ITAT Remands Section 50C Addition After Finding Breach of Natural Justice

ITAT Remands Section 50C Addition After Finding Breach of Natural Justice

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) condoned a delay of 223 days in filing an appeal and restored the matter to the Commissioner of Income Tax (Appeals) for fresh adjudication after holding that the assessee had been denied an adequate opportunity of hearing. A Bench comprising Judicial Member Beena Pillai and Accountant Member Jagadish set aside the appellate order passed against L P Realcon Private Limited for AY 2018-19.

The dispute arose from an addition of Rs 3.14 crore made under Section 45 read with Section 50C of the Income Tax Act on account of the difference between the sale consideration declared by the assessee and the value adopted by the stamp valuation authority. The assessee challenged the addition before the Tribunal after a delay of 223 days in filing the appeal.

The assessee submitted that the company had remained dormant for several years and had no active business operations during the relevant period. Owing to the absence of operational management and dedicated personnel to monitor statutory compliances, the appellate order could not be acted upon within the prescribed time. It was contended that the delay was neither intentional nor mala fide and deserved to be condoned in the interest of justice.

The Tribunal examined the explanation furnished by the assessee and referred to various judicial precedents emphasising that the expression “sufficient cause” should receive a liberal interpretation to advance substantial justice. It observed that the Revenue had not seriously opposed the condonation request and there was nothing on record to suggest that the delay was deliberate.

“When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred.”

After condoning the delay, the Tribunal considered the assessee’s grievance that the Commissioner of Income Tax (Appeals) had disposed of the appeal without providing an effective opportunity of hearing. It found merit in the contention that the order had been passed in violation of the principles of natural justice.

“The principles of natural justice require that a reasonable and effective opportunity should be afforded to an assessee before any adverse view is taken.”

Holding that the matter required fresh examination, the Tribunal set aside the impugned appellate order and restored the appeal to the file of the CIT(A) for de novo adjudication after granting adequate opportunity to the assessee to place all relevant submissions and evidence on record. Since the matter was remanded, the Tribunal did not examine the merits of the addition under Sections 45 and 50C. Therefore, the appeal was allowed for statistical purposes.

To Read Full Order, Download PDF Given Below