Denial of Exemption u/s 54 for Lack of Documents: ITAT Sets Aside CIT(A) Order [Read Order]

The Bangalore Bench of Income Tax Appellate  Tribunal ( ITAT ) set aside the Commissioner of Income Tax ( Appeals )[CIT(A)] order on the denial of exemption under Section 54 of Income Tax Act,1961 due to lack of supporting documents.

Manoj Kumar Ekambaram Arcot,appellant-assessee,filed his income tax return on 30/09/2015. The case was selected for scrutiny due to large deductions claimed under sections 54B, 54C, 54D, 54G, and 54GA. The assessee did not reply to the notices, leading to a show-cause notice for penalty.

The assessee submitted a sale agreement for a new property but did not provide any supporting documents. The assessing officer(AO) denied the exemption under section 54 and added Rs. 72,14,370 to the income. The assessee filed an appeal before the CIT(A) after a delay of 164 days but did not respond to further notices. As a result, the CIT(A) dismissed the appeal after condoning the delay.

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The assessee appealed before the tribunal aggrieved by the order passed by the CIT(A).

The assessee filed a petition to condone a 256-day delay in filing the appeal, explaining that all notices were sent to the Chartered Accountant's email, but no action was taken. No physical notices were issued by the department or the  CIT(A), preventing a timely response.

The assessee learned about the ex-parte order and penalty proceedings only after receiving penalty notices at the same email. After consulting the present counsel, the appeal was filed on 11/09/2024 instead of the due date of 30/11/2023. A request was made to condone the delay.

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The two member bench comprising Sundararajan K ( Judicial Member ) and Laxmi Prasad Sahu ( Accountant Member ) reviewed the delay condonation petition and found the reasons satisfactory, condoning the delay as it was not the appellant-assessee’s fault.

It also noted that the CIT(A) had passed the order ex-parte due to a lack of cooperation. Although a paper book with documents was filed, the ITAT did not examine the merits since the appeal was decided ex-parte.

The tribunal allowed the appeal and set aside the CIT(A)’s order for this reason. The matter was sent back for fresh consideration, directing the CIT(A) to pass a new order after hearing the assessee.

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Read More: Non Appearance and Failure to submit Documentation in exemption claim u/S 54 of Income Tax Act: ITAT dismisses appeal

In short,the appeal filed by the assessee was partly allowed for statistical purposes

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