Hyderabad ITAT: Written Submissions Filed in Physical Appellate Proceedings Cannot Be Overlooked After Migration to Faceless Regime
Case Overview
Case Name: Sradhavathi Yalamanchali Vs ITO (ITAT Hyderabad)
**ITA No.😗* 1197/Hyd/2025
Assessment Year: 2014-15
Order Date: 21.08.2026
Forum: Income Tax Appellate Tribunal, Hyderabad
Background and Factual Matrix
This case arose from an assessment order passed under Section 143(3) of the Income-tax Act, 1961 for Assessment Year 2014-15. The assessee had originally filed her return of income on 20/01/2016, declaring total income of Rs. 8,64,510/-. Upon selection of the case for scrutiny under Section 143(2) of the Income-tax Act, 1961, the Assessing Officer (AO) conducted proceedings and ultimately issued an assessment order dated 26/12/2016.
Additions Made by the Assessing Officer
The AO, through his order under Section 143(3), determined the total assessed income at Rs. 1,58,08,390/- by making the following additions:
- **Long-Term Capital Gains (LTCG)😗* Rs. 1,45,98,765/-
- Interest Income: Rs. 3,45,115/-
This resulted in a massive upward revision from the declared income of Rs. 8,64,510/- to over Rs. 1.58 crore — a difference that the assessee vigorously contested.
The Assessee's Grounds of Challenge
The assessee challenged the additions on multiple legal and factual grounds. The most significant substantive ground related to the capital gains addition concerned the nature and location of the land transferred under a development agreement.
Key Substantive Arguments
- The land in question was agricultural land situated beyond the municipal limits of GHMC (Greater Hyderabad Municipal Corporation)
- Since the land fell outside GHMC limits, the assessee argued it could not be treated as a "capital asset" within the meaning of
Section 2(14)(iii)of the Income-tax Act, 1961 - The developer had not completed the project, and therefore the transaction could not be treated as a completed transfer giving rise to taxable capital gains
- The valuation adopted by the AO for computing capital gains was allegedly erroneous and not reflective of actual market conditions
- The overall treatment of the development agreement transaction as a completed sale attracting capital gains liability was, according to the assessee, legally unsustainable
Procedural History: The Critical Issue
While the substantive grounds were significant, the procedural dimension of this case became the central issue before the Hyderabad ITAT.
Timeline of Appellate Proceedings
| Event | Date |
|---|---|
| Assessment Order passed under Section 143(3) | 26/12/2016 |
| Assessee filed appeal before CIT(A) | 03/04/2017 |
| Physical hearings conducted | 28.11.2017 to 24.01.2020 |
| Appeal migrated to Faceless regime (NFAC) | Post-2020 |
| NFAC disposed of the appeal | 10/06/2025 |
| ITAT Order | 21/08/2026 |
What Happened During Physical Hearings
During the initial phase of appellate proceedings before the CIT(A), the appeal was heard in physical mode across multiple dates between 28.11.2017 and 24.01.2020. During this period, the assessee duly participated in the hearings and filed written submissions along with supporting documentary evidence before the first appellate authority. These submissions were recorded at Pages 8-16 of the Appeal Paper Book (APB).