आदेश/ORDER

PER VIJAY PAL RAO, VICE PRESIDENT :

This appeal by the assessee is directed against the Order dated 16.09.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2017-2018.

2. The assessee has raised the following grounds of appeal:

1. The order of the Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre ('the Ld. CIT(A)') in confirming the addition of Rs 1,37,61,115 being gain on sale of agricultural land as capital gain chargeable to tax under section 45 of the Income Tax Act 1961 ('the Act') is unsustainable both in law and on facts.

2. The Ld. CIT(A) failed to appreciate and note that the Assessing Officer himself in the assessment order at Para 5.5, Page 3 recorded that on causing local enquiries with Sri. Bala Mallesh, Sarpanch of Jainapally Gram Panchayat office, it was gathered that the land was said to be rural agricultural land and crops like kandi, Jowar and grass were cultivated in the said land. The nearest municipality to the Jainapally Village is Bhongir Town and the aerial distance from the land to the municipal limits of the Bhongir town is about 8.56Kms. Further population of the Bhongir Municipality is 53,339 as per 2011 census. Therefore, to hold the agricultural land as capital asset under section 2(14) of the Act and stating that the assessee could not prove with documentary evidence that impugned land was used for cultivation and agricultural purpose is unsustainable both in law and on facts.

3. The Ld. CIT(A) failed to note that the land is situated in Jainapally Village which falls in Gram Panchayat, Bibinagar Mandal, Nalgonda District. The nearest municipality is Bhongir town and the aerial distance from Jainapaily Village to the Bhongir Municipality is more than 8kms. Therefore, to hold at Para 10 of the order that the agricultural land is situated in the Bhongir Municipality having 53,339 population and the appellant is not fulling the conditions laid in section 2(14)(iii) (b) of the Act is devoid of merit and to be quashed.

4. The order of the Ld. CIT(A) in holding that the assessee company has not filed any documentary evidence to prove that the agricultural land is not a capital asset is contrary to facts and record when the Department investigation clearly establishes that the land is a agricultural land.

5. The Appellant craves to add, modify, or amend the above grounds anytime during the course of appeal.”

3. The solitary issue arises for our consideration and adjudication is whether the land in question transferred by the assessee falls in the exclusion clause of ‘capital asset’ as per the provisions of sec.2(14)(iii)(b) of the Income Tax Act [in short "the Act"], 1961.

4. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has conducted an enquiry regarding the nature of the land sold/ transferred by the assessee during the year under consideration and found that the land in question is a rural agricultural land and situated beyond the 8.56 KM from nearest municipality limits. However, the Assessing Officer has assessed the long-term capital gains by treating the land as ‘capital asset’ on the ground that the agricultural activities carried out in the land has not been proved and the claim of such activity and agricultural income has not been substantiated with proof by the assessee as the majority of the land is open dry land. Thus, the learned Authorised Representative of the Assessee has submitted that despite the fact that the land is a rural agricultural land and situated beyond 8 KM from the nearest municipality/local authority, the Assessing Officer has made the addition for want of proof of carrying out the agricultural activities on this land which is contradictory finding of the Assessing Officer. He has referred to the relevant record and submitted that the revenue record shows the land in question is agricultural land and even the sale document also describes the land