2023 (9) TMI 756 - HC - Income Tax

Validity of assessment u/s 144B - LTCG on sale of inherited shares which were held in petitioner's father's name - petitioner had merely uploaded an affidavit of his mother which is not sufficient and petitioner ought to have uploaded a proper reply/representations to the draft Assessment order cum Show Cause Notice in absence of the proper response from the petitioner - HELD THAT - Mere filing of the affidavit does not prove that shares (which were sold by the assessee) were transferred by his mother in favour of her son A.v.Kishore (assessee). In this support no documentary evidence has been furnished by the assessee. Petitioner has failed to give a proper response to the Show Cause Notice cum Draft Assessment order dated 22.04.2021. In absence of a proper reply, the respondent could not be blamed. Whether the respondents are entitled to make additions to re-compute the taxable income of the petitioner to demand the differential tax of cannot be decided under Article 226 of the Constitution of India. The proper remedy for the petitioner is only to file a Statutory Appeal before the Appellate Commissioner under Section 246 of the Income Tax Act, 1961. The petitioner has instead filed this writ petition within the time period prescribed for filing a Statutory Appeal. Considering the above, Court is inclined to dispose this writ petition by giving liberty to the petitioner to file a Statutory Appeal before the Appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order. Petitioner is also given liberty to file appropriate application before the respondents for stay of recovery proceedings in accordance with Section 220(6) of the Income Tax Act or in the alternative ask for waiver in accordance with the relevant circular of the Board. The petitioner shall file the Appeal before the Appellate Authority and the application before the concerned Authority either for waiver/or for stay as the case may be, within a period of four weeks from the date of receipt of a copy of this order. Pending disposal of such application, the respondent/Income Tax Department, recovery proceedings shall be kept in abeyance.

Summary

Issues involved: Challenge to assessment order under Income Tax Act, 1961 for Assessment year 2018-2019 based on inherited shares and capital gains.

The petitioner challenged the Assessment order dated 13.08.2021 under Section 144B of the Income Tax Act, 1961 concerning the sale of inherited shares from the petitioner's father in Larsen and Turbo Limited. The petitioner was issued notices and a Show Cause Notice, leading to a Draft Assessment Order proposing a re-computation of taxable income. The Draft Assessment Order treated the capital gains from the sale of shares as income from other sources under Section 56 of the Act. The petitioner responded and uploaded an affidavit from his mother in defense.

The petitioner argued that the Assessment order lacked application of mind and violated principles of natural justice, contending that a fair opportunity to explain the case would have led to a different outcome. The petitioner's counsel pointed out a Supreme Court decision emphasizing that income included under specific heads cannot be taxed under residuary provisions. The respondents defended the order, stating that the petitioner did not file a Statutory Appeal against it and failed to provide a proper response to the Show Cause Notice.

The impugned order concluded that the shares were not proven to be transferred by the petitioner's mother, and without documentary evidence, the petitioner's explanation lacked force. The order added the capital gains to the petitioner's income under Section 56 of the Income Tax Act. The Court disposed of the writ petition, granting the petitioner 30 days to file a Statutory Appeal before the Appellate Commissioner and allowing an application for stay of recovery proceedings. The petitioner was directed to file the appeal and application within four weeks to halt the recovery proceedings in the meantime.