Facts of the Case

The assessee, Mahipatsinh Ramseenh Solankee, filed an appeal for Assessment Year 2020-21 against the order dated 18.03.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The Assessing Officer had made an addition of ₹1,49,66,253, being the assessee’s 50% share in total sale consideration of ₹2,99,32,506 from sale of agricultural land, by treating the land as a taxable capital asset. Interest under Sections 234A and 234B was also levied.

The assessee contended that the land sold was rural agricultural land not constituting a capital asset under Section 2(14), that mandatory notice under Section 143(2) was not served, and that cost of acquisition was not properly allowed. The CIT(A), NFAC disposed of the appeal ex parte without adjudicating the issues on merits.

Issues Involved

Whether the CIT(A) erred in passing an ex parte order without deciding the appeal on merits in violation of Section 250(6), whether sale of rural agricultural land could be taxed as a capital asset under Section 2(14), whether non-service of notice under Section 143(2) vitiated the assessment, and whether the matter required fresh adjudication.

Petitioner’s Arguments

The assessee submitted that hearing notices were not served on him and were served only on the former authorised representative, who failed to inform him. It was argued that the land sold was rural agricultural land and therefore not a capital asset under Section 2(14). The assessee also contended that mandatory notice under Section 143(2) was not served within the prescribed time and that the Assessing Officer failed to allow cost of acquisition while computing capital gains.

Respondent’s Arguments

The Revenue submitted that the CIT(A) passed the order ex parte due to non-compliance and suggested that the matter be remanded. It was further contended that the buyer of the land was a company, which could not have purchased agricultural land, and therefore the transaction resulted in transfer of a taxable capital asset.

Court Order / Findings

The ITAT Ahmedabad observed that the order passed by the CIT(A) was ex parte and the appeal had not been decided on merits. The Tribunal noted the submissions of both sides and found that the issues relating to service of notice, nature of land sold, taxability under Section 2(14), and computation of capital gains had not been properly examined by the Assessing Officer as well as by the CIT(A).

In the interest of justice, the Tribunal remitted the matter back to the file of the Assessing Officer for de novo adjudication. The Assessing Officer was directed to consider all arguments raised by the assessee, examine the complete details and supporting documents, and pass a fresh order in accordance with law after granting proper opportunity of being heard.

Important Clarification

The Tribunal clarified that appellate and assessment proceedings must result in adjudication on merits. Issues relating to taxability of agricultural land, validity of service of statutory notices, and computation of capital gains require factual and legal examination and cannot be confirmed mechanically through ex parte orders.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The matter was remanded to the file of the Assessing Officer for fresh adjudication on merits after granting adequate opportunity of being heard to the assessee.

Link to Download Order-https://www.mytaxexpert.co.in/uploads/1769062762_MAHIPATSINHRAMSEENHSOLANKEEDEKAVADAAHMEDABADVS.INCOMETAXOFFICERWARD335VEJALPURAHMEDABAD.pdf

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