Sunita Gurnani Vs ITO (ITAT Raipur)
Ignoring Assessee’s Filed Reply Vitiates Appellate Order: ITAT Remands Section 54F Dispute
Summary: The Income Tax Appellate Tribunal (ITAT), Raipur Bench, has set aside an appellate order after finding that the Commissioner of Income Tax (Appeals) incorrectly recorded that the assessee had not responded to a remand report, despite an acknowledgement establishing that a reply had been filed.
In Sunita Gurnani v. ITO, the Tribunal held that a quasi-judicial authority must consider all submissions and evidence on record before reaching a conclusion. Since the assessee’s response remained unaddressed, the matter was restored to the CIT(A) for fresh adjudication.
The order was pronounced on 5 November 2026 by Judicial Member Partha Sarathi Chaudhury in ITA No. 613/RPR/2026, concerning Assessment Year 2015-16.
Background of the Section 54F Dispute
The assessee challenged the order of the CIT(A), National Faceless Appeal Centre, Delhi, dated 5 June 2025. The dispute concerned the deduction claimed under Section 54F, including a disputed investment amount of ₹17 lakh and the computation of taxable capital gains.
In the appellate proceedings, the Assessing Officer furnished a remand report identifying what was described as a computational error in the assessment order.
According to the findings reproduced by the Tribunal, the assessment had directly reduced the eligible investment from the capital gain. The CIT(A) observed that Section 54F(1)(b) prescribed a proportionate computation where the cost of the new asset was less than the net consideration.
The CIT(A) accepted the computation proposed in the remand report, which worked out taxable capital gains at ₹19,39,599.
CIT(A) Presumed Acceptance of the Computation
While accepting the remand report, the CIT(A) stated that it had been forwarded to the assessee but that no submission had been received on the computational issue.
On that basis, the appellate authority presumed that the assessee agreed with the existence of the computational errors in the assessment order.
The CIT(A) also upheld the denial of deduction concerning ₹17 lakh, observing that the disputed payments were made outside the period prescribed under Section 54F.
The judicial decisions relied upon by the assessee were treated as distinguishable. The CIT(A) stated that the assessee had not demonstrated how the factual circumstances of those decisions matched her case.
Consequently, the Assessing Officer was directed to recompute taxable capital gains under Section 54F(1)(b) and adopt ₹19,39,599, after following the process required by law.
Acknowledgement Established That Reply Was Filed
Before the Tribunal, the assessee’s representative challenged the factual foundation of the appellate order.
He referred to page 110 of the paper book, containing the acknowledgement of the assessee’s reply and rejoinder to the remand report.
The acknowledgement demonstrated that the assessee had submitted a response. Therefore, the CIT(A)’s observation that no submission had been furnished was based on an incorrect appreciation of the record.
This discrepancy was material because the supposed absence of a response had been used to presume agreement with the computation proposed in the remand report. The actual contents of the assessee’s reply had not been addressed.
Revenue Conceded the Factual Error
After examining the acknowledgement, the Revenue’s representative fairly conceded that it was incorrect to state that no submissions had been filed in the remand proceedings.
The Tribunal accordingly found that the first appellate authority had proceeded on an erroneous factual premise.
The issue was therefore more than a disagreement over the ultimate computation. A response available on record had been overlooked while deciding the assessee’s rights and liabilities.
The Tribunal observed that those rights and liabilities had not been substantially determined, since the contents of the filed submissions remained unexamined.
Duty to Consider Submissions and Evidence
The Tribunal held that the appellate order was not in accordance with Sections 250(4) and 250(6) of the Income-tax Act.
It emphasised that a quasi-judicial authority must consider all submissions and evidence placed before it before arriving at a conclusion.
The finding that no response existed could not stand against the acknowledgement establishing its filing. Equally, a decision reached without addressing that response could not substitute for a proper examination of the assessee’s case.
The ruling thus turned on fair consideration of the record and observance of natural justice, rather than a determination of the substantive Section 54F claim.
Fresh Adjudication Ordered
In the interest of substantive justice, the Tribunal set aside the CIT(A)’s order and remanded the matter for de novo adjudication in accordance with law.
The CIT(A) was directed to properly appreciate the facts and the submissions and documents filed by the assessee, while complying with the principles of natural justice.
The assessee was also directed to comply with hearing notices and present her case on merits.
Outcome of the Appeal
The appeal was allowed for statistical purposes. The Tribunal expressly refrained from examining the merits of the dispute.
Accordingly, the order does not grant the disputed Section 54F deduction or approve a final capital-gains computation. Those questions remain for fresh examination by the CIT(A), after considering the assessee’s response and the complete record.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 05.06.2025 for the assessment year 2015-16 as per the grounds of appeal on record.
2. At the very outset, it is brought to the notice of the Bench by the Ld. Counsel for the assessee in the findings of the Ld. CIT(Appeals)/NFAC, wherein he writes as follows:
“I further find merit in the observations of the Assessing Officer regarding the computational error in the assessment order. Section 54F(1)(b) specifically prescribed a proportionate formula where the cost of new asset is less than the net consideration. The assessment order incorrectly reduced the eligible investment directly from the capital gain instead of applying the statutory formula. The computation furnished in the remand report is in accordance with the provisions of section 54F and correctly works out taxable capital gain at Rs.19,39,599/-. The remand report was forwarded to assesse but there was no submission by the assesse on this issue, therefore it is presumed that the assesse agree with the fact of computational errors in assessment order.
The case laws relied upon by the appellant have been carefully considered. However, the facts of those cases are materially different from the facts of the present case. The issue involved in the present appeal relates to payments admittedly made outside the period prescribed under section 54F of the Act. The appellant has not demonstrated how the factual circumstances of the cited decisions are identical to the facts of the present case. Therefore, the said decisions being distinguishable on facts do not assist the appellant and are not applicable to the present case.
Accordingly, the action of the Assessing Officer in denying deduction in respect of the disputed amount of Rs.17,00,000/- is upheld. Further, the computation proposed in the remand report is accepted. The Assessing Officer is directed to recompute the taxable capital gain in accordance with section 54F(1)(b) and adopt the figure of taxable capital gain at Rs.19,39,599/- after following due process as required under law. Ground No.1 is dismissed.”
3. The Ld. Counsel for the assessee simultaneously referred to Page 110 of the Paper book which is the acknowledgement of the reply submitted by the assessee and rejoinder of the remand report, therefore, findings of the Ld. CIT(Appeals)/NFAC that there was no submission by the assessee regrading remand report, is itself based on appreciation of wrong facts by the First Appellate Authority.
4. The Ld. Sr. DR fairly conceded after seeing the acknowledgement placed on record by the assessee that it is not correct to say that no submissions were filed in the remand proceedings. Therefore, there have been incorrect appreciation of facts by the Ld. CIT(Appeals)/NFAC. That when in reality the submissions have been placed on record, the writing in the order by the First Appellate Authority that no submissions have been furnished by the assessee regarding remand report itself demonstrates that the order passed is not in terms with Section 250(4) & (6) of the Act. Therefore, rights and liabilities of the parties herein have not been substantially determined since contents of the assessee’s submissions is left unaddressed by the First Appellate Authority. It is incumbent upon a Quasi judicial authority to consider all the submissions and evidences placed on record before coming to a certain conclusion.
5. In view thereof, in the interest of substantive justice, even without going into the merits of the matter, I set aside the order of the Ld.CIT(Appeals)/NFAC and remand the matter back to its file for denovo adjudication as per law after proper appreciation of facts and submissions/documents placed on record by the assessee while complying with the principles of natural justice. The assessee shall duly comply with the hearing notices issued from the office of the Ld. CIT(Appeals)/NFAC and represent the matter on merits.
6. As per aforesaid terms, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in open court on 5th day of November, 2026.
