2019 (5) TMI 1255 - AT - Income Tax

Admission of additional evidence - sufficient cause - CIT(A) appreciated the reasonable cause put forth by the assessee for delay in filing the appeal - HELD THAT - In my view, approach of the CIT(A) appears to be incongruous and does not stand the test of reason. Rule 46A of the Rules prescribes circumstances under which additional evidence can be admitted after allowing opportunity to the AO. One of the conditions laid down in Rule 46A of the Rules is when there is sufficient cause for failure to produce the evidence before the AO. While evaluating sufficient cause for failure to produce evidence before the AO, the test of reasonableness and human probabilities must be applied so as to aid the object of assessment proceedings, i.e., determination of the income liable for taxation. Assessment proceedings and appellate proceedings under the Act, between the assessee and Revenue, are not adversarial proceedings. The ultimate object of assessment and appellate proceedings is to determine the correct income of the assessee liable for taxation and technicalities must not come in the way of determination of the correct total income. Therefore, the refusal by the CIT(A) to admit additional evidence, in the facts and circumstances of the case on hand, does not stand to reason. Claim of Exemption u/s 54 - in remand report AO has only remarked that there is a claim for exemption u/s 54 and that no return of income has been filed by the assessee for AY 2009-10 - HELD THAT - No adverse remarks have been made by the AO with regard to the computation of LTCG as well as the entitlement to claim exemption u/s 54. It is, therefore, clear that the AO was satisfied about the sale / purchase of the said properties and the investment benefit available to the assessee u/s 54. In the remand report, the AO has only remarked that there is a claim for exemption u/s 54 and that no return of income has been filed by the assessee for Assessment Year 2009-10. This remark by the AO cannot be a factor to deny the assessee its legitimate claim for exemption u/s 54. There is no prohibition under the Act on the assessee in claiming exemption u/s 54 in case it has not filed a return of income. Such a legal claim can be put forth at any stage of assessment / appellate proceedings and should be considered on merits in the light of the details / documents / corroborative evidence filed in this regard. Having considered the entire material on record on this issue and taking into account the peculiar facts and circumstances of the case on hand, the assessee is entitled to exemption u/s 54 and therefore the entire sale consideration assessed by the AO is hereby deleted. - Decided in favour of assessee.

Summary

Issues:
1. Assessment of capital gains on the sale of a residential property.
2. Admissibility of additional evidence under Rule 46A of the Income Tax Rules.
3. Claim of exemption under section 54 of the Income Tax Act.

Assessment of Capital Gains:
The case involved the sale of a residential property by the assessee for a consideration of ?46,65,000, with the Assessing Officer (AO) initiating proceedings under section 147 of the Income Tax Act due to non-filing of income tax return. The AO completed the assessment ex-parte, taxing the entire sale consideration as income from capital gains. The assessee claimed exemption under section 54 of the Act, stating the purchase of a new residential property. The CIT(A) dismissed the appeal, upholding the assessment of capital gains. However, the Tribunal found that the assessee was entitled to exemption under section 54, considering the facts and circumstances. The AO's satisfaction about the sale/purchase of properties and the investment benefit under section 54 were crucial in allowing the claim for exemption, resulting in the deletion of the assessed sale consideration.

Admissibility of Additional Evidence:
The CIT(A) declined to admit additional evidence under Rule 46A of the Rules, stating insufficient cause as the assessee did not respond to notices issued by the AO. However, the Tribunal disagreed, emphasizing that technicalities should not impede the determination of correct income. The Tribunal found the assessee's lack of notice about assessment proceedings due to notices sent to the old address constituted sufficient cause for admitting additional evidence. The CIT(A)'s refusal to admit the evidence was deemed incongruous and not in line with the objective of assessment proceedings. Consequently, the Tribunal held that the additional evidence should have been admitted under Rule 46A.

Claim of Exemption under Section 54:
The Tribunal analyzed the assessee's claim for exemption under section 54 concerning the sale of the residential property. Despite the delay in filing the appeal, the Tribunal acknowledged the reasonable cause for the delay due to the notices being sent to the old address. The AO's satisfaction with the sale/purchase details and the absence of adverse remarks supported the assessee's claim for exemption. The Tribunal concluded that the assessee was entitled to exemption under section 54, leading to the deletion of the assessed sale consideration. The decision was based on the factual and legal aspects of the case, ensuring justice and adherence to tax laws.

In conclusion, the Tribunal allowed the assessee's appeal for Assessment Year 2009-10, granting exemption under section 54 and deleting the assessed capital gains. The judgment highlighted the importance of considering individual circumstances, admitting additional evidence for a fair assessment, and upholding legal claims within the tax framework.