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2019 (8) TMI 1926 - AT - Income TaxEx-parte order passed without allowing proper opportunity of being heard - As submitted before us that none appeared before the lower authorities due to ailment of assessee s daughter the matter may be remitted back to the file of the AO for denovo assessment - HELD THAT - We heard the rival submissions and perused the material on record. We are of the considered opinion that it is a fit case to be remitted back to the file of the AO for denovo assessment after affording due opportunity of hearing to the appellant. Hence appeal filed by the assessee is partly allowed for statistical purposes. In the result the appeal filed by the assessee is partly allowed for statistical purpose.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are: - Whether the delay of 1533 days in filing the appeal by the assessee should be condoned on grounds of medical emergency affecting the assessee's family. - Whether the Commissioner of Income Tax (Appeals) erred in passing an ex-parte order without affording the assessee a proper opportunity of being heard. - Whether the addition of Long Term Capital Gains (LTCG) amounting to Rs. 55,17,360/- was rightly confirmed by the CIT(A) in the absence of the assessee's participation. - Whether the addition should have been made only with respect to the appellant's share (1/6th) as a power agent representing six legal heirs, rather than the entire consideration. - Whether the existence of pending civil litigation involving the subject property, with all family members impleaded, should have influenced the tax assessment or the additions made. - Whether the appeal should be remitted back to the Assessing Officer for de novo assessment after affording the assessee proper opportunity of hearing. 2. ISSUE-WISE DETAILED ANALYSIS Condonation of Delay in Filing Appeal Relevant Legal Framework and Precedents: The Income Tax Act and procedural rules empower the Tribunal to condone delay in filing appeals if the delay is shown to be neither willful nor wanton and sufficient cause is demonstrated. Court's Interpretation and Reasoning: The Tribunal accepted the assessee's explanation that the delay was due to the serious medical condition of his minor daughter who underwent a kidney transplantation, with the assessee actively attending to her care. The assessee supported this with a medical certificate from Dr. K. Sampathkumar. The Departmental Representative did not seriously object to the condonation. Application of Law to Facts: Given the medical emergency and lack of willful delay, the Tribunal found the cause sufficient to condone the delay. Conclusion: Delay of 1533 days in filing the appeal was condoned and the appeal admitted for adjudication. Ex-parte Order and Opportunity of Hearing Relevant Legal Framework and Precedents: Principles of natural justice require that an assessee be given a proper opportunity of being heard before adverse orders are passed. Section 144 of the Income Tax Act permits best judgment assessment in absence of compliance but does not preclude hearing if requested. Court's Interpretation and Reasoning: The CIT(A) passed the order confirming the addition ex-parte as the assessee did not appear before the lower authorities. However, the Tribunal noted the absence was due to the daughter's ailment, which was a valid reason for non-participation. Key Evidence and Findings: Medical certificate and family circumstances were accepted as genuine reasons for absence. Application of Law to Facts: The Tribunal held that the assessee was not afforded proper opportunity of hearing and hence the ex-parte order was not sustainable. Treatment of Competing Arguments: The Department did not seriously oppose remand; hence the Tribunal favored the assessee's contention. Conclusion: The matter required de novo assessment with proper opportunity of hearing. Addition of Long Term Capital Gains and Share of Consideration Relevant Legal Framework and Precedents: Capital gains tax is levied on the transfer of capital assets. When multiple legal heirs are involved, the share of each heir is relevant for assessment. The power of attorney or agency status does not transfer ownership but merely authorizes representation. Court's Interpretation and Reasoning: The Assessing Officer assessed LTCG on the entire sale consideration of Rs. 55,17,360/-, treating the appellant as the sole owner. The appellant contended that he was only one of six legal heirs and acted as power agent for the others, and therefore only his 1/6th share should be assessed. Key Evidence and Findings: The appellant's assertion of being a power agent for six heirs and pending civil litigation involving all family members over the property was noted. Application of Law to Facts: The Tribunal did not decide on the merits of the share entitlement or the addition amount due to absence of proper hearing and evidence examination at the lower level. Instead, it ordered remand for de novo assessment considering these aspects. Treatment of Competing Arguments: The Department did not seriously contest the remand or the appellant's plea for hearing. Conclusion: The addition of LTCG should be reconsidered after proper hearing and evidence evaluation, including the appellant's share and agency status. Pending Civil Litigation and Its Impact on Assessment Relevant Legal Framework and Precedents: Pending civil suits relating to ownership and title of property may have bearing on income tax assessments, particularly on capital gains arising from transfer of disputed property. However, tax authorities are not bound by civil court decisions and must assess based on available evidence. Court's Interpretation and Reasoning: The appellant submitted that a suit involving all family members was pending before the High Court concerning the subject property. The Tribunal acknowledged this fact but did not treat it as conclusive for tax assessment. Application of Law to Facts: The Tribunal held that since the civil litigation was pending, the tax authorities should consider the issue afresh with proper opportunity to the appellant to present evidence and arguments. Conclusion: The pending civil litigation is a relevant factor to be considered during reassessment but does not preclude tax assessment. Remand for De Novo Assessment Court's Interpretation and Reasoning: Considering the delay condoned due to genuine medical reasons, the absence of the appellant at lower forums, the ex-parte nature of the order, and the appellant's claim of acting as power agent for multiple heirs, the Tribunal found it appropriate to remit the matter back to the Assessing Officer. Application of Law to Facts: The remand would allow the Assessing Officer to conduct a fresh assessment after affording the appellant due opportunity of hearing and examining evidence regarding ownership, share of consideration, and pending litigation. Treatment of Competing Arguments: The Department did not oppose remand, indicating acceptance of procedural fairness requirements. Conclusion: The appeal was partly allowed for statistical purposes and remanded for de novo assessment. 3. SIGNIFICANT HOLDINGS "Delay is neither willful nor wanton and therefore the delay of One Thousand Five Hundred Thirty Three days in filing the appeal is condoned." "The Learned Commissioner of Income Tax erred in passing an ex-parte order without allowing proper opportunity of being heard." "It is a fit case to be remitted back to the file of the Assessing Officer for de novo assessment after affording due opportunity of hearing to the appellant." Core principles established include the necessity of condoning delay when justified by sufficient cause, the requirement of affording a proper hearing before passing adverse orders under Section 144, and the appropriateness of remanding cases for fresh assessment where procedural lapses or factual disputes exist. Final determinations on each issue are:
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