The Delhi High Court in the case of Blackstone Capital, Partner Versus ACIT Obligor, served and quashed the reassessment notice as it had been failed by the AO to apply his mind as to whether an investment made by the assessee in the shares was a capital account transaction. The division bench, comprised of Justices Rajiv Shakdher and Tara Vitasta Ganju, noted in the case that the main allegation against the assessee is that the shares, purchased by an Indian company, resulted in the avoidance of taxable income. Therefore, the central issue to which the AO should have applied his mind is whether the investment made in shares by the assessee was a capital account transaction, wherein it has been stated that there are no such allegations of round-tripping. There is no such reference to Section 115A in the show-cause, the notice, or the order issued by the AO. The allegations made by the principal against the petitioner were that the shares were being purchased from an Indian company going by the name Agile Electric Sub-Assembly Pvt. Ltd. According to the respondent or department, it was being led to the avoidance of taxable income. It has been contended by the assessee that no income has accrued or arisen in India, the subject transaction being a capital account transaction, and the remittance was being made to the seller after adjusting the withholding tax, as was ascertained by the respondent. As a result, neither the aforementioned provision of Section 139 nor Section 115A of the Act apply to the petitioner. The department has also argued that because the petitioner chose not to file a return, the fact of non-filing a return would result in the “escapement” of income under Explanation 2 to Section 147 of the Act. In the petitioner’s case, Section 139 of the Act, as well as Section 115A of the Act, must be read in conjunction with the requirement to file an income tax return. It has also been held by the said court that the AO would carry out a de novo exercise. The AO will be dealing with the contentions made by the petitioner that the transaction in issue is a capital-account transaction and that no income whatsoever is ever chargeable to tax accounts, due, or arises in India. , , It has also been ordered by the court that the AO will accord a personal hearing to the authorized representative of the petitioner. A notice will be issued by the AO fixing the date and time of the hearing.

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