B.R. CONSTRUCTION,KOLKATA V. I.T.O., WARD - 25(1), KOLKATA

ITA 2534/KOL/2024

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B.R. Construction appealed against the order of the Commissioner of Income Tax (Appeals) which was passed following an assessment order under Section 143(3) of the Income Tax Act, 1961. The primary contention was the misclassification of a development agreement as an 'investment in immovable property', leading to an unwarranted addition under Section 56(2)(x)(b)(B) of the Act. The assessee argued that the agreement was purely contractual, pertaining to development rights, not ownership. The Tribunal noted procedural lapses in communication and compliance, leading to the decision to remit the case back to the Assessing Officer for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298641 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Other Referred Cases: K.R. Srinath v. ACIT, DCIT v. Shailesh S. Shah, Md. Salim & Ors. vs. Abdul Hafiz & Anr., Nemai Chandra Kumar & Ors. vs. Mani Square Ltd. & Ors., CIT vs. Premkumar Arjundas Luthra (HUF), Pahari Mata Sahkari Awas Samiti Ltd. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Question of law; Principle of natural justice
• Section: 143(3); 250

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction Vs. I.T.O., Ward-25(1), Kolkata (Appellant) (Respondent) PAN: AAPFB5859D Appearances: Assessee represented by : Debayan Patra, FCA. Department represented by : B.DebbarmaJCIT, SR. DR.. Date of concluding the hearing : April 21st, 2025 Date of pronouncing the order : April 24th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2020-21 dated 15.04.2024, which has been passed against the assessment order u/s 143(3) of the Act, dated 21.09.2022. Page | 2 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 2 of 7 1.1. The Registry has informed that the appeal filed by the assessee is barred by limitation by 165 days. An application along with an affidavit seeking condonation of delay has been filed by the assessee. The content of the affidavit is as follows: “I, Joydeep Mukherjee son of Nitya Gopal Mukherjee, born on 22nd of July, 1967, bearing I.T.P.Α.Ν. ΑΙOPM3834C, by faith Hindu, residing at 25/12 Prince Golam Mohammad Road, PS Jadavpur, Golf Green, Kolkata 700095, by capacity as the Partner of B. R. Construction, do hereby solemnly affirm on oath and declare as follows: 1. That I was assessed under Section 143(3) of the IT Act, 1961, for the A.Y. 2020-21. 2. That I had filed an Appeal in Form 35 against the Assessment Order for A.Y. 2020-21. 3. That the CIT(A) heard the Appeal and passed the Order on 15/04/2024. 4. That due to miscommunication and technological challenges, I was unaware of the Order passed by the CIT(A). 5. That the Appeal Order dated 15/04/2024 came to my notice only in November 2024 when it was pointed out by my income tax filing service provider during their attempt to prepare my Income Tax Return (ITR) for the Assessment Year (AY) 2024-25. 6. That I was surprised to learn about the Order and the consequent demand, which involves a significant amount. 7. That the delay in filing the ITAT appeal is due to the above-mentioned reasons and not due to any intentional negligence on my part. 8. That I believe the matter involves a question of law that was not adequately dealt with by the CIT(A). Instead of addressing the substantive legal issues raised, the CIT(A) focused solely on my non-appearance, which was due to genuine challenges. 9. That I was dependent on my accountant for handling technological compliance and appeal proceedings. However, due to his failure to communicate effectively, I could not comply with the required proceedings timely. 10. That I did not even receive the physical copy of the Appellate Order. Page | 3 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 3 of 7 11. That it is imperative for the matter to be properly adjudicated by the Hon'ble ITAT, as the issue involves legal interpretation under the IT Act, 1961. 12. That I am filing this affidavit in support of the condonation of delay in filing the appeal with ITAT. 13. That the delay in filing the Appeal with ITAT is due to sufficient cause and not due to wilful negligence of disregard of the law. 14. That the statements made by me in the above paragraphs are true and correct to the best of my knowledge and belief. 15. That the statements made by me in the above paragraphs are in good faith.” 1.2. Considering the affidavit and the condonation application and the reasons stated therein, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. a.) For that in the facts and circumstances of the case, the Ld. A.O. failed to understand the nature of transaction. While the assessee had entered into a Development Agreement with Thika Tenants/Principals as the Developer/Attorney, the A.O. wrongly considered the same as an 'Investment in Immovable Property' and thus wrongly invoked Section 56(2)(x)(b)(B) The addition under Section 56(2)(x)(b)(B) is unwarranted as there was no purchase of immovable property. The agreement is purely contractual and pertains to development rights rather than outright purchase. The CIT(Appeals) dismissed the appeal without considering the detailed grounds and the nature of the agreement, leading to an ex-parte order that denied the appellant natural justice. The agreement entered into by the appellant is not a sale or purchase of immovable property but a contractual arrangement. The stamp duty valuation is irrelevant for such agreements where the appellant, as a developer, is not acquiring ownership but development rights. Page | 4 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 4 of 7 Case Law References K.R. Srinath v. ACIT (268 ITR 436) Held that development agreements do not constitute transfer of ownership of immovable property. DCIT v. Shailesh S. Shah (ITA No. 512/Mum/2015) Reinforced that stamp duty valuation provisions apply only to transfers of immovable property and not to development rights agreements. Md. Salim & Ors. vs. Abdul Hafiz & Anr. (C.O. No. 4244 of 2019, Calcutta High Court) Held that entering into a development agreement with Thika Tenants does not confer ownership of the land to the developer. The Thika Tenant retains tenancy rights, and the developer only acquires limited rights to develop the property. Nemai Chandra Kumar & Ors. vs. Mani Square Ltd. & Ors. (Supreme Court of India) The Supreme Court observed that under the Calcutta Thika Tenancy Act, a developer entering into an agreement with Thika Tenants does not obtain ownership of the land; the tenancy rights remain with the Thika Tenant. b.) Violation of Principles of Natural Justice: The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal primarily due to alleged non- compliance, without adequately addressing the substantive legal issues raised. This approach contravenes the principles of natural justice, which mandate that every appellant deserves a fair hearing and a reasoned order addressing all grounds of appeal. Obligation to Pass a Speaking Order. It is a settled legal principle that appellate authorities are required to pass speaking orders, even in ex-parte scenarios. The CIT(A) failed to provide a detailed order discussing the merits of the case, thereby neglecting this obligation. Technological Challenges and Communication Gaps: The dismissal was influenced by perceived non-compliance, which stemmed from communication gaps and technological challenges faced by the appellant. These genuine difficulties led to miscommunication and an unjust dismissal. Non-Consideration of Relevant Case Laws: The CIT(A) overlooked pertinent judicial precedents that clarify the nature of development agreements with Thika Tenants, leading to an incorrect affirmation of the AO's order. Case Law References CIT vs. Premkumar Arjundas Luthra (HUF) (Bombay High Court) The court held that the CIT(A) is required to apply his mind to all issues arising from the impugned order, regardless of whether the appellant raised them. The CIT(A) cannot dismiss an appeal without deciding on its merits. Page | 5 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 5 of 7 Pahari Mata Sahkari Awas Samiti Ltd. vs. ACIT (ITAT Lucknow) The ITAT emphasized that the CIT(A) is duty-bound to dispose of appeals through a speaking order on merits, even in the absence of the appellant. Dismissing an appeal for non-prosecution without addressing the substantive issues is improper. In light of the above grounds and supporting judicial precedents, it is respectfully prayed that the Hon'ble Tribunal: 1. Set Aside the CIT(A)'s Order: Nullify the order passed by the CIT(A) due to its failure to address the merits of the case and lack of a speaking order. 2. Delete the Addition Made Under Section 56(2)(x)(b)(B): Remove the unjustified addition to the appellant's income, as the development agreement with Thika Tenants does not constitute a transfer of immovable property. 3. Do not Remand for Fresh Consideration: Since the matter involves matter of law which has not been dealt with at the lower levels, the matter be decided by the Hon'ble ITAT as the assessee would not like to fall in the same trap of miscommunication considering the technological challenges faced. 4. Grant Any Other Relief: Provide any other relief that the Hon'ble Tribunal deems fit in the interest of justice. 2. For that the Appellant craves leave to supplement, modify and/or amend the grounds N-stated herein above.” 3. It was submitted in the course of the appeal that the notices and other communication was received on the e-mail of the accountant who did not inform the assessee. The assessee had not purchased any property but had only entered into the development agreement. Since no compliance was made before the Ld. AO, the addition was made and the compliance could not be made because the assessee was not aware of the ongoing proceeding on account of lack of communication between the accountant and the assessee. The Ld. AR requested that the matter may be remitted to the Ld. AO as the assessee has sufficient evidence for claiming the relief. The Ld. Sr. DR did not raise any serious objection to the request of the assessee. Page | 6 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 6 of 7 4. Since there was no proper compliance before both the Ld. AO as well as the Ld. CIT(A), in the interest of justice and fair play it was considered by the Bench that the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) as well as the order of the Ld. AO and remit the matter back to the Ld. AO for making the assessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in his appeal are allowed for statistical purposes. 5. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 24th April, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 24.04.2025 Bidhan (P.S.) Page | 7 I.T.A. No.: 2534/KOL/2024 Assessment Year: 2020-21 B.R. Construction. Page 7 of 7 Copy of the order forwarded to: 1. B.R. Construction, 757, Jogendra Garden, Kasba, Kolkata, West Bengal, 700078. 2. I.T.O., Ward-25(1), Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "