2023 (2) TMI 520 - AT - Income Tax

Deduction u/s 54F - CIT (A) upholding the assessment order passed by the AO by relying on evidences collected by him behind the back and using them without confronting them to the assessee and affording an opportunity to cross examine witnesses and rebut them - HELD THAT - Assessee is submitting that material collected by the AO were not confronted by the assessee and straightaway taken into the assessment order. In this regard, we accede to the request of assessee that assessee should be given chance to rebut these evidences and assessee should be permitted to bring the necessary submissions in this regard before the AO. Ld. DR for the Revenue did not have any objection to this proposition. Accordingly, we also remit the merits of addition to the file of AO. AO is directed to consider the issue afresh after giving the assessee an opportunity of making necessary submissions and allowing the assessee to confront with the evidences of Tehsildar and Inspector s report collected by the AO. Needless to add, assessee should be granted an opportunity of being heard. Appeal by the assessee stands allowed for statistical purposes.

Summary

Issues:
1. Upholding assessment order based on evidence collected without confrontation.
2. Disallowance of exemption claim for capital gain from agricultural land.
3. Failure to consider alternate claim of LTCG exemption u/s 54F.
4. Consideration of evidences by AO without confrontation.

Analysis:

1. The appeal challenged the order of the ld. CIT (Appeals)-16, New Delhi for the Assessment Year 2016-17. The grounds of appeal included objections to the assessment order based on evidence collected by the AO without confronting the assessee, denying the opportunity to cross-examine witnesses. The appellant contended that the assessment was flawed due to reliance on unverified evidence.

2. The controversy arose from the disallowance of the claim of exemption for capital gain of Rs.2,42,38,987 from agricultural land. The AO contended that the land sold was not agricultural as claimed by the assessee, citing the absence of agricultural activities and the conversion of land for non-agricultural/commercial purposes. The AO rejected the claim, leading to the appeal challenging this disallowance.

3. Another issue pertained to the failure of the AO to consider the alternate claim of LTCG exemption under section 54F of the Income Tax Act. The appellant argued that the claim was not entertained by the AO despite being raised during the assessment proceedings. The ld. CIT (A) upheld the AO's decision, citing precedents and the timing of the claim. However, the ITAT admitted this ground for further adjudication, directing the AO to consider it.

4. The final issue revolved around the consideration of evidence by the AO without confrontation, as raised by the appellant. The ITAT acknowledged the need for the assessee to rebut the evidences collected by the AO and directed a fresh consideration of the issue. The ITAT emphasized the importance of providing the assessee with an opportunity to respond and confront the evidence, ensuring a fair hearing before making any additions to the assessment.

In conclusion, the ITAT allowed the appeal for statistical purposes, remanding the matter back to the AO for a fresh assessment considering all relevant aspects and providing the assessee with a fair opportunity to present their case and rebut any evidence collected during the assessment process.