2023 (8) TMI 1014 - AT - Income Tax

Best judgment assessment u/s 144 - negligence on the part of assessee in not responding to the notices issued by the AO - denial of exemption u/s 10(38) - assessee has tried to explain the reasons for not responding to the notices filed by the AO and delay in filing of objections before the DRP due to non-communication of notices to the assessee by its custodian in India-Kotak Custody Services - HELD THAT - It is evident from records that the assessee could not represent its case before the AO, effectively. At the same time we are of view that there is negligence on the part of assessee in not responding to the notices issued by the AO. The assessee should have made reliable arrangement for communication of notices. Non-communication of notices cannot be attributed to the Department. Therefore, it is a fit case for levy of cost on assessee for not responding to the notices. Accordingly, we deem it appropriate to levy cost of Rs. 10,000/- on the assessee.

Summary

Issues involved:
The issues involved in the judgment are related to the assessment order passed under section 144C(13)/143(3) r.w.s. 147 of the Income Tax Act, 1961 for the Assessment Year 2015-16. The key issues include the claim of exemption under section 10(38) of the Act, non-filing of return of income, communication of notices, objections filed before the Dispute Resolution Panel (DRP), and the dismissal of objections on the ground of limitation.

Assessment Order and Claim of Exemption:
The appellant, a tax resident of the USA and a registered Foreign Portfolio Investor [Category-III], primarily invested in shares to earn Long Term Capital Gains and dividend income. The appellant sold equity shares of a company, earning Long Term Capital Gain (LTCG) claimed as exempt under section 10(38) of the Act. Due to no taxable income, the appellant did not file a return of income, leading to a notice under section 148. The appellant faced challenges in responding to notices, resulting in the rejection of the exemption claim by the Assessing Officer (AO) and dismissal of objections by the DRP.

Contentions of the Parties:
The Authorized Representative (AR) acknowledged the challenges faced by the appellant in responding to notices and the belated objections before the DRP. The Department representative supported the assessment order, highlighting the appellant's failure to cooperate and file necessary information. The Department relied on a previous decision to justify the rejection of objections based on limitation.

Judgment and Directions:
The Appellate Tribunal observed the lack of proper communication of notices to the appellant, impacting the appellant's ability to present its case effectively. While acknowledging the appellant's negligence in responding to notices, the Tribunal deemed it appropriate to levy a cost of Rs. 10,000 on the appellant. The appeal was restored for denovo assessment, with directions for the appellant to pay the cost, provide updated contact information, and respond to future notices from the AO. Failure to comply may result in adverse consequences as per the Tribunal's directions.

Conclusion:
In conclusion, the Tribunal set aside the impugned order, allowing the appeal for statistical purposes. The judgment emphasized the importance of timely responses to notices and the need for effective communication between the appellant and tax authorities for a fair assessment process.