2023 (9) TMI 1153 - AT - Income Tax

Validity of reassessment - Notice beyond period of four years - reason to believe - share transactions - HELD THAT - A.O has recorded the reasons without any tangible material/ fresh material except charges based on the information. The assessee has purchased shares in the financial year 2007-08 The Ld.AR submitted that the information of sale and purchase of shares was already filed on record vide letter in the original assessment proceedings U/sec 143(3) of the Act and the A.O after verifying the facts and information has passed order on 23-03-2015. Therefore the reopening of assessment is based on the same set of facts and is only a change of opinion and no inquiry or independent investigation by the A.O. As the notice issued by the A.O falls beyond the period of time limit specified and the assessing officer has to show/highlight the failure on part of the assessee to disclose fully and truly all material facts at the time of assessment. Accordingly, the notice issued for reassessment is bad in law and quash the assessment order passed u/s 143(3) r.w.s 147 of the Act. Grounds of appeal are allowed in favour of the assessee.

Issues Involved:
1. Validity of the order passed by the National Faceless Appeal Centre (NFAC) upholding the assessment.
2. Legality of the reopening of assessment under section 148 of the Income Tax Act.
3. Justification for treating long-term capital gain as unexplained cash credit under section 68 of the Act.
4. Liability to pay interest under section 234B and 234C of the Act.

Issue-wise Summary:

1. Validity of the Order Passed by NFAC:
The assessee contested the NFAC's decision, which upheld the Income Tax Officer's determination of the total income as Rs. 5,74,900/- against the returned income of Rs. 3,72,978/-. The order dated 25.01.2023 was challenged as bad in law and requested to be quashed.

2. Legality of the Reopening of Assessment:
The Ld. CIT(A) upheld the reopening of the assessment based on a notice dated 31.03.2019, which the assessee argued was issued without independent inquiry, relying solely on information from the investigation wing. The Tribunal found that the original assessment was completed under section 143(3) and all material facts were disclosed by the assessee. The reopening was based on the same set of information, constituting a mere change of opinion without new tangible material. The Tribunal referred to the jurisdictional High Court decision in Gateway Leasing Pvt Ltd Vs. ACIT, which emphasized that reassessment should not be based on the same facts without new material evidence. Consequently, the reassessment notice was deemed bad in law and quashed.

3. Justification for Treating Long-Term Capital Gain as Unexplained Cash Credit:
The AO added Rs. 2,01,925/- as unexplained cash credit under section 68, treating the long-term capital gains from the sale of shares as non-genuine. The assessee provided documentary evidence supporting the transactions, which were subjected to Securities Transaction Tax (STT). The Tribunal noted that the AO did not provide an opportunity for cross-examination of the persons whose statements were relied upon, violating principles of natural justice. Given the lack of independent inquiry and the evidence provided by the assessee, the addition was found unjustified.

4. Liability to Pay Interest under Section 234B and 234C:
The assessee denied any liability to pay interest under sections 234B and 234C of the Act. Since the primary issues were decided in favor of the assessee, the question of interest liability was rendered moot.

Conclusion:
The appeal was allowed in favor of the assessee, quashing the reassessment order and the additions made under section 68. The Tribunal emphasized adherence to legal principles and proper inquiry before reopening assessments. The decision underscores the importance of new tangible material for reassessment and the necessity of following principles of natural justice.

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