2025 (6) TMI 306 - AT - Income Tax

Long term capital gain - lands sold by the assessee is Non-Agriculture land or not? - Validity of order of CIT(A) u/s 250 - ex-parte order - Condonation of delay of 76 days in filing the appeal before ITAT HELD THAT - DR has no objection if delay is condoned. We after hearing both Ld. AR and Ld. DR and so also after perusing the application and affidavit are of the considered view that sufficient cause is shown for condonation of delay. Hence delay is condoned. Appeal is admitted and taken up for further hearing. The Ld. AR for the assessee then took us through the impugned order and contended that same is bad in law illegal and not proper. It is passed in violation of the principles of natural justice. The impugned order should therefore be set aside as no notice(s) of hearing ever came to her knowledge and an exparte order came to be passed by Ld. CIT(A). The impugned order has just not examined the merits of the case as contemplated by law i.e Under Section 250(6) of the Act. Further though the opportunities were afforded to the assessee but due to the reasons as stated above she could not utilise the opportunity given. Under these peculiar facts and circumstances of the case we set aside the impugned order and remand the case back to the file of CIT(A) to pass a fresh order on denovo basis after giving reasonable opportunity to the assessee to presdent her case on merits.

Summary

Issues Presented and Considered

1. Whether the lands sold by the assessee are agricultural lands exempt from capital gains tax or non-agricultural lands liable to capital gains tax.

2. Whether the population of Neemuch city, relevant for determining the status of the land, was correctly assessed by the authorities.

3. Whether the claim of deduction under Chapter VI-A amounting to Rs. 1,82,066/- was rightly disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

4. Whether the CIT(A) erred in dismissing the first appeal without proper discussion on merits and records.

5. Whether the principles of natural justice were violated in passing the impugned order, particularly regarding non-communication of hearing notices to the assessee.

6. Whether the delay of 76 days in filing the second appeal before the Tribunal should be condoned.

Issue-wise Detailed Analysis

1. Classification of Land as Agricultural or Non-Agricultural

Legal Framework and Precedents: Under the Income Tax Act, capital gains arising from the sale of agricultural land situated in rural areas are exempt from tax. The determination of whether land is agricultural or non-agricultural depends on location, population of the area, and whether the land is notified as agricultural. Section 2(14) of the Act defines capital asset and excludes agricultural land in specified rural areas. Section 50C provides for valuation of consideration for transfer of immovable property.

Court's Interpretation and Reasoning: The AO examined the sale deeds, location of the land, and population of Neemuch city. The assessee claimed the lands were agricultural, situated more than 6 km from the municipality limits, and the population of Neemuch was less than 1,00,000. However, the AO found the lands were situated within Nagarpalika Neemuch and the population was approximately 8,00,000, contradicting the assessee's claim. The AO also noted absence of 7/12 extract or other proof validating agricultural land status. The sale deed was registered with the Sub-Registrar of Neemuch, reinforcing urban classification.

Key Evidence and Findings: Sale deeds, registration details, population statistics, and absence of agricultural land proof. Stamp duty paid corresponded with declared sale consideration, negating undervaluation claims.

Application of Law to Facts: The AO applied the legal definition of agricultural land and urban area population criteria, concluding the lands were non-agricultural and liable to capital gains tax.

Treatment of Competing Arguments: The assessee's contention that the land was agricultural and exempt was rejected due to contradictory evidence and lack of supporting documentation. The AO's findings were upheld by the CIT(A).

Conclusions: The lands sold are non-agricultural, and long-term capital gains arise on their sale, taxable under the Act.

2. Determination of Population of Neemuch City

Legal Framework and Precedents: Population figures are relevant for determining whether land qualifies as agricultural under the Act. Accurate demographic data is essential.

Court's Interpretation and Reasoning: The AO relied on official population data indicating Neemuch's population is approximately 8,00,000, contrary to the assessee's claim of less than 1,00,000. This larger population figure supports classification of the land as non-agricultural.

Key Evidence and Findings: Official population statistics and registration location of the land.

Application of Law to Facts: The AO correctly applied population data to assess the land's status.

Treatment of Competing Arguments: The assessee's incorrect population figure was rejected due to lack of evidence.

Conclusions: The population of Neemuch city is higher than claimed, supporting non-agricultural classification of the land.

3. Disallowance of Deduction under Chapter VI-A

Legal Framework and Precedents: Deductions under Chapter VI-A (such as 80C, 80D) require proper documentation and verification. The AO is empowered to disallow claims unsupported by evidence.

Court's Interpretation and Reasoning: The assessee claimed deductions under 80C, 80D, and 80TTA totaling Rs. 1,82,066/-. Documentary evidence was provided for 80C, but 80D could not be verified. The AO disallowed the entire deduction without assigning reasons, which was challenged.

Key Evidence and Findings: Submitted documents supported 80C but not 80D deduction.

Application of Law to Facts: The AO's disallowance without specific reasons was questionable. However, the CIT(A) confirmed the disallowance without detailed discussion.

Treatment of Competing Arguments: The assessee argued deductions were allowed in processing of ITR and should not be disallowed without reasons. The AO and CIT(A) did not adequately address this.

Conclusions: The disallowance of Chapter VI-A deductions requires reconsideration on merits with proper reasons.

4. Dismissal of First Appeal Without Discussion on Merits

Legal Framework and Precedents: Appeals must be decided on merits with consideration of relevant facts and law. Summary dismissals without discussion violate principles of natural justice.

Court's Interpretation and Reasoning: The CIT(A) dismissed the first appeal without detailed discussion or addressing the assessee's submissions, effectively deciding the appeal in limine.

Key Evidence and Findings: Record of appeal proceedings and impugned order.

Application of Law to Facts: Such dismissal is improper and warrants remand for fresh consideration.

Treatment of Competing Arguments: The assessee contended lack of opportunity to present case on merits; the revenue did not dispute this point.

Conclusions: The first appeal was not properly adjudicated and requires fresh hearing.

5. Violation of Principles of Natural Justice Due to Non-Communication of Hearing Notices

Legal Framework and Precedents: Principles of natural justice require that parties be given notice and opportunity to be heard before adverse orders are passed. Non-communication of notices invalidates proceedings.

Court's Interpretation and Reasoning: The assessee did not receive hearing notices as her contact details on the portal belonged to her estranged younger son, who did not inform her. The ex-parte order was passed without her knowledge.

Key Evidence and Findings: Affidavit and explanation regarding family disputes and incorrect contact details.

Application of Law to Facts: The Tribunal found sufficient cause for non-receipt of notices and violation of natural justice.

Treatment of Competing Arguments: Revenue did not object to condonation of delay or remand for fresh hearing.

Conclusions: The impugned order is invalid due to violation of natural justice and requires remand for fresh adjudication.

6. Condonation of Delay in Filing Second Appeal

Legal Framework and Precedents: Delay in filing appeals can be condoned if sufficient cause is shown. Courts consider bona fide reasons and absence of prejudice to the other party.

Court's Interpretation and Reasoning: The assessee explained delay due to family disputes and lack of knowledge of notices caused by incorrect contact details. Affidavit supported the explanation.

Key Evidence and Findings: Affidavit and explanation of circumstances.

Application of Law to Facts: The Tribunal accepted the bona fide reasons and condoned the delay.

Treatment of Competing Arguments: Revenue had no objection.

Conclusions: Delay of 76 days in filing the appeal is condoned.

Significant Holdings

"The impugned order has just not examined the merits of the case as contemplated by law i.e Under Section 250(6) of the Act."

"Under these peculiar facts and circumstances of the case we set aside the impugned order and remand the case back to the file of CIT(A) to pass a fresh order on denovo basis after giving reasonable opportunity to the assessee to present her case on merits."

"Assessee is directed to give her new e-mail address and mobile number to the Ld. CIT(A) office as soon as possible and amend the Form No.35 suitably to provide for her new e-mail Id and mobile number for communication purposes."

"Delay is thus bonafide and same may please be condoned."

Core principles established include the necessity of adherence to principles of natural justice, proper verification of land classification based on population and location, requirement of substantiation for deductions under Chapter VI-A, and the procedural propriety in appellate proceedings.

Final determinations are that the lands sold are non-agricultural and capital gains tax is applicable; the first appellate order is set aside for non-adjudication on merits; delay in filing appeal is condoned; and the matter is remanded for fresh hearing with proper communication and opportunity to the assessee.