2021 (11) TMI 627 - AT - Income Tax

Classification of capital gain - LTCG or STCG - Non consider the cost of acquisition/indexed cost of acquisition of the property in question while computing the capital gain - HELD THAT - Admittedly, there can be no second thought on the fact that the assessee had consistently adopted a lackadaisical approach and had neither complied with the directions of the AO nor appeared before the CIT(A). The conduct of the assessee was no better, and as observed by us hereinabove he had failed to participate in the course of the appellate proceedings before us. Be that as it may, we find substance in the claim of the assessee that as the CIT(A) had not only declined his request for adjournment, but had also not considered the submissions which were filed by him along with Form No. 35 on the e-portal of the Department, therefore, he was not afforded sufficient opportunity of being heard. We find that it is the claim of the assessee that the CIT(A) had not only wrongly classified the sale transaction as STCG, as against the LTCG, but had also erred in not directing the AO to consider the cost of acquisition/indexed cost of acquisition of the property in question while computing the capital gain. In the backdrop of the aforesaid facts, we though deprecate the conduct of the assessee who had throughout been non-cooperative, but cannot remain oblivious of the fact that there are certain infirmities arising from the order of the CIT(A) as regards the mode and manner of quantification of the income resulting from the sale of the property in question. We, thus, in all fairness are of the considered view that the matter requires to be re-visited by the AO, who is directed to re-adjudicate the issue after affording an opportunity of being heard to the assessee.AO shall in the course of the de novo assessment proceedings allow an opportunity of being heard to the assessee who shall remain at liberty to substantiate his claim on the basis of supporting documentary evidence/material - Appeal filed by the assessee is allowed for statistical purposes.

Issues:
1. Validity of the order passed by the Commissioner of Income Tax (Appeals)
2. Assessment of income from sale of property as Short Term Capital Gains
3. Treatment of long term capital loss on extinguishment of shares

Issue 1: Validity of the order passed by the Commissioner of Income Tax (Appeals)
The appellant challenged the order of the Commissioner of Income Tax (Appeals) on the grounds of being invalid and unsustainable in law. The appellant contended that the order was passed in violation of Principles of Natural Justice as the Commissioner did not accept submissions, refused to take attendance, and ignored requests for adjournment. Additionally, the appellant argued that the Commissioner erred in not considering the submissions filed along with Form No. 35 on the e-portal of the department.

Issue 2: Assessment of income from sale of property as Short Term Capital Gains
The Commissioner of Income Tax (Appeals) assessed the income from the sale of property as Short Term Capital Gains, contrary to the appellant's claim that it should be treated as Long Term Capital Gains. The appellant argued that the Commissioner failed to properly compute the Capital Gains and did not allow deductions for the cost of acquisition/indexed cost of acquisition of the property. The appellant highlighted the need for proper computation of chargeable Capital Gains by incorporating the long term capital loss arising from the extinguishment of shares in a company.

Issue 3: Treatment of long term capital loss on extinguishment of shares
The appellant experienced a long term capital loss due to the extinguishment of shares in a company following a High Court order. The appellant asserted that if given an opportunity to be heard, they would have provided explanations, evidence, and computations to demonstrate the long term capital loss. The appellant emphasized the importance of considering this loss in the overall assessment of capital gains.

In the judgment, the Appellate Tribunal acknowledged the appellant's lack of cooperation but found merit in the appellant's claims regarding the inadequacies in the Commissioner's order. The Tribunal directed the Assessing Officer to re-adjudicate the issue after affording the appellant an opportunity to be heard. The Tribunal emphasized the importance of allowing the appellant to substantiate their claims with supporting documentary evidence. As a result, the appeal filed by the appellant was allowed for statistical purposes.

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