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Income Tax Appellate Tribunal, “SMC – A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
Date of hearing : 28.03.2018 Date of Pronouncement : 10.04.2018 O R D E R
This appeal is preferred by the assessee against the order of CIT(Appeals) inter alia on the following grounds:-
“1. The learned Income Tax Officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The impugned orders being bad in law are liable to be quashed.
2. The learned Income Tax Officer has erred in passing the assessment order u/s 147 r.w.s 144 without providing copy of reasons recorded. if any, for the issue of notices u/s 148 and without providing the details of additions proposed in the notice u/s 142(1). The learned Commissioner of Income Tax Appeals has erred in confirming the same. Hence, the assessment order and the CIT(A) order is bad in law and required to be quashed.
3. The learned Income Tax Officer, Ward5(2)(1). Bangalore has erred in issuing notice under section 148 dated 20.03.2015, initiating and concluding the assessment under section 147 r.w.s 144 when the learned ITO, Ward 5(2)(2), Bangalore had already issued notice U/S 148 dated 02.03.2015 and the appellant had already filed a letter on 13.03.2015 before the learned ITO, Ward 5(2)(2). Bangalore. The issue of second notice u/s 148 dated 20.03.2015 is bad in law and consequently the assessment proceedings and the order passed by the learned ITO, Ward 5(2)(1), Bangalore u/s 147 r.w.s 144 dated 28.03.2016 is bad in law and liable to be quashed.
4. The learned ITO, Ward 5(2)(1), Bangalore has erred in passing the assessment order under 147 read with section 144 without issuing and serving notice under section 143(2) of the IT Act, 1961. The order so passed being had in law is liable to be quashed.
5. The learned Commissioner of Income tax (Appeals) has erred in confirming the assessment order passed by the learned ITO, Ward 5(2)(1). Bangalore u/s 147 r.w.s 144 in the absence of 'reason to believe' that income has escaped assessment. The order so passed on mere conjecture, surmise. Without any 'reason to believe' that income has escaped assessment is bad in law and liable to be quashed.
6. The learned ITO, Ward 5(2)(1), Bangalore has erred in passing the assessment order under 147 read with section 144 and erred in making the addition of Rs. 9.87.280 merely on the basis of admission of one Mr. Mukesh Choksi and without demonstrating as to how the appellant was involved in the same and without providing an opportunity to rebut the material relied on and without providing an opportunity to cross examine the said person. The order so passed being bad in law is liable to be quashed.
In any case and without prejudice, the learned ITO. Ward 5(2)(1), Bangalore has erred in not reducing the short term capital gains amounting to Rs. 7,54,301.55 included in the income returned as the impugned transaction is not treated as genuine and as the entire purchase and sale amount of Rs. 9,87.280 is treated as Income from other sources'. The addition of Rs. 9.87.280 thus has resulted in double taxation of the very same amount twice and thus bad in law and liable to be quashed.
The learned Commissioner of Income tax (Appeals) has erred in holding that the appellant has not responded to notice issued u/s 142(1) dated 04.01.2016 and also in confirming that the assessing officer has got jurisdiction in reopening the assessment by issuing the notice u/s 148 of the Act.
The learned Commissioner of Income tax (Appeals) has instead of quashing the impugned order, has just confirmed the order of Assessing Officer without properly considering the fact and circumstances of the case, arguments of the appellant and the law applicable.
The learned assessing officer has erred, in holding that the appellant has not earned capital gains on sale of shares amounting to Rs.7,54,301.55 and the learned Commissioner of Income tax (Appeals) has erred in confirming the same.
The appellant denies the liability to pay the enhanced interest under section 234B amounting to Rs. 3,54,938 (Rs.3,55,788-Rs.850) and under section 234C amounting to Rs. 12,471 (Rs. 15,655-Rs. 3,184). The interest having been levied erroneously is to be deleted.
In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned assessing officer and Commissioner of Income tax (Appeals) – 5, Bengaluru be quashed, or in the alternative a. Addition of Rs.9,87,280 he deleted. b. Without prejudice. addition, if any, be limited to Rs.2,32,978 [9,87,280 less 7,54,301] after reduction of short term capital gains included in the income returned. c. Interest under section 23413 be deleted, and d. Interest under section 234C be deleted. The appellant prays accordingly.”
During the course of hearing, the ld. Counsel for the assessee has invited my attention to the preliminary objections raised through grounds on validity of the assessment framed u/s. 147 of the Act without serving a copy of the reasons recorded for reopening the assessment. In support of these contentions, the ld. Counsel for the assessee invited my attention to the fact that during the assessment proceedings, the assessee has repeatedly asked the AO to supply a copy of the reasons recorded for reopening the assessment u/s. 147 of the Act, but despite repeated requests, copy of the reasons recoded for reopening the assessment was never supplied. A copy of letter dated 10.03.15 and 07.04.15 written in response to notice issued by the AO is placed on record through which the AO was asked to supply a copy of the reasons recorded if any, for issue of notice u/s. 148 of the Act, but despite this letter reasons recorded for reopening the assessment was not supplied to the assessee. The assessee has also taken a ground before the CIT(Appeals) challenging the validity of the assessment without supplying copy of the reasons recorded, but the CIT(Appeals) opted not to adjudicate that ground.
The ld. Counsel for the assessee further contended that on request of the assessee, the AO was under an obligation to supply the copy of reasons recorded for reopening the assessment so that assessee can file its objections if any, to the reasons recorded and thereafter the AO has to dispose of that objections before proceeding on merits for completing the assessment.
The ld. Counsel for the assessee further invited our attention to the judgment of jurisdictional High Court in the case of Kothari Metals v. ITO 377 ITR 581 (Kar) in which the Hon’ble High Court has categorically held that where reasons for reopening were not furnished to the assessee despite requests, the assessment was not valid. The relevant observations of the Hon’ble High Court is extracted hereunder for the sake of reference:-
6. The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. After filing of the return in response to the notice issued under Section 148 of the Act or on request of the assessee requesting that the return of income initially filed be treated as a return of income filed in response to such notice, the assessee is entitled to be furnished the reasons for such re-opening, which can also be challenged independently. Since such reasons had not been furnished to the appellant, even though a request for the same had been made, we are of the opinion that proceedings for the re-assessment could not have been taken further on this ground alone.
In the instant case undisputedly reasons were not supplied to the assessee despite repeated requests, therefore in the light of the aforesaid judgment of the jurisdictional High Court, the assessment framed by the AO u/s. 147/143(3) of the Act without offering copy of reasons recorded for reopening the assessment is not sustainable in the eyes of law. I accordingly quash the assessment framed. Since the assessment is quashed, I find no justification to deal with the issues on merits. Accordingly, the appeal of the assessee stands allowed.
In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 10th day of April, 2018.