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Facts
The AO assessed Long Term Capital Gains (LTCG) of Rs. 70,07,715/- for AY 2014-15 based on a Joint Development Agreement. The assessee's appeal to the CIT(A) was dismissed, sustaining the addition.
Held
The Tribunal found that the CIT(A) failed to provide independent findings, merely reproducing the AO's order, and denied the assessee an adequate opportunity of being heard. Consequently, the ITAT set aside the CIT(A)'s order and remanded the case for fresh adjudication.
Key Issues
Whether the CIT(A) erred by failing to provide an independent finding and upholding LTCG on a Joint Development Agreement without considering assessee's arguments, thus denying natural justice and violating principles of natural justice.
Sections Cited
Section 250, Section 147, Section 144, Section 48, Section 45(5A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA BENCH”, PATNA
(Assessment Year 2014-15) Shardha Devi, Sarari, Near Durga Asthan, Khagaul, Bihar - 801105 [PAN: CKSPD5978E] ..............…...…………….... Appellant vs. Income Tax Officer, Patna Ward 6(4), Income Tax Department, Patna, Bihar – 800001 ..….............................. Respondent Appearances by: Assessee represented by : Sh. Sudeep Sinha, Adv. Department represented by : Sh. Ashwani Kr. Singal, JCIT Date of concluding the hearing : 22.04.2025 Date of pronouncing the order : 23.04.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER
The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereinafter “the Act”), passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter the Ld. CIT(A)”] vide order dated 28.03.2024 for AY 2014-15.
1.1 In this case, the Ld. AO passed an order u/s 147/144 of the Act on which the Long Term Capital Gains (LTCG) worked out as Rs. 70,07,715/-. The LTCG has been worked out on the basis of Joint Development Agreement entered into by the assessee. Aggrieved with this action of the Ld. AO, the assessee approached the Ld. CIT(A) and there also the assessee could not succeed since the basis for making the impugned addition was sustained by the Ld. CIT(A).
“1. For that the Learned CIT(A) has erred both in law and on facts. 2. For that Learned CIT(A) has dismissed the appeal without going into the merits of the case and without adjudicating the grounds of appeal raised by the appellant, thereby, violating the provisions laid out in section 250(6) of the Income Tax Act, 1961.
3. For that as per section 250(6) of the Act the Ld. CIT(A) is required to pass an order on points of determination with reason. In the present case, the Ld. CIT(A) appears to have verbatim reproduced the conclusions made in the assessment order and has completely ignored all the grounds raised by the appellant and therefore, the impugned order passed by Ld. CIT(A) requires to be annulled.
4. For that the appellant was not afforded fit and proper opportunity of being heard as the order of the Ld. CIT(A) has no mention of the detailed written submission and supporting documents furnished by the appellant on e-Proceeding page of the Income Tax portal, in response to the hearing notice u/s 250 issued by the Ld. CIT(A) on 12.09.2023. Therefore, in violation of principles of natural justice the said impugned order requires to be quashed.
5. For that the unjustified dismissal of appeal by Ld. CIT(A), by not adjudicating on the grounds raised by the appellant and without going into the merits of the case, has only exacerbated the financial hardships in terms of bearing legal expenses and appeal fees in preferring second appeal before the Tribunal. It may be duly noted that the appellant is an old lady who is a widow and 65 per cent physically handicapped.
6. For that the A.O. has made addition of long term capital gain, on account of entering into a joint development agreement, purely on hypothetical assumptions. It is a settled law that income tax cannot be levied on hypothetical income and therefore, the addition of LTCG made by the A.O., confirmed by Ld. CIT(A), may be deleted.
7. For that the A.O. has erred in not giving credit of indexed cost of acquisition, as the immovable property in question is ancestral in nature, which clearly violates the provisions of section 48 of the Income Tax Act, 1961 and therefore, the addition of Rs.70,07,715 as LTCG may be deleted.
8. For that the developer has not obtained any sanctioned map for developing the immovable property in question till date and in absence of such map, the A.O. has taken the super built up area and calculated cost of construction on an estimation based purely on hypothetical assumptions. Therefore, the addition of LTCG amounting to Rs. 70,07,715 may be deleted.
9. For that as per section 45(SA) of the Act, the capital gain would arise in the year the completion certificate by a competent authority is given to the appellant. Till date the developer has neither started the construction on the immovable property in question nor has it obtained any completion certificate. Therefore, in violation of section 45(5A) of the Act, no LTCG arose to the appellant in the relevant AY and accordingly, the addition of Rs. 70,07,715 and the demand of Rs. 23,67,486 may be deleted.
Shardha Devi 10. For that one has to pay income tax out of income of the year, but the appellant has not derived any income during the year because the developer has not developed the property till date. Though the appellant has not derived any income she has to pay to the tune of Rs. 23,67,486 which is arbitrary and unjustified.
For that any other grounds, if any, may be urged at the time of hearing.”
Before us, the Ld. AR vehemently argued that the Ld. CIT(A) has not given any independent finding of fact and has merely reproduced the finding of Ld. AO. The Ld. AR took us through various portions of the impugned order to show that the exact finding of the Ld. AO have been reproduced in the impugned order and thereafter, the appeal has been dismissed. The Ld. AR argued that there was denial of natural justice.
2.1 The Ld. DR supported the orders of authorities below.
We have carefully considered the submissions of Ld. AR/DR and have also gone through the records before us. It is seen that indeed the Ld. CIT(A) has not given any finding whatsoever and has also not considered any argument from the side of the assessee. In this background, we deem it fit to set aside the impugned order and remand this matter back to the file of Ld. CIT(A) for fresh adjudication. Needless to say, the Ld. CIT(A) would give adequate opportunity of being heard to the assessee.
In the result, appeal filed by the assessee is allowed for statistical purposes.