2024 (7) TMI 1415 - AT - Income Tax

Validity of reopening of assessment - non-disposal of the objection filed by the assessee - exemption u/s 10(38) of long term capital gain on sale of shares be treated as unexplained cash credit u/s 68 by treating the same as a sham transaction - HELD THAT - During the course of original assessment proceedings the assessee has made compliance with all the queries and detail called by the assessing officer on the issue of long term capital gain claimed on the sale of shares. Also undisputed fact that assessing officer has not disposed off the objection filed by the assessee in respect of reopening of the case as directed in the case of GKN Driveshaft 2002 (11) TMI 7 - SUPREME COURT . Therefore, we don t find error in the decision of ld. CIT(A) in holding that reassessment order in the case of the assessee was passed by the assessing officer without justification on account of non-disposal of the objection filed by the assessee. Assessee has demonstrated from the copies of various material as discussed supra in this order and in the finding of ld. CIT(A) that in the original assessment proceedings, the AO has specifically raised issue regarding information received from DIT(Investigation) Kolkata relating to claim of long term capital gains from operators and the AO has obtained the various explanation of the assessee and did not make any addition after raising the issue in the show cause notice issued. During the course of assessment proceedings before us the assessee has also referred the decision of Kalpataru Land P. Ltd. 2022 (10) TMI 365 - SUPREME COURT and case of TechSpan India (P) Ltd. 2018 (4) TMI 1376 - SUPREME COURT on the proposition that when the assessing officer finalised the assessment and passed assessment order subsequent reopening can be said to be change of opinion on the similar information. CIT(A) held that reopening of the assessment for the assessment year 2014-15 is bad in law as the conditions precedent for invoking the provision for reopening of the assessment are not complied, therefore, the assessment order passed u/s 143(3) r.w.s 147 of the Act was quashed. No infirmity in the decision of ld. CIT(A) and the ld. CIT(A) has rightly quashed the assessment order, therefore, all the grounds of the revenue stand dismissed.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Deletion of additions made on account of penny stock transactions.
3. Application of the GKN Driveshaft judgment.
4. Consideration of non-existent transactions and incorrect filing of ITR forms.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment:
The revenue contested the reopening of the assessment under section 147 of the Income Tax Act, arguing that the facts on which the reopening was based were not available at the time of the original assessment. The CIT(A) held that the reopening was invalid, referencing the original assessment order dated 30.12.2016, where various documents and submissions were already considered. The Tribunal agreed with the CIT(A), noting that the AO had issued a show cause notice during the original assessment proceedings and had received detailed submissions from the assessee. The reopening was deemed a change of opinion rather than based on new facts, thus violating jurisdictional principles.

2. Deletion of Additions Made on Account of Penny Stock Transactions:
The revenue argued that the CIT(A) erred in deleting the additions related to penny stock transactions, which were alleged to be bogus and used for providing accommodation entries. The CIT(A) found that the transactions were already scrutinized during the original assessment, and the AO had accepted the assessee's submissions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO had all the necessary information during the original assessment and had not made any additions then. The reopening based on the same information was therefore invalid.

3. Application of the GKN Driveshaft Judgment:
The revenue contended that the CIT(A) wrongly applied the GKN Driveshaft judgment, arguing that the assessee had not filed a valid return within the prescribed time limit. The CIT(A) disagreed, stating that the AO failed to dispose of the assessee's objections to the reopening, as required by the Supreme Court in GKN Driveshaft. The Tribunal concurred, noting that the AO did not follow the mandated procedure of providing reasons for reopening and addressing the objections before proceeding with the reassessment.

4. Consideration of Non-Existent Transactions and Incorrect Filing of ITR Forms:
The revenue raised issues about the assessee's alleged smart manipulation of non-existent transactions and the incorrect filing of ITR-1 instead of ITR-2. The CIT(A) did not specifically address these points, as the primary issue of reopening was already decided in favor of the assessee. The Tribunal noted that since the reopening was quashed, these additional grounds did not require separate adjudication.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision that the reopening of the assessment was invalid and that the additions made on account of penny stock transactions were rightly deleted. The Tribunal emphasized the importance of following proper procedures as laid down by the Supreme Court in GKN Driveshaft and found no merit in the revenue's additional grounds. The appeal was dismissed in favor of the assessee.