Premakumari Vs ITO (ITAT Bangalore)
Assessment Order Vs Remand Report- CIT(A) not providing any basis for discarding AO’s revised stand in Remand Report – CIT(A) faulted for mechanical dismissal
Assessee, an individual engaged in land development & agricultural activities, was also supplying food items to Bannerghatta Biological Park. AO treated sale of plotted land as business income, denied agricultural income claims & disallowed house property interest deduction.
CIT(A) confirmed AO’s orders despite contradictory findings in AO’s own remand reports, which supported the assessee.
Tribunal observed that AO initially treated the transaction as a business activity based on the scale of operations & development undertaken by the assessee. However, during the remand proceedings, the same AO accepted that the land falls within the agricultural limits specified u/s2(14)t & also accepted the sale value & development costs as declared by the assessee in the return of income. This contradiction is crucial. CIT(A), despite noticing the remand report, did not conduct any further verification & upheld the original addition. Tribuanl concluded that CIT(A) failed to examine the factual inconsistency between the assessment order & the remand report. Tribunal held that the remand report is a vital piece of evidence as it reflects the AO’s revised view after further inquiry. Once the AO accepted the land as agricultural in nature & agreed with the income classification under “Capital Gains,” CIT(A) ought to have given proper weight to such findings. In the absence of any material to contradict the findings of the remand report, the addition made by AO & sustained by CIT(A) cannot be justified. Tribunal thus held that the treatment of the surplus as business income is not tenable.
