2016 (5) TMI 864 - AT - Income Tax

Reopening of assessment - Non Providing opportunity of being heard - determination of capital gain and/ or imposition of tax and interest with reference thereto - Held that - We are of the considered view that without going into the merits of the case, proper opportunity of being heard is required to be provided to the assessee by the AO, who being a quasi judicial authority was under obligation to follow the rule of natural justice. Resultantly, cross appeal filed by the revenue is also not sustainable because when the assessment order is not sustainable in the eyes of law, the impugned order passed by the CIT (A) is also a nullity. Consequently, present appeal filed by the assessee is hereby allowed for statistical purposes

Issues Involved:
1. Validity of assessment proceedings under section 148 of the Income Tax Act.
2. Service of notice under section 148.
3. Procedure of assessment under sections 143 and 147.
4. Validity of the order passed under sections 147/144.
5. Disclosure of primary facts necessary for assessment.
6. Opportunity of personal hearing.
7. Deduction claims on expenses related to the transfer of land.
8. Deduction claims on indexed cost of acquisition and improvement.
9. Deduction claims on investment in the construction of a new residential house.
10. Revenue's cross-appeal on various deductions allowed by CIT(A).

Detailed Analysis:

1. Validity of Assessment Proceedings under Section 148:
The assessee challenged the initiation of assessment proceedings under section 148, arguing that the notice was not served and the reasons for reopening were not properly communicated. The Tribunal found that the return of income filed by the assessee with the wrong jurisdiction should have been transferred to the competent authority, and the assessment was reopened without proper examination of the return filed on 08.01.2009.

2. Service of Notice under Section 148:
The assessee contended that the notice under section 148 was not served. The Tribunal noted that the assessment was completed under section 144, where no notice under sections 143(1) or 143(2) is required. However, the Tribunal emphasized that the AO should have ensured proper service of notice and provided adequate opportunity for the assessee to respond.

3. Procedure of Assessment under Sections 143 and 147:
The assessee argued that the AO ignored the proper procedure by not taking the matter under section 143. The Tribunal highlighted that the AO completed the assessment in haste without considering the return filed and necessary documents, indicating non-application of mind and procedural lapses.

4. Validity of the Order Passed under Sections 147/144:
The Tribunal found the order passed under sections 147/144 to be non-speaking and lacking consideration of the merits of the case. The assessment was completed ex-parte within four days without providing the assessee an adequate opportunity to present his case, rendering the order unsustainable.

5. Disclosure of Primary Facts Necessary for Assessment:
The assessee claimed that all primary facts were disclosed in the return filed. The Tribunal noted that the CIT(A) treated the return filed with the wrong jurisdiction as non-est, which was incorrect. The CIT(A) should have either transferred the return to the correct jurisdiction or provided an opportunity for the assessee to file the return with the competent authority.

6. Opportunity of Personal Hearing:
The assessee argued that the assessment was completed without providing a reasonable opportunity for a personal hearing. The Tribunal agreed, noting that the AO completed the assessment in haste without allowing the assessee to submit the required documents, violating the principles of natural justice.

7. Deduction Claims on Expenses Related to the Transfer of Land:
The Tribunal did not specifically address this issue in detail due to the procedural lapses and the need for a fresh assessment. The matter was to be reconsidered by the AO after providing a proper hearing to the assessee.

8. Deduction Claims on Indexed Cost of Acquisition and Improvement:
The Tribunal noted the CIT(A) allowed certain deductions which were contested by the revenue. However, since the assessment order was found to be procedurally flawed, these claims were to be re-examined in the fresh assessment.

9. Deduction Claims on Investment in the Construction of a New Residential House:
Similar to the indexed cost issue, the Tribunal found that the deductions allowed by the CIT(A) were part of the flawed assessment process. The AO was directed to reconsider these claims in the fresh assessment after providing the assessee an opportunity to present evidence.

10. Revenue's Cross-Appeal on Various Deductions Allowed by CIT(A):
The revenue's cross-appeal contested the deductions allowed by the CIT(A). The Tribunal dismissed the cross-appeal as infructuous, given that the original assessment order was found to be procedurally unsound and required a fresh assessment.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes and dismissed the revenue's cross-appeal. The file was ordered to be restored to the AO for a fresh assessment, ensuring proper service of notice and providing the assessee with an adequate opportunity of being heard. The Tribunal emphasized the need for adherence to procedural requirements and principles of natural justice in the assessment process.

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