2025 (5) TMI 337 - AT - Income Tax

Suppression of sale consideration - assessee had understated the sale consideration arising from the sale of non-agricultural land - HELD THAT - As on perusal of the sale deed documents and the reply filed by the assessee in response to notices it is evident that the said property was not solely owned or sold by the assessee. The sale was effected jointly by the assessee along with three other co-owners. The assessee was a confirming party in the transaction and had received only a proportionate share of the sale proceeds which was duly declared in the return of income and is also reflected in Form 26AS. Notably this fact of joint ownership and proportionate receipt of consideration was also part of the very information on the basis of which the AO had initiated proceedings u/s 147. Despite being aware of this fact the AO erroneously attributed the entire sale consideration of Rs. 4.91 crore to the assessee and concluded that he had suppressed income. This approach is factually and legally untenable and does not sustain. Assessee had filed response to the notices issued u/s 142(1) prior to the passing of the assessment order which have not been considered by the AO. These replies contain the explanation of the assessee about the declaration of the sale consideration supporting documents such as detail of TDS deducted sale deed extracts etc. The failure of the AO to examine these submissions renders the assessment order erroneous and unsustainable. As assessee has declared income correctly corresponding to his share in the transaction we hold that the addition made by the AO is unsustainable. The assessee cannot be taxed on the entire sale consideration when it is factually established that the sale was a joint transaction and only a part of the proceeds accrued to him. The addition is therefore directed to be deleted. Appeal of the assessee is hereby allowed.

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 211 days in filing the appeal before the Tribunal is liable to be condoned, given the reasons stated by the assessee, including incorrect service of appellate orders and the assessee's medical condition.

- Whether the addition of Rs. 2,27,21,046/- made by the Assessing Officer (AO) on the ground of suppression of sale consideration in the assessment year 2015-16 is justified and sustainable.

- Whether the AO correctly attributed the entire sale consideration of Rs. 4,91,10,780/- to the assessee despite the fact that the sale was a joint transaction involving multiple co-owners.

- Whether the ex-parte orders passed by the AO and the learned CIT(A), in the absence of the assessee's participation due to non-receipt of notices, are valid and sustainable.

- Whether the evidence and documents submitted by the assessee at the time of filing the appeal but not during appellate proceedings could be considered.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

The legal framework governing condonation of delay requires the appellant to demonstrate sufficient cause for the delay. The Court considered the principles of equity and justice, emphasizing that delay caused by non-receipt of notices due to incorrect email addresses and serious medical illness of the assessee are relevant factors. The assessee's correct email ID as per official records was different from the one used by the Revenue for communication, causing non-receipt of hearing notices and appellate order. Furthermore, the assessee was undergoing treatment for Lymphatic Cancer since 2021, supported by medical records.

The Court found that the delay was neither intentional nor deliberate and that the Revenue raised no objection to condonation. Applying the principle that procedural lapses not attributable to the appellant should not bar substantive justice, the Tribunal condoned the delay of 211 days and proceeded to decide the appeal on merits.

Validity of Addition of Rs. 2,27,21,046/- on Suppression of Sale Consideration

The addition was made under section 147 read with section 144 of the Income Tax Act, 1961, based on the AO's finding that the assessee understated sale consideration from Rs. 4,91,10,780/- to Rs. 2,76,32,116/-. The AO reopened the assessment on the basis of information received and proceeded ex parte due to non-response by the assessee.

However, the Tribunal examined the sale deed and related documents, including the assessee's replies to notices under section 142(1), which showed that the property was jointly owned and sold by the assessee along with three other co-owners. The assessee's share of the sale consideration was Rs. 2,76,32,116/-, which was correctly disclosed in the return of income and reflected in Form 26AS.

The AO's attribution of the entire sale consideration to the assessee was found to be factually and legally incorrect. The Tribunal noted that the AO failed to consider the assessee's submissions and supporting documents, rendering the assessment order erroneous and unsustainable. The principle that an individual's tax liability must correspond to their actual share in a transaction was applied, rejecting the Revenue's assumption of full consideration as income of the assessee.

Ex-parte Orders and Non-participation of Assessee in Appellate Proceedings

The CIT(A) dismissed the appeal ex parte, observing that the assessee neither attended hearings nor submitted documents during appellate proceedings, and rejected documents filed at the time of appeal on the ground of non-compliance with Rule 46A. The CIT(A) relied on Supreme Court precedent stating that mere filing of an appeal is insufficient without effective pursuit.

The Tribunal, however, recognized that the non-participation was due to non-receipt of notices caused by incorrect email addresses used by the Revenue. This procedural lapse deprived the assessee of an opportunity to be heard, violating principles of natural justice. The Tribunal also considered the serious health condition of the assessee, which further justified a merit-based hearing rather than dismissal on procedural grounds.

Accordingly, the Tribunal held that the ex-parte dismissal was not justified and that the documents submitted should be considered. It emphasized the need to balance procedural compliance with substantive justice, especially where procedural lapses are attributable to the Revenue.

Consideration of Documents Filed During Appeal but Not During Appellate Proceedings

The CIT(A) rejected documents filed at the time of filing the appeal due to absence of an application under Rule 46A during appellate proceedings. The Tribunal, however, noted that the documents were relevant and material to the issue of correct sale consideration and joint ownership. Given the procedural irregularities and the assessee's inability to participate, the Tribunal treated the documents as admissible for deciding the appeal on merits.

3. SIGNIFICANT HOLDINGS

- "Considering the above facts, including the incorrect service of appellate order, the health condition of the assessee, and in the interest of justice and equity, we are of the view that the delay in filing the appeal was neither intentional nor deliberate. Accordingly, the delay of 211 days in filing the appeal is hereby condoned."

- The Tribunal established the principle that "an individual cannot be taxed on the entire sale consideration when it is factually established that the sale was a joint transaction and only a part of the proceeds accrued to him."

- The Tribunal held that the AO's failure to consider the assessee's replies and supporting documents before making the addition renders the assessment order "erroneous and unsustainable."

- The Tribunal emphasized that procedural lapses by the Revenue, such as incorrect service of notices, cannot be allowed to deprive the assessee of the opportunity to be heard, stating that "the ex-parte dismissal of the appeal by the learned CIT(A), without appreciating the merits of the case or the evidence placed on record at the time of filing the appeal," was unjustified.

- The final determination was to delete the addition of Rs. 2,27,21,046/- and allow the appeal of the assessee on merits, thereby reversing the orders of the AO and the CIT(A).

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