ITAT Kolkata Allows Delayed Appeal And Orders De Novo Assessment In Capital Gains Dispute

Background Of The Dispute

The case of Samar Nath Mondal Vs ITO came before the ITAT Kolkata arising out of an order passed by the Commissioner of Income Tax (Appeals)-NFAC, Delhi under Section 250 of the Income Tax Act 1961 for AY 2014-15.

The assessee approached the Tribunal after the CIT(A) rejected his appeal solely on the ground that there was a delay of 1,439 days in filing the appeal. No examination was undertaken on the merits of the capital gains computation made by the Assessing Officer (AO). The assessee’s stand was that:

  • He had properly explained the delay through an affidavit,
  • The appeal should not have been dismissed only on limitation, and
  • The assessment had created a heavy and unjustified tax demand, whereas, on correct computation, his long-term capital gains would be nil.

The Tribunal had to decide whether such an inordinate delay could be condoned and, if so, what should be the fate of the assessment framed under Sections 144, 147 and 144B.

Facts Leading To Reopening And Ex Parte Assessment

Non-filing of Return and Reopening Under Section 147

For AY 2014-15, the assessee did not file a return of income. Subsequently, income tax authorities obtained information that he, along with co-owners, had sold two parcels of land to M/s. Goodluck Merchants Pvt. Ltd.

On the basis of this information:

  • The AO initiated reassessment proceedings under Section 147 and issued a notice under Section 148 on 20.03.2020, requiring the assessee to file his return.
  • Thereafter, multiple notices were issued under Section 142(1) calling for details and explanations.

Despite proper service of these notices, there was complete non-compliance from the assessee’s side.

Application Of Section 50C And Capital Gains Addition

During the reassessment proceedings, the AO treated the transaction as a transfer within the meaning of Section 2(47) read with Section 53A, on the footing that possession of the land had been handed over to the developer.

The AO then:

  • Referred to the stamp duty valuation for the two properties,
  • Determined the assessee’s share in the sale consideration based on such valuations, and
  • Applied Section 50C to compute deemed sale consideration.

On this basis, the AO:

  • Worked out the assessee’s share in the sale consideration at Rs. 62,83,970/-,
  • Computed long-term capital gains without apparently granting any indexed cost of acquisition, and
  • Completed the assessment ex parte under Sections 144, 147 and 144B on 21.09.2021, adding the entire computed capital gains to the assessee’s total income and raising a tax demand of Rs. 34,46,398/-.

Order Of The CIT(A): Refusal To Condon e 1439-Day Delay

The assessee filed an appeal before the CIT(A)-NFAC against the reassessment order. However, the appeal reached the CIT(A) with a delay of about 1,439 days.

Explanation For Delay Before CIT(A)

The assessee explained the delay broadly as follows:

  • He had no taxable income in AY 2014-15 and therefore did not file a return.
  • For subsequent years, he had appointed a tax consultant, to whom he entrusted all notices, orders and communication from the Income Tax Department.
  • This consultant, according to the assessee, had failed to respond to notices and did not file any appeal against the assessment order.
  • The assessee lacked digital literacy, did not track the e-filing portal, and was unaware of the notices and orders uploaded there.
  • He discovered the problem only when refunds for AY 2023-24 and AY 2024-25 were adjusted against the demand for AY 2014-15.
  • On visiting the consultant’s address, he found that the consultant had expired. The assessee then collected back the assessment papers and a copy of the consultant’s death certificate from the consultant’s wife.
  • After some time searching for another reliable consultant, he eventually got professional assistance and filed the delayed appeal along with an affidavit and petition for condonation of delay.