Case Law Details
ITO Vs Maddila Ramakrishna (ITAT Bangalore)
The Revenue filed an appeal before the ITAT Bangalore against the order dated 3 April 2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year (AY) 2015–16. The CIT(A) had allowed the assessee’s appeal and quashed the reassessment proceedings. The Revenue challenged that decision, contending that the reassessment notice was within the limitation period due to the extension granted under the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), that the Supreme Court’s decision in Union of India v. Rajeev Bansal did not invalidate the notice, and that the Assessing Officer had complied with the procedure prescribed under Section 148A pursuant to Union of India v. Ashish Agrawal.
The assessee had filed his return of income for AY 2015–16 on 28 September 2015 declaring total income of ₹66,49,470. Information available with the department indicated that the assessee had sold immovable properties for ₹1,88,55,000, whereas the stamp duty value of those properties was ₹16,08,30,001, resulting in a substantial difference. Based on this information, the assessment was reopened under Section 147 after obtaining approval from the competent authority.
In response, the assessee explained that he had entered into an MOU dated 5 August 2004 with Hotel Rama Pvt. Ltd. regarding acquisition and development of land. Subsequently, an unregistered sale agreement dated 2 December 2004 was executed between the parties. Under the arrangement, advances totaling ₹61,00,000 were received through cheques. The agreement fixed the sale price at ₹9,00,000 per acre, while the guideline value at that time was ₹1,87,500 per acre. Although the eventual sale deeds were executed on 21 April 2014, the agreed consideration remained ₹1,88,55,000, whereas the stamp duty value at the time of registration had risen to ₹16,08,30,001.
The assessee contended that Sections 43CA(2), 43CA(3), and 43CA(4) were applicable because there was a written agreement and part consideration had been received through banking channels. He maintained that the property constituted stock-in-trade, the profit was offered under the head “Income from business and profession,” and therefore no capital gains arose. The assessee also provided details of loans, conversion charges, bank statements, payment records, and documents relating to legal issues affecting the land. He stated that the agreed price reflected anticipated demand, conversion efforts, and expected business profit, and that the delay in execution of sale deeds resulted in a substantial increase in the stamp duty value over time.
The Assessing Officer rejected these explanations. According to the AO, the amounts received were merely advances for acquiring agricultural land on behalf of Hotel Rama Pvt. Ltd., converting it into non-agricultural land, and transferring it back to the same company. The AO observed that the transactions were financed through a related concern, Indira Hotels (Mysore) Pvt. Ltd., and that common directors existed between the entities involved. The AO concluded that the assessee was liable to long-term capital gains tax by adopting the stamp duty value of ₹16,08,30,001. The profit disclosed by the assessee was treated as commission income earned for facilitating land transactions on behalf of the company. Consequently, the AO added the entire value of ₹16,08,30,001 and assessed total income at ₹16,74,79,471.
The assessee challenged the reassessment before the CIT(A). The CIT(A) accepted the assessee’s contention that the reopening for AY 2015–16 was barred by limitation. The original notice under Section 148 had been issued on 29 June 2021 under the old reassessment regime. Following the Supreme Court’s decision in Ashish Agrawal, the notice was treated as a notice under Section 148A, an opportunity was provided to the assessee, and thereafter an order under Section 148A(d) and a fresh notice under Section 148 were issued on 29 July 2022.
Before the CIT(A), the assessee relied upon the Supreme Court decision in Union of India v. Rajeev Bansal and argued that notices issued for AY 2015–16 on or after 1 April 2021 were time-barred irrespective of the amount of alleged escaped income. It was further argued that TOLA applied only where the limitation period fell between 20 March 2020 and 31 March 2021 and therefore did not extend limitation for AY 2015–16. Accepting these submissions, the CIT(A) held that the reopening was invalid and quashed the assessment.
The Tribunal considered the rival submissions and examined the orders of the lower authorities. It noted that the reassessment related to AY 2015–16 and that the CIT(A) had relied on the Supreme Court’s decision in Rajeev Bansal while concluding that the reopening proceedings were barred by limitation. The Tribunal observed that the CIT(A) had provided detailed reasons for this conclusion and that the Departmental Representative was unable to point out any infirmity in the appellate order.
Accordingly, the Tribunal dismissed all three grounds raised by the Revenue and upheld the order of the CIT(A). As a result, the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal has been filed by the Income Tax Officer, Ward 6(2)(1), Bangalore (the learned AO), in the case of Shri Maddila Ramakrishna, Bangalore (the assessee), for Assessment Year 2015–16. It arises from the appellate order dated 3 April 2025 passed by the National Faceless Appeal Centre, Delhi (the learned CIT(A), by which the Assessee’s appeal against the reassessment order dated 19 May 2023 passed u/s 147 of the act, was allowed. Aggrieved by that decision, the Revenue has filed the present appeal before us.
2. The learned assessing officer has raised the following grounds of appeal.
(i) Whether on the facts and in the circumstances of the case, the learned CIT(4) erred in holding that the reassessment notice issued on 29.06.2021 is barred by limitation, without appreciating that by virtue of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (“TOLA”), the limitation period stood validly extended up to 30.09.2021. Accordingly, the notice issued is well within the statutory period.
(ii) Whether on the facts and in the circumstances of the case, the learned CIT(A) has failed to appreciate that the Hon’ble Supreme Court in Union of India vs. Rajeev Bansal & Ors. [2024] upheld the validity of notices issued during 01.04.2021 to 30.06.2021 under the old regime, by deeming them as notices under Section 148A(b). The order does not render such notices invalid for AY 2015-16; reliance on a concession made by the Revenue ‘s counsel cannot override the statutory provisions or binding ratio.
(iii) Whether on the facts and circumstances of the case, the learned CIT(A) erred in ignoring that the Assessing Officer duly complied with the procedure mandated by Section 148A, as directed by the Hon ‘ble Supreme Court in Union of India vs. Ashish Agrawal [2022] 444 ITR 1 (SC), by supplying information, granting opportunity, passing a speaking order ws 148A(d), and thereafter issuing notice w’s 148 on 29.07.2022.
3. The brief facts are that the assessee filed the return of income for Assessment Year 2015–16 on 28.09.2015, declaring total income of Rs.66,49,470/-. Based on available information, the assessee had sold immovable properties during the relevant year for an aggregate consideration of Rs.1,88,55,000/-, whereas the stamp duty value of those properties was Rs.16,08,30,001/-, resulting in a difference of Rs.14,19,75,001/-. Accordingly, the case was reopened under section 147 of the Act after obtaining prior approval from the competent authority.
4. In response, the assessee submitted that an MOU had been executed with M/s Hotel Rama Pvt. Ltd. on 05.08.2004 at Bangalore. Under the MOU, Hotel Rama Pvt. Ltd. intended to acquire land in and around Bangalore for development of hotels, resorts, residential schools, and residential layouts, as required, and the assessee, Shri M. Ramakrishna, agreed to make available such non-agricultural land as and when required. Thereafter, a sale agreement was entered into between Shri M. Ramakrishna, as seller, and M/s Hotel Rama Pvt. Ltd., as purchaser, on 02.12.2004. The agreement was not registered. Under the MOU and sale agreement, the purchaser paid Rs.15,00,000/- as advance and a further sum of Rs.46,00,000/- by cheque No. 786204 dated 21.09.2004 in favour of the seller. As recorded in clause 4 at page 3 of the sale agreement, the agreement came into effect from the date of execution and was to remain valid for two years, extendable by mutual consent. The sale agreement was ultimately culminated in sale deeds executed on 21.04.2014, and the total sale consideration was taken at Rs.1,88,55,000/- instead of the SRO value of Rs.16,08,30,001/-prevailing on the date of execution of the sale deeds.
5. The assessee submitted that he had entered into an MOU dated 05.08.2004 with Hotel Rama Pvt. Ltd. for purchase of agricultural land, its conversion into non-agricultural land, and its subsequent sale, followed by an unregistered sale agreement dated 02.12.2004, for which registration was optional. Under the agreement, the sale price was fixed at Rs.9,00,000/- per acre, while the SRO value on that date was Rs.1,87,500/- per acre. During the relevant year, 20.38 guntas were sold for Rs.1,88,55,000/-, whereas the SRO value at the time of registration was Rs.16,08,30,001/-. Since the agreement was in writing and part consideration of Rs.61,00,000/- had been received by cheque— Rs.15,00,000/- by cheque No.239812 dated 06.08.2004 and Rs.46,00,000/- by cheque No.786204 dated 21.09.2004—the assessee contended that section 43CA(2), (3), and (4) applied, and that the declared sale consideration of Rs.1,88,55,000/- should therefore be adopted instead of the SRO value. The investment of Rs.1,20,00,000/-was stated to have been financed through a loan from Indira Hotel Pvt. Ltd. The property was held as stock-in-trade, and the profit on sale was offered under the head “Income from business and profession.” The assessee also stated that conversion charges of Rs.5,86,920/- on 11.03.2005 and Rs.5,54,340/- on 18.02.2006, aggregating to Rs.11,41,260/-, were incurred as cost of improvement. No cash consideration was received. Since the property was stock-in-trade, the assessee contended that no capital gains arose. He further submitted that purchase and sale of property was his business, and that the agreed price of Rs.9 lakh per acre reflected anticipated demand, conversion efforts, and expected profit. Although the agreement was executed when the SRO value was Rs.1,87,500/- per acre, the sale was delayed due to legal hitches and was completed only during the relevant year, by which time Bangalore had developed considerably, the area had come under BBMP, and the SRO value had increased. The assessee also filed Annexure-17 showing year-wise receipts of sale consideration, details of final payments received in respect of Sy. No. 17/1 aggregating Rs.57,88,500/- with TDS of Rs.57,885/-, along with copies of bank statements, payment details, loan details, and land-wise records of legal hitches.
6. The learned AO held that section 43CA(2), (3), and (4) of the Act did not apply to the Assessee’s case, as the amounts received from M/s Hotel Rama Pvt. Ltd. were only advances for acquiring agricultural land on its behalf, converting it into non-agricultural land for residential use, and thereafter selling it to the same company. The funds for these transactions were also stated to have been provided by its sister concern, M/s Indira Hotels (Mysore) Pvt. Ltd., whose board members and directors were common. According to the AO, the assessee was therefore liable to capital gains tax on the sale of the immovable property by adopting the value of Rs.16,08,30,001/-. The AO further held that the net profit of Rs.67,77,527/- shown in the profit and loss account was merely commission earned by the assessee for purchasing and selling the land on behalf of M/s Hotel Rama Pvt. Ltd., using funds arranged by that group. On this basis and having regard to the documents and material on record, the AO concluded that the assessee had failed to satisfactorily explain the transactions and the income arising therefrom during the relevant year. Accordingly, the entire fair market value of the property, namely Rs.16,08,30,001/-, was treated as long-term capital gains and added to the Assessee’s total income.
7. The learned Assessing Officer passed the assessment order determining the Assessee’s total income at Rs.16,74,79,471/-, including an addition of Rs.16,08,30,001/-.
8. Aggrieved, the assessee appealed before the learned CIT(A), who allowed the appeal on the technical ground that the reopening for AY 2015–16 was barred by limitation. The original notice under section 148 was issued on 29.06.2021 under the unamended provisions of the Act. Pursuant to the judgment of the Hon’ble Supreme Court in Ashish Agrawal, that notice was treated as one under section 148A, the assessee was given an opportunity to respond, and thereafter an order under section 148A(d) and a fresh notice under section 148 were issued on 29.07.2022. Before the CIT(A), the assessee relied on the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal and contended that all notices issued for AY 2015–16 on or after 01.04.2021 were time-barred, regardless of the quantum of escaped income, as recorded in paragraph 19(f) of that decision. It was further submitted that TOLA applied only where the limitation period fell between 20.03.2020 and 31.03.2021, whereas AY 2015–16 fell outside that period. Accepting this contention, the learned CIT(A) held that the reopening was invalid and quashed the assessment.
9. The Assessing Officer is in appeal before us. The learned CIT-DR supported the order of the Assessing Officer, while the learned authorized representative submitted that, for AY 2015–16, the learned CIT(A) had rightly quashed the reopening proceedings by relying on the decision of the Hon’ble Supreme Court.
10. We have considered the rival submissions and perused the orders of the lower authorities. The reassessment in the present case pertains to AY 2015–16. The learned CIT(A), following the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra), held that the reopening proceedings for AY 2015–16 were barred by limitation, particularly in view of the specific concession recorded on behalf of the Revenue. The learned CIT(A) has given detailed reasons for that conclusion, and the learned CIT-DR was unable to point out any infirmity in the impugned order. Accordingly, all three grounds raised by the Revenue are dismissed.
11. In the result appeal of the learned assessing officer is dismissed.
Pronounced in the open court on this 29th day of May 2026.
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