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of <h1>Assessee wins case against unexplained investment allegations for genuine share transactions with proper documentation</h1> <h3>Rameshbhai Prajapati Versus Assistant Commissioner of Income-tax, Gandhinagar Circle, Gandhinagar</h3> Rameshbhai Prajapati Versus Assistant Commissioner of Income-tax, Gandhinagar Circle, Gandhinagar - TMI ISSUES: Whether reopening of assessment after four years without tangible material is valid under the Income-tax Act.Whether addition of Rs. 1,99,350/- as unexplained investment related to share transactions can be sustained without sufficient evidence.Whether the appellate authority erred in rejecting the appeal without considering the documents on record.Whether penalty proceedings initiated under sections 270A(1) and 270A(9)(a) are in accordance with the provisions of the Act.Whether interest charged under sections 234A, 234B, and 234C is justified in absence of default under section 210 or advance tax payment. RULINGS / HOLDINGS: The reopening of the case after four years was held to be invalid as there was no 'tangible evidence' or material on record to justify such action.The addition of Rs. 1,99,350/- as unexplained investment was deleted because the assessee had furnished evidence of shareholding since 2002 and sale in 2011, and no tangible evidence was produced by Revenue to disprove this; thus, the addition was not sustainable.The appellate authority's rejection of the appeal without considering the material on record was found to be erroneous, as the decision was based on 'assumption and presumption' which is 'not valid in law.'The penalty proceedings under sections 270A(1) and 270A(9)(a) were held to be contrary to the provisions of the Act and therefore required to be dropped.The interest charged under sections 234A, 234B, and 234C was unjustified as there was no default under section 210 nor any default in payment of advance tax. RATIONALE: The Court applied the provisions of the Income-tax Act, 1961, particularly sections 147, 148 (reopening of assessment), 250 (appeal to CIT(A)), 270A (penalty), and sections 234A, 234B, 234C (interest for defaults).The principle that reopening of assessment requires tangible material was reaffirmed, emphasizing that mere suspicion or assumption is insufficient to justify reopening after four years.The Court relied on documentary evidence such as shareholding records filed before the Registrar of Companies (RoC) and the timeline of purchase and sale of shares to negate the Revenue's claim of unexplained investment.The rejection of appeal based on assumption and presumption was held contrary to established legal standards requiring decisions to be based on evidence.The penalty provisions under section 270A require adherence to statutory conditions, and their invocation without proper basis was held improper.The interest under sections 234A, 234B, and 234C is chargeable only upon proven default in furnishing return or payment of advance tax, which was not established in this case.
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