2024 (2) TMI 271 - AT - Income Tax

Reopening of assessment u/s 147 - gain on sale of property - LTCG or STCG - AIR information indicating that the assessee has sold immovable property during the year under consideration - though the property sold was a long term capital asset, however, AO has taxed the profit derived from sale of the property as short term capital gain since, assessee could not produce the purchase deed in course of assessment proceedings - subject addition on account of short term capital gain is only for the reason that the purchase deed was not available before the Departmental Authorities - HELD THAT - It is the specific case of the assessee that the property was purchased on 30/05/2006 and sold on 16/03/2011, therefore, it is a long term capital asset. It is further case of the assessee that the assessee is one of the co-owners of the said property. If the assessee wants to prove the nature of the asset, whether long term of short term by leading some evidence, in our view, such opportunity should be granted to the assessee. Since, FAA has refused to take cognizance of the evidences furnished by the assessee, in our view, the assessee deserves an opportunity to prove his case through proper evidence not only with regard to nature of asset, whether long term and short term, but also the extent of his ownership over all the asset. Accordingly, we set aside the impugned order of the First Appellate Authority and restore the issue to the file of the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee.

Summary

Issues:
The issues involved in this case are related to the non-acceptance of additional evidences by the Ld. CIT (A), the violation of principles of natural justice, the refusal to admit crucial evidence for calculating Long Term Capital Gain, and the ex-parte assessment by the Assessing Officer due to non-compliance of statutory notices.

Non-Acceptance of Additional Evidences:
The appellant filed an appeal against the order of the Ld. CIT (A) for Assessment Year 2011-12, citing that additional evidences were not accepted by the Ld. CIT (A) on the grounds that they were not produced before the Assessing Officer. The appellant argued that statutory notices were not served upon them during the assessment proceedings, leading to an ex-parte assessment. The Ld. CIT (A) was criticized for not admitting crucial evidence necessary for the appeal, and it was contended that Rule 46A cannot override the principles of natural justice. The Tribunal noted that the Ld. CIT (A) erred in dismissing certain grounds of appeal without verifying the services of statutory notices, thus violating the principle of natural justice.

Violation of Principles of Natural Justice:
The Tribunal observed that the Ld. CIT (A) did not admit additional evidence crucial for calculating Long Term Capital Gain, citing lack of support by an application under Rule 46A of the I.T Rules. It was held that the refusal to admit such evidence was a violation of the principle of natural justice. The appellant's written submission and essential material evidence were not considered by the Ld. CIT (A), impacting the assessment of tax liability on the sale of a residential house.

Ex-Parte Assessment and Restoration of Issue:
The Tribunal addressed the ex-parte assessment conducted by the Assessing Officer due to non-compliance with statutory notices. The Assessing Officer proceeded with the assessment based on available records, leading to the taxation of profit from the sale of property as short term capital gain. The Tribunal noted that the appellant, as one of the co-owners of the property, could not produce the purchase deed during the assessment, resulting in the short term capital gain assessment. The Tribunal set aside the Ld. CIT (A)'s order and restored the issue to the Assessing Officer for fresh adjudication, allowing the appellant an opportunity to provide evidence regarding the nature of the asset and ownership details.

Conclusion:
The appeal was partly allowed for statistical purposes, with the Tribunal granting the appellant an opportunity to prove their case with proper evidence before the Assessing Officer. The decision aimed to uphold principles of natural justice and provide a fair chance for the appellant to present relevant evidence for the assessment of Long Term Capital Gain.