ITAT Sets Aside CIT(A)’s Order for not providing fair & reasonable opportunity

Rajesh Kumar Tiwari Vs ITO (ITAT Raipur)

In the present case, Admittedly, in view of the aforesaid submissions of the assessee, it is emanating that the order of Ld. CIT(A) was under part consideration of the contentions raised by the assessee and the facts / submissions made by the assessee before him. Apparently, Ld. CIT(A) had not considered the adjournment request of the assessee neither additional submission nor legal grounds / additional grounds assailed by the assessee. Under such facts and circumstances, we are of the considered view that the assessee was not afforded with fair and reasonable opportunity of being heard by the Ld. CIT(A) during the appellate proceedings and the decision rendered therein was found to be without / part appreciation of the submissions of the assessee, therefore, in the interest of justice, it would be appropriate, as fairly admitted by both the parties, to restore the matter back to the files of Ld. CIT(A) for fresh adjudication, considering the legal / additional grounds of the assessee with appreciation of facts and submissions of the assessee in terms of prescribed provisions of the law. Resultantly, ground no. 3 and 4 of the present appeal of the assessee are partly allowed.

Since while dealing with the aforesaid legal ground of the assessee in the present case, ITAT set aside the order of Ld. CIT(A) back to his file for fresh adjudication of the present case, therefore, without dealing with the merits of the case, the present appeal of the assessee is set aside to the files of Ld. CIT(A).

FULL TEXT OF THE ORDER OF ITAT RAIPUR

The aforesaid appeal is filed by the assessee against the order of Commissioner of Income (Appeal), NFAC, Delhi (in short “Ld. CIT(A)”), dated 15.01.2024, u/s 250 of the Income Tax Act, 1961 (in short “The Act”), which in turn arises from the order u/s 147/143(3) by Income Tax Officer Ward- 3(2), Raipur, (in short “Ld. AO”), dated 09.12.2012.

2. The ground of appeal raised by the assessee in the present case are as under:

1. Ld. CIT(A) erred in confirming addition of Rs. 1,31,69,500/- made by AO on account of long term capital gain considering the stamp duty value of the property sold by appellant of Rs.1,54,19,500/- in place of actual consideration of Rs. 22,50,000/-. The addition of made by AO and confirmed by Ld. CIT(A) is arbitrary and not justified.

2. Ld. CIT(A) erred in confirming disallowance of Rs. 88,700/- made by AO on account of transfer expenses incurred for selling the property claimed by appellant. The disallowance made by AO and confirmed by Ld. CIT(A) is not justified.

3. Ld. CIT(A) erred in not adjudicating the ground relating to validity of reassessment order. The re-assessment order passed by AO is illegal inasmuch as the AO completed assessment without providing copy of reasons recorded for re-opening. The assessment order is liable to be quashed.

4. Ld. CIT(A) erred in not adjudicating following additional grounds taken before him vide separate application dt. 15.12.2023 filed by the appellant:-

i) The reassessment order dt. 09.10.2019 passed by the AO is illegal and invalid as it is in contravention of mandatory condition prescribed by CBDT vide its Circular No. 19/2019 dt. 14.08.2019 inasmuch as reassessment order does not contain DIN. In absence of generation & communication of DIN, consequent reassessment order is liable to be annulled.

ii) The reassessment order passed by the AO is illegal and liable to be quashed as no notice u/s 143(2) was issued by the AO after filing of return by the appellant, before completing the reassessment. The reassessment order is liable to be annulled.

iii) In the facts and circumstances of the case and in law, initiation of reassessment and invocation of sec. 147 is illegal, ab initio void inasmuch as there was no “reason to believe” that there was escapement of income. The initiation of reassessment and consequent reassessment order passed is illegal, unsustainable, ab initio void.

5. The appellant reserves the right to add, amend or alter any ground/s of appeal.

3. The short facts of the case as discussed by Ld. CIT(A) in the impugned order are extracted as under:

3. Facts of the case as per Column 11 of the Form 35:

1. The appellant is assessed with ITO-3(2), Raipur. Original return of income was filed declaring total income of Rs. 1,57,520/- Notice u/s 148 was issued by AO on 26.03.2019 against which the appellant filed return declaring same income as declared in original return. The AO passed order u/s 147 assessing the income at Rs. 1,44,48,972/- making following additions/disallowances:

1. During the year under consideration, the appellant had sold a property for a consideration of Rs. 22,5000/-. The AO observed that though the appellant has sold the property on 22.12.2012 and amount of sale consideration has been received by the appellant on same date but the registration was made by Registrar on 17.02.2014. The AO has already passed order of A.Y. 2014-15 u/s 147 vide order dt. 30.12.2018, making substantive addition in the hands of appellant of Rs. 1.54 * 0.14 * 0.5 /­being value adopted by Stamp Valuation Authority on sale of this property. Present appeal in being filed against the protective addition made by AO during the year under consideration for same issue.

2. The AO observed that while computing the capital gain, the appellant has shown sale consideration of Rs. 22,50,000/- instead of Rs. 1,54,19,500/-i.e. value adopted by Stamp Valuation Authority. During the assessment proceedings, vide letter dt.14.11.2019 the appellant specifically requested before AO to refer the matter to DVO for valuation of property but AO did not accept the submission of the appellant. Ignoring the request of appellant, the AO concluded that, considering the location of property, the value adopted Stamp Valuation Authority is reasonable and not disputable. He made addition of Rs. 1,31,69,500/- and recomputed the capital gain disclosed by the appellant.

3. The AO also disallowed deduction of Rs. 10,33,252/- being the indexed cost of improvement claimed by the appellant in respect of property sold. He made the disallowance observing that the appellant has not filed details of such expenses.

4. In order to dispute the addition/disallowance made by the Ld. AO on account of Long-Term Capital Gain (LTCG) in the assessment order for Rs. 1,42,91,452/-, thereby determining the total income of the assessee at Rs. 1,44,48,972/-, apart from the agriculture income of Rs.13,82,476/-, the assessee being aggrieved has preferred an appeal before the first appellate authority i.e., Ld. CIT(A), wherein the contention of the assessee have partly been accepted with the following observations:

5. Decision:

The appellant in its ground of appeal has assailed the addition of Rs.1,42,91,452/- by invoking the provisions of section 50C of the Act. The AO in the assessment had mentioned that the during the year the appellant had sold immovable property for Rs.22,50,000/- and the stamp value is Rs.1,54,19,500/- The AO was not satisfied with the capital gain calculations of the appellant and hence he made fresh calculations based on the facts and added LTCG of Rs.1,42,91,452/-to the income of the appellant.

5.1 The issue under dispute is the adoption of the circle rate and the non-granting of the cost of improvement in the property. The submission of the appellant is examined. The AO had adopted the sale consideration as per the stamp value and the indexed cost of acquisition but has not granted the cost of improvement for want of the evidence. The AO is correct in adopting the sale value as per the stamp value adopted by the registration authority for the purposes of section 50C. However, the property indexed cost was taken from the 1981. The appellant must have incurred expenses on it whose bills were not available with him which led to the disallowance of improvement. After examining the factual matrix of the case, the value adopted by the stamp authority by the AO is correct. However, the AO is directed to allow the cost of improvement of Rs. 2161301/- and compute the long-term capital gain. The appeal is partly allowed.

5. At the outset, Ld. Authorized Representative of the assessee, Shri R. B. Doshi, CA (in short “Ld. AR”), adverting to ground no. 3 and 4 of the instant appeal have submitted that the assessee has challenged the validity of reassessment order before the Ld. CIT(A), but the said legal ground along with additional grounds submitted by the assessee were not adjudicated by the Ld. CIT(A) and therefore, the order of Ld. CIT(A) was erroneous and against the settled principle of law. It is the submission that, since the assessee is not satisfied with the decision of Ld. CIT(A) in toto on the merits of the issues, therefore, the assessee is aggrieved with the order of Ld. CIT(A), wherein the legal contentions raised are not adjudicated by the Ld. CIT(A), hence, it was the request that the matter should in all fairness be set aside to the filed of Ld. CIT(A) for fresh adjudication.

6. Ld. AR further drew our attention to the page no. 8 of the assessee’s paper book consisting of assessee’s submission before the Ld. CIT(A) regarding the validity of reassessment order. The submissions of the assessee before the Ld. CIT(A), which apparently are not considered in the appellate order, therefore, for the sake of clarity, the same are extracted as under:

As regards ground no. 4

This ground of appeal is against the legality of the reassessment order inasmuch as the reassessment was completed without providing a copy of the reasons recorded. In this regard, it is humbly submitted that: –

4.1 Against the notice u/s 148 dt. 26.03.2019, the appellant filed return of income on 13.11.2019. A copy of the acknowledgment is enclosed (page no. 35).

4.2 However, the AO completed reassessment without providing copy of the reasons recorded. It is humbly submitted that when the AO reopened the assessment and when the return was filed by appellant, the AO was, on his own, required to provide copy of the reasons to the appellant, whether or not they were asked.

4.3 Since reassessment has been completed without providing copy of reasons, as per ratio laid down in the following cases, consequent reassessment order becomes illegal, ab initio void and is liable to be struck down: –

i) CIT vs Staunch Marketing P. Ltd. (2018) 404 ITR 299 (Del.).

ii) Rajendra Kumar sehgal vs ITO (2015) 414 ITR 286 (Del.)

iii) CIT vs Oberoi Hotels (P.) Ltd. (2018) 96 taxmann.com 104 (Cal.).

iv) CIT vs Shri Jai Shiv Shankar Traders P. Ltd. 383 ITR 448 (Del.).

v) Pankaj Dutta vs ITO (2017) 51 CCH 375 (Kol.).

vi) Alok Mittal vs DCIT (2017) 167 ITD 325 (Kol.)

4.4 In view of above explanation, it is humbly requested that the assessment order may kindly be annulled.

7. Ld. AR further drew our attention to page no. 54 to 57 of the assessee’s PB stating that the assessee had also made a request for admission of additional ground which are purely legal issues, goes to the root of the matter, therefore, the same are merits adjudication in the in the interest of justice. Application for additional grounds dated 15.12.2023, submitted before the Ld. CIT(A), but are not adjudicated by the Ld. CIT(A) are extracted as under:

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8. Ld. AR further contended that the assessee had made a request for adjournment of the case on 15.12.2023, however, the same was not taken into consideration by the Ld. CIT(A) before disposing of the order dated 15.01.2024, therefore, the assessee was deprived of fair opportunity of being heard before the Ld. CIT(A), this is a complete violation of principle of natural justice, therefore, on this count also the matter should be restored back to the files of Ld. CIT(A).

9. Ld. AR also submitted that the assessee had duly complied and furnished all the necessary requisite information before the Ld. CIT(A) on 18.12.2023 and copy of such communication was placed before us at page No. 13-14 of assessee’s PB, however, assessee’s application containing filing the submission is found to be disregarded by the Ld. CIT(A), who had categorically observed that the appellant did not file the submissions, which is contrary to the facts on record, therefore, ostensibly, the submissions of assessee were not taken into consideration while the decision was made by the Ld. CIT(A). On this issue also it was the prayer to set aside the order of Ld. CIT(A) for adjudication of the issues left without consideration by the Ld. CIT(A).

10. Per contra, Ld. Senior Departmental Representative, Shri Satya Prakash Sharma, (in short “Ld. Sr. DR”) vehemently supported the order of authorities, however, have not objected to the request of the assessee for setting aside the matter to the files of Ld. CIT(A).

11. We have considered the rival submission, perused the material available on record and case laws furnished by the assessee in support of the aforesaid contentions. In the present case, Admittedly, in view of the aforesaid submissions of the assessee, it is emanating that the order of Ld. CIT(A) was under part consideration of the contentions raised by the assessee and the facts / submissions made by the assessee before him. Apparently, Ld. CIT(A) had not considered the adjournment request of the assessee neither additional submission nor legal grounds / additional grounds assailed by the assessee. Under such facts and circumstances, we are of the considered view that the assessee was not afforded with fair and reasonable opportunity of being heard by the Ld. CIT(A) during the appellate proceedings and the decision rendered therein was found to be without / part appreciation of the submissions of the assessee, therefore, in the interest of justice, it would be appropriate, as fairly admitted by both the parties, to restore the matter back to the files of Ld. CIT(A) for fresh adjudication, considering the legal / additional grounds of the assessee with appreciation of facts and submissions of the assessee in terms of prescribed provisions of the law. Resultantly, ground no. 3 and 4 of the present appeal of the assessee are partly allowed.

12. Since while dealing with the aforesaid legal ground of the assessee in the present case, we have set aside the order of Ld. CIT(A) back to his file for fresh adjudication of the present case, therefore, without dealing with the merits of the case, the present appeal of the assessee is set aside to the files of Ld. CIT(A).

13. In result, the appeal of the assessee in ITA No. 78/RPR/2024 is partly allowed, in terms of our aforesaid observations.

Order pronounced in the open court on 04/07/2024.