Revenue appeals partly allowed, issues sent for re-evaluation. Assessee cross objections allowed.

ACIT, Circle-1, Kadapa Versus Shri S.V. Satish Kumar Reddy And (Vice-Versa) And ACIT, Circle-1, Kadapa Versus Smt. M. Bhagya Lakshmi And (Vice-Versa)

ACIT, Circle-1, Kadapa Versus Shri S.V. Satish Kumar Reddy And (Vice-Versa) And ACIT, Circle-1, Kadapa Versus Smt. M. Bhagya Lakshmi And (Vice-Versa) - TMI Issues Involved:

1. Condonation of delay in filing the cross objection by the assessee.
2. Taxability of capital gains arising from a development agreement.
3. Claim of deduction under Section 54F of the Income Tax Act.
4. Determination of the cost of construction per square foot.
5. Addition of sundry creditors under Section 68 of the Income Tax Act.
6. Disallowance of agricultural income declared by the assessee.

Summary:

1. Condonation of Delay:
The assessee filed a condonation application explaining the delay of 88 days in filing the cross objection. After considering the reasons and hearing both sides, the delay was condoned, and the cross objection was admitted for adjudication.

2. Taxability of Capital Gains:
The Assessing Officer (AO) reopened the assessment under Section 147 based on information that the assessee entered into a development agreement, which led to capital gains. The AO computed the value of the superstructure and determined the taxable short-term capital gain. The AO also made additions for sundry creditors and disallowed a deduction under Chapter VIA due to lack of proof.

3. Deduction under Section 54F:
The assessee claimed deduction under Section 54F before the Commissioner of Income Tax (Appeals) [CIT(A)], which was allowed. However, the Tribunal noted that the assessee did not claim this deduction in the original or revised return. The Tribunal restored the issue to the AO to verify if the assessee did not possess any other residential house, directing the AO to decide the issue as per facts and law.

4. Cost of Construction:
The AO adopted the cost of construction at Rs. 2286 per sq.ft, while the CIT(A) reduced it to Rs. 1370 per sq.ft. The Tribunal found that the AO's computation based on the Telangana Registration Department website should be considered. The issue was restored to the AO for re-evaluation based on the rate as per the office of the Sub Registrar.

5. Addition of Sundry Creditors:
The AO made an addition under Section 68 for sundry creditors, which the CIT(A) deleted, noting that the amount was an opening balance from an earlier year. The Tribunal upheld the CIT(A)'s decision, stating that the addition should have been made in the year the amount was borrowed, not in the assessment year under consideration.

6. Disallowance of Agricultural Income:
The AO disallowed a portion of the agricultural income declared by the assessee, while the CIT(A) restricted the disallowance to 30%. The Tribunal found both the AO's and CIT(A)'s methods arbitrary and directed the AO to restrict the disallowance to 50% of the agricultural income for lack of detailed evidence.

Conclusion:
The Tribunal partly allowed the appeals filed by the revenue for statistical purposes and restored specific issues to the AO for re-evaluation. The cross objections filed by the assessee were also allowed for statistical purposes. The order was pronounced in the Open Court on 16th May, 2023.