ITAT Remands ₹2.81 Cr on Long-Term Capital Gains Addition Granting One More Opportunity to Assessee [Read Order]

The bench of the Income Tax Appellate Tribunal, Pune, set aside the ex-parte order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)]. The Tribunal remanded the matter to the appellate authority, directing that the assessee be granted one final opportunity to substantiate his claim in relation to disallowance of expenses on improvement of land against long-term capital gains under the Income Tax Act, 1961.

The appellant, Rajendra Ganpat Jagtap of Pune, was identified as a non-filer of income tax returns for the assessment year 2018-2019. However, information revealed that he had engaged in high-value financial transactions during the relevant financial year, including sale of immovable property for ₹2,95,00,000 commission income of ₹1,01,698, and rental receipts of ₹2,97,71,698 as per TDS statements.

Based on this information, the Assessing Officer (AO) reopened the assessment under Section 147 of the Income Tax Act, 1961, issuing notice under Section 148 on 19 April 2022. In response, the assessee filed his return of income declaring total income of ₹17,54,860. The AO, however, completed assessment under Section 147 read with Section 144B by determining the total income at ₹2,98,88,836.

While allowing indexed cost of acquisition of only ₹27,200, the Assessing Officer disallowed the assessee’s claim of ₹2,03,33,500 towards expenses incurred on improvement of land, resulting in an addition of ₹2,81,33,976 as long-term capital gains.

On appeal, the CIT(A) upheld the assessment in an ex-parte order, as the assessee failed to respond to notices.

Appearing for the assessee, S.D. Pathak, contended that the ex-parte order of the CIT(A) was unjustified as the assessee was granted only three short opportunities within a span of two and a half months. It was further argued that the assessee, being unfamiliar with the digital platform of the NFAC, could neither access the notices nor appoint counsel in time.

It was submitted that in the interest of justice, the assessee should be afforded one final opportunity to present necessary details and substantiate his claim regarding the cost of improvement of the land.

Appearing for the Revenue, Arvind Desai, argued that adequate opportunities had already been provided by the CIT(A), but the assessee failed to make any compliance or even seek adjournment. Therefore, it was urged that the order of the CIT(A) be sustained and no further indulgence be granted.

The Bench comprising Vice President, Rama Kanta Panda and Judicial Member, Vinay Bhamore observed that although the CIT(A) granted three opportunities, the assessee neither filed submissions nor sought adjournment, leading to an ex-parte order. The Tribunal, however, accepted the plea that the assessee could not avail the opportunity due to technical and procedural reasons.

Therefore, in the interest of justice, the matter was in file of the CIT(A) with a direction to grant the assessee one final opportunity to substantiate his claim. Subsequently, the Tribunal categorically directed the assessee to make submissions on the appointed date without seeking adjournment under any pretext, failing which the CIT(A) would be at liberty to pass an order in accordance with law.

Accordingly, the appeal was allowed for statistical purposes.

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