2019 (10) TMI 1538 - AT - Income Tax

Addition u/s 68 - Denial of natural justice - absence of opportunity of hearing by providing copy of the statement and related detailed regarding the alleged share amount - HELD THAT - We find that the CIT(A) has co-terminus powers with AO, therefore, he ought to have provided copies of statements and other related materials and also opportunity of cross-examination to the assessee before deciding the issue on merits when she had specifically requested for those evidences. Therefore, we are of the considered view that in absence of proper opportunity of hearing and also cross-examination to the assessee for her rebuttal, the assessment order passed by the AO suffers from principles of natural justice and hence addition made by the AO cannot be sustained. Hence, we are of the view that the appeal filed by the assessee needs to go back to the file of the AO for fresh consideration. In so far as the arguments of the learned DR in light of the decision of Suman Poddar 2019 (7) TMI 1514 - ITAT DELHI and Pooja Ajmani 2019 (4) TMI 1665 - ITAT DELHI we find those cases were decided on merits on the issues without considering the aspect violation of principles of natural justice, whereas, in the case of Devichand Kothari 2015 (2) TMI 1383 - KARNATAKA HIGH COURT has restored the matter back to the file of the AO for alleged violation of principles of natural justice. Therefore, we are of the considered view that the case laws relied upon by the learned DR has no application to the facts of the present case and hence not considered. We are of the considered view that order passed by the AO suffers from principles of natural justice and hence, we restore the appeal to the file of the AO for denovo consideration of the issue after making available to the assessee for rebuttal all documents including statements, investigation reports, etc., relied upon by the AO for making additions towards amount received from sale of shares under section 68 - Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Assessment order challenged for lack of natural justice and fair play.
2. Addition of sale proceeds of shares to income under section 68.
3. Denial of liability to pay interest under sections 234A, 234B, and 234C.

Issue 1: Assessment Order Challenged for Lack of Natural Justice and Fair Play:
The appeal challenged the assessment order for being passed without following principles of natural justice. The AO made additions based on third-party statements without giving the assessee an opportunity to rebut. The AR cited a Karnataka High Court case where a similar issue led to the order being set aside. The AR also referenced an ITAT Bengaluru case supporting the need for fair opportunity. The DR argued that the AO had provided sufficient opportunity and confronted the information with the assessee. However, the tribunal found that the AO did not adhere to principles of natural justice. The case was remanded to the AO for fresh consideration, emphasizing the importance of providing all relevant documents and cross-examination opportunities.

Issue 2: Addition of Sale Proceeds of Shares to Income under Section 68:
The AO added the sale proceeds of shares to the assessee's income under section 68 due to concerns regarding unexplained cash credits. The CIT(A) upheld this addition. The AR contended that the addition was unjust as the AO did not provide a fair opportunity for the assessee to respond to the allegations. The tribunal found that the AO's failure to follow principles of natural justice rendered the addition unsustainable. The case was remanded for a fresh assessment, emphasizing the need for proper hearing and cross-examination.

Issue 3: Denial of Liability to Pay Interest under Sections 234A, 234B, and 234C:
The appellant denied liability to pay interest under the specified sections of the Income Tax Act. The tribunal, after considering the facts and circumstances, found in favor of the appellant due to the primary issue of lack of natural justice in the assessment order. Consequently, the appeal was treated as allowed for statistical purposes, and the case was remanded to the AO for a fresh assessment with proper adherence to principles of natural justice.

This detailed analysis highlights the core legal issues raised in the judgment, focusing on the lack of natural justice in the assessment process and the consequent remand for a fair reassessment.