2016 (1) TMI 646 - AT - Income Tax

Tribunal validates notice service, proceedings initiation, and expenses disallowance under Tax Act

Smt. Puneet Kaur Dhupia Versus - A.C.I.T., Circle-35, Kolkata. Kolkata

Smt. Puneet Kaur Dhupia Versus - A.C.I.T., Circle-35, Kolkata. Kolkata - TMI Issues Involved:1. Validity of service of notice under Section 143(2) of the Income Tax Act.2. Validity of initiation of proceedings under Section 148 of the Income Tax Act.3. Disallowance of various expenses and claims by the Assessing Officer (AO).Issue-wise Detailed Analysis:1. Validity of Service of Notice under Section 143(2):The primary issue raised by the assessee was the validity of the service of notice under Section 143(2) of the Income Tax Act. The assessee argued that the notice was not served within the stipulated time prescribed by law, rendering the reassessment order without jurisdiction and invalid. The return of income was filed on 1.8.2005, and the notice under Section 148 was issued subsequently. The return in response to this notice was deemed to have been filed on 15.5.2007. According to the provisions, the notice under Section 143(2) should have been served by 31.5.2008. However, the notice was served on 5.9.2008. The AO and the CIT(A) held that the amended provisions of Section 143(2) by the Finance Act, 2008, which allowed six months from the end of the financial year for serving the notice, were applicable. The tribunal upheld this view, stating that the service of notice was within the time contemplated by law, rejecting the assessee's ground of appeal.2. Validity of Initiation of Proceedings under Section 148:The assessee contended that the reopening of the assessment under Sections 147/148 was not tenable in law. The reassessment was initiated because the assessee had claimed interest against commission income. The AO also disallowed other expenses during reassessment. The tribunal referenced Explanation 3 to Section 147, which empowers the AO to assess any income that escapes assessment once reassessment proceedings are validly initiated. The tribunal found that the AO had valid reasons to believe there was escapement of income, thus validating the reassessment proceedings.3. Disallowance of Various Expenses and Claims:- Brokerage Paid on Commission: The assessee claimed a deduction for brokerage paid, which the AO disallowed due to lack of evidence. The CIT(A) and the tribunal upheld this disallowance as the assessee failed to substantiate the claim.- Consultancy Charges: The assessee did not provide specific grounds or evidence for this claim before the CIT(A) or the tribunal, leading to the disallowance being sustained.- Interest on Overdraft: The assessee claimed interest on an overdraft account against commission income. The CIT(A) and the tribunal found no evidence of a direct nexus between borrowed funds and investment in shares, sustaining the disallowance.- Demat Charges: The demat charges were related to non-taxable dividend income, leading to the disallowance being upheld by the CIT(A) and the tribunal.- Rebate under Section 88: The assessee's claim for rebate under Section 88 was disallowed as her total income exceeded Rs. 5,00,000, which is in accordance with the legal provisions. The tribunal upheld the AO and CIT(A)'s decision.Conclusion:The tribunal dismissed the appeal of the assessee, upholding the validity of the service of notice under Section 143(2), the initiation of proceedings under Section 148, and the disallowance of various expenses and claims by the AO. The judgment emphasized adherence to procedural laws and the necessity of substantiating claims with evidence.