Shri Sujay Pankajbhai Shah, Ahmedabad V. The Asstt. Commissioner of Income Tax, OSD Circle-10, Ahmedabad

ITA 1138/AHD/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9643 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAURYA S SHUKLA
• Keywords: Bonafide belief; Reason to believe
• Section: 143(3); 143(1); 147; 131; 148

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1138/AHD/2016 ( ASSESSMENT YEAR : 2009-10) SHRI SUJAY PANKAJBHAI SHAH 3/4, SWEET HOME SOCIETY, NR. SHREYAS FOUNDATION, AMBAWADI, AHMEDABAD / VS. ASST. COMMISSIONER OF INCOME TAX (OSD) CIRCLE 10, AHMEDABAD ./ ./ PAN/GIR NO. : AGSPS6448Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JAIMIN SHAH, A.R. / RESPONDENT BY : SHRI SHAURYA S. SHUKLA, SR.D.R. DATE OF HEARING 10/12/2020 !'# / DATE OF PRONOUNCEMENT 04/01/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-5, AHMEDABAD, (CIT(A) IN SHORT), DATED 16.02.2016 ARISING IN THE ASSESSMENT ORDER DATED 29.01.2014 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2009-10. ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E TWO FOLD; (I) CHALLENGING THE LEGALITY OF JURISDICTION UNDER SECT ION 147 OF THE ACT AND (II) CHALLENGING THE ACTION OF THE ASSESSING OF FICER (AO) IN MAKING ADDITION OF RS.7,79,178/- ON MERITS AS UNACC OUNTED INCOME IN PURSUANCE OF ALLEGED WRONGFUL JURISDICTION ASSUM ED UNDER S.147 OF THE ACT. 3. WHEN MATTER WAS CALLED FOR HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CHALLENGED THE ACTION OF THE AO IN USURPING JURISDICTION UNDER SECTION 147 OF THE ACT WRONGFULLY. THE LEARNED AR CONTENDED THAT THE REASONS RECORDED BY T HE AO DO NOT MEET THE PRE-REQUISITES FOR ASSUMPTION OF JURISDICT ION AND THEREFORE THE NOTICE ISSUED UNDER S.148 OF THE ACT PURSUANT T O THE REASONS SPELT OUT IS BAD IN LAW. IT WAS THUS ESSENTIALLY S UBMITTED THAT CONSEQUENT RE-ASSESSMENT ORDER IS WITHOUT AUTHORITY OF LAW. FOR THIS PURPOSE, THE LEARNED COUNSEL ADVERTED OUR ATTENTION TO THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT AND FIRSTL Y CONTENDED THAT NOTICE UNDER S.148 OF THE ACT WAS ISSUED ON THE ASS ESSEE DATED 19.03.2013. THE LEARNED COUNSEL THEREAFTER REFERRE D TO THE REASONS RECORDED WHICH IS SHOWN TO BE DATED 26.03.2013. IT WAS THUS CONTENDED THAT THE REASONS WERE RECORDED SUBSEQUENT TO THE ISSUANCE OF NOTICE AND THEREFORE THE WHOLE ACTION OF THE AO IS VITIATED IN LAW. AT THIS STAGE ITSELF, WE ALSO TAKE COGNIZANCE OF TH E COUNTER SUBMISSIONS OF THE REVENUE IN THIS REGARD. THE LEAR NED DR FOR THE REVENUE POINTED OUT THAT THE REASONS WERE ACTUALLY RECORDED ON 19.03.2013 ITSELF WHICH IS EVIDENT FROM THE PROPOSA L SENT BY THE AO TO THE JT.CIT FOR HIS APPROVAL UNDER S.151 OF THE A CT ON 19.03.2013. THE REASONS RECORDED SHOWING DATE OF 26.03.2013 IS MERELY A DATE ON WHICH THE REASONS RECORDED MIGHT HAVE BEEN REPRO DUCED AND PROVIDED TO THE ASSESSEE AND DOES NOT CONVEY THE DA TE OF RECORDING OF REASONS PER SE. WE FIND FROM THE PROPOSAL MEMO UNDER S.151 OF THE ACT DATED 19.03.2013 THAT EXACT REASONS WERE PR E-EXISTING ON THE ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 3 - DATE OF ISSUANCE OF THE NOTICE. THUS, WE SEE NO ME RIT IN THIS FIRST LINE OF ARGUMENT. 4. THE LEARNED COUNSEL NEXT ADVERTED TO THE BODY OF REASONS RECORDED AND CONTENDED THAT A BARE READING OF THE R EASONS RECORDED WOULD SHOW THAT THE INITIATION OF PROCEEDINGS UNDER S.147 OF THE ACT BY THE AO IS BASED ON CERTAIN INFORMATION STATED TO BE RECEIVED FROM THE DIRECTOR OF INCOME TAX (I&CI), NEW DELHI VIDE A LETTER DATED 07.03.2013. BASED ON SUCH INFORMATION, THE AO HAS PROPOSED TO REOPEN THE CASE INTER ALIA WITH EXPRESSION THE SAID TRANSACTIONS REQUIRED TO BE VERIFIED THOROUGHLY. THE LEARNED COUNSEL IN THIS CONTEXT SUBMITTED THAT NO REFERENCE TO THE NATURE A ND DESCRIPTION OF INFORMATION PURPORTEDLY RECEIVED FROM THE OFFICE OF DIRECTOR OF INCOME TAX IS DISCERNIBLE EITHER FROM THE REASONS R ECORDED OR EVEN FROM ASSESSMENT ORDER. IT WAS THUS SUBMITTED THAT THE AO NOT PRIVY TO ANY SUCH INFORMATION WHICH IS THE BASIS FOR DRAS TIC ACTION TAKEN UNDER S.147 OF THE ACT TO RE-OPEN A COMPLETED/TIME BARRED ASSESSMENT. THE LEARNED COUNSEL THEREAFTER SUBMITT ED THAT IT IS OSTENSIBLE FROM THE REASONS RECORDED THAT THE AO DI D NOT FORM ANY FIRM REASONS TO BELIEVE CONTEMPLATED UNDER SECTIO N 147 OF THE ACT TOWARDS ESCAPEMENT OF INCOME. THE LEARNED COUNSEL EXHORTED THAT A PLAIN READING OF THE REASONS PROVIDED WOULD OVERTLY SHOW THAT THE AO MERELY WANTED TO MAKE ENQUIRY TO FIND OUT THE CO RRECTNESS OF SO- CALLED INFORMATION CLAIMED TO HAVE BEEN RECEIVED FR OM THE DIRECTOR OF INCOME TAX. THE LEARNED COUNSEL ACCORDINGLY SUB MITTED THAT A BONAFIDE BELIEF TOWARDS ESCAPEMENT OF INCOME IS C LEARLY ABSENT IN THE PRESENT CASE. THE LEARNED COUNSEL CONSEQUENTLY SUBMITTED THAT THE ENTIRE ACTION OF THE AO IS A COMPLETE NON-START ER AND THUS REQUIRES TO BE STRUCK DOWN. THE LEARNED COUNSEL PO INTED OUT THAT THERE ARE LONG LINE OF JUDICIAL PRECEDENTS DELIVERE D BOTH BY THE JURISDICTIONAL HIGH COURT AS WELL AS OTHER HIGH COU RTS FOR THE PROPOSITION THAT RE-ASSESSMENT NOTICE FOR MERE VERI FICATION OR FOR ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 4 - CONDUCTING A FISHING ENQUIRY IS NOT PERMISSIBLE IN LAW NOTWITHSTANDING THAT THE RETURN OF INCOME WAS NOT S UBJECTED THE SCRUTINY UNDER S.143(3) OF THE ACT. THE LEARNED COU NSEL ACCORDINGLY CONTENDED THAT ACTION OF THE AO FOR INVOKING JURISD ICTION IS NOT CONSISTENT WITH THE MANDATE OF LAW AND THEREFORE RE QUIRES TO BE QUASHED. 5. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW TO DEFEND THE ACTION OF THE REVEN UE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR ISSUANCE OF N OTICE UNDER SECTION 147 OF THE ACT WHICH IS UNDER CHALLENGE. I T WILL BE APT TO REPRODUCE REASONS RECORDED HEREUNDER FOR EASY REFER ENCE:- THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR TH E A.Y.2009-10 ON 25/09/2009 DECLARING TOTAL INCOME OF RS.2260660/- T HE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. HOWEVER, NO SCRUTINY ASSESS MENT U/S. 143(3) HAS BEEN MADE. THE SEARCH & SEIZURE ACTION WAS CARRIED OUT B Y THE DEPARTMENT ON 25.11.2009 IN THE CASE OF M/S. MAHASAGAR SECURITIES LTD., WHICH ALSO COVERED ITS GROUP COMPANIES, CONTROLLED BY SHRI MUKESH M. C HOKSHI, AT MUMBAI. SHRI MUKESH CHOKSHI HIMSELF ADMITTED THAT IN HIS STATEME NT RECORDED ON OATH U/S. 131 OF THE IT. ACT ON 16.01.2013 THAT HIS GROUP COM PANIES ARE PROVIDING ENTRY FOR TAKING PROFIT OR LOSS BY SHOWING PURCHASE OR SALE OF THE SHARES AND SECURITIES TB VARIOUS PARTIES ACROSS INDIA ON WHICH HE CHARGED CERTAIN COMMISSION FROM THE BENEFICIARIES. THIS INFORMATION IS RECEIVED BY THIS OFFICE FROM THE DIRECTOR OF INCOME TAX (I&CI); NEW DELHI, VIDE LETTER DATED 07.03.2013. ON SCRUTINY OF THE DATA/DETAILS RECEIVE D, IT IS ASCERTAIN THAT THE ASSESSEE SHRI SUJAY PANKAJBHAI SHAH IS ALSO INVOLVED IN THE TAKING ENTRY FROM THE GROUP COMPANIES BELONGS TO SHRI MUKESH CHO KSHI DURING THE F.Y.2008-09 RELEVANT TO A.Y. 2009-10 AND INVOLVED IN TOTAL TRANSACTION OF RS. 804836/- BY SHOWING FICTITIOUS ENTRIES OF PURCHASE AND SALE OF SHARE AND SECURITIES. THEREFORE, IN THE CASE OF THE ASSESSEE, THE SAID TRANSACTIONS REQUIRED TO BE VERIFIED THOROUGHLY. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y. 2009-10 DUE TO THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THEREFORE, THIS CAS E NEEDS TO BE RE-OPENED BY ISSUING NOTICE U/S. 148 OF THE IT ACT, 1961. 6.1 A BARE GLANCE OF THE REASONS RECORDED GIVES AN UNFLINCHING IMPRESSION THAT POWERS EXERCISED UNDER SECTION 147 OF THE ACT WAS TO ENABLE THE AO TO CARRY OUT DETAILED VERIFICATION OF THE VARIOUS ASPECTS OF SUCH MATTER IN REFERENCE MADE TO THE AO HEREIN BY THE ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 5 - OFFICE OF DIRECTOR OF INCOME TAX, DELHI. THUS, IT IS SELF-EVIDENT THAT NO DEFINITE FORMATION OF BELIEF TOWARDS ESCAPE MENT OF INCOME WAS EXISTING AT THE TIME OF ISSUANCE OF NOTICE BY T HE AO. WHAT THE AO REALLY INTENDED IS TO MAKE AN OBJECTIVE INQUIRY INTO THE CORRECTNESS OR OTHERWISE OF THE INFORMATION RECEIVE D FROM OTHER WING OF THE DEPARTMENT TO FIND OUT IF THERE IS ANY ESCAPEMENT OF CHARGEABLE INCOME INDEED. THE AO MERELY SEEKS TO C ONCLUDE THAT THERE IS A CASE FOR INVESTIGATION TO UNEARTH AND AS CERTAIN TRUTHFULNESS OF ALLEGED TRANSACTIONS. THIS IS NOT THE SAME THIN G AS SAYING THAT THERE ARE REASONS TO BELIEVE THAT SOME CHARGEABLE INCOME HAS ESCAPED ASSESSMENT. OSTENSIBLY, THE AO, AT BEST, H AS MADE OUT A CASE OF PROBABLE ESCAPEMENT IN CONTRAST TO A DEFINI TE PRIMA FACIE CONCLUSION OF ESCAPEMENT OF INCOME. MERE QUOTING O F SECTION OR ITERATION OF EXPRESSION REASON TO BELIEVE WOULD N OT SATISFY THE REQUIREMENT OF LAW. THUS, THE REQUIREMENT OF SECTI ON 147 OF THE ACT IS CLEARLY NOT FULFILLED IN THE INSTANT CASE. 6.2 NEEDLESS TO SAY, THE PROVISIONS OF SECTION 147 OF THE ACT WHICH GIVES DRASTIC POWERS TO REOPEN A TIME BARRED/ COMPLETED ASSESSMENT CAN BE INVOKED ONLY WHEN THE CONDITIONS PRECEDENT FOR EXERCISING THE JURISDICTION CLEARLY EXISTS. EXERCI SE OF POWER UNDER SECTION 147 OF THE ACT CANNOT BE MADE ON THE BASIS OF MERE IPSE DIXIT OF REVENUE. A RECEIPT OF SOME INFORMATION FROM AN OTHER WING OF THE DEPARTMENT CANNOT BE EQUATED WITH A REALIZAT ION OF ESCAPEMENT PER SE . SUCH INFORMATION/EVIDENCE CAN POSSIBLY GIVE BIRTH TO REALIZATION OR BELIEF OF THE AO AS CONTEMP LATED UNDER SECTION 147 OF THE ACT. HOWEVER, AN INDEPENDENT FO RMATION OF BELIEF THEREON IS SINE QUA NON FOR TAKING ACTION UNDER SECTION 147 OF THE ACT. 6.3 IT IS WELL SETTLED BY PLETHORA OF JUDICIAL PREC EDENTS, INCLUDING PR.CIT VS. MANZIL DINESHKUMAR SHAH (2018) 406 ITR 3 26 (GUJ), THE ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 6 - SLP AGAINST WHICH HAS BEEN DISMISSED IN (2019) 101 TAXMANN.COM 259 (SC) THAT REOPENING IS NOT PERMISSIBLE MERELY TO SEEK INVESTIGATION OF FACTS COLLECTED WITHOUT HOLDING AT LEAST PRIMA FACIE BELIEF TOWARDS ESCAPEMENT OF INCOME BASED ON RELEVA NT MATERIAL. THE CONDITIONS SET OUT FOR INVOCATION OF SECTION 14 7 OF THE ACT HAVE NOT BEEN MET IN THE INSTANT CASE. HENCE, THE NOTIC E ISSUED UNDER SECTION 148 OF THE ACT IS NOT BACKED BY AUTHORITY O F LAW AND CONSEQUENTLY BAD IN LAW. 6.4 THE ASSESSMENT UNDER SECTION 147 OF THE ACT AS A SEQUEL TO THE ILLEGAL NOTICE UNDER SECTION 148 OF THE ACT IS THER EFORE A NULLITY AND REQUIRES TO BE QUASHED. 7. IN THE RESULT, THE ASSESSEE SUCCEEDS ON LEGAL GR OUND TOWARDS VALIDITY OF JURISDICTION UNDER SECTION 147 OF THE A CT. NEITHER HAS THE LEARNED COUNSEL FOR THE ASSESSEE ADDRESSED US O N THE ASPECTS OF MERITS AT THE TIME OF HEARING NOR DO WE CONSIDER IT NECESSARY TO DWELL UPON THE SAME. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/01/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. THIS ORDER PRONOUNCED IN OPEN COURT ON 04/01/202 1 ITA NO.1138/AHD/16 [SHRI SUJAY P. SHAH VS. ACIT(OSD)] A.Y. 2009-10 - 7 - BY ORDER / 4 /5 *+#4 56)