2012 (9) TMI 623 - HC - Income Tax

Addition u/s 69A - reassessment proceedings - ITAT uphold CIT s order of upholding deletion as appropriate opportunity had been denied to the assessee - Held that - As decided in Dhakeswari Cotton Mills Limited Versus Commissioner Of Income-Tax West Bengal 1954 (10) TMI 12 - SUPREME COURT the Tribunal ought not to have merely upheld the CIT (Appeal) s order but should have remanded the proceeding to correct the irregularities which crept in during the reassessment proceedings. A close reading of the assessment order discloses that neither has the contentions of the assessee been discussed nor any attempt made to connect entry 177 with the assessee. It is also apparent from the Appellate Commissioner s order that these matter were not put to the assessee. Consequently there cannot be two opinions of the fact that assessee was denied proper opportunity to deal with the materials sought to be relied upon - direction the AO to consider the entire matter afresh after giving all the necessary materials in his possession which deemed are adverse to the assessee and also after further affording an opportunity for cross-examination of such witnesses.

Summary

Issues:
1. Whether the Tribunal erred in upholding the deletion of Rs.1,01,00,000/- under Section 69A due to denial of proper opportunity to the assessee.
2. Whether the Tribunal should have remanded the proceeding to correct irregularities during reassessment proceedings.

Analysis:

Issue 1:
The Revenue challenged the ITAT's order deleting Rs.1,01,00,000/- under Section 69A, claiming denial of proper opportunity to the assessee. The assessment for AY 2001-2002 was reopened under Section 147 due to a raid at Sh. B.M. Gupta's premises. The AO relied on an entry showing the amount in question connected to the assessee. The reassessment order cited statements and documents to add back the sum under Section 69A. The Appellate Commissioner accepted the assessee's appeal citing denial of proper opportunity. The Tribunal rejected both appeals, upholding the Appellate Commissioner's decision. The Tribunal found that the AO failed to provide incriminating material to the assessee for defense. The Supreme Court's ruling in ITO v. M. Pirai Choodi was referenced, emphasizing the importance of granting opportunities for cross-examination. Ultimately, the Court directed the AO to reconsider the matter, ensuring the assessee receives all necessary adverse materials and opportunities for cross-examination.

Issue 2:
The Court noted that the AO did not discuss the assessee's contentions or attempt to connect the incriminating entry with the assessee. The Appellate Commissioner also failed to address these issues with the assessee. While acknowledging the denial of proper opportunity to the assessee, the Court cited the Supreme Court's decision in Dhakeswari Cotton Mills Ltd. v. CIT, emphasizing the need to correct irregularities during reassessment proceedings. Consequently, the Court directed the AO to conduct a fresh assessment, providing all necessary adverse materials to the assessee and allowing opportunities for cross-examination. The Tribunal's decision was set aside, and the appeal was allowed accordingly.