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2025 (6) TMI 706 - AT - Income TaxReopening of assessment u/s 147 - addition as made on account of short term capital gain arising on sale consideration of the property -DR submitted that the assessee had neither appeared before the Assessing Officer nor before the CIT(A) and no compliance was made by the assessee at all at any stage - HELD THAT - The assessee has not explained the reason for non-compliance either before the Assessing Officer or before the Ld. CIT(A). In the absence of any explanation we deem it proper to impose a cost of Rs. 5, 000/- on the assessee which should be paid to the Income Tax Department within 15 days of receipt of this order. Further as the matter was not examined on merits by the Ld. CIT(A) we deem it proper to set aside the file to the Ld. CIT(A) with the direction to allow another opportunity of being heard to the assessee. The assessee is also directed to co-operate and comply with the notices issued by the CIT(A) in the said proceeding.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Appellate Tribunal in these appeals arising from the Assessment Year 2009-10 are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Reopening under Section 147 Relevant Legal Framework and Precedents: Section 147 empowers the Assessing Officer (AO) to reopen an assessment if there is reason to believe that income chargeable to tax has escaped assessment. The reopening must be based on tangible material and proper reasons must be recorded. Precedents emphasize that reopening cannot be arbitrary or without jurisdiction. Court's Interpretation and Reasoning: The reopening was triggered by documents found during a search at the premises of a third party, Shri Rohit Chanduji Thakor, indicating that the assessee had undisclosed capital gains from the sale of a property in which the assessee held a one-fifth share. The AO recorded reasons before reopening the assessment under Section 147. The Tribunal noted that the reopening was based on tangible material and proper reasons, thus prima facie valid. Key Evidence and Findings: The key evidence was the documents seized during search indicating the sale consideration of Rs. 16,15,40,700/-, which was not disclosed by the assessee. The AO's action was triggered by these undisclosed facts. Application of Law to Facts: Given the discovery of new material indicating escaped income, the AO's reopening was within the scope of Section 147. Treatment of Competing Arguments: The assessee challenged the reopening as without jurisdiction, but did not substantiate this claim with any explanation or material. The Tribunal found no merit in this contention. Conclusion: The reopening under Section 147 was valid and justified on the available material. Issue 2: Addition of Capital Gain on Sale of Property Relevant Legal Framework and Precedents: Capital gains arising from the sale of property must be disclosed and taxed under the Act. Failure to disclose sale consideration and resultant gains can lead to additions under reassessment proceedings. Court's Interpretation and Reasoning: The addition of Rs. 3,20,48,140/- was made on account of short-term capital gain arising from the undisclosed sale consideration. The AO completed the reassessment ex parte under Section 144 read with Section 147 due to non-compliance by the assessee. The CIT(A) confirmed the addition but dismissed the appeal ex parte due to non-compliance. Key Evidence and Findings: The sale documents seized during search were the primary evidence. The assessee did not provide any rebuttal or explanation during reassessment or appellate proceedings. Application of Law to Facts: The law mandates disclosure of such income. In absence of any explanation or evidence from the assessee, the addition was rightly confirmed. Treatment of Competing Arguments: The assessee argued that the addition was not properly adjudicated on merits as the appeal was dismissed ex parte. The Tribunal acknowledged procedural lapses but did not find fault with the addition itself. Conclusion: The addition on account of capital gain is prima facie justified but requires adjudication on merits. Issue 3: Violation of Principles of Natural Justice by Ex Parte Dismissal Relevant Legal Framework and Precedents: Principles of natural justice require that an assessee be given a fair opportunity to be heard before adverse orders are passed. Ex parte dismissal is permissible only if the assessee wilfully defaults in appearing or complying with notices. Court's Interpretation and Reasoning: The CIT(A) dismissed the appeals ex parte due to non-compliance by the assessee. The Tribunal observed that the assessee had not explained the reasons for non-compliance before either the AO or CIT(A). However, the Tribunal emphasized the importance of adjudicating appeals on merits and the necessity of affording an opportunity to the assessee. Key Evidence and Findings: The record showed no appearance or submission by the assessee in appellate proceedings. Application of Law to Facts: While the CIT(A) was justified in dismissing the appeal for non-compliance, the Tribunal found it appropriate to set aside the order and direct fresh adjudication with proper opportunity. Treatment of Competing Arguments: The Revenue contended that non-compliance justified ex parte dismissal. The assessee sought remand for merits hearing. The Tribunal balanced these by imposing a cost for non-compliance but allowing fresh hearing. Conclusion: The appeals were set aside for fresh adjudication to uphold principles of natural justice. Issue 4: Levy of Interest under Sections 234A/B/C/D Relevant Legal Framework and Precedents: Interest under these sections is leviable for defaults in furnishing returns, payment of advance tax, and other related defaults. Court's Interpretation and Reasoning: The CIT(A) confirmed the levy of interest. However, since the matter was not adjudicated on merits due to procedural dismissal, the Tribunal did not address the interest issue substantively. Key Evidence and Findings: No substantive submissions or evidence were placed before the Tribunal on this point. Application of Law to Facts: Interest liability is consequential to assessment; hence, it is linked to merits of the case. Treatment of Competing Arguments: Not extensively addressed due to procedural posture. Conclusion: Interest levy to be reconsidered upon merits adjudication. Issue 5: Initiation and Confirmation of Penalty under Section 271(1)(c) Relevant Legal Framework and Precedents: Penalty under Section 271(1)(c) is imposable for concealment of income or furnishing inaccurate particulars. The penalty proceedings require adherence to principles of natural justice and proper adjudication. Court's Interpretation and Reasoning: The penalty of Rs. 1,07,82,129/- was imposed due to concealment of capital gains. The CIT(A) confirmed the penalty but dismissed the appeal ex parte. The Tribunal noted that since the quantum of income was set aside for fresh adjudication, penalty proceedings must also be remanded for reconsideration. Key Evidence and Findings: The penalty was based on the addition of undisclosed income. The assessee did not participate in penalty proceedings. Application of Law to Facts: Penalty is consequential to the addition and must be decided after merits hearing. Treatment of Competing Arguments: Revenue supported penalty confirmation; assessee sought fresh hearing. Conclusion: Penalty appeal set aside for fresh adjudication along with assessment appeal. Issue 6: Remand for Fresh Adjudication Relevant Legal Framework and Precedents: Appellate authorities have power to remand matters for fresh hearing when procedural lapses or non-compliance prevent adjudication on merits. Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not adjudicate on merits due to non-compliance by the assessee. To ensure justice and fair hearing, the Tribunal directed the CIT(A) to provide another opportunity to the assessee and to proceed with merits adjudication. Key Evidence and Findings: Absence of any explanation for non-compliance by the assessee. Application of Law to Facts: The Tribunal balanced the need to uphold procedural fairness with the assessee's non-compliance by imposing a cost but allowing fresh hearing. Treatment of Competing Arguments: Revenue's reliance on non-compliance was countered by the need for merits adjudication. Conclusion: Appeals allowed for statistical purposes and remanded to CIT(A) for fresh hearing with direction for cooperation by the assessee. 3. SIGNIFICANT HOLDINGS "The reopening was based on tangible material and proper reasons recorded, hence valid under Section 147." "The addition of Rs. 3,20,48,140/- on account of short-term capital gain arising from undisclosed sale consideration is prima facie justified." "Dismissal of appeals ex parte due to non-compliance, without adjudication on merits, violates principles of natural justice requiring remand for fresh hearing." "Penalty proceedings under Section 271(1)(c) are consequential to addition and must be adjudicated after merits hearing." "In absence of explanation for non-compliance, imposition of cost is warranted but does not preclude fresh opportunity to the assessee." Final determinations:
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