Machavarapu Koteswara Rao Vs DCIT (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, disposed of two appeals involving identical issues through a common order. The assessees challenged separate orders of the Commissioner of Income Tax (Appeals) confirming additions made as long-term capital gains (LTCG) in assessments completed under Section 153C of the Income-tax Act.
In the first appeal, the assessee had filed the return declaring total income of ₹14,31,010. Following a search under Section 132 in another group, proceedings under Section 153C were initiated. The Assessing Officer observed that the assessee and two co-owners had sold plots of land, computed the assessee’s 25% share of sale consideration at ₹47,56,937, allowed indexed cost of ₹48,721, and made an addition of ₹47,08,216 as long-term capital gains. The CIT(A) upheld the addition.
Before the Tribunal, the assessee submitted that the land had been purchased with the intention of carrying on a real estate business. The agricultural land had been converted into non-agricultural land with permission from the Revenue Divisional Officer, divided into 13 plots after providing internal roads, and sold as plots. The assessee contended that the entire sale consideration of ₹47,56,937 had already been disclosed as business turnover and income had been offered under Section 44AD. It was argued that the Assessing Officer had accepted the returned business income and could not again tax the same transaction under the head “Capital Gains,” as this resulted in double taxation. The Revenue relied on the orders of the lower authorities and referred to the assessee’s statement recorded after the search and the observations of the CIT(A).
