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Facts
The Assessing Officer (AO) reopened assessment based on AIR information that the assessee sold three properties for Rs. 1.45 Cr, but did not offer capital gains. Due to non-compliance with various notices (u/s 133(6), 148, 142(1)), the AO completed a best judgment assessment u/s 144, computing capital gains of Rs. 1.20 Cr. The CIT(A) dismissed the assessee's appeal in limine for non-compliance with Section 249(4)(b). Before the ITAT, the assessee contended that they had in fact purchased, not sold, the properties and presented new sale deeds as evidence for the first time.
Held
The ITAT noted that the assessee's claim, supported by new evidence not previously submitted to lower authorities, required factual verification by the departmental authorities. Consequently, the ITAT set aside the CIT(A)'s order and restored the quantum assessment to the AO for fresh adjudication, providing the assessee a reasonable opportunity of being heard. As the underlying addition did not survive due to the remand, the penalty imposed under section 271(1)(c) was deleted.
Key Issues
1. Whether the reopening of assessment u/s 147 was valid when the assessee claimed the facts relied upon were incorrect (purchase vs. sale of properties). 2. Whether the CIT(A) was justified in dismissing the appeal in limine due to non-compliance with Section 249(4)(b). 3. Whether penalty u/s 271(1)(c) could be sustained when the quantum addition was remanded for fresh adjudication.
Sections Cited
Section 271(1)(c), Section 147, Section 148, Section 133(6), Section 142(1), Section 144, Section 249(4)(b)
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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & SHRI M. BALAGANESH
PER SAKTIJIT DEY, VICE-PRESIDENT
Captioned appeals by the assessee arise out of two separate orders of learned Commissioner of Income Tax (Appeals), Noida, for the assessment year 2009-10. While arises out of quantum proceedings, is against imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 (In short ‘the Act’). & 3400/Del/2019 AY: 2009-10 ITA No.3399/Del/2019 (Quantum Appeal)
The assessee has raised the following additional ground:
That the CIT(A)-1, Noida, has erred in law and on facts in sustaining the assessment as the notice u/s148 has not been served on the assessee. Hence, the assessment as such may be quashed.
2. That the CIT(A)-1, Noida has erred in law and on facts in sustaining the assessment as reopening u/s 147 is based on incorrect facts. Hence, the assessment as such may be quashed. 3. That the CIT(A)-1, Noida, has erred in law and on facts in sustaining the assessment as reopening u/s 147 is mechanical in nature and without application of mind. Hence, the assessment as such may be quashed.
Since, the issues raised in the additional grounds are purely legal and jurisdictional issues, we are inclined to admit them for adjudication.
Briefly the facts are, the assessee is a resident individual.
Based on AIR information, the Assessing Officer came to know that in the year under consideration, the assessee had sold three properties for aggregate consideration of Rs.1,45,72,000/-. Since, the Assessing Officer had no information as to whether the assessee has filed any return of income offering such capital gain, he issued a notice under section 133(6) of the Act to the assessee seeking information relating to aforesaid transactions. However, the assessee did not comply. Therefore, having reason to believe 2 | P a g e & 3400/Del/2019 AY: 2009-10 that the income chargeable to tax has escaped assessment, the Assessing Officer reopened the assessment under section 147 of the Act. As alleged by the Assessing Officer, the assessee did not comply with the notices issued under sections 148 and 142(1) of the Act. Therefore, due to complete lack of response from assessee’s side, the Assessing Officer proceeded to complete the assessment to the best of his judgment invoking the provisions of section 144 of the Act. While doing so, he computed net capital gain of Rs.1,20,68,220/-. Against the assessment order so passed, the assessee preferred an appeal before learned first appellate authority. As observed by learned first appellate authority, the assessee failed to comply with any of the hearing notices issued by him. Therefore, he proceeded to decide assessee’s appeal ex-parte. While doing so, learned first appellate authority observed that the assessee has failed to pay the amount equal to the amount of advance tax, which she was required to pay, in terms of section 249(4)(b) of the Act. Alleging non- compliance with the provisions of section 249(4)(b) of the Act, learned first appellate authority dismissed the appeal in limine without deciding it on merits. & 3400/Del/2019 AY: 2009-10
Before us, learned counsel appearing for the assessee submitted that the reopening of assessment has been made on unsubstantiated reasons to belief. Drawing our attention to the reasons recorded for reopening of assessment, he submitted that the Assessing Officer has reopened the assessment alleging that capital gain derived from sale of three immovable properties has not been shown by the assessee. Whereas, he submitted, in the year under consideration, the assessee had not sold any properties, but in fact, had purchased the properties. In this context, he drew our attention to the copies of the sale deeds placed in the paper-book evidencing purchase of properties by the assessee. Thus, he submitted, since the reopening of assessment is based on wrong facts, initiation of proceeding under section 147 of the Act is vitiated. Therefore, the assessment order should be quashed.
However, he fairly submitted that the sale deeds evidencing purchase of property by the assessee were not filed before the departmental authorities and are being furnished as additional evidences before the Tribunal. & 3400/Del/2019 AY: 2009-10
The learned Departmental Representative submitted, the assessee neither appeared before the Assessing Officer, nor before the first appellate authority. He submitted, no evidences were furnished by the assessee before the departmental authorities to establish her claim that the information received by the Assessing Officer is incorrect. Thus, he submitted, in absence of any response from assessee’s side, the Assessing Officer had no other alternative, but to proceed for completing the assessment based on information available on record.
We have considered rival submissions and perused the materials on record. As could be seen, the Assessing Officer has reopened the assessment under section 147 of the Act, based on AIR information that the assessee had sold three properties during the year. Whereas, she has not offered any capital gain. It is the say of the assessee before us that the facts, based on which, the assessment has been reopened are completely wrong facts and the assessee had, in fact, not sold any land during the year, but had purchased the land. Therefore, there is no question of offering any capital gain. In the context of the aforesaid submission of the assessee, it must be observed, in course of & 3400/Del/2019 AY: 2009-10 assessment proceedings, the assessee remained totally absent and did not comply with statutory notices issued by the Assessing Officer. Therefore, in absence of any compliance by the assessee, the Assessing Officer was compelled to complete the assessment ex-parte to the best of his judgment. Even, before the first appellate authority, the assessee remained absent and the appeal was dismissed in limine without going into the merits.
For the first time before us, the assessee has taken a stand that contrary to the observations of the departmental authorities, the assessee, in fact, had purchased and not sold land during the year. In this context, the assessee has drawn our attention to three sale deeds placed in the paper-book. Admittedly, these evidences were not furnished before the departmental authorities.
Even, the assessee never brought it to the notice of the departmental authorities that in the year under consideration the assessee had purchased and not sold land. The veracity of assessee’s claim that in the year under dispute, the assessee had purchased the land but has not sold any land, has never been factually verified by any of the departmental authorities. Without such verification, assessee’s claim cannot be accepted at face & 3400/Del/2019 AY: 2009-10 value. However, we are of the view that the plea taken by the assessee before us that the reopening of assessment is based on wrong facts, requires factual verification. Accordingly, we set aside the impugned order of learned first appellate authority and restore all the issues arising in the appeal, including the issues raised in the additional grounds to the Assessing Officer for fresh adjudication, after providing due and reasonable opportunity of being heard to the assessee.
It is made clear, the Assessing Officer must restrict himself to the grounds/issues arising in this appeal and cannot expand the scope of assessment to any other new issue. Grounds are allowed for statistical purposes.
In the result, appeal is allowed for statistical purposes.
In view of our decision in the quantum appeal (supra), since, the issues have been restored back to the Assessing Officer for fresh adjudication, the addition no longer survive. Therefore, the penalty imposed on such addition cannot survive, at least for the present. & 3400/Del/2019 AY: 2009-10
In the result, penalty imposed under section 271(1)(c) of the Act is deleted.
To sum up, quantum appeal in is allowed for statistical purposes and penalty appeal in ITA No. 3400/Del/2019 is allowed.
Order pronounced in the open court on 10th July, 2024