2019 (12) TMI 600 - AT - Income Tax

Gain arising out of the sale of land - Assessee with an opening stock during the year under assessment purchased land for an integrated project - HELD THAT - When assessee has categorically relied upon Board Resolution of the company to prove the fact that both the project at Gurgaon and Jaipur were integrated projects which certainly gets corroboration from the audited accounts, summarily dismissing the claim of assessee is certainly violation of rules of natural justice. CIT (A) has not deliberated in any manner as to what would be the outcome of Board Resolutions relied upon by the assessee when examined in the light of the audited accounts. All these Board Resolutions are available and audited financials are available - CIT (A) was required to get the Board Resolutions examined in the light of the audited financials and the other circumstantial evidence during appellate proceedings but he has dismissed this argument of the assessee by merely recording the findings that no third party evidence has been brought on record by the assessee. All these facts go to prove that the issue is required to be examined afresh by the AO in the light of the Board Resolutions and audited financials of the company and the evidence available on record by providing adequate opportunity of being heard to the assessee. Consequently, impugned order passed by the ld. CIT (A) is set aside and the file is remanded back to the AO to decide afresh after providing adequate opportunity of being heard to the assessee.

Summary

Issues:
1. Validity of the order passed by CIT(A) under section 250 of the Income Tax Act, 1961.
2. Addition made by the Assessing Officer on account of alleged gain from the sale of land.
3. Consideration of evidence regarding the integrated nature of the project by the authorities.

Issue 1:
The Appellant sought to set aside the order passed by the CIT(A) under section 250 of the Income Tax Act, 1961, alleging it to be illegal and against natural justice and the provisions of the Act. The Tribunal found that the CIT(A) did not adequately consider evidence presented by the Appellant, such as Board Resolutions, to establish the integrated nature of the project. The Tribunal concluded that dismissing the Appellant's claims without proper examination was a violation of natural justice. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the case back to the Assessing Officer for fresh consideration.

Issue 2:
The Assessing Officer disallowed certain expenses claimed by the Appellant, making an addition of a substantial amount on account of alleged gain from the sale of land. The CIT(A) confirmed this addition, leading to the Appellant appealing to the Tribunal. The Tribunal observed that the AO's decision was based on the premise that the Gurgaon project was not an extension of the Jaipur project, leading to the taxation of profits from land sales. However, the Tribunal noted that the Appellant had reduced the sale consideration from work-in-progress and had not offered the profits for taxation. The Tribunal found that the AO's decision did not adequately consider the evidence provided by the Appellant regarding the integrated nature of the projects. Consequently, the Tribunal set aside the CIT(A)'s order on this issue as well and remanded it back to the AO for fresh consideration.

Issue 3:
The Appellant contended that the project in Gurgaon was an extension of the project in Jaipur, presenting evidence such as Board Resolutions. However, both the AO and the CIT(A) did not give due consideration to this evidence. The Tribunal found that the CIT(A) had summarily dismissed the Appellant's claim without properly examining the Board Resolutions and audited financials. Therefore, the Tribunal set aside the CIT(A)'s decision and remanded the case to the AO for a fresh assessment after providing the Appellant with adequate opportunity to present their case. As a consequence, the penalty appeal under section 271(1)(c) was also set aside for fresh consideration by the AO. Ultimately, both appeals filed by the Appellant were allowed for statistical purposes.

This judgment highlights the importance of considering all evidence presented by the taxpayer, ensuring a fair and just assessment process in line with the principles of natural justice.