Facts of the Case

The assessee filed his original return declaring income of ₹42,46,330, which was assessed under Section 143(3). Subsequently, the Assessing Officer observed that the assessee had sold land and claimed indexed cost as well as exemption under Section 54F. The assessment was reopened under Sections 147/148 within four years on the ground that adequate details regarding construction of the new residential house were not furnished.

During reassessment proceedings, the Assessing Officer held that the assessee failed to submit complete bills, vouchers, and sanctioned building plan from the development authority. Accordingly, exemption under Section 54F amounting to ₹27,46,978 was disallowed.

The CIT(A) issued multiple notices through email but, due to non-compliance, passed an ex-parte order upholding both the validity of reopening and the addition on merits.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148 were valid.
  2. Whether denial of exemption under Section 54F for investment in residential property was justified.
  3. Whether the ex-parte order of CIT(A) complied with Section 250(6).

Petitioner’s Arguments (Assessee)

  • Reopening was initiated without valid material and allegedly based on audit objections.
  • All relevant facts regarding the capital gain transaction had been disclosed in the original assessment.
  • Investment in construction of residential property was duly recorded in the capital account.
  • The CIT(A) passed the order ex-parte without granting effective opportunity of hearing.
  • The appellate order was non-speaking and contrary to law.

Respondent’s Arguments (Revenue)

  • The reassessment was initiated within the statutory time limit and with necessary approvals.
  • The assessee failed to provide complete evidence supporting the claim of exemption.
  • Multiple notices were issued during appellate proceedings but remained uncomplied with.
  • Therefore, confirmation of addition by CIT(A) was justified.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the CIT(A) had passed the order ex-parte due to non-appearance of the assessee and had upheld the reassessment and additions without proper adjudication of all issues on merits.

It noted that under Section 250(6), the appellate authority is required to pass a reasoned order after due application of mind. The CIT(A) possesses powers co-terminus with those of the Assessing Officer and could have called for records or conducted further inquiries.

Considering that the assessee had raised several legal and factual grounds, the Tribunal held that the issues deserved fresh examination.

Accordingly, the Tribunal:

  • Set aside the order of the CIT(A)
  • Restored the matter for fresh adjudication on all issues
  • Directed the CIT(A) to grant proper opportunity of hearing
  • Clarified that no opinion was expressed on merits
  • Allowed the appeal for statistical purposes

 Important Clarification

  • CIT(A) must adjudicate appeals on merits even when the assessee is absent.
  • Powers of CIT(A) are co-terminus with those of the Assessing Officer.
  • Reassessment validity and exemption claims require detailed examination of evidence.
  • Orders must comply with the requirements of Section 250(6).
  • The assessee is obligated to cooperate and furnish necessary documents during remand proceedings.

Link to download the order -  https://itat.gov.in/public/files/upload/1694171778-ITA%20No.%2067%20Alld%202023%20Mr%20Devendra%20Singh.pdf

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