The DCIT (Int. TAxa)-1, Ahmedabad V. Ms. Mana Sarabhai, Ahmedabad

ITA 156/AHD/2021

AI Insights

The case involves an appeal by the DCIT against the order of the CIT(A) which had deleted an addition of Rs. 4.5 crores made by the Assessing Officer to the assessee's income for the assessment year 2015-16. The addition was initially made on the grounds that the assessee had withdrawn the entire amount from the capital gains account scheme in 2014-15 and did not utilize it for purchasing or constructing a new property within the stipulated period under Section 54 of the Income Tax Act. The CIT(A) accepted the assessee's contention that the withdrawals were made in 2015-16, and the amount was offered to tax in 2016-17. The Department appealed against the CIT(A)'s decision, arguing that fresh evidence was admitted without remanding the case back to the AO for examination. The Tribunal found that the CIT(A) had not followed the due process as prescribed under Rule 46A of the Income Tax Rules and restored the matter to the AO for a fresh examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131449 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 09-06-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Tax effect; Liquidation; Capital Gains
• Section: 147; 148; 54; 143(3); 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member The DCIT (Int. Tax ation)-1, Ah medab ad (Appellant) Vs S mt. Mana Sarabhai, 5, Retreat, Opposite the under bridg e, Shahibag, Ah med abad-3800 04 PAN: AB JP S1376B (Resp ondent) S mt. Mana Sarabh ai, 5, Retreat, Op posite the un der bridge, Shah ibag, Ah medab ad-380 004 PAN: AB JP S13 76B (Cro ss Ob jector) Vs The DCIT (In t. Taxation )-1, Ah med abad (Resp ondent) Asses see b y : Shri Dhrun al Bha tt, A.R. Revenue by : Shri Rake sh J ha, Sr. D. R. Date of hearing : 22-03 -2 023 Date of pronouncement : 27-03 -2 023 ITA No. 156/Ahd/2021 Assessment Year 2015-16 Cross Objection 27/Ahd/2021 (in ITA No. 156/Ahd/2021) Assessment Year 2015-16 I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 2 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- The appeal filed by the Revenue and the Cross Objection filed by the assessee are against the order of the ld. Commissioner of Income Tax (Appeals)-13, Ahmedabad, in proceeding u/s. 250 vide order dated 10/03/2021 passed for the assessment year 2015-16. 2. The Department has taken the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in admitting fresh evidence in contravention to Rule 46A of I.T. Rules. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not remanding the case back to the AO for examining fresh evidence which is in the form of Bank Statement of assessee for FY 2015-16 which was never brought before the AO. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in rejecting the Bank Statement of the Assessee for FY 2014-15, which clearly shows that the assessee closed its Capital Gain Scheme account thus giving rise to tax liability in AY 2015-16 and not AY 2016-17. 4. That the revenue craves leave to alter, add, modify, delete any or all grounds of appeal.” 3. The brief facts of the case are that the assessee had sold property in assessment year 2014-15 and had claimed deduction u/s. 54(1) of the Act amounting to Rs. 4.5 crores by investing the same in capital gains account scheme. The Assessing Officer initiated proceedings u/s. 147 of the Act, but the assessee did not respond to the aforesaid notices since as per the assessee, he was under the impression that there was nothing unusual in this assessment year and no amount was withdrawn from the capital gains I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 3 account deposit scheme and therefore the assessee did not reply to the notices issued by the Assessing Officer. In absence of any response on the part of the assessee, the ld. CIT(A) passed ex-parte assessment order and made addition of Rs. 4.5 crores on the ground that from 16-08-2014 to 21- 08-2014, the assessee made withdrawals from the capital gain account scheme. Therefore, as per the DCIT, the assessee withdrew entire amount from capital gain account scheme and no evidence of application on such withdrawal amount towards either purchase or re-construction of a residential property has been brought on record. Therefore, as per the Assessing Officer, in view of the provisions of section 54(2) of the Act , the assessee should have offered the unutilized capital gain of Rs. 4.5 crores as long term capital gain as income of the previous year relevant to assessment year 2015-16, in which the withdrawals from the capital gains account had been made. The ld. DCIT observed that on perusal of the return of income for assessment year 2015-16, the assessee has shown income from other sources of Rs. 45,35,125/- as “income from other sources” and has not offered un-utilised capital gain of Rs. 4.5 croes as its income under the head capital gains during the year under consideration. Accordingly, the DCIT made an addition of Rs. 4.5 crores to the returned income of the assessee as income from long term capital gains. 4. Before ld. CIT(A), the contention of the assessee was that investments were not liquidated during the impugned assessment year i.e.. 2015-16 and in fact, the investments were “withdrawn” in the succeeding assessment year i.e. 2016-17 and a sum of Rs. 4.5 crores was offered to tax in assessment year 2016-17 by the assessee. The ld. CIT(A) accepted the submission of I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 4 the assessee and deleted the addition of Rs. 4.5 crores with the following observations:- “DECISION 4. The submission is considered. The appellant has claimed deduction under Section 54 of the Act for Rs.4,50,00,000 out of income from capital gain in A.Y. 2014-15 and same was allowed by the AO while passing the assessment order under Section 143(3) of the Act as well as 143(3) r.w.s. 147 of the Act. As per provisions of Section 54 of the Act the appellant is required to utilize amount deposited in capital gain savings account within prescribed period by purchasing or constructing the new property and if such amount is withdrawn before completion of such period, such amount is taxed as income from capital gain in the year of withdrawal. The AO based upon entries reflected as "QIC" in the bank statement during the period 16 th August, 2014 to 21 st August, 2014 came to the conclusion that appellant has withdrawn such amount. However, the bank statement referred by the AO contains entries relating to closure of such proceeds in A.Y. 2016-17. The closure proceeds were credited in bank account during the period 17 th August, 2015 to 21 st August, 2015. In fact, entries referred by the AO containing narration of "QIC" means "quarterly interest certificate" and the appellant has in fact made capital gain FDs during such period. The appellant has made four FDs of Rs.99,00,000 each and Rs.59,91,781 separately on such dates. The appellant has in fact transferred funds lying in capital gain savings account into capital gain FDs and such entries nowhere prove that appellant has withdrawn funds from capital gain savings accounts. In fact, the appellant has filed the return of income for A.Y. 2016-17 which is already on record of the AO and again submitted by appellant during the Rectification Proceedings from which it is apparent that the appellant has offered income from capital gain of Rs.4,50,00,000 in A.Y. 2016-17 being the year of withdrawal of the funds. The appellant has offered such income as per provisions of Section 54 of the Act. Considering the fact that appellant has not made any withdrawal of funds in the current year as well as amount withdrawn is already offered to tax in A.Y. 2016- 17, the addition made by AO for Rs.4,50,00,000 cannot be sustained. This ground of appeal is allowed.” 5. The Department is in appeal before the ld. CIT(A) against the aforesaid order passed by ld. CIT(A). The primary contention of the Department is that the ld. CIT(A) has erred in admitting fresh evidence in contravention to Rule 46A of the Income Tax Rules without remanding the case back to the Assessing Officer for examining fresh evidence which is in I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 5 the form bank statement of the assessee for financial year 2015-16, which was never examined by the Assessing Officer during the course of assessment proceedings. Accordingly, as per the Departmental Representative, there was clear lapse on the part of the ld. CIT(A) in allowing the assessee to produce fresh evidence without allowing the ld. Assessing Officer to examine the same independently. In response, the ld. counsel for the assessee submitted from the facts on record it is evident that the assessee itself suo motu offered the capital gains in respect of withdrawals/liquidation of the aforesaid investments in the succeeding assessment year i.e. 2016-17 and such amount was not liquidated during the year under consideration. Accordingly, there is no error in the order of ld. CIT(A) in allowing the appeal of the assessee in the instant set of facts. 6. We have heard the rival contentions and perused the material on record. Firstly, we observe that there is delay of six days in filing of appeal by the Department. However, looking into the minor period of six days’ delay in filing of appeal, in the interest of justice, we are hereby condoning the delay in filing of appeal by the Department. The ld. assessee has also not objected to the delay in filing of appeal by the Department owing to the small period of six days involved. Accordingly, we are proceeding to hear the case on merits. 6.1 On merits, we observe that in the instant case, the ld. CIT(A) admitted additional evidence in support of contention that the investments were not liquidated by the assessee during the year under consideration but the same were liquidated/withdrawn by the assessee in the succeeding assessment I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 6 year i.e. assessment year 2016-17. However, evidently, before admitting such additional evidence in support of the assessee’s case, the ld. CIT(A) has not referred the matter back to the ld. Assessing Officer for his comments and has not sought remand report from the ld. Assessing Officer before adjudicating the appeal in favour of the assessee. We observe that the due process as prescribed under Rule 46A of the Income Tax Rules has not been followed in the instant facts. Therefore, looking into the facts of the case, in the interest of justice, the matter is being restored to the file of ld. Assessing Officer for examining the case of the assessee afresh after examining the claim of the assessee in the light of the supporting documents to the effect as to which year the investments have been liquidated by the assessee i.e. whether or not the same sere liquidated by the assessee during the year under consideration. Further, in case, the Assessing Officer is of the view that the assessee is liable to pay long term capital gains during the impugned year under consideration itself i.e. assessment year 2015-16, then, the Assessing Officer may also verify if the same long term gain has been offered to tax by the assessee in the succeeding assessment year i.e. A.Y. 2016-17 and if the assessee has offered capital gains on the same in A.Y. 2016-17, then, appropriate relief may be afforded to the assessee as per law. In the result, the case of the assessee is being restored to the file of ld. Assessing Officer with the above directions. 7. In the result, the appeal of the Revenue is allowed for statistical purposes. Cross Objection No. 27/Ahd/2021 I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 7 8. The assessee has filed Cross Objection against the order of ld. CIT(A) on the ground that the re-assessment proceedings were initiated are bad in law and are required to be quashed. 9. The assessee has taken the following grounds in the cross objection:- Grounds of cross-objections 1. On the facts and in circumstances of the case, reassessment notice issued u/s 148 of the Act is bad in law since inception and consequent reassessment passed by AO deserves to be quashed. 2. The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. Total tax effect (see note below) Rs.1 ,03,14,167 10. Before us, the ld. counsel for the assessee submitted that he shall not be pressing the cross objections before us. Accordingly, in the light of above submission made by the ld. counsel for the assessee, the cross objections of the assessee are being dismissed as not pressed. 11. In the result, the cross objection of the assessee is being dismissed as not pressed. I.T.A No. 156 & CO No. 27/Ahd/2021 A.Y. 2015-16 Page No. DCIT vs. Ms. Mana Sarabhai 8 12. In the combined result, the appeal filed by the Revenue is allowed for statistical purposes and Cross Objections filed by the assessee are being dismissed as not pressed. Order pronounced in the open court on 27-03-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 27/03/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद