CA Mistakenly Identified Sale Agreement As Sale Deed: ITAT Condones 498-Day Delay, Remands Capital Gains Matter [Read Order]

The Bangalore Bench of Income Tax AppellateTribunal ( ITAT ) condoned a delay of 498 days in filing an appeal and remanded a capital gains dispute for fresh verification, after finding that the taxpayer’s Chartered Accountant (CA) had mistakenly treated an agreement for sale as a sale deed.

Shri Shankar Rajashekar, appellant-assessee, was engaged in civil contracting and had filed his return of income on 26/03/2018. The case was selected for scrutiny under CASS, and notices under Section 143(2) were issued on 11/08/2018 and 17/09/2018. Since there was no response, the Assessing Officer (AO) issued a show-cause notice, followed by a final notice on 21/12/2018.

The assessee appeared on 29/12/2018 and submitted copies of the sale deed to show the cost of acquisition but did not furnish details to support the deduction claimed under Section 54F. Accordingly, the AO treated the amount as taxable capital gains.

3000 Illustrations, Case Studies & Examples for Ind-AS & IFRS, Click Here

In appeal, the assessee contended that there was no actual sale of property and that the return had been incorrectly filed by his representative, who had mistaken an agreement for sale as a sale deed. He also produced an encumbrance certificate to show that the property continued to stand in his name.

The Commissioner of Income Tax(Appeals)[CIT(A)] found that the assessee had failed to produce bank statements or any statements from the parties to deny the transaction and therefore upheld the AO’s order. The assessee then approached the Tribunal, filing the appeal with a delay of 498 days.

The assessee sought condonation of delay, stating that he was a layman and unaware of the CIT(A)’s order. He explained that he had responded manually earlier but did not know how to proceed after the case was shifted to the Faceless Appeal system. He came to know about the order only after receiving a recovery notice on 14/10/2024 and filed the appeal on 10/01/2025, causing a delay of 498 days.

The tribunal accepted his explanation, noting his lack of familiarity with e-proceedings, and condoned the delay in the interest of justice before taking up the appeal on merits.

The two member bench comprising Prashant Maharishi (Vice President) and Soundararajan K( Judicial Member) heard both sides and reviewed the records. It noted that the Assessing Officer had issued a notice alleging capital gains, to which the assessee’s representative had responded by submitting a sale deed and computation of income. However, since no details were provided to support the deduction claimed under Section 54, the AO computed the capital gains based on the available material.

Before the CIT(A), the assessee claimed that no sale had actually taken place and that the return was incorrectly filed. He produced property tax receipts and an encumbrance certificate showing that the property remained in his name. The CIT(A) rejected this claim, observing that the sale deed was duly executed and involved large sums, which could not be ignored without denial from the other parties.

Read More:Shortest Road DistanceMeasurement to Ascertain Agricultural Land Sale: ITAT drops Addition by Rs 73.3Lakhs

Before the tribunal, the assessee furnished bank statements for 2015-16, property tax receipts from 2017-18 to 2024-25, and an encumbrance certificate. The bank statements did not show any transfer-related transactions, and the tax receipts confirmed that the property at 155/1, Nagawara, continued in his name. The encumbrance certificate also reflected no change in ownership.

After considering the evidence and the fact that related litigations were pending, the tribunal held that the matter required proper verification. It observed that the documents were not filed before the AO but were produced before the CIT(A), who had not accepted them.

The appellate tribunal therefore set aside the orders of the lower authorities and remitted the matter to the AO for de novo consideration. It directed the AO to verify the documents, and if no transfer was found, to delete the capital gains addition. The assessee was also directed to cooperate and submit all necessary evidence for early completion of the proceedings.

Accordingly the appeal was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates