Tribunal quashes reassessment for failure to address objections. Long Term Capital Gain deemed legitimate.

The Tribunal quashed the reassessment proceedings due to the Assessing Officer's failure to address objections raised by the assessee, as required by law. Additionally, the Tribunal found the Long Term Capital Gain from the sale of shares to be legitimate and dismissed the additions made under Sections 68 and 69C. As a result, the appeal of the assessee was fully allowed.

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Issues Involved:
1. Validity of reopening under Section 148.
2. Addition of Rs. 1,77,24,158 as undisclosed income under Section 68.
3. Addition of Rs. 1,77,251 under Section 69C for alleged cash commission.

Issue-wise Detailed Analysis:

1. Validity of Reopening under Section 148:
The assessee challenged the reopening under Section 148 on the grounds that the Assessing Officer (AO) did not dispose of the objections raised against the notice issued under Section 148. The objections were filed on 23.05.2017, but the AO neither addressed them in a separate order nor mentioned them in the assessment order. The CIT (A) dismissed the issue, erroneously stating that no such objections were raised. The assessee provided evidence, including an RTI response confirming the objections were filed. The Tribunal noted that the AO's failure to dispose of the objections violated the principles laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO, which mandates the AO to pass a speaking order on the objections before proceeding with reassessment. Citing various judgments, including those from the Gujarat and Bombay High Courts, the Tribunal emphasized that non-disposal of objections could lead to the quashing of the entire reassessment proceedings. The Tribunal concluded that the AO's failure to comply with the mandatory procedure warranted quashing the reassessment order.

2. Addition of Rs. 1,77,24,158 as Undisclosed Income under Section 68:
The AO added Rs. 1,77,24,158 as undisclosed income, treating the Long Term Capital Gain (LTCG) from the sale of shares of M/s. CCL International Ltd. as a sham transaction. The AO's reasoning included the financial instability of M/s. CCL International Ltd., the abnormal rise in share prices, and the general modus operandi of brokers providing accommodation entries. The AO relied on an investigation report from the Kolkata Director of Investigation, which indicated that brokers facilitated bogus entries. However, the Tribunal found no direct or indirect evidence linking the assessee or her broker to such activities. The assessee provided comprehensive documentation, including allotment letters, bank statements, dematerialization records, broker statements, and contract notes, proving the genuineness of the transactions. The Tribunal observed that the shares were purchased and sold through recognized stock exchanges, with all necessary compliances, including payment of Securities Transaction Tax (STT). The Tribunal held that in the absence of any material evidence against the assessee, the addition under Section 68 was unwarranted.

3. Addition of Rs. 1,77,251 under Section 69C for Alleged Cash Commission:
The AO made an addition of Rs. 1,77,251 under Section 69C, assuming that cash commission must have been paid at 1% on the alleged bogus LTCG. The Tribunal, having found the LTCG to be genuine, consequently deleted the addition under Section 69C, as it was based on the presumption of a bogus transaction.

Conclusion:
The Tribunal quashed the reassessment proceedings due to the AO's failure to dispose of the objections raised by the assessee, as mandated by the Supreme Court. Additionally, the Tribunal found the LTCG from the sale of shares to be genuine and deleted the additions under Sections 68 and 69C. The appeal of the assessee was allowed in full.

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