By TIOL News Service

JAIPUR, JUNE 07, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether merely because assessee did not ask for the material in possession of AO and did not object to initiation of proceedings u/s 147 at the assessment stage, is no reason to conclude that assessee has waived its rights for all times to come. YES is the answer.

Facts of the case:

As a a result of search/survey u/s 132/133A conducted at the residential and business premises of Surender Kumar Jain and his brother Virendra Jain, the assessee's return was picked up for scrutiny. After issuing of notice u/s 147, the assessee was show caused as to why the addition of Rs. 48.00 lacs should not be made in the hands of assessee as accommodation entry. The assessee having failed to convince the AO why shares were sold on a premium by a company only two months old challenged the addition before the CIT(A). The challenge was posed on various grounds before the CIT(A) including the grounds that the material relied upon to make the addition was never confronted to the assessee.

On appeal, the ITAT held that,

++ the prayer of the AR that the department having collected the material at the back of the assessee and relying upon the same has committed such an error, which warrants that the addition be deleted, cannot be accepted. The procedural violation is capable of being addressed by addressing the stage at which the lapse has occurred. Accordingly, setting aside the aforesaid finding of the CIT(A), this Tribunal is of the view that simply because the assessee did not ask for the material in possession of the AO and did not object to the initiation of proceedings u/s 147, at the assessment stage, cannot be a reason to conclude that the assessee has waived its rights for all times to come. It is well settled that the jurisdictional issue being a foundational issue has to be justified whenever it is challenged by the affected party. The law does not contemplate that the foundational fact and challenge thereto can be said to be waived in the peculiar facts of the present case. The assessee is within his rights to challenge the jurisdiction before the CIT(A). The challenge having been posed has to be addressed by the tax authorities. Accordingly, the impugned order is set aside and the issue is restored back to the file of the CIT(A) with a direction to confront the assessee within the material relied upon and decide the jurisdictional issue which the assessee has raised and thereafter to proceed to decide the issue on merits if so warranted.

(See 2017-TIOL-805-ITAT-JAIPUR)