ITAT Quashes CIT(A) Order for Not Considering Assessee's Submissions, Directs AO to Re-Examine Case [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ), Surat Bench, quashed the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] and directed the Assessing Officer (AO) to re-examine the case, providing the taxpayer a fair opportunity to present their case. The decision pertains to the appeal filed by Dhirubhai Bavabhai Gevaria for the Assessment Year 2013-14, which raised several issues regarding the assessment order under Section 144 of the Income Tax Act, 1961.

The dispute centered around the AO’s decision to make an addition of Rs.71.68 lakh under Section 50C, relating to long-term capital gains (LTCG) from the sale of immovable property. The AO had invoked Section 50C to determine the value of the property sold by the assessee on 16.05.2012, based on the stamp valuation authority’s report, which assessed the property value at Rs.72.78 lakh, significantly higher than the sale consideration of Rs.24.61 lakh reported by the appellant.

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The assessee argued that the AO failed to consider crucial submissions, including a request for a reference to the Departmental Valuation Officer (DVO) under Section 50C(2) to determine the fair market value of the property. Moreover, the CIT(A), who reviewed the appeal, passed an ex parte order without addressing the appellant's contentions, including written submissions filed earlier. Notably, the CIT(A) had only sent notices on 05.08.2019 and 22.09.2020, and failed to provide an opportunity to the assessee to contest the case properly.

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The appellant counsel contended that the CIT(A) had not considered the relevant material and had dismissed the appeal without providing any detailed reasoning. The ex parte decision, according to the assessee, was unjust, as it did not take into account the information provided, including the request for a DVO reference and the fact that the assessment was carried out under Section 144 (best judgment assessment) due to the taxpayer’s alleged non-cooperation.

In its ruling, Two Member Bench comprised of Pawan Singh (Judicial Member) and Bijayananda Pruseth(Accountant Member),  noted that both the AO and CIT(A) had passed ex parte orders, ignoring the necessary submissions made by the assessee. The Tribunal found that the AO had improperly handled the capital gains computation and failed to consider the costs of acquisition and improvements.

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Therefore, the ITAT set aside the CIT(A)'s order and remanded the matter to the AO, instructing him to grant the assessee an opportunity to present its case afresh. Additionally, the AO was directed to consider the taxpayer’s request for a DVO reference and ensure that reasonable opportunities for compliance are provided in future proceedings.

The ruling emphasizes the need for fair procedural practices in tax assessments, ensuring that taxpayers are given ample opportunity to contest matters on merit before the authorities. It also highlights the importance of due diligence in considering the claims made by the assessee, especially in matters involving complex valuations and capital gains calculations.

The case has been allowed for statistical purposes, with the AO tasked with re-examining the issues in light of the directions provided.

To Read the full text of the Order CLICK HERE

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