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Facts
Assessee sold a jointly-held immovable property for Rs. 45 lakhs (her share Rs. 22.5 lakhs) in AY 2011-12 and did not file an ITR. The AO initiated reassessment under Section 148, computed Long Term Capital Gain (LTCG) as Rs. 22.5 lakhs without allowing cost of acquisition or indexation. On appeal, the CIT(A) partially allowed cost and indexation for one part of the property but denied it for the other part of the same jointly-held property without assigning any reason.
Held
The Tribunal held that the CIT(A)'s order was cryptic and arbitrary, as it allowed cost of acquisition and indexation for one part of the jointly sold property but denied it for another part of the same property without proper reasoning. The Tribunal emphasized that a quasi-judicial authority must provide reasoned findings, which was absent in this case. Consequently, the Tribunal deleted the addition made by the lower authorities.
Key Issues
Whether the CIT(A) erred in arbitrarily denying cost of acquisition and indexation for a portion of a jointly-held property without providing proper reasoning, thereby violating principles of natural justice and rendering the order cryptic.
Sections Cited
Section 148 of the Income Tax Act, 1961, Section 2(14) of the Income Tax Act, Section 144 r.w.s. 147 of the Act
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM
This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)/NFAC, Delhi dated 19.01.2024 for the assessment year 2011-12 as per the following grounds of appeal on record:
1. The order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, in so far as it is prejudicial to the assessee is opposed to law, facts and circumstances of the case.
2. It is submitted that this impugned order lacks proper adjudication of the grounds vide Ground no.5,6,7,9 submitted by the appellant before the CIT (A), NFAC Delhi. This is a clear violation of the principle of natural justice and thus the impugned order liable to be quashed.
3. It is submitted that the Learned CIT (A), NFAC Delhi has erred in providing a fair personal hearing as requested by the appellant. This is clear violation of mandatory proceedings as envisaged in the National faceless appeal scheme, 2021.
4. It is submitted that the assessment order is totally illegal, unsustainable and void-ab-initio due to non-service of notice u/s. 148 of the Income Tax Act, 1961 which confers jurisdiction on the AO.
5. The Impugned assessment order is totally illegal, unsustainable and void-ab-initio, since the notices dated 03-09-2018 and 08-10- 2018 ought to have been served on the appellant were been served on the appellant.
6. The non-service of the notices during the assessment proceedings was prejudicial to the appellant in so far as it violates the principles of natural justice.
7. The show cause notice dated 30-10-2018 has also not been served on the appellant and is Violations of natural justice and violated the binding instructions no 20 /2015 dated 29-12-2015 Issued by CBDT.
8. The appellant is residing at NN 11, Nanjappa Nagar, Olavakkode P0, Palakkad Dist. Kerala State-678002 for the past so many years and hence the ITO, Ward 3(1), Raipur (C.G) suffers from want of jurisdiction.
9. The appellant craves leave to add or amend any grounds of appeal
before it is finally disposed off.
10. For these amongst other grounds that may permitted to be raised and evidences adduced at the time of hearing it is prayed that the justice be done to the appellant by quashing or modifying the impugned order of assessment.
2. The brief facts in this case are that the Assessing Officer on the basis of specific information that during the year under consideration, though assessee had sold an immovable property situated at Nenmara, Ellenthoor Taluk Distt.- Palakkad, Kerala for Rs.45 lacs but had not filed her return of income, issued a notice u/s.148 of the Income Tax Act, 1961 (for short ‘the Act’) on 24.03.2018 after obtaining necessary approval from the Joint Commissioner of Income Tax, Range-3, Raipur and assessee was asked to file her return of income for A.Y 2011-12. Despite having received the notices, assessee did not comply with the aforesaid notices and did not participated in the assessment proceedings. Also, the A.O observed that during the year under consideration the assessee jointly with Aravindakshan Nair had sold an immovable property in a form of a piece of plot admeasuring area of 0.740 Hectare at Survey No 484, Sub Registration No 3,4,5,11 & 12 No 2 Village no 47, of Nenmara, Taluk-EUanthoor, Distt- Palakkad, Kerala along with shed constructed on the land on 13.12.2010 for a sum of Rs.45,00,000/- wherein the assessee's share was Rs. 22,50.000/-. Also, it was noticed by the A.O that the case of other person Aravindakshan Nair had also been reopened and scrutiny proceedings are pending with ITO-4(4), Raipur, his share of sale consideration was separately been examined in his case. However, since despite giving numerous opportunities assessee has failed to furnish supporting evidences in respect of the above transaction, it was presumed by the A.O that the sold land was hold for more than three years and so it is long term capital asset. Also, the A.O was of the view that since there was a shed constructed on the land, the property cannot be said to be an agricultural land and therefore, it is a capital asset as per section 2(14) of the Act. The A.O also observed that since no details in respect of purchase of the subject property were available, therefore, no deduction for cost of acquisition was allowed. Accordingly, the A.O calculated the Long Term Capital Gain (LTCG) as under:
“Sale Consideration : Rs.45,00,000/- Assessee’s share of sale consideration : Rs.22,50,000/- Indexed cost of purchase/acquisition-Nil Long Term Capital Gain : Rs.22,50,000/-”
Accordingly, the A.O vide his order passed u/s. 144 r.w.s. 147 of the Act, dated 29.11.2018 had made an addition of Rs.22,50,000/-.
On appeal before the First Appellate Authority, the CIT(Appeals) had provided cost of indexation and acquisition for one of the property and provided relief to Rs.7 lacs (approx.) and at present the impugned demand stands to Rs.15,11,628/- which resulted to tax effect @20% i.e. Rs.3,23,258/-.
The Ld. Authorized Representative (for short “AR’) for the assessee submitted that the main grievance of the assessee is that there has been sale of two properties, in which, the A.O had not provided cost of indexation and cost of acquisition and made total demand to Rs.22,50,000/-. It was submitted by the Ld. AR that the CIT(Appeals) had considered the sale deed of one of the property and appreciated that it is a property between a father and daughter which was sold and accordingly, had taken cost of acquisition and necessary deduction with respect to one of the property while he had denied the same in respect of other property.
Per contra, the Ld. Sr. Departmental Representative (for short ‘DR’) relied on the order of the CIT(Appeals)/NFAC and submitted that as per the facts available on record/sale deed and the order of the CIT(Appeals)/NFAC, it is correct that cost of acquisition and cost of indexation had been provided to the assessee in respect of one property, whereas, actually the sale deed was jointly held by a father and daughter for both the properties.
I have carefully considered the entire documents on record and facts and circumstances of the case and submissions made by both the parties. This is a case where the property was sold as per the sale deed by a father and daughter and the CIT(Appeals)/NFAC had provided relief towards cost of acquisition and indexation in respect of one property. It is also pertinent to mention in the level of the Assessing Officer, there was no details available before him and accordingly, when the matter came up before the CIT(Appeals)/NFAC, it had taken cost of acquisition and necessary deduction with respect to one of the property while denied the same in respect of other property without assigning any reason in its order and that of the other part of the property, the cost of indexation and acquisition had not been given. It is also noticed from Para 5.1 of the CIT(Appeals)’s order, that out of the total consideration of Rs.45 lakhs, the assessee’s share was only Rs.19 lakhs though the assessee claimed in written submission that her share was Rs.22.5 lacs, therefore, he had calculated LTCG at Rs.15,11,628/-. For the sake of clarity, Para 5.1. of the CIT(Appeals)’s order is culled out as follows:
“5.1 During appeal proceedings this office verified purchase deed and sale deed submitted by the appellant. As per the purchase deed dated 20/12/2007 the appellant purchased 7.4 are (18 1/2 cents) land for Rs.300,000. She sold this land along with her father's land (total 44.97 are) for a total consideration of Rs.45 lakhs vide sale deed dated 13/12/2010. The period of holding is not sufficient to claim long term capital gain. But, a lenient view is being taken as the period of holding is less by only 7 days and the act was subsequently amended from 36 months to 24 months. It is mentioned in the sale deed that it is a commercial land with a saw- mill. As per the sale deed, out of total consideration of Rs.45 lakhs, the appellant's share was only Rs.19 lakhs, though the appellant claimed in written submission that her share was Rs.22.5 lakhs. So the long term capital gain is calculated as follows; Full value of consideration — 19,00,000 Indexed cost of acquisition — 3,88,372(300000x167/129) Long term capital gain - 15,11,628.
Hence it is held that the appellant is liable to pay tax on Long Term Capital Gain of Rs.15,11,628/-. As a result the appeal is partly allowed.”
That considering the arguments of the both the parties, since entire transaction emerges from one sale deed alone which had been duly considered by the department and for one property cost of acquisition/indexation was allowed, therefore, without giving any reason for not providing cost of acquisition and indexation in respect of the other property which also is the part of the same sale deed, hence, the same has to be termed as arbitrary and infructuous.
In this background when Para 5.1 of the CIT(Appeals)’s order is perused, it clearly appears that there is no finding or reasoning as regards his decision arrived at which is mandatory as Quasi-Judicial Authority and hence, I am of the considered view that the same takes the character of a cryptic order bereft of facts and reasoning and the appeal had been decided merely in a summary manner. The essential element is that based on same document i.e. sale deed wherein out of the cost of acquisition and indexation of the joint property, one part was allowed and other part of cost of acquisition and indexation had not been allowed to the assessee without assigning any reason. That being quasi-judicial authority and First Appellate authority, it is first and foremost that the appellate authority should consider all the documents available on record and come to a reasonable finding and demonstrate the reasoning for that decision which he had arrived at. In the present order of Ld. CIT(Appeals)/NFAC, no such exercise has been done.
Before parting, it is also pertinent to mention that as submitted by the Ld. AR that this appeal had been going on before the Tribunal since March, 2024 i.e. one year without any adjudication. Considering all these facts and examination as per records, I do not find any justification in the order Ld.CIT(Appeals)/NFAC sustaining the impugned addition and accordingly, the same is deleted.
As per the above terms the grounds of appeal of the assessee stands allowed.
In the result, the appeal of the assessee is allowed. 10.
Order pronounced in open court on 04th day of March, 2025.