Legal Challenge to Reopening of Assessment Not Raised Before CIT(A): ITAT Restores Appeal for Fresh Adjudication [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) restored the appeal for fresh adjudication of a legal issue regarding the validity of the reopening of the assessment stating that this legal ground was never raised before the lower authorities for the Assessment Year (AY) 2015-16.

Rathi Gajendran (assessee) for whom the case originated when the assessee purchased immovable property for Rs.54,06,160 but did not file a return of income. Consequently, the Assessing Officer (AO) issued a show cause notice under Section 148 of the Income Tax Act, 1961.

The assessee filed no response to the show cause notice and therefore, the AO issued notice under Section 148 of the Income Tax Act seeking the assessee to file a return of the Income. In response the assessee filed a return of income.

The AO, in the assessment, added a sum of Rs. 5,67,280 and treated the entire property purchase amount of Rs. 54,06,160 as unexplained investment under Section 69 read with Section 115BBE of the Income Tax Act.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal on the grounds that the assessee failed to explain the source of the investment in the property.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee raised the legal issue regarding the reopening's validity and argued that sufficient opportunities were not provided by the lower authorities to substantiate the transaction's genuineness.

On the other hand, the counsel for the revenue supported the orders of the lower authorities and sought to dismiss the appeal.

The two-member bench, comprising S.S. Viswanethra Ravi (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member), noted that the legal issue concerning the assessment's reopening was raised for the first time before the Tribunal. In the interest of justice, the Tribunal decided to restore the issue to the file of the CIT(A).

The tribunal directed the CIT(A) to adjudicate the issue afresh after providing the assessee with an adequate opportunity of being heard.In the result, the appeal filed by the assessee was allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates