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2017 (5) TMI 1422 - AT - Income TaxBest judgment assessment - non opportunity of being heard - Held that - Admittedly the assessment was framed consequent to the directions issued by the Additional CIT and as per the directions claim of the assessee for computing the long term capital gain was to be rejected and it was to be computed as a short term capital gain meaning thereby that the directions of the Additional CIT was prejudicial to the assessee and before the issue of the same an opportunity of being heard should have been afforded to the assessee as per the proviso to section 144A of the Act. Unfortunately the Additional CIT has not afforded any opportunity of being heard before issuing such directions. Thus it is of the view that capital gain computed pursuant to the directions of the Additional CIT deserves to be set aside. Accordingly set aside the order of the AO passed consequent to the directions of the Additional CIT for computing the capital gain and restore the matter to the file of the AO to recompute the capital gain after affording an opportunity of being heard to the assessee. If the AO feels that the direction of Additional CIT is to be complied with he may place the matter before the Additional CIT to first afford opportunity of being heard to the assessee and then readjudicate the issue afresh and directions be issued thereafter. Accordingly the appeal of the assessee is allowed for statistical purposes.
Issues:
1. Assessment order passed by assessing officer and CIT(A). 2. Directions issued under section 144A. 3. Treatment of stock options as short term capital asset. 4. Denial of exemption claimed under section 54EC. 5. Incorrect observations by Commissioner of Income tax (Appeals). 6. Levying of interest under section 234D. Analysis: Issue 1: Assessment Order The appellant challenged the assessment order passed by the assessing officer and CIT(A) on various grounds, including the treatment of stock options as short term capital assets instead of long term, denial of exemption under section 54EC, and incorrect observations made by the Commissioner of Income tax (Appeals). Issue 2: Directions under Section 144A The appellant contested the directions issued under section 144A by the Additional CIT, arguing that the directions were prejudicial to the appellant's interests and were issued without affording the appellant an opportunity to be heard. The ITAT held that the directions were indeed prejudicial, as they led to the computation of short term capital gains instead of long term gains. The ITAT set aside the assessment order and directed the AO to recompute the capital gains after affording the appellant a proper opportunity to be heard. Issue 3: Treatment of Stock Options The dispute centered around the treatment of stock options transferred to Infosys Technologies Limited. The appellant argued that the options were long term capital assets, while the revenue treated them as short term capital assets. The ITAT found in favor of the appellant, stating that the options were indeed long term in nature, resulting in long term capital gains. The denial of exemption under section 54EC was also contested. Issue 4: Incorrect Observations The Commissioner of Income tax (Appeals) made incorrect observations regarding the appellant's receipt of shares instead of options from the employer company. The ITAT clarified the factual inaccuracies and discrepancies in the observations made by the Commissioner. Issue 5: Interest under Section 234D The appellant disputed the levying of interest under section 234D by the assessing officer. The ITAT did not provide a detailed analysis of this issue in the judgment. In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, setting aside the assessment order and directing the AO to recompute the capital gains after providing the appellant with a proper opportunity to be heard. The judgment highlighted the importance of following due process and ensuring that directions issued under section 144A are not prejudicial to the assessee without affording them an opportunity to present their case.
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