What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in admitting additional evidence without giving the AO an opportunity to examine it, violating Rule 46A of the Income Tax Rules. The matter was therefore remanded to the AO for fresh assessment.

The Revenue appealed against the CIT(A)'s order which allowed additional evidence (VDIS certificate and bills/vouchers) produced by the assessee without providing an opportunity to the AO. The assessee had claimed deductions for cost of acquisition and improvement of land, and exemption under Section 54.

What were the issues?

Whether the CIT(A) erred in admitting additional evidence without providing an opportunity to the AO, thereby violating procedural fairness.

Asstt.CIT, Cir.11(2) vs Smt. Kalpana Abhay Mutha | ITAT Pune 2018

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

For Appellant: Shri Ajay Modi, JCIT

For Respondent: Shri Hari Krishan

Hearing: 19.03.2018Pronounced: 21.03.2018

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Revenue against the order of CIT(A)-I, Pune, dated 29-09-2011 for the Assessment Year 2007-08.

Grounds raised by the Revenue read as under :

“1. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in relying upon the additional evidence produced by the assessee of Voluntary Disclosure of Income Scheme, 1997 certificate of Rs.50 lakhs treating the same as the source for investment in purchase of land at Karve Nagar even though the same was not produced before the AO during the assessment proceedings. The tax effect of the same is Rs.11,70,559/-. 2. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in relying upon the additional evidence produced by the assessee of bills and vouchers relating to the cost of improvement of the land at Karve Nagar even though the same was not produced before the AO during the assessment proceedings. The tax effect of the same is Rs.14,91,680/-. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) grossly erred in not calling for report from the AO when additional evidence was produced before the CIT(A).

The appellant craves to leave, add, amend or alter any ground(s) of appeal.”

Briefly stated relevant facts are that the assessee is an individual and

is engaged in the business of trading in garments, dress material etc.

Assessee derives income from business, income from capital gains and

income from other sources. Assessee filed the return of income on

18-09-2008 declaring total income of Rs.97,22,014/-. In the return of

income for the year under consideration, assessee disclosed the long term

capital gains on sale of vacant land situated at Sr.No.10/15, Karve Nagar,

Pune. Assessee entered into a development agreement with M/s. Shree

Balaji Developers and Mr. Abhay Bansilal Mutha, Mr. Kapil Abhay Mutha

for a sale consideration of Rs.3.51 crores. The said land was originally

purchased by the assessee on 07-12-1998 for a consideration of Rs.37.88

lakhs (which includes stamp duty, registration and other legal expenses). In

the return, assessee computed the long term capital gain at

Rs.1,29,30,566/-. Details mentioned at Para No.3.2 of the assessment order

are relevant and the same are extracted here as under for the sake of

completeness :

Sale consideration 3,51,00,000 Cost of Selling 3,51,000 Net Sale Consideration 3,47,49,000 Indexed cost of Improvement FY 1998-99 20,85,335 FY 1999-00 19,10,690 FY 2000-01 10,81,850 FY 2001-02 27,412 FY 2002-03 1,45,134 FY 2003-04 28,77,444 FY 2004-05 17,08,921 FY 2005-06 5,16,053 FY 2006-07 5,20,361 Total 1,08,73,206 Balance 2,38,75,794 Less : Investment in purchase of (-)1,09,45,228 Residential property u/s.54 Long Term Capital Gain 1,29,30,566

The table given above shows that the assessee claimed the indexed cost of

improvement of Rs.1,08,73,206/-. There is no claim of deduction on

account of cost of purchase of asset. Further, assessee invested the part of

the capital gains in a residential property and claimed the deduction u/s.54

of the Act to the extent of Rs.1,09,45,228/-.

During the assessment proceedings, AO denied the benefit of indexed

cost of improvement for want of evidences and only allowed the claim of

deduction u/s.54 of the Act. According to the AO, the taxable long term

capital gains work out to Rs.2,35,21,850/-. Details of computation of

capital gains by the AO are given in Para 3.4 of the assessment order and

the same are extracted as under :

Sale consideration 3,51,00,000 Less : Exemption u/s.54 (-)1,15,78,150 Long Term Capital Gain 2,35,21,850

During the First Appellate proceedings, assessee made various written

submissions. The source of funds for purchase of asset was also the issue

for scrutiny by the AO. In this regard, the assessee furnished the evidences

for cost of acquisition of Rs.37.88 lakhs for the said land. Assessee

furnished the details of disclosure of cash of Rs.50 lakhs under Voluntary

Disclosure of Income Scheme, 1997 (in short ‘VDIS’) and filed a copy of the

VDIS Certificate No.308/73, dated 18-12-1997. The said details were

furnished in the context of evidencing the source for purchase of the said

lands. At the end of the proceedings, CIT(A) not only granted the deduction

towards cost of acquisition but also allowed the cost of improvement without

calling for requisite remand report from the AO on the said additional

evidences. Eventually, the appeal of the assessee was partly allowed.

Aggrieved with the said relief granted by the CIT(A) to the assessee,

the Revenue is in appeal before us with the grounds raised above.

From the above grounds raised by the Revenue, the core issue raised

by the Revenue relate to admitting the additional evidences at the back of

the AO and CIT(A)’s failure to call for a remand report from the AO in

contravention to the provisions of Rule 46A of the Income Tax Rules, 1962.

It is the case of the Revenue before us that the CIT(A) admitted the

additional evidences at the back of the AO and not called for any remand

report which constitutes procedural irregularity. Revenue therefore desires

that the matter should be remanded to the file of AO for meeting the set

principles of natural justice.

Per Contra, Ld. AR for the assessee fairly submitted that the powers of

the CIT(A) are co-terminus with that of the AO. In that sense, the order of

CIT(A) and the procedure followed by him is well within the scope of CIT(A).

Therefore, the order of CIT(A) does not call for any interference.

We heard both the parties on this issue relating to the violation of

Rule 46A of the Income Tax Rules, 1962. It is an admitted fact that the

evidences furnished by the assessee before the CIT(A) relating to cost of

acquisition of land, source for investment in the said land, VDIS related

documents/certificates (supra), evidences for cost of improvement, etc.,

were not furnished to the AO during the assessment proceedings.

Considering the same, we are of the view that there is failure on part

of CIT(A) in not granting an opportunity to the AO before admitting the said

additional evidences and the same constitutes contravention to Rule 46A of

the Income Tax Rules, 1962. Therefore, we direct the AO to consider and

examine the said evidences before making fresh assessment on this issue.

AO shall grant reasonable opportunity of being heard to the assessee in

accordance with the set principles of natural justice. Therefore, in our

opinion, the grounds raised by the Revenue are justified on technicalities.

Accordingly, they are allowed for statistical purposes.

10.

In the result, appeal of the Revenue is allowed for statistical purposes.

Order pronounced on this 21st day of March, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 21st March, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-I, Pune 3. आयकर आयु� / The CIT-I, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “A” / 5. DR ‘A’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

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

ASSTT.CIT, CIR.11(2), PUNE, PUNE vs. SMT. KALPANA ABHAY MUTHA, PUNE

What did the Tribunal hold?

What were the facts?

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