Ganesh Ramchandra More Vs ITO (ITAT Pune)
CIT(A) Enhancement Quashed for No Notice – ITAT Restores LTCG Issues to AO
The ITAT Pune partly allowed the appeal of the assessee, primarily holding that enhancement by CIT(A) without issuing mandatory notice u/s 251(2) is invalid, and accordingly quashed the enhancement of income and related directions for penalty proceedings u/s 271D.
On merits, the Tribunal held that indexed cost of acquisition must be allowed while computing capital gains. Since the assessee had not furnished the purchase deed earlier, the matter was restored to the AO for fresh computation after verifying documents.
Further, the Tribunal noted that the sale consideration should be taken at ₹27 lakh (as admitted) and not ₹30 lakh as enhanced by CIT(A), and directed fresh determination accordingly.
The additional claim that the land was agricultural (hence not a capital asset) was also restored to the AO for verification.
Result: Enhancement quashed; penalty directions nullified; capital gains issues remanded to AO – appeal allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 25.09.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2017-18.
2. The appellant has raised the following grounds of appeal :-
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal), National Faceless Appeal Centre (NFAC) erred in holding that the Long Term Capital Gains on sale of the impugned property enhanced to Rs.30,00,000/- as admitted by the appellant for the reason of non furnishing of copy of purchase deed of the said land thereby disallowing the benefit of Cost of Acquisition/Indexed Cost of Acquisition for determining the income from capital gains ignoring and without appreciating the facts that for computation of capital gains within the provisions of section 45 to 48 of the I T Act, 1961, the appellant was entitled to get the benefit of Cost of Acquisition/Indexed Cost of Acquisition for this relevant Assessment Year. The Assessing Officer be directed to allow such Cost of Acquisition after considering the purchase deed of the said property.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal), National Faceless Appeal Centre (NFAC) erred in holding that in the case of the appellant under consideration the provisions of section 2695S r.w.s. 271D of the IT Act, 1961 were attracted for this relevant AY 2017-18 for acceptance of cash owing sale of the immovable property and directing the Assessing Officer to take necessary action in this regard ignoring and without appreciating the facts that no such penalty proceedings were initiated by the Ld. Assessing Officer in the Assessment Order when he had the materials of cash transactions in his possession during such proceedings and therefore such proceedings cannot be initiated later on the direction of the Ld. CIT(A) in the Appellate Order. Such direction given for initiating proceedings u/8.271D of the Act by the Ld. CTT(A) being, arbitrary, illegal and bad-in-law be quashed.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal), National Faceless Appeal Centre (NFAC) erred in holding that in the case of the appellant under consideration the provisions of section 269SS r.w.s. 271D of the IT Act, 1961 were attracted for this relevant AY 2017-18 for acceptance of cash owing sale of the immovable property and directing the Assessing Officer to take necessary action in this regard ignoring and without appreciating the facts that no such penalty proceedings were initiated by the Ld. Assessing Officer in the Assessment Order when he had the materials of cash transactions in his possession during such proceedings and further that initiation of such proceedings on the basis of direction of the CIT(A) after almost 3172 years of the passing of the Assessment Order was barred by limitation within the provisions of section 275(1)(c) of the said Act and therefore now initiation of the said proceedings would be contrary to the law and therefore such direction given in the Appellate Order being arbitrary, illegal and bad-in-law be quashed.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeal), National Faceless Appeal Centre (NFAC) erred in holding that in the case of the appellant under consideration the provisions of section 269SS r.w.s. 271D of the IT Act, 1961 were attracted for this relevant AY 2017-18 for acceptance of cash owing sale of the immovable property and directing the Assessing Officer to take necessary action in this regard ignoring and without appreciating the facts that the transactions of cash for sale of the said property made by the appellant and the buyer on compulsion and need of the hour and the genuineness of such transaction was not under any suspicion being duly admitted by the assessee in the statement recorded by the DDIT (Inv) Unit-1(3), Pune and on which income from Capital Gains was subjected to tax as assessed by the Assessing Officer in the Assessment Order and so also considered by the Ld. CIT(A). The direction therefore so given for initiation of such penalty proceedings being arbitrary, illegal and bad-in-law be quashed.
5. The appellant craves leave to add, alter, modem, revise, amend, withdraw or substitute any ground or grounds of appeal or to add any new ground or grounds of appeal on or before the hearing of appeal.”
3. The appellant has raised the following additional grounds of appeal by filing written submission dated 30.01.2026 :-
“i. On the facts and circumstance of the case and in law, the Ld. Assessing Officer erred in computing the income from Long Term Capital Gains (LTCG) in respect of sale of an Agricultural Land ignoring and without appreciating the facts that the sale proceeds of an agricultural land is not subjected to Income Tax being not a capital asset within the provisions of section 2(14) r.w.s. 10(1) of teh I.T. Act, 1961. The Assessment Order passed taxing of the profit from such sale of land as income from Long Term Capital Gains by the AO being arbitrary, illegal and bad-in-law be quashed/set-aside.
ii. On the facts and circumstance of the case and in law, the Ld. Assessing Officer erred in computing the income from Long Term Capital Gains (LTCG) of Rs.27,00,000/- in respect of sale of an Agricultural Land ignoring and without appreciating the facts that the Agreement to Sale executed and registered vide Document No. 1365/2016 dated 12/04/2016 relying on which the income from Long Term Capital Gains had been computed by him clearly mentioned the land as an agricultural land besides the other Revenue records such as 7/12 extracts etc. and therefore sale consideration from the sale of an agricultural land was not subjected to Income Tax being not a capital asset within the provisions of section 2(14) r.w.s. 10(1) of the I.T. Act, 1961. The addition made on account of Long Term Capital Gains of Rs.27,00,000/- in the Assessment Order duly confirmed by the Ld. CIT(A), NFAC in the Appellate Order passed dated 25/09/2025 be deleted.”
4. The appellant has also raised the following additional ground of appeal by filing an application dated 05.02.2026 :-
“1 On the facts in the circumstance of the case and in law, CIT(Appeal), National Faceless Appeal Centre (NFAC) erred in passing the assessment order in violation of provisions of section 251(1) (a) of the I.T. Act, 1961 in enhancing the total income of the appellant in the appellate order of Rs.30,00,000/-, as against the total income assessed by the Ld. Assessing Officer in the assessment order passed u/s. 144(1) (a) r.w.s. 147 of the Act dated 23/03/2022 at Rs. 11,50,000/-. Without providing opportunity being heard to the appellant be quashed/set-aside and/or the enhanced income determined be deleted.
2. On the facts and in the circumstances of the case and in law the Ld. CITA), NFAC patently erred in enhancing the total income at Rs.3,00,000/- as against the income assessed by the Ld. Assessing officer at Rs. 11,50,000/- in the assessment order passed u/s. 144(1)(a) r.w.s. 147 of the Act on 23/03/2022 ignoring and without appreciating the facts that for such enhancement of income by him in the appellate order a mandatory notice u/s. 251(2) of the LT Act, 1961 was required to be issued to the appellant providing opportunity of being heard and obtain in explanation from the appellant. The total income enhanced in the appellate order without giving any opportunity of hearing to the appellant in compliance to section 251(1)(a) of the said Act being arbitrary, illegal and bad- in-law be deleted and/or appellate orders passed be quashed.”
5. Facts of the case, in brief, are that the assessee is an individual and has not furnished his return of income for the year under consideration. On the basis of information received from the Assistant Police Inspector, Bharti Vidhyapeeth Police Station, Pune, that cash amounting to Rs.15 lakhs was seized from the assessee, the case of the assessee was reopened u/s 147 of the IT Act and statutory notices u/s 148 and 142(1) of the IT Act and show cause notice respectively were issued to the assessee. The assessee did not comply with any of the above notices and the Assessing Officer on the basis of the statement of assessee recorded u/s 131(1) of the IT Act completed the assessment proceedings and vide order dated 23.03.2000 passed u/s 147 r.w.s. 144 of the IT Act determined total income of the assessee at Rs.27 lakhs as against no return filed by the assessee. The above assessed income includes unexplained money of Rs.15,50,000/- u/s 69A of the IT Act and long-term capital gain of Rs.11,50,000/-.
