Naval Kishore Khaitan, Visakhapatnam V. The Assistant Commissioner of Income Tax, Circle-1(1), Visakhapatnam

CO 41/VIZ/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4191 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 16-06-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Earning of tax free income; Reassessment proceedings; Capital Gains
• Section: 148; 143(3)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.74/Viz/2021 (निर्धारण वर्ा / Assessment Year : 2012-13) Asst.Commissioner of Income Tax Circle-1(1) Visakhapatnam Vs. Sri Naval Kishore Khaitan Prop : M/s SRG Minerals & Metals D.No.28-16-18/2, Khaitan Towers, Suryabagh Visakhapatnam [PAN : AGVPK0314L] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Cross Objection No.41/Viz/2021 Arising out of I.T.A.No.74/Viz/2021 (निर्धारण वर्ा / Assessment Year : 2012-13) Sri Naval Kishore Khaitan Prop : M/s SRG Minerals & Metals D.No.28-16-18/2, Khaitan Towers, Suryabagh Visakhapatnam [PAN : AGVPK0314L] Vs. Asst.Commissioner of Income Tax Circle-1(1) Visakhapatnam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) राजस्व की ओर से / Revenue by : Shri S.P.G.Mudaliar, DR निर्ााररती की ओर से/ Assessee by : Shri G.V.N.Hari, AR सुिवधई की तधरीख / Date of Hearing : 27.04.2022 घोर्णध की तधरीख/Date of Pronouncement : 26.05.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by revenue against the order of the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]-1, Visakhapatnam in ITA 2 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam No.10656/2019-20/CIT(A)-1/VSP/2020-21 dated 14.09.2020 for the Assessment Year (A.Y.) 2012-13 and the cross objections are filed by the assessee in support of the order of the Ld.CIT(A). 2. Brief facts of the case are that the assessee is an individual, filed the return of income for the A.Y.2012-13 on 18.09.2012 admitting total income of Rs.15,41,278/- after claiming exemption of Rs.27,06,612/- in respect of long term capital gains on sale of shares. The assessment was completed u/s 143(3) of the Act on 10.03.2015. The Assessing Officer(AO) reopened the case by issuing notice u/s 148 on 19.03.2019 on the basis of information received from investigation unit, Kolkata to the effect that the assessee was one of the beneficiaries of pre-arranged bogus long term capital gains. The case was taken up for scrutiny by issue of notice u/s 143(2) on 30.09.2019. The assessment proceedings were kept pending on account of interim order of Hon’ble A.P.High Court in the writ petition filed by the assessee and the same were revived vide notice dated 6.1.2020 and the writ petition was dismissed by the Hon’ble High Court. In the reasons recorded for reopening, it was mentioned that the reopening was made as the assessee did not admit the long term capital gains arising from the sale of shares. However, in the reassessment order, the AO himself mentioned that the assessee had shown the long term capital gains in the income tax 3 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam return in schedule E1 as exempt income. Therefore, there is no failure on the part of the assessee to disclose the relevant facts. The AO simply wanted to make further enquiries on the basis of certain information received from the Investigation Wing, Kolkata, in order to ascertain the correctness of the claim of the assessee. The AO did not even quantify how much income has escaped assessment. Further contention of the assessee is that primary condition for reopening the assessment beyond 4 years from the assessment year was not satisfied, therefore, reopening is invalid and is liable to be quashed as void-ab-initio. The AO did not accept the contention of the assessee and passed order u/s 143(3) r.w.s. 147 by making disallowance of Rs.27,06,612/- received in the previous year 2011- 12 on account of sale proceeds and he came to conclusion that this is nothing but unexplained cash credits made through pre arranged long term capital gains. 3. On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) after considering the case of the assessee held that the assessment was initiated to verify the genuineness of exempt income in the original return. Suspicion cannot be the basis for reopening the assessment and more so, the assessment is governed by provisions of section 147 of the Act. The Ld.CIT(A) also relied on the decision of 4 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam jurisdiction bench of ITAT and quashed notice u/s 148 dated 19.03.2019 as invalid and consequently held the reassessment proceedings as void-ab- initio. 4. On being aggrieved, the revenue is in appeal before the Tribunal and raised the following grounds : 1. The order of the Ld.CIT(A)-1, Visakhapatnam is erroneous on facts and in law. 2. The Ld.CIT(A)-1, Visakhapatnam has erred both in law and on facts in quashing the notice issued u/s 148 of the Act as invalid and illegal, especially when the jurisdictional Hon’ble High Court of Andhra Pradesh dismissed the writ petition challenging the validity of the same notice issued u/s 148 of the Act. 3. The Ld.CIT(A) failed to appreciate the material evidences such as barring of the given penny scrips M/s Ecowave Infotech Limited’ and ‘BSR Finance and Construction Ltd.’ by the stock exchanges, several inconsistencies in the transactions performed by the assessee like gap of more than 6 months between the purchase of the shares and subsequent payment by assessee, poor financials of the scrips. 4. The Ld.CIT(A) ought to have considered various judicial pronouncements, including the recent judgements like Hon’ble Supreme Court and Hon’ble Delhi High Court judgement in the case of Saman Poddar Vs. Income Tax Officer (2019) 112 taxmann.com 330 (SC) (2020) 268 taxman 320 (SC) [2019] 112 taxmann.com 329 (Delhi) that have confirmed the addition based on bogus LTCG before deleting the addition of Rs.27,06,612/- in the instant case. 5. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and or at the time of hearing of appeal. 5 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam For these and other grounds that may be urged at the time of appeal hearing, it is prayed that all these above additions made on bogus LTCG be restored. Now the question before us is whether the notice issued u/s 148 is valid under the eyes of law or not. The Ld.DR submitted that there are many inconsistencies in the transactions performed by the assessee like gap of more than six months between the purchase of the shares and subsequent payment by the assessee. Therefore pleaded for setting aside the order passed by the Ld.CIT(A). 5. On the other hand, the Ld.Counsel for the assessee submitted that all facts are brought out in the original return of income and the Ld.AO has passed order u/s 143(3) of the Act. Therefore, the assessment cannot be reopened beyond 4 years without any material to establish that there is escapement of income and assessee’s failure to disclose fully and truly all material facts. In the case on hand, the assessee has completely furnished all the material facts before the AO at the time of filing the return of income and the AO has also considered the original return and passed order u/s 143(3) of the Act. The assessee relied on the following decisions : (i) Hon’ble Bombay High Court in the case of Usha Exports Vs. CIT, 185 DTR 87 6 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam (ii) Hon’ble High Court of Andhra Pradesh and Telangana in the case of Anne Venkata Vishnu Vara Prasad Vs. ACIT 169 DTR 377 He further submitted that the Ld.CIT(A) has considered jurisdictional High Court’s decisions and various judicial pronouncements and passed the order. Therefore, he pleaded that the order passed by the Ld.CIT(A) to be confirmed. 6. We have heard both the parties and perused the material placed on record. It is an admitted fact that the assessment was reopened beyond 4 years. It is also an admitted fact that the assessee has claimed exemption of long term capital gains in the original return of income and the reopening notice was issued by the AO only for the purpose of verification of genuineness of the exempt income. The AO reopened the assessment based on the information received from investigation wing that the assessee is also one of the beneficiaries of pre arranged bogus long term capital gains, but the AO has not brought out any material evidence to establish that the assessee is also involved in this bogus sale transactions and claimed long term capital gains. The Ld.CIT(A) has considered the decision of jurisdictional High Courts as well as Hon’ble Bombay High Court and passed a detailed speaking order. We have also gone through the decision of Hon’ble Bombay High Court in the case of Usha Exports Vs. CIT 7 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam 185 DTR 87 who held that “the period of four years is of significance because of the first proviso to S.147 of the Act. It stipulates an additional requirement when the assessment is sought to be reopened after the expiry of 4 years from the end of relevant assessment year and where an assessment order u/s 143(3) is made for the relevant assessment year, then no action shall be taken during the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year for the assessee’s failure to disclose fully and truly all material facts necessary for his assessment for that year. Reassessment shall not be undertaken on a mere change of opinion and reassessment proceedings are not akin to review.” We have also gone through the decision rendered by the Hon’ble Jurisdictional High court of Andhra Pradesh and Telangana has held that “the jurisdictional condition precedent for reopening an assessment beyond a period of 4 years was that there must be failure on the part of the petitioner to disclose fully and truly all the material facts necessary for assessment for that year and also that the income chargeable to tax had escaped assessment would amount to or was likely to one lakh rupees or more. In the absence thereof, reopening of such assessment beyond the period of 4 years cannot be countenanced.” In this case also, 8 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam there is no failure on the part of the assessee to furnish all necessary material for the purpose of assessment. The Ld.CIT(A) considered the ratio laid down in the above said decisions and passed order saying that the reassessment was initiated only to verify the genuineness of the exemption claimed in the original return. Suspicion cannot be the basis for reassessment and more so when the reassessment is governed by the proviso to sec.147 of the Act. Therefore, we are of the firm view that the Ld.CIT(A) has rightly appreciated the ratio laid down by the jurisdiction bench of ITAT as well as Hon’ble Bombay High Court and quashed the reassessment proceedings as void-ab-initio. We do not find any infirmity in the order passed by the Ld.CIT(A). Hence, the grounds raised by the revenue are dismissed. 7. The assessee filed cross objections in support of the order of the Ld.CIT(A). Since the appeal of the revenue is dismissed, the cross objections filed by the assessee becomes infructuos, hence, dismissed. 8. In the result, appeal of the revenue as well as the cross objections of the assessee are dismissed. 9 ITA No.74/Viz/2021 & CO No.41/CO/Viz/2021, A.Y.2012-13 Shri Naval Kishore Khaitan, Visakhapatnam Order Pronounced in open Court on 26 th May, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIAL MEMBER Dated : 26.05.2022 L.Rama, SPS आदेश की प्रनतनिनि अग्रेनषत/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Circle-1(1), Prathyakshakar Bhavan, Sector-8, MVP Double Road, Visakhapatnam 2. निर्धाऩरती/ The Assessee– Sri Naval Kishore Khaitan, Prop : M/s SRG Minerals & Metals, D.No.28-16-18/2, Khaitan Towers, Suryabagh, Visakhapatnam 3. प्रर्ाि आयकर आयुक्त / The Pr.Commissioner of Income Tax-1, Visakhapatnam 4. आयकर आयुक्त (अपील) / Commissioner of Income Tax (Appeals)-1, Visakhapatnam 5. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam