2018 (7) TMI 129 - AT - Income Tax

Validity of reopening of assessment - Addition u/s.68 - bogus share capital received from companies controlled and managed by Praveen Kumar Jain - whether Commissioner of Income Tax (Appeals) has erred in not dealing the issue pertaining to validity of reopening, however, he decided the issue upon merits in favour of the assessee? - Held that - If a decision is challenged before the first appellate authority both on the issue of validity of jurisdiction as well as merits of the case, the adjudication on validity of reopening can by no stretch of imagination be liable for rejection on the ground that the assessment has been decided in favour of the assessee on merits. We also note that adjudication of issue raised on validity of reopening need reference to factual records which are not available before us. CIT(A) has decided one issue and has left undecided another issues duly raised before him. Hence, we are of the considered opinion that these issues relating to validity of reopening were duly raised, which have been left undecided by the ld. CIT(A) and need to be remitted to the file of the ld. CIT(A). Appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of bogus share capital under section 68 of the Income Tax Act.
2. Validity of reopening of assessment under section 147.
3. Failure to adjudicate additional grounds raised during appellate proceedings.

Issue 1: Addition of Bogus Share Capital:
The Revenue appealed against the deletion of an addition of ?1,20,00,000 made by the Assessing Officer under section 68 of the Income Tax Act regarding bogus share capital received from companies controlled by a specific individual. The Revenue argued that the assessee failed to provide essential documents like bank statements of investors and copies of ROI, and did not produce investors for cross-examination. The Revenue contended that the decisions relied upon by the Assessee were not applicable, and the Hon'ble Delhi High Court's decision in a specific case should be considered. The Appellate Tribunal allowed the Revenue's appeal and set aside the order of the Commissioner of Income Tax (Appeals).

Issue 2: Validity of Reopening of Assessment:
The Assessee raised objections against the reopening of assessment under section 147, stating that the notice was issued beyond the permissible period and without proper approval as required under section 151 of the Income Tax Act. The Assessee argued that the notice was based on information from another authority without independent application of mind by the Assessing Officer. The Appellate Tribunal noted a delay in filing the cross objection but condoned it. The Tribunal held that the Commissioner of Income Tax (Appeals) erred in not adjudicating the issue of validity of reopening and remitted the issue back for proper consideration.

Issue 3: Failure to Adjudicate Additional Grounds:
The Assessee contended that the Commissioner of Income Tax (Appeals) did not address the additional grounds raised during the appellate proceedings regarding the validity of reopening. The Appellate Tribunal emphasized that when multiple issues are raised before an appellate authority, all issues should be considered to avoid prolonging the proceedings. Citing a case law precedent, the Tribunal directed the Commissioner of Income Tax (Appeals) to decide on the issues related to the validity of reopening that were left unresolved. Both parties agreed to this proposition, and the Revenue's appeal and the Assessee's cross objection were allowed for statistical purposes.

This judgment highlights the importance of addressing all issues raised during appellate proceedings, including the validity of reopening assessments, to ensure a comprehensive and fair resolution in tax matters.