CIT(A) Order Lacks Reasoning: ITAT Quashes ₹2.53 Cr LTCG Addition, Orders Fresh AO Assessment [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in rejecting additional evidence under Rule 46A without providing an opportunity of hearing, in a case involving an addition of Rs. 2,53,62,000 as long-term capital gains (LTCG) under Section 45 of the Income Tax Act, 1961.

Asheesh Kumar Sharma (assessee) filed his return of income for Assessment Year (AY) 2012-13, declaring Rs. 10,20,000. The assessment was reopened based on ITS details indicating the sale of two immovable properties.

The AO completed the reassessment at Rs. 2,53,62,000, treating the transaction as LTCG from the sale, relying on registered sale deeds obtained from the sub-registrar. The assessee contended that no sale occurred in AY 2012-13, as the properties agricultural land in the Khadar area were sold in FY 2007-08 to Hari Om Aggarwal via a General Power of Attorney (GPA).

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The assessee argued that the land did not qualify as a capital asset under Section 2(14)(iii), no consideration was received in the relevant year, and the AO failed to issue a final show-cause notice or allow cross-examination of evidence collected under Section 133(6) of the Income Tax Act.

Aggrieved by the AO’s order, the assessee appealed to the CIT(A). The assessee submitted additional evidence under Rule 46A, including the GPA, agreement to sell, affidavits, bank statements, Khasra-Khatauni records, and a notarized document confirming the land’s agricultural nature and distance from municipal limits. The CIT(A) rejected the evidence without reasoning or hearing, upheld the addition, and dismissed the appeal ex parte.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the CIT(A)’s order was cryptic, ignored submissions, and violated natural justice by not admitting evidence that addressed the core issues, including the land’s non-capital asset status and absence of any transaction in AY 2012-13.

The two-member bench comprising Challa Nagendra Prasad (Judicial Member) and S Rifaur Rahman (Accountant Member) observed that the CIT(A) neither adjudicated the submissions nor provided independent findings, rendering the order unsustainable.

The bench noted that the additional evidence went to the root of the matter and warranted admission for just resolution. It held that the CIT(A)’s failure to consider the evidence and submissions justified remanding the case to the AO for fresh assessment, with liberty to the assessee to furnish evidence.

The Tribunal set aside the CIT(A)’s order and restored the matter for de-novo adjudication. The appeal of the assessee was allowed for statistical purposes.

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