2013 (11) TMI 1643 - AT - Income Tax

Reopening of assessment - exemption u/s 54 - condonation of delay - Held that - The assessee had a bona-fide belief that reopening of assessment was correct and the assessee is not entitled for deduction u/s. 54(1) of the Act. Being so, in our opinion, the bona-fide belief is a reason for delay in filing the appeal before the CIT(A). If the assessee is otherwise entitled for exemption u/s. 54(1), we direct the CIT(A) to examine the issue afresh and decide the issue in accordance with law. As the appellate authorities are empowered to entertain the claim during the appeal proceedings which was not put before the AO on earlier occasion by the revised return. The judgement of Supreme Court in the case of Goetze (India) Ltd. vs. CIT (2006 (3) TMI 75 - SUPREME Court ) does not prevent the CIT(A) in entertaining this issue. Accordingly, we remit the issue to the CIT(A) for deciding it afresh.

Summary

Issues:
Appeals against CIT(A) orders for assessment year 2005-06.

Analysis:
1. The appeals were filed against orders of the CIT(A)-IV, Hyderabad for A.Y. 2005-06. The grounds raised by the assessees included errors in law and facts by the CIT(A), non-consideration of genuine factual situations for condonation of delay in filing appeals, and failure to acknowledge property purchases within the specified period for exemption under section 54(1).

2. The case involved an assessee who initially claimed capital gains exemption under section 54 for the entire gain from the sale of a property in A.Y. 2004-05. Subsequently, the new property for which the exemption was claimed was sold in A.Y. 2005-06, resulting in short term capital gains. The Assessing Officer calculated the gains after reducing the claimed exemption amount from the cost of acquisition, leading to a tax liability.

3. On appeal, the CIT(A) refused to condone the delay in filing the appeals, citing the assessee's failure to disclose investments in the second property during reassessment proceedings. The CIT(A) also noted that the assessee admitted to the short term capital gains without disclosing the investment, which affected the merits of the claim.

4. The ITAT Hyderabad, after hearing both parties, considered the delay in filing the appeals and the reasons provided by the assessee for the delay. The ITAT opined that the delay was unintentional and should be condoned, especially considering the substantial justice involved. The ITAT directed the CIT(A) to re-examine the issue of exemption under section 54(1) and decide accordingly, as the appellate authorities have the power to entertain claims not previously raised before the Assessing Officer.

5. Ultimately, the ITAT allowed both appeals for statistical purposes, remitting the issue of exemption under section 54(1) back to the CIT(A) for fresh consideration in accordance with the law. The judgment emphasized the importance of substantial justice over technicalities and the authority of appellate bodies to entertain new claims during appeal proceedings.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the decisions made by the ITAT Hyderabad.