Case Law Details
Sarojben Rajkumar Bansal Vs DCIT (ITAT Ahmedabad)
In a recent decision, the Income Tax Appellate Tribunal (ITAT) in Ahmedabad has reopened the appeal filed by Sarojben Rajkumar Bansal, challenging a previous order from the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The case revolves around the assessment for the assessment year 2013-14, where the tax authorities had made a substantial addition of ₹4,27,83,714 as unexplained cash credits under section 68 of the Income Tax Act, 1961.
The original return of income was filed by the late Shri Rajkumar Kakaram Bansal on October 9, 2013, reporting an income of ₹84,98,510. Following this, an assessment under section 143(3) was completed on November 26, 2015, accepting the declared income. However, the assessment was reopened on March 31, 2021, based on information from the Investigation Wing, which alleged that the assessee had engaged in non-genuine transactions involving penny stocks.
The reopening was prompted by findings from a search conducted on January 23, 2015, on Globe Ecologistics Group. The Investigation Wing claimed that Bansal had made bogus long-term capital gains (LTCG) through transactions involving KGN Enterprise Ltd. The income tax authorities argued that these gains were not legitimate and issued a notice under section 148 for reassessment.
Bansal’s legal heirs filed a revised return on May 31, 2021, reiterating the original income and seeking clarification on the reasons for the reassessment. However, during the reassessment proceedings, the Assessing Officer (AO) concluded that the transactions involving KGN shares were part of an organized scheme to generate bogus LTCG, subsequently adding the entire sale consideration as unexplained cash credits.
Dissatisfied with the AO’s decision, Bansal’s representatives appealed to the CIT(A) on April 23, 2022. However, the CIT(A) dismissed the appeal ex-parte on December 28, 2023, citing non-compliance with several notices. This decision did not consider the merits of the case, prompting Bansal’s heirs to take the matter to the ITAT.
During the hearing, the Authorized Representative (AR) for Bansal highlighted several key points, particularly the procedural issues surrounding the CIT(A)’s ex-parte decision. The AR emphasized that the legal heirs, particularly a senior citizen, were unaware of the notices sent via email and could not respond accordingly. The CIT(A) was also criticized for failing to address a crucial challenge regarding the jurisdiction of the reopening under section 147, which the AR contended was merely a review of the previous assessment.
The ITAT noted the importance of adhering to principles of natural justice, especially in faceless proceedings that might pose communication challenges for some taxpayers. It agreed that the CIT(A)’s failure to adequately consider the grounds of appeal and the reopening challenge compromised the integrity of the proceedings.
In its ruling, the ITAT set aside the CIT(A)’s order and directed a fresh hearing of the appeal, emphasizing the need to provide the appellant a reasonable opportunity to present their case. The tribunal also highlighted the necessity of addressing the critical jurisdictional issues raised concerning the reassessment, particularly since no new tangible evidence had been introduced to justify the reopening.
The ITAT’s order restores the matter to the CIT(A) for a fresh evaluation, requiring the tax authorities to ensure that the legal heirs of Bansal are afforded the opportunity to fully participate in the proceedings. The case will now be revisited with a focus on both the procedural and substantive issues raised by the appellant.
This development highlights the complexities involved in tax reassessments and the importance of due process in ensuring fair treatment of taxpayers, especially in cases where significant sums are at stake. The ITAT’s decision serves as a reminder of the judiciary’s role in safeguarding taxpayer rights while balancing the need for effective tax administration.
The appeal is now treated as allowed for statistical purposes, pending further proceedings before the CIT(A). The order was pronounced in open court on October 10, 2024, in Ahmedabad.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the assessee challenging the order passed u/s.250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”], dated 28/12/2023, by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (NFAC) [hereinafter referred to as “CIT(A)”] for the Assessment Year (A.Y.) 2013-14. The appeal has been filed against the assessment order under section 143(3) read with section 147 of the Act, wherein an addition of Rs.4,27,83,714/- was made by the Assessing Officer [hereinafter referred to as “AO”] under section 68 of the Act as unexplained cash credits.
Facts of the case:
2. The original return of income was filed by the assessee, Late Shri Rajkumar Kakaram Bansal, on 09.10.2013 for the A.Y. 2013-14, declaring a total income of Rs.84,98,510/-. The return was processed, and an assessment under section 143(3) of the Act was completed on 26.11.2015, accepting the returned income. The assessment was subsequently reopened under section 147 of the Act, based on information received from the Investigation Wing, Ahmedabad. The Investigation Wing conducted a search in the case of Globe Ecologistics Group on 23.01.2015 and found that several individuals, including the assessee, had engaged in non-genuine transactions involving penny stocks of KGN Enterprise Ltd. and KGN Industries Ltd. It was alleged that the assessee had sold shares of KGN Enterprise Ltd. during F.Y. 2012-13, resulting in bogus long-term capital gains (LTCG) of Rs.4,27,83,714/-, which were claimed as exempt under section 10(38) of the Act. The notice under section 148 of the Act was issued on 31.03.2021 with the prior approval of the Principal Commissioner of Income Tax (PCIT), Ahmedabad. The assessee, through legal heirs, filed a revised return on 31.05.2021, reiterating the income declared in the original return and requesting the reasons for reopening the assessment. During the reassessment proceedings, the AO observed that the transactions in KGN shares were part of an organized racket of accommodation entries to create bogus LTCG and evade taxes. The AO concluded that the entire sale consideration of Rs.4,27,83,714/- represented unaccounted income and added it as unexplained cash credits under section 68. The AO also initiated penalty proceedings under section 271(1)(c) for concealment of income.
3. Aggrieved by the addition, the assessee filed an appeal before the CIT(A) on 23.04.2022. However, due to non-compliance with several notices issued by the CIT(A), the appeal was decided ex-parte on 28.12.2023 without considering the merits of the case. The CIT(A) dismissed the appeal for non-prosecution, affirming the addition made by the AO.
4. Aggrieved by the order of CIT(A), the assessee is in appeal before us with following grounds of appeal:
1. The Ld. CIT(A) has erred in law and on facts in deciding the appeal ex-parte in violation of principles of natural justice.
2. The Ld. CIT(A) has erred in law and on facts in deciding the appeal without entering into merits of the case in violation of Section 250(6) of the Act.
3. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of AO of reopening of assessment us. 147 of the Act which is made beyond the limitation period.
4. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of AO of reopening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and in not permissible either in law or on facts.
5. The Ld. CIT(A) has erred in law and on facts of the case in confirming addition of Rs.4,2 7,83,714/- made by Ld. AO as unexplained cash credit u/s. 68 of the Act.
6. In the facts and circumstances of the case, provisions of S. 68 of the Act have no application as the transaction is carried out on a recognized stock exchange and through banking channels. No part of the amount of long-term capital gain can be treated as unexplained.
7. Both the lower authorities have erred in law and on facts of the case in confirming the addition without supplying necessary material to the appellant on the basis of which impugned addition has been made and also not providing appellant with the opportunity to cross examine persons whose statements were recorded during the course of search/seizure.
8. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
9. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s. 234A/B/C/D of the Act.
10. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s. 271 (1)(c) of the Act.
11. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
5. During the course of the hearing before us, the Authorised Representative (AR) of the assessee, stated that the appellant is a senior citizen and filed the appeal before CIT(A) as a legal heir of the assessee and was not aware about the details of notices which were sent by email and therefore could not comply with the same. The AR also submitted that the some critical aspects were not dealt with in the order passed by the CIT(A) such as challenging the reopening of the concluded assessment under section 147 of the Act when it was specifically contended that the reopening amounted to nothing more than a review of the original assessment conducted under section 143(3). The AR also stated that the original assessment had accepted the returned income, and there was no fresh tangible material justifying the reopening. This critical issue of jurisdiction was never addressed by the CIT(A).
6. We have heard the submissions made by the Authorised Representative (AR) of the assessee and perused the material available on record. The case revolves around the reopening of the assessment under section 147 of the Act, 1961, which led to an addition of Rs.4,27,83,714/- under section 68 of the Act, as well as the dismissal of the assessee’s appeal by the CIT(A) ex-parte.
6.1. We are mindful that every taxpayer, particularly senior citizens, must be given adequate opportunity to present their case, especially in the context of faceless proceedings where communication through electronic means might create hurdles for some individuals. The AR’s submission that the appellant was unaware of the emails containing notices is reasonable in the circumstances. Natural justice demands that the party to a proceeding should be given a fair opportunity to be heard before an adverse decision is made. This principle has not been adhered to in the present case.
6.2. One of the significant submissions made by the AR was that the reopening of the assessment under section 147 of the Act was contested on the ground that it amounted to nothing more than a review of the original assessment conducted under section 143(3) of the Act. The AR pointed out that the original assessment had accepted the returned income of the assessee and that there was no fresh tangible material justifying the reopening of the concluded assessment. The failure of the CIT(A) to deal with this fundamental challenge to the reopening of assessment goes against the mandate of section 250(6) of the Act, which requires the CIT(A) to pass a reasoned and speaking order on all issues raised by the assessee. In support of the submission the assessee submitted the paper book of 290 pages which was not considered by the CIT(A).
6.3. In light of the submissions made by the AR and perusal of the material available on record, we find that the CIT(A) erred in dismissing the appeal ex-parte without giving due consideration to the principles of natural justice. Moreover, the jurisdictional challenge to the reopening of the assessment under section 147 of the Act, which was a fundamental aspect of the case, was not addressed by the CIT(A).
6.4. We also note that the original assessment under section 143(3) of the Act was completed after accepting the returned income, and no fresh tangible material was brought on record to justify the reopening of the assessment. The addition under section 68 of the Act was made without providing the assessee with the necessary evidence or the opportunity to cross-examine witnesses.
6.5. In view of the above, we set aside the order of the CIT(A) dated 28.12.2023 and restore the matter back to the file of the CIT(A) for fresh adjudication on merits. The Departmental Representative (DR) did not raise any objection for restoring the mater back to the file of the CIT(A).
6.5. The CIT(A) is directed to provide a reasonable opportunity of being heard to the assessee and decide the appeal afresh, considering all the submissions made by the assessee, particularly the challenge to the reopening of the assessment under section 147 of the Act. The appellant (legal heir of the assessee) is also directed to fully co-operate with the proceedings.
7. In the result, the appeal of the assessee is treated as allowed for
statistical purposes.
Order pronounced in the Open Court on 10 October, 2024 at Ahmedabad.
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