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Income Tax Appellate Tribunal, “I” BENCH MUMBAI.
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALE
सुनवाई की तारीख / Date of Hearing 11/05/2023 घोषणा की तारीख /Date of Pronouncement 29 /05/2023 आदेश / ORDER PER PAVAN KUMAR GADALE - JM:
The assessee has filed the appeal against the order of Assessing Officer (“AO”) passed under section 144C (13) r.w.s.147 of the Income Tax Act, 1961 (“the Act”) in pursuance of the directions of Ld. Dispute Resolution Panel (“DRP”) u/s 144C(5) of the Act.
The assessee has raised following grounds of appeal:-
1. “The Ld. Assessing officer erred in re-opening the case u/s. 147 and that the re- assessment is bad and void in law.
2. The Ld. Assessing Officer erred in making addition on account of sale of property without appreciating ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai that there is no escapement of income under section 147 of the Income Tax Act, 1961. That the addition is unjustified and ought to be deleted.
The Ld. Assessing Officer erred in making the addition on sale of property amounting to Rs. 61,00,000/- as unexplained cash credit u/s. 68 of the Income Tax Act, 1961 ignoring the submissions made by the appellant and without appreciating the facts of the case.
4. Without prejudice to the above, the Ld. Assessing Officer erred in treating the sale consideration of property the addition u/s. 68 without appreciating that section 68 does not apply to the facts of the case of the appellant.
The Ld. Assessing Officer erred in applying special rate of tax u/s. 115BBE to the addition made of Rs.61,00,000/-. That such action of Assessing Officer is purposefully done to escalate the demand and is totally unwarranted.
6. All of the above grounds are without prejudice to each other and the Appellant craves leave to add, amend, alter or delete any of the above grounds of appeal
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3. The brief facts of the case are that the assessee is a non-resident and has not filed the return of income u/s 139(1) of the Act for the Assessment Year 2014-15.The Assessing Officer (AO) has received information as per NMS(P1) that the assessee has entered into transactions for purchase of immovable property and payment was made to the seller and TDS was deducted u/s 194IA of the Act. Further, the assessee has sold two immovable properties and received sale consideration. Since the said information was not disclosed and the return of income was not filed by the assessee. The A.O has reason to believe that the income has escaped the assessment and issued notice u/s 148 of the Act and also reasons recorded for re-opening of the case was provided to the assessee. In compliance to the notice, the asssessee has filed the return of income on 30.05.2021 disclosing a total income of Rs.1,26,120/-. Subsequently, notice u/sec 143(2) and U/sec 142(1) of the Act are issued and the assessee had filed the details through ITBA portal. The AO considering the facts and information found that during the Financial Year (“FY”) 2013-14, the assessee has sold two immovable properties, one flat at Kandivali. Mumbai for Rs.1,30,00,000/- and second flat at Thane for Rs.61,00,000/-.Whereas the assessee has disclosed capital gains in respect of Kandivali flat in the return of income. And the sale consideration in respect of flat sold at Thane was not disclosed. Therefore the A.O. has issued a show cause notice on 25.03.2022. In compliance to the notice, the assessee has filed the information on 3 | P a g e ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai 27.03.2022 referred at Page4 Para 5.4 of the order read as under:
“...There is no cause to add the sum of 61,00,000/- to the assessee's income for the year since as per the Revised Computation of Income which we are submitting herewith, there is no taxable income for the year. The assessee has filed his ITR on 30-5-2021 against notice issued u/s 148 declaring NIL income.
During the AY 2014-15, two house properties were sold for Rs 1,30,00,000/- and Rs.61,00,000/- incurring a Capital Gain of Rs. 27,86,194/- and Rs. 17,07,095/- respectively totaling to Rs. 44,93,289/- Simultaneously, one house property has been purchased during the year at the cost of Rs 4,03,71,750/- for which substantial amount of payment was made during the year totaling to Rs. 1,42,83,137/- . (Agreement attached as Annexure D).
Resultantly, there was no taxable income for the year. However, there was an inadvertent error in the computation of income because the sale of Flat for Rs. 61,00,000/- was omitted erroneously.
ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai Although this did not result in any escapement of income, to put the records straight, we are submitting herewith a REVISED COMPUTATION OF INCOME for your perusal and record. (Annexure A).
We are submitting this additional information before the completion of assessment as per the ratio of CIT v. Sam Global Securities Ltd [2014] 360 ITR 682 (DELHI) wherein it was decided that the assessee has the right to make a claim before the AO during the course of assessment proceedings.
We also rely on the judgment in the case of Balmukund Acharya vs. DCIT of 2001 dated 19/12/2008. (Bombay High court) and CBDT Circular No.14-XL (35) dated 11-04-1955...wherein it was commented that .."Having said so, we must observe that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconceptions or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected" (see S.R. Kosti v. CIT [2005] 276 ITR 165 1 (Guj.), CPA Yoosuf v. ITO [1970] 77 ITR 237 (Ker.), CIT v. Bharat General Reinsurance Co. Ltd. [1971] 81 ITR 303 (Delhi), 5 | P a g e ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai CIT v. Archana R. Dhanwatey [1982] 136 ITR 3552 (Bom.). We are attaching the sale agreement for sale of flat valued at Rs.61,00,000/- (Annexure B) and purchase agreement (Annexure C) and the investment made in new flat purchased during the year (Annexure D).
In view of above, you are requested to take the new submission on record and refrain from making any addition to the income of the assessee..."
The AO was not satisfied with the information/ details filed and observed that the assessee has not offered the sale consideration of Thane flat sold and the assessee has claimed exemption u/s 54 of the Act in respect of Long Term Capital Gain (“LTCG”) arising from the sale of flat at Thane which is not tenable. The AO observed that since the assessee has not claimed the exemption of long term capital gains in the return of income filed and therefore the claim of the assessee in the revised computation income is denied. Finally the A.O has made an addition of Rs.61,00,000/- as unexplained cash credit u/s 68 of the Act and assessed the total income of Rs.62,26,120/- and passed draft assessement order u/s 144C r.w.s147 of the Act dated 28.03.2022. The assessee aggrieved by the draft assessment order has filed objections in Form No.35A with the DRP. Whereas the DRP has considered the objections and findings of the AO and made observations on the claims at Para 6 of the order and rejected the objections 6 | P a g e ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai filed by the assessee and passed order U/sec144C(5) of the Act dated 14-12-2022. Subsequently, the A.O has assessed the total income of Rs.62,26,120/- and passed the final assessment order u/s 144C(13) r.w.s.147 of the Act dated 02.01.2023, Aggrieved by the final assessment order, the assessee had filed the appeal with the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR submitted that the DRP has erred in rejecting the objections filed and confirming the addition by the AO overlooking the factual information and revised computation of income filed claiming the exemption of Long Term Capital Gains on sale of flat at thane U/sec54 of the Act in the proceedings. Further the Ld. AR submitted that the assessee has a good case on merits and substantial material evidences in respect of claim and prayed for an opportunity to file the details/ information before the lower authorities.Per contra, the Ld.DR submitted that the transactions were not established with evidences before the lower authorities and the Ld. DR supported the order of the lower authorities.
We have heard the rival submissions and perused the material available on record. The sole matrix of the disputed issue envisaged by the Ld.AR that during the FY 2013-14 the assessee has sold two residential flats, one at Kandivali and other at Thane. Whereas in the return of income filed in compliance to notice under section 148 of the Act, the assessee could not include LTCG arising on the sale of flat at Thane. Therefore, the assessee has claimed exemption of LTCG U/sec54 of the Act on sale of 7 | P a g e ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai flat at Kandivali by investing in the new residential property as per the provisions of law. The Ld.AR emphasized that the cost of the new house property purchased is Rs.4,03,71,750/- and during the F.Y 2013-14 the assessee has invested/made payments of Rs.1,42,83,147/- and whereas the Long term Capital Gains on sale of two house properties (i) Kandivali flat at Rs.27,86,194/- and (ii) Thane flat at Rs.17,07,095/- all aggregating to Rs.44,93,289/-.Since the investment in new house property is more than the aggregated long-term capital gains, therefore the claim of long term capital gains in respect of Thane property should also be considered for exemption u/s 54 of the Act.
When a query was raised to Ld.AR of the assessee, to explain the reasons for not filing the return of income and the documentary evidences of property purchased and sold before the lower authorities. The Ld.AR mentione that the details were not available during that period and demonstrated the sale agreement of the flat at Thane at page 15 to 30 of the paper book and the purchase agreement of new house property at page 31 to 80 of the paper book, The evidence play important role in decision making in the adjudicating proceedings. Therefore considering the facts, circumstances , and evidences the assessee should not suffer for non filing of material information, as the evidences played vital role in decision making Accordingly, to meet the ends of justice, we set aside the order of the A.O. and restore the entire disputed issues along with the evidences and the revised ITA 619/Mum/2022 Prashant Chandra Sadh. Mumbai computation of income claiming exemption of Long term capital gains on sale of flats to the file of the assessing officer to decide afresh on merits and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. And we allow the grounds of appeal of the assessee for statistical purposes..