2021 (5) TMI 963 - AT - Income Tax

Reopening of assessment u/s 147 - value of shares purchased by the assessee as penny stocks were treated as unexplained investment u/s 69B - HELD THAT - As relying on SRI NARENDER KUMAR GUPTA VERSUS ASSTT. CIT CIRCLE 7 (1) HYDERABAD 2021 (5) TMI 887 - ITAT HYDERABAD this appeal of the assessee is also remitted to the file of the Assessing Officer with a direction to supply the assessee, the reasons for reopening of the assessment and only after disposal of the objections, if any, raised by the assessee to the reopening, the Assessing Officer shall proceed to recompute the income of the assessee in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing. Assessee s appeal is treated as allowed for statistical purposes.

Summary

Issues:
Assessment of unexplained investment under section 69B, Failure to provide reasons for reopening the case under section 147, Violation of principles of natural justice.

Analysis:
1. Assessment of unexplained investment under section 69B:
The case involved the assessee's appeal against the addition of ?12,98,500 as unexplained investment under section 69B. The Assessing Officer treated the shares purchased by the assessee as penny stocks used for generating bogus LTCG/STCL and business loss. The CIT (A) confirmed the addition, leading to the appeal before the Tribunal. The assessee contended that the source of investment was explained, and the Assessing Officer's decision was not justified. The Tribunal, citing a similar case, remanded the issue to the Assessing Officer, directing to provide reasons for reopening and afford the assessee a fair opportunity of hearing.

2. Failure to provide reasons for reopening the case under section 147:
The Tribunal highlighted the importance of providing reasons for reopening a case under section 147. Citing the decision in another case, it emphasized that the Assessing Officer must supply reasons for reopening and address any objections raised by the assessee before proceeding with reassessment. In this case, the Assessing Officer failed to follow due procedure, leading to the Tribunal's decision to remand the issue for proper compliance with the law.

3. Violation of principles of natural justice:
The assessee raised a ground alleging a violation of natural justice due to the lack of opportunity for a fair hearing. The Tribunal acknowledged this concern and remitted the case to the Assessing Officer with directions to provide reasons for reopening and ensure the assessee's objections are duly considered before proceeding with the reassessment. This decision aimed to uphold the principles of natural justice and procedural fairness in the assessment process.

In conclusion, the Tribunal's judgment addressed the issues of unexplained investment assessment under section 69B, the necessity of providing reasons for reopening cases under section 147, and the importance of upholding natural justice principles in tax assessments. The decision emphasized the procedural requirements and the assessee's right to a fair hearing, ensuring compliance with the law and safeguarding the taxpayer's interests.