Madhavan Thambi Vijaya Kumar Vs CIT (Appeals) (ITAT Chennai)
Chennai ITAT Remands Section 10(37) Claim After Admitting Additional Evidence on Agricultural Land Acquired for Vizhinjam Seaport Project
The Chennai ITAT restored the assessment to the Assessing Officer for fresh adjudication after the assessee produced additional evidence supporting his claim for exemption under section 10(37) in respect of compensation received on transfer of agricultural land for the Vizhinjam International Seaport Project. The Tribunal noted that the assessee had filed, for the first time, the sale deed, Government acquisition notifications, CBDT Circular No. 36/2016, and an Agricultural Officer’s certificate certifying the agricultural nature of the land, all of which had a direct bearing on the claim for exemption as well as the computation of capital gains. Since these documents required factual verification, the Tribunal set aside the orders of the Assessing Officer and the CIT(A) and directed the Assessing Officer to examine the additional evidence, verify the claim under section 10(37), consider the indexed cost of acquisition and improvement, and pass a fresh assessment after providing adequate opportunity of hearing.
Cases Discussed
- Balakrishnan v. Union of India (SC)
- Kishor Ganpatrao Karande v. ITO (ITAT)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The captioned Appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi, [CIT(A)] dated 15.09.2025 Assessment Year 2018-19.
2. Brief facts of the case are that the assessee, an individual, did not file the return of income for AY 2018-19 Based on information received through the Risk Management Strategy of the CBDT regarding sale of immovable property for Rs.1,12,84,777/- to Vizhinjam International Seaport Limited (VISL), the assessment was reopened u/s. 147 of the Act. In response to notice u/s. 148, the assessee filed a return declaring long-term capital gain (LTCG) of Rs.27,65,497/- after claiming indexed cost of acquisition and indexed cost of improvement. The Assessing Officer disallowed the claims for want of supporting evidence and assessed the entire sale consideration of Rs.1,12,84,777/- as LTCG. The assessee failed to furnish documentary evidence in support of the claimed indexed cost of acquisition and cost of improvement despite several opportunities. In the absence of purchase deed, proof of date of acquisition and evidence regarding improvement expenditure, the AO disallowed the claimed deductions. The entire sale consideration of Rs.1,12,84,777/- was treated as taxable long-term capital gain and assessment was completed u/s. 147 read with section 143(3).
3. On appeal, The CIT(A) confirmed the assessment order. The CIT(A) upheld the reopening as well as the assessment made by the AO. The claim for exemption u/s. 10(37), raised for the first time in appeal, was rejected. The CIT(A) held that the land was situated in Vizhinjam Village, Neyyattinkara Taluk, an urban area, and therefore constituted a capital asset u/s. 2(14).The CIT(A) further observed that the assessee had failed to establish agricultural use of the land and had also not produced evidence in support of the claimed cost of acquisition and improvement. Accordingly, the additions made by the AO were confirmed.
Aggrieved assessee is in appeal before the Tribunal.
4. Before the Tribunal, the assessee produced additional documents, including the sale deed, Government notifications, CBDT Circular 36/2016, and a certificate issued by the Agricultural Officer, and claimed exemption u/s. 10(37) on the ground that the land was agricultural land acquired for the Vizhinjam Seaport Project.
5. The ld. AR for the assessee submitted that the land was agricultural land compulsorily acquired for the Vizhinjam International Seaport Project and that the compensation received was exempt u/s. 10(37) of the Act. Reliance was placed on the decision of the Supreme Court in Balakrishnan v. Union of India and the decision of the ITAT in Kishor Ganpatrao Karande v. ITO.
6. The assessee produced additional evidence before the Tribunal, including Sale deed dated 09.2017;English translation thereof; Relevant Government of Kerala notifications relating to acquisition; CBDT Circular No. 36/2016 dated 25.10.2016; and Certificate dated 18.04.2023 issued by the Agricultural Officer certifying agricultural nature/use of the land. It was contended that these documents were necessary for proper adjudication of the claim u/s. 10(37).
7. The ld. DR for the Revenue supported the orders of the AO and the CIT(A).It was argued that the land constituted a capital asset situated in an urban area and the assessee failed to satisfy the conditions prescribed u/s. 10(37).The Revenue submitted that no evidence regarding agricultural operations or compulsory acquisition had been produced before the lower authorities. It was further contended that the transfer was through a negotiated sale deed and not by compulsory acquisition under the Land Acquisition Act. The Revenue also justified the disallowance of indexed cost of acquisition and improvement for want of supporting evidence.
8. We observe that the assessee had produced several additional documents before it, including the sale deed, Government notifications relating to acquisition, CBDT Circular 36/2016, and the certificate issued by the Agricultural Officer, which were not available before the Assessing Officer or the CIT(A). These documents have a direct bearing on the adjudication of the claim u/s. 10(37) as well as on the computation of capital gains. Since the additional evidence requires factual verification and examination by the Assessing Officer, and in the interest of natural justice, we consider it appropriate to restore the matter to the file of the Assessing Officer. Accordingly, the orders of the lower authorities are set aside on the issues under appeal. The Assessing Officer is directed to examine the additional documents/evidence filed before the Tribunal, verify the claim of exemption u/s. 10(37), the claim of indexed cost of acquisition and improvement, and all other relevant contentions, after affording adequate opportunity of hearing to the assessee. The Assessing Officer shall thereafter pass a denovo assessment order in accordance with law by considering all the evidence placed on record.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on the 27th day of July 2026 in Chennai.
