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Facts
The assessee, a retired school teacher, sold a flat and claimed short-term capital gains. The Assessing Officer (AO) considered the entire sale consideration as income without indexation. The assessee also claimed exemption under section 54 for investing in a new property, which was denied.
Held
The Tribunal held that both the AO and the CIT(A) failed to follow the correct procedure for calculating long-term capital gains, specifically regarding indexation of cost of acquisition. The Tribunal also noted that the CIT(A) wrongly rejected the assessee's claim for deduction under section 54 as additional evidence.
Key Issues
Whether the AO and CIT(A) correctly computed capital gains and allowed exemption, and whether denial of additional evidence was justified.
Sections Cited
148, 144, 48, 112, 54
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] under section 250 of the Income Tax Act, 1961 dated 29.01.2025 for the A.Y.2013-14. The Assessee has raised the following grounds of appeal :
1. The Hon CIT(A) erred in declining the prayer of the appellant to admit additional evidences u/r 46A of IT Rules 1962 and refusing to admit the additional evidences furnished during appellate proceedings, inspite of the fact that the appellant who is a retired school teacher was unaware of the assessment proceedings and therefore was prevented by sufficient cause from producing such evidences before the Id AO. The appellant prays that the additional evidences be admitted and considered in deciding the merits of the addition.
2. The Hon CIT(A) erred in upholding the addition of Rs.20,00,000/- as short term capital gain arising on transfer of 1/2 share in flat no. A/301, Vedashree CHS, Plot no. E-30, Sector no.3, Kharghar, Navi Mumbai, instead of determining long term capital gains, after granting deduction for indexed cost of acquisition as per the provisions of section 48 and levying concessional tax rate as per section of 112 of the IT Act, 1961. The addition being unjustified is required to be deleted.
3. The Hon CIT(A) erred in denying the appellant, exemption u/s 54 of the IT Act, 1961 to the extent of Rs.14,31,056/- on account of investment in new house property at Poynad, Taluka Alibaug, Dist. Raigad. The exemption u/s 54 of the IT Act, 1961 may kindly be granted.
4. The appellant craves leave to add, alter, amend and/or vary any of the above grounds of appeal
/relief claimed at any time before the decision of the appeal.” Submission of ld.AR :
2. At the outset of hearing, no one appeared on behalf of the assessee. No adjournment letter was filed.
Findings & Analysis : 3. We have heard ld.DR for the Revenue and perused the records. In this case, as per the assessment order, Assessee had not filed Return of Income(RoI) for A.Y.2013-14. The Assessing Officer based on the information, issued notice u/s.148 of the Act, dated 20.03.2020. The AO in the assessment order has noted that Assessee had not complied the notices and hence, AO passed ex- parte order u/s.144 of the Act.
3..1 The AO in the assessment order has noted that Assessee along with her husband Shri Sudhakar Pingale had sold immoveable property for a total consideration of Rs.40 lakhs vide agreement dated 09.11.2012 duly registered with Sub-Registrar, Panvel. Therefore, Assessing Officer considered 50% as Assessee’s share and taxed the entire Rs.20 lakhs. Aggrieved by the same, Assessee filed appeal before the ld.CIT(A).
3.2 In the statement of facts in Form No.35 filed before the ld.CIT(A), Assessee submitted that Assessee is a Retired School Teacher. During the year, she had sold Flat No.A/301, Vedashree CHS, Plot No.E-30, Sector No.3, Kharghar, Navi Mumbai along with her Husband vide registered agreement of sale for a total consideration of Rs.40 lakhs only. Her share was 50%. The assessee had purchased impugned Flat No.A/301 along with her Husband vide registered agreement dated 01.03.2004 for a consideration of Rs.5,92,000/-. The assessee has further mentioned that therefore, there was Long Term Capital Gain and Assessing Officer has not given benefit of indexation. Assessee further mentioned that Assessee has invested the entire capital gain along with her Husband in a new residential property and hence eligible for benefit u/s.54 of the Act. Assessee has also mentioned that since there is no taxable income, Assessee has not filed Return of Income for A.Y.2013-14.
Ld.CIT(A) has not considered any of these facts and dismissed the appeal of the Assessee on the ground that Assessee failed to file details during assessment proceedings.
We have perused the assessment order and CIT(A)’s order. It is a fact that Assessing Officer had obtained copy of the Registered Agreement from the SRO. However, it is also a fact that Assessing Officer(AO) has not given any benefit of Indexation of Cost of Acquisition. As per Section 48 of the Income Tax Act, 1961, Capital Gain shall be calculated after deducting Index Cost of Acquisition as it is a long term capital gain. But, Assessing Officer has not bothered to reduce the Index Cost of Acquisition. The Assessing Officer has considered entire sale consideration as income of the assessee. However, as per Section 48 of the Act, entire sale consideration can never be income of the assessee.
Even ld.CIT(A) has not bothered to reduce the Index Cost of Acquisition, Assessee had filed elaborate submission before ld.CIT(A). Assessee had also claimed before the ld.CIT(A) that she has invested entire capital gain in the new asset i.e.purchase of flat and claimed deduction u/s.54 of the Act. However, ld.CIT(A) rejected the submission of the assessee as not admissible being additional evidence. Substantial justice is more important than procedural lapses.
In this case, there is a lapse on the part of the Assessee in not following the procedure laid down in the Act. But, at the same time, the Assessing Officer who is supposed to know the law has also not followed the procedure for calculating Long Term Capital Gain. First and foremost, the Assessing Officer has to decide whether the Asset was hold for a Long-Term Period or Short-Term Period. The Assessing Officer has to specify the dates, based on documents. In this case, Assessing Officer has imagined that it was a Short-Term Asset, without specifying any dates. Assessing Officer is precluded from such imagination without documentary support. It is mentioned in the assessment order that Assessing Officer obtained copy of impugned sale deed from the Sub Registrar Officer(SRO) for the sale of flat. Any such agreement always have a history specifically narrating the ownership of the property over the period. From that history, one can understand when assessee had acquired the impugned flat and at times it also contains the cost for which assessee had acquired the impugned flat. Since Assessing Officer was having copy of the impugned sale deed, he could have easily understood date of acquisition of the said asset.
Next, Assessing Officer has to follow Section 48 of the Income Tax Act, 1961 which gives Mode of Computation. For a Long- Term Capital Asset, while calculating Capital Gain, Index Cost of Acquisition needs to be reduced along with cost of improvement, if any. However, in this case, Assessing Officer has not followed the procedure laid down in the Act.
8.1 In these facts and circumstances of the case, in the interest of the justice, we set-aside the order of the Assessing Officer to the Assessing Office for denovo adjudication after providing opportunity to the assessee. Assessee shall file necessary documents before the Assessing Officer, including copy of impugned sale deed and copy of purchase agreement for the new asset which has been claimed to have been purchased, to avail benefit of deduction u/s.54of the Act. Accordingly, grounds of appeal raised by the assessee are allowed for statistical purpose.
In the result, appeal of the assessee allowed for statistical purpose. Order pronounced in the open Court on 26 May, 2025.