Why the ITO Filed a Case Against Jagroshni (L/H of Late Anant Ram) for AY 2014-15 – ITA 6087/DEL/2019

Case Overview: Jagroshni (L/H of Late Anant Ram) vs. ITO Ward 54(5), New Delhi

Case Number: ITA 6087/DEL/2019

Appellant: Jagroshni (L/H of Late Anant Ram), New Delhi

Respondent: ITO Ward 54(5), New Delhi

Assessment Year: 2014-15

Case Filed On: 2019-07-17

Order Type: Final Tribunal Order

Date of Order: 2021-10-13

Pronounced On: 2021-10-13

Introduction

The case ITA 6087/DEL/2019 involves an appeal filed by Jagroshni, the legal heir of Late Anant Ram, against the ex parte order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] pertaining to the assessment year 2014-15. The core issue in this appeal is the addition of Rs. 23,09,415/- made by the Assessing Officer (AO) on account of interest on compensation received from the compulsory acquisition of agricultural land.

Background of the Case

Anant Ram, the deceased, filed his return of income on September 27, 2014, declaring a total income of Rs. 2,45,160/-. During the assessment proceedings, the AO requested a detailed bifurcation of the compensation/enhanced compensation and the interest on such compensation received by Anant Ram from the compulsory acquisition of agricultural land located in the villages of Kilokari and Behlolpur Khaddar.

In response, the representative of the legal heir, Jagroshni, clarified that the amount of Rs. 74,42,895/- mentioned as agricultural income was in fact the total compensation received against the compulsory acquisition of agricultural land. This amount was erroneously reported as agricultural income in the return for the assessment year 2014-15.

Key Issues and Legal Grounds

The primary legal issue arose from the classification of Rs. 46,18,829/- out of the total compensation as interest on compensation/enhanced compensation, which the AO deemed taxable under Section 56(2)(viii) read with Section 145A(b) of the Income Tax Act, 1961. After allowing a deduction of 50% under Section 56(2)(viii), the AO added Rs. 23,09,415/- to the total income of the assessee, leading to a final assessed income of Rs. 25,54,580/-.

Jagroshni, the legal heir, did not appear before the CIT(A) for the hearing, leading to an ex parte order being passed, which sustained the addition made by the AO. This ex parte order was the basis for Jagroshni’s appeal before the Income Tax Appellate Tribunal (ITAT).

Tribunal’s Observations and Findings

The ITAT, presided over by Accountant Member Shri R.K. Panda, reviewed the case on October 13, 2021, through a virtual hearing. Notably, no one appeared on behalf of the appellant (Jagroshni) despite being served notice. Therefore, the tribunal decided the appeal based on the available records and the submissions made by the Departmental Representative (DR), Shri R.K. Gupta.

The ITAT noted that the CIT(A) had relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. Multiplan India Ltd., reported in 38 ITD 320, to pass an ex parte order. However, the tribunal found that the CIT(A) did not address the merits of the case as required under Section 250(6) of the Income Tax Act. This section mandates that the CIT(A)’s order should be in writing, clearly stating the points for determination, the decision, and the reasons for the decision.

Case Conclusion and Final Judgment

In light of the failure of the CIT(A) to decide the appeal on its merits, the ITAT deemed it appropriate to remand the case back to the CIT(A) for reconsideration. The tribunal directed the CIT(A) to grant one final opportunity to Jagroshni to substantiate her case and decide the appeal afresh based on facts and law by passing a speaking order. The ITAT also directed Jagroshni to appear before the CIT(A) and present her case without seeking unnecessary adjournments, failing which the CIT(A) would be at liberty to pass an appropriate order as per law.

The tribunal’s decision to remand the case was made to ensure that justice is served by allowing the appellant another opportunity to present her case, which had not been adequately addressed in the previous proceedings.

The decision of the ITAT was pronounced in the open court on October 13, 2021, with the appeal being allowed for statistical purposes.

Implications of the Ruling

This case highlights the importance of ensuring that appeals are decided on their merits rather than through ex parte orders, especially in situations where the appellant is a legal heir dealing with the proceedings of a deceased individual. The tribunal’s decision reinforces the need for tax authorities to give appellants a fair chance to present their case and the necessity of passing reasoned orders that address the key issues involved in the appeal.

The case also underscores the procedural obligations of legal heirs who are responsible for handling the tax matters of deceased relatives. It serves as a reminder to legal heirs to actively participate in legal proceedings to avoid adverse ex parte decisions.

In conclusion, the case of ITA 6087/DEL/2019 serves as a crucial reminder of the procedural fairness required in tax assessments and appeals, particularly when dealing with cases involving deceased individuals and their legal heirs. The ITAT’s decision to remand the case ensures that the appellant, Jagroshni, will have another opportunity to present her case before the CIT(A), hopefully leading to a just and equitable resolution.

Why the ITO Filed a Case Against Jagroshni (L/H of Late Anant Ram) for AY 2014-15 – ITA 6087/DEL/2019