MUKHTIYAR KASAMBHAI MANSURI,AHMEDABAD vs. THE ITO, WARD-1(3)(1), AHMEDABAD

The assessee has raised the following grounds of appeal:

During the course of assessment proceedings, the Assessing Officer called upon the assessee to furnish documentary evidence in support of the claim of indexed cost of acquisition, copy of purchase deed or evidence establishing ownership and cost of acquisition. The assessee, however, could not produce the purchase deed or the evidence in support of acquisition of the property. In absence of such supporting material, the Assessing Officer rejected the claim of long-term capital gain and indexation and proceeded to treat the entire sale consideration attributable to the assessee’s share amounting to Rs.24,71,758/- as short-term capital gain under section 45 of the Act. The Assessing Officer further held that since the assessee failed to discharge the onus of substantiating cost of acquisition, no deduction towards cost could be allowed. Accordingly, the said amount was added to the total income, resulting in assessed income of Rs.28,41,208/-, along with initiation of penalty proceedings and levy of interest and fee.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals), raising detailed contentions that the property in question was ancestral, that the assessee was merely a co-owner having only 0.70% share in the property, that indexed cost of acquisition was duly computed on the basis of valuation report obtained from a registered valuer, and that in the cases of other co-owners, the Assessing Officer had accepted similar computation of long-term capital gain on identical facts. The assessee also placed reliance on valuation report and additional evidences to substantiate the cost of acquisition and pleaded that the same could not be filed before the Assessing Officer due to technical issues.

With regard to the additional evidence in the form of valuation report, the Ld. CIT(Appeals) refused to admit the same on the ground that the assessee had not made a formal application under Rule 46A of the Income-tax Rules, nor demonstrated sufficient cause for non-production of such evidence before the Assessing Officer. It was observed that the assessee had been granted sufficient opportunities during assessment proceedings and, therefore, failure to produce evidence at that stage disentitled him from producing the same at appellate stage. The Ld. CIT(Appeals) thus adopted a strict procedural approach and declined to consider the valuation report and other supporting documents.

Further, the Ld. CIT(Appeals) upheld the action of the Assessing Officer in treating the entire sale consideration attributable to the assessee as taxable capital gain, without granting any deduction towards cost, on the reasoning that the assessee had failed to substantiate the same with documentary evidence. The contention of the assessee regarding his limited shareholding of 0.70% and the fact that the transaction involved multiple co-owners was not examined in detail, nor was any verification

Thus, the Ld. CIT(Appeals) dismissed the appeal holding that there was no infirmity in the action of the Assessing Officer and that the assessee had failed to discharge the burden of proof, both at the assessment stage and appellate stage.

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

We have considered the rival submissions, perused the material available on record and the orders of the lower authorities. At the outset, we find that the impugned order passed by the Ld. CIT(Appeals) suffers from serious legal infirmities both on procedural as well as substantive aspects.

Firstly, it is evident that the assessee had filed additional evidences, including valuation report and details substantiating cost of acquisition, before the Ld. CIT(Appeals). The rejection of such evidences solely on the ground that no formal application under Rule 46A was filed is, in our considered view, hyper-technical and contrary to the settled principles of law. The Ld. CIT(Appeals), being a quasi-judicial authority vested with coterminous powers with that of the Assessing Officer, was duty bound to examine such evidences in the interest of justice. The Hon’ble Delhi High Court in the case of CIT vs. Manish Buildwell Pvt. Ltd. (2012) 245 CTR 397 (Del) has held that the appellate authority has wide powers to admit additional evidence and cannot refuse to consider relevant material merely

Secondly, we find that both the Assessing Officer as well as the Ld. CIT(Appeals) have failed to properly appreciate the fundamental fact that the assessee was merely a co-owner having only 0.70% share in the property. The entire approach of treating the gross receipt as income without proper verification of ownership structure and without correlating with co-owners’ assessments is legally unsustainable. The Hon’ble Supreme Court in ITO vs. Ch. Atchaiah (1996) 218 ITR 239 (SC) has held that income must be assessed in the hands of the correct person. Failure to properly determine the assessee’s share and corresponding tax liability vitiates the assessment.

Thirdly, the assessee has placed on record assessment orders of other co-owners in respect of the same property wherein benefit of indexed cost of acquisition has been granted. The principle of consistency, as laid down by the Hon’ble Supreme Court in Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC), requires that on identical facts, a uniform view should be adopted unless there are distinguishing features. The Ld. CIT(Appeals) has failed to consider this crucial aspect, thereby resulting in discriminatory treatment.

Further, it is also apparent that there was lack of proper representation before the lower authorities, and the assessee, being an individual with limited resources, could not effectively place all relevant evidences on record. In such circumstances, the Hon’ble Supreme Court

Considering the totality of facts and circumstances, we are of the considered view that the matter requires fresh examination at the level of the Assessing Officer. The Assessing Officer shall examine the issue of capital gains afresh after taking into account the assessee’s share in the property, valuation report, nature of asset (ancestral or otherwise), indexed cost of acquisition, and also keeping in view the treatment given in the cases of other co-owners. The Assessing Officer shall also provide adequate opportunity of being heard to the assessee and consider all evidences that may be filed in support of the claim.

Accordingly, the matter is restored to the file of the Assessing Officer for de novo adjudication in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 23/04/2026