RAJNIKANT RAICHAND SHAH,AHMEDABAD vs. THE ITO, WARD-1(3)(1), AHMEDABAD

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4. The brief facts of the case are that the assessee initially filed the original Income Tax Return (ITR) on 19.05.2015 for AY 2015-16, declaring a total income of Rs. 5,02,380/-. In this return, the assessee had claimed an exemption of Rs. 41,00,000/- under section 54F of the Income Tax Act (Act) on account of capital gains arising from the transfer of a tenancy right. However, the assessee filed a revised ITR in which the assessee altered the above claim and apportioned the exemption between sections 54F and 54EC of the Act, claiming a sum of Rs. 27,51,587/- under section 54EC of the Act and Rs. 12,29,518/- under section 54F of the Act. The Assessing Officer initiated re-assessment proceedings. The Assessing Officer observed that despite this change, no justification or reason for the alteration in the claim was provided by the assessee. Moreover, the assessee did not disclose any immovable property investment details in Schedule AL of the ITR, even though the total income exceeded Rs. 25 lakhs, which mandates such disclosure. During reassessment proceedings, Assessing Officer noted that the assessee did not cooperate, he failed to furnish details of the capital gain computation, investment evidence under sections 54F or 54EC, or any sale/investment dates or documents. The Assessing Officer observed that despite issuance of repeated notices and Rajnikant Raichand Shah vs. ITO Asst.Year –2015-16 - 3– opportunities of hearing, the assessee remained unresponsive and uncooperative, and accordingly, the Assessing Officer passed the assessment order on ex-parte basis under section 144 of the Act on the basis of material available on record. In absence of any supporting evidence for claim of exemption and due to the change in stand without any explanation, the Assessing Officer held that the entire amount of Rs. 40,32,000/- received from the transfer of “tenancy rights” was taxable as long-term capital gain.

5. In appeal before us CIT(Appeals), the assessee reiterated that the reopening of the assessment was based on factually incorrect grounds, and submitted that the reassessment order was invalid. However, the CIT(A) held that the reassessment proceedings were validly initiated and rightly completed under law. The CIT(Appeals) observed that the assessee not only failed to explain the revised stand on capital gain exemptions but also did not submit any documentary evidence either at the assessment stage or during appellate proceedings to support the claims under section 54EC or 54F of the Act. Since the burden of proof lies entirely on the assessee to substantiate exemption claims under the Act, the CIT(A) held that the assessee had failed to discharge this onus. In absence of any proof or valid explanation, the AO was justified in computing capital gains on the entire sale consideration of Rs. 40,32,000/-. Accordingly, the CIT(A) confirmed the addition made by the AO and dismissed the appeal.

6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. In the present case, Rajnikant Raichand Shah vs. ITO Asst.Year –2015-16 - 4– the reassessment proceedings were initiated on the ground that the assessee had not disclosed capital gains arising from the sale of property amounting to Rs. 40,32,000/-. However, on perusal of the original return of income filed by the assessee and submissions made before the lower authorities, we observe that the assessee had in fact disclosed the full value of sale consideration in “Schedule CG” of the return of income filed under section 139(1) of the Act, along with a claim of exemption under section 54F of the Act. The Assessing Officer, however, proceeded to complete the reassessment ex parte under section 144 read with section 147 of the Act, primarily on the ground that the assessee did not furnish necessary supporting evidence for the exemption claims, and had changed his stand in the revised return without explanation. While the CIT(A) confirmed the action of the Assessing Officer, the assessee has consistently maintained that he had disclosed the transaction in the original return, and that the basis of reopening was factually incorrect. Moreover, it is also evident from the record that various submissions and replies filed by the assessee during the reassessment proceedings have not been duly considered or addressed by the Assessing Officer. Accordingly, in the interest of justice and considering the fact that the assessee had disclosed the transaction in the original return of income and the reassessment has proceeded without properly adjudicating the assessee's explanation or verifying supporting documents, we are of the considered view that the matter requires re- examination. Therefore, the matter is hereby directed to be restored to the file of the jurisdictional Assessing Officer with a direction to examine the claim of the assessee afresh, after affording adequate opportunity of being heard and after considering all the submissions and documentary evidence that the assessee may file in support of his claim under section 54F and/or section 54EC of the Act. The assessee is also directed to fully cooperate in the proceedings and furnish all relevant details and evidence within the time granted by the Assessing Officer.