SMT. SANGEETA KRISHNAKUMAR SADANI,,KOLKATA vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRLCE-1,, AURANGABAD

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ITSSA 19/PUN/2018Status: DisposedITAT Pune15 February 2023AY 2013-147 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee's first ground regarding the absence of incriminating material for the Section 153A assessment was not sustainable. The Tribunal noted that the AO had issued a show cause notice based on seized material and that the assessment year 2013-14, being prior to the search action on 20.08.2014, qualified as an 'abated' assessment under the second proviso to Section 153A(1). Therefore, this legal argument was rejected. Regarding the second and third grounds concerning the enhancement of the Section 54GB exemption disallowance, the Tribunal found merit in the assessee's plea. The CIT(A) issued his enhancement notice on 15.06.2018, which was the last date of hearing, and his main order followed on 21.06.2018. The Tribunal considered this a clear violation of the principles of natural justice. Consequently, the Tribunal restored the issue of Section 54GB deduction claim back to the Assessing Officer for fresh adjudication. The assessee was directed to bear the onus of filing all necessary details for the Section 54GB claim in the consequential proceedings. The appeal was partly allowed for statistical purposes.

What were the facts?

This appeal by the assessee, Smt. Sangeeta Krishnakumar Sadani, for Assessment Year 2013-14, challenges the order of the CIT(A)-12, Pune, dated 21.06.2018. The assessment proceedings were conducted under Section 153A read with Section 143(3) of the Income Tax Act, 1961, following a search action on 20.08.2014. The assessee had claimed exemption under Section 54GB of Rs. 1,74,62,906/- on the sale of a property. The Assessing Officer (AO) disallowed Rs. 25,00,000/- of this exemption. The CIT(A) enhanced the disallowance to Rs. 73,02,732/-. The assessee's appeal before the ITAT raised grounds concerning the validity of the assessment in the absence of incriminating material, the CIT(A)'s enhancement without a proper show cause notice, and the disallowance of the Section 54GB exemption.

What were the issues?

1. Whether on the facts and circumstances of the case, the exemption under Section 54GB of capital gains of Rs. 1,74,62,906/- can be subject to addition in proceedings under Section 153A arising out of a search action when there was no incriminating material found during the search? (Assessee's contention: The assessment under Section 153A is unsustainable without incriminating material, relying on CIT vs. Gurinder Singh Bawa and CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. Revenue's contention: The AO issued a show cause notice based on seized material, and the assessment year being abated as per the second proviso to Section 153A(1) makes the assessment valid.) 2. Whether the learned CIT(A) erred in law and on facts in enhancing the disallowance of exemption under Section 54GB to Rs. 73,02,732/- from Rs. 25,00,000/- made by the AO, in the absence of a show cause notice under Section 251(2) of the Act? (Assessee's contention: Violation of principles of natural justice due to lack of proper show cause notice before enhancement. Revenue's contention: Not explicitly recorded, but impliedly the CIT(A) followed due process by issuing a show cause notice.) 3. Whether the learned CIT(A) erred in law and on facts in disallowing exemption under Section 54GB of Rs. 73,02,732/- without appreciating the facts and circumstances of the case? (Assessee's contention: The CIT(A) misappreciated facts and circumstances in disallowing the exemption. Revenue's contention: Not explicitly recorded, but impliedly the CIT(A)'s findings on the proportion of investment and eligible exemption are correct.)

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 54GB,Section 251(2),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B” : PUNE

Before: SHRI SATBEER SINGH GODARA & DR. DIPAK P. RIPOTE

Hearing: 02.02.2023Pronounced: 15.02.2023

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER I.T.(SS) A.No.19/PUN./2018 Assessment Year 2013-14 Smt. Sangeeta Krishnakumar Sadani, 281, S K Deb Road, Gour The ACIT, Central Circle-1, Apartment, 4th Floor, Flat vs. No.15/16, Kolkata. Aurangabad. PIN – 700 048. PAN ALMPS2525F (Appellant) (Respondent) For Assessee : Smt. Deepa Khare For Revenue : Shri M.G. Jasnani Date of Hearing : 02.02.2023 Date of Pronouncement : 15.02.2023 ORDER PER SATBEER SINGH GODARA, J.M.

This assessee’s appeal for assessment year 2013-14, arises against the CIT(A)-12, Pune’s order dated 21.06.2018, passed in case No.PN/CIT(A)-12/10834/2016-17, involving proceedings u/s. 153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”).

Heard both the parties. Case file perused.

2.

The assessee pleads the following substantive grounds in the instant appeal :

1.

“Whether on facts and circumstances of the case, the exemption u/s 54GB of capital gains of

2 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. Rs.1,74,62,906/- can be subject matter of addition in proceedings u/s 153A arising out of search action when there was no incriminating material found during the course of search. 2. The learned CIT(A) erred in law and on facts in making enhancement of disallowance of exemption u/s 54GB to Rs.73,02,732/- from Rs.25,00,000/- made by Id AO in absence of show cause notice u/s 251(2) of the Ac required by law. 3. The learned CIT(A) erred in law and on facts in disallowing exemption u/s.54GB of Rs.73,02,732/- without appreciating the facts and circumstance of the case. 4. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing.”

3.

Learned counsel first of all submitted that the impugned assessment itself is not sustainable in law in absence of any incriminating material found/seized during the course of search herein dated 20.08.2014 in light of CIT vs. Gurinder Singh Bawa [2016] 386 ITR 483 (Bom.) and CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom.) We hardly see any merit in the assessee’s instant legal argument in light of the assessment

3 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. 29.12.2016 [para-5 page-2] that the discussion dated Assessing Officer had indeed issued his show cause notice dated 08.11.2016 to her based on seized material only. We further clarify that this is assessment year 2013-14 followed by the search action in issue dated 20.08.2014 thereby making it an instance of an “abated” assessment only as per sec.153A(1) 2nd proviso. We thus reject the assessee’s instant first and foremost legal argument.

4.

Next comes the assessee’s second substantive ground on merits involving enhancement of sec.54GB disallowance from Rs.25,00,000/- made in the course of assessment to Rs.73,02,732/- in the CIT(A)'s detailed discussion reading as under :

“18.2. I have considered the materials placed before me. Brief facts are that the appellant sold a property for Rs.2,50,00,000/- on 22.05.2012. The property was purchased on 18.08.2000. The appellant calculated capital gain of Rs.1,84,62,906/- on the said transaction. The appellant claimed exemption u/s 54(1) on reinvestment towards new residential property 1 year prior to date of transferred at Gour Aprtment, P S Lake Town, Kolkata of Rs.10,00,000/- and balance Rs.1,74,62,906/- was claimed as exempt u/s 54GB on

4 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. account of investment in shares of newly incorporated manufacturing company Aarogyam Packaging Solutions Pvt Ltd (hereinafter APSPL). The AO during the assessment proceedings found out that the appellant had received back Rs.25,00,000/- from APSPL during the year under consideration. The AO disallowed the amount of Rs.25,00,000/- from the exemption claimed u/s 54GB and added back to the total income of the appellant. During the appellate proceedings, the appellant submitted that the investment made by the appellant was Rs.1,93,50,000/- if Rs.25,00,000/- withdrawn by the appellant was deducted, then eligible investment came to Rs.1,68,50,000/- out of which the company had made investment in fixed assets of Rs.1,52,55,879/-. The appellant contended that the AO should have allowed exemption of Rs.1,52,55,879/- and balance Rs.22,07,027/- (i.e. Rs.1,74,62,906 - Rs.1,52,55,879/-) should have been added to the total income instead of Rs.25,00,000/- added by the AO. I have considered the submissions filed by the appellant. The appellant claimed exemption u/s 54GB to the extent of Rs.1,74,62,906/-, which was the investment made in the shares of newly incorporated company APSPL. As per the provision of section 54GB, the capital gain exemption is limited to the

5 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. proportion of the amount invested in equity shares of an eligible company to the total sale consideration of the capital asset. As per the fact on record the total consideration on sale of the original asset is Rs.2,50,00,000/- and the amount invested in subscription of equity shares which was utilized for purchase of new asset within one year is only Rs.1,51,11,615. Therefore, the eligible exemption is Rs.1,11,60,123/-, whereas the appellant claimed exemption of Rs.1,74,62,906/- Hence, there was an excess claim of deduction of Rs.73,02,732/- made by the appellant. Vide Order Sheet Noting dated 15.06.2018 the AR of the appellant was asked to show cause why this amount of Rs.73,02,732/- should not be disallowed and income should not be enhanced. In response to the show cause the appellant submitted that the amount utilized for purchase of new assets were Rs.2,95,30,128/- and not Rs.1,51,11,615/-. However in the assessment order the figures were mentioned as Rs.1,51,11,615/- and not Rs.2,95,30,128/- and even if it were so, the appellant had not disputed the amount in appeal and therefore hard to believe. Therefore, ground raised by the appellant is dismissed and exemption claimed u/s 54GB of Rs.73,02,732/- is hereby disallowed. Income of the appellant is hereby enhanced by

6 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. Rs.73,02,732/-. For computational purpose income of appellant would increase by 48,02,732/- (i.e. Excess claim of 54GB of Rs.73,02,732/- minus amount already disallowed by the AO of Rs.25,00,000/-}. The appellant, therefore, furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax Act, 1961 to the extent of excess claim of deduction u/s 54GB. Penalty proceedings u/s 271(1)(c) is hereby initiated separately for furnishing inaccurate particulars of income. Issue notice u/s 274 rws 271(1)(c) for furnishing inaccurate particulars of income. Ground raised by the appellant is hereby dismissed with enhancement of income.”

5.

It emerges during the course of hearing in light of vehement rival submissions of both the parties that the CIT(A) had issued his enhancement notice on 15.06.2018 which also turns out to be his last date of hearing in the lower appellate proceedings. The same amounts to a clear cut of violation of principles of natural justice in our considered opinion since the latter’s main order itself followed thereafter on 21.06.2018. Faced with the situation, we deem it appropriate to restore the assessee’s instant second substantive grievance of sec.54GB deduction claim back to Assessing Officer for his afresh appropriate adjudication as per law preferably within three

7 IT(SS)A.No.19/PUN./2018 Smt. Sangeeta Krishnakumar Sadani, Kolkata. effective opportunities of hearing. It is further made clear that the assessee only shall bear the entire onus of filing all the necessary details relating to his impugned sec.54GB deduction claim in consequential proceedings. Ordered accordingly.

6.

No other ground or argument has been pressed before us during the course of hearing.

7.

This assessee’s appeal is partly allowed for statistical purposes in above terms.

Order pronounced in the open Court on 15.02.2023.

Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 15th February, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order//

Assistant Registrar, ITAT, Pune Benches Pune.

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