Assessment order quashed for failing to dispose objections before proceeding under sections 144 and 147

The ITAT Mumbai quashed the assessment order passed under sections 144 and 147, ruling in favor of the assessee. The tribunal found that the AO failed to dispose of objections raised by the assessee through a speaking order before proceeding with assessment, rendering the assessment order without jurisdiction. The CIT(A)'s finding that objections were not filed during assessment proceedings was deemed factually incorrect and perverse. The tribunal relied on SC precedent in GVK Driveshaft and HC decisions in Bayer Material Sciences and Fomento Resorts Hotels. Additionally, the tribunal noted that in identical circumstances for AY 2011-12, exemption under section 10(38) for long-term capital gains was accepted despite penny stock allegations.

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Issues Involved:
1. Validity of reopening of assessment under Section 147 by issuing notice under Section 148.
2. Validity of the ex-parte order passed under Section 144 read with Section 147.
3. Non-disposal of objections raised by the appellant.
4. Failure to provide reasons within a reasonable time and non-compliance with the procedure prescribed by the Supreme Court in GKN Driveshafts (P) Limited.
5. Lack of proper opportunity of being heard.
6. Reliance on general information without independent inquiries.
7. Addition of Rs. 10,70,000/- under Section 69A on account of long-term capital gain.
8. Invoking provisions of Section 69A despite evidence provided by the appellant.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment Under Section 147 by Issuing Notice Under Section 148:
The appellant challenged the reopening of the assessment under Section 147 by issuing notice under Section 148, claiming it was outside the sanction of law, illegal, and void for want of jurisdiction. The Tribunal referred to the legal background, particularly the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. ITO, which mandates that the Assessing Officer must provide reasons for reopening and dispose of any objections by passing a speaking order before proceeding with the assessment. Since the Assessing Officer failed to dispose of the objections, the Tribunal held that the reassessment order was without jurisdiction.

2. Validity of the Ex-parte Order Passed Under Section 144 Read with Section 147:
The appellant argued that the ex-parte order passed under Section 144 read with Section 147 was invalid. The Tribunal noted that the appellant was non-compliant during the assessment proceedings, leading to the ex-parte order. However, the Tribunal found that the Assessing Officer did not follow the proper procedure for disposing of objections, rendering the order without jurisdiction.

3. Non-disposal of Objections Raised by the Appellant:
The appellant contended that the objections raised on 25/11/2019 were not disposed of by a separate order. The Tribunal found that the objections were indeed filed electronically and that the Assessing Officer failed to dispose of them before proceeding with the reassessment. This failure violated the procedure prescribed by the Supreme Court, rendering the reassessment order invalid.

4. Failure to Provide Reasons Within a Reasonable Time and Non-compliance with the Procedure Prescribed by the Supreme Court in GKN Driveshafts (P) Limited:
The Tribunal emphasized the Supreme Court's ruling in GKN Driveshafts, which requires the Assessing Officer to provide reasons for reopening within a reasonable time and to dispose of objections by passing a speaking order. The Tribunal found that the Assessing Officer did not comply with this procedure, leading to the conclusion that the reassessment order was without jurisdiction.

5. Lack of Proper Opportunity of Being Heard:
The appellant argued that they were not given a proper opportunity to be heard. The Tribunal noted that the Assessing Officer took more than six months to respond to the appellant's request for reasons and provided only four days to respond to the last show cause notice. The Tribunal found that this did not constitute a reasonable opportunity, further invalidating the reassessment order.

6. Reliance on General Information Without Independent Inquiries:
The appellant contended that the Assessing Officer made the addition based solely on general information supplied by the Deputy Director Income Tax (Investigation) without conducting independent inquiries. The Tribunal agreed, noting that the Assessing Officer failed to verify the information independently, which was necessary to substantiate the addition.

7. Addition of Rs. 10,70,000/- Under Section 69A on Account of Long-term Capital Gain:
The appellant challenged the addition of Rs. 10,70,000/- under Section 69A on account of long-term capital gain, arguing that there was no specific finding against the bona fide investment and sale through a recognized stock exchange. The Tribunal found that the appellant had provided sufficient evidence, such as contract notes and banking channel payments, to support the claim. The Tribunal noted that in a similar case for the Assessment Year 2011-12, the exemption under Section 10(38) was allowed.

8. Invoking Provisions of Section 69A Despite Evidence Provided by the Appellant:
The appellant argued that the provisions of Section 69A were invoked despite providing evidence related to the contract notes, online sales through recognized stock exchanges, and payments through banking channels. The Tribunal found that the appellant had discharged the onus of proof and that the Assessing Officer did not conduct any inquiries to disprove the evidence. Consequently, the addition under Section 69A was deemed unsustainable.

Conclusion:
The Tribunal quashed the reassessment order dated 04/12/2019 and the addition of INR 10,77,000/- made under Section 69A, allowing the appeal in favor of the appellant. All other grounds were disposed of as infructuous. The appeal was allowed, and the order was pronounced on 30.08.2024.

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