ABC INDIA LIMITED,KOLKATA vs. DCIT, CIRCLE 11(1),, KOLKATA

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.09.2025 for the AY 2022-23.

“1. Whole assessment proceedings is void ab initio an statutory 14 notice has not been issued in prescribed format of CBDT as per C circular No F.No. 225/157/2017/ITA-11 dt 26.3.17. 2. The L'U CIT(A) erred in sustaining the addition made by ld. AO by computing the capital gain in the relevant year AY 22-23 in respect of sale of two offices in Mumbai whereas already offered for taxation in AY 16-17 when sale agreement was executed, consideration w received and possession was given

3.1. The facts in brief are that the assessee filed the return of income on 27.10.2022, declaring total loss of ₹8,04,027/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Thereafter the notice u/s 143(2) of the Act was issued on 01.06.2023, were issued along with the questionnaire which were duly served upon the assessee. The AO was framed u/s 143(3) read with section 144B of the Act vide order dated 27.03.2024, by determining the total income at ₹5,88,79,047/-.

3.2. In the appellate proceedings also the ld. CIT (A) confirmed the order of the ld. AO by dismissing the appeal of the assessee.

3.3. After hearing the rival contentions and perusing the materials available on record, we find that particularly the notice was issued

3.3.1. In our opinion, the notice issued u/s 143(2) of the Act which is not in the prescribed format as provided under the Act is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. The case of the assessee find support from the decision of Shib Nath Ghosh Vs. ITO in for A.Y. 2018-19 vide order dated 29.11.2024, wherein the co-ordinate Bench has held as under:-

“10. After hearing both the sides and the materials available on record, we find that the notice issued u/s 143(2) dated 9th August, 2017 was not in any of the formats as provided in the CBDT instruction F.No.225/157/2017/ITA-II dated 23.06.2017. We have examined the notice, copy of which is available at page no.1 of the Paper Book and find that the same is not as per the format of CBDT Instruction F.No. 225/157/2017/ITA-II dated 23.06.2017 as stated above. In our opinion, the instruction issued by the CBDT are mandatory and binding on the Income tax authorities failing which the proceedings would be rendered as invalid. Hon'ble Apex Court in case of UCO Bank (supra) held that the circular issued by CBDT in exercise of its statutory powers u/s 119 of the Act, are binding on the authorities. The Hon'ble Apex court held as under:-:- “The Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory “6. I have considered the rival submissions. As it is noticed that the Assessing Officer who has passed the assessment has not issued notice u/s.143(2) of the Act. Such notice has been issued by an authority who has no jurisdiction over the assessee on this ground notice u/s.143(2) of the Act is quashed and I do so.

4.1. The facts in brief are that the assessee is a PAN India Multi- Model Logistic Company and is listed on the Bombay Stock Exchange (BSE). The assessee company is a member of cooperative society namely Bombay Goods Transport Agency. The assessee was allotted

4.2. The ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under:

“10.1 These grounds are mainly about the issue of capital gain. An issue of capital gain has been decided earlier in case of land parcels at Jagi Road. Assam and Vizag. Now, the issue of capital gain is being adjudicated for the sale of offices at BGTA Mumbai. The main claim of the assessee is that the same gain has already been computed in the computation of AY 2016-17. Assessee claimed that registry of the same has been taken place in AY 2022-23 only. However, AO has observed that the agreement for sale was executed in AY 2016-17 but such agreement was not registered. Recent amendments and judicial pronouncements clearly support the AO's conclusion that transfer under section 2(47)(v) of the Income Tax Act, 1961, in relation to section 53A of the Transfer of Property Act. 1882, now strictly requires that the agreement for sale must be registered to be enforceable in law. It is to be noted that after the Registration and Other Related Laws (Amendment) Act, 2001, any agreement relied upon for invoking section 53A must be registered. Also. Unregistered agreements are explicitly invalid for claiming transfer under section 2(47)(v), and courts have held such documents have no effect in law for transfer of immovable property. In case of CIT v. Balbir Singh Maini, 2017, Hon. Apex Court and in case of Ushaben Jayantilal Sodhan v. ITO, Bombay High Court held that only registered documents create transfer for capital gains tax purposes. Also, Hon. ITATs in various pronouncements have clarified that unregistered sale agreements do not constitute a transfer, though payment and possession may have occurred, Thus, the taxable event is the execution of registered sale deed and not the unregistered agreement or mere handing over of possession. Therefore, I don't find any infirmity in the stand taken by the AO. Accordingly, addition made by the AO of Rs. 2,20,96,585/- is upheld.

"a. Whether Ld. ITAT erred in law in not appreciating that addition under the provision of section 56(2)(x) of the Act cannot be made for the previous year relevant to assessment year 2018-19 as the purchase/sale/transfer of the said rice mill took place in the previous year relevant to the assessment year 2017- 18 and not in the assessment year 2018-19 ? b. Whether Ld. ITAT erred in law in not appreciating that the de-facto transfer of immovable property in terms of section 2(47)(ii) read with and 2(47)(vi) of the Act took place on the date of 'AGREEMENT FOR SALE' (i.e. December 30, 2016), as the total sale consideration of Rs.86 Lac was paid by your petitioner (second party/purchaser) to the first party (seller) through banking channel and possession of rice mill and all rights and benefits accruing therefrom were surrendered by the first party in favor of your petitioner and production of the said rice mill was started by your petitioner and the resulting profit was earned “12. We find that section 2(47) of the Act uses the word "or" instead of "and". Therefore, all the conditions as laid down in the provisions of section 2(47) of the Act are not required to be cumulatively satisfied, and even if any condition is satisfied, the capital asset can be considered to be transferred within the meaning of section 2(47) of the Act. We find that, as per the provisions of clause (ii) to section 2(47) of the Act, the extinguishment of any right in the capital asset results in a transfer in relation to the capital asset. We are of the considered view that the term "any right" used in the aforesaid clause is of wide amplitude and includes within its meaning the possession rights handed over by the assessee to the purchaser in the impugned plot of land. In the present case, from the perusal of the record, it is evident that the assessee had transferred the possession rights over the plot of land to the purchaser in the financial year 2009-10, which fact is duly apparent from the reply of the purchaser in response to the notice issued under section 133(6) of the Act, as noted in the foregoing paragraph. Therefore, even though the Deed of Conveyance was executed on 11.03.2016, the plot of land was already transferred to the purchaser in the financial year 2009-10 and thus, for all intents and purposes, the land was transferred in the assessment year 2010-11.

5.1. The facts in brief are that the assessee had purchased land in Vishakhapatnam, long back on 08.10.1999 for a consideration of ₹1,39,355/- + registration expenses. Over the years the said asset/land continued to be shown in the audited balance sheets of the company along with the development expenses incurred on the said land amounting to ₹1,04,08,220/- which continued to be shown in the successive balance sheets. During the year the assessee has sold the said piece of land and the cost of improvement has been claimed as cost of acquisition for the computation of capital gain. However, the ld. AO disbelieved that the said expenditure and disallowed the cost of improvement on the allegation that no satisfactory evidences were furnished to prove the cost of improvement. The assessee submitted before the ld. AO that since

5.2. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by observing and holding as under:-

“The appellant's so-called "cost of improvement at both Jagi Road and Vizag properties largely consists of alleged levelling, filling, and maintenance expenses. Such recurrent expenditure on upkeep of an open yard used for unloading and moverment of vehicles is in the nature of revenue expenditure, not capital improvement, and therefore does not qualify as "cost of improvement" under section 55(1)(b). The appellant has failed to produce contemporaneous bills or vouchers to substantiate these expenses. Merely recording entries in books of accounts or getting them certified by an auditor does not prove actual incurrence of capital expenditure Their plea of non-availability of records due to section 128(5) of the Companies Act is untenable, since under Income Tax law, the burden of proof lies on the assessee to substantiate claims, particularly where such claims result in reduction of taxable capital gains. Further, the appellant's argument that the Department has accepted such costs in earlier years' scrutiny assessments does not create res judicata in income-tax proceedings. Each assessment year is separate and independent. Moreover, there is no evidence that the earlier scrutiny specifically examined and accepted the alleged cost of improvement in question. Hence, this plea cannot override the statutory requirement of evidence.

9.1. The facts in brief are that the assessee company has been accounting for rental income consistently on accrual basis as per the practice . Rental income of ₹33,98,834/- was outstanding as on 31.03.2021, which was received by the company during A.Y. 2022- 23 on which the TDS was deducted in A.Y. 2022-23 and hence, it appeared in Form 26AS. The ld. AO added ₹23,79,184/- after

9.2. In the appellate proceedings, the ld. CIT (A) confirmed the action of the ld. AO.

9.3. After hearing the rival contentions and perusing the materials available on record, we find that assessee has been following mercantile system of accounting and has been returning the rental income on accrual basis. We note that as on 31.03.2021, the accumulated outstanding/receivable rental income was ₹33,98,834/- which was received in A.Y. 2022-23 and the TDS was also deducted by the payer. Hence, it appeared in form 26AS. The ld. AO treated the same as current year income after allowing the standard deduction and the ld. CIT (A) confirmed the same. In our opinion, when the assessee has offered the income on accrual basis and therefore the same cannot be taxed in the year when the payer deducted TDS on the same and made the payment to the assessee. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no 5 is allowed.

Order pronounced in the open court on 15.04.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 15.04.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to:

1. 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// Asst. Registrar Income Tax Appellate Tribunal, Kolkata