2021 (1) TMI 220 - AT - Income Tax

Addition u/s 68 - bogus long term capital gains - submissions of the assessee before the A.O. was that he had done this transaction through stock exchanges and banking channels and that he had paid Security Transaction Tax / SEBI Tax / Stamp Duty which was applicable for trading of shares - HELD THAT - CIT(A) while deciding the case of the assessee discussed the facts of another case and not that of the assessee, she reproduced the grounds of appeal in para 2 of the impugned order which were different from the grounds raised by the assessee in Form No. 35 which is placed on record. In the said grounds mentioned in Form No. 35 the assessee challenged the addition made by the A.O. while the Ld. CIT(A) dealt with the additionwhich was not related to the assessee. In the present case the main grievance of the assessee is that the evidences used by the Ld. CIT(A) while sustaining the addition were not confronted to the assessee and that the submissions of the assessee were not considered by the Ld. CIT(A). The principles of natural justice demand that the material used against the person must be confronted before taking the decision against the said person. We therefore keeping in view the peculiar facts of this case deem it appropriate to set aside this case back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee and by confronting the relevant material / evidence which were used against the assessee. Appeals of the Assessee are allowed for statistical purposes.

Summary

Issues:
Appeal against orders of Ld. CIT(A)-3, Ludhiana, delay in filing appeal, addition of long term capital gains under section 68 of the Income Tax Act, denial of natural justice, application of mind by Ld. CIT(A), confrontation of evidence, principles of natural justice.

Analysis:
The judgment involves two appeals by the Assessee and the legal heir of a deceased assessee against separate orders of Ld. CIT(A)-3, Ludhiana, each dated 01/06/2019. The issues being common, the appeals were heard together and disposed of by a consolidated order for convenience. The first appeal (ITA No. 1417/Chd/2019) faced a 44-day delay in filing, attributed to the gatekeeper's oversight in delivering the order. The delay was condoned after the Assessee's plea, supported by an affidavit. The main grounds of appeal included challenges to the addition of long term capital gains and denial of natural justice.

The facts of the case revealed that the Assessee traded in Penny stock of a company, earning substantial profits claimed as Long Term Capital Gain (LTCG). The Assessing Officer (A.O.) raised concerns about the transactions' commercial nature, suspecting tax evasion. Despite the Assessee's submissions on legitimate trading through stock exchanges and banking channels, the A.O. applied section 68 of the Act to make the addition. The Ld. CIT(A) upheld the addition, citing lack of proof of genuineness and creditworthiness, and reliance on precedents.

In the appeal, the Assessee argued that the Ld. CIT(A) erred in not considering detailed submissions, misstating LTCG amount, and not confronting relevant evidence. The Ld. CIT(A) discussed facts of a different case, leading to confusion. The Tribunal found a breach of natural justice principles, setting aside the case for fresh adjudication with proper consideration of Assessee's submissions and confrontation of evidence.

In the second appeal (ITA No. 1418/Chd/2019), a similar delay in filing was condoned, mirroring the first case's circumstances. The judgment allowed both appeals for statistical purposes, emphasizing the need for due process and adherence to natural justice principles in tax assessments.

The judgment highlights the importance of fair proceedings, proper application of law, and adherence to principles of natural justice in tax disputes, ensuring that Assessees have a meaningful opportunity to present their case and confront evidence used against them.