2023 (6) TMI 34 - AT - Income Tax

Reopening of assessment u/s 147 - addition on account of sale of property as unexplained cash credit u/s. 68 - assessee has not offered the sale consideration of Thane flat sold and the assessee has claimed exemption u/s 54 of the Act in respect of Long Term Capital Gain ( LTCG ) arising from the sale of flat at Thane which is not tenable - AO observed that since the assessee has not claimed the exemption of long term capital gains in the return of income filed and therefore the claim of the assessee in the revised computation income is denied - HELD THAT - When a query was raised to assessee, to explain the reasons for not filing the return of income and the documentary evidences of property purchased and sold before the lower authorities. AR mentioned that the details were not available during that period and demonstrated the sale agreement of the flat at Thane of the paper book and the purchase agreement of new house property - evidence play important role in decision making in the adjudicating proceedings. Therefore assessee should not suffer for non filing of material information, as the evidences played vital role in decision making Accordingly, to meet the ends of justice, we set aside the order of the A.O. and restore the entire disputed issues along with the evidences and the revised computation of income claiming exemption of Long term capital gains on sale of flats to the file of the assessing officer to decide afresh on merits - Appeal of the assessee for statistical purposes.

Summary

Issues Involved:
The appeal against the order of Assessing Officer passed under section 144C (13) r.w.s. 147 of the Income Tax Act, 1961 in pursuance of the directions of Ld. Dispute Resolution Panel u/s 144C(5) of the Act.

Issue 1: Re-opening of the case under section 147
The appellant contended that the re-assessment is invalid and void in law due to the re-opening of the case under section 147. The Assessing Officer had reasons to believe that income had escaped assessment, leading to the issuance of a notice under section 148 of the Act. The appellant challenged the validity of this re-assessment.

Issue 2: Addition on account of sale of property
The Assessing Officer made an addition on account of the sale of property without appreciating the absence of income escapement under section 147 of the Income Tax Act. The appellant argued that the addition was unjustified and should be deleted.

Issue 3: Addition as unexplained cash credit
The Assessing Officer added an amount as unexplained cash credit under section 68 of the Income Tax Act, relating to the sale of property. The appellant contended that this addition was made without considering the submissions and facts presented, and without merit.

Issue 4: Application of special rate of tax
The Assessing Officer applied a special rate of tax under section 115BBE to the addition made, which the appellant argued was unwarranted and done purposefully to escalate the demand. The appellant challenged this action as unjust.

The appellant, a non-resident, had not filed the return of income for the Assessment Year 2014-15. The Assessing Officer received information indicating transactions for the purchase and sale of immovable properties, leading to a belief that income had escaped assessment. The appellant disclosed income in the return but failed to disclose the sale consideration of one property. The Assessing Officer issued a show cause notice, and the appellant submitted revised income computations, claiming no taxable income due to an inadvertent error in the computation. The Assessing Officer, however, made an addition as unexplained cash credit and denied the exemption claimed under section 54 of the Act for Long Term Capital Gains. The Dispute Resolution Panel rejected the appellant's objections, leading to the final assessment order.

During the hearing, the appellant argued that the claim for exemption of Long Term Capital Gains should be considered based on the investment in new property, exceeding the capital gains. The appellant presented documentary evidence to support this claim. The Tribunal found that the appellant should not suffer due to lack of information and evidence during the initial proceedings. The order of the Assessing Officer was set aside, and the case was remanded for fresh consideration with all evidence and revised income computation, providing the appellant with a fair opportunity to present their case. The appeal was allowed for statistical purposes.