Sradhavathi Yalamanchali Vs ITO (ITAT Hyderabad)
Hyderabad ITAT: CIT(A) Cannot Ignore Written Submissions Filed During Physical Hearings After Appeal Migrates to Faceless Regime
Summary: In Sradhavathi Yalamanchali v. ITO, ITA No. 1197/Hyd/2025, AY 2014-15, order dated 21.08.2026, the Hyderabad ITAT considered an appeal involving additions of ₹1,45,98,765 towards long-term capital gains and ₹3,45,115 towards interest income, with total income assessed at ₹1,58,08,390 against returned income of ₹8,64,510. The assessee had challenged, among other matters, the capital-gains addition on the contention that the land transferred under a development agreement was agricultural land situated beyond GHMC municipal limits and therefore did not constitute a “capital asset” under Section 2(14)(iii) of the Income-tax Act. The assessee also disputed the valuation and contended that the developer had not completed the project. The appeal was filed before the CIT(A) on 03.04.2017 and was initially heard physically, during which the assessee filed written submissions. It was subsequently transferred to the faceless regime and disposed of by the NFAC on 10.06.2025. The Tribunal noted that the appeal had been disposed of more than eight years after filing and held that the written submissions filed during the physical hearing had not been considered by the CIT(A), NFAC, while disposing of the appeal. Accordingly, the Tribunal set aside the CIT(A)’s order and restored the appeal for fresh adjudication after considering the written submissions already filed and after providing the assessee a reasonable opportunity of hearing. The Tribunal did not adjudicate the capital-gains addition on merits and allowed the appeal for statistical purposes. [Taxability of Capital Gain on Transfer of Agricultural Land](https://taxguru.in/income-tax/taxability-capital-gain-transfer-agricultural-land.html?utm_source=chatgpt.com)
In Sradhavathi Yalamanchali v. ITO, ITA No. 1197/Hyd/2025 (AY 2014-15), order dated 21.08.2026, the Hyderabad ITAT dealt with an appeal involving substantial additions, principally long-term capital gains of ₹1,45,98,765 and interest income of ₹3,45,115. The AO had assessed total income at ₹1.58 crore as against returned income of ₹8.64 lakh.
The assessee challenged the capital-gains addition contending, inter alia, that the land transferred under a development agreement was agricultural land situated beyond GHMC municipal limits and therefore was not a “capital asset” under Section 2(14)(iii). It was also contended that the developer had not completed the project and that the valuation adopted for computing capital gains was erroneous.
The crucial procedural issue was that the appeal had originally been filed before the CIT(A) on 03.04.2017 and physically heard, during which the assessee had furnished written submissions and supporting material. Subsequently, the appeal migrated to the faceless regime, and NFAC ultimately disposed of it on 10.06.2025—more than eight years after it had been filed. The faceless CIT(A), however, proceeded on the footing that the assessee had failed to participate and did not consider the written submissions filed during the earlier physical proceedings.
The ITAT strongly observed that it was “incomprehensible” that an appeal filed in April 2017 was disposed of only after more than eight years. More importantly, it held that because the written submissions filed during the physical hearing had not been considered by the NFAC while deciding the appeal, the CIT(A)’s order could not be sustained.
Accordingly, the Tribunal set aside the CIT(A)’s order and restored the entire appeal to the CIT(A) with a direction to re-decide it after considering the written submissions already filed during the physical proceedings and after granting the assessee a reasonable opportunity of hearing. Thus, the ITAT did not adjudicate the ₹1.46 crore capital-gains addition on merits; the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 10/06/2025, which in turn arises from the assessment order passed by the Assessing Officer (for short, “AO”) under Section 143(3) of the Income-tax Act, 1961 (for short, “the Act”), dated 26/12/2016, for the Assessment Year 2014-15. The assessee has assailed the impugned order on the following grounds of appeal raised before us:
1) The learned Commissioner of Income- tax (Appeals) order is erroneous in facts and law.
2) The Learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in law and on facts in dismissing the appeal without proper appreciation of the documentary evidence and written submissions physically filed and argued during the personal hearings held from 28.11.2017 to 24.01.2020.
3) The Learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in not considering the fact that the appellant duly responded to the notices issued by the CIT(A) in the physical proceedings phase and filed all necessary submissions and evidences. The concl usion drawn in the impugned order, which states that the assessee failed to respond OR furnish documents, is factually incorrect and against the principle of natural justice
4) The CIT(A), in the faceless order, failed to consider the records and proceedings of the physical hearings that were conducted on multiple dates as mentioned in Para 4.1 of the impugned order, and the findings are solely based on the faceless portal status, thereby vitiating the adjudication process.
5) The CIT(A) erred in confirming/upholding the action of the assessing officer in determining capital gains an amount of Rs.1,45,98,765/- for unstainable reasons without appreciating the facts that the developer not completed the project.
6) The CIT(A) erred in confirming the actioning the officer without considering the fact that the property located beyond Municipal limits of GHMC and the same is not a capital asset u/s 2(14)(iii) of the income tax act.
7) The CIT(A) erred in confirming the actioning the officer without considering the fact that, at the time adjudicating the substantive issue on merits, particularly the legal ground that the land transferred under the Development Agreement was agricultural land situated beyond the GHMC municipal limits and hence does not fall within the ambit of “Capital Asset” u/s 2(14)(iii) of the Income-tax Act.
8) The CIT(A) further erred in not considering the well- reasoned submissions made by the assessee in regard to the incorrect estimation of market value and erroneous treatment of the transaction as liable for capital gains without performance by the developer.
9) The very approach of the learned Commissioner of Income- tax (Appeals) /NFAC in passing an order u/s 250 of the Income tax act without considering the appellant submissions is illegal arbitrary, and perverse, highhanded is contrary to the provisions law, therefore the order passed by the Learned Commissioner of Income Tax(appeals)NFAC is illegal ex- facie and violative of principals of natural justice
10) The CIT(A) erred in confirming the actioning the officer in determining total income of Rs. 1,58,08,389/- as against the return of income of Rs. 8,64,510/-.
11) The Appellant craves leave to add, amend, OR alter any of the above grounds at the time of hearing.”
2. Succinctly stated, the assessee had filed her return of income for AY 2014- 15 on 20/01/2016, declaring an income of Rs.8,64,510/-. Thereafter, the assessee’s case was selected for scrutiny proceedings under section 143(2) of the Act.
3. Thereafter, the AO vide his order passed under section 143(3) of the Act, dated 26/12/2016 determined the income of the assessee at Rs.1,58,08,390/- after making two additions, viz., (i) addition under the head long term capital gains (LTCG): Rs.1,45,98,765/-; and (ii) addition of interest income: Rs.3,45,115/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) observed that the assessee, despite having been put to notice about the fixation of the appeal on six occasions, had failed to participate in the proceedings; therein, referring to the observations of the AO, upheld the additions made by him and dismissed the appeal.
5. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.
6. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.
7. Shri T Chaitanya Kumar, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee appellant, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and facts of the case in summarily dismissing the appeal without considering the “written submissions” that were filed in the course of the appellate proceedings. Elaborating on his contention, the Ld. AR submitted that the assessee had filed the appeal with CIT(A) on 03/04/2017. It was submitted that the appeal was initially heard in physical mode, during which the assessee filed his “written submissions” before the first appellate authority (Pages 8-16 of APB). The Ld. AR submitted that thereafter the aforesaid appeal of the assessee was transferred to the Faceless regime and had been disposed of by the CIT(A), NAFAC, Delhi vide his order, dated 10/06/2025, i.e., after lapse of a period of more than eight years from the date of institution of the said appeal. The Ld. AR submitted that the CIT(A), NAFAC, Delhi, had failed to consider the written submissions filed by the assessee during the physical hearing of the appeal at the initial stage. Carrying his contention further, the Ld. AR submitted that the appeal in the case of the assessee’s wife wherein a similar issue is involved is, as on date, pending before the CIT(A). The Ld. AR submitted that considering the fact that the CIT(A) had dismissed the appeal without considering the “written submissions” that were filed by the assessee appellant before the first appellate authority, the matter in all fairness and in interest of justice be set aside to his file with a direction to re- adjudicate the same after taking cognizance of the said written submissions and affording a reasonable opportunity of being heard to the assessee appellant.
8. Per contra, Shri K Prasad, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below.
9. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.
10. At the threshold, we find it incomprehensible that an appeal which was filed by the assessee on 03/04/2017 had been disposed of by the CIT(A) after lapse of a period of more than eight years.
11. Be that as it may, we are of the view that as the “written submissions” filed by the assessee during the course of the physical hearing of the appeal had not been considered by the CIT(A), NAFAC, Delhi while disposing of the appeal, therefore, the order so passed by him cannot be sustained.
12. In our view, the matter in all fairness and in the interest of justice is required to be set aside to the file of the CIT(A), who is directed to re-decide the appeal after considering the “written submissions” that were filed by the assessee before him in the course of physical hearing of the appeal, Pages 8-10 of APB. Needless to say, the CIT(A) shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee appellant.
13. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the open court on 21st August, 2026.
