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2024 (6) TMI 1054 - AT - Income TaxIssues Involved: 1. Validity of proceedings u/s 147 based on vague information. 2. Jurisdictional notice u/s 148 not served on the appellant. 3. Addition of Short Term Capital Gains in the hands of the appellant. 4. Legality of re-assessment proceedings due to lack of statutory notice. 5. Rejection of additional evidence by the ld CIT(A) under Rule 46A(1) of the Income Tax Rules. Issue 1: Validity of proceedings u/s 147 based on vague information: The appeal challenged the initiation of proceedings u/s 147 solely on vague/unsubstantiated information without proper verification. The AO issued a notice u/s 148 based on information received, alleging undisclosed income from the sale of property. However, the Tribunal found that the notice was undelivered as the property had already been sold, indicating incorrect assumptions by the AO. The Tribunal concluded that the reopening was based on incorrect facts and quashed the re-assessment proceedings. Issue 2: Jurisdictional notice u/s 148 not served on the appellant: The appellant contended that the notice u/s 148 was not served as claimed by the AO. The notice was dispatched to an address where the property had been sold, rendering service impossible. The Tribunal noted that the property belonged to individual partners, not the firm, and the notice was returned unserved. The Tribunal held that the reopening was erroneous due to incorrect assumptions and lack of proper service of notice. Issue 3: Addition of Short Term Capital Gains in the hands of the appellant: The AO treated the sale consideration of land and building as short-term capital gains of the appellant. The appellant argued that the property did not belong to the firm but to individual partners who had sold it. Despite providing evidence, the ld CIT(A) rejected the additional evidence under Rule 46A(1) of the Income Tax Rules. The Tribunal found that the property was owned by partners, not the firm, and the sale proceeds were credited to individual bank accounts, not the firm's. Consequently, the Tribunal allowed the appellant's grounds and quashed the re-assessment. Issue 4: Legality of re-assessment proceedings due to lack of statutory notice: The appellant contested the legality of re-assessment proceedings due to the non-service of the statutory notice u/s 148. The Tribunal observed that the notice was returned unserved, indicating that the property had been sold before the notice was issued. As the property belonged to individual partners, not the firm, the Tribunal concluded that the re-assessment was based on incorrect assumptions and annulled the proceedings. Issue 5: Rejection of additional evidence by the ld CIT(A) under Rule 46A(1) of the Income Tax Rules: The ld CIT(A) refused to admit additional evidence filed by the appellant under Rule 46A(1) of the Income Tax Rules. Despite submitting documents showing the property ownership and sale proceeds credited to individual partners, the ld CIT(A) did not consider the evidence. The Tribunal found that the additional evidence was crucial in establishing the ownership of the property and the distribution of sale proceeds, leading to the quashing of the re-assessment proceedings. In conclusion, the Tribunal allowed the appellant's grounds, quashed the re-assessment proceedings, and found the reopening to be based on incorrect assumptions and lack of proper service of notice, ultimately ruling in favor of the appellant.
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