ARATHARAKKAL PUTHUKKUDIYIL MOHAMMAD,,NASHIK vs. INCOME TAX OFFICER,, NASHIK

PER D. KARUNAKARA RAO, AM:

This is the appeal filed by the assessee against the order of CIT(A)- 1, Nashik, dated 16-03-2017 for the Assessment Year 2011-12.

“1. On the basis of facts and in the circumstances of the case and as per law, the CIT(A)-1 Nashik, is not justified in dismissing the appeal of the appellant by holding that the appellant has neither furnished any reason for not filing the evidence before the AO nor provided any sufficient cause particularly when the appellant has made application to CIT(A)-1 vide letter dated 21/02/2017 mentioning complete facts & reason therein. 2. On the basis of facts and in the circumstances of the case and as per law, the CIT(A)-1 Nashik, is not justified in not allowing the benefit of indexed cost of acquisition in respect of construction/structure on the area of Plot Nos. 3 & 7 bearing Survey No.265, Wadiwarhe, Tal. Igatpuri, Dist. Nashik particularly when the appellant has furnished the evidence in respect of the same.

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and is engaged in the business of trading in Toys. Assessee filed the

return of income on 02-03-2012 declaring total income of Rs.1,53,100/-

claiming refund of Rs.1,69,734/-. The return was processed

u/s.143(1)(a) of the Act with refund of Rs.1,78,220/-. AO noticed that

the assessee’s land was transferred under compulsory acquisition of

land and Rs.16,97,332/- was paid after deducting TDS of Rs.1,69,734/-

u/s.194L of the Act. Therefore, treating the same as concealed income,

a notice u/s.148 of the Act was issued for taxing the same. Assessee filed

written submissions. Thereafter, notices u/s.143(2) and 142(1) were

issued on 18-03-2014. A show cause notice was also issued to the

assessee on 13-03-2015. However, assessee did not respond. AO

proceeded to make addition of Rs.14,47,402/- on the basis of

information gathered from the Special Land Acquisition Officer, National

Highway Project, Nashik. The Special Land Acquisition Officer, vide

letter dated 16-03-2015 informed that the land in question is non-

agriculture and therefore, the AO opined that the same is under purview

of capital asset u/s.2(14) of the Act. On finding that the land is an

ancestral land the AO took the cost of acquisition as on 1981 and

computed the capital gain as under :

Actual consideration received from Land Acquisition Officer Rs.16,97,332/- Less : Cost of Acquisition Area 676 Sq.mtrs x Rs.52/- P. Mtrs = Rs.35,152/- Index Cost = 731280 X 711/100 Rs.2,49,930/- ----------------------- Long Term Capital Gain Rs.14,47,402/- ----------------

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Eventually, the AO made addition of Rs.14,47,502/- u/s.143(3)

r.w.s.147 of the Act and determined the income at Rs.16,00,500/-.

the CIT(A).

Special Land Acquisition Officer acquired the part of Plot Nos. 3,5,6 and

7 as well as structure/construction thereon for the purpose of widening

of National Highway. Assessee received the compensation of

Rs.16,97,332/-. Details of compensation are given in Page 4 of the

appellate order. Referring to the constructed building on the said land,

assessee requested for granting indexed cost in respect of constructed

area. Assessee filed written submissions before the CIT(A) filing certain

additional evidences. CIT(A) did not admit the said additional evidences

stating that the assessee has not demonstrated any sufficient cause for

not submitting the said additional evidences before the AO. Contents of

Para Nos.4.8 to 4.11 are relevant. At the end of First appellate

proceedings, the CIT(A) upheld the addition made by the AO.

appeal with the grounds extracted above.

indexed cost of acquisition relatable to buildings and also admitting

additional evidences are the issues in the appeal. Stating that the

additional evidences filed before the CIT(A) in connection with the

request for considering the same was denied invoking the provisions of

section 46A of the I.T. Rules, 1962. Ld. Counsel for the assessee

requested for directing the CIT(A) for admitting the same. Explaining the

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fact that these papers are relevant and also in the interest of

administration of justice, Ld. Counsel submitted that it relates to the

indexed cost of acquisition of the structures on the area of plot at

Sy.No.265, Wadiwarhe, Tal. Igatpuri, Nashik acquired by the

Government. Explaining the reasons for not submitting these papers

before the AO, Ld. Counsel for the assessee submitted that the assessee

is under bonafide belief that the land in question constitutes an

agricultural land and therefore, he was sure of relief on that ground of

Agricultural land. Contrary to the same, AO proceeded to tax the sale

proceeds which was confirmed by the CIT(A). It is the claim of the Ld.

Counsel for the assessee that the same constitutes a reasonable cause

and therefore, the CIT(A) erred in not admitting the additional evidences

leavealone the adjudication of the relevant grounds. As such, assessee

has no issue on the taxability of the compensation received from the

Government.

was completed in an ex-parte manner and there is non-compliance by

the assessee before the assessing authorities. Eventually, the AO

determined the assessed income at Rs.16,00,500/- against the returned

income of Rs.1,53,100/-. AO made addition of Rs.14,47,402/- on

account of the compensation received from the Government in

connection with acquisition of land at Sy.No.265, Wadiwarhe, Tal.

Igatpuri, Nashik. No discussion in the assessment about the super

structures/construction existed on the said land at the relevant point of

time. It is also a fact that AO gave 3 to 4 opportunities before

assessment is made. Before the First Appellate authority, the additional

evidence is furnished about the existence of the said super structure on

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the said Sy.No.265 and assessee sought reasonable deduction with

regard to the cost of acquisition of property while computing the capital

gains taxable on the said compensation. The discussion given in Para

Nos.4.7 to 4.11 of the order of CIT(A) is relevant. CIT(A) invoked the

provisions of Rule 46A of the Act and rejected the admission of the said

additional evidence and confirmed the order of the AO. For the sake of

completeness, the operational para Nos. 4.11 and 4.12 of the order of

CIT(A) :

“4.11 In view of the above, the additional evidence cannot be admitted as assessee has not demonstrated the sufficient cause for admission of the same. Therefore, the same is rejected. 4.12 From the assessment order, it is observed that the appellant neither responded to the notices issued nor to the summon issued u/s.131 of the Act. A final show cause was also issued by the Assessing Officer stating that in case of no response from assessee addition of Rs.14,47,402/- will be made. There was no compliance to the show cause issued. The AO thereafter computed the capital gain as per material available on record. I find no infirmity in the order of the Assessing Officer while computing cost of acquisition.”

the CIT(A) goes to the root of the matter relating to quantum of

income/tax. However, the evidences were not rejected basing on the

reasoning that they are not genuine and it has no linkage to the issue

under consideration. When there is a building existing on the land

acquired by the Government as a part of widening of the National

Highway, the assessee must have certainly incurred certain expenditure

on the said construction/super structure. The details are placed before

me in the paper book (Pages 1 to 3 of the paper book). According to the

submissions of the assessee, the compensation categorically specified for

the land as well as the constructed building. Assessee’s letters to the AO

only indicate the arguments relating to the exemptness of the

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compensation received by the assessee on the ground of Agricultural

nature of the land. The arguments relating to merits were never raised.

Thus, I am of the view that there is direct nexus of the evidence to the issue under consideration. Therefore, I am of the opinion that admitting the additional evidence is in the interest of administration of justice. Therefore, I direct the CIT(A) to admit the said additional evidences and adjudicate the issue afresh after giving reasonable opportunity of being heard to the assessee. Accordingly, the grounds

raised by the assessee are allowed for statistical purposes.

purposes.

Order pronounced on this 22nd day of June, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; िदनांक Dated : 22nd June, 2018. Satish

आदेश की !ितिलिप अ#ेिषत/Copy of the Order is forwarded to : अपीलाथ� / The Appellant; 1. ��थ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The Pr.CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” 5. / DR ‘SMC’, ITAT, Pune; गाड# फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER,स

स�ािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune