2017 (12) TMI 353 - AT - Income Tax

Reopening of assessment - assessee taken entries of purchases from hawala dealers - Held that - AO has reopened by issuing notice u/s 148 the earlier assessment made u/s 143(1). In ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME Court) the Hon ble Supreme Court has held that intimation u/s 143(1)(a) in not an assessment. It held the notice issued u/s 148 as valid. In the instant case the AO had received specific information that the assessee had merely taken entries of purchases from hawala dealers reflected in the website of the Sales Tax Department, Government of Maharashtra. In view of the decision in Rajesh Jhaveri Stock Brokers P. Ltd. (supra), we hold that the AO has rightly issued notice u/s 148. The 1st ground of appeal of the assessee is thus dismissed. Determination of income from house property - estimation of rent - Held that - We find that the AO has estimated the rent of the second flat at ₹ 25,000/- per month without any basis. He has not mentioned in the assessment order the sort of market enquiry conducted by him. As the rate arrived at by the AO is based on conjectures, we delete the addition made by the AO as income from house property.

Summary

Issues:
1. Delay in filing appeal by the assessee.
2. Addition of amount under section 69C of the Income Tax Act.
3. Reopening of assessment under section 147.
4. Disallowance of expenses related to house property.

Issue 1: Delay in Filing Appeal
The assessee filed an appeal with a delay of 54 days, supported by an affidavit explaining the delay. The tribunal, after reviewing the affidavit, acknowledged the genuine difficulty faced by the assessee and condoned the delay, allowing the appeal to proceed.

Issue 2: Addition of Amount under Section 69C
The Revenue appealed against the CIT(A)'s decision to restrict the addition made by the Assessing Officer under section 69C. The AO had added a significant amount based on purchases from certain parties. The tribunal found that the AO's actions were justified as the assessee failed to produce the parties for examination and provide evidence of the transactions' genuineness. The tribunal upheld the AO's decision to add the amount under section 69C.

Issue 3: Reopening of Assessment under Section 147
The assessee contested the reassessment proceedings initiated under section 147, claiming lack of independent application of mind by the Assessing Officer. Additionally, the assessee argued against the lack of opportunity for cross-examination of witnesses, citing legal precedents. The tribunal emphasized the importance of cross-examination as a fundamental right in legal proceedings. Citing relevant case laws, the tribunal set aside the CIT(A)'s order and directed a fresh assessment, allowing the assessee to cross-examine the concerned parties and submit relevant documents.

Issue 4: Disallowance of Expenses related to House Property
Regarding the income from house property, the AO estimated the rent of a second flat without a clear basis. The tribunal found the AO's estimation to be conjectural and lacking proper justification. Consequently, the tribunal deleted the addition made by the AO, allowing the appeal filed by the assessee on this issue.

In conclusion, the tribunal allowed the Revenue's appeal for statistical purposes and partly allowed the assessee's appeal, directing a fresh assessment for certain issues and providing opportunities for cross-examination and submission of relevant documents.