2018 (6) TMI 697 - AT - Income Tax

Revision u/s 263 - no proper opportunity was given to the assessee to discharge the onus casted upon it as required in sec. 68 matters - Held that - We note that only one notice u/s. 142(1) of the Act was issued against the assessee company on 28.08.2013 and the assessee attended the hearing and filed written submission, which fact has been acknowledged by the AO. However, thereafter no notice was issued to assessee. AO after issuing sec. 131 notices to the share applicants (date not specified) and taking note that none appeared before him, drew adverse inference against the assessee. Since the Ld. AR of the assessee appeared, he should have called him again for proper explanation and conducted the investigation in a fair manner. Without doing that AO has suddenly come to a conclusion that assessee failed to prove the genuineness of the share capital. We find force in the submission of the Ld. AR that no proper opportunity was given to assessee by AO during the reassessment proceedings and so we are, therefore, of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings. In the light of the Hon ble Supreme Court s decision in Tin Box Company (2001 (2) TMI 13 - SUPREME COURT) and taking into consideration the fact the order of the Ld. CIT passed u/s. 263 of the Act in similar cases being upheld up to the level of Apex Court, and taking note of Hon ble Delhi High Court s order in Jansampark Advertising & Marketing Pvt. Ltd. (2015 (3) TMI 410 - DELHI HIGH COURT), we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter - Appeal of assessee is allowed for statistical purposes .

Summary

Issues:
Ex-parte order by Ld. CIT(A) | Violation of natural justice | AO's investigation as per guidelines | Lack of proper opportunity during reassessment proceedings

Ex-parte Order by Ld. CIT(A):
The appeal was filed against an ex-parte order by Ld. CIT(A), where the hearing was fixed on multiple dates, and no representation was made on behalf of the assessee except for filing an adjournment application. The Ld. CIT(A) found fault with the assessee for not appearing on one specific date, concluding that the assessee was not interested in pursuing the appeal. However, the assessee had promptly filed adjournment applications on all hearing dates, indicating active follow-up. The tribunal noted a violation of natural justice as the Ld. CIT(A) did not provide the assessee with a fair opportunity to present its case during the appellate proceedings.

AO's Investigation as per Guidelines:
The AO was implementing the order of Ld. CIT passed under section 263 of the Act, which provided specific guidelines for investigating the genuineness and source of share capital. However, the AO's investigation did not align with the guidelines laid out. The AO issued notices but did not receive responses from the directors, leading to adverse inferences against the assessee. The main contention was the lack of proper opportunity granted to the assessee during the reassessment proceedings. The AO's conclusions were drawn without affording the assessee a reasonable chance to explain, leading to the addition of share application money to the total income of the assessee.

Lack of Proper Opportunity During Reassessment Proceedings:
The assessee argued that it did not receive proper opportunities to discharge the onus cast upon it in matters related to section 68. While the AR of the assessee attended a hearing and submitted written responses, no further statutory notices were issued. The AO drew adverse inferences against the assessee without conducting a fair investigation. The tribunal agreed with the AR's submission that the assessee was not granted a proper opportunity during the reassessment proceedings. Citing the Tin Box Company case, the tribunal emphasized the importance of providing a reasonable opportunity to the assessee during assessment stages.

Judicial Precedents and Tribunal Decisions:
The tribunal referred to previous judgments to support its decision, including a case where lack of opportunity led to the assessment being remanded back to the assessing authority for fresh consideration. Another case highlighted the need for a thorough inquiry to establish creditworthiness and genuineness of transactions. In line with these precedents and considering the lack of opportunity afforded to the assessee, the tribunal set aside the Ld. CIT(A)'s order and remanded the matter back to the AO for a fresh assessment, emphasizing the importance of providing a fair hearing to the assessee.

In conclusion, the tribunal allowed the appeal for statistical purposes, setting aside the Ld. CIT(A)'s order and instructing a de novo assessment by the AO with proper opportunity for the assessee to be heard, in accordance with the law.