2017 (2) TMI 540 - AT - Income Tax

Reopening of assessment - Claim of assessee u/s 10(38) relating to long term capital gain - Held that - Claim cannot be just denied on the basis of presumption that they are in respect of fictitious and not genuine without allowing the assessee to go through the statement of Mukesh M. Chokshi used against her and also not allowing to cross examine him. Therefore, respectfully following the judgment of Hon. Supreme Court, in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT ), Chartered Motors Pvt. Ltd. (2014 (9) TMI 83 - ITAT AHMEDABAD) and Dhwani Mahendra Shah 2017 (2) TMI 463 - ITAT AHMEDABAD we allow this ground of assessee and quash the re-assessment proceedings u/s 143(3) r.w.s. 147 of the Act dated 18.3.2014. - Decided in favour of assessee

Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Legality of the assessment order passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961.
3. Violation of principles of natural justice and equity by not providing the statement of Shri Mukesh Choksi and other relied upon materials.
4. Treatment of long-term capital gain as undisclosed income.
5. Absence of a separate and speaking order disposing of objections against the reassessment proceedings.
6. Confirmation of addition as alleged undisclosed income.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:

The appellant contested the validity of the notice issued under Section 148, claiming it was illegal and should be quashed. The Tribunal did not address this issue separately as it quashed the entire reassessment proceedings based on other grounds.

2. Legality of the Assessment Order Under Section 143(3) Read with Section 147:

The appellant argued that the assessment order was illegal and bad in law. The Tribunal, after considering the facts and the precedents, quashed the reassessment proceedings, rendering this issue academic.

3. Violation of Principles of Natural Justice:

The appellant contended that the assessment was framed in gross violation of principles of natural justice and equity, as the statement of Shri Mukesh Choksi and other materials were not provided. The Tribunal found that the Assessing Officer's refusal to provide the statement and opportunity for cross-examination was a serious flaw. Citing the Supreme Court's decision in the case of Andaman Timber Industries, the Tribunal emphasized that not allowing cross-examination violated principles of natural justice, making the order null and void.

4. Treatment of Long-Term Capital Gain as Undisclosed Income:

The appellant's long-term capital gain was treated as undisclosed income by the Assessing Officer. The Tribunal observed that the appellant had provided sufficient evidence, such as broker's contract notes and demat account statements, to prove the genuineness of the transactions. The Tribunal concluded that the claim of long-term capital gain could not be denied based on presumptions and surmises without direct evidence to the contrary.

5. Absence of a Separate and Speaking Order:

The appellant argued that the Assessing Officer did not pass a separate and speaking order disposing of the objections against the reassessment proceedings. The Tribunal did not address this issue separately as it quashed the reassessment proceedings on other grounds.

6. Confirmation of Addition as Alleged Undisclosed Income:

The appellant contested the addition of ?1,56,709 as alleged undisclosed income. The Tribunal, after reviewing the facts and legal precedents, quashed the reassessment proceedings, thereby nullifying the addition.

Conclusion:

The Tribunal quashed the reassessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act, 1961, primarily due to the violation of principles of natural justice by not providing the statement of Shri Mukesh Choksi and the opportunity for cross-examination. The Tribunal relied on the Supreme Court's decision in Andaman Timber Industries and other relevant case laws to support its decision. Consequently, the issues related to the legality of the notice, the assessment order, and the addition of undisclosed income were rendered academic. The appeal of the assessee was allowed.

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