2025 (2) TMI 489 - AT - Income Tax

Ex-parte order u/s.250 - Unexplained capital gain u/s. 45 - long term capital gain on sale of land by applying sec.50C(1) without referring the matter to DVO for valuation of such land u/s.50C(2) when actual sale consideration is less than the stamp duty value - HELD THAT -Although we concur with the CIT(Appeals) that the appellate proceedings could not have been jeopardized for want of prosecution but at the same time are unable to persuade ourselves to subscribe to the manner in which the appeal had been disposed off by him. It transpires on a perusal of the statement of facts that were filed by the assessee before the CIT(A) that he had assailed the impugned addition of undisclosed capital gain u/s. 45 for the reason that the AO had grossly erred in treating the entire amount of sale consideration as his undisclosed capital gain u/s. 45 of the Act. We are of the view that though the assessee had not participated in the appellate proceedings but the CIT(Appeals) ought to have adverted to the facts involved in the case before him in the backdrop of the grounds based on which the impugned addition was assailed before him and adjudicated the said respective issues vide a speaking order instead of dismissing the same for want of prosecution. CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(Appeals). In our considered view once an appeal is preferred before the CIT(Appeals) it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact a perusal of Sec.251(1)(a) and (b) as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(Appeals) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per the mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. We thus not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(A) for non-prosecution therefore set-aside his order with a direction to dispose off the same on merits. Appeal filed by the assessee is allowed for statistical purposes

ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment include:

Whether the Assessing Officer (A.O) erred in treating the entire sale consideration of Rs. 73,65,000 as unexplained capital gain under Section 45 of the Income Tax Act, 1961, without referring the matter to the Valuation Officer under Section 50C(2) when the actual sale consideration was less than the stamp duty value.
Whether the Commissioner of Income-Tax (Appeals) [CIT(A)] erred in sustaining the addition of Rs. 73,65,000 by making an ex-parte order under Section 250 without adjudication on merits.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Application of Section 50C and Reference to Valuation Officer

Legal Framework and Precedents: Section 50C of the Income Tax Act provides that if the consideration received on transfer of a capital asset is less than the value adopted by the stamp valuation authority, the latter value should be deemed as the full value of consideration. Section 50C(2) allows the assessee to dispute the stamp duty value, in which case the A.O should refer the matter to a Valuation Officer. The appellant relied on precedents such as Sunil Kumar Agarwal (Calcutta High Court) and other Tribunal decisions which emphasize the necessity of such a reference.
Court's Interpretation and Reasoning: The Tribunal noted that the A.O did not make a reference to the Valuation Officer despite a significant discrepancy between the actual sale consideration and the stamp duty value. The Tribunal found this approach inconsistent with the legal requirement under Section 50C(2) and the precedents cited.
Key Evidence and Findings: The A.O based his assessment on information from the Investigation Wing, which highlighted a discrepancy of Rs. 54.59 lacs between the fair market value and the sale consideration.
Application of Law to Facts: The Tribunal agreed with the appellant that the A.O should have referred the matter to the Valuation Officer, given the substantial difference in values.
Treatment of Competing Arguments: The appellant argued for the necessity of a Valuation Officer's assessment, while the Departmental Representative supported the A.O's decision. The Tribunal sided with the appellant, emphasizing procedural compliance.
Conclusions: The Tribunal concluded that the A.O's failure to refer the matter to a Valuation Officer was a procedural lapse, warranting a reconsideration of the assessment.

Issue 2: Ex-parte Order by CIT(A) and Non-prosecution of Appeal

Legal Framework and Precedents: The Tribunal referred to Section 251 of the Income Tax Act, which requires the CIT(A) to adjudicate appeals on merits, even in the absence of the appellant's participation. The judgment of the Bombay High Court in CIT Vs. Premkumar Arjundas Luthra (HUF) was cited, which mandates that CIT(A) should not dismiss an appeal for non-prosecution.
Court's Interpretation and Reasoning: The Tribunal criticized the CIT(A) for dismissing the appeal without addressing the merits of the case, noting that the CIT(A) is obligated to examine the issues raised in the appeal.
Key Evidence and Findings: The CIT(A) dismissed the appeal due to the appellant's non-participation despite multiple opportunities. However, the Tribunal emphasized the statutory duty of the CIT(A) to decide on the merits.
Application of Law to Facts: The Tribunal found that the CIT(A) failed to fulfill his statutory duty by not addressing the substantive issues raised in the appeal.
Treatment of Competing Arguments: The Tribunal acknowledged the Departmental Representative's reliance on the CIT(A)'s order but ultimately found it procedurally flawed.
Conclusions: The Tribunal set aside the CIT(A)'s order, directing a de-novo consideration of the appeal on merits.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal emphasized that the CIT(A) is "obliged to dispose of the appeal on merits" and cannot dismiss it for non-prosecution, as highlighted in the Bombay High Court's decision.
Core Principles Established: The necessity for the A.O to refer valuation discrepancies to a Valuation Officer under Section 50C(2) and the obligation of CIT(A) to adjudicate appeals on merits, regardless of the appellant's participation.
Final Determinations on Each Issue: The Tribunal allowed the appeal for statistical purposes, remanding the case to the CIT(A) for a decision on merits, with instructions to provide a reasonable opportunity to the appellant for presenting his case.

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