SHRI SUMER SINGH CHANDEL, ROOPANGARH V. INCOME TAX OFFICER, WARD-2, KISHANGARH

ITA 1037/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6009 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Assessee Lawyers: O P BATHEJA ITP
• Keywords: Unexplained investment; Transactions in derivatives; Reassessment proceedings
• Section: 147; 148; 144; 69

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 1037/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 SHRI SUMER SINGH CHANDEL, 222, NEAR SCHOOL, ROOPANGARH, KISHANGARH-305801. CUKE VS. THE ITO, WARD-2 KISHANGARH. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AEXPC 6338 Q VIHYKFKHZ@ AP PELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI O.P. BATHEJA (ITP) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 29/10/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 23/01/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), AJMER DATED 26.07.2018 FOR THE ASSESSMENT Y EAR 2010-11 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL:- THE LD. CIT(A), AJMER HAS GROSSLY ERRED ON FACTS A ND IN LAW IN CONFIRMING THE ADDITION OF RS. 7,49,856/- MADE U/S 69 OF THE ACT, 1961. ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 2 2. FURTHER, IN FORM NO. 36, THE ASSESSEE HAS ALSO T AKEN THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL AS UNDER:- 1. THE LD. AO HAS GROSSLY ERRED IN LAW IN INITIATI NG THE PROCEEDINGS U/S 147/148 ON HIS FALLACIOUS ASSUMPTIO NS, WITHOUT ANY APPLICATION OF MIND AND WITHOUT FULFILLING THE REQUIREMENTS OF LAW. THEREFORE, THE NOTICE ISSUE BY HIM U/S 147/148 IS BAD IN LAW AND VOID AB INITIO AND DESERVES TO BE QUASHED. 2. THE LD. PR. CIT, AJMER HAS ACCORDED APPROVAL TO ISSUE NOTICE U/S 148. WITHOUT ANY APPLICATION OF MIND AND THUS D ID NOT FULFILL THE MANDATE OF PROVISION OF SEC. 151. THEREFORE, TH E NOTICE ISSUED U/S 148 ON THE BASIS OF SUCH APPROVAL DESERVED TO B E QUASHED. 3. THE REASONS RECORDED BY THE AO FOR INITIATING PR OCEEDINGS U/S 147/148 ARE TOTALLY DIFFERENT THAN THE ADDITION MAD E BY THE AO AND THEREFORE, THE REOPENING ITSELF IS NULL AND VOI D. 3. THE LD. AR HAS SUBMITTED THAT THE ADDITIONAL GRO UNDS ARE PURELY A LEGAL GROUNDS AND IT GOES TO THE ROOT OF THE MATTER , THE SAME SHOULD BE ADMITTED IN THE INTEREST OF JUSTICE. IN SUPPORT, RE LIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF NA TIONAL THERMAL POWER CORPORATION LTD. VS. CIT 229 ITR 383. AFTER H EARING BOTH THE PARTIES, THE ADDITIONAL GROUND BEING A PURELY LEGAL GROUND, THE SAME IS BEING ADMITTED FOR ADJUDICATION. 4. FIRSTLY, WE TAKE UP ONE OF THE ADDITIONAL GROUND S TAKEN BY THE ASSESSEE WHEREIN HE HAS CHALLENGED THE ORDER PASSED BY THE ASSESSING OFFICER U/S 147 OF THE ACT HOLDING THAT THE REASONS RECORDED BY THE AO FOR INITIATING THE PROCEEDINGS U/S 147 OF THE ACT A RE TOTALLY DIFFERENT ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 3 THAN THE ADDITION MADE BY THE AO AND THEREFORE, THE REOPENING ITSELF IS NULL AND VOID AND LIABLE TO BE QUASHED. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT THE NOTIC E U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29.03.2017 AFTER RECO RDING THE REASONS AND SEEKING THE NECESSARY PERMISSION OF THE COMPETE NT AUTHORITY AND THEREAFTER THE ASSESSEE FILED HIS RETURN OF INCOME ON 18.12.2017 DECLARING TOTAL INCOME OF RS. 1,42,108/- AND THE AS SESSMENT WAS THEREAFTER COMPLETED U/S 147 R.W.S. 144 OF THE ACT WHEREIN AN AMOUNT OF RS. 7,49,856/- WAS BROUGHT TO TAX AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 6. THE REASONS RECORDED BY THE AO BEFORE ISSUANCE O F NOTICE U/S 148 WHICH READS AS UNDER:- ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, IT REVEALS THAT THE ASSESSEE HAS MADE TRANSACTIONS AS PER NMS CYCLE-1 M ORE THAN RS. 10. LACS I.E. RS. 13,43,18,580/- IN THE FUTURE & OPTION (F&O) AND DELIVERY BASIS DURING THE PERIOD OF 01/04/2009 TO 31/03/2010. THE ASSESSEE WAS PROVIDED WITH AN OPPOR TUNITY TO EXPLAIN THE TRANSACTIONS. HOWEVER, THE ASSESSEE HAS FAILED TO SUBMIT ANY EXPLANATION IN THIS REGARD. IN ABSENCE O F RETURN OF INCOME FOR AY 2010-11 AS WELL AS THE EXPLANATION OF THE ASSESSEE, THE ABOVE TRANSACTIONS IS NOT OPEN FOR VE RIFICATION. I HAVE, THEREFORE, REASONS TO BELIEVE THAT ON ACCOUNT OF NON- AVAILIABILITY OF ADEQUATE DETAILS ON THE RECORD, IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 4 FURTHER, IT IS PERTINENT TO MENTION HERE THAT AS PE R THE PROVISIONS OF CLAUSE (A) OF EXPLANATION 2 OF SECTION 147 OF TH E INCOME-TAX ACT, 1961, WHERE NO RETURN OF INCOME HAS BEEN FURNI SHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY PERSON IN RESPECT OF WHICH HE IS ASSESSEABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX, SHALL ALSO BE DEEMED TO B E INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES I HAVE SUF FICIENT REASONS TO BELIEVE THAT THE ASSESSEE HAS NOT SHOWN PROFIT ON THE SAID TRANSACTIONS IN RESPECT OF WHICH HIS ASSESSABL E UNDER THE INCOME-TAX ACT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. AS SUCH THE IN COME TO THE TUNE OF RS. 13,43,18,580/- HAS ESCAPED ASSESSMENT A S THE ASSESSEE HAS NOT FILED RETURN OF INCOME FOR THE AY 2010-11. THUS, IT IS A FIT CASE TO ISSUE A NOTICE UNDER SECTION 14 8 OF THE I. T. ACT, 1961 FOR INITIATING THE ASSESSMENT PROCEEDINGS UNDE R SECTION 147 OF THE INCOME-TAX ACT, 1961. THEREFORE, APPROVAL OF WORTHY PR. CIT IS REQUESTED TO INITIATE PROCEEDINGS U/S 147 IN THE INSTANT CASE. 7. ON PERUSAL OF THE REASONS SO RECORDED BY THE ASS ESSING OFFICER, IT IS NOTED THAT THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAS MADE TRANSACTIONS AMOUNTING TO RS. 13,43,18,580/- I N THE FUTURE & OPTION AND DELIVERY BASIS, HOWEVER, NO RETURN OF IN COME HAS BEEN FILED AND THE ASSESSEE HAS NOT SHOWN PROFIT ON THE SAID T RANSACTION AND THEREFORE, THE INCOME TO THE TUNE OF RS. 13,43,18,5 80/- HAS ESCAPED ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 5 ASSESSMENT. THEREFORE, THE VERY BASIS FOR ASSUMPTIO N OF JURISDICTION U/S 147 OF THE ACT RELATES TO PROFIT ARISING OUT OF THE TRANSACTIONS IN THE FUTURE AND OPTION DURING THE PREVIOUS YEAR RELEVANT THE IMPUGNED ASSESSMENT YEAR. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER HAS TAKEN NOTE OF THE FA CT THAT THE ASSESSEE HAS NOT DECLARED ANY PROFIT/ LOSS FROM SHARE AND DE RIVATIVE TRADING AND FROM THE DETAILS OF COMMODITY TRADING FURNISHED BY THE ASSESSEE, THE ASSESSEE HAS INCURRED HUGE LOSSES IN COMMODITY TRAD ING. THEREAFTER, THE ASSESSING OFFICER HAS LOOKED AT THE COMMODITY T RADING ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S TRADESWIFT DERIVA TIVE PRIVATE LIMITED AND M/S TRADESWIFT COMMODITIES PRIVATE LIMITED AND NOTED THAT THE ASSESSEE HAS MADE TOTAL PAYMENT OF RS. 7,69,856/- T O THE BROKER AGAINST THE LOSS INCURRED BY THE ASSESSEE IN COMMOD ITY TRADING, HOWEVER, ONLY AN AMOUNT OF RS. 20,000/-WAS PAID FRO M THE ASSESSEES BANK ACCOUNT AND REMAINING PAYMENT OF RS. 7,49,856/ - WAS NOT REFLECTED IN THE ASSESSEE BANK ACCOUNT. THEREFORE, THE SAID AMOUNT OF RS. 7,49,856/- WAS BROUGHT TO TAX AS UNEXPLAINED IN VESTMENT U/S 69 OF THE ACT. 8. WE, THEREFORE, FIND THAT THE REASONS FOR ASSUMPT ION OF JURISDICTION RELATES U/S 147 RELATES TO TRANSACTIONS IN THE FUTU RE AND OPTION AMOUNTING TO RS. 13,43,18,580/- AND IN RESPECT OF W HICH THE ASSESSEE HAS NOT DISCLOSED THE PROFIT IN HIS RETURN OF INCOM E. DURING THE ASSESSMENT PROCEEDINGS U/S 147, THE ASSESSING OFFIC ER HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS INCURRED HUGE LOS S IN COMMODITY TRADING AND THEREFORE, NOTHING HAS BEEN BROUGHT TO TAX. FIRSTLY, IT IS NOT VERY CLEAR WHETHER THE TRANSACTION IN THE FUTURE AN D OPTION AND THE ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 6 TRANSACTION EXAMINED BY THE ASSESSING OFFICER RELAT ING TO COMMODITY TRADING ARE SIMILAR TRANSACTIONS OR NOT. SECONDLY, THE REASONS RECORDED TALKS ABOUT THE FACT THAT SUCH INCOME TO THE TUNE O F RS. 13,43,18,580/- HAS ESCAPED ASSESSMENT, HOWEVER, NOTHING TO THAT EF FECT HAS BEEN BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE WHILE C OMPLETING THE ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. EVEN WHE RE THE TRANSACTION IN THE FUTURE AND OPTION AND THE TRANSACTION EXAMIN ED BY THE ASSESSING OFFICER RELATING TO COMMODITY TRADING ARE ASSUMED T O BE SIMILAR TRANSACTIONS, THE FACT THAT THE ASSESSEE HAS INCURR ED A LOSS, THE AO HAS NOT DETERMINED THE LOSS SO INCURRED BY THE ASSESSEE . THEREFORE, WHERE THE BASIS OF ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT IN TERMS OF TRANSACTIONS IN THE FUTURE AND OPTIONS HAS NOT BEEN BROUGHT TO TAX WHILE COMPLETING THE ASSESSMENT PROCEEDINGS, BRINGING TO TAX ANY OTHER INCOME BY INVOKING THE DEEMING PROVISIONS OF SECTIO N 69 OF THE ACT IS BEYOND THE JURISDICTION OF THE ASSESSING OFFICER U/ S 147 OF THE ACT. IT IS A SETTLED LEGAL PROPOSITION THAT ONLY WHERE THE TRA NSACTION WHICH IS SUBJECT MATTER OF ASSUMING THE JURISDICTION U/S 147 OF THE ACT SURVIVE DURING THE COURSE OF EXAMINATION AND FINALLY BROUGH T TO TAX WHILE COMPLETING THE ASSESSMENT PROCEEDING U/S 147, THE A O MAY ALSO BRING TO TAX ANY OTHER INCOME FOUND DURING THE EXAMINATIO N WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE IN THE COURSE OF PROCEEDINGS U/S 147 OF THE ACT. HOWEVER, WHERE THE TRANSACTION WHICH IS THE BASIS FOR ASSUMING OF JURISDICTION U/S 147 DOES NOT SURVIVE AND IS NOT BROUGHT TO TAX FINALLY IN THE HANDS OF THE ASSE SSING OFFICER, THEN IN SUCH A SITUATION EVEN WHERE ANY OTHER INCOME CHARGE ABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E IN THE COURSE OF PROCEEDINGS U/S 147 OF THE ACT, THE SAME CANNOT BE BROUGHT TO TAX IN ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 7 THE HANDS OF THE ASSESSEE. IN THE RESULT, IN THE PR ESENT CASE, THE ADDITION TOWARDS UNEXPLAINED INVESTMENT BY INVOKING DEEMING PROVISIONS U/S 69 OF THE ACT CANNOT BE SUSTAINED FO R THE REASONS THAT THE TRANSACTIONS RELATING TO FUTURE AND OPTION WHIC H WAS THE SUBJECT MATTER OF ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT DOES NOT SURVIVE. 9. IN THIS REGARD, USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT V. JET AIR WAYS (I) LTD.[2011] 331 ITR 236, WHILE EXAMINING EXPLANATION 3 TO SECTI ON 147 OF THE ACT, THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSING OFFICER HAS TO NECESSARILY ASSESS/RE-ASSESS THE INCOME WHICH ESCAP ED ASSESSMENT ON THE BASIS OF THE FORMATION OF THE REASONABLE BELIEF FOR OPENING THE ASSESSMENT. IT IS ONLY ON ASSESSING/REASSESSING SUC H INCOME WHICH HAS ESCAPED ASSESSMENT IN THE REASONS RECORDED, WOULD I T BE OPEN TO THE ASSESSING OFFICER TO ASSESS/REASSESS ANY OTHER INCO ME, WHICH CAME TO HIS NOTICE DURING THE REASSESSMENT PROCEEDINGS. HOW EVER, IN THE ABSENCE OF REASSESSING THE INCOME WHICH ESCAPED ASS ESSMENT AND WHICH WAS THE BASIS FOR FORMATION OF BELIEF IN ISSU ING THE NOTICE, THE ORDER PASSED ON REASSESSMENT IS BAD IN LAW. 10. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER PAS SED U/S 147 CANNOT BE SUSTAINED AND THE ADDITION SO MADE BY THE ASSESS ING OFFICER DESERVED TO BE SET ASIDE. 11. IN THE VIEW OF THE ABOVE, THE OTHER GROUNDS SO RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND HAVE NOT BEEN ADJU DICATED UPON. ITA NO. 1037/JP/2018 SHRI SUMER SINGH CHANDEL VS. ITO 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/01/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/01/2019. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SUMER SINGH CHANDEL, KISHANGARH . 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-2 KISHANGARH. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 1037/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR