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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
ORDER
PER VIKAS AWASTHY, JM
This appeal by the assessee is directed against the assessment order dated 27.01.2023 passed under section 144C(13)/143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for the Assessment Year 2015-16.
Sh. A.N. Shah appearing on behalf of the assessee submitted that the assessee is a tax resident of USA. The assessee is a registered Foreign Portfolio Investor [Category-III]. The assessee primarily invests in shares to earn Long Term 2 आअसं. 916/मुं/2023 (िन.व. 2015-16) (AY 2015-16) Capital Gains and dividend income. During the period relevant to AY under appeal, the assessee had sold equity shares of Stride Aerolabs Ltd. for a total consideration of Rs. 1,99,94,497/-. The assessee earned Long Term Capital Gain (LTCG) on sale of aforesaid shares, the said LTCG was claimed as exempt from tax under section 10(38) of the Act. There being no taxable income during the relevant previous year, the assessee did not file any return of income. A notice under section 148 was issued to the assessee on 30.04.2021 for non-filing of return of income. In response to the said notice, the assessee filed return of income on 28.04.2021, thereafter, the assessee received show-cause notice under section 142(1) dated 19.01.2022. In response to the said notice, the assessee furnished detailed reply on 16.02.2022. Thereafter, the AO allegedly issued notices under section 142(1) on 03.02.2022 and 22.03.2022, the said notices were never received by the assessee. The AO passed the draft assessment order on 30.03.2022 rejecting assessee’s claim of exemption u/s 10(38) of the Act. The assessee could not make proper submissions before the AO due to non- receipt of the notices. Even the draft assessment order was not received by the assessee in time. As soon as the assessee came to know about the draft assessment order, the assessee filed objections before the DRP. However, the DRP dismissed the objections of assessee on the ground of limitation. 3. The Ld. Authorized Representative (AR) fairly admitted that in the absence of proper communication of notices, the assessee could not make submissions before the AO and the objections filed before the DRP were belated. He submitted that if an opportunity is granted, the assessee would be able to show that no tax is payable on LTCG earned on sale of shares. He further submitted that the assessee has prima facie good case in its favour and balance of convenience is also in favour of the assessee.
3 आअसं. 916/मुं/2023 (िन.व. 2015-16) (AY 2015-16) 4. Sh. Anil Sant representing the Department vehemently supported the impugned order. The Ld. DR submitted that multiple opportunities were granted to the assessee by AO to make submissions, but the assessee choose not to co- operate and did not file the requisite information as sought by the AO. The AO had no option but to complete assessment u/s 144 of the Act. He pointed that the assessee failed to file objections before the DRP within the time specified under the provisions of the Act. The DRP has no power to condone delay in filing of the objections, hence, the DRP rightly rejected the objections on the ground of limitation. In support of his submissions, he placed reliance on the decision in the case of Inno Estates (P.) Ltd. Vs. DRP-2(2018) 96 taxmann.com 646 (Madras).
We have heard the submissions made by rival sides and have examined the orders of authorities below. A perusal of the draft assessment order shows that the AO had issued show-cause notice under section 142(1) of the Act on 19.01.2022, 03.02.2022, 22.03.2022 and 26.03.2022. Ostensibly the assessee replied to only first notice and furnished some details. Thereafter, the AO sought further documentary evidences, the assessee failed to furnish reply to the subsequent show-cause notices. In the absence of documentary evidences as sought by the AO, the AO completed the assessment on the basis of documents already on record. The AO made the assessment under section 144 on best judgment basis. The assessee further goofed in filing objections before the DRP. The DRP dismissed the objections in limine on ground of limitation. The assessee has tried to explain the reasons for not responding to the notices filed by the AO and delay in filing of objections before the DRP. The failure to respond to the notices by the AO has been attributed to non-communication of notices to the assessee by its custodian in India-Kotak Custody Services. It is evident from records that the assessee could not represent its case before the AO, effectively.