2025 (6) TMI 717 - AT - Income Tax

Reopening of assessment - assessee s case was re- opened on the basis of information available from the Office of the Registrar for properties in Patna District as requisitioned after obtaining prior approval from the competent authority u/s 133(6) of the Income Tax Act 1961 wherein it was noticed that the assessee has entered into a registered land development agreement under the terms and conditions laid down that the rights of ownership of the land is transferred by the Land Owner against receipt of ownership of a portion of property constructed while the remaining portion of the constructed property is apportioned by the builder against the cost of development incurred by the developer such arrangement attract incidence of capital gain and capital gain tax thereon. - HELD THAT - Considering the facts and circumstances of the case we are inclined to set aside the order passed by the ld. CIT(Appeals) in order to meet the principle of natural justice and remit the matter back to the file of ld. CIT(Appeals) with a direction to provide one more opportunity of being heard to the assessee. At the same breath we also hereby caution the assessee to promptly co-operate with the proceedings before the Ld. CIT(Appeals) - Grounds raised by the assessee are allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal include:

• Whether the reopening of the assessment under section 147 of the Income Tax Act, 1961 was valid and justified based on the information obtained under section 133(6) regarding the land development agreement entered into by the assessee.
• Whether the transaction under the registered land development agreement constituted a transfer attracting capital gains tax under sections 2(47)(v), 45, and 48 of the Income Tax Act, 1961.
• Whether the assessee's failure to file the return of income and respond to notices under sections 148, 142(1), and 143(2) justified the assessment being completed under section 144 of the Income Tax Act, 1961 on the basis of available material.
• Whether the ex-parte dismissal of the appeal by the Commissioner of Income Tax (Appeals) was appropriate in light of the assessee's non-compliance and absence of representation.
• Whether the appellate tribunal should uphold the order of the CIT(A) or remit the matter for fresh adjudication to ensure the principles of natural justice are met.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Reopening under Section 147

Relevant Legal Framework and Precedents: Section 147 permits reopening of assessment if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. Section 133(6) enables the tax authorities to obtain information from other authorities with prior approval.

Court's Interpretation and Reasoning: The reopening was triggered by information obtained from the Registrar's office regarding a registered land development agreement. The agreement indicated a transfer of ownership rights in land for a share in constructed property. The Tribunal noted that the prior approval for reopening was obtained and the notice under section 148 was duly issued.

Key Evidence and Findings: The land development agreement was registered and disclosed the value of land and the consideration payable to the assessee. The transaction involved relinquishment of ownership rights, attracting capital gains provisions.

Application of Law to Facts: The Tribunal accepted that the reopening was based on credible information indicating escapement of income from capital gains, justifying the reopening under section 147.

Treatment of Competing Arguments: The assessee did not contest the validity of reopening but failed to cooperate or file returns timely.

Conclusion: The reopening of assessment was valid and justified.

Issue 2: Applicability of Capital Gains Provisions on Land Development Agreement

Relevant Legal Framework and Precedents: Sections 2(47)(v), 45, and 48 of the Income Tax Act define "transfer" and tax capital gains arising from transfer of capital assets. Section 53A of the Transfer of Property Act relates to rights in property under development agreements.

Court's Interpretation and Reasoning: The Tribunal observed that the registered land development agreement involved transfer of ownership rights in land in exchange for constructed property shares, constituting a transfer under section 2(47)(v). The capital gains arising therefrom were taxable under sections 45 and 48.

Key Evidence and Findings: The agreement specified the total land value and the consideration payable to the assessee. The assessee did not pay capital gains tax on the amount of Rs. 86,44,500/- arising from this transaction.

Application of Law to Facts: The transaction was correctly treated as a transfer attracting capital gains tax. The Assessing Officer's addition of Rs. 96,44,500/- as income under long-term capital gains was based on the value of the transaction and the consideration.

Treatment of Competing Arguments: The assessee did not provide evidence or submissions to contest the applicability of capital gains provisions.

Conclusion: The application of capital gains provisions to the land development agreement transaction was appropriate.

Issue 3: Assessment under Section 144 due to Non-Compliance

Relevant Legal Framework and Precedents: Section 144 allows the Assessing Officer to make an assessment based on available material if the assessee fails to comply with notices or file returns.

Court's Interpretation and Reasoning: The assessee failed to respond to notices under sections 148, 142(1), and 143(2), did not file the return timely, and ignored questionnaire and show-cause notices. Consequently, the Assessing Officer was justified in completing the assessment under section 144 based on material on record.

Key Evidence and Findings: Multiple notices and opportunities were given to the assessee, who failed to comply until after the final show-cause notice. The return was filed belatedly and no submissions were made.

Application of Law to Facts: The Assessing Officer's recourse to section 144 was lawful and warranted due to the assessee's non-cooperation.

Treatment of Competing Arguments: The assessee did not offer any explanation for non-compliance or contest the use of section 144 assessment.

Conclusion: The assessment under section 144 was valid and properly invoked.

Issue 4: Ex-parte Dismissal of Appeal by CIT(A)

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 if the assessee fails to appear or file submissions despite opportunities.

Court's Interpretation and Reasoning: The CIT(A) gave multiple opportunities to the assessee who neither appeared nor filed submissions. Hence, the ex-parte dismissal was in accordance with procedural norms.

Key Evidence and Findings: The assessee's failure to respond or appear before the CIT(A) despite repeated chances.

Application of Law to Facts: The dismissal was procedurally correct but the Tribunal considered the principle of natural justice to allow one more opportunity.

Treatment of Competing Arguments: The assessee sought remand for fresh adjudication to present her case.

Conclusion: While ex-parte dismissal was procedurally justified, the Tribunal remitted the matter to ensure fairness.

Issue 5: Remand for Fresh Adjudication and Ensuring Natural Justice

Relevant Legal Framework and Precedents: The appellate authority has the discretion to remit matters for fresh consideration to ensure compliance with natural justice and fair hearing.

Court's Interpretation and Reasoning: The Tribunal emphasized the need to provide the assessee one final opportunity to be heard and submit evidence before the CIT(A). It cautioned the assessee to cooperate or face appropriate orders based on existing materials.

Key Evidence and Findings: The assessee's prior non-cooperation but expressed desire for remand.

Application of Law to Facts: The remand balances procedural fairness with the need to conclude the matter on merits.

Treatment of Competing Arguments: The Department urged upholding the dismissal; the Tribunal prioritized natural justice.

Conclusion: The appeal was allowed for statistical purposes and remanded for fresh hearing.

3. SIGNIFICANT HOLDINGS

"Considering the facts and circumstances of the case, we are inclined to set aside the order passed by the ld. CIT(Appeals) in order to meet the principle of natural justice, and remit the matter back to the file of ld. CIT(Appeals) with a direction to provide one more opportunity of being heard to the assessee."

"The reopening of assessment under section 147 was valid and justified on the basis of credible information obtained under section 133(6) regarding the registered land development agreement."

"The transaction under the registered land development agreement constituted a transfer attracting capital gains tax under sections 2(47)(v), 45, and 48 of the Income Tax Act, 1961."

"The assessment under section 144 was validly invoked due to the assessee's failure to comply with statutory notices and non-filing of returns."

The Tribunal established the core principles that reopening assessments require credible information indicating escapement of income; that land development agreements involving transfer of ownership rights attract capital gains provisions; and that non-compliance with notices can justify summary assessment under section 144. However, the principles of natural justice mandate that the assessee be given a fair opportunity to present her case before adverse orders are confirmed. Hence, the matter was remanded for fresh adjudication with a caution to the assessee to cooperate.