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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SMT. DIVA SINGH & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against the order dated 11.11.2010 passed by learned Commissioner of Income Tax(Appeals) for the assessment year 2006-07, raising the following grounds:
1. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in not deleting the addition made by Ld AO treating the sale of land in divisions/plots as business activity against the assessee’s version of the same being in the nature of capital assets and thereby treating the returned capital gains as business income (Amt. Rs 10,79,600)
2. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in not deleting the addition made by Ld AO treating the sale of land in divisions/plots as business activity, without appreciating admitted and, uncontroverted fact that there was no change of land use: always the land is treated as investment by assessee and there was no development activity carried on said land except sale in divisions, accepted stand of assessee in subsequent years, land held for more than 10 years.
3. That onthefacts and in the circumstances of the caseand in law, learned Commissioner of Income Tax-A erred in not deleting the addition made by Ld AO treating the sale of land in divisions/plots as business activity on basis of ONLY presumptions, conjectures and surmises, thereby erred in denying exemption claimed u/s 54B and 54EC of the Act. That the appellant craves leave to add, to, amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of hearing of this appeal. In application dated 07.12.2011, the assessee filed additional grounds as 2. under:
1. 1. That on the facts and in the circumstances of the case in law, learned CIT-A erred in not decided our appeal groud no. 2, in Form No. 35 relating to natural justice violation treating the same as academic in nature at para 2.1 of impugned order.
2. That on the facts an in the circumstances of the case and in law, learned CIT-A erred in affirming the order of learned AO without appreciating that back material (inspector report) is not confronted to assessee before being utilized against your honors appellant.
3. That on the facts and in the circumstances of the case and in law, learned CIT-A erred in affirming the order of learned Assessing Officer without appreciating that our letter dated 12.11.2008 and 27.11.2008 as submitted to learned AO, (paper book page 22 onwards) are never considered by learned AO framing the impugned assessment.
3. The learned Authorized Representative of the assessee, addressing to the additional ground no. 2, submitted that the report of the Inspector obtained by the Assessing Officer has been used against the assessee in the assessment order, however, the same was not confronted to the assessee, which is in violation of the Principles of Natural Justice. He further submitted that the issue was raised by the assessee before the learned Commissioner of Income Tax (Appeals) in ground no. 2, however it was not adjudicated by the learned Commissioner of Income Tax(Appeals), holding the same as academic in nature. The learned Authorized Representative further placed reliance on the order of the Hon’ble Supreme Court in the case of ITO v. M Pirai Choodi (2011) 334 ITR 262(SC), and submitted that additional ground may be admitted and the impugned order be set aside to the file of the learned Assessing Officer. On the contrary, the learned Sr. Departmental Representative could not 4. controvert the facts that the learned Commissioner of Income Tax(Appeals) did not adjudicate upon the ground No. 2 of the assessee.
We have heard the rival submissions and perused the material on record. We find that the Assessing Officer had deputed Inspector to conduct the spot verification of the plots with reference to deduction claimed by the assessee under provisions of Section 54B and 54EC of the Act. This report was, however, not confronted to the assessee. The Assessing Officer has reproduced the report of the Inspector on page 6 of his order. As per the principle of ‘audi alterm partem’ no one can be condemned unheard, therefore, the action of the Assessing Officer in deciding the issue without confronting the report of the Inspector, is violation of Principles of Natural Justice.
We further find that the learned Commissioner of Income Tax(Appeals) in para 2.1 of the impugned order had decided the ground no. 2 as under: “2.1 Aggrieved, the assessee filed appeal raising ten grounds. Grounds no. 1 to 5 and 10 of the appeal are academic in nature and do not require specification adjudication. For statistical purposes, these grounds are treated as dismissed.”
Thus, it is evident that the learned Commissioner of Income Tax (Appeals) did not adjudicate the above specific ground raised by the assessee. It is settled law that legal ground may be raised at any stage of appellate proceedings in view of the finding of the Jurisdictional High Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax (1998) 229 ITR 383, thus, we admit the additional ground of the assessee.
In the case of M Pirai Choodi (supra), the Hon’ble High Court had set aside the order of assessment on the ground that no opportunity to cross examine was granted, sought by the assessee. On appeal, the Hon’ble Supreme Court held that the High Court should have directed the Assessing Officer to grant an opportunity to the assessee to cross-examine the witness rather than setting aside the assessment.
On being proposed by the Bench as why the appeal may not be restored back to the file of the Assessing Officer for providing sufficient opportunity of hearing to the assessee and confronting on the materials gathered by the Assessing Officer, including the Inspector’s report and pass a speaking order, learned Departmental Representative, did not object to the proposition. 10. In view of the above and in the interest of natural justice, we restore the matter back to the file of the Assessing Officer for passing order afresh, keeping in view the directions given above. 11. In the result, the appeal of the assessee is allowed for statistical purposes. The decision is pronounced in the open court on 29th June, 2016.