Shri Tushar Sompura, Ahmedabad V. The Income tax Officer,Ward-9(4), Ahmedabad

ITA 1182/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9877 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-10-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Reopening of assessment; Principle of natural justice; Reason to believe; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1182/AHD/2013 (ASSESSMENT YEAR: 2003-04) SHRI SOMPURA TUSHAR, 10, MUKHUNDKUNJ SO., OPP. KAMWSHWAR- MAHADEV, ANKUR ROAD, NARANPURA, AHMEDABAD 380013 APPELLANT VS. I.T.O., WARD-9(4), AHMEDABAD RESPONDENT PAN: ABIPS3455A / BY ASSESSEE : SHRI S. N. DIVETIA, A.R. / BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING : 28.10.2016 /DATE OF PRONOUNCEMENT : 30.11.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2003-04 ARISES AGAINST THE CIT(A)-XV, AHMEDABADS ORDER DATED 14 TH FEBRUARY, 2013, IN APPEAL NO. CIT(A)-XV/ITO/9(4)/386/10-11, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . ITA NO.1182/AHD/2013 (SHRI SOMPURA TUSHAR VS. ITO) A.Y. 2003-04 - 2 - 2. THE INSTANT APPEAL RAISES FOLLOWING SUBSTANTIVE GROUNDS: 1.1 THE ORDER PASSED U/S.250 ON 27.7.2011 FOR A.Y. 2003-04 BY CIT(A)-XV, A'BAD UPHOLDING THE ADDITION MADE BY AO IS WHOLLY I LLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGN ED ADDITIONS. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND IN FACTS IN CONFIRMING THAT THE INVESTMENT OF RS.9,27,576/- IN SHARES WAS UNACC OUNTED. 2.1 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION OF RS.9,27,576/-AS UNACCOUNTED. 3.1 THE LD.CIT(A) HAS ERRED IN UPHOLDING THAT THE INVESTMENT IN SHARE WAS BOGUS IN SPITE OF EVIDENCE SUCH AS DOCUMENTS, BILL ETC. 3. WE FIRST COME TO ASSESSEES LEGAL GROUND NO.1.1 CHALLENGING THE LOWER APPELLATE ORDER UPHOLDING VALIDITY OF THE IMPUGNED REOPENING AS UNDER: 5.1 THE APPELLANT VIDE GROUND NO. 2.1 AND 2.2 RAISED TH E GROUND AGAINST THE REOPENING OF ASSTT. AND REASSTT. PROCEEDINGS. ON BE ING ASKED THE APPELLANT WAS PROVIDED THE REASONS ON 23/12/2010 BY A.O. AND APPE LLANT HAS NOT RAISED ANY OBJECTION. NOW IN THE APPEAL SUCH OBJECTION IS RAIS ED. THE APPELLANT CONTENDED THAT A.O, WAS NOT HAVING DEFINITE AND SUFFICIENT IN FORMATION TO HAVE 'REASON TO BELIEVE' SINCE ON THE BASIS OF A THIRD PARTY STATEM ENT SUCH BELIEF IS NOT SUFFICIENT. I AM NOT INCLINED TO ACCEPT THE CONTENTION OF APPELLA NT BECAUSE IT IS DURING THE COURSE OF SEARCH, ON THE BASIS OF CREDIBLE EVIDENCE S, IT WAS FOUND BY DEPARTMENT THAT SHRI MUKESH CHOKSHI OF MAHASAGAR SECURITY PVT. LTD. THROUGH OTHER RELATED CONCERN INDULGED IN LAUNDERING OF MONEY PROVIDED TO VARIOUS BENEFICIARIES IN THE FORM OF FICTITIOUS SHORT TERM/ LONG TERM GAIN. SHRI MUKESH CHOKSHI UNDER OATH IN THE STATEMENT ADMITTED ABOUT SUCH ACTIVITY. THE ANA LYSIS OF SUCH MATERIAL AS FOUND DURING THE COURSE OF SEARCH AT THE RESIDENTIAL & BU SINESS PREMISES OF SHRI MUKESH CHOKSHI REVEALS APPELLANT AS ONE OF THE BENEFICIARY , IT IS THEREFORE THE DIT (INV.) PASSED ON THIS INFORMATION TO A.O. FOR FURTHER VERI FICATION. THIS INFORMATION FROM DIT(LNV.) IS THEREFORE CREDIBLE EVIDENCE TO HAVE PR IMA FACIE BELIEVE THAT INCOME TO THE EXTENT OF 'SUCH BENEFIT' RECEIVED THROUGH LAUND ERING OF MONEY HAS ESCAPED THE INCOME IN THE CASE OF APPELLANT. THERE WAS A PRIMA FACIE BELIEF ON THE BASIS OF CREDIBLE INFORMATION. AS PER SETTLED LEGAL PREPOSIT ION, THERE SHOULD BE A PRIMA FACIE BELIEF FOR INITIATION OF REASSTT. PROCEEDINGS AND NOT A CONCLUSIVE THE ULTIMATE RESULT WILL NEVER JUSTIFY THE INITIATI ON OF PRIMA FACIE BELIEF ABOUT INCOME ESCAPING ASSTT. WITHOUT PREJUDICED TO THE SE TTLED LEGAL PREPOSITION, ON THE FACTUAL ASPECT THE INITIATION OF REASSTT. PROCEEDIN GS ARE ALSO JUSTIFIED. THE APPELLANT FOR THE IMPUGNED PREVIOUS YEAR FILED ORIGINAL RETUR N OF INCOME ON 26,06.03 WITH ITA NO.1182/AHD/2013 (SHRI SOMPURA TUSHAR VS. ITO) A.Y. 2003-04 - 3 - I.T.O. WD 9(4) AHMEDABAD VIDE A/C. NO. 24500759. IN RETURN TOTAL INCOME OF RS. 204140/- WAS DISCLOSED UNDER FOLLOWING HEAD: (RS.) (A) INCOME FROM SELF OCCUPIED PROPERTY (-) 35 09 (B) PROFIT & GAINS OF BUSINESS OR PROFESSION 78034 (C) INCOME FROM OTHER SOURCES (I) INCOME FROM DIVIDED 471 (II) INCOME FROM INTEREST 133136 (III) MINOR INCOME CLUBBED U/S 64(A) 12702 GROSS TOTAL INCOME 220754 LESS DEDUCTION UNDER CHEP. VIA 16610 TOTAL INCOME 204144 THIS RETURN OF INCOME NEITHER HAS ANY REFERENCE OF LONG TERM NOR SHORT TERM CAPITAL GAIN. NO PROFIT FROM SALE OF SHARES REFLECTED IN AN Y ACCOUNT I.E. IN PROFIT & GAINS FROM BUSINESS & PROFESSION. NO NOTE IS MENTIONED AB OUT ANY SUCH GAIN DERIVED BY APPELLANT FROM SHARE TRANSACTION OF BUNIYAD CHEMICA L LTD. THE APPELLANT VERY CLEVERLY WHILE FILING A RETURN OF INCOME IN RESPONS E TO NOTICE. U/S 148 OF THE ACT VIDE RETURN OF INCOME DT. 27/08/10 FILED WITH ITO W ARD 9(4) AHMEDABAD VIDE A/C. NO. 24502684 MADE A NOTE AS FOLLOWS: 'DURING THE YE AR I HAVE SOLD THE SHARES OF BUNIYAD CHEMICAL LTD, AND HAD A CAPITAL GAIN OF RS. 8,65,430/- WHICH I WILL INVEST IN RESIDENTIAL PROPERTY WITHOUT STIPULATED TIME AS MENTIONED IN SECTION 54'. THIS CLEARLY REFLECTED THE FAILURE ON THE PART OF APPELLANT THAT HE HAS NOT DISCLOSED THE PARTICULARS OF THIS TRANSACTION AND I NCOME COMPONENT OF IT TRULY AND FULLY AND THE MODUS OPERANDI AS ADMITTED BY SHREE M UKESH CHOKSHI HAS CREDIBILITY AND INFORMATION TO A.O. WAS ALSO CREDIBLE. THE APP ELLANTS GROUND AGAINST REOPENING IS THEREFORE DISMISSED SINCE NEITHER BASE D ON FACTS NOR SUPPORTED BY LEGAL PROPOSITION. 4. SHRI DEVETIA PRODUCES BEFORE US COPY OF THE REOP ENING REASONS AS RECORDED BY THE ASSESSING AUTHORITY AS UNDER: REG: SHRI TUSHAR H. SOMPURA, 10, MUKUND KUNJ SOCIETY, OPP: KAMESHWAR MAHAVIR, ANKUR ROAD, NARANPURA, AHMEDABAD PAN: ASSTT.YEAR:2003-04 REASONS FOR INITIATING PROCEEDINGS FOR RE-OPENING O F THE CASE U/S 147 OF THE L.T. ACT. 1961 IN THIS CASE, IT HAS BEEN BROUGHT TO THE NOTICE FRO M THE INFORMATION RECEIVED FROM D.I.T. (INV), AHMEMDABAD THAT THE MAHASAGAR S ECURITIES PVT. LTD. AND ITS GROUP CONCERNS( MAHASAGAR GROUP) WERE ENGAGED IN FR AUDULENT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/LOSS SHORT TERM/LONG CAPITAL GAIN/LOSS, COMMODITIES PROFIT/LOSS ON COMMO DITY TRADING (THROUGH MCX). ITA NO.1182/AHD/2013 (SHRI SOMPURA TUSHAR VS. ITO) A.Y. 2003-04 - 4 - THE ASSESSEE IS ONE OF THE BENEFICIARIES OF THIS CO MPANY. IN THIS CASE THE AMOUNT PAID FOR THE CONSIDERATION FOR PURCHASE OF SHARES H AS BEEN PAID IN CASH. THE AMOUNT REPRESENTS UNDISCLOSED INCOME OF THE BENEFIC IARIES FOR THE A.Y. 2003-04 RELEVANT TO F.Y. 2002-03 WHICH HAS BEEN LAUNDERED B Y MEANS OF OBTAINING BOGUS SHARE PURCHASE. THIS HAS TO BE VERIFIED BY CHECKIN G THE ASSESSEE DEMAT STATEMENT AND ASSESSEES BANK ACCOUNT. HENCE RELEVANT INFORMATION HAS BEEN FORWARDED BY TH E D.I.T. (INV), AHMEDABAD TO THIS OFFICE FOR INITIATING ACTION AND TO ISSUE NOTICE U/S. 148 OF THE I.T. ACT. (MS. D.A. BHATT) ITO, WD.7(4), ABAD. DATE: 30-03-2010 5. WE HAVE HEARD BOTH THE PARTIES REITERATING THEIR RESPECTIVE STANDS AGAINST AND IN SUPPORT OF THE IMPUGNED REOPENING. A PERUSAL OF THE ABOVE EXTRACTED REASONS INDICATES THAT THE ASSESSING OFFI CER HAS NOWHERE FOUND ANY OPINION ABOUT ESCAPEMENT OF ASSESSEES TAXABLE INCO ME FROM BEING ASSESSED. HE RATHER SEEKS TO VERIFY ASSESSEES DEMAT STATEMEN T AND BANK ACCOUNT. WE NOTICE IN THIS FACTUAL BACKDROP THAT A CO-ORDINATE BENCH IN ITA NO.232/AHD/2016 JAGDISHCHANDRA C. SHAH HUF VS. ITO DECIDED ON 31.05.2016 HOLDS SUCH A RECOURSE TO REOPENING TO BE NOT SUSTAINABLE AS UNDER: 5. THE ASSESSEE IS STILL NOT SATISFIED AND IS IN F URTHER APPEAL BEFORE US. A PLAIN READING OF THE REASONS FOR REOPENING THE ASSESSMENT REPRODUCED BEFORE US SHOWS THAT THERE IS NOTHING MORE THAN SUSPICION AT THE FO UNDATION OF THE REOPENING. THE ASSESSING OFFICER HIMSELF HAS STATED THAT CAPITAL GAIN SHOULD HAVE BEEN OFFERED FOR FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT Y EAR 2007-08, WHICH MAY NOT HAVE BEEN OFFERED IN THE RETURN OF INCOME. ESSENT IALLY WHAT THE ASSESSING OFFICER, THEREFORE, WANTED WAS A VERIFICATION OF WHETHER OR NOT THE AMOUNT HAS BEEN OFFERED IN THE RETURN OF INCOME BUT THEN THE SCHEME OF THE ACT DOES NOT PERMIT SUCH REOPENING OF THE ASSESSMENT TO CARRY OUT SUCH AN EX ERCISE. IT IS IMPORTANT TO BEAR IN MIND THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN ENQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING TH E ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF TH AT AN INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER , NECESSARY IS THAT THERE MUST BE SOMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ITA NO.1182/AHD/2013 (SHRI SOMPURA TUSHAR VS. ITO) A.Y. 2003-04 - 5 - ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSE SSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT. IN OUR CONS IDERED VIEW, MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED O UT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT VERY SIGNIFICANT DISTINCTION BE TWEEN THE FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. TH E FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMEN T. THE LATTER CATEGORY CONSISTS OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER ENQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. BUT THEN THESE CATEGORIES OF REASONS DO NOT PERMIT REOPENING OF COMPLETED ASSESSMENTS. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND OBSERVATION MADE BY HONBLE SUPREME COURT IN T HE CASE OF ITO VS. LAKHMANI MEWAL DAS [(1976) 103 ITR 437]. REASONS FOR THE FORMATION OF BELIEF MUST HAVE RATI ONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATIO N OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF T HE ITO AND THE FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPE MENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. 6. VIEWED IN THIS PERSPECTIVE AND HAVING NOTED THAT THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT DO NOT SUGGEST ANYTHING MORE THAN THE VERIFICATION, WE ARE OF THE CONSIDERED VIEW THAT THE VERY INITIATION OF REASSESSMENT PROCEEDINGS ON THE FACTS OF THIS CASE IS UNSUSTAINABLE IN LAW. AS PER THE LEARNED DEPARTMENTAL REPRESENTATIVES SUGGESTION THAT THOUGH REASONS MAY NOT HAVE BEEN PROPERLY RECORDED, REOPENING OF ASSESSMENT WAS VERY MUCH JUS TIFIED ON FACTS OF THIS CASE, WE ONLY REFER TO THE OBSERVATIONS MADE BY THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR [(2004) 268 IT R 332] WHEREIN IT IS, INTER ALIA, OBSERVED THAT '.IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO . NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE R EASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT REC ORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECO RDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AN D THE EVIDENCE.'. 6. LD. DEPARTMENTAL REPRESENTATIVE FAILS TO POINT O UT ANY EXCEPTION THEREIN. WE ACCORDINGLY HOLD THAT THE IMPUGNED REO PENING IS NOT TO BE CONQUERED FOR THE REASON THAT EVEN THE ASSESSING OF FICER DOES NOT INDICATE ESCAPEMENT OF ASSESSEES TAXABLE INCOME FROM BEING ASSESSED. WE THUS ITA NO.1182/AHD/2013 (SHRI SOMPURA TUSHAR VS. ITO) A.Y. 2003-04 - 6 - QUASH THE IMPUGNED REOPENING LEAVING OTHER GROUNDS IN THE INSTANT APPEAL ON MERITS TO HAVE BEEN RENDERED INFRUCTUOUS. 7. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF NOVEMBER, 2016.] SD/- SD/- (AMARJIT SINGH) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/11/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0