SHRI BABUBHAI KURJIBHAI PATEL,SURAT vs. THE INCOME TAX OFFICER, SURAT

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ITA 749/AHD/2014Status: DisposedITAT Surat17 April 2018AY 2008-097 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the Addl. CIT failed to provide an opportunity of being heard to the assessee before issuing directions under Section 144A, which were prejudicial. Therefore, the assessment order was set aside.

What were the facts?

The assessee's property sale consideration was enhanced by the AO based on AIR information. The assessee had applied for a direction under Section 144A, but the Addl. CIT issued directions without affording the assessee an opportunity to be heard.

What were the issues?

Whether directions issued under Section 144A are invalid if the assessee is not given an opportunity of being heard. Whether the assessment order is bad-in-law due to violation of natural justice principles.

Which sections of the Income-tax Act were involved?

Section 144A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: SHRI C.M.GARG & SHRI O.P.MEENA

Hearing: 11.04.2018

आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. This appeal filed by the assessee is directed against the

order of Learned Commissioner of Income-tax (Appeals)-II, Surat

[in short “the CIT(A)”] dated 05.12.2013 pertaining to

Assessment Year 2008-09, which in turn has arisen from the order

dated 31.12.2010 passed by the DCIT Circle -2, Surat (in short

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 2 of 7

“the AO” ) under section 143 (3) of Income Tax Act,1961 ( in

short ‘the Act’).

2.

Ground no. 1 states that on the facts and in law, the ld.

Commissioner of Income-tax (Appeals) grievously erred rejecting

the assessee ground regarding issuance of direction u/s.144A.

3.

Succinctly, facts as culled out from the orders of lower

authorities are that the assessee is earning income from interest,

rent and other source. During the course of assessment

proceedings, on the basis of AIR information, it was noticed that

the assessee with co-owner M/s. Balaji Builders has sold an

immovable property for Rs.4.23 crores in which assessee`s share

comes to 5.52% as per investment of Rs. 11.50 lacs made by him.

However, the AO noticed that the assessee has received a sum

of Rs. 25 lakhs as sale consideration, hence, the AO considered

the sale consideration at Rs. 25 Lakh as against the sale

consideration of Rs. 12 Lakh offered by the assessee which

resulted in addition of Rs. 11.50 lakhs. However, during the

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 3 of 7

course of assessment proceedings, the assessee has made an

application under section 144A dated 13.12.2010 before the

JCIT/Addl. CIT Range-2 (Paper Book page no. 32). However, the

Addl. CIT Range-2 vide letter dated 15.12.2010 issued direction

to the AO (PB-36 to 37) without affording an opportunity of being

heard to the assessee. The assessee has challenged this before

the CIT (A) that the order passed without giving assessee an

opportunity of being heard on the direction of Addl. CIT, is bad-

in-law. However, the CIT (A) was of the view that the assessee

has not filed copy of application under section 144A with the AO,

therefore, the AO was not aware of the direction. Therefore, the

assessment order passed by the AO does not suffer any infirmity,

as the AO was not informed by the Appellant. With regard to

opportunity not being allowed to the assessee before issuing

direction, the CIT (A) opinioned it is not section 144A does not

make it obligatory for JCIT/ Addl. CIT to afford opportunity of

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 4 of 7

being heard before issuing direction, as the word used in section

144A is MAY and not SHALL.

4.

Being aggrieved, the assessee filed an appeal before the ld.

CIT (A). The learned counsel for the assessee submitted that the

AO had passed an order without making any reference of

direction issued under section 144A of the Act, hence, order so

passed is bad-in-law. Further, the Addl. CIT Range-2 Surat had

erred in law in giving opportunity of being heard as requested by

the assessee in his reference application made under section

144A of the Act. The order passed by the AO in violation of

principle of natural justice, deserve to be quashed. The learned

counsel for the assessee also placed reliance in the case of ITO v.

Mishrilal Gordhanlal [1986] 17 ITD 958(JP) wherein it was laid

down that section 144A clearly provides that no direction

prejudicial to the assessee should be issued without giving an

opportunity of being heard. Therefore, the order passed on

illegal direction was to be set-aside from the stage from where

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 5 of 7

the illegality was cropped in. Therefore, we are urged upon to

set-aside the case to the file of the AO and the Addl. CIT, Range

be directed to afford an opportunity of being heard before

issuing direction.

5.

Per contra, the ld. Sr. DR submitted that the assessee has

not informed the AO about application made for direction under

section 144A nor the direction issued by the Addl. CIT are

prejudicial to the assessee as same were issued with reference to

enquiries to be conducted. Hence, order of CIT (A) is in order.

6.

We have heard the rival submissions and perused the

relevant material on record. We have also gone through the

provision of section 144A and find that as per Explanation to

section 144A, no direction should be issued which are prejudicial

to the assessee without affording an opportunity of being heard

to the party who has made an application under section 144A of

the Act. We find that direction under section 144A were issued

by the Addl. CIT, Range -2 Surat, vide letter dated 15.12.2010

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 6 of 7

and there was sufficient time to afford opportunity of being

heard as the assessment was getting time barring by 31.12.2010.

Therefore, such direction which are prejudicial to the assessee,

the Addl. CIT should have afforded an opportunity of being

heard to the assessee. We have gone through the direction

placed at Paper book page no. 36-37 and find that the Addl. CIT

has directed the AO to conduct the enquiries of share holding in

the land transaction and may ascertained after getting document

from M/s. Balaji Builders and examined the source of payment of

Rs. 11.50 lakhs for purchase of property. In view of these facts

and circumstances, we are of the considered opinion the Addl.

CIT, Range -2 Surat has failed to observe the procedure as laid

down in section 144A read with Explanation thereto. Therefore,

we deem if fit to set-aside the assessment to be made de-nova,

afresh after affording an reasonable opportunity of being heard

to the assessee by the AO as well as by Addl. CIT before issuing

direction under section 144A of the Act.

Shri Babubhai Kurjibhai Patel v. ITO 2(3) Surat /I.T.A. No.749/Ahd/2014/A.Y.:08-09 Page 7 of 7

7.

Since we have set-aside the assessment order to be afresh,

hence, the other ground related to addition of Rs. 12,93,089

short-term capital gains is not being adjudicated as the same is

to be decide afresh after opportunity of being heard to the

assessee.

8.

In the result, appeal is set-aside from statistical purposes.

9.

The order pronounced in the open Court on 18-04-2018.

Sd/- Sd/- (सी.एम.गग�) (ओ.पी.मीना) ( C.M. GARG) (O.P.MEENA) �याियक सद�य लेखा सद�य JUDICIAL MEMBER ACCOUNTANT MEMBER सुरत/ Surat: �दनांक /Dated : April, 2018/opm Copy sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat

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