Case Law Details
Narender Rangineni Vs ITO (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, partly allowed the assessee’s appeal for statistical purposes by remanding two additions made for Assessment Year 2020-21 to the Assessing Officer (AO) for fresh adjudication.
The assessee challenged the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), contending that the appellate authority failed to consider requests for additional time, did not adjudicate the jurisdictional issue relating to proceedings under Section 148A, wrongly sustained an addition of Rs.30 lakh as short-term capital gains by treating the entire sale consideration as taxable without considering the cost of acquisition, and upheld an addition of Rs.10,83,713 as unexplained investment under Section 69.
The Tribunal recorded that the assessee did not press the ground challenging the validity of the notice under Section 148, and accordingly dismissed that ground.
Regarding the addition of Rs.30 lakh towards short-term capital gains, the Tribunal noted that the AO had completed the assessment ex parte under Sections 147 read with 144 based on information received from the Sub-Registrar’s Office about the sale of the property. As the assessee had not responded to the notices, the AO assessed the entire sale consideration as short-term capital gains. The Tribunal observed that the correct income should be determined after considering the cost of acquisition and improvement, if established by the assessee. It further noted that the assessee had filed a paper book containing replies submitted during the assessment proceedings, along with the sale deed and purchase deed of the property, but these documents had not been considered either by the AO or by the Commissioner (Appeals). The Tribunal therefore set aside the issue to the AO for fresh adjudication after examining these records and deciding the matter in accordance with law.
On the addition of Rs.10,83,713 under Section 69 for unexplained investment in shares, the Tribunal observed that the AO had made the addition because the assessee had failed to explain the source of the investment. However, it noted that after assessing Rs.30 lakh as short-term capital gains, the source of funds used for purchasing the shares should have been examined in light of the property sale transaction. It also observed that the Commissioner (Appeals) had dismissed the appeal for non-prosecution without considering the assessee’s replies and supporting documents. Consequently, this issue was also remanded to the AO for fresh adjudication after considering the assessee’s explanation and documentary evidence, while providing the assessee an opportunity of hearing before passing a fresh order.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 03/12/2025 for the A.Y.2020-21.
2. The assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the order of the Id. CIT (A) is erroneous both on facts and in law and is passed in gross principles of natural justice. The Id. CIT(A) failed to appreciate that on couple of occasions the Appellant has sought time to file submissions.
2. Without prejudice to the above, the Ld. CIT (A) erred in not adjudicating the ground with respect to the jurisdiction of JAO in initiating proceedings u/s. 148A of the Act as per amended law.
3. Without prejudice to the above, the Id. CIT(A] erred in sustaining the addition made by the AO of Rs.30,00,000 as income from short term capital gains. The Id. CIT(A) failed to appreciate that the AO has made addition of entire sale consideration as capital gains, without considering the cost of house property sold.
4. The Id. CIT(A) erred in sustaining the addition made by the AO of Rs.10,83,713 as unexplained investment u/s.69 of the Act.
(Tax Effect: Rs. 17,73,461)
5. Any other ground that may be urged at the time of hearing.”
3. Ground No.1 is general in nature and does not require any specific adjudication.
4. Ground No.2 is regarding the validity of notice issued under section 148 of the Act by the Jurisdictional Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO). At the time of hearing the Ld. AR of the assessee has submitted that the assessee does not press ground No.2 and the same may be dismissed as not pressed.
5. The Ld. DR has raised no objection, if ground no.2 of the assessee’s appeal is dismissed as not pressed. Accordingly, ground no.2 of the assessee’s appeal is dismissed being not pressed.
6. Ground No.3 is regarding the addition made by the A.O on account of Short-term Capital Gain. The Ld. AR of the assessee has submitted that the A.O has made the addition of the entire sales consideration while assessing the capital gain arising from the sale of the property without considering the cost of acquisition/improvement and indexed cost of acquisition/improvement of the property in question. He has further submitted that the Ld. CIT (A) has also dismissed the appeal of the assessee for non-prosecution without adjudication of the same on merits. Thus, the Ld. AR has submitted that this issue may be remanded to the record of the A.O for re-adjudication after considering the cost of acquisition/improvement of the property in question.
7. On the other hand, the Ld. DR has relied upon the orders of the authorities below and submitted that since the assessee has not responded to the notices issued by the A.O as well as by the Ld. CIT (A), therefore, the A.O has framed the assessment on the basis of information available with the A.O. Therefore, the A.O was justified in assessing the sale consideration as short-term capital gain in the absence of any details/evidence regarding the purchase.
8. We have considered the rival submissions as well as the relevant material available on record. At the outset, we note that the A.O has passed the assessment order ex-parte under section 147 r.w.s. 144 of the Act on the basis of the information received from the Sub Registrar’s Office regarding the sale of property by the assessee. Thus, the entire sale consideration has been assessed by the A.O as Short Term Capital Gains. On further appeal, the Ld. CIT (A) has dismissed the appeal of the assessee for non-prosecution when the assessee did not respond to the 2 notices issued by the Ld. CIT (A) on 29/10/2025 and 12/11/2025. Accordingly, in the facts and circumstances of the case, we are of the considered view that the correct income of the assessee is required to be assessed after considering and allowing the cost of acquisition/improvement, if any brought on record by the assessee. Hence, this issue is set aside to the record of the A.O for re-adjudication after considering the cost of purchase and improvement if any in respect of the property in question. We further note that the assessee has filed the paper book containing the replies filed by the assessee during the assessment proceedings as well as the sale deed and purchase seed of the property in question. Since all these records are not considered either by the A.O or by the Ld. CIT (A), therefore, the A.O is directed to consider these records and then decide the issue as per law.
9. Ground No.4 is regarding the addition made by the A.O on account of unexplained investment for purchase of shares under section 69 of the Act.
10. We have heard the Ld. AR as well as the Ld. DR and carefully perused the orders of the authorities below. The A.O has made the addition on account of unexplained investment in purchase of shares when the assessee has failed to explain the details and source of the purchase consideration of Rs.10,83,713/-. It is pertinent to note that when the A.O has assessed the short-term capital gains of Rs.30 lakhs, then the source of the shares acquired after the sale of the said property ought to have been considered in the light of that transaction of property. Further, the Ld. CIT (A) has also dismissed the appeal of the assessee for non-prosecution without considering the relevant details and even the replies filed by the assessee during the assessment proceedings. Accordingly, in the facts and circumstances of the case and in view of our order on the issue of assessment of short-term capital gains is already set aside to the record of the A.O, this issue is also set aside to the record of the A.O for fresh adjudication after considering the explanation and relevant documentary evidence to be filed by the assessee. Needless to say, the assessee shall be given an opportunity before passing the fresh order.
11. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 3rd June, 2026.
Author Bio
