Nellore Venkateswara Reddy Vs CIT (ITAT Chennai)
Chennai ITAT: Rural Agricultural Land Claim Requires Proper Verification Before Taxing Capital Gains
The Chennai ITAT held that a short delay of 59 days in filing an appeal should ordinarily be condoned where the assessee has furnished a reasonable explanation, particularly when the assessment itself was completed ex parte and substantial additions were made without examining the assessee’s contentions. The assessee, an agriculturist, had sold agricultural land for ₹45.44 lakh and purchased a residential property for ₹54 lakh. Since no return of income was filed and there was no response to the statutory notices, the Assessing Officer completed the reassessment under sections 147/144, treating the sale consideration as short-term capital gains and also making an addition towards the investment in the residential property. The CIT(A) declined to condone the 59-day delay and dismissed the appeal.
Before the Tribunal, the assessee contended that the land sold was rural agricultural land, which did not constitute a “capital asset” under section 2(14) and, therefore, no capital gains could arise on its transfer. It was further submitted that the entire sale proceeds had been utilised for purchasing the residential property, and consequently the investment could not be treated as unexplained. The Tribunal observed that these contentions went to the very root of the additions and required verification of the nature and location of the land, revenue records, distance from the nearest municipality, sale deed, and the source of investment.
Relying on the Supreme Court’s decisions in Collector, Land Acquisition v. Mst. Katiji and N. Balakrishnan v. M. Krishnamurthy, the Tribunal reiterated that substantial justice should prevail over technicalities and that the acceptability of the explanation is more important than the length of the delay. Since the delay was only 59 days, the assessment had been framed ex parte, and the assessee’s claims required factual examination, the Tribunal condoned the delay, set aside the order of the CIT(A), and restored the matter to the Assessing Officer for fresh adjudication. The Assessing Officer was directed to verify the applicability of section 2(14), examine the source of investment in the residential property, and pass a speaking order after granting the assessee a reasonable opportunity of being heard. The appeal was accordingly allowed for statistical purposes.
Cases Discussed:
- N. Balakrishnan v. M. Krishnamurthy [(1998) 7 SCC 123].
- Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)].
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal has been preferred by the Assessee against the order dated 15.01.2026 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 16.01.2025 passed by the Assessing Officer, Assessment Unit, National Faceless Assessment Centre, Delhi [hereinafter referred to as “the AO”], u/s.147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2020-21.
