ATIT MAHESHBHAI PATEL,AHMEDABAD V. THE ITO, WARD-3(3)(1), AHMEDABAD

ITA 524/AHD/2024

AI Insights

The case involves Atit Maheshbhai Patel, who appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the assessment made by the Income Tax Officer under sections 144 and 147 of the Income Tax Act, 1961. The assessment was initially reopened due to information indicating that the assessee had sold immovable properties and made substantial deposits, without filing a return of income for the relevant year. The Assessing Officer treated these transactions as unexplained investments and capital gains, leading to a significant tax liability. The CIT(A) upheld this assessment, rejecting the assessee's claims that the land sold was agricultural and thus exempt from capital gains tax. The Tribunal's decision to restore the matter for fresh examination was influenced by procedural lapses in the issuance of notices and the need to ensure a fair hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 789080 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 22-03-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NITIN VISHNU KULKARNI
• Assessee Lawyers: PARIN SHAH
• Keywords: Set aside; Capital asset; Opportunity of being heard; Unexplained investment; Reopening of assessment; Capital Gains; Principle of natural justice
• Section: 147; 148; 144; 142(1); 271(1)(c); 133(6); 2(14)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद Ûयायपीठ “C”, अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER I.T.A. No. 524/Ahd/2024 Asstt. Year: 2012-13 Atit Maheshbhai Patel, B-202, Maruit Tower, Shivranjani Char Rasta, Satelite, Ahmedabad PAN: AHPPP4257J Vs. Income Tax Officer, Ward-3(3)(1), Ahmedabad (Applicant ) (Respondent) Assessee by : Shri Parin Shah, A.R. Respondent by: Shri Nitin Vishnu Kulkarni, Sr. DR Date of Hearing 11.11.2025 Date of Pronouncement 25.11.2025 O R D E R PER MAKARAND V. MAHADEOKAR, ACCOUNTANTMEMBER: This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”] dated 25.01.2024, for the Assessment Year 2012-13. The said appellate order arises from the assessment framed under section 144 read with section 147 of the Act by the Income Tax Officer, Ward 3(3)(1), Ahmedabad [hereinafter referred to as “the Assessing Officer”], vide order dated 19.12.2019 passed under section 144 r.w.s 147 of the Income Tax Act, 1961[hereinafter referred to as “the Act”]. Facts of the Case Printed from counselvise.com ITA No. 524/Ahd/2024 Atit Maheshbhai Patel Asst.Year 2012-13 - 2– 2. The assessment for A.Y. 2012–13 was reopened on the basis of information received through ITD/AIR/CIB systems indicating that the assessee had jointly sold immovable properties and had made substantial time deposits with Union Bank of India, Jodhpur Branch. The departmental database further reflected that no return of income had been filed for the year. The Assessing Officer issued a series of NMS notices dated 09.07.2016, 02.08.2016, 08.09.2016, 17.02.2017 and 27.02.2017, calling upon the assessee to file the return of income and to explain the reported financial transactions. As there was no compliance, the assessment was reopened under section 147 after recording reasons and obtaining approval of the Principal Commissioner of Income Tax-3, Ahmedabad. 3. Notice under section 148 dated 25.03.2019 was issued requiring the assessee to file a return within 30 days. The assessee did not respond. Thereafter, statutory notices under section 142(1) were issued on 31.07.2019 and 10.10.2019, both of which remained uncomplied with. 4. The Assessing Officer thereafter issued show-cause notices under section 142(1) on 21.10.2019 and again on 22.11.2019 (served by e-mail), specifically confronting the assessee with (i) sale of immovable properties aggregating to Rs. 8,71,50,000/- and (ii) term deposits aggregating to Rs. 32,00,000/-, and calling upon him to explain why the said amounts should not be brought to tax. The notice dated 22.11.2019 fixed the compliance date as 29.11.2019 at 4.30 p.m., with intimation that assessment under section 144 would be completed in the absence of a response. 5. In response, the assessee submitted a letter dated 05.12.2019, denying having sold any property or having made the time deposits, and enclosed a copy of an “original return of income” dated 11.12.2013, declaring income of Printed from counselvise.com ITA No. 524/Ahd/2024 Atit Maheshbhai Patel Asst.Year 2012-13 - 3– Rs. 8,77,410/-. The assessee did not provide any working of capital gains or details regarding the bank deposits. 6. To verify the property transactions, the Assessing Officer invoked section 133(6) and obtained information from the Sub-Registrar, Bhiloda. Based on the registered sale deeds, the Assessing Officer compiled details of 11 immovable properties sold jointly by the assessee and co-owners on 24.10.2011 for a total consideration of Rs. 6,38,00,000/-, of which the assessee’s share was computed at 50 percent, i.e. Rs. 3,19,00,000/-. 7. The Assessing Officer also noted, on the basis of bank information, that the assessee had made (i) a term deposit of Rs. 29,00,000/- on 21.10.2011 and (ii) a term deposit of Rs. 3,00,000/- on 01.12.2011, both standing in his name. Since the assessee denied the same and failed to explain the source, the entire amount of Rs. 32,00,000/- was treated as unexplained investment. 8. As the assessee did not file the return of income in response to notice under section 148 or any details despite repeated opportunities, the Assessing Officer completed the assessment under section 144 read with section 147 of the Act, adding (i) Rs. 3,19,00,000/- as long-term capital gain and (ii) Rs. 32,00,000/- as unexplained investment and determining the total income at Rs. 3,59,77,410/-. Penalty proceedings under section 271(1)(c) were also initiated. The assessee filed an appeal before the CIT(A). The appeal was subsequently transferred to the National Faceless Appeal Centre (NFAC). E-notice was issued on 23.12.2020, to which the assessee filed written submissions. 9. Before the CIT(A), the assessee admitted the fact of sale of land but contended that the land was agricultural and, therefore, outside the ambit of “capital asset” under section 2(14). The assessee, however, did not file any Printed from counselvise.com ITA No. 524/Ahd/2024 Atit Maheshbhai Patel Asst.Year 2012-13 - 4– documentary evidence to substantiate the agricultural character of the land or the distance criteria. The assessee also did not produce any evidence regarding the alleged term deposits. 10. The CIT(A) held that the assessee had failed to discharge the onus of proving exemption of capital gains or the source of the term deposits. The CIT(A) further held that grounds challenging the validity of notices were unsupported by evidence, and the argument regarding approval under section 153D was misconceived, since section 153D applied only to search assessments under section 153A/153B. The CIT(A) accordingly upheld the assessment order in full. 11. Aggrieved by the order of CIT(A), the assessee carried the matter in appeal before us raising following grounds: 1. The order passed by lower authorities is bad in law and required to be quashed. 2. Ld. NFAC erred in law and on facts in confirming action of AO reopening of assessment u/s 148 of the Act. 3. Ld. NFAC erred in law and on facts in confirming addition of Rs.31900000/- by treating capital gain on sale of rural agriculture land which is exempt u/s 2(14) as taxable. 4. Ld. NFAC erred in law and on facts in confirming addition of Rs. 3200000/- as undisclosed investment. 5. Charging of Interest u/s 234A, 234B, 234C are unjustified. 6. Initiation of penalty u/s 271(1)(c) of the Act is unjustified. 12. During the course of hearing before us, the learned Authorised Representative (AR) submitted that the statutory notices issued during the reassessment as well as during the appellate proceedings were inadvertently sent to an incorrect e mail address and, therefore, could not be responded to in time. It was contended that the noncompliance was not deliberate and that the assessee was deprived of a reasonable opportunity of being heard. The learned Printed from counselvise.com ITA No. 524/Ahd/2024 Atit Maheshbhai Patel Asst.Year 2012-13 - 5– AR further submitted that the lands sold during the relevant previous year were rural agricultural lands falling outside the definition of capital asset and, therefore, the sale proceeds were not disclosed in the original return of income. It was pleaded that the assessee be afforded one more opportunity to place all relevant evidence on record and that the matter be restored to the file of the Assessing Officer for fresh adjudication. 13. The learned Departmental Representative raised no objection to the request of the assessee for restoration of the matter to the Assessing Officer for a de novo examination. 14. Having considered the rival submissions and keeping in view the principles of natural justice, we are of the view that the assessee deserves one more opportunity to substantiate his claim regarding the character of the lands and the source of the deposits. At the same time, to ensure deterrence against noncompliance of statutory notices, we direct the assessee to deposit a cost of Rs. 20,000 into the Prime Minister Relief Fund. Subject to such compliance, the orders of the lower authorities are set aside, and the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law after providing adequate opportunity to the assessee. 15. In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 25/11/2025 Sd/- Sd/- (SANJAY GARG) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad; Dated 25/11/2025 True Copy Printed from counselvise.com ITA No. 524/Ahd/2024 Atit Maheshbhai Patel Asst.Year 2012-13 - 6– TRUE COPY आदेशकȧĤितिलǒपअĒेǒषत/Copy of the Order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent. 3. संबंिधतआयकरआयुƠ/ Concerned CIT 4. आयकरआयुƠ(अपील) / The CIT(A)- 5. ǒवभागीयĤितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड[फाईल / Guard file. आदेशानुसार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad a.k. Printed from counselvise.com "