AMITA SINHA,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS), PRYAGRAJ

The brief facts of the case are that the assessee, Smt. Amita Sinha, is an individual who filed her return of income for A.Y. 2014-15 on 17.09.2015 declaring total income of ₹13,87,420/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Income-tax Act, 1961 (“the Act”).

During the assessment proceedings, the Assessing Officer examined the long-term capital gain from sale of immovable property. The assessee had taken the stamp duty value of ₹3,19,49,000/- as sale consideration and had claimed indexed cost of acquisition and improvement. The assessee also filed a valuation report in support of the value adopted as on 01.04.1981. The Assessing Officer did not accept the valuation report and referred the matter to the DVO. Since the DVO's report was not received before the assessment became time-barred, the Assessing Officer took the indexed cost of acquisition at Nil, allowed exemption under section 54 of the Act of ₹1,10,00,000/- and computed long-term capital gain at ₹2,09,49,000/-. At the same time, the Assessing Officer specifically noted in the assessment order that the long-term capital gain would be revised on receipt of the DVO's report.

The Assessing Officer also noticed that the assessee had purchased certain properties during the year at a value lower than the stamp duty value. Accordingly, the Assessing Officer made a further addition of ₹14,10,000/- under section 56(2)(vii)(c)(ii) of the Act. The Assessing Officer also did not allow the long-term capital loss claimed on sale of old furniture. The Assessing Officer computed the total income at ₹2,37,46,420/-.

The assessee carried the matter in appeal before the CIT(Appeals). During the appellate proceedings, the assessee filed written submissions and pointed out that the Assessing Officer himself had referred the valuation issue to the DVO but completed the assessment without waiting for the report. The CIT(Appeals) thereafter issued a notice dated 06.03.2026 asking the assessee to state whether the DVO's report had been received. However, as per CIT(Appeals) the assessee did not respond to the above notice.

The CIT(Appeals) noticed that the Assessing Officer had himself stated that the long-term capital gain would be revised on receipt of the DVO's report.

The assessee is in appeal before us against the order passed by the CIT(Appeals).

We have heard the rival submissions and perused the material available on record. We find that the assessment was completed even though the DVO's report had not yet been received till the time of passing of assessment order and the Assessing Officer himself had stated that the long-term capital gain would be revised after receipt of the report from DVO. We also find that the CIT(Appeals) did not decide the issues on merits and simply directed the Assessing Officer to consider the DVO's report as and when received.

We further note that the assessee has raised certain legal grounds before us which go to the validity of the assessment itself. The assessee has contended that the case was selected only for limited scrutiny in relation to purchase of property and the Assessing Officer could not have gone beyond the scope of such scrutiny without following the procedure prescribed under the relevant CBDT Instructions. The assessee has also questioned the jurisdiction of the Assessing Officer at Mumbai on the ground that the case was originally with the Assessing Officer at Patna and, according to the assessee, no valid order under section 127 of the Act transferring the jurisdiction was served upon her.

We also take note of the fact that the assessee did not respond to the final notice dated 06.03.2026 and, therefore, there was no participation by the assessee at the final stage of the appellate proceedings. Considering the nature of the issues involved, we are of the view that the assessee should be given one more opportunity to present the entire case before the first appellate authority.

We therefore restore the matter to the file of the CIT(Appeals) for fresh adjudication. The CIT(Appeals) shall examine the legal grounds raised by the assessee, including the contention regarding limited scrutiny and jurisdiction, and shall also consider the additional grounds, if any, in accordance with law.

On merits, the CIT(Appeals) shall consider the DVO's valuation report, along with the valuation report and other material filed by the assessee and thereafter decide the issue of long-term capital gain afresh. The CIT(Appeals) shall also adjudicate the addition of ₹14,10,000/- under section 56(2)(vii)(c)(ii) after considering the assessee's explanation and the relevant material.

The CIT(Appeals) shall provide reasonable opportunity of hearing to the assessee and pass a fresh reasoned order dealing with the legal as well as factual issues raised before him. The assessee shall cooperate with the proceedings and furnish the necessary details.

In the result, the appeal of the assessee is allowed for statistical purposes.