95. AGGRIEVED THE REVENUE IS ON APPEAL AND RAISED THE SAME GROUNDS AS HAS BEEN RAISED IN THE CASE OF MS. POTLA SHANTHI IN ITA 1529/H/11 SUPRA. IN THAT CASE WE HAVE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH CERTAIN OBSERVATIONS: 96. THE FACTS OF THIS CASE ARE IDENTICAL WITH THOS E OF ASSESSEES SISTER KUM. POTLA SHANTHI AND THE ASSESS EE HAS SOLD THE LANDS FROM THE SAME AREA AS HIS SISTER. HENCE F OLLOWING OUR DECISION IN THE CASE OF MS. POTLA SHANTHI FOR THIS VERY ASSESSMENT YEAR IN ITA NO 1529/H/11, WE SET ASIDE THE ISSUE WITH REGARD TO DETERMINATION OF THE NATURE OF LAND, VIZ. AGRICULTURAL LAND OR NOT AND ASSESSABLE AS CAPITAL GAINS OR NOT, TO THE FILES OF THE ASSESSING OFFICER WITH SIMILAR DIRECTIONS, FOR DECIDING THE SAME AFRESH AFTER GIVING REASONABLE OP PORTUNITY TO THE ASSESSEE. 97. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO 1568/H/11 FOR ASSESSMENT YEAR 2007-08 IS ALLOWED FO R STATISTICAL PURPOSES. CO NO 80/H/2011 IN ITA 1568/H/11 FOR AY 2007-08 98. THIS CROSS OBJECTION FILED BY THE ASSESSEE, SH RI POTLA NISHANTH, IS MERELY IN SUPPORT OF THE CIT(A) ORDER DECIDING THE ISSUE IN HIS FAVOUR. AS WE HAVE SET ASIDE THE APPEA L BY THE REVENUE, IN 1568/H/11 FOR THIS YEAR, TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION, THIS CO FILED BY T HE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY. 99. IN THE RESULT CO NO 80/H/2011 FILED BY THE ASS ESSEE IN THE REVENUES APPEAL ITA NO 1568/H/11 IS DISMISSED. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 42 ITA NO 1531/H/11: SRI. POTAL NISHANTH- DEPARTMENTA L APPEAL FOR AY 2008-09: 100. THE FIRST GROUND IN REVENUES APPEAL IS AGAINS T THE RE- COMPUTATION OF CAPITAL GAINS ARISING FROM THE DEVELOPME NT AGREEMENT BETWEEN THE ASSESSEE AND M/S ADITYA CONSTRUCTION. AS WE HAVE SET ASIDE THIS ISSUE TO THE FILE S OF THE AO IN THE ASSESSEES APPEAL IN ITA NO 1522/H/11 SUPRA, THE REVENUE S APPEAL ON THIS ISSUE IS ALSO SE T ASIDE TO THE FILES WITH THE SAME DIRECTIONS AS IN THE ASSESSEE S APPEAL. 101. THE SECOND GROUND OF APPEAL BY THE REVENUE IS AGAINST THE DELETION OF CAPITAL GAINS IN RESPECT LAND SOLD TO M /S AMSRI DEVELOPERS (WRONGLY MENTIONED AS M/S ADITHYA DEVELO PERS BY THE CIT(A) IN PARA 5 OF HIS ORDER). 102. AGGRIEVED THE REVENUE IS IN APPEAL. THE CONT ENTION OF THE REVENUE IS THAT WHEN THE ASSESSEE HAD GIVEN THE LAN D FOR DEVELOPING AN INTEGRATED RESIDENTIAL TOWNSHIP ON AN AREA OF 19.9 ACRES, THE LAND CANNOT BE SAID TO BE HELD FOR AGRIC ULTURAL PURPOSES. 103. WE HEARD THE PARTIES. WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL IS SIMILAR TO THE ONE WE HAVE CONSIDERE D, HEREINABOVE, WHILE DEALING WITH THE APPEAL OF THE A SSESSEES SISTER, KUM. POTLA SHANTHI IN ITA 1529/H/11. THERE FORE, FOLLOWING OUR ORDER IN THE CASE OF ASSESSEES SISTE R KUM. POTLA SHANTHI IN ITA 1529/H/11 HEREINABOVE, WE SET ASIDE THIS ISSUE TO THE FILES OF THE ASSESSING OFFICER, WITH DIRECT IONS SIMILAR TO THE ONES WE HAVE GIVEN IN THE CONTEXT OF APPEAL ITA NO.1529/HYD/11 HEREINABOVE, FOR REDECIDING THE MAT TER AFRESH THE IN ACCORDANCE WITH LAW. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 43 104. IN THE RESULT THE REVENUES APPEAL IN ITA 153 1/H/11 IS ALLOWED FOR STATISTICAL PURPOSES. CO NO 78/H/11 IN ITA NO 1531/H/11 FOR AY 2008-09-CR OSS OBJECTION BY ASSESSEE 105. THIS CROSS OBJECTION FILED BY THE ASSESSEE SH RI POTLA NISHANTH IS MERELY IN SUPPORT OF THE CIT(A) ORDER D ECIDING THE ISSUE IN HIS FAVOUR. AS WE HAVE SET ASIDE THE APPEA L BY THE REVENUE, IN 1531/H/11 FOR THIS YEAR, TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION, THIS CO FILED BY T HE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY. 107. IN THE RESULT THE ASSESSEES CO NO 78/H/11 FO R AY 2008- 09 IS DISMISSED. ITA NO1522/H/11: SRI. POTLA NISHANTH- ASSESSEES AP PEAL FOR AY 2008-09: 108. THE FACTS IN THE APPEAL OF THE ASSESSEE ARE I DENTICAL WITH THE APPEAL OF HIS FATHER SRI. POTLA NAGESWARA RAO I N ITA NO 1521/H/11. IN THAT CASE WE HAVE SET ASIDE THE APPEA L TO THE FILES OF THE AO WITH CERTAIN OBSERVATIONS. 109. FACTS AND CIRCUMSTANCES OF THE CASE BEING IDENTICAL WITH THE ONES WE HAVE CONSIDERED IN THE CONTEXT OF APPEA L OF ASSESSEES FATHER, IN ITA NO.1522/HYD/2011, FOLLOWI NG THE SAME WE SET ASIDE THE APPEAL OF THE ASSESSEE IN ITA NO 1 522/H/11 TO THE FILES OF THE AO FOR RECOMPUTING THE CAPITAL GAI NS AS PER OUR OBSERVATIONS IN THE CASE OF SRI POTLA NAGESWAR RAO IN ITA NO 1521/H/11. 110. IN THE RESULT THE ASSESSEES APPEAL IN ITA NO 1522/H/11 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 44 112. TO SUM UP- (A) IN THE CASE OF SHRI P.NAGESWARA RAO- (I) OUT OF THREE ASSESSEES APPEALS, ITA NOS.1519 AND 1520/HYD/2011 ARE DISMISSED; AND 1521/HYD/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (II) OUT OF THE TWO APPEALS OF THE REVENUE, ITA NO.1528/HYD/2011 IS DISMISSED, WHEREAS ITA NO.1567/HYD/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES; AND (III) BOTH THE CROSS OBJECTIONS OF THE ASSESSEE IN THE APPEALS OF THE REVENUE ARE DISMISSED AS INFRUCTUOUS. (B) IN THE CASE OF KUM POTLA SHANTI - (I) ASSESSEES APPEAL, ITA NOS.1523/HYD/2011 AS WELL AS THE REVENUES APPEALS, ITA NOS.1529 AND 1530/HYD/2011 ARE ALLOWED FOR STATISTICAL PURPOSES; AND (II) BOTH THE CROSS OBJECTIONS OF THE ASSESSEE IN THE APPEALS OF THE REVENUE ARE DISMISSED AS INFRUCTUOUS. (C) IN THE CASE OF SRI POTLA NISHANTH - (I) ASSESSEES APPEAL, ITA NOS.1522/HYD/2011 AS WELL AS THE REVENUES APPEALS, ITA NOS.1568 AND 1531/HYD/2011 ARE ALLOWED FOR STATISTICAL PURPOSES; AND ITA NO.1568 OF 2011 & OTHER APPEALS M/S POTLA NAGESWARA RAO & OTHERS, KHAMMAM 45 (II) BOTH THE CROSS OBJECTIONS OF THE ASSESSEE IN THE APPEALS OF THE REVENUE ARE DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON: 22.3.201 2 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 22 ND MARCH, 2012 COPY FORWARDED TO: 1. THE DCIT, CENTRAL CIRCLE -4, HYDERABAD 2. SHRI POTLA NAGESWARA RAO, (11-3-119, NEHRU NAGAR, KHAMMAM) C/O SHRI T. GANDHI & CO., COMPANIES ACT, 1956 (1 OF 1956), NO.4916, 10 TH FLOOR, HIGH POINT, IV, 45 PALACE ROAD, BANGALORE-560 001. 3. KUM. POTLA SHANTI, (11-3-119, NEHRU NAGAR, KHAMMAM) C/O SHRI T. GANDHI & CO., COMPANIES ACT, 1956 (1 OF 1956), NO.4916, 10 TH FLOOR, HIGH POINT, IV, 45 PALACE ROAD, BANGALORE-560 001. 4. SHRI POTLA NISHANTI, (11-3-119, NEHRU NAGAR, KHAMMA M) C/O SHRI T. GANDHI & CO., COMPANIES ACT, 1956 (1 OF 1956), NO.4916, 10 TH FLOOR, HIGH POINT, IV, 45 PALACE ROAD, BANGALORE-560 001. 5. THE CIT(A)-VII, HYDERABAD 6. THE CIT, HYDERABAD 7. THE DR, ITAT, HYDERABAD NP/BVS