2018 (10) TMI 233 - AT - Income Tax

Profit on sale of land - to be assessed from business income or short term capital gain - Held that - Perusal of the order of the CIT(A) would indicate that neither the CIT(A) carved out any points of disputes nor recorded reasons for the decision. After looking into the record, he simply concurred with the AO. CIT(A) ought to have applied his independent mind on the facts collected by the AO and the explanation given by the assessee before the AO. CIT(A) failed to adhere to the procedure contemplated in section 250(6) of the Act, therefore, orders of CIT(A) are not sustainable. We deem it appropriate to state here for the argument s sake that even if it is assumed that there is a contributory negligence at the end of the assessee by not appearing before the ld.CIT(A), then also, punishment in the shape of tax liability on additions extracted (supra) is disproportionate to the negligence.

Issues Involved:
1. Delay in filing the appeals.
2. Dismissal of appeals by CIT(A) without providing sufficient opportunity of hearing.
3. Whether profit on sale of land should be assessed as business income or short-term capital gain.
4. Disallowance of the appellant's claim of cost on improvement of land.
5. Rejection of appellant's claim in respect of sale transactions claimed as Long Term Capital Gain.
6. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.
7. Charging of interest under Sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeals:
The appeals were time-barred by 203 days. The assessees explained the delay through affidavits, stating that their accountant, who was responsible for filing the appeals, kept the orders in his drawer and did not take any action before resigning in December 2015. The appeals were filed immediately after discovering the oversight. The Tribunal considered the affidavits, attendance records, and salary payment details, concluding that the delay was due to a bona fide human error and not a deliberate tactic. Citing the Supreme Court's liberal interpretation of "sufficient cause" in condoning delays, the Tribunal condoned the delay and decided to hear the appeals on merit.

2. Dismissal of Appeals by CIT(A) Without Providing Sufficient Opportunity of Hearing:
The assessees argued that the CIT(A) dismissed their appeals without providing sufficient opportunity for a hearing. The Tribunal noted that the CIT(A) had not recorded any independent findings and merely concurred with the AO's decision due to non-prosecution by the assessees. The Tribunal emphasized that the CIT(A) should have followed the procedure under Section 250(6) of the Income Tax Act, which requires stating points in dispute and recording reasons for the decision. The Tribunal found the CIT(A)'s orders unsustainable and remitted the issues back to the CIT(A) for fresh adjudication.

3. Whether Profit on Sale of Land Should Be Assessed as Business Income or Short-Term Capital Gain:
The AO had treated the profit on the sale of land as business income instead of short-term or long-term capital gains. The CIT(A) dismissed the assessees' appeals without addressing this issue independently. The Tribunal remitted this issue back to the CIT(A) for fresh consideration, directing the CIT(A) to apply an independent mind and follow the procedure under Section 250(6).

4. Disallowance of the Appellant's Claim of Cost on Improvement of Land:
The AO disallowed the assessees' claim of expenses incurred on the improvement of land. The CIT(A) upheld this disallowance without providing independent reasoning. The Tribunal remitted this issue back to the CIT(A) for fresh adjudication, emphasizing the need for an independent evaluation of the facts and the assessees' explanations.

5. Rejection of Appellant's Claim in Respect of Sale Transactions Claimed as Long Term Capital Gain:
The AO rejected the assessees' claim that certain sale transactions should be treated as long-term capital gains. The CIT(A) concurred with the AO without independent analysis. The Tribunal remitted this issue back to the CIT(A) for a fresh hearing, directing the CIT(A) to provide a detailed and reasoned decision.

6. Initiation of Penalty Proceedings Under Section 271(1)(c) of the Income Tax Act:
The CIT(A) dismissed the assessees' ground regarding the initiation of penalty proceedings under Section 271(1)(c), noting that no appeal lies against mere initiation of penalty proceedings. The Tribunal did not address this issue further, as it was not within the scope of the present appeals.

7. Charging of Interest Under Sections 234A, 234B, and 234C:
The CIT(A) dismissed the assessees' grounds regarding the charging of interest under Sections 234A, 234B, and 234C, stating that these were consequential in nature. The Tribunal did not provide a separate analysis for this issue, as it was contingent on the outcome of the other issues.

Conclusion:
The Tribunal condoned the delay in filing the appeals and set aside the orders of the CIT(A), remitting all issues back to the CIT(A) for fresh adjudication. The Tribunal directed the CIT(A) to follow the procedure under Section 250(6) and provide a detailed and reasoned decision after giving the assessees a fair opportunity to present their case. The appeals were allowed for statistical purposes.

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