VINOD K SHAH, MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 1264/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1419 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-04-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: DEEPAK S SHAH; SS SABOO
• Keywords: Reopening of assessment; Unexplained investment; Recovery proceedings; Depreciation; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Period of limitation; Speculation loss; Difference of opinion; Accommodation entries; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 54F; 142(1); 147; 131; 246; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 1264/MUM/2013 ITA NO. 1736/MUM/2014 (ASSESSMENT YEARS: 2003-04 & 2004-05) SHRI VINOD K. SHAH VS. INCOME TAX OFFICER - 16(1)(1) 30 WARDEN COURT 79-81 A.K. MARG MUMBAI 400036 MATRU MANDIR, TARDEO MUMBAI 400007 PAN AACPS7717E APPELLANT RESPONDENT APPELLANT BY: S/S. SABOO & DEEPAK S. SHAH RESPONDENT BY: SHRI RAJAT MITTAL DATE OF HEARING: 24.11.2016 DATE OF PRONOUNCEMENT: 14.12.2016 O R D E R PER JASON P. BOAZ, A.M. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A)-27, MUMBAI DATED 30.11.2012 FOR A.Y. 2003-04 AND OF THE CIT(A)- 28, MUMBAI DATED 30.12.2013 FOR A.Y. 2004-05. SINCE SIMILAR ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOG ETHER AND ARE DISPOSED OFF BY WAY OF THIS COMMON ORDER. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 FOR A.Y. 2003-04 , THE ASSESSEE FILED THE RETURN OF INCOME ON 29.03.2004 DECLARING TOTAL INCOME OF ` 1,39,286/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (IN SHORT 'THE ACT'). SUBSEQUENTLY, REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITIATED ON THE BASIS OF INFORMATION RECE IVED FROM THE DDIT (INV) 1(4), MUMBAI ON 25.11.2009 THAT THE ASSESSEE HAD EN TERED INTO SHARE TRANSACTIONS FOR SALE/PURCHASE OF SHARES OF M/S. BU NIYAD CHEMICALS LTD. THROUGH A BROKER OF THE MAHASAGAR GROUP OF COMPANIE S OPERATED BY ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 2 MUKESH CHOKSI, I.E. M/S. GOLD STAR FINVEST LTD. WHO WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND THE ASSESSEE HA D TAKEN FICTITIOUS GAINS IN SUCH SHARE TRANSACTIONS. IN THE STATEMENT RECORDED IN THE COURSE OF SEARCH, SRI MUKESH CHOKSI ADMITTED TO PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS. IN THE CASE ON HAND THE ASSESSEE HAD PURCHASED 46000 SHARES OF BUNIYAD CHEMICALS LTD. IN F.Y. 2001-02 THROUGH M/S. GOLD STAR FINVEST LTD. @60 PAISE PER S HARE WHICH WERE DELIVERED IN PHYSICAL FORM AND SUBSEQUENTLY SOLD BE TWEEN 12.12.2002 TO 13.03.2003 RESULTING IN CAPITAL GAINS OF ` 35,17,518/- WHICH WERE INVESTED IN PURCHASE OF RESIDENTIAL FLAT AT JALDARSHAN, MALA BAR HILLS, MUMBAI AND EXEMPTION UNDER SECTION 54F CLAIMED THEREON. AFTER RECORDING REASONS IN THIS REGARD, THE ASSESSING OFFICER (AO) ISSUED NOTI CE UNDER SECTION 148 OF THE ACT TO THE ASSESSEE ON 29.03.2010. THE ASSESSME NT WAS THEN COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE AC T VIDE ORDER DATED 27.12.2010, WHEREIN THE CAPITAL GAINS OF ` 35,17,598/- ON THE SALE OF SHARES WAS TREATED AS A BOGUS TRANSACTION AND THE E XEMPTION CLAIMED UNDER SECTION 54F OF THE ACT WAS DENIED TO THE ASSE SSEE FOR THE REASON THAT IT WAS UNEXPLAINED INVESTMENT. IN ADDITION THERETO, 5% OF THE ABOVE AMOUNT WAS TREATED AS COMMISSION PAID TO M/S. GOLD STAR FINVEST LTD. FOR PROVIDING THE ACCOMMODATION ENTRIES TO THE ASSESSEE . ON APPEAL, THE LEARNED CIT(A), VIDE ORDER DATED 30.11.2012, SUBSTA NTIALLY UPHELD THE ORDER OF ASSESSMENT, BUT ALLOWED THE ASSESSEE PARTI AL RELIEF BY REDUCING THE COMMISSION PAID TO GOLD STAR FINVEST LTD. FROM 0.5% TO 0.15%. 2.2 FOR A.Y. 2004-05 , THE ASSESSEE FILED THE RETURN OF INCOME ON 30.03.2005 DECLARING INCOME OF ` 7,38,124/-. IN THIS YEAR, THE ASSESSEE CLAIMED TO HAVE PURCHASED 5500 SHARES OF BUNIYAD CH EMICALS LTD. ON 13.04.2001 DURING F.Y. 2001-02, @ 60 PAISE PER SHAR E. THE SHARES WERE IN PHYSICAL FORM AND WERE SENT TO THE COMPANY FOR TRAN SFER. THE SHARES WERE SOLD IN THE PERIOD BETWEEN 02.05.2003 TO 30.05.2003 RESULTING IN CAPITAL GAINS OF ` 6,07,034/-, WHICH WAS INVESTED IN PURCHASE OF RESID ENTIAL FLAT AT JALDARSHAN, MALABAR HILLS, MUMBAI AND IN RESPECT OF WHICH EXEMPTION UNDER SECTION 54F OF THE ACT WAS CLAIMED. ON SIMILA R FACTUAL SITUATION AS IN A.Y. 2003-04 (SUPRA), PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 3 INITIATED AND AFTER RECORDING REASONS IN THIS REGAR D, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29.03. 2011. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF TH E ACT VIDE ORDER DATED 30.12.2011 WHEREIN THE AO TREATED THE CAPITAL GAINS OF ` 6,07,034/- ON SALE OF SHARES AS A BOGUS TRANSACTION AND THE EXEMPTION CLAIMED BY THE ASSESSEE OF THIS AMOUNT WAS TREATED AS UNEXPLAINED INVESTMENT AND EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT WAS DENIED. FURTHER, 5% OF THE ABOVE AMOUNT WAS TREATED AS COMMISSION PAID TO M/S. GOLD STAR FINVEST LTD. FOR PROVIDING THE ACCOMMODATION ENTRY TO THE ASSESSEE AND THE AO ALSO DISALLOWED TRANSFER FEES OF ` 3,00,000/- CLAIMED FOR WANT OF EVIDENCE. ON APPEAL, THE LEARNED CIT(A) VIDE ORDER DATED 30.12.2013 SUBSTANTIALLY UPHELD THE ORDER OF THE ASSESSMENT, B UT ALLOWED THE ASSESSEE PARTIAL RELIEF BY REDUCING THE COMMISSION PAID TO G OLD STAR FINVEST LTD. FROM 0.5% TO 0.15%. 3. AGGRIEVED BY THE ORDERS OF THE CIT(A)-27, MUMBAI DA TED 30.11.2012 FOR A.Y. 2003-04 AND OF THE CIT(A)-28, MUMBAI DATED 30.12.2003 FOR A.Y. 2004-05, THE ASSESSEE HAS PREFERRED THESE APPEALS R AISING ALMOST IDENTICAL GROUNDS. THESE APPEALS WILL BE DISPOSED OFF IN SERI ATUM AS UNDER. 3.1 ASSESSEES APPEAL FOR A.Y. 2003-04 (ITA NO. 1264/MU M/2013) IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS: - 1. THE LD CIT [A] HAS ERRED IN LAW AND FACTS IN PA RTLY ALLOWING APPEAL CONFIRMING ADDITION OF RS 3517598/- AS INCOM E FROM CAPITAL GAIN AND REDUCING COMMISSION ESTIMATED 5% B Y A.O.TO 0.15%. 2. ADDITION CONFIRMED BY CIT[A] WHICH WAS UNWARRAN TED, ARBITRARY, WITH BIAS MIND BASED ON PRESUMPTION , VI OLATING THE PRINCIPLES OF NATURAL JUSTICE. 3. CIT[A] HAS NOT PUT BEFORE APPELLANT TO REBUTE NO TICE U/S 143[2] ON WHICH CIT[A] RELIED UPON. 4. A.O. HIMSELF MENTIONED IN ASSESSMENT ORDER THAT SUBSEQUENTLY INFORMATION WAS RECEIVED FROM DDIT[INV}. CIT[A] IS GIVEN DIFFERENT FINDING THEN IT IS NOT PUT BEFORE APPELLA NT TO REBUTE SAME. 5. CIT[A] HAS NOT DISPOSED OFF GROUNDS OF APPEAL NO 3.4.AND 6 OF GROUNDS OF APPEAL HENCE ORDER OF CIT{A] IS NOT ACCO RDING TO LAW 6. REASON RECORDED ARE NOT ACCORDING TO LAW ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 4 7. A.O. HAS MERELY RELIED ON THE INFORMATION RECEIV ED FROM DDI AND STATEMENT OF BROKER. NO INDEPENDENT ENQUIRY HAS BEE N MADE. 8. CIT[A] HAS ERRED IN CONFIRMING PARTIAL ORDER WHI CH IS PASSED BY VIOLATING PRINCIPLES OF NATURAL JUSTICE. NO OPPORTU NITY TO APPELLANT TO CROSS EXAMINE AS WELL AS TO REBUTE INFORMATION C OLLECTED ON THE BACK OF APPELLANT. 9. A.O. HAS ACCEPTED CAPITAL GAIN AND CHARGE TAX 10 % BUT DENYING EXEMPTION U/S 54F WITHOUT ASSIGNING ANY REASON. 10. APPELLANT FACTS ARE DIFFERENT THAN WHAT MODUS A PPENDING MENTION BY A.O. 11. NOTICE U/S 148 IS NOT VALID IT WAS SERVED BEFOR E INFORMATION RECEIVED AT THE TIME OF SERVICE NO INFORMATION IN P OSSESSION OF A.O. 12. CONFESSION OF BROKER AND GOLD STAR IS GENERAL I N NATURE NOT ABOUT APPELLANT. 13. YOUR APPELLANT CRAVES YOUR LEAVE TO ADD, ALTER OR MODIFY THESE GROUNDS OF APPEAL. 4. GROUNDS NO. 2, 5, 10 & 13 4.1 AT THE OUTSET OF THE HEARING, THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT GROUNDS RAISED AT S. NOS 2, 5, 10 AN D 13 (SUPRA) WERE GENERAL IN NATURE AND NO ADJUDICATION WAS CALLED FO R THEREON. IN THIS VIEW OF THE MATTER, THESE GROUNDS ARE RENDERED INFRUCTUO US AND ARE ACCORDINGLY DISMISSED. 5. GROUNDS NO. 4, 6 & 11 VALIDITY OF REOPENING OF AS SESSMENT 5.1 IN THESE GROUNDS, THE ASSESSEE CHALLENGES THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE ACTION OF THE AO IN REOPENING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2003-04 BY MERELY R ELYING ON INFORMATION RECEIVED FROM DDIT (INV) I(4), MUMBAI AND STATEMENT OF SHRI MUKESH CHOKSI RECORDED ON OATH UNDER SECTION 131 OF THE AC T. ACCORDING TO THE LEARNED A.R. OF THE ASSESSEE, NO INDEPENDENT ENQUIR Y WAS MADE BY THE AO BEFORE RECORDING THE REASONS FOR INITIATION OF PROC EEDINGS UNDER SECTION 147 OF THE ACT OR ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. IT WAS CONTENDED THAT THE LEARNED CIT(A) HAS NOT CONSIDERED THE SUBM ISSIONS PUT FORTH BY THE ASSESSEE AND HAS ERRONEOUSLY UPHELD THE VALIDIT Y OF THE PROCEEDINGS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE A CT AND ISSUE OF NOTICE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 5 UNDER SECTION 148 OF THE ACT, WHICH IS BAD IN LAW. THE LEARNED A.R. ALSO REITERATED THE SUBMISSIONS PUT FORTH BEFORE THE LEA RNED CIT(A). 5.2 PER CONTRA, THE LEARNED D.R. STRONGLY RELIED ON THE LEARNED CIT(A)S FINDING UPHOLDING THE AOS REOPENING OF THE ASSESSM ENT FOR A.Y. 2003-04. IT WAS SUBMITTED THAT ON SIMILAR FACTS, THE COORDIN ATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR A.Y. 2005-06 IN ITA NO. 197 8 & 1979/MUM/2014 DATED 07.10.2016 HAS UPHELD REOPENING OF THAT ASSES SMENT BY THE AO. 5.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED (SUPRA). IT IS SEEN THAT THE LEARNED CIT(A) D EALT WITH THIS ISSUE AT PARAS 4 AND 5 OF THE IMPUGNED ORDER UPHOLDING THE R EOPENING OF THE ASSESSMENT AS UNDER: - 4. DURING THE PROCEEDINGS BEFORE ME, THE AR SUBMITT ED THAT THE NOTICE U/S. 148 IS BAD IN LAW SINCE THERE WAS NO INFORMATI ON RECEIVED BY THE A.O. TO FORM A REASON TO BELIEVE THAT INCOME ESCAPE D ASSESSMENT BEFORE ISSUE OF THE IMPUGNED NOTICE. ACCORDING TO T HE AR, THE INFORMATION WAS RECEIVED BY THE A.O. AFTER ISSUE OF THE NOTICE U/S. 148 OF THE ACT. THE AR ALSO SUBMITTED THAT THERE WA S NO DIRECT LINK ESTABLISHED BETWEEN THE INFORMATION RECEIVED AND TH E FACTS IN THE APPELLANT'S CASE IN AS MUCH AS THAT THE A.O. HAS NO T CONDUCTED ANY INDEPENDENT INQUIRY ON HIS OWN. SECONDLY, THE AR HA S TAKEN THE GROUND THAT IN THE NOTICE ISSUED U/S. 143(2) OF THE ACT, SUBSEQUENT TO THE REOPENING OF THE ASSESSMENT, THE ASSESSMENT YEA R WAS MENTIONED AS A.Y. 2008-09 AND NOT AS A.Y. 2003-04. HENCE, ACCORDING TO THE AR. THE ASSESSMENT MADE U/S. 143(3 ) RWS 147 IS ALSO BAD IN LAW. AS REGARDS THE MERITS OF THE CASE, THE AR SUBMITTED THAT ALL THE RELEVANT EVIDENCE IN THE FORM OF CONTR ACT NOTES, ACCOUNT STATEMENTS, TRANSFER OF SHARES IN APPELLANT'S NAME, THE BANK ACCOUNT EXTRACT ETC. ARE PLACED BEFORE THE A.O. AT THE TIME OF THE ASSESSMENT PROCEEDINGS WHICH GOES TO SHOW THAT THE IMPUGNED TR ANSACTION IS GENUINE. IT IS ALSO SUBMITTED THAT A.O. HAS NOT BRO UGHT ANY EVIDENCE ON RECORD TO SHOW THAT APPELLANT HAS PAID HIS OWN M ONEY IN CASH IN LIEU OF RECEIVING CHEQUES FROM M/S. GOLD STAR FINVE ST LTD. THUS, THE AR ARGUED THAT THE IMPUGNED ASSESSMENT IS BAD IN LA W AND THE ADDITIONS MADE BY THE A.O. ARE TO BE DELETED IN THE LIGHT OF THE EVIDENCE PLACED ON RECORD. 5. I HAVE CAREFULLY CONSIDERED THE CONTENTS OF THE ASSESSMENT ORDER AND THE APPELLANT'S SUBMISSIONS. ON PERUSAL OF THE ASSESSMENT RECORDS IT IS NOTED THAT THE A.O. HAS RECORDED THE REASONS FOR REOPENING THE ASSESSMENT DULY MENTIONING THE FACTS AS TO THE SEARCH CONDUCTED IN THE MAHASAGAR GROUP OF COMPANIES AND T HE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 6 ACCOMMODATION ENTRIES GIVEN BY THE SAID GROUP COMPA NIES, WHICH INVOLVES THE APPELLANT'S CASE ALSO. THE INFORMATION FROM DDIT (INV.) WAS RECEIVED ON 15-03-2010 AND THE A.O. SOUGHT TO R EOPEN THE ASSESSMENT ON 26-03-2010, FOR WHICH THE SANCTION OF THE JCIT WAS OBTAINED ON 29-03-2010. ON THE SAME DATE I.E. ON 29 -032010, THE ASSESSMENT WAS REOPENED AND THE NOTICE U/S. 148 WAS SERVED ON 30- 03-2010. IN VIEW OF THE ABOVE FACTS, I DO NOT FIND ANY ILLEGALITY IN REOPENING THE ASSESSMENT U/S 147 OF THE ACT. ACCORD INGLY, THIS GROUND IS DISMISSED. 5.3.2 AS CONTENDED BY THE AO, WE FIND THAT ON SIMIL AR FACTS, IN RESPECT OF SIMILAR TRANSACTIONS, THE COORDINATE BENCH OF THE T RIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2005-06 IN ITS ORDER I N ITA NO. 1978 & 1979/ MUM/2014 DATED 07.10.2016 HAS UPHELD THE AOS ACTIO N IN REOPENING THE ASSESSMENT FOR THAT YEAR HOLDING AS UNDER AT PARAS 6 TO 7 THEREOF: - 6. IN THIS GROUND LD. AR CHALLENGE THE ORDER OF CI T(A) UPHOLDING THE ORDER OF REOPENING ON THE GROUND THAT THE AO HAS ME RELY RELIED ON INFORMATION RECEIVED FROM DDI AND STATEMENT OF BROK ER WHICH IS RECORDED BY DDI. IT WAS SUBMITTED BY LD. AR THAT NO INDEPENDENT ENQUIRY HAS BEEN MADE THEREFORE NOTICE U/S 148 IS B AD IN LAW. IT WAS FURTHER SUBMITTED THAT CIT(A) HAS NOT CONSIDER THE GROUNDS AND SUBMISSIONS RAISED BY ASSESSEE AND HAS WRONGLY UPHE LD THE REOPENING OF ASSESSMENT WHICH IS EVEN OTHERWISE BA D IN LAW. THE LD. AR REITERATED THE SAME ARGUMENTS WHICH WERE RAISED BEFORE CIT(A) AND THE SAME IS ALSO MENTIONED IN THE ORDERS OF CIT (A). LD. CIT(A) HAS DEALT WITH THIS ISSUE IN PARA NO. 2.4.3 ONWARDS WHI CH IS REPRODUCED HEREIN BELOW: 2.4.3 UNDISPUTEDLY, THIS IS A CASE WHERE ORIGINAL RETURN WAS ACCEPTED U/S. 143(1). WHILE DEALING WITH THE SUBJEC T OF SCOPE AND EFFECT OF NOTICE U/S. 147 AS SUBSTITUTED WITH EFFEC T FROM 01-04- 1989, THE HON'BLE SUPREME COURT IN THE CASE OF RAJE SH JHAVERI STOCK BROKERS (P) LTD. 291 ITR 500 (SC) HAS HELD TH AT UNDER THE SUBSTITUTED SECTION OF 147, EXISTENCE OF ONLY THE F IRST CONDITION I.E. 'ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT' IS SUFFICIENT AND 'IF THE ASSES SING OFFICER FOR WHATEVER REASON, HAS REASON TO BELIEVE THAT, INCOME HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO REOPEN THE A SSESSMENT'. IT WAS FURTHER HELD THAT SO LONG AS THE CONDITIONS OF SECTION 147 ARE FULFILLED, THE AO IS FREE TO INITIATE THE PROCEEDIN GS U/S. 147 AND FAILURE TO TAKE STEPS U/S. 143(3) WILL NOT RENDER T HE AO POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS, EVEN WHEN THE INTIMATION U/S. 143(1) HAS BEEN ISSUED. 2.4.4 HON'BLE APEX COURT FURTHER OBSERVED THAT SUBS TANTIAL CHANGES HAVE BEEN MADE TO SECTION 143(1) WITH EFFEC T FROM 1-6- 1999. UP TO 31-3-1989, AFTER A RETURN OF INCOME WA S FILED, THE ASSESSING OFFICER COULD MAKE AN ASSESSMENT UNDER SE CTION 143(1) ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 7 WITHOUT REQUIRING THE PRESENCE OF THE ASSESSEE OR T HE PRODUCTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. WH ERE THE ASSESSEE OBJECTED' TO SUCH AN ASSESSMENT OR WHERE T HE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORREC T OR INCOMPLETE OR THE OFFICER DID NOT COMPLETE THE ASSE SSMENT UNDER SECTION 143(1), BUT WANTED TO MAKE AN INQUIRY, A NO TICE UNDER SECTION 143(2) WAS REQUIRED TO BE ISSUED TO THE ASS ESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPORT OF HIS RETURN. A FTER CONSIDERING THE MATERIAL AND EVIDENCE PRODUCED AND AFTER MAKING NECESSARY INQUIRIES, THE OFFICER HAD POWER TO MAKE ASSESSMENT UNDER SECTION 143(3). WITH EFFECT FROM 01-04-1989, THE PROVISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW SCHEME WAS INTRODUCED AND IN THE NEW SUBSTITUTED SECTION 143(1) PRIOR TO THE SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1-6-1999, IN CLAUSE ( A), A PROVISION WAS MADE THAT WHERE A RETURN WAS FILED UNDER SECTIO N 139 OR IN RESPONSE TO A NOTICE UNDER SECTION 142(1), AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUCH RETURN AFTER ADJ USTMENT OF TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX OR ANY AMOUNT P AID OTHERWISE BY WAY OF TAX OR INTEREST, AN INTIMATION WAS TO BE SENT WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143( 2) TO THE ASSESSEE SPECIFYING THE SUM SO PAYABLE AND SUCH INT IMATION WAS DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTIO N 156. THE FIRST PROVISO TO SECTION 143(1)(A) ALLOWED THE DEPA RTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS DECLARED IN THE RETURN. 2.4.5 IT WAS ALSO SEEN THAT WHAT WERE PERMISSIBLE U NDER THE FIRST PROVISO TO SECTION 143(1)(A) TO BE ADJUSTED WERE TH AT, (I) ONLY APPARENT ARITHMETICAL ERRORS IN THE RETURN, ACCOUNT S OR DOCUMENTS ACCOMPANYING THE RETURN, (II) LOSS CARRIED FORWARD, DEDUCTION ALLOWANCE OR RELIEF, WHICH WAS PRIMA FACIE ADMISSIB LE ON THE BASIS OF INFORMATION AVAILABLE IN THE RETURN BUT NOT CLAI MED IN THE RETURN AND SIMILARLY (III) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION AVAILABLE IN THE RETURN, PRIMA FACIE IN ADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMIS SIBLE WAS CORRECTION OF ERRORS APPARENT ON THE FACE OF THE DO CUMENTS ACCOMPANYING THE RETURN. THE ASSESSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJUDICATE UPON ANY DEBATABL E ISSUES. IN OTHER WORDS, THE ASSESSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS, EITHER IN ALLOWING O R IN DISALLOWING DEDUCTIONS, ALLOWANCE OR RELIEF. 2.4.6 THE INTIMATION UNDER SECTION 143(1)(A ) IS GI VEN WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2). THOU GH TECHNICALLY THE INTIMATION ISSUED WAS DEEMED TO BE A DEMAND NOT ICE ISSUED UNDER SECTION 156, THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143(2). THAT RIGHT IS PRESERVED AND IS NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 01-04- 1989 TO 31-03-1998, THE SECOND PROVISO TO SECTION 1 43(1)(A) REQUIRED THAT WHERE ADJUSTMENTS WERE MADE UNDER THE FIRST PROVISO TO SECTION 143(1)(A), AN INTIMATION HAD TO BE SENT TO THE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 8 ASSESSEE, NOTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM OR TO HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT F ROM 01-04- 1998, THE SECOND PROVISO TO SECTION 143(1)(A) WAS S UBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPERATIVE TILL 01- 06-1999. THE REQUIREMENT WAS THAT AN INTIMATION WAS TO BE SENT T O THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENT HAD BEEN MAD E UNDER THE FIRST PROVISO TO SECTION 143(1) AND NOTWITHSTAN DING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERN ED. BETWEEN 01-04-1998 AND 31-05-1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATORY. THUS, THE LEGISLAT IVE INTENT IS VERY CLEAR FROM THE USE OF THE WORD 'INTIMATION' AS SUBSTITUTED FOR 'ASSESSMENT' THAT TWO DIFFERENT CONCEPTS EMERGED. W HILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAK E ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKI NG ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A), NO AD DITION WHICH IS IMPERMISSIBLE BY THE INFORMATION GIVEN IN THE RETUR N COULD BE MADE BY THE ASSESSING OFFICER. THE REASON IS THAT U NDER SECTION 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE ASSESSING OFFICER PROCEEDS ON HIS OPINION ON THE BA SIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF BEING HEARD IS GIVEN UNDER SECTION 143(1)(A) INDICA TES THAT THE ASSESSING OFFICER HAS TO PROCEED AFTER ACCEPTING TH E RETURN AND MAKING THE PERMISSIBLE ADJUSTMENTS ONLY. AS A RESUL T OF INSERTION OF THE EXPLANATION TO SECTION 143 BY THE FINANCE (N O.2) ACT OF 1991 WITH EFFECT FROM 1-10-1991 AND, SUBSEQUENTLY, WITH EFFECT FROM 1-6-1994, BY THE FINANCE ACT, 1994, AND ULTIMA TELY OMITTED WITH EFFECT FROM 01-06-1999, AN INTIMATION SENT TO THE ASSESSEE UNDER SECTION 143(1)(A ) WAS DEEMED TO BE AN ORDER FOR THE PURPOSES OF SECTION 246 BETWEEN 1-6-1994 AND 31-05- 1999, AND UNDER SECTION 264 BETWEEN 1-10-1991 AND 31-05-1999. THE EXPRESSIONS 'INTIMATION' AND 'ASSESSMENT ORDER' HAV E BEEN USED AT DIFFERENT PLACES. THE CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS HAS TO BE UNDERSTOOD IN THE CONTEXT THE EXPRESSIONS ARE USED, THE ASSESSMENT IS USED AS MEANING SOMETIM ES THE COMPUTATION OF INCOME', . SOMETIMES ''THE DETERMIN ATION OF THE AMOUNT OF TAX PAYABLE' AND SOMETIMES 'THE WHOLE PRO CEDURE LAID DOWN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYER'. IN THE SCHEME OF THINGS, AS NOTED ABOVE, THE INTIMATION UN DER SECTION 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSES SMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTO RY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIME. UNDER SECTI ON 143(1)(A), AS IT STOOD PRIOR TO 01-04-1989, THE ASSESSING OFFICER HA D TO PASS AN ASSESSMENT ORDER IF HE DECIDED TO ACCEPT THE RETURN , BUT UNDER THE AMENDED PROVISION, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMA TION IS REQUIRED TO SENT. VARIOUS CIRCULARS SENT BY THE CBD T SPELL OUT THE INTENT OF THE LEGISLATURE, I.E., TO MINIMIZE THE DE PARTMENTAL WORK TO SCRUTINIZE EACH AND EVERY RETURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. UNDER THE FIRST PROVISO TO THE NEWLY ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 9 SUBSTITUTED SECTION 143(1), WITH EFFECT FROM 01-06- 1999, EXCEPT AS PROVIDED IN THE PROVISION ITSELF, THE ACKNOWLEDGEME NT OF THE RETURN SHALL BE DEEMED TO BE AN INTIMATION UNDER SECTION 1 43(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B ) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEM ENT IS NOT GIVEN BY ANY ASSESSING OFFICER, BUT MOSTLY BY MINISTERIAL STAFF. NO ASSESSMENT CAN BE DONE BY THEM. THE INTIMATION UNDE R SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156, FOR THE APPARENT PURPOSE OF MAKING MACHINERY P ROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APP LICATION ONLY RECOVERY INDICATED TO BE PAYABLE IN THE INTIMATION BECAME PERMISSIBLY. AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. 2.4.7 SECTION 147 AUTHORIZES AND PERMITS THE ASSESS ING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE H AS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESC APED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNO T BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINA LLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCT ION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNE SS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINC ES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662, F OR INITIATION OF-ACTION UNDER SECTION 147(A) (AS THE PROVISION ST OOD AT THE RELEVANT TIME) FULFILMENT OF THE TWO REQUISITE COND ITIONS IN THAT REGARDS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT TH E ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF N OTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEME NT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMA TION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJEC TIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO. (P.) LTD. [1996] 217 ITR 597 (SC); RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC). 2.4.8 THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTI TUTED WITH EFFECT FROM 01-04-1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM PROVISIONS AS THEY STO OD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SEC 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS C OULD BE ASSESSED A REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRES TO BE SATISFIED FIRSTL Y THE ASSESSING ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 10 OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PRO FITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, A ND SECONDLY THE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCA PEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIA L FACTS NECESSARY FOR 'HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDIT IONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASS ESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTI ON 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 1 47 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS, IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPE N THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBI T OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COVERED BY THE MAI N PROVISION AND NOT THE PROVISO. 2.4.9 IT WAS THUS HELD THAT SO LONG AS THE INGREDIE NTS OF SECTION 147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER S ECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. 2.4.10 FURTHER, IT IS THE DUTY OF THE ASSESSEE TO D ISCLOSE FULL AND TRUE MATERIALS TO THE A.O. BUT FOR WHICH THE A.O. C OULD INITIATE THE REASSESSMENT PROCEEDINGS. IT HAS BEEN HELD BY THE H ON'BLE SUPREME COURT IN SHRI KRISHNA P. LTD. 221 ITR 538, 549 THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRU E AND FULL DISCLOSURE. A DISCLOSURE MAY BE A FALSE ONE OR A TR UE ONE. IT MAY BE A FULL DISCLOSURE OR IT MAY NOT BE. THE HON'BLE SUPREME COURT HELD THAT A PARTIAL DISCLOSURE MAY VERY OFTEN BE A MISLEADING ONE. THEREFORE, WHAT IS REQUIRED IS A FULL AND TRUE DISC LOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. I FIND FROM THE REASONS RECORDED BY THE LD. AO. THAT THE TRUE NATURE OF THESE TRANSACTIONS WERE NOT DISCLOSED BY THE APP ELLANT AND THEREFORE, PRIMA FACIE HE HAD VALID GROUNDS TO REOP EN THE CASE. 2.4.11 IT HAS BEEN HELD IN A NUMBER OF CASES THAT O NCE THE AO. RECORDS THE MANDATORY REASONS BEFORE INITIATING REA SSESSMENT PROCEEDINGS ON THE BASIS OF EVIDENCE BROUGHT TO HIS KNOWLEDGE, THE COURTS CANNOT STEP INTO HIS SHOES AS REGARDS TH E SUFFICIENCY OF THE REASONS RECORDED. THE BELIEF MUST BE HONEST AND OF REASONABLE PERSON BASED ON REASONABLE GROUNDS. THE AO MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE: BUT HIS BELIE F MUST NOT BE BASED ON MERE SUSPICION, GOSSIP OR RUMOUR. I FIND F ROM THE FACTS OF THE CASE THAT THE REASON IS BASED ON SPECIFIC FACTS . THE HON'BLE APEX COURT HAS HELD THAT THE COURT CAN ALWAYS EXAMI NE THIS ASPECT (LE. FORMATION OF BELIEF) THOUGH THE DECLARA TION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 11 {(SHEO NATH SINGH 82 ITR 147)(SC) : BHAGWAN INDUSTR IAL P.LTD. 31STC 293 (SC):} 2.4.12 HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. VS. ITO 236 ITR 34, 35 (SC) HAS HELD THA T FOR DETERMINING WHETHER INITIATION OF REASSESSMENT PROC EEDINGS WAS VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRI MA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. IT FURTHER HELD THAT THE SUFFICIENCY OR CORRE CTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS ST AGE. THE HON'BLE APEX COURT IN THE CASE OF SHRI KRISHNA P. LTD. 221 ITR 538, 549 (SC) HAS ALSO HELD THAT THE ENQUIRY AT THE STAGE OF EXAMINING THE VALIDITY OF REASSESSMENT NOTICE IS ONLY TO SEE WHET HER THERE ARE REASONABLE GROUNDS FOR THE AO AND NOT WHETHER THE OMISSIONS/FAILURES AND THE ESCAPEMENT OF THE INCOME IS ESTABLISHED. THE HON'BLE COURT THEREFORE, CAUTIONED THAT IT WAS NECESSARY TO KEEP THIS DISTINCTION IN MIND. 2.4.13 AT THIS JUNCTURE IT WOULD BE APPROPRIATE TO REPRODUCE THE EXPLANATION TO SEC.147 WHICH READS AS UNDER:- 'EXPLN. 2 - FOR THE PURPOSES OF THIS SECTION, THE F OLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT, NAMELY: (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED B Y THE AO THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN T HE RETURN; (C) . WHERE AN ASSESSMENT HAS BEEN MADE, BUT- (I) INCOME CHARGEABLE TAX HAS BEEN UNDER ASSESSED; ;OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO IOWA RATE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED.' 2.4.14 INTERPRETING AND HIGHLIGHTING THE SIGNIFICAN CE OF THE SAID EXPLANATION IN CONSOLIDATED PHOTO & FINVEST LTD. VS . ASSTT. CIT (2006) 200 CTR (DEL) 433 : (2006)281 ITR 394 (DEL) IT HAS BEEN HELD: '9. THE ABOVE WOULD SHOW THAT CASES FALLING IN CL. (E) OF EXPLN. 2 IN WHICH INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSES SED OR ASSESSED AT TOO IOWA RATE OR CASES IN WHICH INCOME HAS BEEN ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 12 MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT OR WHERE EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OF ANY OTH ER ALLOWANCE UNDER THE ACT HAS BEEN COMPUTED, WOULD CONSTITUTE C ASES OF INCOME ESCAPING ASSESSEE. THERE IS CONSIDERABLE AUT HORITY FOR THE PROPOSITION THAT THE JURISDICTION OF THE AO TO INIT IATE PROCEEDINGS WOULD DEPEND UPON WHETHER HE HAS REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. A LONG STRING OF DECISIONS RENDERED BY THE SUPREME COURT HAVE EMP HASIZED THAT THE BELIEF OF THE AO MUST BE IN GOOD FAITH AND MUST NOT BE A MERE PRETENCE. THE APEX COURT HAS FURTHER HELD THAT THERE MUST BE A NEXUS BETWEEN THE MATERIAL BEFORE THE AO AND THE BELIEF WHICH HE FORMS REGARDING THE ESCAPEMENT OF THE ASSESSEE'S INCOME. A WRIT COURT, THEREFORE, IS ENTITLED TO EXAMINE WHETH ER THE AO'S BELIEF WAS IN GOOD FAITH AND WHETHER SUCH REASONS H AD A NEXUS WITH THE ACTION PROPOSED TO BE TAKEN.' 2.4.15 THE PRESENT CASE IS NOT ONE OF CHANGE OF OPI NION AS ALLEGED BY THE APPELLANT. QUESTION OF CHANGE OF OPINION ARI SES WHEN THE AO FORMS AN OPINION AND DECIDES NOT TO MAKE AN ADDI TION AND HOLDS THAT THE APPELLANT WAS CORRECT IN HIS STAND. IN THE PRESENT CASE, NO FACTS REGARDING THE BOGUS TRANSACTIONS WIT H MUKESH WAS EVER PRODUCED BY THE APPELLANT AND THEREFORE FOR TH E SAKE OF FORMING A PRIMA FACIE BELIEF, THE INFORMATION IN TH E POSSESSION OF THE LD. AO. ON THE BASIS OF INVESTIGATIONS MADE, WA S SUFFICIENT TO INITIATE REASSESSMENT PROCEEDINGS. IT WILL BE APPRO PRIATE IN THIS REGARD TO REFER TO EXPLANATION 1 TO SEC.147 OF THE ACT WHICH READS AS UNDER:- 'EXPL.1 PRODUCTION BEFORE THE AO OF ACCOUNT BOOKS O R OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO.' 2.4.16 REFERRING TO THE SAID EXPLANATION IN CONSOLI DATED PHOTO & FINVEST LTD. (SUPRA) IT HAS BEEN HELD: '8. IT IS CLEAR FROM THE ABOVE THAT THE TWO CRITICA L ASPECTS WHICH NEED TO BE ADDRESSED IN ANY ACTION UNDER S. 147 ARE WHETHER THE AO HAS 'REASON TO BELIEVE' THAT ANY INCOME CHARGEAB LE TO TAX HAS ESCAPADE ASSESSMENT AND WHETHER THE PROPOSED REASSE SSMENT IS WITHIN THE PERIOD OF LIMITATION PRESCRIBED UNDER TH E PROVISO TO S. 147. EXPLN .1 TO THE SAID PROVISION MAKES IT CLEAR THAT PRODUCTION OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH THE A O COULD WITH DUE DILIGENCE DISCOVER MATERIAL EVIDENCE WOULD NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROV ISO THAT STIPULATES AN EXTENDED PERIOD OF LIMITATION FOR ACT ION IN CASES WHERE THE ESCAPEMENT ARISES OUT OF THE FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE .FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. ' 2.4.17 IN KANTAMANI VENKATA NARYANA & SONS VS. ADD! . ITO (1967) 631TR 638 (SC), THE APEX COURT HELD THAT IN PROCEEDINGS ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 13 UNDER ART.226 OF THE CONSTITUTION OF INDIA CHALLENG ING THE JURISDICTION OF THE ITO TO ISSUE A NOTICE FOR REOPE NING THE ASSESSMENT, THE HIGH COURT WAS ONLY CONCERNED WITH EXAMINING WHETHER THE CONDITIONS WHICH INVESTED THE ITO WITH THE POWERS TO REOPEN THE ASSESSMENT EXISTED. IT IS NOT, OBSERVED THE COURT, WITHIN THE PROVINCE OF THE HIGH COURT TO RECORD A F INAL DECISION ABOUT THE FAILURE TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS BEARING ON THE ASSESSMENT AND CONSEQUENT ESCAPEMENT OF INCOME FROM ASSESSMENT AND TAX. THE COURT ALSO HELD THAT F ROM A MERE PRODUCTION OF THE BOOKS OF ACCOUNT, IT COULD NOT BE INFERRED THAT THERE HAD BEEN FULL DISCLOSURE OF THE MATERIAL FACT S NECESSARY FOR THE PURPOSES OF ASSESSMENT. THE TERMS OF THE EXPLAN ATION, DECLARED THE COURT, WERE TOO PLAIN TO PERMIT AN ARG UMENT THAT THE DUTY OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS WOULD STAND DISCHARGED WHEN HE PRODUCES THE BOOKS O F ACCOUNT OR EVIDENCE WHICH HAS A MATERIAL BEARING ON THE ASS ESSMENT. THE COURT OBSERVED (P.644): 'IT IS THE DUTY OF THE ASSESSEE TO BRING TO THE NOT ICE OF THE ITO PARTICULAR ITEMS IN THE BOOKS OF ACCOUNT OR PORTION S OF DOCUMENTS WHICH ARE RELEVANT. EVEN IF IT BE ASSUMED THAT FROM THE BOOKS PRODUCED, THE ITO MAY NOT ON THAT ACCOUNT BE PRECLU DED FROM EXERCISING THE POWER TO ASSESS INCOME WHICH HAD ESC APED ASSESSMENT' 2.4.18 TO THE SAME EFFECT IS THE DECISION OF THE SU PREME COURT IN MALEGAON ELECTRICITY CO. (P) LTD. VS. CIT (1970) 78 ITR 466 (SC) WHERE THE COURT OBSERVED (PAGE 471) : 'IT IS TRUE THAT IF THE ITO HAD MADE SOME INVESTIGA TION, PARTICULARLY IF HE HAD LOOKED INTO THE PREVIOUS ASSESSMENT RECOR DS, HE WOULD HAVE BEEN ABLE TO FIND OUT WHAT THE WRITTEN DOWN VA LUE OF THE ASSETS SOLD WAS AND CONSEQUENTLY HE WOULD HAVE BEEN ABLE TO FIND OUT THE PRICE IN EXCESS OF THEIR WRITTEN DOWN VALUE REALIZED BY THE ASSESSEE. IT CAN BE SAID THAT THE ITO IF HE HAD BEEN DILIGENT COULD HAVE GOT ALL THE NECESSARY INFORMATION FROM H IS RECORDS. BUT THAT IS NOT THE SAME THING AS SAYING THAT THE ASSES SEE HAD PLACED BEFORE THE ITO TRULY AND FULLY ALL MATERIAL FACTS N ECESSARY FOR THE PURPOSE OF ASSESSMENT. THE LAW CASTS A DUTY ON THE ASSESSEE TO 'DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS ASSESSMENT FOR THAT YEAR'''. 2.4.19 IT HAS BEEN FURTHER OBSERVED IN CONSOLIDATED PHOTO & FINVEST LTD. (SUPRA): THE ARGUMENT THAT THE PROPOSED REOPENING OF ASSESSM ENT WAS BASED ONLY UPON A CHANGE OF OPINION HAS NOT IMPRESS ED US. THE ASSESSMENT ORDER DID NOT ADMITTEDLY ADDRESS ITSELF TO THE QUESTION WHICH THE AO PROPOSES TO EXAMINE IN THE COURSE OF R EASSESSMENT PROCEEDINGS. THE SUBMISSION OF MR. VOHRA THAT EVEN WHEN THE ORDER OF ASSESSMENT DID NOT RECORD ANY EXPLICIT OPI NION ON THE ASPECTS NOW SOUGHT TO BE EXAMINED. IT MUST BE PRESU MED THAT ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 14 THOSE ASPECTS WERE PRESENT TO THE MIND OF THE AO AN D HAD BEEN HELD IN FAVOUR OF THE ASSESSEE IS TOO FAR-FETCHED A PROPOSITION TO MERIT ACCEPTANCE. THERE MAY INDEED BE A PRESUMPTION THAT THE ASSESSMENT PROCEEDINGS HAVE BEEN REGULARLY CONDUCTE D, BUT THERE CAN BE NO PRESUMPTION THAT EVEN WHEN THE ORDER OF A SSESSMENT IS SILENT, ALL POSSIBLE ANGLES AND ASPECTS OF A CONTRO VERSY HAD BEEN EXAMINED AND DETERMINED BY THE AO .. ' 2.4.20 IT IS WELL SETTLED THAT EVEN AN AUDIT OBJECT ION ON THE POINT OF FACT CAN BE A VALID GROUND FOR REOPENING OF ASSESSM ENT. IN THE CASE OF NEW LIGHT TRADING CO. VS. CIT (2001) 170 CT R (DEL)138: (2002) 256 ITR 391 (DEL), A DIVISION BENCH OF THE C OURT AFTER REFERRING TO THE DECISION OF SUPREME COURT IN CIT V S P.V.S. BEEDIES (P) LTD. (1999) 155 CTR (SC) 538 : (1999) 237 ITR 1 3 (SE) HAS HELD AS UNDER (AT P.393): 'IN THE CASE OF CIT VS. P. V.S. BEEDIES (P) LTD. (1 999) 155 CTR (SC) 538: (1999) 237 ITR 13 (SC) THE APEX COURT HELD THA T THE AUDIT PARTY CAN POINT OUT A FACT, WHICH HAS BEEN OVERLOOK ED BY THE ITO IN THE ASSESSMENT. THOUGH THERE CANNOT BE ANY INTER PRETATION OF LAW BY THE AUDIT PARTY, IT IS ENTITLED TO POINT OUT A FACTUAL ERROR OR OMISSION IN THE ASSESSMENT AND REOPENING OF A CASE ON THE BASIS OF FACTUAL ERROR OR OMISSION POINTED OUT BY THE AUD IT PARTY IS PERMISSIBLE UNDER LAW. AS THE TRIBUNAL HAS RIGHTY N OTICED, THIS WAS NOT A CASE FOR THE AO MERELY ACTING AT THE BEHE ST OF THE AUDIT PARTY OR ON ITS REPORT. IT HAS INDEPENDENTLY EXAMINED THE MATERIAL COLLECTE D BY THE AUDIT PARTY IN ITS REPORT AND HAS COME TO AN INDEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. THE ANSWER TO THE Q UESTION, THEREFORE, IN THE AFFIRMATIVE, IN FAVOUR OF THE REV ENUE AND AGAINST THE ASSESSEE.' 2.4.21 WHEN THERE IS NO DISCUSSION ON THE ISSUE IN THE ASSESSMENT ORDER AND NO DETAILS WERE CALLED FOR BY THE AO OR FILED BY THE ASSESSEE ON THE ISSUE, NO FINDING EITHER POS ITIVE OR NEGATIVE CAN BE SAID TO HAVE BEEN ARRIVED AT DURING THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS. HENCE, THERE IS NO QUESTION OF CHANGE OF OPINION AS HELD IN THE FOLLOWING JUDGEMENTS: 1. KALYANJI MAVJI & CO. VS. CIT 102 ITR 287 (SC) 2. ESSKAY ENGINEERING P. LTD. VS. CIT 247 ITR 818 3. ITO VS. PURUSHOTTAM DAS BANGUR & ANR. 224 ITR 36 2 (SC) IN THE LIGHT OF THE ABOVE DISCUSSION, THE CONTENTIO N OF THE ASSESSEE THAT THE PRESENT CASE IS OF CHANGE OF OPINION HAS T O BE REJECTED. 2.4.22 THE SECOND QUESTION ARISES FOR CONSIDERATION IS WHETHER THE APPELLANT HAD MADE FULL AND TRUE DISCLOSURE OF MATE RIAL FACTS. I HAVE ALREADY REPRODUCED ABOVE THE CONTENTIONS OF TH E APPELLANT IN THIS REGARD AND THE OBJECTIONS RAISED. THERE IS NOT HING ON RECORD AND NOT EVEN THE STAND OF THE APPELLANT THAT DETAIL S AS RECORDED IN ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 15 THE 'REASON TO BELIEVE' WERE EITHER CALLED FOR OR F URNISHED AND EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS. 2.4.23 IN WRIT PETN. NO.9036 OF 2007, HONDA SIEL PO WER PRODUCTS LTD. VS. DY CIT & ANR. DECISION DT. 14TH FEB. 2011 (REPORTED AT (2011) 52 DTR (DEL) 353 - ED.) IT WAS HELD: '10 THE TERM 'FAILURE' ON THE PART OF THE ASSESSEE IS NOT RESTRICTED ONLY TO THE IT RETURN AND THE COLUMNS OF THE IT RET URN OR THE TAX AUDIT REPORT. THIS IS THE FIRST STAGE. THE SAID EXP RESSION 'FAILURE TO FULLY AND TRULY DISCLOSE MATERIAL FACTS' ALSO RELAT E TO THE STAGE OF THE ASSESSMENT PROCEEDING, THE SECOND STAGE. THERE CAN BE OMISSION AND FAILURE ON THE PART. OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY MATERIAL FACTS DURING- THE COURSE OF THE ASSESSMENT PROCEEDINGS. THIS CAN HAPPEN WHEN THE ASSESSEE DOES NOT DISCLOSE OR FURNISH TO THE AO COMPLETE AND CORRECT INFORMATION AND DETAILS IT IS REQUIRED AND UNDER AN OBLIGATION TO D ISCLOSE. BURDEN IS ON THE ASSESSEE TO MAKE FULL AND THE TRUE DISCLO SURE'. 2.4.24 FORMATION OF OPINION OF THE AO. HAS TO BE CO NSIDERED ON THE TOUCH STONE WHETHER THERE WAS REASONABLE BELIEF THA T INCOME HAD ESCAPED ASSESSMENT AND FOR THAT PURPOSE RELIANCE IS PLACED ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN RAYMOND W OOLEN MILLS LTD. VS ITO 236 ITR 34 (SC). CONSIDERING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE ABOVE CASE, THE QU ESTION IS WHETHER THE AO HAD PRIMA FACIE REASON TO BELIEVE TH AT THE INCOME HAD ESCAPED ASSESSMENT. I HAVE EARLIER REPRODUCED E XPLANATION 2(C) OF SEC.147. :N VIEW OF THE FACTUAL AND LEGAL M ATRIX NARRATED EARLIER, AS THERE WAS NO TRUE DISCLOSURE OF THE MAT ERIAL FACTS DURING THE COURSE OF ORIGINAL PROCEEDINGS, IT PRIMA FACIE CAN NOT BE STATED THAT THERE WAS NO REASON TO BELIEVE. THE VAR IOUS JUDGEMENTS RELIED UPON ON BEHALF OF THE APPELLANT A RE DISTINGUISHABLE IN AS MUCH AS EITHER THERE WAS NO F AILURE TO DISCLOSE THE FULL AND TRUE RELEVANT INFORMATION AND /OR IT WAS MERELY A CHANGE OF OPINION IN THOSE CASES. THE APPE LLANT COULD NOT MAKE OUT THE CASE THAT NO PART OF THE RELEVANT MATE RIAL HAVE BEEN KEPT OUT FROM THE AO. AND THAT IT WOULD NOT BE UNRE ASONABLE FOR THE AO. NOT TO DRAW INFERENCE FROM THE ACCOUNTS PRO DUCED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. SUSTENANCE IN THIS REGARD IS ALSO DRAWN FROM THE JUDGEMENT OF HON'BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF M/S.GIRILAL & CO. YS. ITO 300 ITR 432 (BORN). 2.4.25 ANY FRESH INFORMATION RECEIVED BY THE AO. CA N ENTITLE HIM TO ISSUE NOTICE U/S.148, IF ON THE BASIS OF SUCH IN FORMATION HE HAS PRIMA FACIE REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT. SO MUCH SO THAT IT WAS HELD BY THE HON' BLE SUPREME COURT IN CLAGGETT BRACHI CO.LD. VS CIT 177 ITR 409 (SC) THAT AN INFORMATION OBTAINED DURING ASSESSMENT PROCEEDINGS OF A SUBSEQUENT YEAR CAN ALSO VALIDATE THE PROCEEDINGS I NITIATED U/S.147 FOR EARLIER YEAR. SIMILARLY, HON'BLE BOMBAY HIGH COURT IN THE CASE OF ANUSANDHAN INVESTMENTS LTD. VS. M.R .. SINGH, DCIT, ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 16 287 ITR 482 HELD THAT A NOTICE ISSUED U/S.148 BASED ON ASSESSMENT OF SUBSEQUENT ASSESSMENT YEAR IS VALID E VEN IF THE APPEAL IS PENDING FOR SUCH ASSESSMENT. FURTHER, IN THE CASE OF PIAGGIO VEHICLES P. LTD. YS. DCIT 290 ITR 377 (BOM) , THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT IN A CASE OF RE OPENING AFTER 4 YEARS SUBSEQUENT TO SCRUTINY ASSESSMENTS, CONTRADIC TION WAS DISCOVERED BETWEEN TAX AUDIT REPORT AND RETURN OF I NCOME, IT WAS A CASE OF OMISSION AND/OR FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE FULLY AND TRULY ALL FACTS FOR COMPUTATION OF ITS INCOME. IT IS ALSO HELD BY HON'BLE SUPREME COURT IN THE FOLLOWING CASES THAT FACTS WHICH COULD HAVE BEEN FOUND BY THE ITO BY FUR THER PROBING ARE COVERED UNDER FAILURE TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS:- INDO - ADEN SALT MFG. AND TRADING CO. P. LTD. YS.CI T 159 ITR 624 (SC) R.B. BANSILAL ABIRCHAND FIRM VS. CIT 70 ITR 74 (SC) 2.4.26 IN SUCH CIRCUMSTANCES, IT CANNOT BE HELD THA T THERE WAS FULL AND TRUE DISCLOSURE BY THE APPELLANT. ACCORDINGLY, THE SECOND CONTENTION OF THE APPELLANT FAILS. 2.4.27 IN VIEW OF THE ABOVE BINDING PRECEDENTS OF T HE HON'BLE SUPREME COURT, I AM OF THE VIEW THAT THE LD. AO HAD VALID REASONS TO INITIATE REASSESSMENT PROCEEDINGS WHICH WERE DULY RECORDED AND COMMUNICATED TO THE APPELLANT AND THER EFORE, THERE IS NO MERIT IN THE ARGUMENTS ADVANCED BY THE LD. AR . ON THIS GROUND. ACCORDINGLY, THE ADDITIONAL GROUND OF APPEA L IS DISMISSED. 7. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. AR F URTHER SUBMITTED THAT IN THE CASE OF SHRI VISHAL VINOD SHAH WHO IS A FAMILY MEMBER OF THE ASSESSEE AND IN HIS CASE ON IDENTICAL FACTS THE HONBLE ITAT MUMBAI BENCH IN ITA NO.4209/MUM/2014 FOR A.Y.2003 -04 HAS DELETED THE ADDITION MADE BY THE AO. IT WAS ALSO SU BMITTED THAT ALTHOUGH THE REOPENING WAS UPHELD BY CIT(A) BUT THE ADDITIONS WERE DELETED. HOWEVER THE REVENUE FILED APPEAL AGAINST T HE ORDER OF CIT(A) AND THE HONBLE ITAT DISMISSED THE APPEAL OF THE RE VENUE AND UPHELD THE ORDER OF CIT(A) DELETING THE ADDITION. EVEN LD. CIT(A) HAS TAKEN INTO CONSIDERATION ALL THE FACTUAL AND LEGAL POSITI ON, AND RIGHTLY HELD THAT THE AO HAS RIGHTLY EXERCISED HIS POWER OF RE-O PENING, AS HE HAD VALID REASONS TO BELIEVE THAT INCOME HAD ESCAPED AS SESSMENT. THE AO HAD JUSTIFICATION TO SUPPOSE THAT INCOME HAD ESC APED ASSESSMENT AND HENCE HAS RIGHTLY RE-OPENED THE ASSESSMENT. HEN CE, THE ORDER OF CIT(A) IS WELL REASONED AND SPEAKING ORDER WHILE UP HOLDING THE ORDER OF AO REGARDING RE-OPENING. NO NEW FACTS OR CIRCUMS TANCES HAVE BEEN BROUGHT BEFORE US IN ORDER TO CONTROVERT OR REBUT T HE FINDINGS BY THE CIT(A). THEREFORE WHILE MAINTAINING JUDICIAL CONSIS TENCY AND FINDING ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 17 NO MERIT IN THE ARGUMENTS ADVANCED BY LD. AR WE UPH OLD THE ORDER OF REOPENING. ACCORDINGLY THIS GROUND OF APPEAL IS DIS MISSED. 5.3.3 ON AN APPRECIATION OF THE FACTS ON RECORD AND TAKING INTO ACCOUNT THE FACTUAL AND LEGAL POSITION OF THE CASE ON HAND, WHICH WE FIND IS SIMILAR TO THAT OF A.Y. 2005-06 AS LAID OUT IN THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE AO HAD RIGHTLY EXERCISED HIS POWER OF REOPENING THE ASSESSMENT IN PROCEEDINGS UNDER SECTION 147/148 OF THE ACT, AS HE HAD PRIMA FACIE V ALID REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE EXIGIBLE TO TAX FOR A.Y . 2003-04 HAD ESCAPED ASSESSMENT AND HAD THEREFORE CORRECTLY REOPENED THE ASSESSMENT FOR A.Y. 2005-06. BEFORE US, NO MATERIAL EVIDENCE HAS BEEN B ROUGHT ON RECORD BY THE ASSESSEE TO CONTROVERT THE FINDINGS OF THE LEAR NED CIT(A) ON THIS ISSUE. IN THIS VIEW OF THE MATTER, WHILE MAINTAINING JUDIC IAL CONSISTENCY AND FINDING NO MERIT IN THE GROUNDS RAISED OR ARGUMENTS PUT FORTH BY THE LEARNED A.R. OF THE ASSESSEE, WE UPHOLD THE ACTION OF THE AO IN REOPENING THE ASSESSMENT FOR A.Y. 2003-04 IN THE CASE ON HAND . CONSEQUENTLY, GROUNDS 4, 6 & 11 OF THE ASSESSEES APPEAL ARE DISM ISSED. 6. GROUNDS 1, 7, 8, 9 & 12 6.1 IN THESE GROUNDS, THE ASSESSEE ASSAILS THE IMPU GNED ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE AOS ACTION IN TREA TING THE CAPITAL GAINS ON SALE OF SHARES OF BUNIYAD CHEMICALS LTD. AMOUNTING TO ` 35,17,598/- AS BOGUS TRANSACTION AND THE TREATMENT OF THE INVESTME NT THEREOF, IN PURCHASE OF RESIDENTIAL FLAT AT JALDARSHAN, MALABAR HILLS, MUMBAI AS UNEXPLAINED INVESTMENT; THEREBY DENYING THE ASSESSE E EXEMPTION CLAIMED THEREON UNDER SECTION 54F OF THE ACT. IT IS ALSO CO NTENDED THAT NO INDEPENDENT INQUIRY HAS BEEN MADE BY THE AO TO ASCE RTAIN THE TRUTH IN THE MATTER, SINCE IT IS EVIDENT THAT HE MERELY RELIED O N THE INFORMATION RECEIVED FROM THE DDIT (INV) AND THE STATEMENT OF ONE SHRI M UKESH CHOKSI, WHICH IS SAID TO BE GENERAL IN NATURE AND DID NOT SPECIFI CALLY NAME THE ASSESSEE. THE ASSESSEE FURTHER ASSAILS THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND AO AS BEING VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE, SINCE NO OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO CROSS-E XAMINE SHRI MUKESH CHOKSI AND FURTHER ALSO TO RELY ON THE SAME STATEME NT WHICH WAS RECORDED ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 18 BEHIND THE BACK OF THE ASSESSEE FOR MAKING/UPHOLDIN G FINDINGS ADVERSE TO THE ASSESSEES CLAIMS OF CAPITAL GAINS AND TO DENY EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. THE LEARNED A.R. OF THE ASS ESSEE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. IT WAS SUBMITTED TH AT ALL DETAILS OF THE SHARE TRANSACTIONS OF BUNIYAD CHEMICALS ENTERED INT O BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS PART OF ASSESSEES PAPER BOOK (PG. 1 TO 62), THE DETAILS OF WHICH WERE PLACED BEFORE THE AUTHORI TIES BELOW; I.E. COPIES OF PURCHASE PURCHASE/SALE BILLS (PG. 45 TO 62); COPIES OF PHYSICAL SHARE CERTIFICATES (PG. 36 TO 40); COPY OF DEMAT ACCOUNT (PG. 41), ETC. IT WAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE. IN SIMILAR FACTUAL SITUATION ON THIS ISSUE A COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2005-06 IN ITA NO. 197 8 & 1979/MUM/2014 DATED 07.10.2016, FOLLOWING THE DECISION OF, INTER ALIA, THE MUMBAI ITAT IN KAMLESH MUNDRA IN ITA NO. 6248/MUM/2012, HAS DELETE D SIMILAR ADDITIONS/DISALLOWANCES MADE AND CONFIRMED BY THE A UTHORITIES BELOW. 6.2 PER CONTRA, THE LEARNED D.R. SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN CONSIDERED AND ADJUDICATED IN FAVOUR OF THE ASSESSEE BY A COORDINA TE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2005-0 6 IN ITA NO. 1978 & 1979/MUM/2014 DATED 07.10.2016, WHEREIN AT PARAS 8 TO 10 THEREOF HAS HELD AS UNDER: - 8. SINCE ALL THE GROUNDS RAISED BY THE ASSESSEE AR E INTER-CONNECTED AND INTER-RELATED THEREFORE WE THOUGHT IT FIT TO DI SPOSE OFF THE SAME THROUGH THE PRESENT COMMON ORDER. WE HAVE COUNSEL F OR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL ON RE CORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE HAVE A LSO PERUSED THE ORDERS OF COORDINATE BENCH OF ITAT IN THE CASE OF I TO VS. SHRI VISHAL VINOD SHAH WHO IS A FAMILY MEMBER OF ASSESSEE AND A S PER THE LD. AR, THE CASE OF VISHAL VINOD SHAH WAS ALSO ON IDENT ICAL FACTS. THE RELEVANT PARA IS REPRODUCED BELOW: 10. AFTER HEARING THE COUNSEL AS WELL AS THE ORDER PASSED BY THE REVENUE AUTHORITIES, WE HAVE OBSERVED THAT THE CO-O RDINATE BENCH ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 19 OF ITAT, MUMBAI HAD ALREADY DEALT WITH THE SIMILAR ISSUE IN THE CASE OF SHRI KAMLESH MUNDRA VS. ITO IN ITA NO.6248( MUM)/2012 FOR THE ASSESSMENT YEAR 2003-04. THE OPERATIVE PORT ION OF THE DECISION OF THE HONBLE ITAT IN THE AFOREMENTIONED CASE IS AS UNDER; 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE LOWER AUTHORITIES AND AFTER CONSIDERI NG THE SAME, WE HAVE OBSERVED THAT THE CO-ORDINATE BENCH OF ITAT MUMBAI HAS ALREADY DEALT WITH THE SIMILAR ISSUE IN ITA NO. 1175/MUM/2012 AND ITA NO. 1176/MUM/2012 WHERE IN AL SO THE ASSESSEES IN THOSE CASES HAVE DEALT WITH THE SHARE TRANSACTION WITH THE SAME COMPANIES. WE REFERRED THE OPERATIVE PARA OF ITA NO. 1175/MUM/2012 TITLED SMT. DURGADEVI MUDRA VS. ITO AND THE SAME IS REPRODUCED HERE IN BELOW: I HAVE HEARD THE PARTIES AND PERUSED THE RECORD. T HE LD. COUNSEL SUBMITS THAT IN RESPECT OF THE 'SHARES SCAM' ALLEGE D TO BE INVOLVED BY SHRI MUKESH CHOKSHI ACTIONS WERE TAKEN AGAINST M ANY PERSONS DISALLOWING THEIR CLAIM IN RESPECT OF LONG- TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN. HE SUBMITS THAT ON IDE NTICAL SET OF FACTS THE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL . THE LD. COUNSEL FILED THE COPIES OF THE TRIBUNAL DECISION B Y WAY OF COMPILATION AS UNDER: I) MUKESH R. MAROLIA VS. ADDL. CIT -6 SOT 247 II) RAJNUDEVI CHOWDHARY VS. ITO -ITA 6455/M/2007(BOM ) III) ITO VS. TRUPTIC SHAH -ITA 6455/M/2007(BOM) IV) CHANDRAKANT BABULAL SHAH -ITA 6108/M/2009(BOM) V) ACIT VS. SHRI RAVINDRAKUMAR THSHINWAL ITA 5302/M /2008 (BOM) 5. HE, THEREFORE, PLEADED FOR ACCEPTING THE CLAIM O F THE ASSESSEE IN RESPECT OF LONG-TERM CAPITAL GAIN. I HAVE ALSO HEAR D THE LD. D.R. 6. I FIND THAT IN THE PRESENT CASE, THE ASSESSEE HA S PRODUCED THE BILLS SHOWING THE PURCHASE OF THE SHARES. THE ASSES SEE ALSO PROVED THAT THE SHARES WERE SOLD THROUGH THE SHARE BROKER AND HE PRODUCED THE PROOF FOR THE SAME. THE IDENTICAL SITU ATION HAS BEEN CONSIDERED BY THE ITAT C BENCH, MUMBAI IN THE CAS E OF CHANDRAKANT BABULAL SHAH (SUPRA). THE OPERATIVE PAR T OF THE ORDER OF THE TRIBUNAL IS AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND EXAMINED THE RECORD. THE CASE RELIED UPON BY THE LE ARNED COUNSEL ARE NOT DIRECTLY APPLICABLE TO THE FACTS OF THE CAS E AS IN THOSE CASES THE SALE PROCEEDS ARE TREATED AS UNDISCLOSED INCOME DENYING THE ENTIRE TRANSACTION AS SUCH, WHEREAS, IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT TREAT THE SALE OF SHARES AS BOGUS. HE HAS ONLY EXAMINED THE PURCHASE OF SHARES AND DOUBTED ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 20 THE DATE OF PURCHASE. BUT IN THE COMPUTATION HE HAS GIVEN BENEFIT TO THE SAME COST OF PURCHASE OF SHARES AND TAXED TH E LONG TERM CAPITAL GAIN OFFERED AS SHORT TERM CAPITAL GAIN ONL Y. AS FAR AS THE DATE OF PURCHASE IS CONCERNED, THE EVIDENCE ON RECO RD INDICATE THAT THE ASSESSEE HAD INDEED EARNED SPECULATION PRO FIT BY SALE OF APTECH SHARES WHICH THE ASSESSING OFFICER HAS NOT D OUBTED. FURTHER THE ASSESSEE ALSO SUFFERED SPECULATION LOSS AS STATED ABOVE IN FEBRUARY, 2001 AND DEBIT AND CREDIT ENTRIE S PERTAINING TO SAME BROKER WERE SHOWN IN THE BALANCE SHEET IN THE RETURN FILED FOR THE AY 2001-2002 IN AUGUST, 2001. THERE IS ALSO A MENTION OF PURCHASING OF SHARES OF THE COMPANY IN THE RETURN. IT IS ALSO ON RECORD THAT THE SAID COMPANY VIDE LETTER DATED 30-6 -2000 HAD TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE WITH THE FOLIO NO. 15021 AND CERTIFICATE NOS. 105744 TO 105848. TH E ASSESSING OFFICER NEITHER QUESTIONED THE SAID COMPANY NOR DIS PROVED THE TRANSFER OF SHARE CERTIFICATES BY 30/6/2000. THE ON LY BASIS FOR ARRIVING AT THE CONCLUSION THAT THE TRANSACTION IS NOT GENUINE IS ON THE BASIS OF THE STATEMENT GIVEN BY MR. MUKESH CHOK SHI ON 20-6- 2004/20-6-2002 BEFORE THE DDIT (INV.) WITH REFERENC E TO CERTAIN TRANSACTIONS UNDERTAKEN BY MR. MUKESH CHOKSHI AND H IS GROUP OF COMPANIES, MAINLY GOLD FINVEST PVT. LTD. RICHMOND S ECURITIES AND ALEMBIC SECURITIES, WHICH ARE DEALING IN INTERCONNE CTED STOCK EXCHANGE/ NSC. MOST OF THE ENQUIRIES PERTAINS TO TH E TRANSACTIONS IN INTERCONNECTED STOCK EXCHANGE AND SALE OF SHARES IN THE COMPANY VIZ., RASHEL AGRO TECH LTD. THE ENQUIRY IN THE SAID GROUP OF COMPANIES WAS WITH REFERENCE TO THE ISSUANCE OF BOGUS , PURCHASE AND SALE BILLS AND ACCOMMODATING VARIOUS P ARTIES IN EARNING THE CAPITAL GAINS. HOWEVER, AS SUBMITTED BY THE LEARNED COUNSEL, THE ASSESSEE'S NAME IS NOT FIGURING IN THE TRANSACTIONS WHICH WERE ORIGINALLY ENQUIRED BY THE DDIT (INV.) O N 26-4-2002. EVEN THOUGH THE MODUS OPERANDI WAS EXPLAINED AND ST ATED THAT THEY WERE GETTING 0.5% COMMISSION IN ARRANGING THE TRANSACTIONS, NOTHING WAS CONCLUDED AGAINST THE ASSESSEE IN THE S AID STATEMENT. THE ASSESSING OFFICER IN THE COURSE OF A SSESSMENT AGAIN RECORDED THE STATEMENT UNDER SECTION 131 ON 9 -11-2006 IN WHICH QUESTION NO. 4 AND 5 WHICH ARE EXTRACTED IN T HE ASSESSMENT ORDER ITSELF. THE MAIN RELIANCE IS ON QUESTION NO. 5 WHICH IS AS UNDER: 'Q.5 : PLEASE GIVE THE DETAILS OF BILLS OF PROFIT I SSUED BY YOUR COMPANY AS STATED ABOVE. ANS: THESE BILLS NUMBERS B ILLS NO. CC/2000/16/12501 DT.18-4-2000 WHICH SHOWS THAT B.87 610.85 PAYABLE TO SHRI CHANDRAKANT D. SHAH. THERE IS ANOTH ER BILL NO. CC/2001/07/164 (N) DT.20/2/2001 IN WHICH RS.89602 W AS RECEIVABLE BY SHRI CHANDRAKANT B. SHAH. THESE BILLS ARE ISSUED SHOWING FICTITIOUS PROFIT AND THEREFORE THE PURCHAS E ARE NOT SUBSTANTIATED BY GENUINE PAYMENTS.' '8. THIS STATEMENT WAS RELIED UPON BY THE ASSESSING OFFICER TO STATE THAT THE PURCHASE BILLS ARE ISSUED SHOWING FI CTITIOUS PROFIT. ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 21 HOWEVER, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE MR. MUKESH CHOKSHI AND WHEN AN OPPORTUNITY WAS GIVEN AND ASSESSEE WAS PRESENT MR. MUKESH CHOKSHI WAS NOT AVAILABLE. THE ONLY BASIS FOR THIS ABOVE STATEMENT IS THAT THE PAYMENTS ARE NOT MADE IMMEDIATELY BUT EVEN STATEMEN T ITSELF INDICATE THAT THEY WERE CAPITAL GAINS EARNED BY THE ASSESSEE AS SPECULATION PROFITS AND IN QUESTION NO. 4 IN THE ST ATEMENT MR. MUKESH CHOKSHI ADMITS THE PURCHASE OF 10500 SHARES OF RASHEL AGRO TECH, LTD. MADE OUT OF ADJUSTED SHARE PROFITS AND THEREFORE CONFIRMED THAT THIS IS AN 'ADJUSTMENT TRANSACTION). IN VIEW OF THIS STATEMENT IN QUESTION NOS. 4 AND 5) WE ARE UNABLE T O UNDERSTAND HOW THE TRANSACTIONS BECOMES A BOGUS ONE. THERE IS NO EVIDENCE EXCEPT THIS ORAL STATEMENT WHICH IS ALSO NOT SUBMIT TED FOR CROSS- EXAMINATION TO PROVE/ DISPROVE THE TRANSACTION. WHE REAS THE ASSESSEE FURNISHED TRANSACTION DETAILS) THE BANK AC COUNTS) PURCHASE AND SALE OF OTHER LISTED COMPANIES) SPECUL ATION PROFIT AND LOSS AND ALSO EVIDENCE IN THE FORM OF BALANCE S HEET FILED MUCH BEFORE THE SAID SHARES WERE SOLD. THE SALE OF SHARE S WAS UNDERTAKEN IN DECEMBER 2001 WHEREAS THE RETURN FOR AY 2001- 2002 WAS FILED BY AUGUST 2001 ITSELF INDICATING THE PURCHASE OF SHARES AND OUTSTANDING AMOUNTS TO M/ S. GOLDEN FINV EST LTD IN THE STATEMENTS. IN VIEW OF THE DOCUMENTARY EVIDENCE IN FAVOUR OF THE ASSESSEE, WE ARE UNABLE TO ACCEPT THE CONTENTIO N OF THE ASSESSING OFFICER BASED ON THE STATEMENT WHICH IS A LSO UN SUPPORTED BY ANY OTHER EVIDENCE TO DENY THE BENEFIT OF PURCHASE OF SHARES BY THE ASSESSEE ON 8-4-2000. NOT ONLY THA T THE ASSESSING OFFICER HAS ALSO GAVE CREDIT FOR THE SAME AMOUNT OF PURCHASE OF SHARES AT COST AND DID NOT TREAT THE SA LE PROCEEDS AS BOGUS/UNACCOUNTED INCOME. THE ONLY ACTION TAKEN BY THE ASSESSING OFFICER IS TO DENY THE ASSESSEE THE BENEF IT OF LONG TERM CAPITAL GAIN AND SUBSEQUENT DEDUCTION UNDER SECTION 54EC OF THE ACT AS THE ASSESSEE INVESTED THE CAPITAL GAINS IN R EC BONDS. WE DO NOT SEE ANY REASON TO AGREE WITH THE FINDINGS OF THE' ASSESSING OFFICER AND ALSO THE FINDINGS OF THE CIT (A). IN FA CT, THE CIT (A) HAS WENT AHEAD IN TREATING THE ENTIRE TRANSACTION AS BO GUS AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER WHILE HOLDING 'THIS WILL BE MORE FOR AN UNEXPLAINED RECEIPT OF MONEY OF THE APPELLANT. HENCE, ASSESSING OFFICER HAD RIGHTLY ADDED THE AMOU NT BY AND THE ACTION OF THE ASSESSING OFFICER IN MAKING THIS ADDITION IS CONFIRMED TREATING IT AS STCG)). IN ARRIVING AT THI S CONCLUSION, THE CIT (A) PRESUMED THAT ASSESSEE COULD HAVE PAID FULL PAYMENT OF 16 LAKHS BY WAY OF CASH WHICH WAS NOT THE CASE OF T HE ASSESSING OFFICER EITHER. THERE IS NO EVIDENCE EVEN TO PRESUM E THESE OBSERVATIONS OF THE CIT (A) AS STATED ABOVE. 7. THE FACTS ARE IDENTICAL IN THIS CASE AS IN THE C ASE OF CHANDRAKANT BABULAL SHAH (SUPRA). I HOLD THAT THE A SSESSEE HAS PROVED THE GENUINENESS OF THE SHARE TRANSACTIONS AN D THERE IS NO JUSTIFICATION TO DISALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LONG-TERM CAPITAL GAIN. I, ACCORDINGLY, DIRECT THE A.O. TO ALLOW THE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 22 SAME. ACCORDINGLY, GROUND NO.2 IS ALLOWED. ASSESSEE 'S APPEAL IS PARTLY ALLOWED. IN ADDITION WE HAVE ALSO ANALYSE THE ORDERS PASSED IN ITA NO. 1176/MUM/2012 TITLED SHRI MAHESH MUNDRA VS. ITO T HE OPERATIVE PARA IS REPRODUCED HERE IN BELOW: I HAVE HEARD THE PARTIES. IN THIS CASE ALSO THE AS SESSEE HAS DECLARED THE LONG-TERM CAPITAL GAIN IN RESPECT OF T HE SALE OF THE SHARES OF M/ S. BUNIYAD CHEMICALS LTD. IT WAS CLAIM ED THAT THE SHARES WERE SOLD THROUGH M/ S. GOLDSTAR FINVEST PVT . LTD. THERE WAS INVESTIGATION AGAINST SHRI MUKESH CHOKSHI WHO W AS THE MENTOR AND THE MAIN PERSON IN THE ENTIRE SHARES' 'S CAM'. THE FACTS ARE IDENTICAL AS IN THE CASE OF SMT. DURGADEVI MUND RA IN ITA NO.1175/M/2012. HENCE, TO AVOID THE REPETITION OF T HE FACTS AND FOR THE SAKE OF BREVITY, I ADOPT THE FACTS MENTIONE D IN THE CASE OF SMT. DURGADEVI MUNDRA AS WELL AS THE REASONS. IN TH IS CASE ALSO THE A.O. ASSESSED CAPITAL GAIN DECLARED BY THE ASSE SSEE AS 'INCOME FROM OTHER SOURCES'. I, THEREFORE, FOLLOWIN G MY REASONS AND DECISION IN THE CASE OF SMT. DURGADEVI MUNDRA (SUPR A) ALLOW GROUND NO.2 IN THIS APPEAL ALSO AND DIRECT THE A.O. TO ASSESS THE LONG-TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS SUCH AND ACCEPT THE SAME. 7. AFTER ANALYZING THE AFORE MENTIONED ORDERS, WE F OUND THAT THE ISSUE CONTAINED IN THE PRESENT CASE ARE SIMILAR TO THE ISSUES OF AFORE MENTIONED CASES. THEREFORE, KEEPING IN VIEW T HE PRINCIPLES OF JUDICIAL CONSISTENCY AND WHILE RESPECTFULLY FOLLOWI NG THE JUDGEMENTS PASSED BY THE CO-ORDINATE BENCH, WE ALSO HOLD THAT IN THE PRESENT CASE BY VIRTUE OF INDEPENDENT DOCUMENTS AS REFERRED IN PAPER BOOK THE ASSESSEE HAS PROVED THE GENUINENE SS OF THE SHARE TRANSACTION AND THERE WAS NO JUSTIFICATION TO DISALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM CAPIT AL GAIN MERELY ON THE BASIS OF INFORMATION RECEIVED FROM DDIT WHIC H IS BASED ON ADMISSION OF SHRI MUKESH CHOKSHI. THEREFORE ACCORDI NGLY, WE DIRECT THE AO TO ASSESS THE LONG TERM CAPITAL GAIN DECLARED BY ASSESSEE AS SUCH AND ACCEPT THE SAME. 11. APART FROM ANALYZING THE AFORESAID ORDER, WE HA VE ALSO NOTICED IN PAPER BOOK AT PAGES 11 & 12 WHEREIN SPEC IFIC DIRECTIONS WERE GIVEN BY THE LD. CIT(A) TO THE AO TO PROVIDE O PPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. BUT EVEN INSPITE OF THAT NO OPPORTUNITY OF CROSS EXAMINATION WAS EVER GRANTED B Y THE AO TO THE ASSESSEE. DURING THE COURSE OF ARGUMENT, WE HA VE PUT THIS SPECIFIC QUESTION TO THE LD. DR WHO APPEARED ON BEH ALF OF REVENUE, BUT THE LD. DR APPEARING ON BEHALF OF THE REVENUE WAS UNABLE TO GIVE ANY SATISFACTORY REPLY AS TO WHY THE AO HAS NOT COMPLIED WITH SPECIFIC DIRECTION FOR ALLOWING THE A SSESSEE TO CROSS EXAMINE SUCH PERSON AS PER DIRECTIONS GIVEN AT PAGE NO.11 & 12 OF PAPER BOOK. AFTER CONJOINT READING OF THE ORDER S PASSED BY THE CIT(A) IN THE PRESENT CASE AS WELL AS THE EARLIER O RDERS BY THE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 23 HONBLE ITAT, MUMBAI BENCH IN SIMILAR CASE AND AN A FTER TAKING INTO CONSIDERATION THE DOCUMENTS RELIED UPON BY THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS RIGHTLY POINTED OUT THAT THE ASSESSMENT ORDER IS SINGLE PAGE CRYPTI C ORDER IN WHICH THE ADDITION OF RS.43,52,980/- HAS BEEN MADE TO THE RETURNED INCOME, WHICH IS PRIMARILY BASED ON THE SOLITARY ST ATEMENT OF SHRI MUKESH CHOKSI RECORDED BY THE DDIT(INV.)(1)(4), MUM BAI. THE LD. CIT(A) HAS ALSO RIGHTLY CONSIDERED THE FACTUAL POSI TION OF THE PRESENT CASE, WHEREIN NO INDEPENDENT ENQUIRY HAS B EEN DONE BY THE AO TO VERIFY WHETHER THE STATEMENT OF SHRI MU KESH CHOKSI ADMITTING TO ISSUING BOGUS BILLS WAS CORRECT IN THE CASE OF ASSESSEE OR NOT BY PROVIDING AN OPPORTUNITY OF CROS S EXAMINATION TO THE ASSESSEE OF SUCH PERSON AND THEREFORE, IN S UCH CIRCUMSTANCES IN THE PRESENT CASE, THE STATEMENT OF THIRD PARTY I.E. MUKESH CHOKSI RECORDED AT THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST HIM WITHOUT GIVING THE ASSESSEE AN OPP ORTUNITY TO CROSS EXAMINE AND REBUT THE ALLEGATION. IN THE PEC ULIAR FACTS OF THE PRESENT CASE, WE HAVE ALSO NOTICED THAT THE AO HAS NOT FULLY COMPLIED WITH THE DIRECTIONS GIVEN BY THE LD. CIT(A ) AS PER PAGE NO.11 & 12 OF THE PAPER BOOK. 9. APART FROM THE AFORE MENTIONED CASE THE LD. AR A LSO RELIED UPON ANOTHER CASE OF HONBLE ITAT IN THE CASE OF SHRI KA MLESH MUNDRA VS. ITO IN ITA NO.6248/MUM/2012 FOR A.Y. 2003-04 ON SIM ILAR FACTS AND IN THAT CASE THE ADDITIONS MADE BY THE AO WERE ALSO DELETED BY ITAT. 10. AFTER ANALYZING THE AFORE MENTIONED ORDERS AND KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW, THAT HONBLE ITAT MUMBAI BENCH IN SIMILAR CASES HAVE ALREADY DELETED THE ADDITION ON THE GROUND THA T NO OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN TO THE ASSESSEE AN D MOREOVER NO INDEPENDENT ENQUIRY HAS BEEN DONE BY AO TO VERIFY WHETHER THE STATEMENT OF SHRI MOKESH CHOKSHI ADMITTING TO ISSUE BOGUS BILLS WAS CORRECT IN THE CASE OF THE ASSESSEE OR NOT BY PROVI DING AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE OF SUCH PERSON . EVEN OTHERWISE, THE STATEMENT OF THIRD PARTY I.E. MUKESH CHOKSHI RE CORDED AT THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST HIM WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE OR REBUT T HE ALLEGATION. THEREFORE, KEEPING IN VIEW THE PRINCIPLES OF JUDICI AL CONSISTENCY AND WHILE RESPECTFULLY FOLLOWING THE JUDGMENTS PASSED B Y THE COORDINATE BENCHES AND KEEPING IN VIEW OUR ABOVE FINDINGS WE A LSO HOLD THAT LD. CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY AO. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS. 6.3.2 ON AN APPRECIATION OF THE FACTS ON RECORD IN THE CASE ON HAND AND THE DECISIONS OF VARIOUS COORDINATE BENCHES OF THIS TRIBUNAL IN SIMILAR CASES, WE FIND THAT SUCH ADDITIONS/ADVERSE FINDINGS RENDERED BY AOS HAVE BEEN DELETED/REVERSED ON THE GROUNDS THAT NO INDEP ENDENT ENQUIRY HAS ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 24 BEEN CONDUCTED BY THE AO TO ASCERTAIN/PROVE THAT IN FORMATION RECEIVED WAS TRUE AND ALSO SINCE NO OPPORTUNITY OF CROSS EXA MINATION WAS AFFORDED TO THE ASSESSEE IN ORDER TO VERIFY WHETHER THE STAT EMENT/DEPOSITION GIVEN BY SHRI MUKESH CHOKSI ADMITTING TO THE ISSUE OF BOG US BILLS WAS CORRECT IN THE CASE OF THE ASSESSEE, BEFORE THE AO COULD HAVE USED THE SAME AGAINST THE ASSESSEE. IN THIS FACTUAL MATRIX OF THE CASE ON HAND, AS DISCUSSED ABOVE, FOLLOWING JUDICIAL CONSISTENCY AND THE DECIS IONS OF THE COORDINATE BENCHES , INTER ALIA, IN THE ASSESSEES OWN CASE FO R A.Y. 2005-06 IN ITA NO. 1978 & 1979/MUM/2014 DATED 07.10.2016, WE HOLD THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE AOS ACTION IN TREATI NG THE CAPITAL GAINS ON SALE OF SHARES AMOUNTING TO ` 35,17,598/- AS A BOGUS TRANSACTION, CHARGING COMMISSION THEREON AND DENYING THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 54F OF THE ACT. WE ACCORDINGLY SET ASIDE TH E ORDERS OF THE AUTHORITIES BELOW ON THESE ISSUES. SINCE IT APPEARS THAT THE AUTHORITIES BELOW HAVE DENIED THE ASSESSEES CLAIM FOR EXEMPTIO N UNDER SECTION 54F OF THE ACT SUMMARILY, WITHOUT EXAMINING THE FACTS OF T HE CLAIM AND COMPUTATION THEREOF, THE AO IS DIRECTED TO DO SO WH ILE GIVING EFFECT TO THIS ORDER. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY , GROUNDS 1, 7, 8, 9 AND 12 ARE ALLOWED/DISPOSED OFF AS INDICATED ABOVE. 7. GROUND NO. 3 ISSUE OF NOTICE UNDER SECTION 143(2) 7.1 IN THIS GROUND, THE ASSESSEE CHALLENGES THE SER VICE OF NOTICE UNDER SECTION 143(2) OF THE ACT DATED 20.05.2010 WHICH TH E LEARNED CIT(A) HAS REFERRED TO IN THE IMPUGNED ORDER. THE BENCH CALLED FOR THE CONCERNED RECORDS OF ASSESSMENT WHICH REPORTEDLY WERE NOT TRA CEABLE. THE LEARNED CIT(A) ADDRESSED THIS ISSUE AT PARA 6 OF THE IMPUGN ED ORDER AS UNDER: - 6. AS REGARDS THE NOTICE U/S. 143(2) OF THE ACT, I NOTE THAT THE FIRST NOTICE IN THIS REGARD WAS ISSUED ON 20-05-2010 BY ITO, 16( 1)(1), MUMBAI AND WAS RECEIVED BY THE APPELLANT ON 25-05-2010. IT IS ALSO NOTED THAT ON THE SAID NOTICE THE ASSESSMENT YEAR WAS MENTIONED AS A. Y. 2003-04 CORRECTLY. THUS, THE NOTICE REQUIRED TO BE ISSUED W ITHIN THE STATUTORY TIME WAS PROPERLY ISSUED. SECONDLY, THE NOTICE U/S. 143( 2) OF THE ACT DATED 02-11-2010 ISSUED BY THE SUBSEQUENT INCUMBENT OFFIC ER IN WHICH THE ASSESSMENT YEAR WAS MENTIONED AS 2008-09, WHICH IS RELIED UPON BY THE AR, IS OF NO CONSEQUENCE SINCE THE FIRST NOTICE REQUIRED TO BE ISSUED WITHIN THE STATUTORY TIME WAS ISSUED IN A PROPER MA NNER. IT IS ALSO NOTED THAT IN THE SUBSEQUENT NOTICES ISSUED U/S. 142(1) O F THE ACT ALSO THE ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 25 ASSESSMENT YEAR WAS WRONGLY MENTIONED AS A.Y. 2008- 09. HOWEVER, CONSIDERING THE FACT THAT APPELLANT HAS PARTICIPATE D IN THE ASSESSMENT PROCEEDINGS AND DID NOT RAISE ANY OBJECTION BEFORE THE A.O., THE MISTAKE IN MENTIONING THE ASSESSMENT YEAR AS 2008-09 IN THE NOTICE U/S. 142(1) OF THE ACT IS OF NO CONSEQUENCE AND THE IMPUGNED NO TICE ISSUED IS DEEMED TO BE VALID U/S. 292BB OF THE ACT. THEREFORE , I DO NOT FIND ANY MERIT IN THE APPELLANT'S ARGUMENT ON THIS GROUND. A CCORDINGLY, THE SAME IS DISMISSED. HOWEVER, SINCE IN THE APPELLATE PROCEEDINGS EXCEPT FOR RAISING THIS GROUND, THE ASSESSEE DID NOT CHALLENGE THE ISSUE OF THE SAID NOTICE UNDER SECTION 143(2) OF THE ACT AND IN THE LIGHT OF THE F ACTUAL FINDING RENDERED BY THE LEARNED CIT(A) (SUPRA), WE DISMISS THIS GROUND RAISED BY THE ASSESSEE. 8. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2003- 04 IS PARTLY ALLOWED AS INDICATED ABOVE. ASSESSEES APPEAL FOR A.Y. 200405 (ITA NO. 1736/MUM /2014) 9. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS: - 1. CIT (A) HAS ERRED IN LAW AND FACTS CONFIRMING O RDER OF A.O. IGNORING SUBMISSION MADE BY APPELLANT. APPELLANT WA S PREVENTED BY SUFFICIENT CAUSE FOR NOT ATTENDING ON APPOINTED DATE. 2. CIT[A] HAS ERRED IN CONFIRMING ADDITION ON THE B ASIS APPELLANT OWN CASE CONFIRM IN A.Y. 2003-04 BY CIT[A] 27 WITHO UT APPRECIATING FACT THAT APPEALS OF GROUND ARE DIFFER ENT AND EACH YEAR ASSESSMENT IS INDEPENDENT ASST YEAR. 3. CIT[A] HAD WRONGLY MENTIONED THAT THE APPELLANT HAS ALSO RAISED SIMILAR CONTENTIONS / GROUNDS OF APPEAL. CONTENTION AND GROUNDS OF APPEAL BOTH ARE DIFFERENT IN BOTH APPEAL. 4. CIT[A] HAS NOT DISPOSED OFF ALL GROUNDS OF APPEA L NO OBSERVATION ON ACTION U/S 147 REASON RECORDED ARE NOT RELEVANT TO ESCAPEMENT OF INCOME WHICH ARE CHALLENGE BY APPELLA NT. 5. CIT[A] HAS NOT MADE ANY OBSERVATION ON THE CAPIT AL GAIN ADDED TO INCOME. 6. REOPENING U/S 147 IS BAD IN LAW, NOTICE U/S 148 IS BAD IN LAW NO APPLICATION OF MIND BY A.O. NO INDEPENDENT ENQUI RY WERE MADE BY A.O. 7. CIT[A] HAS CONFIRM ORDER PASSED BY A.O. BY VIOLA TING PRINCIPLE OF NATURAL JUSTICE. 8. CIT[A] HAS IGNORE FACT THAT APPELLANT PURCHASE P HYSICAL SHARES WHICH WERE DULY TRANSFER IN HIS NAME THAN SEND FOR DEMATE. THE SOLD SHARES HAS BEEN DEBITED IN DEMATE ACCOUNT. ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 26 9. A.O. HAS MENTIONED THAT BOGUS INCOME IF IT IS BO GUS INCOME HOW IT CAN BE TAXES AS UNDISCLOSED INCOME 10. NOTICE UNDER SECTION 148 ISSUED AFTER 4 YEAR SO IN REASON RECORDED A.O. HAD COME TO CONCLUSION THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS IN THE RETURN. 11. A.O. HAS NOT PROVED NEXUS. 12. CIT[A] HAS ERRED IN RETAINING .15% COMMISSION O N TRANSACTION VALUE. 13. CIT [A] HAS ERRED IN DISALLOWING TRANSFER FEE O F RS 300000/- 14. APPELLANT CRAVES YOUR LEAVE TO ADD ALTER AND MO DIFY THESE GROUNDS OF APPEAL. 10. GROUNDS NO. 2, 3 & 4 10.1 THESE GROUNDS ARE GENERAL IN NATURE AND DO NO T CALL FOR ADJUDICATION THEREON. NOT BEING URGED BEFORE US, THESE GROUND AR E RENDERED INFRUCTUOUS AND ARE ACCORDINGLY DISMISSED. 11. GROUND NO. 13 DISALLOWANCE OF TRANSFER FEE 11.1 AT THE OUTSET OF THE HEARING, THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THIS GROUND IS NOT BEING PRESSED IN THIS APPEAL. THIS GROUND IS THEREFORE RENDERED INFRUCTUOUS AND IS ACC ORDINGLY DISMISSED. 12. GROUNDS NO. 4, 6, & 10 VALIDITY OF REOPENING OF A SSESSMENT 12.1 THE ISSUE RAISED IN THESE GROUNDS, ON THE VAL IDITY OF REOPENING THE ASSESSMENT FOR A.Y. 2004-05 ARE FACTUALLY/LEGALLY S IMILAR TO THOSE RAISED IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04. WE HAVE A DDRESSED THE SAME AT PARAS 5.1 TO 5.3.3 OF THIS ORDER IN ITA NO. 1264/MU M/2013 (SUPRA) AND DISMISSED THE ASSESSEES PLEAS. FOLLOWING THIS DECI SION OF OURS AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, THE SAME FINDING MUTATIS MUTANDIS APPLIES IN THE ASSESSEES CASE FOR A.Y. 2004-05 ALS O AND WE THEREFORE FINDING NO MERITS IN THESE GROUNDS RAISED BY THE AS SESSEE AT S. NOS 4, 6 & 10 DISMISS THEM. 13. GROUNDS NO. 1, 5, 7, 8, 9 & 12 13.1 THE ISSUES RAISED IN THESE GROUNDS FOR A.Y. 2 004-05 ARE FACTUALLY SIMILAR ON IDENTICAL ISSUES, AS THOSE RAISED IN THE ASSESSEES OWN CASE FOR A.Y. 2003-04. WE HAVE ADDRESSED THE SAME AT PARAS 6 .1 TO 6.3.2 OF THIS ORDER IN ITA NO. 1264/MUM/2013 (SUPRA) AND DECIDED THOSE ISSUES IN ITA NOS. 1736&1264/MUM/2013 SHRI VINOD K. SHAH 27 FAVOUR OF THE ASSESSEE TO THE EXTENT INDICATED THER EIN. FOLLOWING THIS DECISION OF OURS AND IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, THE SAME FINDINGS MUTATIS MUTANDIS APPLIES IN THE ASSESSEES CASE FOR A.Y. 2004-05 ALSO. WE HOLD AND DIRECT ACCORDINGLY. 14. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2004- 05 IS PARTLY ALLOWED AS INDICATED ABOVE. 15. TO SUM UP, THE ASSESSEES APPEALS FOR BOTH ASSESSME NT YEARS 2003-04 AND 2004-05 ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DECEMBER, 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 TH DECEMBER, 2016 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -27/28, MUMBAI 4. THE CIT - 16, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.