2018 (10) TMI 185 - AT - Income Tax

Tribunal remands assessment back to AO for de novo decision, giving assessee opportunity to be heard.

The Tribunal set aside the order of the Ld. CIT(A) and remanded the matter back to the AO for a de novo assessment. The AO was directed to decide the ... Validity of Reopening of assessment - revision u/s. 263 passed by the Ld. CIT setting aside the order passed u/s. 147/143(3) directing the AO to do fresh assessment- no proper opportunity before the AO during reassessment proceedings - denial of natural justice - Held that:- No proper opportunity was given to assessee by AO during the reassessment proceedings and so we are, therefore, of the opinion that assessee did not get proper opportunity before the AO during reassessment proceedings. In the light of decision in Tin Box Company [2001 (2) TMI 13 - SUPREME COURT] and taking into consideration the fact the order of the AO in similar cases being upheld up to the level of Apex Court, and taking note of order in Jansampark Advertising & Marketing Pvt. Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT], and the DR accepted that assessee did not get proper opportunity before the AO during reassessment proceedings, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Issues Involved:1. Validity of the order passed by the Ld. CIT(A) under sections 143(3)/263/147 of the Act.2. Examination of the genuineness and source of share capital.3. Compliance with the directions given by the Ld. CIT in the order under section 263.4. Adequacy of opportunity provided to the assessee during the reassessment proceedings.Issue-wise Detailed Analysis:1. Validity of the order passed by the Ld. CIT(A) under sections 143(3)/263/147 of the Act:The appeal preferred by the assessee challenges the order of the Ld. CIT(A)-6, Kolkata dated 03.03.2016 for AY 2008-09, which upheld the assessment order passed by the AO under sections 143(3)/263/147 of the Act on 29.03.2014. The initial assessment order dated 30.04.2010 assessed the total income at Rs. 25,271/- against a declared total income of Rs. Nil. Subsequently, an order under section 263 of the Act was passed by the Ld. CIT on 30.03.2013, setting aside the initial assessment and directing the AO to conduct a fresh assessment with specific guidelines.2. Examination of the genuineness and source of share capital:The Ld. CIT, while exercising his revisional power under section 263, directed the AO to examine the genuineness and source of share capital for each shareholder independently, not on a test-check basis. The AO was instructed to verify the bank accounts for the entire period to trace the money trail of the share capital. Additionally, the AO was to examine the directors on oath to verify their credentials and the circumstances necessitating any change in directorship, as well as the source of realization from the liquidation of assets shown in the balance sheet after any change of directors.3. Compliance with the directions given by the Ld. CIT in the order under section 263:The Tribunal noted that the AO did not fully comply with the Ld. CIT’s directions while giving effect to the order under section 263. Although the AO examined the books of account, bank statements, and documents provided by the assessee, and issued notices under section 133(6) to various shareholders, the AO drew an adverse inference against the assessee due to the non-appearance of the erstwhile directors summoned under section 131. The AO concluded that the identity, creditworthiness, and genuineness of the shareholders remained unexplained, leading to the addition of Rs. 10,22,50,000/- as unexplained cash credit under section 68 of the Act.4. Adequacy of opportunity provided to the assessee during the reassessment proceedings:The Tribunal found that the assessee was not given a proper opportunity during the reassessment proceedings. The AO’s adverse inference was based on the non-appearance of the erstwhile directors, without notifying the assessee to procure their presence. This lack of proper opportunity was deemed a violation of natural justice. The Tribunal cited the Hon’ble Supreme Court’s decision in Tin Box Company Vs. CIT, which emphasized that an assessment order must be made after giving the assessee a reasonable opportunity to present their case. Consequently, the Tribunal held that the reassessment needed to be done afresh, providing the assessee with a proper opportunity of being heard.Conclusion:In light of the above findings, the Tribunal set aside the order of the Ld. CIT(A) and remanded the matter back to the AO for a de novo assessment. The AO was directed to decide the matter in accordance with the law after giving the assessee an adequate opportunity of being heard. The appeal of the assessee was allowed for statistical purposes.Order:The order was pronounced in the open court on 27/09/2018.