2023 (9) TMI 1153 - AT - Income Tax

Assessee's appeal allowed, reassessment quashed under section 68. Tribunal stresses legal principles and natural justice.

Kala Ramesh Parmar Versus ITO Ward – 23 (2) (6), Mumbai

Kala Ramesh Parmar Versus ITO Ward – 23 (2) (6), Mumbai - TMI 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.