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Facts
The assessee's income was reassessed by the AO under Section 147, adding Rs. 2,88,22,020/- under Section 56(2)(vii) due to an alleged investment in a Joint Development Agreement (JDA). The assessee claimed the JDA was cancelled through an out-of-court settlement, but this evidence was not presented to the AO or CIT(A) during ex-parte proceedings due to non-compliance.
Held
The Tribunal acknowledged that crucial evidence regarding the JDA cancellation was not filed before the lower authorities. To ensure natural justice and a fair opportunity, the Tribunal set aside the order of the CIT(A) and remanded the matter back to the Assessing Officer for a de novo reassessment, allowing the assessee to present new submissions.
Key Issues
Whether the addition under Section 56(2)(vii) was justified given the alleged cancellation of the JDA, and whether the assessee was provided a proper opportunity to present evidence.
Sections Cited
250, 56(2)(vii), 147, 148, 142(1), 144, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 05.04.2025. 1. 1. The Registry has informed that the appeal is barred by limitation by 87 days. However, the assessee has filed a petition along with affidavit for condonation of delay for 114 days explaining the reasons that the assessee is not conversant with the e-portal of the Income Tax Department and accordingly he missed out that an appeal order had been passed. Further, the Ld. AR of the assessee who used to look after the income tax matters of the assessee also missed out to look into the portal. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the ITA No.: 2167/KOL/2025 Assessment Year: 2016-17 Rajendra Rampal. instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the Appeal Order passed u/s 250 dated 05.04.2025 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax, (Appeals) NFAC, Delhi, Income Tax Department, is unlawful, unwarranted and against natural justice.
Your Appellant submits that the framing of assessment order upon one of the Co-Member of an Association of Person is against Law by invoking section 56(2)(vii) and hence prayed to be deleted. [Relief claimed - Deletion of Addition of Rs.2,88,22,020/-].
Your Appellant submits that as the Joint Development Agreement (JDA) itself has been cancelled by virtue of a Settlement executed between the Developers and Landowners so no addition can be made on that ground by invoking Section 56(2)(vii) of the Act and hence prayed to be deleted in full [Relief claimed - Deletion of Addition of Rs.2,88,22,020/-].
That your appellant craves leave to urge, to add, to alter, to amend, to rescind or to adduce further Grounds of Appeal on or before the date of appeal hearing.”
Brief facts of the case are that the assessee is an individual and had filed his original return of income declaring income of Rs. 19,58,040/- on 27.05.2017 for the Assessment year 2016-17 relevant to the previous year 2016-17.As per SFT information, the owners of a piece of land and building, namely Shri Manwendra S/o Lt. Shri Ajay Pratap Singh Rio Mirzapur, Uttar Pradesh and Shri Abhishek Kumar Singh, S/o Lt. Ajay Pratap Singh, had executed a Joint Development Agreement (“JDA”) dated 28.08.2015 and also a General Power of Attorney dated 31.08.2015 in respect of total land measuring 0.7680 decimal in aggregate with two storied commuted pucca structure measuring 16577 sq. ft. situated at Mouza Chandernagore Hooghly, with Shri Rajendra Rampal, S/o Lt. Shri Babarampal and Shri ITA No.: 2167/KOL/2025 Assessment Year: 2016-17 Rajendra Rampal. Biswanath SukumarDey, S/o Sukumar Dey, and Shri Sujit Kumar Dey, for a consideration of Rs.1,50,00,000/- plus ten triple bedrooms residential flats on different floors plus five double bedrooms residential flats on different floors plus one four bedroom residential flat on top room plus 3000 sq ft. commercial area on ground and first floor each. The assessee had invested with others in the development of the above land and two storied building for Rs. 1,50,00,000/-, whose certified Market Value was Rs.8,64,66,055 during FY 2015-16 relevant for the A.Y. 2016-17. In the instant case, the assessee had claimed to have made no investment. In view of the above facts and section 56(2)(vii), it was prima facie evident that income of Sri Rajendra Rampal had escaped assessment which resulted in underassessment of Rs. 2,88,22,020/-. Therefore, on the basis of above information, the case of the assessee was reopened for assessment and notice under section 147 of the Act by issuing a notice u/s 148 of the Act on 26.03.2021. The assessee did not file the return of Income in response to the notice u/s 148 of Income Tax Act, 1961. During the assessment proceedings, the Ld. AO issued several notices u/s 142(1) and show cause notice to the assessee. On non-compliance on the part of the assessee to various statutory notices/letter issued from time to time issued by the Ld. AO, he completed the assessment proceedings u/s 147 r.w.s 144 read with section 144B of the Act by making addition of Rs.2,88,22,020/- under section 56(2)(vii) of the Act. The Ld. AO passed the ex-parte order u/s 147 r.w.s 144 read with section 144B of Income Tax Act, 1961 dated 29.03.2022 at the total income of Rs.3,07,80,060/-. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who vide the impugned order dated 05.04.2025 dismissed the appeal. During the appellate proceedings, the assessee was given ITA No.: 2167/KOL/2025 Assessment Year: 2016-17 Rajendra Rampal. reasonable opportunities of being heard, but no compliance was made to the notice issued.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival submissions were heard and the record and the submissions made have been examined. It was submitted before the Tribunal by the the Ld. AR that the JDA was cancelled and an out-of-court settlement was reached. It is further submitted vide written submission filed as under:
“10. It is pertinent to mention over here that subsequently disputes arose between the "Developers" and the "Landowners and as a result of which the Developers were compelled to file an application before the Hon'ble District Judge at Hooghly on the ground that the Landowners after execution of the Joint Development Agreement (JDA) were trying to sell the piece of Land mentioned in the JDA Agreement to outsiders at a higher price. The said case was registered as Misc. Case No 45/2023. Further, vide an Interim Order dated 22.03.2023, the Hon'ble District Judge granted an Interim Stay against the Landowners restraining them to sell the said piece of Land to outsiders. Latter on an out of the Court a settlement took place between the Landowners and Joint Developers to cancel the Joint Development Agreement and to return the amount of Rs.50,00,000/- given as Advance at the time of execution of the JDA Agreement to one of the Co-Developers namely Shri Sujit Kumar Dey. Thus, after returning of the Advance money after out of the Court Settlement, the Joint Development Agreement (JDA) stands cancelled as no House was built on the piece of Land as mentioned in the JDA Agreement (Copies of Court Order, Out of Court Settlement papers are enclosed herewith).”
The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). Since the documents being filed were not filed before the Ld. AO, it was considered necessary to admit the same and to grant another ITA No.: 2167/KOL/2025 Assessment Year: 2016-17 Rajendra Rampal. opportunity of being heard to the assessee to explain the case. Since there was no proper compliance before both the Ld. AO as well as the Ld. CIT(A), in the interest of justice and fair play it was considered that the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and remand the matter back to the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of the relief claimed and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in his appeal are partly allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 8th December, 2025. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 08.12.2025 Bidhan (Sr. P.S.) ITA No.: 2167/KOL/2025 Assessment Year: 2016-17 Rajendra Rampal. Copy of the order forwarded to:
Rajendra Rampal, Dutch Villa, Town Guard Road, Chinsurah, Hooghly, West Bengal, 712101. 2. A.C.I.T., Circle-23(1), Hooghly.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order