Raghvendra Paliwal Vs ITO (ITAT Indore)
Section 50C Addition: Illiterate Assessee Granted Final Opportunity to Contest Property Sale Through Revoked Power of Attorney
The controversy
The Indore Bench of the Income Tax Appellate Tribunal granted an illiterate assessee a final opportunity to contest an addition of ₹85,54,500 arising from alleged transfers of immovable properties, after his first appeal had been dismissed following repeated non-compliance.
The assessee’s principal contention was that the sale deeds had been executed through a power of attorney which stood revoked before their execution. He also disputed receipt of the sale consideration and challenged the computation of capital gains under Section 50C.
However, the Tribunal did not adjudicate these substantive issues. It set aside the appellate order and restored the matter to the Commissioner (Appeals) for fresh adjudication, coupled with strict directions requiring the assessee to participate and furnish supporting evidence.
Reassessment resulted in substantial capital gains addition
The assessee had not originally filed his return of income. His case was reopened, and a notice under Section 148 was issued on 31 March 2022. In response, he filed a return declaring nil income.
During the reassessment proceedings, notices under Section 142(1) remained unanswered. Following a show-cause notice under Section 144, the assessee furnished certain documents, including agreements and a bank statement, but did not provide the further details or clarifications sought.
The dispute concerned transactions involving immovable properties described as shops. The Assessing Officer ultimately assessed the total income at ₹85,54,500 as long-term capital gains, by an order dated 27 March 2023.
The assessee challenged both the validity of the proceedings and the substantive basis of the addition.
First appeal dismissed after repeated non-compliance
Before the Commissioner (Appeals), several hearing notices were issued during 2024. The appellate order recorded that the assessee had neither furnished the required replies nor effectively pursued the proceedings, notwithstanding further opportunities and an adjournment.
The Commissioner (Appeals) invoked the principle that the law assists the vigilant and not those who sleep over their rights. Reference was also made to judicial observations that pursuing an appeal requires more than merely filing it.
The appellate authority concluded that the Assessing Officer had made the addition after considering the facts and that no infirmity had been demonstrated. Accordingly, the appeal was dismissed.
Assessee disputed the very existence of a valid transfer
Before the Tribunal, the assessee raised a fundamental objection to the alleged property transfers. According to him, the sale transactions had been carried out under a power of attorney which had already been revoked.
On that basis, he contended that the sale deeds were invalid and could not support an addition in his hands. He further maintained that he had not received the consideration attributed to him.
These were the assessee’s contentions; the Tribunal did not record a finding accepting the alleged revocation, invalidity of the deeds or non-receipt of consideration.
Without prejudice, the assessee also challenged the capital gains computation. He argued that the stamp duty valuation had been treated as long-term capital gains without allowing the benefit of indexed cost of acquisition. He additionally questioned the application of Section 50C without following the valuation procedure raised in his grounds.
Illiteracy and undertaking to cooperate persuaded the Tribunal
The appeal before the Tribunal involved a delay of 46 days. The assessee explained the sufficient cause for the delay, and the Departmental Representative concurred on that issue. The Tribunal therefore condoned the delay and admitted the appeal.
On the question of non-compliance, the authorised representative submitted that the assessee was illiterate and lacked knowledge of the proceedings. A paper book running to 92 pages was placed on record.
The representative requested one final opportunity before the Commissioner (Appeals) and undertook that the assessee would participate in the restored proceedings.
Considering the circumstances and that undertaking, the Tribunal held that the interests of justice warranted a fresh opportunity.
Fresh hearing directed, with strict conditions
The Tribunal set aside the Commissioner (Appeals)’s order and restored the matter for de novo adjudication.
It expressly directed the assessee to participate in the hearing and furnish all submissions, documents and supporting evidence. The Commissioner (Appeals) was directed to decide the matter on merits through a speaking and well-reasoned order.
The appeal was consequently allowed for statistical purposes. The Tribunal neither deleted the capital gains addition on merits nor quashed the reassessment.
Author’s comments
The significance of this decision lies in the opportunity restored to the assessee, rather than any substantive ruling on Section 50C or transfers through a revoked power of attorney.
In the fresh proceedings, the assessee will need to substantiate the alleged revocation, its timing and its bearing on the sale deeds, together with the evidence concerning consideration. The alternative objections to the capital gains computation will also require proper examination.
A final opportunity to establish the case is valuable, but it is not a finding that the case has already been established. The Tribunal’s strict directions make effective participation and complete documentary support central to the restored appeal.
Cases Discussed
- M/s Chhabra Land & Housing Ltd. — ITA Nos. 1025–1027/CHD/2005 (ITAT Chandigarh). Cited in the CIT(A)’s reproduced reasoning concerning effective prosecution of appeals.
- B.N. Bhattacharjee & Others — 118 ITR 461 (SC). Cited in the CIT(A)’s reproduced reasoning for the proposition that filing an appeal alone is not sufficient without pursuing it.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT INDORE
This is an Appeal filed by the Revenue under section 253 of the Income tax Act 1961,[ herein after referred to as the Act for the sake of brevity] before this tribunal. The Revenue is aggrieved by the order bearing No:-ITBA/NFAC /S/250/2024-25/1070572772 (1) dated 22.11.2024 passed by the Ld. CIT(A) u/s 250 of the Act which is hereinafter referred as the “Impugned Order”. The Relevant Assessment Year is 2018-2019 and the corresponding Previous Period is from 01/04/2017 to 31/03/2018.
2. FACTUAL MATRIX
2.1 That as and by way of an Assessment Order made u/s 147 RWS 144B the Act, the total Income of the Assessee was computed and Assessed at Rs 85,54,500/-. The ROI filed u/s 148 of the Act was at NIL. LTCG was at Rs 85,54,500/-. That the aforesaid Assessment Order bears No:- ITBA /AST/S/147/2022-23/1051376156(1) and that the same is dated 27.03.2023 which is hereinafter referred to as the “Impugned Assessment Order” for the sake of brevity.
2.2 The assessee was a non-filer. Case of the assessee was reopened under Section 147/148. Notice u/s 148 is dated 31.03.2022. In response to the Notice(s) u/s 142(1) of the Act no reply were filed. Thereafter a show cause notice was issued to the assessee u/s 144 of the Act & in response there to assessee had furnished details like copy of Agreement, bank statement etc but no further details or clarifications were submitted. The core issue was sale of immovable property. The sale consideration of 3 [three] agreements made for sale of immovable properties(shops) for the Aggregate value comes to Rs. 21,00,000/- whereas market value comes to Rs 1,71,0900/- difference is of Rs. 25,54,500/- which was added. By and large the assessee was non- compliant basis Para 2 of the Impugned Assessment Order.
2.3 That the Assessee being aggrieved by the aforesaid “Impugned Assessment Order” prefers the first appeal u/s 246A of the Act before the Ld. CIT (A) who by the “Impugned Order” has dismissed the first appeal of the Assessee on the grounds & the reasons stated therein. The core grounds & the reasons for the dismissal the first appeal was as under:-
“The appellant was issued notices on 04.03.2024 and 19.04.2024to submit its response, but neither any reply nor any adjournment was requested by the appellant. In the interest of natural justice notices were again issued on 03.05.2024, 16.05.2024 and 21.10.2024 which remain un-compiled and again adjournment was requested on 28.10.2024. Further on 29.10.2024 notice was again issued to the appellant to submit his response by 04.11.2024, in which it was specifically, mentioned that, “Please refer to this office hearing notice dated 21.10.2024 [vide DIN NO: ITBA/NFAC/F/APL_1/2024 25/1069827926(1). Subject to a TIMELY reply being filed from your side to the previous Query’s, an adjournment is being given in the case for up-to 04.11.2024 in the interest of natural justice. Based on which/Failing which case shall be decided on merits or dismissed accordingly.” but the same remain un-complied and has failed to submit any evidence in support of his submissions.
The aforesaid mentioned circumstances show that the appellant is not interested in pursuing its appeal. The maxim ‘vigilantibus non- dormientibus jura subvenunt i.e. the law assists those who are vigilant and not those who sleep over their right, is applicable in this case.
The Hon’ble ITAT in ITA No. 1025- 1027/CHD/2005 for the AY 2002-03 in the case of M/s Chhabra Land & Housing Ltd. after following the decision of Hon’ble Supreme Court in the case of B.N. Bhattacharjee & other 118 ITR 461 [SC] held that the appeal does not mean merely filing of the appeal but effectively pursuing the same.
Considering the above facts and material on record, it is held that the assessing officer has made the addition on merits considering facts of the case and no infirmity is noticed in the order of the Assessing officer, hence the appeal of the assesse is dismissed. In the result, appeal of the assessee is dismissed.”
2.4 That the Assessee being aggrieved by the “Impugned Order” has preferred the Instant Second Appeal before this Tribunal & has raised the following grounds of appeal in the form No: -36 against the “Impugned Order” which are as under: –
“1. On the facts and circumstances of the case and in law, the AO grossly erred in completing the assessment of the Appellant ex-parte, without giving proper opportunity of hearing and without considering the facts and merits of the case, which makes the order of AO illegal and violative of principles of natural justice and accordingly liable to be set aside and the assessment of the Appellant deserves to be reassessed denovo as per law and in the interest of justice
2. Without prejudice, on the facts and circumstances of the case and in law, the CIT(A) grossly erred in dismissing the appeal of the Appellant ex-parte, without giving proper opportunity of hearing and without considering the facts and merits of the case, which makes the order of CIT(A) illegal and violative of principles of natural justice and accordingly liable to be set aside and the appeal of the Appellant deserves to be properly adjudicated considering the merits as per law and in the interest of justice.
3. On the facts and circumstances of the case and in law, the reopening of the assessment and the assessment as completed under section 147 read with section 144 read with section 144B of the Income Tax Act, 1961 is illegal, invalid, violative of the principles of natural justice, without jurisdiction and liable to be quashed as per law and in the interest of justice.
4. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A) grossly erred in confirming an addition of Rs. 85,54,500 representing sale consideration allegedly received by the Appellant on sale of immovable properties after invoking provisions of section 50C ignoring the fact that the entire sale transactions forming the basis of the addition were executed through a Power of Attorney which was revoked prior to execution of the sale deeds and consequently the impugned sale transactions are illegal and non-est under law and which cannot form the basis of any addition coupled with the fact that the Appellant has not received the said sale consideration. The addition of Rs. 85,54,500 is thus illegal and which deserves to be deleted as per law and in the interest of justice.
5. On the facts and circumstances of the case and in law, the AO grossly erred in invoking the provisions of section 50C in relation to the alleged transaction of sale of immovable properties ignoring the fact that the entire sale transactions forming the basis of the addition were executed through a Power of Attorney which was revoked prior to execution of the sale deeds and consequently the impugned sale transactions are illegal and non-est under law and which cannot form the basis of any addition much less the addition as made by the AO. The invocation of section 50C is thus illegal and which deserves to be deleted as per law and in the interest of justice.
6. On the facts and circumstances of the case and in law, the sale deeds forming part of the addition as made by the AO are non-est and void under law making the transaction of sale void and consequently no sale can be deemed to have been affected under law and which makes the entire additions by the AO illegal and liable to be deleted as per law and in the interest of justice.
7. Without prejudice, the AO grossly erred in treating the stamp duty valuation as allegedly recorded in the sale deeds to be Long Term Capital Gains (“LTCG”) without giving any benefit of indexed cost of acquisition. In case any of the sale transaction is held to be taxable in the hands of the Appellant then the capital gains on the same deserves to be calculated as per the provisions of Income Tax Act, 1961 in the interest of justice.
8. On the facts and circumstances of the case and in law, the AO grossly erred in making the addition by invoking the provisions of section 50C without following the due process of law including but not limited to referring the property for valuation which makes the invocation of section 50C and the addition made pursuant the same illegal and liable to be deleted as per law.
9. The Appellant craves leave to add, amend, alter, vary and / or withdraw the above ground of appeal with the kind permission of the Hon’ble Tribunal.”
3. Record of Hearing
3.1 The hearing in the matter took place before this Tribunal on 07/10/2026, when the Ld AR for and on the behalf of the Assessee appeared before us & Interalia contended that the “Impugned Order” is bad in law, illegal & not Proper. It is in the violation of the Principles of Natural Justice. It therefore deserves to be set aside.
3.2 The Ld AR has placed on the record of this tribunal a Paper Book containing Pages 1 to 92 in support.
3.3 The Ld AR submitted that the registry has pointed out delay of 46 days for which “sufficient cause” was explained & Ld DR concurred with the same. Since both the Ld AR & Ld DR were ad idem on issue of condonation of delay we condone the delay & admit the appeal. The Ld AR then contended very fairy that the assessee is an illiterate person. The subject property was sold basis a Power of Attorney. Power of Attorney was revoked too. Proceedings were reopened. The Assessee had no knowledge of proceedings being illiterate. The Assessee in these circumstances remained non-compliant before CIT (A). Prayer was made that a last chance be given before the Ld. CIT (A) as final opportunity. The Ld DR for the revenue however left the issue to be decided by this tribunal basis law. Hearing was over & closed.
Observations, Finding and Conclusions
4.1 We have to decide the legality, validity and the proprietary of the “Impugned Order” basis records of the case & the rival submissions canvassed before us.
4.2 We have carefully perused the records of the case and have heard the submissions.
4.3 We basis records of the case and after hearing and further upon examining the rival contentions canvassed before us, are of the considered opinion that the “Impugned Order” is passed basis the Assessee was non-compliant. Now the Ld AR has undertaken before us that the assessee would be participative before Ld CIT(A) if one last opportunity is given. Accordingly we set aside the Impugned Order in order to meet ends of Justice back to the file of Ld CIT(A) with strict directions to the Assessee to participate in the hearing before CIT(A) & to file all submissions together with all documents, evidences in support. The Ld CIT(A) is directed to pass a speaking & well- reasoned order basis merits.
4.4 In view of the above, we set aside the Impugned Order and remand the case back to the file of the Ld. CIT (A) on de novo basis, shall now pass a speaking and well-reasoned order.
5 Order
5.1 In the Result the “Impugned Order” is set aside as and by way of remand back to the file of Ld CIT(A) with directions as aforesaid.
5.2 The appeal of the Assessee is allowed for Statistical Purpose.
Pronounced in open court on 12.10.2026.
