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2025 (5) TMI 809 - AT - Income TaxValidity of reassessment proceedings - order u/s 250 to confirming the error of the AO in passing assessment order u/s. 143(3) r.w.s. 147 - bogus LTCG - HELD THAT - As perusal of the appellate order makes it apparent that the submissions of the assessee as also the evidences furnished either before the AO or before him have not been considered and discussed at all by him in the order. He did not consider it necessary to examine the merits therein. Rather he straightway relied on the decision of hon ble Calcutta High Court in the case of Swati Bajaj 2022 (6) TMI 670 - CALCUTTA HIGH COURT and others and dismissed the grounds of the assessee. There is nothing to show that he applied his mind on the contentions of the assessee at all. There is no discussion either in respect to the ground relating to reassessment Capital gains or the addition made u/s 69C of the Act vis- -vis the submissions of the assessee. Apparently the ld. CIT(A) has failed to adjudicate on the issues with an open mind and his hurried conclusion only reflects a prejudiced and predetermined approach in brushing aside the contentions of the assessee and the evidences furnished in this non speaking appellate order. It would be relevant to examine the action of the ld.CIT(A) in the light of the provisions of the Act relating to powers and duties of CIT(A).A perusal of the provisions u/s 250 of the Act which pertains to the powers of Commissioner of Income Tax(Appeals) that u/s 250(6) of Act shows that he is obliged to dispose of the appeal in writing after stating the points for determination and to then pass an order on each of the points which arose for consideration and is further obliged to state the reasons for his decision on each such points which arose for determination. He is duty bound to dispose of the appeal through a speaking order on merits on all the points which arose for determination in the appellate proceedings including on all the grounds of appeal The first appellate authority cannot dismiss assessee s appeal in a summary manner without deciding the appeal on merits through an order in writing stating the points of determination in the appeal the decision thereon and the reason for the decision. It is well-settled that powers of the CIT(A) are co-terminus with powers of the AO. CIT(A) erred in dismissing assessee s appeal in a summary manner without giving detailed reasons in the order on various grounds of appeal before him. We further hold that he erred in passing a non-speaking order on each of the points which arose for his consideration and he failed in discharging the statutory obligation to state the reasons for his decision on each such points which arose for determination in assessee s appeal before him. Appeal is allowed for statistical purposes.
The core legal questions considered in this appeal include:
Issue-wise Detailed Analysis: 1. Validity of Notice under Section 148 and Reassessment Proceedings The reassessment was initiated based on information from the Investigation Wing, Kolkata, alleging a nexus among brokers, exchanges, and taxpayers to create bogus capital gains and business losses to evade tax. The Assessing Officer (AO) issued notice under section 148 and subsequently passed an assessment order under section 143(3) read with section 147. The appellant challenged the validity of the reassessment, contending that the AO did not provide any direct material implicating the assessee or the company in question. The appellant emphasized that no investigation was conducted specifically against them and no adverse findings from SEBI or other regulatory authorities were on record. The appellant also argued that the AO failed to provide an opportunity for cross-examination of persons whose statements formed the basis of reassessment. The CIT(A) upheld the reassessment without detailed discussion, relying on precedent from the Calcutta High Court. However, the Tribunal noted that the CIT(A) did not apply independent mind or address the appellant's submissions or evidence. The Tribunal emphasized statutory provisions under sections 250 and 251 of the Act, which mandate the CIT(A) to dispose of appeals by passing a speaking order stating points for determination, decisions thereon, and reasons for such decisions. The Tribunal held that the CIT(A)'s summary dismissal without addressing merits amounted to non-application of mind and contravention of statutory duties. It directed the CIT(A) to pass a fresh speaking order after considering all grounds and evidence, granting the appellant an opportunity of hearing. 2. Addition under Section 68 - Alleged Bogus Long Term Capital Gains The AO disallowed LTCG of Rs. 28,03,430/- arising from sale of shares of Global Capital Markets Limited, treating the transactions as pre-arranged and part of a tax evasion scheme involving penny stocks. The addition was grounded on an Investigation Wing report alleging manipulation and bogus entries. The appellant submitted extensive evidence to prove genuineness, including purchase and sale bills, Demat account statements showing shares held for over a year, bank statements evidencing payments through account payee cheques, broker ledger copies, and global reports of the broker. The appellant argued that transactions were conducted on recognized stock exchanges, not through preferential allotments, and that the shares were traded openly with no adverse regulatory findings. The AO and CIT(A) did not engage with these evidences in their orders. The Tribunal noted that once the assessee discharged the primary onus of proving transaction genuineness, the burden shifted to the AO to disprove or invalidate the evidence. The Tribunal found that the AO failed to produce any direct evidence implicating the assessee in manipulation or bogus transactions. The CIT(A) erred in not considering these facts and evidence. Relevant precedents cited by the appellant included Supreme Court and High Court decisions emphasizing the requirement of cogent material before making additions under section 68 and the necessity of giving the assessee a fair opportunity to rebut allegations. 3. Addition under Section 69C - Alleged Commission on Sale Consideration The AO made an addition of Rs. 84,103/- under section 69C, alleging commission paid at 3% of the sale consideration. The appellant challenged this addition, contending that the commission was not an undisclosed income but a legitimate business expense or part of the transaction cost. The Tribunal observed that the CIT(A) did not address this ground separately or discuss the appellant's submissions or evidence. The summary dismissal was held to be contrary to statutory requirements for a speaking order. The matter was remanded for fresh consideration. 4. Compliance of Statutory Duties by CIT(A) in Passing the Appeal Order The Tribunal extensively analyzed the statutory framework governing the powers and duties of the CIT(A) under sections 250 and 251 of the Income-tax Act. It highlighted that the CIT(A) is required to:
The Tribunal relied on authoritative decisions including the Supreme Court ruling in CIT vs. Kanpur Coal Syndicate and Bombay High Court decisions emphasizing the plenary powers of the CIT(A) and the mandatory nature of reasoned orders. The Tribunal found that the CIT(A) failed to discharge these obligations, passing a non-speaking, summary order that did not consider the appellant's detailed submissions or evidence. This non-application of mind was held to be a fundamental procedural infirmity warranting setting aside the order and remand for fresh disposal. Application of Law to Facts and Treatment of Competing Arguments The appellant's detailed documentary evidence and legal submissions were not addressed by the AO or CIT(A), who relied primarily on an investigation report implicating a wider nexus without specific material against the appellant. The appellant's contention that transactions were genuine, executed through stock exchanges with proper banking channels, was supported by documentary proof and consistent with settled legal principles requiring the AO to establish the existence of undisclosed income beyond mere suspicion. The Tribunal underscored the principle that once the assessee furnishes credible evidence, the onus shifts to the revenue to disprove it. The failure of the AO and CIT(A) to engage with this evidence and the appellant's right to cross-examine witnesses whose statements were relied upon was noted as a procedural lapse. The Tribunal also noted the absence of any adverse findings or regulatory action by SEBI or other authorities against the assessee or the company's shares, weakening the revenue's case. Conclusions The Tribunal concluded that:
Significant Holdings: The Tribunal emphasized the mandatory nature of a speaking order by the CIT(A) under sections 250(6) and 251 of the Income-tax Act, stating:
The Tribunal further held:
On the evidentiary aspect, the Tribunal reiterated the principle that the primary onus lies on the assessee to prove genuineness, and once discharged, the burden shifts to the AO to disprove or invalidate such evidence. The final determination was to set aside the CIT(A) order dated 16.10.2023 and remit the appeal for de novo disposal in accordance with law, ensuring adherence to principles of natural justice and statutory requirements.
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