Loading judgment…
Facts
The assessee filed an appeal against the order of the CIT(A) concerning the assessment year 2013-14. The Assessing Officer (AO) initiated reassessment proceedings under Section 147/148, alleging non-disclosure of Long Term Capital Gains (LTCG) on the transfer of an immovable property, valuing it at Rs. 30,56,063/- as per stamp duty. The assessee contended that he acted only as a Power of Attorney (POA) holder for the original owners.
Held
The Tribunal noted that the assessee had not provided adequate submissions or objections before the AO or CIT(A). However, to provide an opportunity for the assessee to present their case, the matter was restored to the file of the AO for fresh consideration. The Tribunal clarified that this decision was not to be construed as a reflection on the merits of the dispute.
Key Issues
1. Whether the reassessment proceedings initiated under Section 147 were valid, given the assessee's role as a POA holder and the AO's alleged lack of proper 'reason to believe'. 2. Whether the CIT(A) erred in passing an ex-parte order without providing adequate opportunity to the assessee.
Sections Cited
147, 148, 144, 234A, 234B, 234C, 234D, 50C, 48, 2(47), 45, 53A, 142(1), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 1294/JP/2024
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 26-08-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2013-14 raising therein following grounds of appeal:
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA ‘’1.1 The impugned order u/s 147 r/w 144 dated 25.09.2021 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed. 1.2 The very action taken u/s 147 r/w 148 is bad in law without jurisdiction and being void ab-initio, the same kindly be quashed. Consequently, the impugned assessment framed u/s 144/148 dated 29.03.2022 also kindly be quashed.
The Id. AO erred in law as well as on the facts of the case in framing the asst. u/s 144 without affording adequate and reasonable opportunity and even without complying with the mandatory statutory requirement of law. The impugned order having been framed in gross breach of natural justice, kindly be quashed.
3. The Id. CIT(A) erred in law as well as on the facts of the case in passing the impugned order in a haste without affording adequate and reasonable opportunity of being heard. The impugned order having been framed in gross breach of natural justice, hence the same kindly be quashed or alternatively be restored to the file of the Id. CIT(A).
Rs. 30,56,063/-: The Id. CIT(A) erred in law as well as on the facts of the case in confirming the addition made of Rs. 30,56,063/ on account of the LTCG. The addition so made being contrary to the provisions of law and facts of the case and contrary hence, the same kindly be deleted in full.
The Id. CIT(A) erred in law as well as on the facts of the case in charging interest u/s 234A, 234B, 234C & 234D of the Act. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
2.1 Apropos Ground of appeals (supra), it is noted that the ld. CIT(A) has partly allowed the appeal of the assessee for statistical purposes by observing at para 3.5 of his order as under:- ‘’3.5 I have perused the grounds of appeal, facts of the case and the assessment order passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act. The appellant has not produced any material to controvert the finding of AO with any document, evidence which he could rely upon. It has been recorded by the AO that the appellant did not file any return in response to notice u/s 148.On the facts and circumstances, the appellant has not made out a case and established that the transfer of immoveable property that took place, which was registered on 30.03.2013, did not fall within the definition of transfer, as provided in section 2(47) of the I. T. Act. It is also not a case where the appellant has disputed & contested determination of SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA value of the property at Rs.30,56,063/-, for the purpose stamp duty at the time of registration, before the respective authorityof the state government. Therefore, provision of section 50C of the I. T. Act, is squarely applicable in the case under consideration. On merit AO's order appears to be reasonable and as per law. The appellant failed to provide any explanation with supporting documents/ evidence during this appellate proceeding. From the above conduct of the assessee, it is clear that the appellant is not interested in prosecuting its appeal. However, in the interest of natural justice the AO is directed to verify whether, the amount paid, of Rs.5,00.000/- by cheque in May 2010,was actually paid to the original owners of the property or not. If it is found that this amount was paid to the original owners as a consideration in connection with the transfer of the property, in that case I am of the opinion that it would be fair & proper to allow deduction in accordance with the provision of section 48 of the I.T.Act, in respect of this sum of Rs.5,00,000/- from the deemed value of sale consideration Rs. 30,56,063/-, in determining income chargeable to tax under the head Capital Gains. Further, the action of the AO in initiating reassessment proceeding by issuing notice u/s 148, is confirmed as it is apparent that the appellant has not disclosed in his Retum of Income for the year, about the transaction related to transfer of immoveable propertyandIncidence of Capital Gains in such transfer. Hence, the appeal is partly allowed in terms of direction as stated herein above, accordingly.
4. In the result, the appeal is Partly Allowed for statistical purpose.’’ 2.2 During the course of hearing, the ld. AR of the assessee has filed following detailed written submission with the prayer either to quash the orders of the lower authorities or restore the matter to the file of the ld.CIT(A) or AO for consideration and afresh decision: ‘’Submissions: GOA 1: No Reason to believe existed: 1.1 A bare perusal of reasons recorded appears more to be reasons to suspicion as against reason to believe but rather no reasons at all existed for the simple reason that in the entire reasons recorded and shown by the AO at pg. 1 pr. 2 of the impugned Assessment Order, the only allegation is that the Appellant did not disclose LTCG on the transfer of some immovable property which was sold for Rs. 5,00,000 though was valued at Rs. 30,56,063 for the purposes of the stamp duty collection resulting into the alleged escapement of income of Rs. 25,56,063 and based on that reason alone, the AO issued impugned notice dt. 30.03.2021 u/s 148, reproduced hereunder-:
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA “2. A notice u/s 148 was issued to the assessee for Asst. Year 2013-14 on 30.03.2021 as the assessee did not admit Long Term Capital Gains on transfer of immovable property situated at No. 11D, Gumanpura, Kota, Rajasthan by applying the provisions of section 50C since the property sold for Rs. 5,00,000/- was valued at Rs. 30,56,063/- for the purposes of collection of stamp duty which resulted in income of Rs. 25,56,063/- chargeable to tax has escaped assessment. The notice was issued to the assessee through ITBA and the same was delivered on 30.03.2021. The notice u/s 148 was issued after recording satisfaction and obtaining prior approval from competent authority.” 1.2However, just contrary thereto, the registered sale deed dt. 30.03.2013(PB 6- 20), in possession of/made a basis to form the belief formed by the AO, has time and againstated the fact that the Appellant acted asthe POA holder, particularly on the very first page (PB 12) in pr. 2 which is reproduced as under-:
The aforementioned paragraph clearly shows that the Appellant acted asthe POA holder of four owners namely Surajmal, Amar Lal, Nemi Chand and Ashok Kumar S/o Late Sh. Madho Lal and Niranjan Kumar, who in fact and in law, earlier purchased a plot measuring 6000 sq. feet in Kota and which continued to be registered (09.03.19) in their name legally owned and possessed by them. 1.3This fact was again stated In the registered sale deed internal Pg. 3 (PB 16) that:-
1.4Thereafter, the joint owners constructed various shops thereon and sold one of the shop (which is under consideration) admeasuring 33 * 16 = 5032 sq. feet to one Shri. Chothmal Birla for consideration of Rs. 5 Lakh through the Assessee POA holder.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA 1.5Interestingly and rather pertinently, the AO himself has admitted this crucial fact in pr. 5 pg. 2 that the appellant acted as the special power of attorney holder of Mr. Suraj Mal, as under-: “5 The gist of submission is that Assessee is a 'Special power of Attorney holder' of Surajmal, Amar Lal, Nemi Chand and Ashok Kumar S/o Late Sh. Madho Lal and Niranjan Kumar S/o Amar Lal all Resident of House No. 11-D, New Colony, Gumanpura, Kota in respect of sale of immovable property situated at 11D, Gumanpura, Kota in favour of Chothmal Birla S/o Kesari Lal Birla Resident of House No C-349, Talwandi, Kota for Rs. 5,00,000/- which was paid to the owners vide cheque no. 018474 dated 11/05/2010 drawn on Bank of Baroda, Jhalawar Road, Kota. But sale deed was executed on dated 30/03/2013.” 1.6There apart, he again referred to the contents of the POA at pg. 3 pr. 6 (ii) which is reproduced as under-: “ii. It is seen from copy of special power of attorney that the the assessee is empowered to vacate the tenants, do construction, obtain electricity & water connections, obtain 'No objection certificate from any department.” 2.1Further, at internal pg. 4 (PB 15) it is stated that the amount of sale consideration of Rs. 5 Lakhs was paid through cheque no. 91874 dt. 11.05.2010 Bank of Baroda, Kota which was earlier received from the buyers and possession of the property was handed over. The relevant portion is reproduced hereunder:-
2.2Yet, another vital fact admitted by the AO at pg. 8 of the assessment order is in pr. 4 (iv) is that the sale consideration of Rs 5 lakhs has been paid to the sellers. Thereafter, he admitted that in the copy of the bank statement (PB 1-3) submitted by the appellant in support of the claim that no sale consideration was received by him, but such fact is nowhere denied what to talk of rebutting this vital fact. In other words, the crucial fact of amount of the sale consideration paid to the four buyers SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA only and not to the Appellant-Power of Attorney holder. This totality of facts and circumstances it was clear that there was no income at all accrued in the hands of the appellant what to talk of the income escaping u/s 147 of the Income Tax Act. 3.1The law of reopening u/s 147 is well settled that there must be some information or material coming to the possession of the AO, based on which, the AO has to form his reason to believe as to escapement. Further, there has to be a proximate connection/nexus between the material/information coming to possession and the formation of the believe. It cannot be a mere rumour, gossip or here say. The AO, acting as an honest person with reasonable prudence has to form a belief. Belief indicates something concrete or reliable. Kindly refer: Gangasharan & Sons Pvt. Ltd. v/s ITO & Anr. (1981) 130 ITR 1 (SC) and ITO v/s Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 3.2Since, s. 147 can only be invoked only in the income escaped the assessment, it presupposes existence of income first then only it can escape assessment if there is no income there can’t be any escapement. The material/information coming to the possession of the AO i.e. the registered sale deed very elaborated these facts. Thus, even prima facie speaking the appellant had no income at all. Firstly, for the reason that the income belonged to some other person and Secondly, even assuming LTCG was to be considered in the hands of the Appellant the same arose only in Ay 11-12 as the part performance by handling over the possession and receiving the payment has appended in that year as per S. 2 (47)/45 r.w.s 53 A of the TP Act. 3.3It may be clarified that the further allegation of there being difference of Rs. 25,56,063 is only consequential and S. 50 C can be invoked only when there is no dispute on the fact of ownership and on the fact of sale by the Appellant himself, which is not at all there. Thus, the impugned reasons to believe are completely non-existent or in other words, they were based on wrong factual premise which has vitiated the entire proceeding u/s 147. 4 Supporting case laws: 4.1.1 Since, the very Reason to Believe are based on wrong factual premise, such reasons to believe are no reasons at all which deserves to be quashed. In the case of Satish Kumar Khandelwal Vs. ITO (2021) 213 TTJ 584 (Jp): 206 DTR289(Jp) (DC 1-8), it was held that the reasons to believe recorded stated that the Appellant did not file Return of Income which, was found factually incorrect hence, the Hon’ble ITAT quashed the Notice u/s 148 in as much as the Reason to Believe were based on wrong factual premise, which is also the case here. 4.1.2In the case of Ashok Commercial Enterprises Vs. Assistant Commissioner Of Income Tax, (2023) 7 NYPCTR 1265 (Bom),it was held that “para 4 of the impugned assessment order for asst. yr. 2017-18 clearly shows, respondent has erroneously proceeded on the basis that no return had been filed by assessee pursuant to the notice under s. 153C, since he records that no return is available on the ITBA portal. This factual basis is demonstrably SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA erroneous. A return of income pursuant to notice issued under s. 153C(1) has been filed on 15th Aug., 2021 and an acknowledgment showing an e-filing acknowledgment number is on record. Non availability of return on the ITBA portal is the only basis on which respondent No. 1 seeks to exercise power under s. 144 relying upon the provisions of s. 144(1)(a). In view of the irrefutable fact that s. 144(1)(a) cannot apply since assessee has filed a return, no best judgment assessment under s. 144 could have been passed.” 4.1.3In the case of Narendra Kumar Shah v. Assistant Commissioner of Income-tax, [2024] 162 taxmann.com 397 (Bombay) (DC 9-12),it was held that the “Section 15, read with sections 148A and 148, of the Income-tax Act, 1961 - Salaries – Chargeable as (Reassessment) – Assessment year 2019-20 – Assessee was an individual assessed to income from salary, house property and other sources – A reopening notice was issued upon assessee for reason that an information was received through insight portal that assessee despite having a salary of certain taxable amount and having purchased securities of certain amount had not filed his return of income – It was noted that notice under section 148A(b) did not call upon assessee to provide any justification on any transaction in question – Further, fact was that assessee had filed his return of income and had also paid total tax and had also claimed refund of certain amount – Whether Assessing Officer before issuing notice, was bound to atleast verify or enquire information that was received in accordance with risk management strategy – Held, yes – Whether, therefore, impugned reopening notice issued under section 148A(b) and further order passed under section 148A(d) had to be quashed and set aside – Held, yes [Paras 7 and 8] [In favour of assessee]” 4.1.4 In the case of Rajhans Processors v. Union of India [2023] 149 taxmann.com 29 (Raj) (DC 13-17), it was held that“12. Resultantly, we are of the firm view that the very foundation of the impugned notice, the reasons to believe and the order turning down objections is non-existent. All the three proceedings are based sheerly on conjectures and surmises. The A.O. had no tangible evidence to initiate the re-assessment proceedings against the petitioner and the impugned action is based sheerly on borrowed satisfaction. Even if it is assumed for argument's sake that the transaction made by the petitioner for acquisition of immovable property at Pali may be read in place of Delhi, then also, the said transaction is duly mentioned in the return filed by the petitioner for the relevant financial year and is supported by the audited balance-sheet, which was accepted by the Assessing Officer. Hence, there is no escape from the conclusion that no tangible material was available with the Assessing Authority so as to initiate the re-assessment proceedings against the petitioner by taking recourse to the provisions under section 148 and 143 (2) of the Income-tax Act.” In view of these legal and factual submissions, the reassessment proceedings u/s 147 and the notice u/s 148 deserved to be quashed. 2.No adequate opportunity: The ld. CIT(A) erred in law as well as on the facts of the case in passing the impugned order in a haste on dated 26.08.2024 without SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA affording adequate and reasonable opportunity of being heard. The impugned order having been framed in gross breach of natural justice, kindly be quashed or alternatively be restored to the file of the ld. CIT(A), as would appear from the following date chart: Chart Showing Different notices and compliances:
Date of Compliance S. Due date Remark issuance by No. of hearing of notice assessee Notice for 1. 16.11.2022 enablement of Window No 2. 17.05.2024 24.05.2024 Compliance No 3. 02.07.2024 09.07.2024 Compliance No 5. 16.08.2024 23.08.2024 Compliance A bare perusal of the above chart shows that the so-called many opportunities granted by the CIT(A) to the appellant, is illusionary and shall reveal an interesting fact that the first notice was given in 16.11. 2022 for enablement of window, which did not require any response neither it had such option. However, there was a long silence and after a long gap of almost 18 months the ld. CIT(A) woke up and issued a notice on 17.05.2024 for hearing thereafter providing a short period of 7 days only. Immediately thereafter on 16.08.2024 he passed the ex-parte order. The question is that when the authority sends the notice after such a long gap it may be difficult for the recipient to check his e-mail/portal every next day throughout the period of 2-3 years. Not only the assessee but also the tax consultant who are also practicing in small towns are not sound with the technical knowledge and infrastructure, it is quite basic for them to have lost sight of such communication if any sent by the department. In the meanwhile, the Central Government was continuously relaxing the time limits for taking actions/making compliance through TOLA. In these circumstances there appears no justified reason at all as to why the ld. CIT(A) was issuing notices for such a short period of 7-10 days only. Also, there was no urgency to pass the appellate order hastily. Therefore, there is no hesitation to say that the ld. CIT(A) just to show a disposal on his part, passed the impugned order in complete disregard to principles of natural justice i.e., Audi alteram partem.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA Hence, to do substantial justice, the appeal kindly be decided in favour of the assessee or alternatively restored to the file of the ld. CIT(A).
Reason of Non-Compliance:It is submitted that on the face though appears that there has been non-compliance from the side of the Appellant however the factual background was not properly appreciated rather ignored in as much as, the assessee is an ordinary layperson with limited familiarity and understanding of the intricate provisions of tax laws. Given his background and lack of exposure to such legal complexities, expecting him to independently provide a detailed submission without access to critical information and in absence of regular legal counsel is both unreasonable and unrealistic. In such circumstances, the expectation of compliance without appropriate guidance appears that too in short span is highly improbable and disproportionate. GOA-4:On Merits- No addition justified: 4.1 It is submitted that the jurisdictional facts are in itself not denied or disputed but rather admitted to the fact that the appellant merely acted as a POA holder. The law is well settled that all the acts and deeds done by a POA holder shall be considered as having been done by the Principal( the person/s who gave the POA i.e Assessee here). It is so elementarily that is doesn’t require any further elaboration. However, for better appreciation, reference maybe made to S.2 of the Power Of Attorney Act,1882, reproduced hereunder, Para 1.1“Execution under power-of-attorney.—The donee of a power-of- attorney may, if he thinks fit, execute or do any 4*** instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by the authority of the donor of the power; and every 4*** instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof. This section applies to powers-of-attorney created by instruments executed either before or after this Act comes into force.” 4.2All the jurisdictional facts which are related to the controversy have already been stated in our submissions towards GOA-1 and need not be repeated. However, the crucial and admitted facts can be summarised as under: a. A registered power of attorney was executed in the name of the appellant and mentioned in the registered sale deed itself i.e Pg 1 b. In the registered sale deed itself the crucial fact that the appellant entered into the subjected transaction, only in the capacity of a Power of Attorney Holder for and on behalf of the real owners, is clearly stated. c. Another crucial fact that the payment of sale consideration was not received by the Appellant but was paid by the buyer to the owners through account payee cheque. The AO did not deny this fact. The CIT(A) also confirmed this fact in his order.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA 4.3 It maybe clarified that the discussion made by the AO at page 3 para 6.i and 6.ii makes it evidently clear that he is not even clear of the basic law as regards the relations between the principal versus agent and the owner versus power of attorney holder.In these facts and circumstances, no income was taxable. 4.4 Supporting Case Laws: 4.4.1 In the case Vishnubhai Kanjibhai Desai vs Income-tax Offi-cer [2024] 166 taxmann.com 738 (Gujarat)(DC 18-20) it was held as under: “Where assessee executed sale deeds as Power of Attorney holder fortwo partnership firms and sale consideration was reflected in books of account of partnership firms, since assessee had not earned any income from said transactions, impugned reassessment proceedings initiated against him were unjustified - Section 148, read with section 45, of the Income-tax Act, 1961 - Income escaping assessment- Issue of notice for (Power of Attorney holder) - Assessment year 2020-21 - Assessee was working as peon with a partnership firm (SKE) - SKE and another firm entered into an agreement to do a Joint Venture Project for sale of immovable properties and Special Power of Attorney (POA) was executed in favour of assessee to do only paper work and execution work including execution of sale deed on behalf of partnership firm - Assessee executed sale deeds as Power of Attorney holder for two partnership firms - Assessee received a notice under section 148A to provide information about said transaction - Whether since sale consideration was reflected in books of account of partnership firms and assessee had not earned any income from said transactions, impugned reassessment proceedings initiated against him were unjustified - Held, yes [Para 18] [In favour of assessee 18. Having considered the submissions made by the petitioner on behalf of the petitioner as well as the observations made by the respondent-Assessing Officer in the impugned order passed under section 148A(d)wherein, it is not disputed that the petitioner is working as peon in M/s. S.K.Enterprise and M/s. Anushri Enterprise. However, the transactions reported on portal were pertaining to both the partnership firms and the sale deeds were signed by the petitioner in the capacity of the Power of Attorney Holder and therefore, there is no question of any income being earned by the petitioner through such transactions which were reflected in the books of accounts of the Partnership Firm” 4.2 In the case of CIT, Chennai VS C. Sugumaran [2015] 57 taxmann.com 20 (Madras)(DC 21-25), it was held that, “- Where owner of property executed power of attorney in favour of assessee without any consideration and thereafter property was registered in name of assessee's wife for certain sum, since property rights had not been handed over to assessee, he could not be treated as owner of property for computing capital gain in his hands. - Immovable property/Power of attorney) - Assessment year 2009-10 - One 'V', who was actual owner and vendor of property, executed a registered power of SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA attorney in favour of assessee without any consideration - Thereafter, property was registered in name of assessee's wife for certain sum by a sale deed - Assessing Officer computed capital gains in hands of assessee- Whether there was no transfer or enabling enjoyment of property in favour of assessee in any manner and, therefore, sub-clause (vi) of section 2(47) was not attracted - Held, yes - Whether, therefore, assessee could not be treated as owner of said property for computing capital gains in his hands - Held, yes [Para 11] [In favour of assessee]”
5. CIT(A)/NFAC did not act as per Law: The CIT(A) has not decided the appeal on merits which is contradictory to the mandate of Section 250(6). The same is reproduced here under for your ready reference: “(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.” A bare perusal of above provision makes it clear that the CIT(A) is bound to dispose of the appeal before him on merits. Merely because the assessee didn’t turn up, he cannot dismiss the appeal in Limine. The law contained u/s250(6) & 251 do not at all contemplates the CIT(A) passing an appellate order in this manner. There are judicial guidelines to support this contention. 5.2. Supporting Case Laws: 5.2.1. Corporate International Financial Services V ITO held as: “Further, it is well-settled that powers of Ld. CIT(A) are coterminus with powers of the Assessing Officer. Useful reference may be made to order of Apex Court decision in CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that the first appellate authority, the Ld. CIT(A) in the case before us, has plenary powers in disposing off an appeal; that the scope of her power is co-terminus with that of the ITO, that she can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Hon’ble Apex Court's decisions in the cases of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 (SC) and CIT vs. B.N. Bhattachargee 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an underassessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, not open for Ld. CIT(A) to not pass order on merits by dismissing the appeal in limine, whether on account of non- prosecution of appeal by the Assessee or due to the Assessee seeking to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee in limine for non- prosecution of appeal by the assessee; in effect, indirectly it leads to same results SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal in limine for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; it is amply clear that Ld. CIT(A) was in error in dismissing the appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon'ble Bombay High Court in the case of CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240 taxman 133 for the proposition that Ld. CIT(A) is required to apply her mind to all issues which arise from impugned order before her whether or not same had been raised by appellant before her; and further, that CIT(A) is obliged to dispose of the appeal on merits. ---------------xxx----------------xxx--------------xxx----------------xxx----------------xxx---------- ----- In view of the foregoing, we hold that the Ld. CIT(A) erred in dismissing the appeal of the Assessee in limine for non-prosecution of appeal by assessee. We set aside the impugned order of the Ld. CIT(A) and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance with Sections 250 and 251 of I.T. Act.” 5.2.2 CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 240 taxmen 133 it was held that: “8…………It is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(l)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it dear that while considering the appeal, the CTT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact, the CIT(A) is obliged to dispose of the appeal on merits. In fact, with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CTT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore, just as it is not open to the Assessing Officer to not complete the assessment by allowing the SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CTT(A) to dismiss the appeal on account of non- prosecution of the appeal by the assessee. This is amply dear from the Section 251(l)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act." 5.2.3 The decision of Shri Onkar Mal in ITA No. 1262/JP/2018 followed in Shri Ram Borewell & Construction company V ACIT ITA No. 180/JP/2019 (DPB 7- 10) it was held as: “As per provisions of Section 250(6) of the Act, the ld. CIT(A) is required to pass a speaking order in writing giving reasons for reaching to the conclusion. However, the order passed by the ld. CIT(A) are not in terms of Section 250(6) of the Act. Therefore, in the substantial interest of justice, we set aside the ex parte order of the ld. CIT(A) and restore the matter back to the file of the ld. CIT(A) for deciding the issue afresh on merits. The assessee is also directed to appear before the ld. CIT(A) within two months from the date of receipt of this order. In case of any failure on the part of the assessee, the ld. CIT(A) is at liberty to pass order after considering the material placed on record.” 6.1The impugned assessment is not a best judgment assessment as contemplated by law: It is submitted that the AO also did not meet with the requirements of making a “best judgment assessment”. It is submitted that while making an assessment u/s 144 the AO does not have blind and arbitrary powers to make the assessment, the way he wants. On the contrary, the law enjoins upon him a more onerous duty in such a circumstance in as much as he has to act in the capacity of quasi-judicial authority, who is supposed to take a best judgment, while making a fairest possible assessment of the income of an assessee. 6.2 Fair estimation required- Judicial Guideline: For a better appreciation, a reference may kindly be made to the commentary by the ld. Authors Chaturvedi Pethisaria Vol. 3 Edition V at page 4932, reproduced hereunder verbatim:- “Best Judgment assessment – how to be made? – In making a best judgment assessment the Assessing Officer must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must be able to take into consideration local knowledge and repute in regard to the assessee’s circumstances, and his own knowledge of previous returns by and assessments of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA necessarily be guess-work in the matter, it must be honest guess-work [CIT Vs. Laxmi Narain Badridas , (1937) 5 ITR 170, 180 (PC), reversing (1934) 2 ITR 246 (Nag); CIT Vs. S. Sen, (1949) 17 ITR 355 (Orissa); Singh Engineering Works Vs. CIT , (1953) 24 ITR 93 (All); M.A. Rauf Vs. CIT, (1958) 33 ITR 843 (Pat); Mohanlal Mahribal Vs. CIT, (1982) 133 ITR 683 (MP) ; Ganga Prasad Sharma Vs. CIT, (1981) 132 ITR 87 (MP) & (1981) 127 ITR 27 (MO); Balchand Udairam Vs. State of Sikkim, (1989) 180 ITR 530, 553 (Sikkim); K.T. Thomas Vs. Ag ITO, (1990) 184 ITR 561, 565 (Ker.)]. In making a best judgment assessment the Assessing Officer does not possess absolutely arbitrary authority to assessee at any figure he likes and that although he is not bound by strict judicial principles he should be guided by rules of justice, equity and good conscience [Abdul Qayum & Co., Vs. CIT, (1933) 1 ITR 375, 378 (Oudh)]. A best judgment assessment is not by way penalty for non-compliance [Jot Ram Sher Singh Vs. CIT, (1934) 2 ITR 129 (All) and it cannot be made capriciously in utter disregard to the material on record [Gunda Subbayya Vs. CIT, (1939) 7 ITR 21, 26-7 (Mad-- FB); CIT Vs. S. Sen, (1949) 17 ITR 355 (Orissa)].”
6.3 A decision is in the case of CIT v/s Gotan Lime Khaniz Udyog (2002) 256 ITR 243 (Raj): However, your honor shall find that the lower authorities in the present case have not conformed to these settled principles by the courts, while making the impugned assessment u/s 144. Hence, the impugned order kindly be quashed or alternatively be set-aside to the AO to be made afresh or alternatively to the ld. CIT(A).
Hence, to do substantial justice, keeping all the facts and circumstances and considering the same sympathetically the impugned order therefore deserves to be quashed. Alternatively, it is therefore humbly prayed that the matter may kindly be set aside andrestored to the file of the ld. CIT(A) or AO for consideration and decision afresh and oblige.’’ 2.3 On the other hand, the ld. DR supported the orders of the lower authorities.
2.4 We have heard both the parties and perused the materials available on record. The Brief facts of the case are that the assessee is an individual SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA who is dealing in real estate. During the year under consideration, the assessee filed his Return of income for A.Y. 2013-14 on 30.03.2014 with a total income of Rs. 12,72,880/- representing ‘profit and gains from business of Rs. 13,65,892/- & income from Other Sources of Rs. 15,223/-. It is noticed that the AO issued notice u/s 148 of the Act for the reasons that the assessee had not shown income under the head Long term capital gain (in short “LTCG”) for an immoveable property transferred (i.e. Shop) alleging that the value of property as per S. 50C of the Act is Rs. 30,56,063/- being the value shown for calculation of stamp duty. During the proceedings, the AO issued various notices to the assessee requiring assessee to furnish details as no income has escaped assessment. In compliance to the notice u/s 142(1) dated 06.01.2022, the assessee replied with a letter dated 03.03.2022 wherein the assessee contendedthat: a. No immovable property was sold by him. b. Since assessee was a ‘Special Power of Attorney Holder’ for the said property on behalf of the real owner of property, namely ‘Surajmal’, Amarlal, Nemichand & Ashok Kumar vide POA/Muktyaarnama executed on 02.08.2010 c. The Assessee executed the sale deed of shop on dt 30.03.2013 only on behalf of original owners in favour of Chothmal Birla S/o Kesari Lal Birla for Rs. 5,00,000/- which was paid to the owners vide cheque no. 018474 dt. 11.05.2010.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA It is further noted that being not satisfied with the submissions of the assessee, the AO passed order dated 29.03.2022 by stating following reasons:-
(i) It is seen from the sale deed that the assessee is shown as seller along with four other sellers which is contrary to his claim that he is not owner. Further, it was not mentioned in the sale deed that he executed the sale deed as the power of Attorney holder. It is also seen that the sale deed was signed only by the assessee and not the real owners as claimed by him. The signatures of other four sellers are not affixed on the sale deed implying that the assessee is the sole owner and other co- owners signed only as consenting parties. It is a common knowledge that ownership in a immovable property gets transferred to the buyer only on execution of registered sale deed by the owner. Therefore, the absence of signatures of aforementioned four persons implies that assessee is the owner of the property sold. Further, the assessee had not furnished any “encumbrance certificate” showing the owner of the property as on the date of transfer.
(ii) It is seen from copy ofspecial power of attorney that the assessee is empowered to vacate the tenants, do construction, obtain electricity & water connections, obtain ‘ No objection certificate from any department, Further, it is seen that it is executed on Rs. 500/- stamp paper which is not registered but it is a notarized document. It is pertinent to mention here that is a partner in construction/builder partnership-firm implies that assessee is the owner of the property.
(iii) It is not clear whether the power of attorney is irrevocable or revocable power of attorney and also whether any consideration was paid by the assessee to persons who executed the said power of attorney. In the absence of these details the claim of the assessee that he did not sell the property as absolute owner is not acceptable.
(iv) It is also seen that the sale consideration of Rs. 5,00,000/- was paid to the sellers. No where it is mentioned in the sale deed that the sale consideration was paid only to other four co-owners mentioned in the sale deed. No evidence in this regard was submitted. The assessee has submitted copy of his bank account statement with the Bank of Baroda in support of his claimthat no sale consideration was received by him.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA Hence, the AO made an addition of Rs. 30,56,063/- as LTCG to the income of assessee. However, the assessee preferred an appeal before the CIT(A) who also passed an ex-parte order by observing that ‘’the assessee failed to provide any explanation with supporting documents/ evidence during this appellate proceeding. From the above conduct of the assessee, it is clear that the assessee is not interested in prosecuting its appeal. However, in the interest of natural justice the AO is directed to verify whether, the amount paid, of Rs.5,00.000/- by cheque in May 2010,was actually paid to the original owners of the property or not. If it is found that this amount was paid to the original owners as a consideration in connection with the transfer of the property, in that case I am of the opinion that it would be fair & proper to allow deduction in accordance with the provision of section 48 of the I.T.Act, in respect of this sum of Rs.5,00,000/- from the deemed value of sale consideration Rs. 30,56,063/-, in determining income chargeable to tax under the head Capital Gains. Further, the action of the AO in initiating reassessment proceeding by issuing notice u/s 148, is confirmed as it is apparent that the appellant has not disclosed in his Return of Income for the year, about the transaction related to transfer of immoveable property and Incidence of Capital Gains in such transfer. Hence, the appeal is partly allowed in terms of direction as stated herein SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA above, accordingly.’’ The Bench noticed from the entire conspectus of the case that the assessee had neither advanced adequate submissions / documents / objections before the AO nor before the ld. CIT(A). However, the ld.AR of the assessee prayed that one more chance may be given to contest the case and submit the documents before the lower authorities and the matter may be set aside to the AO for afresh consideration. The Bench noticed that since it is an admitted fact that the assessee is ex-parte before the AO and also before the ld. CIT(A), therefore, he could not put forth his defense. It was the bounded duty of the assessee to appear before the statutory authorities as and when called for. It is noticed that various opportunities were provided to the assessee for settling the issue but the assessee remained lethargic and unserious in pursuing his case. However, we are of the view that lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Hence, the matter is restored to the file of the AO to decide it afresh by providing one more opportunity of hearing, however, the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings. Thus, the appeal of the assessee is allowed for statistical purposes.
SHRI PUNEET SINGHVI VS ITO, WARD 2(1), KOTA 2.5 Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by AO independently in accordance with law. 3.0. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 13 /02/ 2025.