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Facts
The Assessing Officer made additions totaling over Rs. 2.26 Crores, including Long Term Capital Gains on land sale, lease rent, and a disallowance under Section 14A. The assessee challenged these additions, claiming the land was agricultural and the other additions unwarranted, but the CIT(A) confirmed them ex-parte due to the assessee's non-compliance with notices.
Held
The Tribunal noted the assessee's claim of a communication gap leading to non-receipt of notices and thus no opportunity of hearing. Recognizing that the additions involved issues of fact that could be decided on merits, the ITAT remanded the entire matter back to the CIT(A) for fresh adjudication after providing the assessee a proper opportunity of being heard.
Key Issues
Whether the CIT(A) erred in confirming additions without providing adequate opportunity of hearing due to alleged non-service of notices, and whether the additions relating to LTCG on agricultural land, lease rent, and Section 14A disallowance are sustainable on merits.
Sections Cited
14A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Metropolitan Commercial Pvt. Ltd., 2nd Floor, 2/1A, Burdwan Road, Alipore, Kolkata - 700027 [PAN: AABCM9822E] .....................…...…………….... Appellant vs. ITO Ward 4(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 ...............…..….................... Respondent Appearances by: Assessee represented by : Ramesh Kumar Patodia, Advocate Department represented by : Ranu Biswas, Addl. CIT, Sr. DR Date of concluding the hearing : 29.01.2025 Date of pronouncing the order : 07.02.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’), passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereafter ‘the Ld. CIT(A), dated 19.07.2024.
1.1 In this case, the Ld. Assessing Officer (AO) passed an order dated 30.12.2019 through which an amount of Rs. 2,17,72,327/- was added as Long Term Capital Gains (LTCG) on sale of land. Further, an amount of Rs. 4,09,900/- was added as lease rent and finally an amount of Rs. 5,00,000/- was added u/s 14A of the Act.
Metropolitan Commercial Pvt. Ltd. 1.2 Aggrieved with this action of Ld. AO, the assessee approached the first appellate authority and claimed that none of the additions made by the Ld. AO were sustainable on facts as the land in question was agricultural land. The assessee also claimed that the addition on account of lease rent was unjustifiably made and lastly, the assessee claimed that there was no exempt income earned to make any disallowance u/s 14A of the Act. However, the Ld. CIT(A) has mentioned in detail that the assessee did not make any worthwhile compliance to the notices fixing the case for hearing. Thereafter he proceeded to confirm the action of Ld. AO on all counts.
Further aggrieved with this action, the assessee has approached the ITAT through the following grounds:
“I. FOR THAT in passing the impugned order dated July 19, 2024 the Learned Commissioner of Income Tax (Appeals) (hereinafter referred to as the "CIT (Appeals) has acted by an outright refusal to consider relevant matters, has misdirected itself in points of law, has taken into account irrelevant considerations and has failed to take into account relevant materials on record. The said impugned order dismissing the appeal of the appellant is arbitrary to that core and perverse. II. FOR THAT on the facts and circumstances of the instant case the Learned CIT (Appeals) erred in dismissing the appeal filed by the appellant on the basis of the purported non-compliance to the notices fixing the hearings which were issued even though the appellant was prevented from responding to such notices and/or appearing before the Learned CIT (Appeals) in view of justified and reasonable grounds and such purported action of the Learned CIT (Appeals) is against the violation of principles of natural justice and the impugned order passed by the Learned CIT (Appeals) is illegal, invalid and bad and hence the same is liable to be quashed and/or set aside. III. FOR THAT the notices of hearing having not been served in accordance with the rules which are prescribed as per the law on the latest address of the appellant, even though such address was recorded in the returns of income which was filed subsequently, the appellant did not have any opportunity of hearing and thus the impugned order under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") is liable to be quashed and/or set aside. IV. FOR THAT in any event the substantial injustice cannot prevail over procedures and the appellant deserves hearing on merits before this Hon'ble Tribunal in relation to the addition which has been made by the Assessment Unit, National Faceless Assessment Centre (hereinafter referred to as the "Assessment Unit") vide assessment order dated December 30, 2019 and confirmed by the Learned CIT (Appeals) by dismissing the appeal. V. FOR THAT the Learned CIT (Appeals) failed to appreciate that the Assessment Unit erred in purportedly adding a sum of Rs. 2,17,72,327/- as long term capital gain on the basis of the purported finding that the land was never used for agricultural Metropolitan Commercial Pvt. Ltd. cultivation as well as other findings in this regard and as such the addition of Rs. 2,17,72,327/- is liable to be quashed and/or set aside. VI. FOR THAT the Learned CIT (Appeals) erred in law in not appreciating that the appellant having earned long term capital gain of Rs. 2,17,72,327/- on sale of agricultural land, the same exempt under the provisions of the Act and as such the entire addition is liable to be quashed and/or set aside. VII. FOR THAT the Learned CIT (Appeals) ought to have appreciated that the Assessment Unit erred in adding a sum of Rs. 4,09,900/- as lease rent, ie. income from other sources without referring to any provision of the Act on which the said addition is being made which is not permissible under the law and as such the entire addition of Rs. 4,09,900/- is liable to be quashed and/or set aside. VIII. FOR THAT the Learned CIT (Appeals) should have appreciated, and erred in not doing so, that the Assessment Unit erred in adding a sum of Rs. 5,00,000/-under Section 14A of the Act even though the appellant did not earn any exempt income and as such the entire addition of Rs. 5,00,000/- under Section 14A of the Act is against the judicial pronouncement of this Hon'ble Tribunal as well as other coordinate Benches of the Hon’ble Tribunal and Courts throughout the countries and hence the entire addition of Rs. 5,00,000/- is liable to be quashed and/or set aside. IX FOR THAT the Learned CIT (Appeals) failed to appreciate that the entire addition of Rs. 2,26,82,227/- is illegal, invalid and bad and hence liable to be deleted. X FOR THAT the said impugned orders of the Learned CIT (Appeals) as well as Assessment Unit are otherwise erroneous in law and/or on facts and are liable to be set aside. XI. FOR THAT the appellant craves indulgence to add, amend, alter and/or modify the Grounds of Appeal on or before the hearing of this appeal.” 2.1 Before us, the Ld. AR averred that due to a communication gap the notices sent by the Ld. CIT(A) could not be received by the assessee and therefore, there was no compliance to the said notices. He further averred that the assessee has a strong case on merits and requested for a chance to establish their bonafides before the Ld. CIT(A).
2.2 Per contra, the Ld. DR relied on the orders of authorities below.
We have considered the documents before us, including the paper book filed by the Ld. AR and also, we have heard the rival submissions. All the three impugned additions pertain to issues of facts which could easily be decided, one way or another, on the basis of presentation made by the assessee. Accordingly, we remand this matter back to the file of Ld. CIT(A) for fresh adjudication after giving the assessee an opportunity of being heard.
Order pronounced in the court on 07.02.2025