GADIKOPPA NARASEGOWDRU SRINIVASA,SHIMOGA vs. ACIT CIRCLE - 1, SHIMOGA, SHIMOGA

The brief facts are that the appellant is an individual deriving income from agriculture, capital gains, and other sources. For assessment year 2017-18, he filed his original return of income on 29 March 2018; however, the return was uploaded without payment of taxes. He thereafter filed a revised return on 15 March 2019 declaring total income of Rs. 15,62,030, consisting of long- term capital gains of Rs. 15,17,942 and savings bank interest of Rs. 54,084. He also declared agricultural income of Rs. 94,500. During the year, the appellant sold a site on 4 May 2016 for Rs. 6,75,000. On examining the sale deed, the Assessing Officer noted that the entire consideration was received in cash. In scrutiny proceedings, however, the appellant stated that Rs. 5,00,000 was received by cheque and only the balance was received in cash. As this explanation was not accepted, the Assessing Officer treated Rs. 5,00,000 as unexplained credit under section 68 and taxed under section 115BBE of the Act. The appellant had also deposited cash of Rs. 7,10,000 into his bank account on various dates. The Assessing Officer accepted the explanation to the extent of Rs. 2,69,000 and treated the balance Rs. 4,40,500 as unexplained cash credit under section 68, taxable under section 115BBE. The appellant further purchased agricultural property on 13 June 2016 for Rs. 30,00,000 and paid the seller, Mr. K. Gopal, Rs. 19,00,000 by cheque, Rs. 1,00,000 in cash, and Rs. 10,00,000 to Mr. L. Venkatesh on the seller’s instructions towards the amount due to Mr. K. Gopal. Based on the evidence produced, the Assessing Officer accepted the explanation to the extent of Rs. 20,00,000. For the balance Rs. 10,00,000, he held that the payment, having been made on 21 April 2016—two months before registration of the property, could not be correlated with the purchase transaction and, therefore, treated it as unexplained investment under section 69. The appellant also declared long-term capital gain of Rs. 15,17,942 and claimed indexed cost of acquisition of Rs. 75,347 and indexed cost of improvement of Rs. 13,23,711, applying indexation from financial year 2011- 12 and development cost at Rs. 147 per sq. ft. The Assessing Officer held that the assessee and his family members had entered into a joint development agreement with the developer in financial year 2011-12 for conversion of agricultural land into sites. The developed sites were handed over to the assessee and his family members on 8 June 2015 and registered before the Sub-Registrar, Shivamogga, on the same date vide document No. SMG/1/0193/2015-16. The Assessing Officer further held that the developer had incurred cost at Rs. 137 per sq. ft.; therefore, the assessee’s claim at Rs. 147 per sq. ft. was incorrect. Since the developed sites were handed over only on 8 June 2015, he allowed indexation of the cost of improvement from financial year 2015-16, instead of financial year 2011-12 as claimed by the assessee. Accordingly, against the assessee’s claim of cost of improvement of Rs. 13,23,711, the allowable claim was worked out at Rs. 8,95,861, and the excess claim of Rs. 4,27,849 was brought to tax under the head ―Long-term capital gains‖. Consequently, the assessment order was passed under section 143(3) of the Act by the Assistant Commissioner of Income Tax, Circle-1, Shimoga, on 27 August 2019, determining the assessee’s total income at Rs. 39,30,380.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A) noted that the assessee had been granted six opportunities of hearing, but no details were furnished. Accordingly, the learned CIT(A) examined the issues on merits and observed that, despite sufficient opportunity during the appellate proceedings, the assessee had not controverted the findings of the Assessing Officer. The learned CIT(A), therefore, confirmed the Assessing Officer’s action and dismissed the assessee’s appeal.

The learned authorized representative, Shri Deepak Gunasekara, Chartered Accountant, and Shri Ganesh R. Ghale, learned Standing Counsel for the Department, were heard. The learned authorized representative submitted that the assessee had complied with the notices issued by the learned CIT(A) and had furnished complete details before him on 23 January 2026. He pointed out that the paper book filed by the assessee, consisting of 84 pages, clearly showed that the relevant details had been placed before the lower authorities. Despite this, the learned CIT(A) dismissed the appeal on the grounds that the assessee had nothing further to submit. He further submitted that the assessee had filed detailed written submissions on each issue, which were not considered before the order dated 28 January 2026 was passed, although the complete material was already available before the learned CIT(A) on 23 January 2026. The learned authorized representative therefore contended that the learned CIT(A) had committed a serious violation of the principles of natural justice by not considering the written submissions and evidence produced in the paper book. In support, he also produced the e-filing portal acknowledgement dated 23 January 2026.

On careful verification of the facts, we find that the assessee had filed detailed written submissions before the learned CIT(A) on 23 January 2026, as evidenced by acknowledgement No. 282242901230126 produced before us. The assessee also submitted the bank statement and a summary of cash transactions. Although these materials were available before the learned CIT(A), the appeal was dismissed on the ground that the assessee had not furnished any information. The order of the learned CIT(A) is dated 28 January 2026. Thus, before the appellate order was passed, the assessee had already furnished the complete details before the learned CIT(A). However, due to inadvertence, the learned CIT(A), in the order dated 28 January 2026, recorded that the assessee had not furnished any information and had nothing further to say. On that basis, the appeal was dismissed and all additions were confirmed on merits.

We have carefully considered the rival submissions and the material on record. Since the assessee had furnished the relevant details before the learned first appellate authority, disposal of the appeal without considering those materials amounts to a violation of the principles of natural justice. The matter is therefore required to be restored to the file of the learned CIT(A) for fresh adjudication on merits. In view of the above, we restore the entire appeal to the file of the learned CIT(A) with a direction to consider the details submitted by the assessee through the e-filing acknowledgement dated 23 January 2026, and thereafter decide the issues afresh on merits after granting the assessee due opportunity of hearing and permitting any further submissions, if required.

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