2019 (8) TMI 1926 - AT - Income Tax

Legal Delay Waived: Medical Emergency Justifies 1533-Day Late Appeal Filing, Ensuring Fair Hearing and Reassessment

Shri. J. Samuvel Versus The Income Tax Officer, Ward 1 (4) Tirunelveli

Shri. J. Samuvel Versus The Income Tax Officer, Ward 1 (4) Tirunelveli - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 1,533 days in filing the appeal ought to be condoned on the grounds of medical emergency of the assessee's daughter. 2. Whether the assessment completed by the Assessing Officer under section 144 of the Income Tax Act without the assessee's participation (resulting in an ex parte order) was permissible where notices were issued under section 148 and the assessee did not respond. 3. Whether the addition of long term capital gains of Rs. 55,17,360 assessed on sale of specified land is sustainable as a whole, or whether the assessment should have been limited to the appellant's share (1/6th) where the appellant claimed to act as power agent for other legal heirs. 4. Whether, in the circumstances (non-appearance before lower authorities due to medical reasons and pendency of civil suit in which family members were impleaded), the appropriate remedy is confirmation of the assessment or remand to the Assessing Officer for de novo assessment after affording opportunity of hearing. ISSUE-WISE DETAILED ANALYSIS - Delay Condonation Legal framework: Judicial discretion to condone delay in filing statutory appeals where delay is not willful or wanton and sufficient cause is shown (statutory provisions and settled practice permitting consideration of medical emergencies). Precedent Treatment: The judgment does not cite or apply any specific precedent; the Tribunal applied discretionary principles governing condonation of delay. Interpretation and reasoning: The assessee produced evidence (medical certificate) that his seventeen-year-old daughter had kidney failure and underwent transplantation, the wife being the donor, and asserted that the assessee was attending to her and therefore could not file the appeal in time. The Departmental Representative did not press serious objection. On the basis of the medical certificate and absence of contest, the Tribunal treated the delay as neither willful nor wanton. Ratio vs. Obiter: Ratio - delay was condoned as sufficient cause was established by documentary medical evidence and absence of opposed submission; obiter - none on broader standards for medical emergencies beyond the facts. Conclusion: Delay of 1,533 days in filing the appeal was condoned and the appeal admitted for adjudication. ISSUE-WISE DETAILED ANALYSIS - Validity of Ex Parte Assessment under Section 144 Legal framework: Assessments under section 144 may be completed where the assessee does not respond to notices; however, fundamental requirement is affording opportunity of hearing in accordance with principles of natural justice, unless statutory procedure and facts justify ex parte action. Precedent Treatment: The order does not reference any authority; the Tribunal proceeded on the factual matrix and equitable considerations regarding opportunity to be heard. Interpretation and reasoning: The Assessing Officer issued notice under section 148 based on information of sale and completed assessment under section 144 after the assessee failed to respond. The Commissioner (Appeals) confirmed the addition in an appeal disposed on merits though the assessee had not appeared before lower authorities due to the medical emergency. The Tribunal accepted the assessee's explanation for non-appearance and observed that absence of opportunity to be heard at the assessment stage warranted reconsideration. Ratio vs. Obiter: Ratio - where non-appearance before the lower authorities is caused by verifiable and compelling reasons (here, a serious medical emergency) and opportunity was not afforded, remand for de novo assessment is appropriate; obiter - assessment under section 144 remains available where statutory notices are complied with and natural justice is not thereby violated. Conclusion: The Tribunal found it appropriate to remit the matter for de novo assessment after affording due opportunity of hearing to the appellant, rather than uphold the ex parte assessment. ISSUE-WISE DETAILED ANALYSIS - Addition of Long Term Capital Gains and Claim of Power Agent / Share Limitation Legal framework: Principles governing taxation of capital gains on transfer of property (assessment of long term capital gains on sale consideration), and the position where multiple co-owners or heirs transact through one person acting as agent-tax consequences depend on legal title, beneficial ownership, and whether the consideration relates solely to the agent's share or to entire property. Precedent Treatment: No specific authorities were cited or applied in the decision; the question was not adjudicated on merits by the Tribunal because of the remand. Interpretation and reasoning: The assessee contended before the Tribunal (and raised grounds before lower authorities) that he was one of six legal heirs and acted as a power agent for the other five, so any addition should be limited to his 1/6th share of consideration. The Assessing Officer assessed the entire sale consideration as long term capital gains. The Commissioner (Appeals) confirmed the addition. The Tribunal did not decide the substantive correctness of assessing the whole sale consideration versus only the appellant's share because it remitted the matter for de novo assessment to allow opportunity of hearing and full adjudication of factual and legal issues, including the power agent/share contention and pendency of civil proceedings affecting title. Ratio vs. Obiter: Obiter as to substantive capital gains issue - the Tribunal did not resolve the legal question on the merits and therefore did not lay down a binding ratio on whether the entire consideration or only 1/6th should be taxed in such circumstances. Conclusion: Substantive dispute on long term capital gains and whether assessment should be confined to the appellant's 1/6th share remains open and is to be reconsidered on remand after affording opportunity of hearing and examining documentary and factual evidence (including proof of agency, share entitlements, and title). ISSUE-WISE DETAILED ANALYSIS - Pendency of Civil Suit and Appropriate Remedy Legal framework: Tax proceedings ordinarily proceed independently of civil proceedings affecting title, but where material issues (e.g., beneficial ownership, entitlement to sale proceeds) are sub judice, adjudicatory authorities may consider remand or deferment to enable proper fact finding and fair hearing; Tribunal powers permit remand for de novo assessment where justice so requires. Precedent Treatment: Not cited in the judgment; the Tribunal applied principles of procedural fairness and the need for effective opportunity to be heard. Interpretation and reasoning: The assessee pointed to a pending suit in the High Court concerning the subject property in which all family members were impleaded. Coupled with the asserted agency role and medical non-appearance, the Tribunal concluded that the matter should be remitted for de novo assessment so that the Assessing Officer can examine the interplay of civil litigation, title claims, and tax liability after affording the assessee an opportunity to be heard. Ratio vs. Obiter: Ratio - where factual matrix includes pending civil adjudication over property and contested assertions of agency and share, remand for de novo assessment to permit proper fact-finding and hearing is appropriate; obiter - no direction on whether tax proceedings should await civil determination generally. Conclusion: The Tribunal remitted the matter to the Assessing Officer for de novo assessment after affording due opportunity of hearing, leaving resolution of issues connected with the civil suit and allocation of sale proceeds to the assessment process. OVERALL CONCLUSION AND DISPOSITION The delay in filing the appeal was condoned. In view of verifiable medical reasons for non-appearance and the presence of contested factual/legal issues (claim of acting as power agent, entitlement to 1/6th share, and pendency of civil suit), the Tribunal did not decide the substantive taxability of the entire sale consideration and instead remitted the case to the Assessing Officer for de novo assessment after affording the appellant a proper opportunity of hearing; the appeal was partly allowed for statistical purposes.