SHRI. BASAVARAJ C. BAYAHATTI V. THE PRINCIPAL COMMISSIONER OF INCOME TAX

ITA/100012/2018

AI Insights

The case involves Shri. Basavaraj C. Bayahatti, the appellant, who contested the rejection of his claim for deductions under Section 54B and Section 54F of the Income Tax Act, 1961, by the Income Tax Officer and upheld by the CIT (Appeals) and the Income Tax Appellate Tribunal. The appellant had sold agricultural land and claimed deductions on the capital gains, which were initially denied. The Tribunal dismissed the appeal due to the absence of the appellant's representative on the scheduled hearing dates, leading to an ex-parte decision. The High Court found that the Tribunal did not adequately address the grounds of appeal and did not provide reasons for rejecting them, thus restoring the case for a merit-based decision.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 697930 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-07-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: GANGADHAR M
• Keywords: Agricultural Land; Capital Gains; Deduction; Ex-parte hearing; Income Tax
• Section: 54B; 54F; 260A; 24; 255(5)

Judgement Text

" : 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 5TH DAY OF JULY, 2019 PRESENT THE HON’BLE MR. JUSTICE ARAVIND KUMAR AND THE HON’BLE MR. JUSTICE BELLUNKE A.S. I.T.A. NO.100012 OF 2018 BETWEEN SHRI. BASAVARAJ C. BAYAHATTI, S/O CHINNAPPA BYAHATTI, AGED ABOUT 45 YEARS, R/O: MELGADE ONI, GOPANAKOPPA, HUBBALLI, DIST: DHARWAD. ..... APPELLANT (BY SRI GANGADHAR J M, ADV.) AND THE INCOME TAX OFFICER, WARD-3(2), NAVANAGAR, HUBBALLI, DHARWAD DISTRICT-01. ..... RESPONDENT (BY SRI Y V RAVIRAJ, ADV.) THIS ITA IS FILED U/SEC.260A OF THE INCOME-TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL DATED 08.11.2017 IN ITA NO.828/BANG/2016 FOR ASSESSMENT YEAR 2012-13 AT ANNEXURE-A. : 2 : THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, ARAVIND KUMAR J., DELIVERED THE FOLLOWING: JUDGMENT Assessee has preferred this appeal under Section 260-A of the Income Tax Act, 1961, calling in question the order of the Tribunal dated 08.11.2017, passed in I.T.A. No.828/BANG/2016 whereunder application filed seeking recall of the order dated 31.03.2017 has been rejected. 2. Having hearing Sri Gangadhar J.M., learned counsel appearing for the appellant and Sri Y.V. Raviraj, learned counsel appearing for the respondent, we are of the considered view that following substantial questions of law would arise for consideration: 1) Whether the Tribunal was justified in affirming the orders of the Assigning Officer and CIT (appeals) without adverting to the grounds urged in the memorandum of appeal filed by the assessee? 2) Whether authorities were justified in rejecting the claim of the assessee for deduction claimed under Section 54B of Income Tax Act, 1961, by holding that appellant is not eligible for such deduction? : 3 : 3. Perusal of the records would disclose that the assessee sold 7.2 acres of agricultural land situated in Gopannakuppe for a total consideration of Rs.69,55,000/-. Said property being a capital asset is not disputed. Said land was sold in three pieces under separate sale deeds which came to be registered on the same day i.e., on 16.11.2011. Hence, assessee claimed deduction under Section 54B of the Income Tax Act amounting to Rs.23,91,610/- on the ground of having invested the sale proceeds/capital gains in agricultural lands. Simultaneously, assessee also claimed deduction under Section 54F on the capital gains earned out of sale of the same asset. However, the assessing officer rejected the claim for deduction under section 54B and being aggrieved by the same, appeal was filed before the CIT (Appeals) which also ended in its dismissal and matter came to be carried in second appeal before the Income Tax Appellate Tribunal, Bengaluru, in ITA No.828/BANG/2016. On the date fixed for hearing i.e., 30.03.2017, none appeared on behalf of assessee. Hence, the matter came to be adjourned to next date i.e., 31.03.2017 and even on said : 4 : date, none had appeared on behalf of appellant and as such appeal came to be dismissed and finding recorded by the tribunal in that regard is to the effect that matter was also heard exparte qua the assessee. In other words, arguments of the revenue having been heard, appeal filed by the assessee came to be dismissed. Hence, this appeal under Section 260A of the Income Tax Act, 1961. 4. RE : SUBSTANTIAL QUESTION OF LAW NO.1 As could be seen from the order of the Tribunal dated 31.03.2017, the grounds urged by the assessee has been extracted in the order of the tribunal itself. However, reasons are not forthcoming as to why the grounds urged in the appeal is being rejected. On the other hand, appeal has been rejected by assigning the reason that the CIT (Appeals) has properly adjudicated all the issues raised before said authority. In the words of the Tribunal itself findings so recorded read: “3. On careful perusal of the record, it is noticed that on last date of hearing i.e., 09.02.2017, hearing was adjourned at the request of the assessee to 30.03.2017. Despite : 5 : having issued notice about the date of hearing, none appeared on behalf of the assessee. Therefore we had no option but to hear the appeal ex-parte qua the assessee. Accordingly, we heard the arguments of the revenue and having carefully perused the orders of the authorities below on the impugned issues raised before us in the light of revenue’s contention, we find that CIT(A) has properly adjudicated all the issues raised before us and since no infirmity is pointed out therein, we confirm the order of the CIT(A). Accordingly, the appeal of the assessee stands dismissed.” 5. In exercise of power conferred under Section 255(5) of the Income Tax Act, appropriate Government has formulated the rules applicable to regulate the procedure before the Appellate Tribunal and the Benches of the Tribunal. Rule 24 which is relevant for the purpose of the present case is extracted herein below: “24. Where, on the day fixed for hearing or on any other date to which the hearing may be adjourned, the appellant does not appear in person or through an authorized representative when the appeal is called on for hearing, the Tribunal may : 6 : dispose of the appeal on merits after hearing the respondent : Provided that where an appeal has been disposed of as provided above and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance, when the appeal was called on for hearing, the Tribunal shall make an order setting aside the ex parte order and restoring the appeal.” 6. A bare reading of the above provision would clearly indicate that in case of appellant or its authorized representative does not appear when the matter is called for hearing tribunal can dispose of said appeal on merits after hearing the respondent. Though in the instant case Tribunal has recorded that it has heard the counsel appearing for the revenue, order dated 31.03.2017 passed by tribunal does not disclose as to the reason for rejecting the grounds urged in appeal memorandum and no supporting reasons have been assigned. It is in this background, the expression “dispose of the appeal on merits” occurring Rule 24 would acquire significance. In other words, there is a duty cast on the Tribunal to : 7 : adjudicate the claim on merits even in the absence of parties or their authorized representative. 7. In the instant case, it would not end at this stage, an application was filed for recall of said order which was numbered as M.P.No.235/B/2017. For recalling the order, reasons assigned by the counsel appearing on behalf of assessee was, he had noted down the date of hearing erroneously as 30.04.2017 instead of 30.03.2017. The possibility of said error occurring cannot be ruled out, particularly when number of cases are being handled by the authorized representative of assessee. Under such circumstances, the technicalities, if any, has to give way for substantial justice or in other words, on the ground of technicalities, substantial justice cannot be sacrificed. To put it differently, an opportunity, if afforded to the assessee to put forth his case before the Tribunal, no prejudice or loss would have caused to the revenue, but on the other hand, appeal could have been adjudicated by the Tribunal on merits and finality could have been given. It is for this reason, we are of the considered view that : 8 : substantial question of law No.1 formulated herein above deserves to be answered in favour of the assessee and against the revenue. In the light of substantial question of law No.1 being answered in favour of assessee, examining or adjudicating substantial question of law No.2 does not arise. 8. Hence, the following: ORDER 1) Appeal is herby partly allowed. Order dated 31.03.2017 passed in I.T.A. No.828/BANG/2016 and order passed in M.P.No.235/B/2017 dated 08.11.2017 are hereby set aside. 2) Appeal in I.T.A.No.828/BANG/2016 is restored to the file of Income Tax Appellate Tribunal, “C” Bench, Bengaluru, for being heard and disposed of on merits. 3) However, we make it clear that appellant or his authorized representative without fail shall appear before the tribunal on 29.07.2019 without waiting for any further notice from the tribunal and tribunal need : 9 : not issue any fresh notice to the parties or their representatives. Sd/- JUDGE Sd/- JUDGE Naa "