Rehana Begum Vs ITO (ITAT Bangalore)
CIT(A) Cannot Dismiss Appeal for Non-Prosecution; Bangalore ITAT Restores ₹34.10 Lakh Section 54 Claim
The assessee sold immovable property for ₹95 lakh during AY 2016-17 but did not originally file a return of income. Pursuant to reassessment proceedings, she filed a return declaring nil income and claimed exemption of ₹34,10,005 under section 54.
The AO denied the exemption on the ground that the assessee had not filed the original return within the prescribed due date. Consequently, long-term capital gains of ₹34.10 lakh, representing her 50% share in the property, were brought to tax. The AO also questioned the construction cost claimed by the assessee because no bills, vouchers or other evidence were available.
The CIT(A) confirmed the addition mainly because the assessee failed to respond to hearing notices and did not furnish supporting documents. However, the CIT(A) did not independently adjudicate the grounds of appeal on merits.
The ITAT held that the CIT(A) cannot dismiss an appeal merely for non-prosecution or non-compliance. Under section 250(6), the CIT(A) is required to decide the issues raised in the appeal on merits through a reasoned order.
Accordingly, the Tribunal set aside the ex parte appellate order and restored the matter to the CIT(A) for de novo adjudication on merits, after granting the assessee a reasonable opportunity of hearing. The substantive eligibility of the section 54 claim was left open.
The Tribunal also condoned the 171-day delay in filing the appeal before it, accepting the assessee’s explanation that continued ill health prevented timely filing.
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