Facts of the Case

The assessee, Rina Ray, did not originally file her return of income for Assessment Year 2018-19. Based on information of high-value transactions, proceedings were initiated, and the assessee subsequently filed a return on 30.05.2022 pursuant to notice under Section 148. The assessee had inherited a residential property jointly with her sister from their late father, who had purchased the land in 1974 and constructed a residential house prior to his death. The property was sold during the relevant year for ₹58,00,000, of which the assessee’s share was ₹29,00,000. Applying Section 50C, the stamp duty value attributable to the assessee’s share was ₹38,83,125, which was duly adopted by the assessee. The assessee computed long-term capital gains by adopting fair market value as on 01.04.2001 at ₹6,00,000 and claimed exemption of ₹21,00,000 under Section 54EC on investment in REC Bonds, resulting in net capital gain of ₹1,22,125. The Assessing Officer rejected the FMV adopted by the assessee, took original cost of ₹50,000, did not refer the valuation to the DVO, and computed capital gains at ₹16,86,124, making an addition of ₹15,63,999. The appeal before the CIT(A) was filed with a delay of 189 days and was dismissed in limine without adjudicating the issues on merits.

Issues Involved

Whether the delay of 189 days in filing appeal before the CIT(A) deserved to be condoned, whether dismissal of the appeal in limine without examining the merits was justified, and whether the capital gains issues involving adoption of FMV as on 01.04.2001, application of Section 50C, and exemption under Section 54EC required adjudication on merits.

Petitioner’s Arguments

The assessee contended that the delay occurred due to non-service of the assessment order and lack of effective knowledge of the proceedings, and that there was no wilful negligence or inaction on her part. It was argued that the CIT(A) erred in dismissing the appeal solely on the ground of limitation without considering the explanation for delay and without adjudicating substantive grounds relating to computation of capital gains and failure of the Assessing Officer to refer valuation to the DVO.

Respondent’s Arguments

The Revenue supported the order of the CIT(A) and submitted that ignorance of law is not a valid excuse for delay in filing appeal.

Court Order / Findings

The ITAT Kolkata observed that the CIT(A) had dismissed the appeal in limine without examining the explanation regarding non-service of the assessment order and without touching the merits of the case. The Tribunal held that the delay of 189 days was satisfactorily explained and that there was no wilful negligence on the part of the assessee. Considering the facts and circumstances, the Tribunal condoned the delay and held that the appeal deserved to be adjudicated on merits. Accordingly, the Tribunal remitted the matter back to the file of the CIT(A) with a direction to dispose of the appeal afresh after granting reasonable opportunity of hearing to the assessee.

Important Clarification

The Tribunal clarified that appeals involving substantive rights, particularly in matters of capital gains computation, should not be dismissed on technical grounds of limitation without examining whether sufficient cause exists. Where delay is attributable to non-service of orders or bona fide reasons, the same deserves to be condoned in the interest of justice.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The delay of 189 days was condoned, and the matter was restored to the file of the CIT(A) for adjudication on merits after providing reasonable opportunity of hearing to the assessee.

Source Link- https://itat.gov.in/public/files/upload/1767263851-aaGNGh-1-TO.pdf

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