2017 (11) TMI 976 - AT - Income Tax

Reassessment of proceeding - AO while making the addition in reassessment proceedings, did not consider the request of assessee to provide him the information received against the assessee and to give him an opportunity to cross-examine the said broker by issuing summons to him - Held that - The assessee has received the payments on 02.09.1998 of ₹ 5 lacs and ₹ 4,41,333-50 on 22.09.1998, which is after about six months from the last transaction/settlement date, as noted above. It is also found that in some Broker s notes certain columns such as order No. Trade No. Trade time, are lying blank. The authorities below are required to examine the effect of these columns as also the settlement period as per National Stock Exchange Rules prevailing at the relevant point of time. We, therefore, feel it expedient in the interest of justice that thorough examination and proper verification of the impugned share transactions is necessarily to be made independently with reference to the documentary evidences laid by assessee and in the light of above observations in order to check the genuineness of the impugned transactions. We, therefore, set aside the order of the ld. CIT(A) and restore the matter back to the first appellate authority to decide the appeal afresh after making proper examination in the light of observations made in the body of this judgment. The ld. CIT(A) if feels necessary, may take remand report from the AO in this regard. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Compliance with Tribunal's directions for providing information and cross-examination.
2. Treatment of share transactions as accommodation entry.
3. Failure to examine documentary evidence by AO and CIT(A).

Compliance with Tribunal's Directions:
The appeal was filed against an order for the assessment year 1999-2000. The appellant contended that the material used against them was not provided for rebuttal, violating principles of natural justice. The Tribunal directed the AO to consider the request and inform the appellant of the material being used. However, the AO failed to comply fully, only providing statements of the broker's director. The Tribunal found this inadequate and set aside the orders, emphasizing the right of the assessee to rebut the material used against them.

Treatment of Share Transactions:
The AO added an amount to the appellant's income, deeming it an accommodation entry due to lack of share transaction details. The appellant argued that necessary documents were submitted, but the AO did not consider them. The Tribunal noted discrepancies in the AO's observations and directed a thorough examination of the share transactions, including verification of submitted documents. The matter was remanded to the CIT(A) for a fresh decision, stressing the importance of proper verification and examination of the transactions.

Failure to Examine Documentary Evidence:
The appellant provided various documents supporting the share transactions, but the AO did not reference or examine them in the assessment order. The CIT(A) also overlooked the submitted evidence. The Tribunal highlighted the need for a detailed examination of the documentary evidence, including broker's notes, ledger accounts, and settlement periods. The orders were set aside, and the matter was remanded for proper verification and examination by the authorities, ensuring the appellant's right to be heard and provided with all material used against them.

This detailed analysis of the judgment highlights the issues of compliance with directions, treatment of share transactions, and failure to examine documentary evidence, emphasizing the importance of procedural fairness and thorough examination in tax assessment proceedings.