2019 (4) TMI 1423 - AT - Income Tax

Violation of principles of natural justice - order u/s 144 making an addition u/s 68 - jurisdiction of the assessee s case initially was with ITO, Ward-1(3) who had issued scrutiny notice thereafter, the file was transferred to ITO, Ward-9(4) - assessee filed a letter before the ITO, Ward-1(3) informing change of address with the copy to ITO, Ward-9(4) and both Commissioner of Income Tax. However, ITO, Ward-9(4) issued notice on the old address and such notice was not served - HELD THAT - No notice was issued on the new address, though the same was on the records of the Assessing Officer. Hence these in violation of principles of natural justice. Hence, we are of the opinion that the issue should be restored to the file of the Assessing Officer for fresh adjudication in accordance with law, after giving the assessee adequate opportunity of being heard. We set aside the matter to the file of Assessing Officer for fresh adjudication in accordance with law after giving assessee adequate opportunity of being heard. The assessee is directed to follow the guidelines and specific directions given by the ld. CIT(A) in his order u/s 263 which were upheld in the case of Subhalaxmi Vanijya Pvt. Ltd. vs. CIT 2015 (8) TMI 174 - ITAT KOLKATA

Issues Involved:
1. Violation of principles of natural justice.
2. Improper service of notice.
3. Verification of share capital and share premium.
4. Adequate opportunity for the assessee to present its case.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The Tribunal found that there was a violation of the principles of natural justice in the case. The jurisdiction of the assessee’s case was initially with ITO, Ward-1(3), who issued a scrutiny notice which was complied with. However, the file was later transferred to ITO, Ward-9(4) towards the end of the limitation period for completing the assessment. The assessee informed the change of address to both ITO, Ward-1(3) and ITO, Ward-9(4), but the notice was issued to the old address and was not served. The Tribunal concluded that no notice was issued to the new address, which was on the records of the Assessing Officer. This constituted a violation of the principles of natural justice.

2. Improper Service of Notice:
The Tribunal noted that the notice was issued to the old address despite the assessee having informed the new address. This improper service of notice resulted in the assessee not being given a fair opportunity to present its case. The Tribunal emphasized that proper service of notice is crucial for ensuring that the assessee has the opportunity to respond and participate in the proceedings.

3. Verification of Share Capital and Share Premium:
The Tribunal discussed the need for proper verification of the share capital and share premium. It referenced similar cases where the issue of verification of share capital and share premium was addressed. For instance, in the case of M/s Daffodil Dealers Pvt. Ltd. vs. ITO, the Tribunal highlighted that the Assessing Officer (AO) should have conducted independent enquiries with the shareholders to verify the identity, genuineness, and creditworthiness of the share subscribers. The AO should not have drawn adverse inferences without resorting to further verification or investigation as per law.

4. Adequate Opportunity for the Assessee to Present Its Case:
The Tribunal underscored the importance of giving the assessee adequate opportunity to present its case. It referenced multiple cases where the lack of proper opportunity led to the setting aside of the assessment orders. For example, in the case of Bihari Distributors Pvt. Ltd. vs. ITO, the Tribunal noted that the AO had only 12 days to frame the assessment order after receiving the records, which was insufficient for a proper assessment. The Tribunal emphasized that the assessee should be given a reasonable opportunity to provide evidence and respond to the AO’s queries.

Conclusion:
The Tribunal set aside the matter to the file of the Assessing Officer for fresh adjudication in accordance with the law, after giving the assessee adequate opportunity of being heard. The Tribunal directed the assessee to follow the guidelines and specific directions given by the CIT(A) in his order under section 263, which were upheld by the Hon’ble Supreme Court in the case of Subhalakshmi Vanijya Pvt. Ltd. vs. CIT. The appeal was allowed for statistical purposes.

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