The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently upheld the imposition of a cost of Rs. 10,000 on a foreign portfolio investor (FPI) for failing to respond to notices issued under section 142(1) of the Income Tax Act and found that the FPI’s non-response to the notices had prevented the assessing officer (AO) from conducting a proper assessment of the FPI’s income.
The assesse, Hunt International Investments is a foreign portfolio investor (FPI) that sold Stride Aerolabs Ltd. equity shares for Rs. 1,99,94,497/-, earning Long Term Capital Gain (LTCG) exempt from tax under section 10(38) of the Act. The assessee did not file any income return and was issued a notice for non-filing. The AO rejected the assessee’s claim of exemption, and the draft assessment order was passed on 30.03.2022.
The assessee could not make proper submissions and draft assessment orders due to the non-receipt of notices, which were dismissed by the DRP, leading to a challenge in the ITAT.
The Assessee claimed to have not received the notices from the AO, despite providing the correct email address. The assessee further claimed that they were not informed about the pendency of the assessment order. They argued that the draft assessment order rejected their exemption and filed objections before the Dispute Resolution Panel.
The Income Tax Department argued that the taxpayer failed to cooperate and submit the required information, leading to the assessment being completed under section 144 of the Income Tax Act. They also argued that the taxpayer failed to file objections before the DRP within the specified time frame, which was dismissed on the grounds of limitation.
The Tribunal observed that the AO did not provide the assessee with a fair opportunity to submit, and the assessee was not negligent in not responding to notices. The ITAT also found that the assessee provided the correct email address but the notices were not sent to it. Additionally, the assessee was not informed about the assessment order’s pendency.
The Two Bench Members comprising Vikas Awasthy (Judicial Member) and Padmavathy S (Accountant Member) ruled that the taxpayer failed to respond to multiple show-cause notices issued by the Assessing Officer. The ITAT imposed a cost of Rs. 10,000 on the taxpayer, directing them to pay within three weeks. The ITAT allowed the taxpayer’s appeal for statistical purposes and set aside the impugned order, requiring proof of deposit and correct email address.
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