Loading judgment…
Facts
The assessee filed an appeal against the CIT(A)'s order which upheld the AO's decision to treat the sale of an immovable property as short-term capital gains, disallowing deductions for indexed cost of acquisition and improvement, and Section 54. The assessee claimed these were long-term capital gains and sought deductions. The primary issue was the denial of additional evidence and the classification of gains.
Held
The Tribunal, considering the facts and the need for justice, admitted the additional evidence filed by the assessee. The issue was remitted back to the Joint Assessing Officer (JAO) for fresh consideration, with a cost of Rs. 10,000/- to the assessee. The assessee was directed to provide all requisite documents to substantiate their claims.
Key Issues
Whether the denial of additional evidence by the lower authorities was justified, and whether the gains from the sale of property should be treated as long-term capital gains with eligible deductions.
Sections Cited
54, 54(2), 133(6), 142(1), 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This appeal is filed by the assessee against Order passed by the CIT(A) vide DIN and Order No.ITBA/NFAC/S/250/2024-25/1074200085(1) dated 07.03.2025.
That the order of the Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case 2. The Appellant pleads that the facts of the case may please be perused as regards the Nature of Gains i.e Long Term Capital Gains termed as Short Term Capital Gains Page 2 of 10 2. Ground relating to not taking into cognisance the additional details / documents and evidences furnished during the Appeal Proceedings The learned Commissioner of Income Tax (Appeals) National Faceless Appeals Centre, Delhi erred in law and on facts in not taking into cognisance the additional details/documents and evidences furnished during the appeal proceedings. Further Commissioner of Income Tax (Appeals) National Faceless Appeals Centre, Delhi erred in rejecting the additional evidence filed by the Appellant and holding that there were no exceptional circumstances which prevented the Appellant from filing the evidence during course of assessment proceedings. The additional evidences furnished were not admitted by citing the reason that during the scrutiny or assessment proceedings the Appellant was given enough opportunities to produce details/documents and evidences in support of his claim but the Appellant failed to produce the same. There are numerous judgements in favour of the Appellant, the most relevant being FR. Sauter AG v. ITO IT Appeal No. 831 (Delhi) of 2023 2024 TaxPub(DT) 562 (Del-Trib) : (2024) 204 ITD 0559 wherein the Hanourable ITAT (Delhi) has observed as follows 7. We have heard the rival submissions, perused the material available on records. We find that the learned Commissioner (Appeals) has decided this issue by observing as under :-- 11.4.1 The assessing officer has raised objection to the admission of additional evidence on the ground that as per rule 46A, additional evidence may only be accepted if there were any exceptional circumstances which prevented the assessee from filing the evidence during course of assessment proceedings. The assessing officer has submitted that as per the facts and circumstances of the case, the appellant does not fulfill any of the conditions specified in rule 46A as the assessee had been given enough opportunity of being heard and was not prevented by any sufficient cause to produce the evidence during the assessment proceeding. The assessing officer has contended that the assessee was given ample opportunities to file its replies even then the assessee has failed to file the necessary document in support of its claim. The assessing officer has therefore, requested that the additional evidence submitted by the assessee during appellate proceeding deserve to be rejected. 11.4.2 The appellant has not been able to controvert the observations of the assessing officer in this regard. Therefore, I agree with the assessing officer that the appellant was provided with ample opportunities during the assessment proceedings and therefore, there Page 3 of 10 was no exceptional circumstances which prevented the assessee from filing the evidence during course of assessment proceedings. It is therefore, concluded that the appellant does not fulfill any of the conditions specified in rule 46A and the additional evidences filed during appeal cannot be accepted. The assessment order and remand report in this regard are upheld. Accordingly, no deduction is to be allowed from the total consideration of Rs. 9,15,11,184.' 8. Looking to the material available on record, we find merit into the contention of the assessee that the additional evidence as filed by the assessee goes to the root of the dispute, therefore, to serve the interest of justice, we hereby admit the additional evidences filed by the assessee and restore the additional evidence to the file of the learned Commissioner (Appeals) for deciding the Grounds of Appeal
afresh after giving due opportunity to the assessee and considering the additional evidences so filed. The Appellant’s case is squarely covered by the facts of the above referred case. It is earnestly requested and prayed that the additional evidence filed may please be admitted.
3. Ground relating to disallowance of expenses & Denial of Deduction U/s 54 (2) 3.1. That the Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has failed to appreciate the fact that the Learned Assessing Officer erred in law and on facts in not considering the Indexed Cost of Acquisition of Rs 2,20,33,,317/- and Indexed Cost of Improvement of Rs 60,66,315/- . Further, Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has failed to appreciate the fact that the Learned Assessing Officer erred in law and on facts in treating the entire sale consideration received of Rs 3,72,50,000/-as undisclosed Short Term Capital Gains even though the transaction was reported in both the Original as well as the Revised Returns filed on 07/11/2022 and 06/12/2022 respectively. It is earnestly requested and Prayed that the Indexed Cost of Acquisition of Rs 2,20,33,317/- and Indexed Cost of Improvement of Rs 60,66,315/- be allowed as deductions from the sale consideration of Rs 3,72,50,000/- and Long Term Capital Gains be arrived at Rs 91,50,368/- Page 4 of 10 3.2. The learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has erred in law and on facts in not considering the explanations and details furnished by the Appellant as regards the purchase of a new residential house and thereby denying the deduction U/s 54. It is earnestly requested and prayed that the investment made towards purchase of a new residential house of Rs 58,80,000/- paid on or before 07/11/2022 (the due date for filing the return of income for A Y 2022-23) may please be allowed as aa deduction U/s 54. Further, the appellant had paid an amount of Rs 1,77,86,679/- during F Y 2023-24 towards purchase of a new residential house.
The Appellant earnestly requests and Pleads that since he has made payment of Rs 1,77,86,679/- during the F Y 2023-24 towards purchase of a new residential house the procedural failure of not depositing the unused Long Term Capital Gains of Rs 32,70,369/- in a separate account called Capital Gains Account Scheme Account in terms of Section 54(2) of the Income Tax Act 1961, may please be pardoned and the Appellant be granted deduction of the whole of the Long Term Capital Gains of Rs 91,50,368/- U/s 54 of the Act. 3.3. The learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi erred in law and on facts in not considering the written submissions of the appellant furnished on 26th Nov 2024 The Appellant earnestly requests and Prays that the written submissions and the contents thereof may please be admitted.
4. Ground Relating to production of Additional Evidence before the Deputy Commissioner of Appeals and Commissioner of Appeals 4.1. The Appellant is a Theatre Artist, Film Director and Producer, apart from this the Appellant also a software consultant. Due to his busy schedule and hectic travel both with in India and Outside India, the Appellant could not contact the buyer of the property and obtain a copy of the documents which could substantiate the cost of acquisition and cost of improvement. Further, the Appellant changed his residence during the F Y 2021-22 and could not retrieve the documents relating to the purchase or construction of the Villa at Palm Retreat. Due to the foregoing reasons the Appellant could not respond to any of the notices issued during the course of the scrutiny Page 5 of 10 assessment. The Appellants travel during 2023-24 and 2024-25 is as follows As mentioned in para 2 supra and as per the decision of the Honourable ITAT (Delhi). In the case of FR. Sauter AG v. ITO IT Appeal No. 831 (Delhi) of 2023 2024 TaxPub(DT) 562 (Del-Trib) : (2024) 204 ITD 0559, squarely covers the Appellant’s case and the Appellant earnestly requests and Prays that the Additional evidences furnished during the proceedings before the CIT(A) may please be admitted.
As can be seen from the above, the Appellant was travelling during most of the period during which Scrutiny Assessment was going on and could not contact the buyer or retrieve the documents pertaining to the cost of acquisition and cost of improvement of the villa Sold. It is humbly prayed before the Honourable ITAT Bengaluru Bench that the Appellant may be given an opportunity to produce additional evidence during the course of Hearing.
Ground relating to remanding the case back to the Assessing Officer The Appellant earnestly requests the Honourable ITAT Bengaluru to remand the case back to the Assessing Officer so that the Appellant is afforded an opportunity to furnish all the details/documents and evidences in support of his claim towards Indexed Cost of Acquisition, Indexed Cost of Improvement and claim for deduction U/s 54.
6. Ground relating to admitting of the additional evidence by the Hanourable ITAT(Bangalore) The Appellant earnestly requests and Prays that the Honourable ITAT (Bangalore) may please admit the additional evidence, peruse its contents and grant deduction for Indexed Cost of Acquisition of Rs 2,20,33,317/- and Indexed Cost of Improvement of Rs 60,66,315/- from the sale consideration of Rs 3,72,50,000/- and Long Term Capital Gains be arrived at Rs 91,50,368/- Further the Appellant earnestly requests and Prays that the Honourable ITAT (Bangalore) may please admit the claim of the Appellant towards deduction U/s 54 for investment of the Long Term Capital Gains towards purchase of a new residential house. It is earnestly requested and prayed that the investment made towards purchase of a new residential house of Rs 58,80,000/- paid on or before 07/11/2022 (the due date for filing the return of income for A Y 2022-23) may please be allowed as aa deduction U/s 54. The Appellant earnestly requests and Pleads that since he has made payment of Rs 1,77,86,679/- during the F Y 2023-24 towards purchase of a new residential house the procedural failure of not depositing the unused Long Term Capital Gains of Rs 32,70,369/- in a separate account called Capital Gains Account Scheme Account in terms of Section 54(2) of the Income Tax Act 1961, may please be pardoned and the Appellant be granted deduction of the whole of the Long Term Capital Gains of Rs 91,50,368/- U/s 54 of the Act 7. Classification of Capital Gains That the Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has failed to appreciate the fact that the Learned Assessing Officer erred in law and on facts in terming the Total Sale Consideration of Rs 3,72,50,000/- as Undisclosed Short Term Capital Gains, whereas there were sufficient evidence on record to show that the transaction was reported in both the original and revised returns filed on 07/11/2022 ann d06/12/2022 respectively. The Appellant earnestly requests and Pleads that the Capital Gains may please be termed as Long Term Capital Gains and the associated deductions U/s 54 may please be allowed by the Honourable ITAT (Bangalore( 8. Ground relating to principle of natural justice The Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has erred in law and on facts in not granting sufficient opportunity of being heard to the appellant even though the Appellant
Briefly stated, the facts of the case are that assessee filed his return of income on 07.11.2022. Subsequently, it was revised on 06.12.2022. The assessee’s case was selected for scrutiny under CASS for the reason that “assessee has reported substantial amount under improvement cost under schedule ‘CG’ of ITR, here the genuineness of such claim may be verified.” Accordingly, statutory notices were issued to the assessee. During the course of assessment proceedings, the AO gave ample opportunities to the assessee to substantiate the cost of acquisition claimed and cost of improvement. From the return of income filed, it was noticed that the assessee had purchased immovable property on 23.03.2006 amounting to Rs.47,17,900/- and sold the same on 23.12.2021 for a consideration of Rs.3,72,50,000/- and computation of capital gain from the ITR is reproduced by the AO. From the observation of the details of the capital gain computation sheet, a notice under section 142(1) of the Act was issued to the assessee asking for various details and the assessee sought time for collecting the requisite documents and assessee submitted details in part on 08.09.2023. However, no supporting documents were submitted by the assessee. Again notice under section 142(1) of the Act dated 03.10.2023 was issued to the assessee and the date of compliance was by 11.10.2023, but there was no response form the assessee’s side. Therefore, notice under section 133(6) of the Act was issued to Sourjyendu Medda calling for details regarding Prakash Bare which was submitted and the AO has quoted the same in his Order. During the assessment proceedings, several opportunities were given to substantiate its claim made in the income tax return as per notice issued under section 142(1) of the Act. Since the assessee continuously failed to submit the requisite documents therefore considering the information available in the income tax return and information provided in response to notice under section 133(6) of the Act, the sale value of the immovable property amounting to Rs.3,72,50,000/- and the assessee has not submitted any period of holding and cost of acquisition and cost Page 8 of 10 of improvement and expenditure incurred in connection with immovable property. It was presumed that the assessee has nothing to say and the transactions remains unexplained and the assessee has accepted the findings recorded by the AO. Accordingly, the entire sales amount disclosed in the income tax return of Rs.3,72,50,000/- was considered as short term capital gain.
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A). During the appellate proceedings, assessee submitted detailed written submissions along with the documentary evidence in support of his submissions and filed evidences. However, the learned CIT(A) did not accept the evidence filed by the assessee and applied Rule 46A observing that the assessee did not satisfy the conditions mentioned in Rule 46A and dismissed the appeal of the assessee.
Aggrieved from the Order of the learned CIT(A), assessee filed appeal before the Tribunal. The learned Counsel reiterated the submissions made before the CIT(A) and further submitted that during the assessment proceedings, the AO called for information under section 133(6) of the Act in which the buyer of the property furnished the information and the transactions are genuine with banking channels and TDS is duly deducted on the sale of property. There is no dispute on the quantum of sale of the property. During the course of assessment proceedings, the assessee could not furnish the information because assessee was not aware about the income tax proceedings and he was in the opinion that once the return is filed and due tax is paid, the liability of the assessee gets over. When he came to know that the AO has raised a demand and not accepted the claims made by the assessee, immediately he approached the learned CIT(A) with documentary evidence and requested that the assessee may be granted one more opportunity and undertook that the requisite documents / evidence shall be furnished by the him to substantiate his case.
Page 9 of 10 5. On the other hand, the learned DR relied on the Order of lower authorities and he strongly objected to provide one more opportunity to the assessee. He submitted that the AO has given several opportunities to the assessee to substantiate his claim of cost as shown in the income tax return, however, the assessee sought 15 days time in spite of that he did not furnish any information.
Considering the rival submissions, we noted that the very purpose to select the case for scrutiny under CASS is that substantial amount claimed under improvement cost under the schedule “Capital Gain” and the buyer has deducted TDS on the purchase of the property. Buyer has also furnished information as sought by the AO under section 133(6) of the Act in which there is no dispute regarding the sale consideration and mode of payments. Evidence in support of cost of purchase and cost of improvement and other expenses claimed by the assessee could not be furnished by the assessee for want of proper knowledge as submitted by the learned AR and the learned CIT(A) did not accept the documentary evidence produced before him as additional evidence. On going through the Paper Book filed by the assessee we observed that these documents goes to the root of the matter to decide this issue. Therefore, considering the facts of the case and in the interest of justice, we are remitting this issue back to the file of the JAO for fresh consideration and decide the issue as per law after giving reasonable opportunity of being heard to the assessee with a cost of Rs.10,000/-. The JAO shall take up the case of the assessee for further processing, only on receipt of proof of payment of payment of Rs.10,000/- by the assessee and decide the issue as per law, assessee is directed to submit requisite documents in support of his claim and not seek unnecessary adjournments and facilitate early disposal of the case. In case of failure, no second leniency shall be granted to the assessee.
Pronounced in the court on the date mentioned on the caption page.