2012 (10) TMI 859 - AT - Income Tax

Transfer of inherited land held by assessee with his relatives Held that - Entire gain arising out of such transfer cannot be taxable in hands of assessee alone although he has failed to submit details of land found during search - Order passed by the CIT (A) in case of the present assessee also is set aside and restore the matter back to the file of the AO who shall re-examine the issue in the light of given directions - In the result, both the appeals are treated as allowed for statistical purposes. Undisclosed Income Held that - Order passed by CIT is in gross violation of natural justice as no proper opportunity of being heard was extended to the assessee, therefore order passed by the CIT u/s 263 is set aside and direct the CIT to pass an order afresh after affording an adequate opportunity of being heard to the assessee. Since we are remitting the matter back to the file of CIT, the other grounds raised in this appeal have become merely academic and therefore not adjudicated upon - In the result, all three appeals filed by the assesses are treated as allowed for statistical purposes

Summary

Issues involved:
1. Assessment of undisclosed income for the assessment period.
2. Jurisdiction of CIT under section 263 of the Act.
3. Opportunity of being heard to the assessee before passing orders under section 263.

Assessment of undisclosed income for the assessment period:
The appeals filed by different assessees were directed against separate orders of CIT (A)-VI, Hyderabad, pertaining to assessment periods. A search and seizure operation revealed that a property of 10160 sq. Yards was under the possession of three groups of people. The property was originally allotted to certain individuals, and a middleman was involved in negotiating a purchase deal for the land. The AO concluded that the transaction relating to the transfer of land in the financial year 1995-96 was not disclosed in the regular return of income filed. The AO determined the actual sale consideration received and charged it to tax as long-term capital for the block period. The CIT (A) upheld the AO's decision based on the actual sale consideration. However, the ITAT set aside the assessment in light of related cases and directed a re-examination by the AO, leading to the appeals being treated as allowed for statistical purposes.

Jurisdiction of CIT under section 263 of the Act:
In one of the appeals, the CIT invoked jurisdiction under section 263 of the Act, finding the assessment order to be erroneous and prejudicial to the interests of revenue. The CIT issued a notice to the assessee to show cause, but the order was passed without affording a reasonable opportunity of being heard to the assessee. The CIT rejected a request for adjournment and passed the order due to a perceived lack of time for further hearing. The ITAT found the order passed by the CIT to be in gross violation of natural justice as no proper opportunity of being heard was extended to the assessee. Consequently, the ITAT set aside the order and directed the CIT to pass a fresh order after affording an adequate opportunity of being heard to the assessee, treating all three appeals as allowed for statistical purposes.

Opportunity of being heard to the assessee before passing orders under section 263:
The ITAT emphasized the importance of affording the assessee a proper opportunity of being heard before passing orders under section 263 of the Act. The ITAT found the order passed by the CIT without granting such an opportunity to be a violation of natural justice. By setting aside the order and directing a fresh order after affording a proper hearing, the ITAT ensured compliance with the principles of natural justice in the proceedings, thereby upholding the rights of the assessee in the legal process.