In the matter of Chaudhary Stone Crusher vs. Income Tax Officer (ITO), adjudicated by the Income Tax Appellate Tribunal (ITAT) Delhi, the central issue related to the validity of reassessment proceedings commenced against the taxpayer’s firm for the assessment year 2011-12. Below is a summary of the matter and the tribunal’s decision:
Background
Chaudhary Stone Crusher, a partnership firm in the manufacturing and trading of stone grits and corresponding materials, had not filed its ITR for the AY 2011-12. Thereafter, the Assessing Officer (AO) began reassessment proceedings u/s 147 of the Income Tax Act, 1961. The grounds of AO for reassessment was information obtained from another tax jurisdiction demonstrating that the firm had sold immovable property at the time of the financial year 2010-11, with the market value declared at Rs. 91,74,000.
Appeal grounds
Various grounds are been raised by the appellant contesting the reassessment-
- Reopening Facts: The appellant had argued that AO does not have enough grounds to start the reassessment proceedings u/s 147. The obtained data was vague and unsupported and was without proper verification, they contended.
- Values of Acquisition: The appellant on the merits disputed the addition of Rs 91,74,000 as short-term capital gains, claiming that the property in question did not belong to the firm but to individual partners. They asserted that no investment was made via the firm in the sold assets.
- Jurisdictional Problem: It was contended that the assumption of jurisdiction u/s 147 was prohibited.
- Non-Service of Tax Notice: The appellant claimed that the legal notice u/s 148 was not served upon them, as it was returned undelivered by the postal authorities.
Proceedings Before the Tribunal
- Reassessment Proceedings: It was remarked by the tribunal that the AO moved on the belief that the property sold is of the firm, while it was founded through documentary proof that the property belonged to the individual partners. The tribunal discovered that the reassessment was on the grounds of the wrong factual assumptions even after the firm’s non-PAN status and non-filing of returns.
- Service of Tax Notice: It was confirmed by the tribunal that the notice u/s 148 was returned unserved, depicting that it was sent to an address in which the firm no longer existed as the property had been sold before the beginning of the reassessment proceedings.
- More Proof: The appellant at the time of the procedure of the appeal furnished other proof along with the sale deeds and bank statements of the individual partners depicting the sale proceeds credited to their personal accounts. The same documents were essential in demonstrating that the property belonged to the partners and not the firm, the tribunal noted.
- Tribunal’s judgment: Considering the factual errors in the assumptions of the AO and the non-service of the notice, the tribunal quashed the reassessment proceedings. AO is not able to regard the documentary proof furnished via the appellant which shows the property ownership via the partners and the absence of any financial transactions pertinent to the sale in the firm accounts.
Closure: In the case of Chaudhary Stone Crusher vs. ITO, ITAT Delhi’s decision shows the necessity of factual precision and due process in reassessment proceedings under the Income Tax Act. The principle of natural justice is been carried out by the tribunal by considering the non-service of notice and the right of the appellant to show the proof specifying the ownership of the assets.
| Case Title | Chaudhary Stone Crusher Vs. ITO |
| Case No. | ITA No. 2314/Del/2023 |
| Date | 24.04.2024 |
| Assessee by | Shri C. S. Anand, Adv |
| Revenue by | Shri Vivek Kumar Upadhyay, Sr. DR |
| Delhi ITAT | Read Order |