Sonam Rajesh Rateria Vs ITO (ITAT Mumbai)
Introduction: The Income Tax Appellate Tribunal (ITAT) recently issued a significant decision in the case of Sonam Rajesh Rateria vs. Income Tax Officer (ITO). The ITAT directed the re-adjudication of the case due to the non-consideration of the Assessee’s unsigned reply to a notice issued under section 147 of the Income Tax Act.
Detailed Analysis:
1. Background of the Case: The Assessee, Sonam Rajesh Rateria, filed an appeal against the order dated 28.03.2019 passed by the Ld. Commissioner of Income Tax/National Faceless Appeal Centre under section 250 of the Income Tax Act, 1961.
2. Initial Assessment: The Assessee had declared a total income of Rs. 9,50,670 and sought exemption under section 10(38) for Long Term Capital Gain of Rs. 4,97,000 in the return of income filed on 27.07.2011. The return was processed under section 143(1) of the Act.
3. Reopening of the Case: The Assessee’s case was reopened under section 147 of the Income Tax Act based on an investigation into 84 penny stock companies conducted by the Investigation Directorate in Kolkata. The Assessee was issued a show cause notice, asking why the entire sale consideration of Rs. 5,67,000 from penny stocks should not be treated as unexplained cash credit under section 68 of the Act and brought to tax as income from other sources. The notice did not specify a reason for the proposed action.
4. Assessee’s Response: The Assessee submitted a reply dated 16.12.2016 to the show cause notice. However, the reply was not considered by the assessing officer because it was unsigned, and no letter of authority was provided during the assessment proceedings. The Assessee did not comply with the notices issued to her.
5. Addition of Unexplained Cash Credit: Despite the Assessee’s response, the assessing officer decided to treat the entire sale consideration of Rs. 5,67,000 as unexplained cash credit under section 68 of the Act.
6. First Appeal: The Assessee appealed the decision to the Ld. Commissioner, who upheld the assessing officer’s decision. The Ld. Commissioner relied on judgments of the Hon’ble Apex Court, including CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Kale Khan Mohd. Hanif vs. Commissioner of Income Tax M.P. and Bhopal (50 ITR 1 SC), which established that the onus of proving the source of a received sum of money is on the Assessee.
7. ITAT’s Decision: The ITAT considered the peculiar facts of the case. While the Assessee had indeed submitted a reply, it was unsigned and not considered due to the lack of a signature or authorization. The ITAT believed that in the interest of justice and a fair decision, the case should be remanded to the assessing officer for a fresh decision. The Assessee would be provided with a reasonable opportunity to be heard, and any relevant documents should be filed before the assessing officer for a just decision.
Conclusion: The ITAT’s decision in the case of Sonam Rajesh Rateria vs. ITO highlights the importance of considering all relevant submissions and documents in tax assessments. While the Assessee had filed a reply to the show cause notice, its lack of signature or authorization led to the reply being ignored. The ITAT’s decision to remand the case for re-adjudication emphasizes the need for procedural fairness and a complete examination of the facts before making tax-related decisions.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Assessee/Appellant herein has preferred this appeal against the order dated 28.03.2019 impugned herein passed by Ld. Commissioner of Income Tax/National Faceless Appeal Centre {in short ‘Ld. Commissioner)’} u/s 250 of the Income Tax Act 1961 (in short ‘the Act’).
2. In the instant case, the Assessee declared its total income of Rs. 9,50,670/- and also sought exemption u/s 10(38) qua Long Term Capital Gain of Rs. 4,97,000/- by E-filling its return of income on dated 27.07.2011, which was processed u/s 143(1) of the Act.
3. Subsequently on the basis of Investigation carried out into 84 penny stocks companies by the Investigation Directorate Kolkata, case of the Assessee was re-opened u/s 147 of the Act and thereafter the Assessee was show caused as to why entire sale consideration of Rs. 5,67,000/- from penny stock shall not be treated as unexplained cash credit u/s 68 of the Act and brought to tax under the head ‘income from other source’ by treating the same as transaction which has been manipulated to introduce fund through the LTCG rate at ‘nil’ tax rate.
3. The Assessee filed its reply vide letter dated 16.12.2016 however the same was not considered by the assessing officer on the ground that the same is not signed by the Assessee or any authorized representative of the Assessee. Further the Assessee has not even filed any letter of authority during the course of Assessment proceedings and not complied with the notices issued to her. The assessing officer ultimately on the basis of findings of investigation wing of Kolkata and analyzing “transactions qua purchase of 22500 shares of Tuni Textile Mills Ltd for Rs. 2,25,000/- and selling of 7,000/- shares at the price of Rs. 567000/- and consequently, earning the capital gain of Rs. 497000/-“, decided the case of the Assessee and ultimately added the amount of Rs. 5,67,000/- as unexplained cash credit u/s 68 of the Act.
5. The Assessee being aggrieved preferred first appeal before the Ld. Commissioner, who on the same reasoning as given by the assessing officer and by relying upon the judgment passed by the Hon’ble Apex Court in CIT Vs Durga Prasad More (1971) 82 ITR 540 (SC) and in the case of Kale Khan Mohd. Hanif Vs Commissioner of Income Tax M.P. and Bhopal in 50 ITR 1 (SC) wherein it was held that “it is well established that the onus of proving the source of a sum of money found to have been received by the Assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income tax Officer is entitled to treat it as taxable income.
6. We have given thoughtful consideration to the peculiar facts and circumstance of the case. It is not the case here of not filling any reply/submissions but infact vide letter dated 16.12.2016 the Assessee filed its reply but the same was ignored on the ground that the same is not duly signed by the Assessee or its authorized representative. Therefore considering peculiar facts and circumstance in totality, specifically to the effects that the assessing officer though decided the issue on the basis of the investigation report of Kolkata Wing, however did not consider the submission/claim raised by the Assessee due to non-signing, hence in my considered view it would be proper for just decision of the case and for the ends of justice, to remand the instant case to the file of the assessing officer for decision afresh, suffice to say by affording reasonable opportunity of being heard to the Assessee, hence the case is remanded accordingly. The Assessee is also directed to appear and file the documents before the AO as filed before this bench and also to file relevant document(s) which would be needed for proper and just decision of the case.
7. In the result, appeal filed by the Assessee stands allowed for statistical purpose.
Order pronounced in the open court on 31.08.2023.
