Asst. Commissioner of Income Tax, Circle-1, Kadapa V. M.Bhagya Lakshmi , Kadapa

ITA 96/Hyd/2019

AI Insights

The case involves multiple appeals and cross objections related to the assessment year 2012-13, concerning the income tax assessments of Shri S.V.Satish Kumar Reddy and Smt. M.Bhagya Lakshmi. The primary issues revolved around the computation of capital gains from a development agreement, the admissibility of deductions under section 54F of the Income Tax Act, and the treatment of sundry creditors in the balance sheet. The AO had reopened the assessment under section 147 of the Income Tax Act, leading to disputes over the assessed income and the deductions claimed. The CIT(A) had made certain allowances and deletions which were contested by the revenue in the appeals.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122344 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Next Hearing Date: 01-05-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2019
• Other Referred Cases: CIT vs. Syed Ali Adil, Vittal Krishna Conjeevaram vs. ITO, Sri Syed Irfan Jaffer vs. ITO, ACIT vs. Smt. Fazlunnisa Begum, CIT vs. Goetze India Ltd, Dhanalakshmi Steel Retroling vs CIT AP
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Salary income; Principle of natural justice; Additional evidence; Cost of acquisition; Commercial expediency; Revised return
• Section: 147; 68; 148; 54; 54F; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Before Shri Rama Kanta Panda, Accountant Member AND Shri K.Narasimha Chary, Judicial Member ITA No.2236/Hyd/2018 Assessment Year: 2012-13 ACIT,Circle-1 Aaykar Bhavan #2-430-8, Nagarajupet Kadapa Vs. Shri S.V.Satish Kumar Reddy #1-700A, Dwaraka Nagar Kadapa-516 001 PAN : ARHPS1915N (Appellant) (Respondent) Cross Objection.No.14/Hyd/2019 (In ITA No. No.2236/Hyd/2018) Assessment Year: 2012-13 Shri S.V.Satish Kumar Reddy #1-700A, Dwaraka Nagar Kadapa-516 001 PAN : ARHPS1915N Vs. ACIT,Circle-1 Aaykar Bhavan #2-430-8, Nagarajupet Kadapa (Appellant) (Respondent) ITA No.96/Hyd/2019 Assessment Year: 2012-13 ACIT,Circle-1 Aaykar Bhavan #2-430-8, Nagarajupet Kadapa Vs. Smt. M.Bhagya Lakshmi #1-700A, Dwaraka Nagar Kadapa-516 001 PAN : AJIPM2481N (Appellant) (Respondent) 2 O R D E R Per Shri Rama Kanta Panda (A.M): ITA No. 2236/Hyd/2018 filed by the revenue is directed against the order dated 28.09.2018 of Learned Commissioner of Income Tax (Appeals), Kurnool relating to AY’ 2012-13. Cross Objection No. 14/Hyd/2019 filed by the assessee is against the appeal filed by the revenue in ITA No. 2236/Hyd/2018. ITA No.96/Hyd/2019 filed the revenue is directed against the order dated 29.11.2018 of Learned Commissioner of Income Tax (Appeals), Kurnool relating to AY’ 2012-13. Cross Objection No. 15/Hyd/2019 filed by the assessee is against the appeal filed by the revenue in ITA No. 96/Hyd/2019. For the sake convenience, both the appeals as well as the cross objections were heard together and are being decided by this common order. 2. There is a delay of ‘88’ days in filing of the cross objection by the assessee in CO.No.14/Hyd/2019. The assessee has filed a condonation application along with an affidavit explaining the reasons for such delay in filing of the Cross Objection. After Cross Objection.No.15/Hyd/2019 (In ITA No. No.96/Hyd/2019) Assessment Year: 2012-13 Smt. M.Bhagya Lakshmi #1-700A, Dwaraka Nagar Kadapa-516 001 PAN : AJIPM2481N Vs. ACIT,Circle-1 Aaykar Bhavan #2-430-8, Nagarajupet Kadapa (Appellant) (Respondent) Assessee by: Shri S.Rama Rao, Advocate Revenue by : Shri K.P.R.R.Murthy,Sr.AR Date of hearing: 02.05.2023 Date of pronouncement: 16.05.2023 3 considering the contents of the condonation application filed along with the affidavit and after hearing both the sides, the delay in filing of the cross objection by the assessee is condoned and the cross objection is admitted for adjudication. 3. First we take-up ITA No.2236/Hyd/2018 for AY 2012-13 as the lead case. 4. Facts of the case, in brief, are that the assessee is an individual and a member of the Legislative Council of Andhra Pradesh. He derives income from salary and income from hiring of vehicles. He also derives agricultural income. He filed his return of income for the impugned assessment year on 28.06.2013 by admitting total income of Rs.4,22,180/- and agricultural income of Rs.14,20,400/-. 5. In this case, information was received from office of the DDIT (Inv.), Unit-II(1), Hyderabad on 27.05.2015 that the assessee has entered into a development agreement with M/s. Lotus Properties Ltd, Hyderabad on 03.12.2011 along with two others for development of the land admeasuring 4172.32 sq.yds situated at H.No.8-2-/334/1A&B in plot No.24 Road No.5 and 6 of Banjara Hills, Hyderabad. According to the AO, the capital gain arises for the year under consideration, however according to the assessee the capital gain on entering into the development agreement is taxable in the year in which the construction was completed by the developer for which he did not admit the income from capital gain arising on entering into the development agreement. In view of the above, the AO, after recording reasons, reopened the assessment u/s. 147 of the I.T.Act and accordingly notice u/s. 148 of the I.T.Act was issued. The assessee in response to the same filed a reply stating that the return already filed may be treated as return filed in response to notice u/s. 148 of the 4 I.T.Act. The AO, thereafter issued statutory notices u/s. 143(2) & 142(1). Since the assessee, despite repeated reminders did not furnish the cost of construction of the super structure, the AO obtained details from the Telangana Registration Department website and computed the rates for ground floor, first flood and other floors at Rs. 5,740/- Rs. 4,715/- and Rs. 4,100/- per.sq.ft respectively. Since the assessee in the instant case has constructed area of 92,670 sft in the five floors and constructed area in each floor is 18,534 sft, the AO computed the composite value of 92,670 sft at Rs. 42,17,41,170/-. He computed the value of the super structure of 92670 sq.ft at Rs. 21,18,49,090/- after reducing the value of land of Rs. 20,98,92,080/- from the total composite value of 92,670 sq.ft. Accordingly, he determined the value of super structure per sq.ft at Rs. 2,286/- which is as under:- In Rs. Composite Value of g.Floor @5740 per sq.ft for 18534 sq.ft 10,63,85,160 Composite Value of F.Floor @4715 per sq.ft for 18534 sq.ft 8,73,87,810 Composite value of other three floors @4100 per sq.ft 55602 sq.ft (i.e 18534*3) 22,79,68,200 Total composite value of give floors 42,17,41,170 Less: Land value as per Development Agreement cum GPA 20,98,92,080 Super structure value of 92670 sq.ft 21,18,49,090 Super structure value per sq.ft 2286.059027 6. He further noted that the land owners forfeited 1881.30 sq.yds or 16931.69 sq.ft to the developer. He therefore computed the value of 16931.70 sq.ft of land which is equal to 50,881 sq.ft of super structure allotted to three land owners. The value of such super structure @Rs.2,286/- on 50,881 sq.ft worked out to Rs. 11,63,13,966/-. Finally, the AO computed the taxable short term 5 capital gain in the hands of the assessee at Rs. 73,71,660/- by observing as under:- 8.2 the built up area of each flat and the total no flats and total super structure of land owners are as under:- Flat No. Built up area in Sq.ft No.of flats S.V.S.K.Reddy Flats M.Bhagya Lakshmi Flats B.Preethi Reddy 1 2513 2 5026 2 5026 2 5026 2 2960 1 2960 1 2960 1 2960 3 2870 2 5740 1 2870 4 2362 1 2362 1 2362 5 2957 1 2957 1 2957 1 2957 6 2359 2 4718 Total in sq.ft 6 16683 6 16175 7 18023 Ratio 100 32.788 31.790 35.422 8.3 Out of 4172.32 sq.yds land given for Development, profit on sale of part of land is chargeable under Long Term Capital Gain (LTCG) and part is chargeable under short Term Capital Gain (STCG) in the hand sof land lords in the ratio of 3130.21 : 1042.07 or 75.02: 24.98 respectively. Accordingly, the sale consideration allotted to each landlord and part of income chargeable under LTCG and part under STCG is as given below. Details of super structure allotted to landlords by the developer and sale consideration S.V.S.K.Reddy M.bhagyalakshmi B.Preethi Reddy Super structure 50,881 sq.ft 16,683 sq.ft 16,175 sq.ft 18,023 sq.ft Cost of constructio n @ 2286 per sft Rs.11,63,13,9 66 Rs.3,81,37,33 8 Rs.3,69,76,050 Rs.4,12,0 0,578 Share of LT asset (25.02%) Rs.8,72,58,73 7 Rs.2,90,57,16 0 Rs.2,91,18,241 Rs.2,90,8 3,337 Share of ST asset (24.98%) Rs.2,90,55,22 9 Rs.96,85,076 Rs.96,85,076 Rs.96,85, 076 The STCG share was divided equally among three owners, since the owners have common ownership on such land. 6 8.4 The cost of acquisition of land and indexed cost of acquisition of land given for consideration is as under. The cost of index for the F.Y.2007-08 and 2011-12 are 551 and 785 respectively. The registration expenses arc not furnished by the assessee and arc allowed based on the documents produced and at an average rate of fee applicable to meet the principles of natural justice. The cost of acquisition and indexed cost of acquisition of land forfeited and chargeable under LTCG is as under. S.V.S.K.Reddy 1 Proportionate Sale consideration Rs.2,90,57,160 2 Cost of land Rs.1,25,00,000 3 Registration Expenses Rs.16,47,465 4 Total cost of land (Note 1) Rs.1,41,47,465 5 Cost of acquisition of undivided share (UDS) of land transferred (i.e 45.09%) Rs.14147465*45.09% =Rs.63,79,092 6 Indexed cost of acquisition of UDS of land 6379092*785/551 =Rs/90,88,180 Taxable LTCG (1-6) Rs.1,99,68,979 (Note 1: The assessee shown Site & building at Hyd vide Doc.No.2625/07 and 55/2009 at Rs. 2,29,73,173/- in Balance sheet as on 31.03.2012. As per the copies of Documents of 2625/2007 and 55/2009 produced the cost of properties is Rs. 1,25,00,000/- and Rs.50,00,000/-(1,50,000/3) respectively and registration expenses incurred there on is Rs.16,47,465/- and Rs.1,30,663/-(391990/3) respectively. Accordingly, the value of above immovable properties including registration expenses works out to Rs.1,92,78,128/- (i.e. 12500000+5000000+1647465+130663). The difference of Rs. 36,95,045/- between the value shown in Balance sheet of Rs.22973173/- and calculated as above of Rs.19278128/- was neither explained by the assessee nor produced the relevant information. Hence, the cost of acquisition of assets were taken as per the value reported in purchase documents.) The cost of acquisition of 1042.07 Sq.Yds of land vide General Power of Attorney in Regd.Document No.55/2009 dated 03.02.2009 of SRO, Banjara Hills, Hyderabad for a consideration of Rs.1,50,00,000/- and the registration expenses incurred is Rs.3,91,990/-. The cost of acquisition of the land to the landlords is worked out to Rs. 1,53,91,990/-. The cost of acquisition of undivided share of land i.e.45.09% of 1072.32 sq.yds is works out to Rs. 69,40,248/@ 45.09% of Rs.1,53,91,990/-. The cost of acquisition of land to each land lord is Rs.23,13,416/-. Accordingly, the Short Term Capital Gain (STCG) chargeable in the hands of landlords works out as under. 7 S.V.S.K.Reddy 1 Sale Consideration Rs.96,85,076 2 Cost of acquisition (Rs.15391990*45.09%)/3 Rs.23,13,416 3 Taxable STCG(1-2) Rs.73,71,660 7. Similarly, in absence any details to explain the commercial expediency and utilization of loan for business, date of borrowal, mode of receipt, genuineness of transaction etc. the AO made addition of Rs. 50,66,508/- on account of sundry creditors by observing as under:- The assessee shown sundry creditors of Rs.65,66,508/ - in balance sheet as on 31.03.2012 and asked to produce the commercial expediency, utilization of loans borrowed and identity genuineness and credit worthiness of loan creditors. The assessee's Authorized Representative appeared on 23.12.2016 and produced the details of sundry creditors and confirmation letter from the creditor M/s V.Praveen Kumar Reddy & Co, Kadapa for Rs.50,66,508/ -and copy of acknowledgement of ITR filed for AY.2012-13. Whereas, the commercial expediency and utilization of loan to business, date of borrowal, mode of receipt, genuineness of transaction were not produced. Hence, sundry creditors of Rs.50,66,508/- was disallowed for the above deficiencies It and also for assessee's failure to furnish the details belatedly by not giving scope for further verification. 7.1 Also in absence of production of any proof in support of the claim of Rs. 1 lakh as deduction under Chapter VIA, the AO disallowed the same. Accordingly, the AO determined the total income of the assessee at Rs. 3,29,29,330/-. 8. Before the ld.CIT(A), the assessee made a claim for deduction u/s. 54F. Based on the arguments advanced by the assessee, the ld.CIT(A) allowed the claim of deduction u/s. 54F by observing as under:- "5.8 Ground No.6 is with regard to deduction u1s 54F of the I.T.Act. In so far as the facts are concerned, the total area of the land is admeasuring 4172.32 Sq.yds. Out of the said land, 1042.07 sq.yds. was acquired on 03.02.2009. The capital gain arising on 1042.07 sq.yds. would represent 8 the short term capital gain and 3130.21 sq.yds. would represent long term capital gain. The appellant submits that he did not possess any residential house in his name. He also stated that on completion of the construction, the developer handed over residential house to the appellant. He, therefore, claimed that he is entitled for exemption u1s 54F in proportion to 3130/4172. In this regard, the appellant relied on the following decisions: The High Court of Andhra Pradesh in the case of CIT vs. Syed Ali Adil dated 20.12.2012 reported in (0213) 33 taxmann.com 212 held that for the purpose of deduction u/s 54F any number of flats can be contained in one building. This view is adopted by the Hon'ble ITAT, Hyderabad in the case of Vittal Krishna Conjeevaram vs. ITO dt. 10.07.2013 reported in (2013) 36taxman.com 542 and in the case of Sri Syed Irfan Jaffer, j Hyderabad Vs. ITO, Ward 6(1), Hyderabad in ITA No.465/Hyd/2013 and also in the case of ACIT vs, Smt. Fazlunnisa Begum reported in ITA No.66/Hyd/2017. 5.7 I have carefully considered the submissions made by the appellant. As per the information available on record the appellant is not in possession of any other residential house. The appellant entered Development Agreement cum GP A on 03 day of December, 2011 and as per the agreement the appellant along with two others entered into development agreement according to which the sharing ratio of the constructed area would be 55% to owners and 45% to the developers. As per the supplementary agreement was made on 29th June, 2013 the appellant was allotted 6 flats measuring 16683 Sq.ft in the constructed area. The development agreement was entered into for construction of residential house. The permissions were obtained h the developer for construction of residential complex. To this effect I hold that by entering into the development agreement, the appellant transferred 1043.07 sq. yds. of long term capital asset l. e. land and received 16,683 @75.02% i.e., 12,516 Sq. ft residential house. In view of the decision of the jurisdictional ITAT cited supra, I hold that the appellant is entitled for deduction u/s 54 F of the 1. T. Act in respect of all the six flats which were received by the appellant under the development agreement i.e, to the extent of I 2,516 Sq. ft @ 1370 is Rs. 1,7l,46,920/_. Ground No.6 is accordingly decided. 9. So far as the addition of sundry creditors of Rs. 50,66,508/- is concerned, the ld.CIT(A) also deleted the same by observing as under:- 5.8 Ground No.7 is with regard to addition of Rs.50,66,508/_ made by the Assessing Officer u/s 68 of the 1.T.Acl. The appellant submitted that the said amount was received from the partnership firm M/s V.Praveen Kumar Reddy & Co., Kadapa. The said concern filed letter of confirmation before the Assessing Officer. The creditors also filed the return of income for the assessment year 2012-13 Showing the outflow of 9 Rs.50, 66,508/-. From the facts it is clear that the appellant discharged is burden cast on him in proving the cash credit and that, therefore, the amount of RS.50,66,508/_ cannot be termed as the income u/s 68 of the I. T.Act. I accordingly, delete the same. 10. Aggrieved with such order of the ld.CIT(A), the revenue is in appeal before the Tribunal by raising the following grounds. 1. The order of Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in allowing exemption u/s 54F of the IT Act, which wasn't claimed by the assessee in the return of income, ignoring the binding decision of the Supreme Court in the case of CIT v. Goetze India Ltd 284 ITR 323 wherein it held that assessee was not entitled to claim exemption which was not made in the return of income. 3. Whether the ld. CIT(A) is right in allowing the exemption u1s 54F of the IT Act, under the facts and the circumstances of the case 4. The Ld. CIT (A) has admitted additional evidence regarding conditions to be fulfilled u/s 54F of the Act without giving the opportunity to AO to examine the same as required under Rule 46A, since the assessee hadn't claimed the exemption before the AO and AO had no occasion to examine the same. 5. Whether Ld. CIT(A) is right in directing the AO to adopt cost of construction at Rs.1,370/- per sq.ft as against the Rs.2,286/- per sq.ft. adopted by the AO, under the facts and the circumstances of the case 6. The Ld.CIT(A) erred, under the facts and the circumstances of the case, in deleting the addition of Rs.50,66,508/- made u/s. 68 of the IT.Act as the appellant had not discharged his onus of establishing the creditworthiness and genuineness of the transaction as required. Reliance is placed on the decision of the jurisdictional AP HC in the case of Dhanalakshmi Steel Retroling vs CIT AP 228 ITR 780 7. Any other additional ground that may be urged at the time of appeal hearing. 11. The assessee has raised the following ground in the Cross Objection. 1. The learned Commissioner of Income-Tax (Appeals) erred in adopting the consideration at the rate of Rs.1,370 per sft. Without adopting the rate as per SRO. 10 12. The grounds of No.1 and 7 by the revenue being general in nature are dismissed. 13. Grounds of appeal No. 2,3 and 4 by the revenue relate to the order of the ld.CIT(A) in allowing the exemption u/s.54F of the I.T.Act. by admitting additional evidence. 13.1 We have heard the rival arguments made by both the sides and perused the record. It is an admitted fact that assessee in his original return of income has neither claimed the deduction u/s. 54F nor claimed the same by filing a revised return or before the AO during the course of assessment proceedings. However, the assessee for the first time made the claim of deduction u/s. 54F before the ld.CIT(A). It is the case of the revenue that the assessee cannot claim the exemption u/s. 54F which was not made in the original or revised return of income in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Goetze India Ltd. reported in 284 ITR 323. Simultaneously, it is also the grievance of the revenue that the ld.CIT(A) has admitted additional evidences while allowing deduction u/s. 54F. 13.2 So far as the claim of deduction u/s. 54F before the ld.CIT(A) is concerned, the reliance on the decision of Goetze India Ltd. (supra) by the Revenue cannot stand on the way of the assessee. The Hon’ble Supreme Court in the above aforementioned decision has held that this decision was restricted to the powers of the assessing authority to entertain a claim for deduction otherwise than by a revised return and does not impinge on the power of the Appellate Tribunal u/s. 254 of the I.T.Act. Under these circumstances, we are of the opinion that the assessee can make a new claim u/s. 54F before the 11 appellant authority which was not claimed in the original return or in the revised return. 13.3 However, for allowing the claim of deduction u/s.54F certain conditions are prescribed. Although in the instant case the assessee has stated that he did not possess any residential house in his name, however the same was not verified by the ld.CIT(A) by calling for a remand report from the AO and he has simply accepted the submission of the assessee. Under these circumstances, we deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction that the assessee did not possess any residential house in his name. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the revenue on this issue are accordingly allowed for statistical purposes. 14. Ground of appeal No.5 by the revenue and the only ground raised by the assessee in the cross objection relates to the cost of construction at Rs. 1370 per sq.ft by the ld.CIT(A) as against Rs. 2286/- per sq.ft adopted by the AO. 14.1 After hearing both the sides, we find the AO adopted the cost of construction per sq.ft at Rs.2286/-, the details of which are given at para No.5 of this order. We find the ld.CIT(A) reduced such cost of construction per sq.ft to Rs. 1,370/- by observing as under:- 5.6 Ground Nos.4 and 5 are with regard to determination of sale consideration. The assessing Officer in the assessment order arrived at the cost of construction of the property at Rs.2286/- per sft. It is also found by the Assessing Officer that 92,670/- sft. was constructed and that the total cost was Rs.21,19,49,090/- and that each sft would be of the value of Rs.2286/-. The working made by the Assessing Officer is 12 based on the value of the constructed area if sold in the open market. The plea of the appellant is that the cost of construction alone is to be taken into consideration and not the market value of the property. The appellant in his submissions arrived at the value at Rs.1250/- . According to the appellant the sale price of the area includes the finance charges, administrative charges, advertisement charges and the profit element to the builder. These facts have not been considered by the Assessing Officer while determining the market value of the contracted area at Rs.2286/-. I am in agreement with the appellant that there is profit element in the sale price which would be about 10%. There would also be other expenses which would not go to increase the cost of construction and such expenditure like finance charges advertisement charges and administrative cost would be about 30% of the market value. Considering all these factors, I would fix the value of the super structure handed over to the appellant at Rs.1370/- per sft. as against Rs.2286/- adopted by the Assessing Officer. The cost of construction is directed to be adopted at Rs.1370 as against Rs. 2286/-. 15. It is the grievance of the revenue that the ld.CIT(A) is not justified in adopting the cost of construction at Rs. 1370 per sq.ft. It is the grievance of the assessee in cross objection that the ld.CIT(A) instead of adopting the rate as per SRO has adopted the rate of Rs. 1370/- per sq.ft which is not justified. Since the AO in the instant case has computed the cost of construction on the basis of the figures obtained from the Telangana Registration Department website, therefore, in our opinion everything should be based on the rate as per the office of the Sub Registrar. Under these circumstances and since the issue of deduction u/s. 54F is being restored to the file of the AO for certain verification, therefore, we deem it proper to restore this issue also to the file of the AO with a direction to give an opportunity to the assessee to substantiate his case with evidence and decide the issue as per fact and law. We hold and direct accordingly. The ground of appeal No. 5 filed by the revenue and the only ground of appeal filed by the assessee in the Cross Objection are accordingly allowed for statistical purposes. 13 16. Ground of appeal No. 6 by the revenue relates to the order of the ld.CIT(A) in deleting the addition of Rs. 50,66,508/- made u/s. 68 of the I.T.Act. 17. After hearing both the sides, we find the AO made addition of Rs. 65,66,508/- on the ground that the above figure appears in the balance sheet as on 31.03.2012 and although, the assessee produced the details of sundry creditors and confirmation letter from the creditor M/s. V. Paveen Kumar Reddy & Co, Kadapa for Rs. 50,66,508/- and copy of the acknowledgment of the income tax return filed for AY 2012-13, however, the assessee did not substantiate the commercial expediency and utilization of loan for business, date of borrowal, mode of receipt and genuineness of transaction etc. We find the ld.CIT(A) deleted the addition, the reasons of which are already reproduced in the preceding paragraph. It is the submission of the ld.counsel for the assessee that the above amount is outstanding since 01.04.2010 and therefore, the same should not have been added in the AY 2012- 13. Since the confirmation letter filed before the AO shows that the same amount is the opening balance as on 01.04.2010, therefore, addition of the same for the impugned assessment year for non-submission of date of borrowal and purpose of utilization of the same cannot be a ground for making the addition during the year. Further, the ld.CIT(A) he also given a finding that the above amount was received from the partnership firm M/s. V.Praveen Kumar Reddy & Co. Since the amount was outstanding at the beginning of 01.04.2010 and the confirmation letter to this effect was also filed before the AO, therefore, this amount relates to the AY 2010-11 and addition if any, could have been made in AY 2010-11 and not in the AY 2012-13 being an old outstanding creditor. The ground raised by the revenue on this issue is accordingly dismissed. 14 18. In the result, the appeal filed by the revenue is partly allowed for statistical purposes and the cross objection filed by the assessee is allowed for statistical purposes. ITA No. 96/Hyd/2019 and CO No.15/Hyd/2019 19. The grounds raised by the revenue are as under: - 1. The order of Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in allowing deduction u/s 54F of the IT Act, under the facts and circumstances of the case. The basic conditions for allowing deduction u/s. 54F of the Income Tax Act are, the assessee shall not own more than one residential house, other than the new asset, on the date of transfer of the original asset OR the assessee shall not purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset. The appellant possess more than one house, other than the new asset, as per the Balance sheet as on 31.03.2012 viz H.NO. 8-2-334/A&B, Banjara Hills & House at D.No.1/779, Dwaraka Nagar whereas the Ld.CIT(A) mentioned that appellant is not in possession of any other residential house as per information available on record which is contrary to the facts on record. Hence, it is apparent from the record that the appellant is not entitled for deduction u/s. 54F of the Income tax Act as the basic condition u/s. 54F are not fulfilled. 3. the Ld.CIT(A) erred in allowing deduction u/s. 54F of the I.t.Act which was not claimed by the assessee in the Return of Income, ignoring the binding decision of the Supreme Court in the case of CIT vs. Goetze India Ltd. 284 ITR 323 wherein it held that assessee is not entitled to claim exemption which was not made in the Return of Income. 4. The Ld. CIT (A) has admitted additional evidence regarding conditions to be fulfilled u/s 54F of the Act without giving the opportunity to AO to examine the same as required under Rule 46A, since the assessee hadn't claimed the exemption before the AO and AO had no occasion to examine the same. 5. Whether Ld. CIT(A) is right in directing the AO to adopt cost of construction at Rs.1,370/- per sq.ft as against the Rs.2,286/- per sq.ft. adopted by the AO, under the facts and the circumstances of the case 6. whether the CIT(A) is right in directing the AO to delete the creditors of Rs.1,01,99,767/- under the facts and circumstances of the case. 15 7. whether the ld.CIT(A) is right in directing the AO to disallow only 30% of the agricultural income claimed by the appellant, under the facts and circumstances of the case, since the agricultural income claimed by the appellant is significantly higher than the agricultural income claimed by the appellant for preceding and succeeding assessment years. 8. Any other additional ground that may be urged at the time of appeal hearing. 20. The grounds raised by the assessee in cross objection are as under: - 1.The learned Commissioner of Income-tax (Appeals) erred in adopting the consideration at the rate of Rs.1370 per sft. Without adopting the rate as per SRO 2. The learned Commissioner of Income tax (Appeals) erred in confirming addition of Rs.11,40,000/- being the sundry creditors treated as the income of the assessee. 21. After hearing both the sides, we find the grounds of appeal No.1 and 8 by the revenue are general in nature and therefore are dismissed. 21.1 Grounds of appeal No.2, 3 and 4 by the revenue are identical to grounds of appeal No. 2,3 and 4 in ITA No. 2236/Hyd/2018. We have already decided the issue and the grounds raised by the revenue have been allowed for statistical purposes. Following similar reasonings, the above grounds by the revenue are allowed for statistical purposes. 21.2 Ground of appeal No.5 by the revenue and the only ground of appeal in cross objection are identical to ground of appeal No.5 in ITA No. 2236/Hyd/2018 and the ground of appeal in the cross objection No. 14/Hyd/2019. We have already decided the issue and the above grounds have been allowed for statistical purposes. Following similar reasonings, the above grounds are allowed for statistical purposes. 16 22. Ground of appeal No. 6 by the revenue relates to the deletion of Rs. 1,01,99,767/- on account sundry creditors. 22.1 After hearing both the sides, we find the AO in the instant case made addition of Rs. 1,13,39,767/- on account of sundry creditors which was appearing in the balance sheet as on 31.03.2012 on the ground that assessee could not produce the proper confirmation letters by giving communication address, date of borrowal amount, mode of transaction, permanent account number, bank account statement etc. We find the ld.CIT(A) deleted the addition by observing as under:- 5.8 The other ground with regard to addition of Rs.1,13,38,767/- made by the Assessing Officer u/s. 68 of the I.T.Act. The appellant submitted that the creditors for the year under appeal i.e AY 2012-13 are tune of Rs.11,40,000/- only and the balance of creditors of Rs.1,01,99,767/- belongs to earlier years B.F. Balances, thus adding the Brought forward creditors as credits fo this year is not justified as per provisions of section 68 of the Income tax Act. After considering the facts and circumstances of the case, I am of the view that the creditors of the preceding years cannot be added for the year under consideration and hence the AO is directed to delete the creditors of Rs.1,01,99,767/- pertaining to earlier years and balance creditors of this year to the tune of Rs.11,40,000/- is confirmed. 23. We do not find any infirmity in the order of the ld.CIT(A) on this issue. Since the ld.CIT(A) has given a finding that creditors to the extent of Rs. 1,01,99,767/- belong to the earlier year and are brought forward balances for which addition u/s. 68 cannot be made on account of creditors of the preceding years, therefore, in absence of any contrary material brought to our notice, we do not find any infirmity in the order of the ld.CIT(A) on this issue. Accordingly, the ground raised by the revenue on this issue is dismissed. 24. Ground of appeal No.7 relates to the order of the ld.CIT(A) in directing the AO to disallow only 30% of the agricultural income. 17 24.1 After hearing both the sides, we find the AO made addition of Rs. 9,25,000/- out of the agricultural income of Rs. 12 lakhs shown by the assessee by observing as under:- 9. The assessee admitted agricultural income of Rs. 12,00,000 in the ITR filed and produced a certificate from the Tehsildar, Vempalli on 20.12.2016 stating that the assessee is in possession of 4.15 acres of agricultural lands and getting annual income of Rs.14,50,000/- out of the above lands. But, no sale receipts of agricultural produce and incurrence of expenditure in agricultural activity were produced. Whereas, the agricultural income shown in AY.2010-11, AY.2011-12 and in AY.2013- 14 is Rs.NIL, Rs.5,75,000/- and Rs.2,50,000/- respectively and aggregating to Rs.2,75,000/- per anum. It also noted that the assessee's relative Sri S.V.5athish Kumar Reddy holding lands of 25.43 acres of land in Vempalli Mandal got receipts about Rs.14.20 lakhs. In the same analogy the assessee will get only about Rs.2.32 lakhs of agricultural income. In consideration of the above circumstantial evidences, it is proved that the assessee is admitting agricultural income according to the necessity of requirement of funds. Therefore, the agricultural income of Rs.9,25,000/-(Rs.12,00,000-Rs.2,75,000) in excess of average agricultural income of Rs.2,75,000/- is brought to tax under the head income from other sources. 25. We find in appeal, the ld.CIT(A) directed to AO to disallow only 30% of the agricultural income declared for the year by observing are as under:- 5.9. The other ground with regard to the addition made disallowing the part of agricultural income of Rs.9,25,000/-. Considering the facts of the case, certificate issued by the Mandal Revenue Officer (MRO) and land holding of the appellant the disallowance made by the AO appears to be higher side. Therefore, I direct the AO to disallow 30% of the Agricultural income declared for the year. 26. It is the submission of the ld.DR that the restriction of the disallowance to 30% by the ld.CIT(A) is without any basis. It is the submission of the ld.counsel for the assessee that the ld.CIT(A) is fully justified in restricting the disallowance to 30%. A perusal of the order of the AO as well as ld.CIT(A) shows that neither the AO has adopted any method nor the ld.CIT(A) has given any justification. The AO in the instant case has made average of the 18 last three years as the basis for his computation. A perusal of the assessment order shows that although during the AY 2013-14, assessee has shown ‘nil’ agricultural income, the AO averaged the income of the three years and gave credit of only Rs. 2,75,000/-. Similarly, the ld.CIT(A) on the basis of the certificate issued by the MRO and land holding of the assessee directed the AO to restrict the disallowance to 30% of the agricultural income for the year under consideration which is also without any basis. Considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that disallowance of 50% of the agricultural income in absence of any details for sale of the produce and towards expenses for earning agricultural income will meet the ends of justice. We therefore direct the AO to restrict the disallowance to 50% of the agirucltural income as against 30% restricted by the ld.CIT(A). The ground raised by the revenue on this issue is partly allowed. 27. There is one more issue raised by the assessee in the cross objection i.e. confirming the addition of Rs. 11,40,000/-. So far as the addition of Rs. 11,40,000/- is concerned, the ld.CIT(A) sustained the same on the ground that creditors to the tune of Rs. 11,40,000/- relate to AY 2012-13. However, he has not given any reason as to whether the assessee produced the details which are not sufficient or otherwise. Before the ld.CIT(A), the assessee had submitted that all the credits were duly recorded in the books in respective assessment years, all the amounts were received through cheque except certain cash amounts from the farmers and assessee had given all the details. It is also the submission of the ld.counsel for the assessee that given an opportunity the assessee is in a position to substantiate with evidence to the satisfaction of the AO regarding the balance credit of Rs. 11,40,000/-. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue of 19 Rs. 11,40,000/- to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate his case by filing the requisite details and decide the issue as per fact and law. We hold and direct accordingly. The second issue raised by the assessee in the cross objection is accordingly allowed for statistical purposes. 28. In the result, both the appeals filed by the revenue are partly allowed for statistical purposes and both the cross objections filed by the respective assessees are allowed for statistical purposes. Order pronounced in the Open Court on 16 th May, 2023. Sd/- Sd/- (K.NARASIMHA CHARY) JUDICIAL MEMBER (RAMA KANTA PANDA) ACCOUNTANT MEMBER Hyderabad, dated 16 th May, 2023. Thirumalesh/sps Copy to: S.No Addresses 1 Shri S.V.Satish Kumar Reddy #1-700A, Dwaraka Nagar Kadapa-516 001 2 ACIT,Circle-1 Aaykar Bhavan #2-430-8, Nagarajupet Kadapa 3 Smt. M.Bhagya Lakshmi #1-700A, Dwaraka Nagar Kadapa-516 001 4 CIT(A), Kurnool 5 Pr.CIT, Kurnool 6 DR, ITAT Hyderabad Benches 7 Guard File By Order