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Facts
The assessee's assessment for AY 2011-12 was reopened u/s 147 due to undeclared capital gain from a property sale. The AO disallowed claimed cost of improvement, recomputing Long Term Capital Gain (LTCG) and total income. The CIT(A) dismissed the assessee's first appeal ex-parte due to non-participation and subsequently dismissed a rectification application filed u/s 154, upholding the AO's additions.
Held
The ITAT held that the CIT(A)'s dismissal of the appeal without addressing specific legal grounds, including the validity of reassessment proceedings and natural justice violations, was arbitrary and constituted a mistake apparent from record. Consequently, the ITAT set aside the CIT(A)'s order and remanded the matter back for fresh adjudication, directing the CIT(A) to afford the assessee a reasonable opportunity of being heard and to submit fresh documentary evidence.
Key Issues
The key issues were whether the CIT(A) was justified in dismissing an appeal ex-parte without adjudicating specific legal challenges to reassessment and whether its subsequent dismissal of a rectification application for a non-speaking order was arbitrary and a mistake apparent from record.
Sections Cited
Section 154, Section 250, Section 143(3), Section 147, Section 148, Section 250(6), Section 142(1)
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, u/s.154 r.w.s. 250 of the Income- tax Act, 1961 (in short ‘the Act’), dated 21.09.2024, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 147 of the Act, dated 21.12.2018 for the assessment year 2011-12. The assessee has assailed the impugned order on the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the order passed by the Learned CIT (Appeal), NFAC u/s. 154 r.w.s. 250 which in turn is arising from order u/s. 250 dated 30.08.'23 is unsustainable inasmuch as the original order u/s. 250 dated 30.08.'23 has not been passed in terms of Section 250(6) of the Income Tax Act, 1961 which enjoins upon the Learned CIT (Appeal) to state the points for determination of Grounds of Appeal, the decision thereon and reasons for the decision for each of the Ground of Appeal separately, more particularly, when the assessee had inter alia assailed the legal validity of the reassessment proceedings on the ground that the copy of reasons recorded by the Learned A.O for initiating reassessment proceedings was not provided to the assessee in Form No.35 filed by the assessee against the assessment order passed by the Learned ITO-3(3), Raipur vide order dated 21.12.2018 u/s 143(3) r.w.s. 147 of Income Tax Act and there is no specific adjudication of the Learned CIT (Appeal) in his impugned order u/s 250 dated 30.08.’23 and the disposal of two legal grounds raised by the assessee in Form No. 35 did not require participation of the assessee and therefore could not have been summarily dismissed that to without dealing with the said Legal Grounds anywhere in the body of the impugned order u/s. 250 dated 30.08.’23 which renders the order u/s. 250 dated 30.08.’23 to be-suffering from mistake apparent from records and rectifiable u/s.154, hence, the impugned order u/s 154 r.w.s. 250 dated 23.10.’24 is wholly arbitrary, unjustified, illegal, irrational and therefore, liable to be set aside. It is prayed that the order u/s 154 r.w.s. 250 dated 23 10.’24 may kindly be set aside and the assessee may kindly be afforded an opportunity to present his case before the Learned CIT(Appeal).
2. On the facts and in the circumstances of the case, the order passed by the Learned CIT (Appeal) u/s 154 r.w.s. 250 dated 23.10.’24 is unsustainable inasmuch as the order u/s 250 dated 30.08.’23 passed by the Learned CIT (Appeal), NFAC is vitiated by the vice of violation of principals of natural justice and also contrary to the provisions of Section 250 owing to the reason that the Learned CIT (Appeal), NFAC did not confirm proper communication and/or service of the notices issued by NFAC to the assessee before passing the ex-parte older which is non-speaking and therefore, arbitrary, unjustified, and unlawful. It is prayed that the order passed by the Learned CIT (Appeal), NFAC u/s 154 r.w.s. 250 may kindly be set aside and the Learned CIT (Appeal) be directed to afford reasonable opportunity of being heard to the assessee and to put forward his submissions on merits of the grounds raised in the Grounds of Appeal.
3. On the facts and in the circumstances of the case, the order passed by the Learned ITO -3(3) u/s 143 (3) r.w.s. 147 is unsustainable, illegal and bad in law inasmuch as no Show Cause Notice u/s 142(1) was issued before passing the assessment order which renders the enhancement made to the total income to be arbitrary, irrational, illegal, and bad in law and the Learned CIT(Appeal) was not justified in not considering the said fact in his impugned order u/s 250 dated 30.08.2023, resultantly, the order passed by the Learned C1T (Appeal) u/s 250 dated 30.08.2023 was vitiated by the vice of mistake apparent from record, consequently, the impugned order u/s 154 r.w.s. 250 dated 23.10.2024 is also arbitrary, illegal and unjustified and therefore, liable to be set aside. It is prayed that the impugned order u/s 154 r.w.s. 250 dated 23.10.2024 may kindly be set aside and the Learned CIT(Appeal) may kindly be directed to afford reasonable opportunity of being heard to the assessee and dispose of the grounds of appeal on merits after considering all the facts and documents.
4. The Appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of Appeal.”
Succinctly stated, the assessee had filed his return of income for A.Y.2011-12 on 31.03.2013, declaring an income of Rs.1,57,280/-. Subsequently, the A.O based on information that though the assessee had during the subject year sold an immovable property for a consideration of Rs.47.57 lacs on 03.04.2010 but had not offered the same for tax under the head “capital gain” in his return of income, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act, dated 27.02.2018 was issued by the A.O. In compliance, the assessee had filed his return of income on 29.11.2018 declaring an income of Rs.1,57,280/- i.e. as was originally returned.
During the course of assessment proceedings, the A.O observed that the assessee while computing the income under the head Long Term Capital Gain (LTCG) on sale of the subject property, had, inter alia, raised claim for deduction of cost of improvement aggregating to Rs.9.75 lacs, viz. (i) improvement carried out during the year 1990-91: Rs.6,25,000/-; and (ii) improvement carried out during the year 1991-92 : Rs.3,50,000/-. As the assessee had failed to substantiate his aforesaid claim based on documentary evidence, therefore, the A.O declined the same. Accordingly, the A.O reworked out the LTCG on the sale of the immovable property at Rs.36,90,097/-, as under:
Sale consideration Rs.45,00,000 Less: Stamp duty Rs.4,20,630/- Rs.40,79,370/- Purchase cost (82,125 x 711/150) Rs.3,89,273/- Cost of improvement (As discussed Nil above) Long term capital gain Rs.36,90,097/- Accordingly, the A.O vide his order passed u/s.143(3) r.w.s. 147 of the Act determined the income of the assessee at Rs.38,47,380/-.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. Ostensibly, as the assessee despite having been afforded sufficient opportunities on seven occasions (including enablement of communication window) had failed to participate in the proceeding before the first appellate authority, therefore, the latter finding no infirmity in the view taken by the A.O dismissed the appeal, observing as under:
“5. Decision: It could be seen that the appellant was given adequate opportunities by way of notices issued as narrated above. However, the appellant/ AR has refrained from submitting response/submission during the entire appellate proceedings. If the appellant claims that the assessment order was objectionable or bad in law, he should have provided the supporting evidences. The appellate proceedings are first line of remedy to those who think that the injustice has been done by the A.O. However, the appellant failed to avail the same by simply not complying the various hearing notices issued. The appellant was duly informed about the enablement of communication window through which the appellant can voluntarily submit any submission/communication at any time but the same was not availed by the appellant. So, in the absence of the written submission and evidence, it remains unexplained as to how the order contended in this appeal is erroneous or bad in law. In addition, no request to adjourn the hearing dates was made during the entire appellate proceedings. Therefore, it can be assumed that the appellant is not interested in pursuing his own appeal. Before making any conclusion let me surface the relevant part of the decision of the Hon'ble Punjab & Haryana High Court which is rendered in the case of Anil Goel Vs CIT, [2008] 306 ITR 212 (Punjab & Haryana). The Hon'ble High Court in that case has held as under: "4. It is thus obvious on the plain language of section 250 of the Act that date and place of hearing was duly fixed. The assessee was also given notice along with notice to the Assessing Officer. The assessee had ample opportunity to make his submissions by appearing in person or through authorised representative. Despite fixing the case for seventeen hearings, no one had put in appearance nor any justifiable reason for adjournment was given.
5. The Tribunal also found that non-recording of reasons in support of order passed by CIT(A) would not amount to committing any illegality because the CIT(A) has adopted the reasoning advanced by the Assessing Officer and has upheld his order. The judgment of this Court, in the case of Popular Engineering Co. v. ITAT [2001] 248 ITR 5771, has been rightly relied upon wherein it has been observed that elaborate reasons need not be recorded by the CIT(A) as has been done by the Assessing Officer. The reasons are required to be clear and explicit indicating that the authority has considered the issue in controversy. If the appellate/revisional authority has to affirm such an order it is not required to give separate reasons which may be required in case the order is to be reversed by the appellate/revisional authority." It could be seen from the plain reading of the above decision that in the absence of any document/evidences, no separate reasons needs to be recorded by the appellate authority for affirming the order the AO. The appellant case was re-opened on the basis of information available with the Income Tax Department that although he had sold an immovable of Rs.47,57,000/- and had not admitted any LTCG. The AO has asked the appellant to furnish the documentary evidence of cost of improvement and its supporting evidences. However, it is evident that the appellant during the assessment as well as in the appellate proceedings failed to furnish documentary
evidences/proper explanation in support of his contention. So in view of aforesaid facts, I am not in a position to take a divergent view from the finding of the A.O. Hence, the action taken by the A.O appears to be in order. Accordingly, I uphold the addition made of Rs.36,90,097/- on account of long term capital gain. Accordingly, all the grounds raised by the appellant are dismissed.
6. In the result, the appellant’s appeal is dismissed.”
Thereafter, the assessee filed an application seeking rectification u/s. 154 of the Act, dated 21.09.2024 with the CIT(Appeals), wherein it was claimed that as the CIT(Appeals) had dismissed the appeal without adverting to the specific issues, based on which, the impugned addition was assailed before him, therefore, the same had rendered the order so passed by him as suffering from a mistake which was apparent, glaring, patent and obvious from the record. However, the aforesaid claim of the assessee did not find favour with the CIT(Appeals) who dismissed the rectification application, observing as under:
“03. I have carefully gone through the rectification application dated 20/09/2024 filed under section 250 of the Act. On carefully examination, it has been observed that the rectification sought pertains to dismiss the appellant appeal ex- partee. In the present appeal, the assessment proceedings was completed by the AO u/s.143(3) r.w.s.147 of the Act on 21/12/2018 assessing the total income at Rs.38,47,377/-. In the entire assessment, the AO has given ample opportunities to comply with statutory notices. However, the appellant remained silent and did not bother to comply statutory notices issued from time to time. However, the appellant is well aware and filed appeal before the CIT(A) within prescribed time. In the entire appellate proceeding, the CIT(A) has given ample opportunities (more than 06 times) to appellant to substantiate the issue with documentary evidences. However, appellant/AR has refrained from submitting response/submission during the ern appellate proceedings. Therefore, after considering the fact of the case, the CIT(, has dismissed the appellant's appeal and upheld the addition made by the AO. Nov, the appellant has filed rectification application before me stating that the CIT(A) should rectify the order passed u/s 250 of the Act. However, the appellant has failed to produce any substantive document before me during rectification proceeding which appears that there was some mistake which apparent from record. The CIT(A) has passed order u/s 250 of the Act after considering the fact of the case. Further, it could be seen that there is no mistake which is apparent from record in the order passed u/s 250 of the Act. Therefore, the rectification application filed by the appellant is hereby dismissed.
The assessee being aggrieved with the order passed by the CIT(Appeals) passed u/s.154 r.w.s. 250 of the Act, dated 23.10.2024 has carried the matter in appeal before the Tribunal.
I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
Shri Veekaas S Sharma, Ld. Authorized Representative (for short ‘AR’) for the assessee, at the threshold, submitted that the CIT(Appeals) had grossly erred in law and facts of the case in dismissing the appeal of the assessee vide a non-speaking order without dealing with the specific grounds, based on which, the validity of the jurisdiction assumed by the A.O for framing the assessment was assailed before him. Elaborating on his contention, the Ld. AR submitted that though the assessee had filed an application with the CIT(A)seeking rectification of the mistake that had crept in his order, but the latter had most arbitrarily rejected the same. The Ld. AR submitted that as the assessee had suffered the dismissal of his appeal based on a non-speaking order, which thus, had rendered the order passed by the CIT(Appeals) as suffering from a mistake apparent from record, therefore, the matter in all fairness be restored to the file of the first appellate authority with a direction to re-adjudicate the appeal after affording a reasonable opportunity of being heard to the assessee/appellant.
Per contra, Smt. Anubhaa Tah Goel, Ld. Sr. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. It was submitted by her that as the assessee despite having been afforded sufficient opportunities had failed to participate in the proceedings before the CIT(Appeals), therefore, the latter was constrained to dispose off the appeal based on the material available on record and had rightly upheld the addition made by the A.O.
I have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both the parties in the backdrop of the orders of the lower authorities. I find substance in the Ld. AR’s claim that the CIT(Appeals) without dealing with the specific issues, based on which, the assessment order was assailed before him, had dismissed the appeal. Admittedly, it is a matter of fact borne from record that the assessee vide his Grounds of appeal Nos. 2 & 3 had specifically assailed the validity of the jurisdiction that was assumed by the A.O for initiating the proceedings without making available a copy of the “reasons to believe” based on which the case of the assessee was reopened. I am of the view that now when the assessee had specifically challenged the validity of the jurisdiction that was assumed by the A.O for framing the assessment vide his order passed u/s.143(3) r.w.s. 147 of the Act, dated 21.12.2018, therefore, the CIT(Appeals) ought to have adjudicated the said issue by calling for the assessment records. Rather, I find that though the assessee vide his rectification application dated 20.09.2024 had, inter alia, relied on the judgment of the Hon’ble High Court of Bombay in the case of CIT (Central), Nagpur Vs. Prem Kumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom) seeking disposal of the appeal vide a speaking order but the first appellate authority by dismissing the said application had allowed his said mistake to perpetuate.
Considering the aforesaid facts, I am unable to concur with the view taken by the CIT(Appeals) who had most arbitrarily dismissed the application filed by the assessee vide his order u/s. 154 r.w.s. 250 of the Act, dated 21.09.2024. Accordingly, I restore the matter to the file of the CIT(Appeals) with a direction to re-adjudicate the appeal after affording a reasonable opportunity of being heard to the assessee. Needless to say, the CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his claim on the basis of fresh documentary evidence, if any.
In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations.