2023 (1) TMI 413 - AT - Income Tax

Deduction u/s 54F - Disallowance towards long term capital gain - CIT(A) termed the sale of old property (long term capital asset) as short term capital asset and has directed the A.O. to assess the long term capital gain as short term capital gain vide order impugned - HELD THAT - CIT(A) has not discussed the reasons and not made proper adjudication of the issues while disallowing the deduction u/s 54F claimed by the Assessee and not even dealt with the contention and the judicial decisions cited by the assessee. The order of the CIT(A) is non speaking one. CIT(A) has termed the sale of old property as short term capital asset and directed the A.O. to assess the long term capital gain as short capital gain without affording opportunity to the assessee which is in violation of natural justice. Therefore, we deem it fit to remand the matter to the file of Ld. CIT(A) for de-novo consideration after providing opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purpose.

Issues:
1. Disallowance of deduction under section 54/54F towards long-term Capital-Asset.
2. Classification of the sale of old property as short-term Capital-Asset without proper hearing.
3. Non-speaking order by the Ld.CIT(A) regarding disallowance of Deduction u/s 54F.
4. Compliance with conditions for claiming exemption u/s 54F of the Act.

Analysis:

Issue 1: Disallowance of deduction under section 54/54F towards long-term Capital-Asset
The appellant contested the disallowance of deduction under section 54/54F towards long-term Capital-Asset by the Id. DCIT. The Ld.CIT(A) dismissed the appeal, prompting the appellant to appeal further. The Appellate Tribunal found merit in the appellant's arguments, noting that the Ld.CIT(A) did not adequately discuss the reasons for disallowance, failed to consider the documents supporting the purchase of the new residential property, and did not address the judicial decisions cited by the appellant. The Tribunal deemed the Ld.CIT(A)'s order as non-speaking and remanded the matter back for de novo consideration, emphasizing the need for the appellant to be heard.

Issue 2: Classification of the sale of old property as short-term Capital-Asset without proper hearing
During the appellate proceedings, the Ld.CIT(A) classified the sale of the old property (long-term Capital-Asset) as a short-term Capital-Asset without affording the appellant an opportunity to be heard. The appellant argued that this classification was erroneous and violated principles of natural justice. The Appellate Tribunal agreed with the appellant, directing the Ld.CIT(A) to reconsider the matter after providing the appellant with a proper opportunity to present their case.

Issue 3: Non-speaking order by the Ld.CIT(A) regarding disallowance of Deduction u/s 54F
The Ld.CIT(A) did not pass a speaking order concerning the disallowance of Deduction u/s 54F towards long-term capital gain by the Id. DCIT, which was a ground of appeal filed by the appellant. The Appellate Tribunal found this omission problematic and directed the Ld.CIT(A) to consider the appellant's submissions, documents, and judicial decisions, providing specific findings and passing an appropriate order in accordance with the law.

Issue 4: Compliance with conditions for claiming exemption u/s 54F of the Act
The Ld.A.O. contended that the appellant did not comply with the conditions for claiming exemption u/s 54F of the Act, as the appellant was required to purchase or construct a residential house before a specified date. The Appellate Tribunal did not delve into this issue in detail, as the focus was primarily on the disallowance of deduction and the classification of the old property.

In conclusion, the appeal filed by the appellant was allowed for statistical purposes, and the matter was remanded back to the Ld.CIT(A) for a fresh consideration, ensuring the appellant's right to be heard and addressing the issues raised comprehensively.

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