SRI NATARAJAN V V. THE COMMISSIONER OF INCOME TAX

ITA/511/2018

AI Insights

This case involves an appeal by the assessee, Sri Natarajan V., against the orders of the Income Tax Appellate Tribunal and the CIT (Appeals), which confirmed the addition of Rs.28,59,942 as long-term capital gains for the assessment year 2009-10. The primary contention was regarding the determination of the cost of construction and the cost of acquisition of properties, which the assessee argued were not accurately assessed. The High Court found that the Assessing Officer did not disclose the basis for the cost of construction in the assessment order, and the CIT (Appeals) had dismissed the appeal ex-parte without proper service of notice. Consequently, the court set aside the previous orders and remanded the case for a fresh hearing.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 768799 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 14-12-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DILIP; K V ARAVIND
• Assessee Lawyers: JINITA CHATTERJEE; HEMANT; MALLAHARAO
• Keywords: Assessment Year 2009-2010; Cost of acquisition; Cost of construction; Ex parte dismissal; Income tax appeal; Long Term Capital Gains; Natural Justice; Scrutiny
• Section: 143(3); 143(2); 260-A

Judgement Text

" IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF DECEMBER, 2021 PRESENT THE HON’BLE MRS.JUSTICE S.SUJATHA AND THE HON’BLE MR. JUSTICE S.VISHWAJITH SHETTY I.T.A.No.511/2018 BETWEEN : SRI NATARAJAN V., S.VENKATARAMAN AGED ABOUT 65 YEARS, R/AT OLD NO.7, NEW NO.15, AYODHYA, LAKSHMI STREET WEST MAMBALAM, CHENNAI-600033 ...APPELLANT (BY SMT.JINITA CHATTERJEE, ADV. A/W SRI HEMANT, ADV. FOR SRI MALLAHA RAO, ADV.) AND : 1 . THE COMMISSIONER OF INCOME TAX C.R.BUILDINGS, QUEENS ROAD, BENGALURU 2 . THE INCOME TAX OFFICER ITO-WARD 15(2) BENGALURU …RESPONDENTS (BY SRI DILIP M., ADV. FOR SRI K.V.ARAVIND, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 08.09.2017 PASSED IN ITA NO.837/BANG/2017, FOR THE ASSESSMENT YEAR 2009-2010 PRAYING TO 1. - 2 - FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 08.09.2017 PASSED IN ITA NO.837/BANG/2017 FOR THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE-A. THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (‘Act’ for short) challenging the order dated 08.09.2017 passed in ITA No.837/Bang/2017 by the Income Tax Appellate Tribunal, “SMC-A” Bench, Bangalore (‘Tribunal’ for short) relating to the assessment year 2009-10. 2. The assesssee is an individual. For the assessment year under consideration, return of income was filed on 03.07.2009 by the assessee declaring the total income of Rs.2,43,190/-. The return was selected for scrutiny by the respondent N.2 and notice under Section 143(2) of the Act was issued. The order under Section 143(3) was passed by the Assessing Officer considering the objections filed by the assessee by - 3 - making addition of Rs.28,59,942/- as long term capital gains. Being aggrieved, the assessee preferred an appeal before the CIT (Appeals). The said appeal came to be dismissed ex-parte. Being aggrieved by the same, the assessee has preferred an appeal before the Tribunal unsuccessfully. Hence, this appeal. 3. The appeal was admitted by this Court to consider the following substantial questions of law:- (a) Whether on the facts and circumstances of the case, can the Tribunal ignore the documents furnished by the appellant in support of his claim with regard to the agreement to sell? (b) Whether the Tribunal was right in dismissing the appeal of the appellant only by considering and upholding the orders passed by the Authorities Below and without appreciating the documents furnished by the appellant? (c) Whether on the facts and circumstances of the case, the Tribunal was right in dismissing the appeal of the appellant by - 4 - upholding the order in respect of the capital gain issue? 4. Learned counsel for the appellant – assessee vehemently argued that the Assessing Officer proceeded to determine the cost of construction during the year 1984 at Rs.125/- per sq.ft. and Rs.175/- per sq.ft in the year 1991 without any basis. Inviting the attention of the Court to paragraph No.6 of the assessment order, it was submitted that though Assessing Officer has rendered that the information was collected, but no such information was made available to the assessee to rebut the same. The cost of construction made by the Assessing Officer was confirmed by the First Appellate Authority – CIT (Appeals) without providing reasonable opportunity to the assessee. The Tribunal without appreciating the vital aspects of the matter has confirmed the orders passed by the CIT (Appeals) and the Assessing Officer, which adversely affects the rights of the appellant – assessee, who has purchased the - 5 - property on 09.07.2009 after selling the old property on 13.03.2009 for Rs.80,00,000/-. Learned counsel further submits that the cost of acquisition of new house property at Rs.40,00,000/- is not in conformity with the factual aspects. The authorities as well as the Tribunal have also not considered the commission amount paid with regard to the said transaction. Learned counsel submits that an opportunity, if provided to demonstrate by furnishing the correct valuation report, the same would be made available before the Assessing Officer along with other relevant documents/records. 5. Learned counsel for the Revenue justifying the impugned order submitted that the two points involved in this matter i.e., the cost of construction and the cost of acquisition of the properties involved have been mixed up by the assessee in order to evade the payment of tax under the capital gains. The authorities - 6 - having rightly considered the value of the construction based on the available material, no purpose would be served in remanding the matter back to the Assessing Officer, as contended by the learned counsel for the assessee. It was further submitted that the Tribunal has analysed the material aspects in arriving at a conclusion in regard to the facts and circumstances of the case, as such the appeal deserves to be dismissed as no substantial question of law arises for consideration. 6. We have bestowed our anxious consideration to the arguments advanced by the learned counsel appearing for the parties and perused the material on record. 7. It is evident that the Assessing Officer has determined the cost of construction said to have been incurred based on the information collected but the same is not disclosed in the order. Even assuming the - 7 - said cost of construction and the cost of acquisition determined is on the basis of the material available on record, the same ought to have been reflected in the assessment order, to clarify that the authority has applied the mind in the right perspective. It is discernable that the CIT (Appeals) though has issued notice, the same having been returned without due service of summons, as there was no other option, proceeded to pass ex-parte order. In such circumstances, in the interest of justice and equity, keeping in mind the principles of natural justice and in view of the CIT (Appeals) dismissing the appeal merely recording the observations made in paragraph No.6 of the assessment order sans independent application of mind, we are of the considered opinion that the said order calls for interference by this Court. Further, the finding of the Tribunal based on ex-parte order of the CIT (Appeals) also warrants interference. - 8 - 8. Hence, we deem it appropriate to set aside the orders passed by the Tribunal as well as the CIT (Appeals) in order to provide one more opportunity to the assessee to putforth the material evidence inasmuch as the cost of construction and the valuation report as well as the additional expenses said to have been incurred towards new house, before the CIT (Appeals). 9. Accordingly, without answering the substantial questions of law raised by the assessee, we pass the following ORDER i) The order dated 08.09.2017 passed in ITA No.837/Bang/2017 by the Income Tax Appellate Tribunal, “SMC-A” Bench, Bangalore as well as the order dated 28.02.2017 passed by the CIT (Appeals) in ITA No.218/CIT(A)/BNG- 3/2014-15 are set aside. - 9 - ii) The matter is restored to the file of the CIT (Appeals). iii) The CIT (Appeals) shall consider the matter afresh in accordance with law by issuing notice to the assessee and after providing reasonable opportunity of hearing to the parties. iv) All the rights and contentions of the parties are left open. v) The appeal stands disposed of accordingly. Sd/- JUDGE Sd/- JUDGE PMR "