ITAT Jaipur on Compulsory Acquisition, Cash Deposits & Section 80C: Agreed Addition Not the Final Word

The Jaipur Bench (SMC) of the Income Tax Appellate Tribunal, in the case of Tejpal Singh Vs ITO (ITA No. 877/JPR/2025, AY 2014-15), has clarified that an “agreed addition” during assessment proceedings does not prevent the assessee from subsequently asserting lawful exemptions or deductions, especially where relevant facts are already on record.

The Tribunal examined three key disputes:

  1. Long-term capital gain of ₹99,977 arising from compensation of ₹5,89,563 received on compulsory acquisition of land by NHAI.
  2. Addition of ₹3,32,600 towards alleged unexplained cash deposits, computed on a peak credit basis.
  3. Disallowance of deduction of ₹11,020 under Section 80C towards tuition fees, despite the employer having allowed such deduction in Form 16.

In each of these matters, the Tribunal found that the issues were not evaluated on the correct factual and legal footing, and therefore remanded them to the Assessing Officer (AO) for fresh consideration, granting relief to the assessee for statistical purposes.

Background of the Appeal

The assessee, an individual in Government service, challenged the order of the Commissioner of Income Tax (Appeals), ADDL/JCIT (A), Aurangabad, which had arisen from assessment framed under the Income Tax Act 1961. The appeal contained three grounds, broadly covering:

  • Taxability of capital gain on compulsory acquisition of alleged agricultural land.
  • Addition on account of cash deposits in a savings bank account.
  • Denial of deduction under Section 80C for tuition fees.

The Tribunal’s order focuses on whether the lower authorities had properly applied the law and correctly appreciated the evidentiary record placed before them.

Long-Term Capital Gain on NHAI Acquisition and Section 10(37)

Nature of the Dispute

The first ground concerned an addition of ₹99,977 under the head “Income from Long Term Capital Gains.” This gain was computed with reference to three plots of land, collectively measuring 260 square meters, acquired by the National Highways Authority of India (NHAI). The assessee received compensation of ₹5,89,563 during the relevant previous year.

Before the Tribunal, the assessee’s counsel argued that the capital gain should be fully exempt under Section 10(37) of the Income Tax Act 1961, as the land was agricultural and had been compulsorily acquired.

The assessee relied on clause (37) of Section 10, which provides that in the case of an assessee being an individual or Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land is excluded from total income where specified conditions are fulfilled. Among these, clause (iii) stipulates that:

such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

The assessee’s case hinged on demonstrating that:

  • The land was agricultural in nature, and
  • The transfer took place by compulsory acquisition by NHAI, a fact noted by the AO in the assessment order.

Factual Matrix Placed Before Tribunal

The assessee’s counsel highlighted that:

  • The AO, in paragraph 4 of the assessment order, had recorded that the land was compulsorily acquired by NHAI.
  • Copies of purchase deeds produced (pages 1 to 12 of the paper book) described the land as agricultural.
  • These documents were already part of the assessment record.

Although the assessee had not raised the Section 10(37) exemption claim before the AO or CIT(A), the counsel argued that since all essential facts were already on record, the legal claim could still be entertained at the appellate stage.

The Departmental Representative (DR) objected to the timing of the claim (being raised for the first time before the Tribunal) but conceded that all material facts relevant to the claim indeed existed on the file.