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Facts
The assessee, a non-resident individual, sold and purchased property, and failed to file a return of income. The Assessing Officer (AO) reopened the assessment and made additions for unexplained investment and short-term capital gains. The CIT(A) dismissed the appeal, and the assessee is now before the Tribunal.
Held
The Tribunal held that the reopening of assessment was bad in law due to lack of tangible material and independent application of mind by the AO. It also noted that the assessee had provided evidence for the source of funds for property purchase and had paid taxes with interest on the capital gains.
Key Issues
Whether the reopening of assessment was valid and whether the additions made for unexplained investment and short-term capital gains were justified based on the evidence provided by the non-resident assessee.
Sections Cited
147, 148, 151, 69, 139, 142(1), 144, 250, 251
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER
Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 28-11- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2015-16.
The grounds of appeal are as under:- “Reopening is bad in law: 1) The Ld A.O erred in reopening the assessment u/s.147 of the Act vide notice u/s 148 dt 31/03/2022 which is issued by the Jurisdictional A.O instead of the National Faceless Assessment Centre. Therefore reopening Notice u/s 148 of the act issued is bad in law. 2) The Learned A.O erred in reopening the assessment without providing the copy of approval u/s 151 of the act. Therefore, the reopening is bad in law.
Bhavna Nachiketan Barot, A.Y. 2015-16 3) The Ld Assessing Officer erred in reopening the assessment merely on information received from INSIGHT portal without considering the fact that there was no tangible material on the basis of which assessment could be reopened on the basis of income is escapement, further, the AO failed to apply his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. II. Addition of Rs. 42,27,500/- u/s. 69 of the act: 4) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in confirming the addition of Rs. 42,27,500/- as unexplained money u/s 69 of the IT act on the basis that the assessee has not explained the source of the immovable property purchased of Rs. 42,27,500/- without appreciating the facts that the of property purchased out of money bringing from Democratic Republic of the Congo (Africa) in my NRO A/c, duly supported by all the supporting evidence like bank statement, Property purchase agreement & passport copy. Thus the addition made as unexplained investment u/s 69 of the act liable to be deleted. III Addition of Rs. 9,72,500/- as short term capital gain: 5) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in confirming the addition of Rs. 9,72,500/- as short term capital gain by taking the difference between the Sale price of the property of Rs.52,00,000/- and purchase price of the property of Rs. 42,27,500/- without appreciating the facts that the assesses is a non-resident of India and no source of income in India except capital gain income earned during the year on sale of property. Hence, the assessee under the impression that no return need to file as he is non resident. However, now, the assessee computed the capital gain income and paid the tax alongwith interest of Rs. 2,52,410/-. In support of the same assessee supported the computation of income and tax-paid challan. Thus, the addition made as capital gain income is liable to be deleted. 6) On the facts and In the circumstances of the case and as per the law, the order dated 28.11.2024 as passed by the National Faceless Appeal Centre (NFAC) is bad in law since it dismisses the appeal on the reason of non-prosecution and does not adjudicate on the grounds of appeal and the issues under consideration. The said order being in violation of the provisions of Section 250 and 251 of the Act, thus the order may be quashed. 7) The assessee craves leave to add, amend, alter or delete any or all the above grounds of appeal.”
The assessee is a non-resident individual working in Democratic Republic of Kango. Assessee’s case was selected for scrutiny assessment. The assessee has not filed any return of Bhavna Nachiketan Barot, A.Y. 2015-16 income u/s.
As per the information, the assessee has sold and purchased the immoveable property at consideration price more than 25,00,000/-. Since no return of income was filed by the assessee, Assessing Officer has reason to believe that the said transaction must have escaped the assessment. Notice u/s. 148 dated 20-03-2022 u/s. 148A(b) of the Act was issued. The show cause notice dated 31-03-2022 u/s. 148 was issued and notice u/s. 142(1) dated 03-02-2023 issued to the assessee requesting him to file the return of income for the year under consideration. In response to the said notices, the assessee has not filed the return of income u/s. 148 as well as not filed any written submissions or details to that effect. Another notice u/s. 142(1) dated 01-12-2022 and 20-12-2022 were also issued and served to the assessee. Sine no compliance has been made, the Assessing Officer issued show cause notice u/s. 144 of the Act dated 03-03-2023. The Assessing Officer observed that the assessee did not respond to any of the notices related to the investment made of Rs. 42,27,500/- for purchase of flat at Borivali made on 16-08-2014 and the same was not explained related to the component of payment made for purchase of the said land and therefore the said investment was considered as unexplained investment u/s. 69 of the Act and the Assessing Officer made addition of Rs. 42,27,500/-. The assessee sold the said land on 20-08-2004 at a consideration amount of Rs. 52,00,000/- and thus on short term capital gain of Rs. 72,500/- but the same was not offered to tax and hence the Assessing Officer made addition of Rs. 9,72,500/- as short term capital gains.
The ld. A.R. submitted that the CIT(A) dismissed the appeal of the assessee on the basis of delay without deciding the matter on merit. The Ld. A.R. submitted that the source of property purchased out of money by bringing from Democratic Republic of Cango (Africa) in her NRO A/c., duly supported by all the evidences that of bank statement, property purchase agreement and passport. Therefore, the deduction u/s. 69 of the Act be deleted. As regards to addition on account of short term capital gain, the assessee was under the impression that she is not required to file return of income as she is non-resident. But now the assessee computed the capital gain income and paid the taxes along with interest of Rs. 2,52,410/-. The copy of tax paid challan was submitted during the hearing by Ld. A.R.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the 7. relevant material available on record. From the perusal of the documents, it appears that the assessee was not present when the notices were issued in the country and was residing at Democratic Republic of Cango. At the time of hearing, the assessee submitted the details such as bank statement, property purchase agreement as well as explained the transaction through various evidences including the source of immoveable property purchase. Therefore, Ground No. II is allowed. As regards to Ground No. III, the assessee at this Bhavna Nachiketan Barot, A.Y. 2015-16 juncture has paid the taxes along with interest on the short term capital gain. Therefore, the addition itself does not sustain. Thus, Ground No. III is allowed. Rest of the grounds are general, hence not adjudicated.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 01-07-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 01/07/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद