Case Law Details
Late Kalappa Shanthamma Vs ITO (ITAT Bangalore)
Appeal Restored Because CIT(A) Rejected JDA Capital Gains Challenge on Technical Grounds Alone
The ITAT Bangalore considered an appeal filed by the legal representative of Late Smt. Kalappa Shanthamma against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Year 2015-16. The Tribunal first dealt with a delay of 252 days in filing the appeal before it and subsequently examined whether the CIT(A) was justified in dismissing the assessee’s appeal in limine without considering the application seeking condonation of delay.
The Tribunal condoned the delay of 252 days in filing the appeal before it. The legal representative explained that the assessee had been suffering from serious health issues during the appellate proceedings and passed away on 16.04.2025, shortly after the CIT(A)’s order dated 18.03.2025. Following her demise, the family experienced emotional distress and disputes arose among the legal heirs regarding representation in the pending tax litigation. Only after the disputes were resolved was one legal heir authorised to pursue the appeal, resulting in the delay. The Tribunal held that the delay was caused by sufficient reasons beyond the control of the legal representatives and that denying condonation would deprive the assessee of an opportunity to contest the matter on merits. Relying on the Supreme Court’s decision in Collector, Land Acquisition v. Mst. Katiji, the Tribunal observed that substantial justice should prevail over technical considerations.
The dispute related to computation of long-term capital gains arising from a Joint Development Agreement (JDA). During a survey under Section 133A, a copy of the JDA executed on 05.02.2015 between the assessee and a developer was found. Under the agreement, the assessee received a non-refundable deposit of Rs.34.50 lakh and became entitled to 60% of the constructed area. The assessee declared long-term capital gains in the return of income after claiming indexed cost of acquisition, indexed cost of improvement, selling expenses and deduction under Section 54B.
The Assessing Officer originally enhanced the sale consideration and computed substantially higher capital gains. The assessment adopted a sale value of Rs.500 per square foot based on information obtained from the Sub-Registrar, reduced the indexed cost of acquisition, restricted the cost of improvement and curtailed the deduction claimed under Section 54B, resulting in a significant addition to the assessee’s income.
In earlier proceedings, the Tribunal had remanded the matter because the CIT(A) relied on additional evidence without complying with Rule 46A. The Assessing Officer, in the set-aside proceedings, accepted the assessee’s contention regarding the sale consideration after considering evidence showing that the property was not situated near National Highway-7. However, the Assessing Officer continued to recompute the capital gains by retaining other adjustments made in the original assessment, including the addition of the non-refundable deposit and restrictions relating to deductions.
The assessee challenged the reassessment before the CIT(A) on several legal and factual grounds. These included the contention that there was no transfer within the meaning of Section 2(47) during the relevant assessment year, that Section 45(5A) should be applied retrospectively so that capital gains would be taxable only in the year of receipt of the completion certificate, and alternatively that the adopted value per square foot remained excessive because it related to developed plots whereas the property under the JDA was agricultural land.
The CIT(A) dismissed the appeal solely on the ground of delay of 133 days. The appellate authority recorded that no satisfactory explanation had been furnished for the delay and rejected the appeal as time-barred without examining any of the substantive grounds raised by the assessee.
Before the Tribunal, the assessee demonstrated that a delay condonation application had in fact been filed before the CIT(A). The record included the condonation application, acknowledgement of its filing and supporting affidavit. The Tribunal observed that despite the existence of this application, the CIT(A) proceeded to dismiss the appeal without considering the request for condonation.
The Tribunal held that the CIT(A) failed to evaluate the delay condonation application before dismissing the appeal. It noted that the assessee was an elderly widow suffering from serious health issues and that the circumstances surrounding her illness and subsequent death established genuine hardship. The Tribunal held that when substantial rights are involved, matters should ordinarily be decided on merits rather than rejected on technical grounds. It further observed that the principles of natural justice require an effective opportunity to contest the case, particularly where sufficient cause explaining the delay has been placed on record.
The Tribunal declined to restore the matter to the Assessing Officer because a detailed assessment order had already been passed in the earlier set-aside proceedings. Instead, it found that the CIT(A) had not adjudicated several important legal and factual issues raised by the assessee, including the applicability of Section 45(5A), the question of transfer under Section 2(47), and the alternative valuation arguments. Since these issues remained undecided, the appropriate course was to remit the matter to the CIT(A).
Accordingly, the ITAT set aside the impugned order of the CIT(A) and restored the entire matter for fresh adjudication on merits. The Tribunal directed the CIT(A) to consider all grounds raised by the assessee after providing adequate opportunity of hearing to the legal representative and to decide the appeal in accordance with law. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal filed by Sri Raghavendra C in the capacity of Late Smt. Kalappa Shanthamma (hereafter the assessee) is directed against the order of the learned Commissioner of Income Tax-Appeal (hereafter Ld. CIT-A) for the assessment year 2015-16 passed under section 250 of the Income Tax Act, 1961(hereafter- the Act),
2. At the outset we note that present appeal filed by the assessee is delayed by 252 days. As such the Ld. CIT-A order was passed and served as on 18th March 2025 and the assessee was required to file appeal against impugned order within 60 days from the date of service of the order. However, appeal filed as on 06th February 2026 resulting in delay of 252 days.
3. The learned AR submitted that at the time of proceeding before the Ld. CIT-A, the assessee late Smt. Kalappa Shanthamma was suffering from serious health issues. Shortly after the order u/s 250 (dt. 18th March 2025), she expired as on 16th April 2025 i.e. within a month after Ld. CIT-A order. After her demise the family was under emotional distress due to which immediate attention was not given to pending tax litigation.
3.1 The learned AR further submitted that subsequently a dispute arose among the legal heirs with regard to estate of the deceased. Therefore, who will represent the in the matter pending relating to tax litigation of the deceased assessee was not finalised. After resolving the dispute, the legal heir reached to understanding and the legal heirs authorised that Sri Raghavendra will represent the appeal. Accordingly, this appeal is filed. In this process the appeal has been delayed by 252 days. Accordingly, the learned AR prayed that the delay in filing the present appeal was due to reason beyond the control of the appellant/legal representative of the appellant. The learned AR prayed that lenient view should be taken and the delay should be condoned.
4. Per contra, the learned DR opposed the condonation petition and submitted that the assessee failed to establish sufficient cause for the delay of 252 days in filing the appeal. The learned DR contended that the reasons stated regarding family disputes and emotional distress were not supported by proper evidence. Accordingly, it was prayed that the delay should not be condoned and the appeal may be dismissed as time barred.
5. We have heard the rival submissions of both the parties and perused the materials available on record. The assessee has filed the present petition seeking condonation of delay of 252 days in filing the appeal before the Tribunal. After considering the submissions of the Learned AR and having regard to the reasons stated in the condonation petition, we are of the considered view that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period of limitation. We find that the delay is not due to any mala fide intention or deliberate negligence on the part of the assessee. In our considered opinion, if the delay is not condoned, the assessee would be deprived of an opportunity of hearing on merits. Further we note that the Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji reported in 167 ITR 471 (SC), has held that substantial justice should prevail over technical considerations. Accordingly, in the interest of substantial justice, we condone the delay of 252 days in filing the present appeal and admit the appeal for adjudication on merit of the case.
5.1 The assessee has raised several grounds of appeal which are numbered as Ground Nos. 1 to 13. However, the issues raised therein are interconnected and pertains to addition of capital gain made by the AO on account alleged transfer of land property under the JDA entered which was subsequently confirmed by the Ld. CIT-A in limine by dismissing the appeal on account of delay.
6. The facts in brief are that the assessee Late Smt. Kalappa Shanthamma, a senior citizen, was subject to survey proceedings under section 133A of the Act as on 16th September 2016. During the survey a copy of JDA dated 5th February 2015 between the assessee (landowner) and Shri H.N Narendra (developer) was found in relation to vacant land bearing No. 150/1 at Chockkahalli village, Nandi Hobli, Chikkaballapu. The JDA was for land admeasuring 3 acre out of 4 acre and 10 guntas.
6.1 As per the terms of the JDA, the assessee received a sum of Rs. 34,50,000/- by way cash and cheque as non-refundable deposit. Further the assessee also entitles to receive 60% of constructed area which is equivalent to 78408 sq. ft. In consequence of survey proceedings, the assessee filed return of income for the relevant assessment year 2015-16 as on 6th November 2016 declaring total income of Rs. 4,30,490/- on account of long-term capital gain. As such the assessee has declared sale consideration for the transfer of land under JDA at Rs. 1,20,16,290/- and after deducting selling expenses 17 lakh, index cost of acquisition Rs. 2,34,862/-, index cost of improvement for Rs. 58,67,941/- arrived at the long-term capital gain of Rs. 42,13,487/-. Against the impugned LTCG the assessee further claimed deduction u/s 54B of the Act for Rs. 37,83,000/-and accordingly declared net taxable income of Rs. 430487/- only.
6.2 However, the AO in the original assessment order u/s 143(3) dated 27th December 2017, based on report received from sub-registrar office has taken sales consideration @ Rs. 500 per sq. ft. of constructed area (78408 sq. ft) (gross amount of Rs. 3,92,04,000/-) receivable to assessee plus non-refundable deposit of Rs. 34.5 lakh. The AO also reduced indexed cost of acquisition to Rs. 29,959/- as against the claim of the assessee for 2,34,862/-. The AO further allowed only 40% of cost of improvement as only 40% area transferred to the developer in pursuance to JDA. Likewise, the AO noted that the no document provided to the extent of Rs. 12 lakhs out of total deduction of Rs. 37,83,000/- u/s 54B of the Act hence reduced the deduction to Rs. 25,83,000/-. Thus, the AO computed the LTCG of Rs. 3,59,93,865/- only. As the assessee already offered Rs. 4,30,490/-, the AO made addition of balance amount of Rs. 3,59,93,865/- only.
6.3 On appeal by the assessee, the Ld. CIT(A) recomputed the capital gain by adopting sales consideration @ 150 per sq. ft. based on letter issued by gram panchayat/village accountant without confronting the said letter to the AO.
7. The Revenue against the said order of the Ld. CIT(A) preferred appeal in ITA No. 973/Bang/2019. The Hon’ble Bench vide order dated 23rd August 2021 remitted the issue to the file of the AO to decide the issue in the light of additional evidence filed before the Ld. CIT-A being letter issued by the gram panchayat with following observation and direction:
11. We have heard the ld. DR and perused the material on record. Admittedly, the CIT(Appeals) adopted the value of the property at Rs.150 per sft. based on the letters issued by Gram Panchayat / Village Accountant which was not confronted to the AO. In our opinion, this is in violation of Rule 46A of the Income-tax Rules. Therefore, it is appropriate to remit the issue back to the AO to consider these documents and decide the issue afresh, after giving opportunity of being heard to the assessee. It is ordered accordingly. As we have remitted back the entire issue to the file of AO, at this stage, we refrain from going into other grounds of appeal.
8. The assessee in the set aside proceeding submitted that in the original assessment order, the sale consideration was valued by the Ld. AO based on guidance value report provided by the office of the SRO. However, such guidance value information provided by the SRO was not specific to land bearing survey No. 150/1 in present case. As such the same was general information regarding guidance value of developed site/plot at Chokkahalli village, Nandhi Hobli. Further the said guidance value included 2 lines of items. First, being developed sites/plots which is part of/nearby and /or attached to the national highway 7 and same is valued at Rs. 500 per sq. ft. Per contra second line of item referred as developed sites/plots which is not part of/nearby and /or attached to the national highway 7 and the same is valued at Rs. 150 per sq. ft. only.
8.1 The assessee submitted her land is not nearby or attached to the national highway-7. In support, the assessee filed various evidence in the form of google Map image, information published on the website of Karnataka Stup Value authority stating land survey number at Chokkahalli village as part of/nearby/attached to national highway -7. Accordingly, the assessee claimed that the value adopted by the ld. AO in original assessment order at Rs. 500 per sq. ft. was based wrong assumption of fact.
8.2 The AO after considering the submission and materials provided, accepted the assessee’s contention to the extent of the sales consideration declared in the return of income i.e. Rs. 1,20,16,290/- only. Thus, the considering the sale consideration as declared by the assessee at Rs. 1,20,16,290/- proceeded to recompute the capital gain. While recomputing the capital gain the AO deducted index cost of acquisition, index cost of improvement, selling expenses and deduction u/s 54B of the Act at the same amount as the Ld. AO has allowed in original assessment. The AO also added the amount of non-refundable deposit of Rs. 34.5 lakh received by the assessee to capital gains as the same was added in the original assessment. Accordingly, the AO recomputed the LTCG at Rs. 88,16,155/- and after providing setoff Rs. 4,30,490/- already offered by the assessee made addition of Rs. 83,85,655/- only.
9. Being aggrieved by the assessment order u/s 143(3) r.w.s. 254 of the Act preferred appeal before the learned CIT(A). Before the learned CIT(A) the assessee raised the grounds that there was no transfer of the property as per the provision of section 2(47) of the Act during the year relevant to A.Y. 2015-16. Further the provisions of section 45(5A) should be applied retrospectively which state tax on JDA shall be paid in the year in which completion certificate received. Therefore, the amount of taxes paid should be refunded. The assessee also raised alternative ground that value of Rs. 150 per sq. ft. is higher as the same is for developed plots/sites whereas the property under the JDA at the time was an agricultural property.
10. However, the learned CIT(A) found that the appeal was delayed by 133 days. The learned CIT(A) in his finding noted that the assessee has not furnished reason explaining the delay. Hence, the appeal was dismissed in limine as not maintainable on account of delay.
11. Being aggrieved by the order of the learned CIT(A), the assessee is appeal before us.
12. The learned AR before us filed paper book running from pages 1 to 155. The learned AR submitted that during the appellate proceedings, the assessee filed application for condonation of delay as on 17th November 2023 which are available on pages 79-81 and the acknowledgement of filing of the same is placed on pages 82 to 82 of the paper book. However, the learned CIT(A) without considering the same dismissed the appeal solely for delay in filing of appeal. Before us the learned AR also furnished copy of affidavit in respect of delay filling of appeal before the learned CIT(A) which is placed on pages 84 to 90 of the paper book.
13. On the other hand, the learned DR supported the order of the learned CIT(A) and submitted that the appeal was filed beyond the prescribed limitation period. It was contended that the assessee failed to furnish satisfactory reasons for condonation of delay before the learned CIT(A). The learned DR further submitted that the AO had already passed a detailed order in set aside proceedings after considering relevant materials. Accordingly, the learned DR prayed that the order of the learned CIT(A) be sustained.
14. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the present appeal arises against the order passed by the learned CIT(A) dismissing the assessee’s appeal in limine on the ground of delay in filing of appeal before the learned CIT(A). The record reveals that the assessee Late Smt. Kallappa Shanthamma was a senior citizen widow and was suffering from serious health issues during the relevant period. It is further evident from the material available on record that shortly after passing of the impugned order by the learned CIT(A), the assessee expired on 16.04.2025. Thus, the circumstances placed before us clearly demonstrate that the delay occurred due to genuine hardship and unavoidable circumstances beyond the control of the assessee and her legal representatives.
14.1 We further note that the learned AR had specifically filed application for delay condonation before the learned CIT(A). However, the learned CIT(A), without considering the impugned condonation petition proceeded to dismiss the appeal solely on the ground of limitation without adjudicating the issues raised by the assessee on merits. In our considered opinion, when substantial rights of the assessee are involved, the matter ought to be decided on merits rather than rejecting the appeal on technical considerations. The principles of natural justice require that a litigant should be afforded effective opportunity to contest the matter on merits particularly when sufficient cause explaining the delay is placed on record. During the course of hearing before us, the Bench initially considered restoring the matter to the file of the AO. However, upon careful examination of the material available on record, we notice that pursuant to earlier directions of the Tribunal in set aside proceedings, the AO has already passed a detailed and speaking assessment order after considering the submissions, evidences and contentions advanced by the assessee. Therefore, in the peculiar facts of the present case, we do not find it necessary to again restore the issue to the file of the AO.
14.2 At the same time, we note that in the appeal preferred before the learned CIT(A), the assessee had raised various new legal and factual grounds including the contention regarding applicability of section 45(5A) of the Act, absence of transfer within the meaning of section 2(47) of the Act during the relevant assessment year and also alternative contention regarding adoption of value per sq. ft. These grounds were not adjudicated by the learned CIT(A) on merits since the appeal itself was dismissed as time barred. Therefore, in our considered view, the ends of justice would be met if the matter is restored to the file of the learned CIT(A) for fresh adjudication as per law instead of restoring the matter to the file of the AO.
14.3 Accordingly, in the interest of justice and in adherence to the principles of natural justice, we set aside the impugned order of the learned CIT(A) and restore the entire matter to the file of the learned CIT(A) for fresh adjudication on merits in accordance with law. The learned CIT(A) shall adjudicate all the grounds raised by the assessee afresh after affording adequate and reasonable opportunity of being heard to the assessee/legal representative. The assessee shall also cooperate in the appellate proceedings and furnish all necessary details and supporting documents in support of the contentions raised before the appellate authority. Accordingly, the ground of appeal of the assessee is allowed for statistical purposes.
15. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 21st day of May, 2026
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