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Facts
The appellant filed an appeal with a delay of 256 days. The Assessing Officer (AO) added Rs. 25 lakhs as long-term capital gain after determining the cost of tenancy rights as Nil, citing that the appellant did not purchase these rights from a previous owner. The AO's order was ex-parte as the appellant did not respond to a draft assessment order.
Held
The Tribunal noted that the lower authorities' orders were ex-parte and the appellant's written submission was not considered. Therefore, the Tribunal set aside the order and remanded the matter back to the CIT(A) to provide a reasonable opportunity to the appellant and pass a fresh order. The appeal was allowed for statistical purposes.
Key Issues
Whether the cost of tenancy rights can be considered Nil without providing the assessee an opportunity to be heard, and if the subsequent orders passed ex-parte are sustainable.
Sections Cited
143(3), 143(3A), 143(3B), 55(2)(a), 48, 49, 270A, 54EC, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
During the hearing before the ITAT, none was present on behalf of the appellant. From the record it is observed that the order of Ld. CIT(A) was served on time and sent to his former tax consultant. So, the appellant claims to have obtained a physical copy and filed the appeal. As the delay was unintentional and bonafide, it was pleaded that the delay may be condoned and appeal may be decided on merits. The Ld. DR opposed the delay stating that there is no evidence for the averments made by appellant and appeal should not be admitted. After hearing both sides, the Bench decided to condone the delay as the same was not intentional and also 2 Bharat Amratlal Shah appellant does not gain anything by filing an appeal with delay. The delay in filing appeal is condoned and case is taken up for hearing.
The appellant filed an appeal with following grounds of appeal :-
1. The learned Assessing authority has erred in passing order u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 on 13.04.2021 without considering the last submission made by the appellant on 13.04.2021 and the reasons assigned for doing so are wrong and contrary to the facts and provisions of the law.
WITHOUT PREJUDICE TO THE ABOVE 2. On the facts and under the circumstances of the case and in law, the learned Assessing Authority has erred in invoking Section 55(2)(a) of the Income Tax Act, 1961 for determination of Cost of Acquisition of tenancy right and the reasons assigned for doing so are wrong and contrary to the facts and the provision of the law.
3. On the facts and under the circumstances of the case and in law, the learned Assessing Authority has erred in making addition of Rs. 25,00,000/- under the head Long Term Capital Gain by determining the Cost of Acquisition of tenancy right at NIL u/s 55(2)(a) of the Act and the reasons assigned for doing so are wrong and contrary to the facts and the provision of the law.
On the facts and under the circumstances of the case and in law, the learned Assessing Authority has erred in initiating penalty proceeding u/s. 270A and the reasons assigned for doing so are wrong and contrary to the facts and the provisions of the law.
4. In the above case, the Ld. AO made an addition of Rs. 25 lakh stating that the appellant has not purchased any tenancy rights from previous owner. Section 55(2)(a) of the I.T. Act is reproduced below :-
Section 55 - Meaning of “adjusted", "cost of improvement" and "cost of acquisition”
Section 55 (2)(a) For the purposes of sections 48 and 49," cost of acquisition" (a) in relation to a capital asset, being goodwill of a business, tenancy rights, stage carriage permits or loom (i) in the case of acquisition of such asset by the assessee by, purchase from a previous owner, means the amount of the purchase price; and (ii) in any other case [not being a case falling under sub- clauses (i) to (iv) of sub- section (1) of section 49], shall be taken to be nil;
3 Bharat Amratlal Shah 5. In view of the above, Ld. AO held that the cost of acquisition was taken as Nil as the appellant has not purchased any rights from the previous owner, the capital gain on transfer of tenancy right was worked out by the Ld. AO at Rs. 25 lakh after giving exemption under section 54EC of the I.T.Act. In the assessment order, the Ld. AO mentioned that a draft assessment order was sent to the appellant where he was required to submit his objections by 12.4.2021. As there was no reply from the appellant, the Ld. AO made the addition of Rs. 25 lakhs.
Aggrieved by the order of Ld. AO, the appellant filed an appeal before Ld. CIT(A) and from the order of Ld. CIT(A), it is observed that four opportunities were given to the appellant. Still, the Ld. CIT(A) mentioned in his order under section 250 of the Act, that there was no response. Hence, Ld. CIT(A) confirmed the addition by stating that the appellant has not furnished the details of “tenancy rights” acquired by him.
After getting the order of Ld. CIT(A) the appellant filed an appeal before the ITAT with the grounds of appeal mentioned in page No. 2 of this order.
During the proceedings before the ITAT, none appeared to represent the case of appellant as mentioned above. Since, there is no representation from the appellant side, the papers available on record, the orders of Ld. AO and Ld. CIT(A) and grounds of appeal were perused. As the orders passed by lower authorities are ex-parte and the written submission filed by appellant dated 13.4.2021 were not taken into consideration by Ld. CIT(A) while disposing of the appeal, it is decided to send back the matter to the file of Ld. CIT(A) with a direction to give the appellant a reasonable opportunity and pass an order afresh. Since, there is no compliance before the lower authorities and before the ITAT, cost of Rs. 5000/- imposed on appellant which has to be paid to Bombay High
4 Bharat Amratlal Shah Court Legal Services Authority. With the above direction, the appeal is set aside to the file of Ld. CIT(A).
The appeal of appellant is allowed for statistical purposes.
Order pronounced in the open Court on 25/07/2025.