BHATTACHARYA RUBBER WORKS (1964) PVT. LTD.,KOLKATA V. I.T.O., WARD - 8(1), KOLKATA

ITA 2084/KOL/2024

AI Insights

The case involves Bhattacharya Rubber Works (1964) Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre (CIT(A)) concerning the assessment year 2017-18. The Income Tax Department had reopened the assessee's case under section 147 based on information that the company had sold an immovable property for Rs.5,70,13,000 during FY 2016-17. The Assessing Officer treated this amount as short-term capital gains, assuming it was a sale transaction, and completed the assessment ex parte under section 144 read with section 147 of the Act due to non-compliance from the assessee. The CIT(A) upheld this decision. The Tribunal found that the nature of the transaction was not adequately examined, as the assessee had entered into a Joint Development Agreement (JDA) and not an outright sale. The Tribunal noted the principles of natural justice were not followed, as the assessee was not given an effective opportunity to present its case regarding the complex legal and factual issues of leasehold rights and development agreements.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298609 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Capital asset; Opportunity of being heard; Capital Gains; Principle of natural justice; Competent authority
• Section: 147; 148; 144; 142(1); 250

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA Before Shri Sonjoy Sarma, Judicial Member and Shri Sanjay Awasthi, Accountant Member I.T.A. No.2084/Kol/2024 Assessment Year: 2017-18 Bhattacharya Rubber Works (1964) Pvt. Ltd …….………………....Appellant 965, Jessore Road, Dum Dum, Kolkata-700055. [PAN: AABCB8997M] vs. ITO, Ward-8(1), Kolkata ……............................................…..…..... Respondent Appearances by: Shri Deep Agarwal, AR, appeared on behalf of the appellant. Shri Altaf Hossain, Addl. CIT, appeared on behalf of the Respondent. Date of concluding the hearing : April 16, 2025 Date of pronouncing the order : April 22, 2025 आदेश / ORDER Per Sonjoy Sarma, Judicial Member: The present appeal has been preferred by the assessee against the order dated 22.08.2024 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. Brief facts of the case are that the assessee is a private limited company. As per information available with Income Tax Department, the assessee had sold an immovable property for Rs.5,70,13,000/- during the F.Y 2016-17 relevant to A.Y. 2017-18. Based on the information, the Assessing Officer believed that income had escaped assessment and therefore, the case of the assessee was reopened u/s 147 of the by issuing a notice u/s 148 on 23.03.2021 with the approval of the competent authority. However, the assessee did not file return of income in compliance to the notice issued u/s 148 of the Act. Furthermore, a questionnaire u/s 142(1) dated 18.11.2021 was issued I.T.A. No.2084/Kol/2024 Assessment Year: 2017-18 Bhattacharya Rubber Works (1964) Pvt. Ltd 2 seeking details and documentary evidence regarding the alleged sale transaction. Despite repeated opportunities of about 10 times, there was no compliance from the assessee. Accordingly, the Assessing Officer completed the assessment ex parte u/s 144 r.w.s. 147 of the Act treating the amount of Rs.5,70,13,000/- as short-term capital gains based on the information available on record. 3. Aggrieved by the above order, the assessee preferred an appeal before the ld. CIT(A) who has upheld the order of the Assessing Officer by dismissing the appeal of the assessee. 4. Dissatisfied with the above order, the assessee has come in appeal before this Tribunal. During the time of hearing, the ld. AR submitted that the assessee company i.e. Bhattacharya Rubber Works (1964) Pvt. Ltd. at one point of time was an operational entity but has been effectively stopped functioning since the last 19 years. The ld. AR clarified that there was no outright sale of the property during the F.Y 2016-17 and the assessee had entered into a Joint Development Agreement (‘JDA’) on 10.09.2016 with the developer namely M/s Nisha Enclave Pvt. Ltd. under which leasehold interest in the land owned by the assessee was agreed to be developed. The agreement of development was in respect of land held on 50 years as leasehold basis. The ld. AR also submitted that there was no transfer of title or sale of immovable property during the relevant year as alleged by the Assessing Officer while framing of the assessment order. He stated that the Assessing Officer erroneously treated the JDA as a sale transaction and taxed the entire consideration of Rs.5,70,13,000/- as short-term capital gains without appreciating the nature of the transaction. He further stated that the director of the assessee company was no knowledge with the faceless proceedings and e-filing which led to non-compliance during the initial stage. However, the assessee did eventually file replies to the notice issued u/s 142(1) and furnished the relevant JDA agreement I.T.A. No.2084/Kol/2024 Assessment Year: 2017-18 Bhattacharya Rubber Works (1964) Pvt. Ltd 3 before the Assessing Officer and even the ld. CIT(A) was not examined or considered properly the same. He further contended that both the Assessing Officer and the ld. CIT(A) failed to appreciate the correct facts and legal implication of JDA and that the entire addition has been made merely on assumption and presumption basis. Accordingly, the ld. AR prayed before the Bench that anther opportunity may be given to remand back the matter to the file of the Assessing Officer for proper verification and adjudication of the issue. 5. On the other hand, the ld. DR supported the orders of the lower authorities and submitted that the assessee had given multiple opportunities to explain the nature of the transaction but failed to avail them. It was argued that the Assessing Officer was left no other option but to process the assessment u/s 144 of the Act. Further, the ld. DR emphasised that the reopening was valid and based on credible information. 6. After hearing the rival submissions and perusing the materials available on record, we find that it is evident that the core issue in the appeal relates to the nature of the transaction involved is about Rs. Rs.5,70,13,000/- and whether it was outright sale or JDA involving leasehold property. We consider the fact that the assessee claimed to have entered into a JDA relating to 50 years leasehold land which was not appreciated or examined properly either by the Assessing Officer or by the ld. CIT(A) despite submitting of documents during the appellate proceedings. The ld. CIT(A) summarily confirmed the assessment order without giving any findings on the nature of the lease, term of the JDA or tax implication. The principles of natural justice requires that the assessee be given an effective opportunity to present its case where the fiscal transaction involved complex legal and factual issues such as leasehold rights and development agreement. In the present case, the faceless nature of proceedings and also not formally appearing of the I.T.A. No.2084/Kol/2024 Assessment Year: 2017-18 Bhattacharya Rubber Works (1964) Pvt. Ltd 4 directors with respective compliance protocols also led to claim that the initial non-compliance was not deliberate. Considering the above facts, we find that leasehold right and JDA goes to the root of the matter which ought to have been properly examined before drawing any inference regarding the taxability. Therefore, in the interests of natural justice, we deem it proper to remit the matter to the file of the Assessing Officer with a direction to examine the leasehold deed and JDA submitted by the assessee verifying whether there was any transfer of right within the meaning of section 2(47) of the Act during the year and pass a de novo assessment order after granting reasonable opportunity of being heard to the assessee. In terms of the above, we set aside the order of the ld. CIT(A) and remand the matter back to the file of the Assessing Officer for fresh consideration in accordance with law. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Kolkata, the 22nd April, 2025. Sd/- Sd/- [Sanjay Awasthi] [Sonjoy Sarma] Accountant Member Judicial Member Dated: 22.04.2025. RS Copy of the order forwarded to: 1. Bhattacharya Rubber Works (1964) Pvt. Ltd 2. ITO, Ward-8(1), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "