Agricultural Land Sale Exemption Claim Can Be Made Via Revised Computation If Supporting Evidence Is Already On Record

By | May 26, 2026
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Agricultural Land Sale Exemption Claim Can Be Made Via Revised Computation If Supporting Evidence Is Already On Record

Issue

Whether the tax authorities can reject an exemption claim on the sale of agricultural land solely because it was raised during assessment proceedings via a revised computation instead of a formal revised return, even when the relevant supporting materials are already available on record.

Facts

  • For the assessment year 2011-12, the assessee-company sold certain pieces of land jointly with two of its individual directors.

  • In its initial return of income, the assessee-company offered its share of the sale proceeds to tax under capital gains.

  • Conversely, the individual directors declared their respective shares from the exact same land transaction as exempt from long-term capital gains, on the grounds that the property was agricultural land.

  • During the course of its assessment proceedings, the assessee-company realized the discrepancy and filed a revised computation, claiming that its income was also exempt as a sale of agricultural land.

  • The Assessing Officer rejected this fresh claim at the threshold, on the technical ground that the assessee had failed to file a formal revised return of income.

Decision

  • Substance Over Form: The appellate authority noted that in identical cases, the Tribunal has established that a valid tax claim not explicitly made in the original return can still be entertained during assessment if the necessary material is already part of the record.

  • Merit Examination Required: Since the assessee-company raised the agricultural land exemption claim during active assessment proceedings and all corresponding transaction documents were already accessible, the claim legally required a thorough examination on its merits.

  • Remand for Adjudication: The rigid technical rejection by the Assessing Officer was set aside, and the entire matter was remitted back to the file of the Commissioner (Appeals) for fresh adjudication in accordance with the law.

Key Takeaways

  • No Barrier to Legitimate Relief: Assessing Officers are under an obligation to assess correct taxable income; they cannot use technical omissions, like the absence of a revised return, to tax an item that is otherwise legally exempt.

  • Availability of Record is Crucial: If the evidence, facts, and documentation supporting a deduction or exemption are already embedded in the assessment record, the tax authority has the power and duty to entertain the claim via a revised computation.

  • Parity in Joint Transactions: When identical portions of a shared land parcel are accepted as exempt agricultural land in the hands of co-owners (the directors), the same underlying character of the land cannot be summarily denied to the corporate co-owner without examining the merits.

IN THE ITAT CHENNAI BENCH ‘A’
Balchandra Builders (P.) Ltd.
v.
Deputy Commissioner of Income-tax*
GEORGE GEORGE K, Vice President
and S.R. Raghunatha, Accountant Member
IT Appeal No. 2300 (CHNY) of 2025
[Assessment year 2011-12]
MAY  5, 2026
N. Arjun Raj, Adv. for the Appellant. H. Mahendran, JCIT for the Respondent.
ORDER
George George K, Vice President.- This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 11.08.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2011-12.
2. The assessee has raised ten grounds in its memorandum of appeal. Ground Nos. 1 & 10 are general and no specific adjudication is called for, hence, the same are dismissed. The Ld.AR has not raised any specific arguments / contentions as regards Ground Nos.7 to 9, hence the same are dismissed. The surviving grounds namely Ground Nos. 2 to 6 reads as follows:-
“2. The NFAC, Delhi erred in sustaining the action of the Assessing Officer in refusing to admit fresh claim made through revised statement in claiming a sum of Rs.9,16,27,448/- as exempted income arising from sale of exempted category of agricultural land during the assessment year under consideration without assigning proper reasons and justification.
3. The NFAC, Delhi failed to appreciate that reliance upon the decision of the Supreme Court in the case of Goetze (India) Limited on the facts of the present case was erroneous and not sustainable in law and ought to have appreciated that same would not bar the First Appellate Authority to consider the same as additional claim in view of the law declared by the Madras High Court in the context of powers of First Appellate Authority, thereby vitiating the decision to reject such fresh claim forming part of the return of income.
4. The NFAC, Delhi failed to appreciate that having placed on record the fact of the disputed agricultural land being situated beyond 8 km from nearest municipality, details of agricultural activities carried on in such agricultural land, as well as revenue records in support thereof including Patta, Adangal and Chitta as well as the certificate issued by the VAO in certifying the said land was an agricultural land, the action in rejecting such fresh claim of tax exemption under Section 2(14) of the Act on technical grounds should be reckoned as bad in law.
5. The NFAC, Delhi failed to appreciate that the fresh claim of tax exemption under Section 2(14) of the Act on the facts and in the circumstances of the present case was correct on various facets and ought to have appreciated that the same was in duly validated by the judicial precedents in such factual context, thereby vitiating the decision in rejecting such fresh claim of tax exemption under Section 2(14) of the Act.
6. The NFAC, Delhi erred in directing verification on the compliance of the conditions prescribed in making a claim of deduction under Section 80IB(10) of the impugned order at para 7.3 & 7.4 and ought to have appreciated that all the conditions prescribed for making such claim of deduction on the eligible project were satisfied concurrently, thereby vitiating the directions issued for verification once again.”
3. Brief facts relevant to Ground Nos.2 to 5 are as follows: The assessee is a company. For the assessment year 2011-12, assessee sold lands at Padur and Kazhipattur villages along with two individual directors, namely, Shri Sudarsan and Shri Balachander. In the return of income filed for the assessment year 2011-12, assessee had offered to tax the proceeds received by it on sale of said lands. However, in the individual return of directors, sales were declared as exempt from Long Term Capital Gains for the reason that it was agricultural lands. During the course of assessment proceedings, the Ld.AR filed a revised computation on 17.02.2014 claiming that the income in the hands of the assessee company is also exempt since it is sale of agricultural lands. The AO rejected the fresh claim raised by the assessee during assessment proceedings for the reason that no revised return was filed. The AO relied on the judgment of the Hon’ble Apex Court in the case of Goetze (India) Ltd. v. CIT (SC). The relevant finding of the AO reads as follows:-
“Apart from this scrutiny of Balchandra Builders Pvt Ltd scrutiny proceedings of the individual directors namely sudarsan and balachander for AY 2011-12 is completed. It is seen the assessee company has sold lands in padur and kazhipattur village jointly along with the twe individual directors and offered the sale proceeds to tax. On the other hand in the individual director’s return of income it was claimed that the sale was only agricultural land so it is exempt from tax (in the individual hands). During the hearing the AR was asked to clarify when the company has offered to tax how it was exempt In Individuals hands. Then the AR vide its reply dated 17/2/2014 submitted a revised computation statement claiming to exempt the income offered by the company since it was a sale of agricultural land and also quoted the judgment in the case of Perlos telecommunication v. ACIT company circle V (1) Chennai. The AR claim was examined it is not possible to entertain this claim as it was not propounded by the assessee through a revised return. The Hon’ble Supreme Court in the case of “Goetze (India) Limited v. Commissioner of Income tax reported in 284 ITR 323 (SC) had held that there was no provisions under the Income tax Act to make amendment in the return of income by modifying an application at assessment stage without revising the return of income. Moreover it is clearly established that it was not an agricultural land in the asessement proceedings of individual directors hence this claim is not entertained.”
4. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The FAA confirmed the view taken by the AO and did not adjudicate whether the land sold is agricultural or not. The FAA further relied on the judgment of the Hon’ble Madras High Court in the case of CIT v. Shriram Investments [T.C. (A) No. 344 of 2005, dated 16-6-2011] and the Hon’ble Kerala High Court in the case of Pr. CIT v. Paragon Biomedical India (P.) Ltd  (Kerala). The relevant finding of the FAA reads as follows:-
“10.2 The Hon’ble Kerela High Court in the case of, PCIT v. Paragon Biomedical India Pvt. Ltd. (2021) 438 ITR 227(2022) held that the acceptance of the case of the assessee under section 10A by the Commissioner (Appeals), without there being a revised return having been filed was illegal and untenable. Without a revised return being filed by the assessee the claims could not be modified. The Hon’ble jurisdictional High Court in the case of Shriram Investments Ltd. v. CIT in T.C.(A) No 344 of 2005 held that relief could have been claimed only by revised return. In the case of Assistant DIT(International Taxation) v. Litostroj (2012) 54 SOT 37 of the Hon’ble Chennai Tribunal, held that it is obligatory to provide a revised return for any claims that have not been previously included in the original return of income. In view of the above decisions. The appellant’s reference to the Hon’ble High Court’s decision is not relevant to the facts of the present case.
10.3 Given the above decisions, I am of the opinion that the appellant’s claim that was not submitted through revised retums cannot be considered now. Since this appeal ground hasn’t been admitted, deciding the merit of the case is unnecessary. Thus, these appeal grounds are rejected. Consequently, ground No.6 of the appeal is dismissed.”
5. Aggrieved, assessee has raised this issue before the Tribunal. The Ld.AR submits that the reliance placed by the lower authorities on Goetze (India) Ltd. (supra) is wholly misplaced, as the Hon’ble Supreme Court has expressly restricted the ratio of the said decision to the powers of the AO and clarified in para 4 that it does not impinge upon the jurisdiction of the appellate authorities; hence, the action of the FAA in curtailing his powers on this basis is unsustainable in law. It is further submitted that the issue is squarely covered in favour of the assessee by the binding judgment of the Hon’ble Madras High Court in CIT v. Abhinitha Foundation (P.) Ltd. 396 ITR 251 (Madras) wherein under similar circumstances, a claim not made in the return but raised during assessment proceedings with supporting material was held to be admissible. It was stated that the Hon’ble Court also distinguished Shriram Investments as being confined to cases involving a non-est, time-barred revised return. Therefore, it was contended that judgment of the Hon’ble Madras High Court in the case of Abhinitha Foundation (P) Ltd. (supra) is squarely applicable to the facts of present case. It was stated that the reliance on Paragon Biomedical India (P) Ltd. (supra) is also inapplicable, as that case dealt with substitution of a claim between two distinct provisions without a revised return, whereas in the present case, the claim remains the same, namely exemption on sale of agricultural land, raised during assessment proceedings itself. The Ld.AR further relies on the settled law laid down by the Hon’ble Supreme Court in National Thermal Power Co. Ltd. v. CIT 187 ITR 688 (SC) wherein it has been held that appellate authorities, including the Tribunal, possess plenary powers and can entertain additional grounds or claims so long as the relevant material is already on record. In the present case, the assessee had raised the claim of exemption on sale of agricultural land during the assessment proceedings itself by way of revised computation dated 17.02.2014, and all necessary facts, including the nature of land, transaction details, and joint ownership with individuals who had claimed similar exemption, were already on record; therefore, the lower authorities erred in not adjudicating the claim on merits. Therefore, the Ld.AR prayed to allow the ground of appeal and direct the AO to treat the land as agricultural land and grant the exemption, or in the alternative, remand the matter to the AO for fresh consideration in accordance with law.
6. The Ld.DR supported the orders of the AO and the FAA.
7. We have heard the rival submissions and perused the material available on record. On a query from the Bench, what happened in the case of the co-owners (directors of assessee company are co-owners) of impugned properties, the Ld.AR submitted same are pending adjudication before the FAA.
8. The primary issue for consideration is whether the authorities below were justified in rejecting the assessee’s claim for exemption on sale of agricultural land on the ground that the same was not made in the return of income. The Ld.AR has rightly contended that the reliance placed by the lower authorities on Goetze (India) Ltd. (supra) is misplaced, as the Hon’ble Supreme Court has expressly confined the said decision to the powers of the AO and clarified that it does not impinge upon the jurisdiction of appellate authorities. We find merit in the submission that the FAA erred in declining to entertain the claim on this basis. Further, the issue is squarely covered by the binding judgment of the Hon’ble jurisdictional High Court in Abhinitha Foundation (P) Ltd. (supra), wherein it has been held that a claim not made in the return can be entertained if the relevant material is already on record. The Hon’ble Court had also considered the judgment of the Hon’ble Madras High Court in the case of Shriram Investment, supra relied on by the FAA. It is to be noted that the judgment of the Hon’ble Madras High Court in the case of Shriram Investments(supra) (relied on by the FAA) was confirmed by the Hon’ble Apex Court reported in Shriram Investments v. CIT 468 ITR 372 (SC). However, the said case is distinguishable on facts. The Hon’ble Apex Court at para 8 of the judgment had stated that the Tribunal did not exercise its power u/s.254 of the Act to consider the new claim made by the assessee. Instead, the Tribunal directed the AO to consider the assessee’s claim which the AO did not have jurisdiction to consider the fresh claim since the revised return was filed beyond the time prescribed u/s.139(5) of the Act. The reliance placed by the Revenue on Paragon Biomedical India (P) Ltd., supra is also distinguishable on facts, as the present case does not involve substitution of a claim under different provisions. We take note of the settled legal position laid down by the Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra) and Jute Corporation of India Ltd. (supra) regarding the plenary powers of the Tribunal to entertain new claims. In the present case, it is an undisputed fact that the assessee had raised the claim during the assessment proceedings by way of revised computation and the relevant materials were already available on record. Considering the totality of facts and the legal position discussed above, we are of the view that the claim of the assessee requires examination on merits. Since cases of assessee’s directors are pending adjudication before the FAA, we deem it appropriate to remit the matter to the files of FAA for fresh adjudication in accordance with law, after affording reasonable opportunity of being heard to the assessee.
9. As regards, Ground No.6 is concerned, we find that the FAA had given specific direction to the AO to examine whether flats in question has built-up area of 1500 sq.ft., or less so as to comply with the condition specified in section 80IB(10) of the Act. The relevant finding of the FAA reads as follows:-
7.3 There has been no specific submission from the appellant regarding this aspect of the case in the appellate proceedings. According to the appellant, this matter is covered because Ld. CIT (A) found that the appellant met the conditions mandated in section 801B(10) of the Act in their own case for the assessment years 2009-10 and 2010-11 and they fulfilled all the conditions stipulated in section 801B(10) of the Act. On perusal of my predecessor’s appeal order for appellant’s case for the assessment year 2009-10, I note that the question of whether individual flats in the housing project exceeded the maximum built-up area prescribed in section 80IB(10) was not before him. From paragraph 4.1 of the appellate order, it can be seen that the appellant did not bring up the issue before him. The relevant part of that paragraph is reproduced below for convenience and clarity.

“4.1 The only issue involved in the present appeal is with regard to the disallowance of claim under section 80-IB of the Act. I have carefully considered the facts of the case, grounds of appeal and the submission made by the learned A/R vis-a-vis reasoning of the AO in disallowing claim of the appellant under section 80-IB(10). The reasoning of the AO in disallowing the claim of the appellant under section 80-IB(10) is two folds.

The appellant is not the owner of the entire land as some of the land on which housing projects have been undertaken belongs to the directors of the company; and The appellant first makes the the agreement for sale of undivided share in the land to the buyers and then executes construction contract of the flat and therefore by entering into a construction agreement with the land owner, the appellant bis merely acting as contractor for the construction of the flat and as per Explanation to the sub-section (10) of section 80-IB by the Finance Act, 2009 with retrospective effect from 01/04/2001 the deduction under section 80IB(10) is not allowable to any undertaking which is includes the housing project as a work contract”.

From the above, it is clear that the appellant’s assertion that my predecessor’s order encompasses the issue is incorrect.
7.4 The maximum built-up area for residential units in the housing project must be 1000 square feet, as specified by clause (c) of section 801B of the Act, if they are located within Delhi or Mumbai or in a 25 kilometre radius of either city, and 1500 square feet if they are located outside of these areas. Therefore, section requires a residential unit in a housing project to have a maximum built-up area of 1500 square feet to be eligible for a deduction. The Finance (No 2) Act, 2004 inserted the definition of ‘built-up area’ with effect from April 1, 2005, in accordance with section 80-IB(14)(a) of the Act. In terms of the section, the built-up area refers to the interior measurement of a residential unit’s floor level, including projections and balconies, and it is increased by the thickness of the walls. However, it does not include common areas shared with other residential units. As previously mentioned, the Id. AO observed that 47 out of 48 flats had a built-up area that exceeded 1500 square feet. The appellant merely stated the saleable area of each flat, which included an average of 21% of the total saleable area. If the common area is reduced by 21% from the gross saleable area, the built-up area would be significantly less than the prescribed 1500 square feet. The appellant did not present any convincing evidence in both the assessment and appellate proceedings to establish that the flats in question were indeed 1500 square feet or less. As previously mentioned, the appellant company hasn’t provided any submission about this aspect of the case in the appellate proceedings. The appellant has asserted that every flat in question was less than 1500 square feet, and it is their primary duty to convince the AO by presenting sufficient evidence. At the same time, it needs to be pointed out that if the Id AO was dissatisfied with the appellant’s explanation, he could have requested additional details and proof to prove that the flats in question were actually under 1500 square feet. In the event of any doubts about the appellant’s assertion, he had the option to conduct his own independent investigation with the available resources to determine the exact built-up area of the flats. Thus, it can be inferred there is lapse on the part of the Id. AO as well the appellant. In this situation, In my view, this matter needs further examination to determine the actual built-up area of the flats in question for the sake of justice and equity. Hence, the Id. AO is instructed to examine the issue afresh and make a decision on the limited aspects of the case in accordance with the law. The appellant should be given adequate opportunity of hearing. The appellant is directed to give the Id. AO sufficient evidence to demonstrate that the flats in question had a built-up area of 1500 square feet or less. It is made clear that the appellant’s deduction claim in section 801B(10) should not be denied if the built-up area flats were within 1500 square feet. The appellant’s issue of consistency is fully covered in the paragraph above. Ground No.3 of appeal is allowed for statistical purposes.
10. The above directions of the FAA to the AO are clear & specific and does not call for any interference. Hence, Ground No.6 raised by the assessee is dismissed.
11. In the result, the appeal filed by the assessee is partly-allowed for statistical purposes.