The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has directed re-adjudication as the addition under Section 68 of the Income Tax Act 1961 due to non-consideration of unsigned reply by assessee to notice issued under Section 147 of the Income Tax Act.
The Assessee, Sonam Ra jesh Rateria declared its total income and also sought exemption under Section 10(38) of the Income Tax Act, qua Long Term Capital Gain by E-filing its return of income on dated 27.07.2011, which was processed under Section 143(1) of the Income Tax Act.
Subsequently on the basis of Investigation carried out into 84 penny stocks companies by the Investigation Directorate Kolkata, case of the Assessee was reopened under Section 147 of the Income Tax Act and thereafter the Assessee was show caused as to why entire sale consideration from penny stock should not be treated as unexplained cash credit under Section 68 of the Income Tax Act and brought to tax under the head ‘income from other source’ by treating the same as transaction which had been manipulated to introduce fund through the LTCG rate at ‘nil’ tax rate.
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 was not signed by the Assessee or any authorised representative of the Assessee. Further the Assessee had 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 analysing “transactions qua purchase of 22500 shares of Tuni Textile Mills Ltd and selling of shares and consequently, earning the capital gain , decided the case of the Assessee and ultimately added the amount as unexplained cash credit under Section 68 of the Income Tax Act.
Suchek Anchaliya, on behalf of the assessee relying upon the judgement passed by the Apex Court in CIT Vs Durga Prasad and in the case of Kale Khan Mohd. Hanif Vs Commissioner of Income Tax M.P wherein it was held that “it was well established that the onus of proving the source of a sum of money found to had been received by the Assessee was on him. If he had disputed liability for tax, it was 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 was entitled to treat it as taxable income.
Anurag Tripathi, appeared on behalf of the revenue.
A Single Bench of N. K. Choudhry, (Judicial Member) observed that It was not the case here of not filing any reply/submissions but in fact vide letter dated 16.12.2016 the Assessee filed its reply but the same was ignored on the ground that the same was not duly signed by the Assessee or its authorised representative.
The Bench allowed the appeal filed by the assessee and directed readjudication with a direction 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 to assessee.
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