Facts of the Case

The assessee, Rajesh Kumar Singh, filed his return of income for Assessment Year 2016-17 declaring total income of Rs. 4,05,650. The case was selected for limited scrutiny to examine (i) correctness of sales/receipts offered to tax, (ii) correctness of contract receipts, and (iii) correctness of capital gains/loss on sale of property.

During assessment, the Assessing Officer recorded that the assessee failed to respond to several notices and only submitted partial reply at the end of the assessment period. Upon observing mismatch between receipts shown in Profit & Loss Account and Form 26AS, the AO sought reconciliation and supporting documents. As the assessee failed to furnish bank statements and reconciliation details, an addition of Rs. 13,75,138 was made.

The AO further noted that the assessee sold land on 02.11.2015 for Rs. 20,00,000, whereas the stamp value was Rs. 79,86,000. Holding the land to be non-agricultural as per sale deed, the AO invoked Section 50C and made addition of Rs. 65,09,000 as short-term capital gain.

Additionally, depreciation of Rs. 12,33,034, earlier disallowed by CPC under Section 143(1), was added to income due to non-production of purchase invoices and registration certificates of vehicles.

The CIT(A), after issuing six notices without response, dismissed the appeal ex-parte, holding that there was no material to interfere with the assessment order.

 

Issues Involved

  1. Whether addition on account of mismatch between books and Form 26AS was justified without proper reconciliation.
  2. Whether invocation of Section 50C was valid without referring valuation dispute to the DVO.
  3. Whether the land sold was agricultural land exempt from capital gains.
  4. Whether depreciation disallowance was justified despite audit report disclosures.
  5. Whether ex-parte dismissal by CIT(A) without speaking order was sustainable.

 

Petitioner’s Arguments (Assessee)

  • The additions were arbitrary and based on presumptions without proper verification.
  • There was no discrepancy in books warranting addition of Rs. 13,75,138.
  • The land sold was agricultural land situated beyond eight kilometers from the nearest municipal limits and hence not a capital asset.
  • The AO invoked Section 50C mechanically without referring matter to the DVO despite request and affidavit.
  • Depreciation was claimed as per prescribed rules and duly reflected in audit report.
  • The CIT(A) passed a non-speaking ex-parte order without reasonable opportunity.

 

Respondent’s Arguments (Revenue)

  • Multiple opportunities were granted during assessment and appellate proceedings but were not availed by the assessee.
  • Necessary documents were not produced before the AO.
  • Therefore, the additions were justified and confirmed correctly by CIT(A).
  • If remand is granted, strict compliance should be ensured.

 

Court Order / Findings (ITAT Allahabad)

  • The assessee’s compliance during assessment was delayed and incomplete.
  • Critical issues such as reconciliation of Form 26AS, eligibility of depreciation, and character of land sold were not properly examined due to non-submission of documents.
  • No reference was made to the DVO before invoking Section 50C, despite claim that circle rate did not represent actual consideration.
  • These issues required factual verification.
  • The CIT(A), despite having sufficient material in statement of facts, did not attempt to remand the matter or examine merits and dismissed the appeal for non-compliance.

Considering the circumstances and in the interest of justice, the Tribunal set aside the assessment and restored the matter to the file of the Assessing Officer for de novo assessment after following due process.

The undertaking of the assessee to ensure compliance was recorded, and the assessee was cautioned that future non-compliance may invite adverse inference.

The appeal was allowed for statistical purposes.

 

Important Clarification

  • The Tribunal did not adjudicate the additions on merits.
  • Issues relating to agricultural land exemption, Section 50C valuation, DVO reference, depreciation eligibility, and reconciliation require proper verification.
  • Ex-parte appellate orders must still consider material placed on record.
  • Assessees are obligated to comply promptly in faceless proceedings.
  • Failure to comply may justify adverse conclusions in future proceedings.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771231802_RAJESHKUMARSINGHMIRZAPURVS.ITO32MIRZAPURMIRZAPUR.pdf

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