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Facts
The assessee claimed exemption under section 54F for investment in a new residential flat, after selling gold ornaments, silver utensils, and a share in a shop. The AO denied part of the exemption. The CIT(A) dismissed the appeal, confirming the disallowance and adding back certain amounts, without providing adequate opportunity to the assessee.
Held
The Tribunal held that the CIT(A) failed to provide a reasonable opportunity of being heard to the assessee before passing the enhancement order, which violates the principles of natural justice. Therefore, the matter was restored back to the CIT(A).
Key Issues
Whether the CIT(A) properly provided an opportunity of hearing to the assessee before passing an order enhancing the assessment and denying exemptions?
Sections Cited
250, 54F, 143(1), 154, 251(2)
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Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN
Assessee by Shri Nilesh Gandhi Revenue by Shri Sunny Kachhwaha, Sr. DR Date of Hearing 21.01.2025 Date of Pronouncement 18.02.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
1. The present appeal has been filed by the assessee challenging the impugned order passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’) for the assessment year 2014-15.
2. All the grounds raised by the assessee in the present appeal No 1 to 3 are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in upholding the denial of deduction under section 54F on sale of gold, ornaments and silver utensils and for disallowing, the deduction already allowed u/s 54F in the intimation on the sale of shop. Therefore I have decided to take up all the grounds together and to dispose of through the present consolidated order.
3. Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the revenue authority and also relied upon written submissions. The contents of the written submissions filed by the assessee are reproduced herein below:
With Reference to above appeal we would like state that Appellant Mr. Mahendra Dedhia filed return of Income for AY 2014-15 on 17.05.2015 declaring income of Rs.272,680/- after claiming capital gain exemption u/s 54F of Rs.19,85,387 for Investmenr in new residential flat on 27.11.2013 in Joinr name, his share being Rs.65,77,500/-. Details of Capital assets sold and exemption claimed is as following:
The capital gain being less than the investment in new flat whole of gain was exempt, wide Intimation Order no: CPC/1415/A2/1504274597 dated 17.06.2015 Capital gain Exemption of Rs 1231137 on sale of gold and silver utensils was denied and added to total income and demand of Rs. 315,540/- was raised, rectification letter was filed on 4.03.2017 but again the exemption was not given in full and demand was raised for Rs.255,928 after giving credit for taxes paid of Rs 59312. In response to outstanding demand the rectification was filed twice on 21.03.2018 and 06.04.2019 also the rectification application was simultaneously filed with the assessing officer 31(2)(3) on 21.03.2017. Still rectification was not done and grievance was raised on 13.07.2020. in the response of grievance, the appeal was filed on 28/08/2020.
In response to Notice Raised U/s 250 of Income Tax Act 1961 Dated 16.03.2021, 15.06.2021. 07.06.2021, 06.08.2022, 10.05.2023, 26.09.2023, 17.01.2024 the written submissions were done and following documents were submitted:
1. Statement of Income for the Year end 31.03.2014
Intimation Order us 143(1) dated 17.06.2015
Rectification Application us 154 submitted on 21.03 2017
4. E nirvana Application filed on 13.07.2020
5. Copies of sales Bills of gold ornaments and silver.
Copy of Purchase agreement for Shop Sold.
Extract Copies of agreement for new flat Purchased.
No actions were taken against the above submissions since 2021 however notice dated 25.1.2024 Din no ITBA/APL/F/APL_1/2023- 24/1060108200(1) was issued with hearing dated 29.01.2024 asking for the copy of the agreement for shop sold on 11.11.2013 and full agreement copy for new flat purchased on 27.11.2013. The sale agreement for shop sold was not traceable and the agreement copy of new flat was very bulky. Before we could respond the appeal was dismissed and closure order was passed on date 09.02 2024 with an enhancement of Rs 7,54,250/-.
For the enhancement notice u/s 251(2) was also not served. The section requires that the appellant should be given reasonable opportunity of showing cause against such enhancement. But in the instant case the reasonable opportunity was not provided to the appellant before making the enhancement which is against the principle of natural justice The Hon'ble Supreme Court of India in case of COMMISSIONER OF INCOME TAX, CALCUTTA VS RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 1967 (4) TMI 8- SUPREME COURT held that the Appellate Asst. Commissioner for enhancement u/s 31(3) of the Act is restricted to the subject matter of assessment or the source of income which have been considered expressly or by clear implication by the Income Tax officer From the Point of View of the Taxability of the assessee The Kolkata Bench of the Tribunal in the case of APEEJAY SHIPPING LTD VS ASST COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -III, KOLKATA. [2023 (6) TMI 117- ITAT KOLKATA) and EDELWEISS ASSET MANAGEMENT LTD VS ACIT, CIRCLE -3 (1)(2), MUMBAI-2024(1) TMI 650-ITAT MUMBAI also had similar view.
4. On the other hand, Ld. DR appearing on behalf of the department relied upon the orders passed by the revenue authorities.
I have heard the counsel for both the parties and have gone through the documents placed on record , judgements cited before me and the orders passed by the revenue authorities. From the records, I noticed that the facts of the case are that assessee had claimed capital gain exemption under section 54F of Rs.19,85,387/- for investment in new residential flat in joint name and details of the capital assets sold and exemption claimed by the assessee is as follows.
6. Since the capital gain was less then the investment in new flat. However in intimation dated 17th June 2015, capital gain exemption of Rs.12,31,137/- on gold and silver utensils was denied. Although rectification applications were filed but still exemption was not given in full. And ultimately, appeal was filed before Ld. CIT(A) and during the course of appeal assessee filed written submissions and placed on record the following documents
Statement of Income for the Year end 31.03.2014 2. Intimation Order us 143(1) dated 17.06.2015 3. Rectification Application us 154 submitted on 21.03 2017
E nirvana Application filed on 13.07.2020 5. Copies of sales Bills of gold ornaments and silver. 6. Copy of Purchase agreement for Shop Sold. 7. Extract Copies of agreement for new flat Purchased.
7. But Ld. CIT(A) dismissed the appeal of the assessee by holding that the assessee has failed to submit documents required for consideration of capital gain deduction under section 54F. Therefore genuineness of capital gain deduction cannot be verified and hence disallowance of Rs 12,31,137/- made by the AO CPC was confirmed and deduction of Rs.7,54,250/- claimed under section 54F on sale of the shop was added back.
Ld. AR vehemently argued that before the assessee could respond to the notices issued by Ld. CIT(A), the appeal was dismissed and even enhancement notice under section 251(2) of the Act was also not served and no reasonable opportunity was provided before enhancement.
After having gone through the facts of the present case, I am of the view that the provisions of section 251(2) of the Act are mandatory in nature and CIT(A) was to provide reasonable opportunity of show cause before enhancing the assessment and in this regard I found reliance on the decision of Hon’ble Supreme Court of India in the case of CIT, Calcutta Vs Rai Bahadur hardutroy Motialal Chamaria, 1967(4) TMI 8 Supreme Court, and the decision of coordinate bench of ITA in the case of Apeejay Shipping Limited Vs ACIT [2023] (6) TMI 117, ITAT Kolkata and also from the decision of Coordinate Bench of ITAT Mumbai in the case of Edelwiess Asset management Ld Vs. ACIT, Mumbai, TMI 650 – ITAT Mumbai.
Although Ld. DR submitted that assessee had not appeared when the case was taken up and proper opportunities were granted by the revenue authority before making enhancement.
Be that as it may, in my view, sufficient opportunity should have been granted by Ld. CIT(A) before making enhancement and in the present case it has been specifically argued that no opportunity of hearing was provided by Ld. CIT(A). Therefore in my view, the interest of justice would be met in case the issue between the parties is decided on merits after providing fair opportunity of hearing to the assessee. Therefore, considering the above factual and legal position, the bench feels that the ends of justice would be met only if the matter is restored back to the file of Ld. CIT(A), thus, the present appeal of the assessee is restored to the file of CIT(A) for deciding the issue afresh on merits by providing opportunity of hearing to the assessee. The assessee shall not seek any adjournment on frivolous grounds and remain cooperative during the course of proceedings.
Before parting, I make it clear that my decision to restore the matter back to the file of the CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the CIT(A) independently in accordance with law.
Order pronounced in the open court on 18.02.2025.