AMRISH SOMABHAI DESAI,MEHSANA vs. ITO, WARD 5, MEHSANA, KADI, MEHSANA

The ground of appeal no.2 & 3, it was contended by the Ld. Counsel for the assessee, relate to the merits of the addition made and confirmed by the Ld. CIT(A).

Ld. Counsel for the assessee contended that in the facts of the present case, addition was made to the income of the assesse on account of capital gain allegedly earned by the assessee on the sale of an immovable property. The amount of addition so made being Rs.77,43,783/- taxed under the head ‘capital gains’ and treated as ‘short term capital gain’. Ld. Counsel for the assessee contended that vide ground nos. 2 & 3, the assessee has challenged the confirmation of addition so made in the hands of the assessee on the two grounds; (i) that the asset did not qualify as a capital asset in terms of the provisions of Section 2(14) of the Act; & (ii) that in any case, the AO had treated the entire consideration received on the sale of the impugned immovable property as taxable in the hands of the assessee when the assessee was only co-owner of the property alongwith six other co-owners and, thus, was liable to be taxed only to the extent of his portion of the capital gains earned thereon.

The grounds so raised by the assessee in Ground No.2 & 3 read as under:

Without prejudice to the above ground No.2, the Learned CIT(Appeal)/National Faceless Appeal Centre, Delhi has erred & 1752/Ahd/2025 [Amrish Somabhai Desai vs. ITO] A.Y. 2022-23 - 4 – in law and facts by not considering the fact that the land was co-owned/jointly owned by total seven family members including the appellant and therefore in any case the share of the assessee is required to be added.”

With respect to the contention of the Ld. Counsel for the assessee that no addition on account of capital gain earned in lieu of the transaction of sale of immovable property was warranted, since, the asset sold did not qualify as a capital asset in terms of the provisions of Section 2(14) of the Act, it was pointed out before us that the assessee has pleaded to the authorities below so contending that the property so sold was an agricultural land situated in area with population less than 10000. He drew our attention to the contention so made before the Ld. CIT(A) reproduced at page 5 of Ld. CIT(A)’s order.

Ld. DR pointed out that the assessee had raised this plea before the AO also who had rejected the same noting that the assessee had not adduced any evidence in support of his claim that the impugned property was a rural agricultural property. He drew our attention to page nos. 4 & 5 of the assessment order containing the findings of the AO as above.

Ld. Counsel for the assessee when confronted with the above fact sought time to adduce necessary evidences to prove its claim. He was unable to draw our attention to any evidences proving his claim of the impugned immovable property not being a capital asset being filed to the authorities below.

In view of the above, we reject the contention of the Ld. Counsel for the assessee that property sold during the year did not qualify as a capital asset in terms of Section 2(14) of the Act on account of non-substantiation of the said claim by the assessee.

Taking up the next plea of the assessee, it was contended that the property sold was not in the ownership of the assessee, but, was co-owned with seven persons and this fact was evident both from the copy of the purchase deed and the sale deed, which was filed to the authorities below. Our attention was drawn to the copies of the purchase deed of the impugned land placed before us at paper book page nos. 17 to 46 and copy of the sale deed placed before us at Paper book page nos. 73 to 75 bringing out the fact of & 1752/Ahd/2025 [Amrish Somabhai Desai vs. ITO] A.Y. 2022-23 - 6 – co-ownership of the impugned land by seven co-owners. Ld. Counsel for the assessee contended that this fact was brought to the notice of the Ld. CIT(A) also, which finds mention at page 5 of his order. However, he contended, none of the authorities below considered this contention of the assessee.

Ld. DR was unable to controvert the above facts as pleaded by the Ld. Counsel for the assessee.

In the light of the same, since, the assessee’s factual plea of the assessee’s ownership in the impugned property being only to the extent of 1/7th and, therefore, capital gains being restricted to the said extent only has not being considered and dealt with by the authorities below, We consider it fit to restore the issue back to the file of the AO, for the limited purpose of verification of the assessee’s contention with regard to its share of ownership in the impugned land and its share in the capital gain accordingly being restricted to the said extent. The AO is directed to verify the claim of the assessee and, thereafter, adjudicate the issue in accordance with law. We may add that the assessee be given due opportunity of hearing by the AO.

Ground of appeal no.3 raised by the assessee is, therefore, allowed for statistical purposes.

Ground No.2 is accordingly dismissed and Ground no.3 is allowed for statistical purposes.

We now take up assessee’s appeal in ITA No.1752/Ahd/2025

The grounds raised by the assessee are as under:

Briefly stated, the AO levied penalty u/s.272A(1)(d) of the Act of Rs.20,000/- for non-compliance of two notices dated 11.01.2024 and 30.01.2024 issued by the AO. The contention of the Ld. Counsel for the assessee before us was that the assessee had complied with all other notices issued by the AO and order had been passed u/s.143(3) of the Act. All necessary submissions and explanations had been filed by the assessee to the AO that the assessee had completely participated in the assessment proceedings and the AO was in no way prejudiced by the non- & 1752/Ahd/2025 [Amrish Somabhai Desai vs. ITO] A.Y. 2022-23 - 8 – compliance of two notices by the assessee. Therefore, since, the AO had passed order u/s.143(3) of the Act, it is to be presumed that the AO had condoned the non-compliance of the earlier notice and, therefore, no penalty should be levied on the assessee. Ld. Counsel for the assessee relied on the decision of the ITAT Delhi Bench in the case of Geetu Kamra vs. ITO in dated 27.02.2025, the ITAT, Cochin Bench in the case of Jomon John vs. NFAC in dated 29.04.2025 and M/s. Raj Enterprises vs. ITO in dated 24.03.2015.

Ld. DR, however, supported the orders of the authorities below.

We have heard the rival submissions. Undoubtedly, in the facts of the present case, penalty has been levied for non- compliance with two notices issued by the AO. However, assessment has been completed after considering all submissions and explanation furnished by the assessee on the issue. Therefore, clearly, there is no prejudice caused to the Revenue for non- compliance by the assessee with the notice issued during assessment proceedings. Even otherwise, the assessee has pleaded that the said notices were not complied with, since it was in the process of compiling details and considering that all necessary details were subsequently furnished by the assessee, we see no & 1752/Ahd/2025 [Amrish Somabhai Desai vs. ITO] A.Y. 2022-23 - 9 – reason for levy of any penalty u/s.272A(1)(d) of the Act. The penalty so levied is, therefore, directed to be deleted.

In effect, appeal of the assessee is allowed.