Shri Sumer S Sanghvi, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circle-5, Ahmedabad

ITA 1424/AHD/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6987 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-02-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K PARIKH ITO
• Assessee Lawyers: P D SHAH
• Keywords: Wrong claim; Accommodation entries; Reason to believe; Liquidation
• Section: 143(3); 143(1); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT ./ ITA.NO.1424/AHD/2016 / ASSTT. YEAR: 2006-2007 SUMER S. SANGHVI C/O. MEHTA LODHA & CO CHARTERED ACCOUNTANTS 105, SAKAR-I, ASHRAM ROAD AHMEDABAD 380 009 PAN : AJFPS 4778 K VS ACIT, CIR.5 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI P.D. SHAH, AR REVENUE BY : SHRI DILIP KUMAR, SR.DR, AND SHRI J.K. PARIKH, ITO / DATE OF HEARING : 03/02/2020 / DATE OF PRONOUNCEMENT: 06/02/2020 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-9, AHMEDABAD DATED 22.02.2016 PASSED FOR THE ASSTT.YEAR 2006- 07. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING REOPENING OF THE A SSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 14.9.2006 DECLARING TOTAL INCOME AT RS.1, 36,750/-. THIS RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 ON 31.3.2007. THE LD.AO THEREAFTER REOPENED THE ASSESSMENT BY ISS UANCE OF NOTICE UNDER SECTION 148 OF THE 28.3.2013. IN RESPONSE TO THE N OTICE, THE ASSESSEE HAS FILED ITA NO.1424/AHD/2063 2 HIS RETURN OF INCOME, AND ALSO SOUGHT COPY OF REASO NS RECORDED BY THE AO. THE ASSESSEE THEREAFTER FILED AN OBJECTION TO REOPE NING, AND THOSE OBJECTIONS HAVE BEEN REJECTED BY THE LD.AO. COPIES OF REASONS , OBJECTION FILED BY THE ASSESSEE AND ORDER OF THE AO REJECTING THE OBJECTIO N DATED 22.2.2014 ARE PLACED ON PAPER BOOK FROM PAGE NO.1 TO 14. THE AO THEREAFTER PASSED RE- ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 ON 7.3.2014. THE LD.AO HAS MADE ADDITION OF RS.43,03,195/- ON THE GROUND THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAIN OF RS.43,03,195/- AND CLAIME D IT AS EXEMPT UNDER SECTION 10(38) OF THE ACT. ACCORDING TO THE AO IT IS A BOGUS CLAIM OF THE ASSESSEE AND HE MADE ADDITION. DISSATISFIED WITH R EOPENING OF THE ASSESSMENT, THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE LD.CIT(A). HE HAS CHALLENGED REOPENING OF THE ASSESSMENT AS WE LL AS ADDITION MADE ON MERIT. THE LD.CIT(A)HAS REJECTED BOTH GROUNDS OF A SSESSEE, AND CONFIRMED THE ASSESSMENT ORDER. 4. BEFORE ME, WHILE CHALLENGING ORDER OF THE LD.CIT (A), THE LD.COUNSEL FOR THE ASSESSEE TOOK US THROUGH REASONS RECORDED BY TH E AO. HE POINTED OUT THOUGH SPECIFICALLY COMPLETE REASONS RECORDED BY TH E AO HAS NOT BEEN PROVIDED TO THE ASSESSEE, BUT IN RESPONSE TO THE AP PLICATION OF THE ASSESSEE, THE AO HAS ISSUED A LETTER DATED 29.5.2013 AND IN THIS LETTER, HE HAS REPRODUCED THE REASONS. TAKING US THROUGH THESE REASONS, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO COHERENCE BETWEEN INFORM ATION ALLEGED TO HAVE BEEN AVAILABLE WITH THE AO VIS--VIS FORMATION OF H IS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. HE POINTED OUT THAT THE AO HAS NOT QUANTIFIED INCOME ALLEGED TO HAVE BEEN ESCAPED BECAUSE IN THE REASONS THE AO HAS NOT MADE MENTION OF ANY AMOUNT. THUS, THESE ARE VAGUE REASO NS. NOTICE UNDER SECTION 148 WAS ISSUED ON 28.3.2013 I.E. AFTER FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR, BUT BEFORE SIX YEARS. TAKING US T HROUGH SECTION 149 OF THE INCOME-TAX ACT, THE LD.COUNSEL FOR THE ASSESSEE POI NTED OUT THAT THIS SECTION ITA NO.1424/AHD/2063 3 CONTEMPLATES LIMITATION FOR ISSUANCE OF NOTICE UNDE R SECTION 148 OF THE ACT. AS PER CLAUSE (B) OF SUB-SECTION 1, A NOTICE UNDER SECTION 148 COULD BE ISSUED AFTER EXPIRY OF FOUR YEARS, BUT BEFORE END OF SIX Y EARS FROM THE RELEVANT ASSESSMENT, IF INCOME ESCAPED ASSESSMENT HAS EXCEED ED ONE LAKH. IN THE PRESENT CASE, THE AO HAS NOT QUANTIFIED THE AMOUNT WHICH HAS ESCAPED THE ASSESSMENT. THEREFORE, HOW IT COULD BE ASCERTAINED THAT THE NOTICE ISSUED UNDER SECTION 148 IS WITHIN THE LIMITATION? HE SUB MITTED THAT THIS NOTICE IS WITHOUT JURISDICTION. FOR BUTTRESSING HIS CONTENTI ONS, HE MADE REFERENCE TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BAKULBHAI RAMANLAL PATEL VS. ACIT, 56 DTR 212 (GUJ). HE PLACED ON REC ORD COPY OF THIS DECISION. 5. IN HIS NEXT FOLD OF CONTENTIONS, HE SUBMITTED TH AT IN THE REASONS FOR RE- ASSESSMENT, IT IS STATED THAT THERE IS TRANSACTION WITH GOLD STAR FINVEST SECURITIES PVT LTD., MAHASAGAR SECURITIS P.LTD. WHI CH ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN VIEW OF INFORMAT ION SUPPLIED BY THE ITO, WARD 16(3)(1), MUMBAI. THE ASSESSEE HAS NOT CARRIE D OUT ANY TRANSACTION THROUGH THESE TWO ENTITIES, RATHER IT HAS SOLD SHAR ES THROUGH ALLIANCE INTERMEDIARIES NETWORKING P.LTD. THERE IS NO MENTIO N OF ALLIANCE INTERMEDIARIES NETWORKING IN THE REASONS, THUS, THE REASONS ARE VAGUE AND BASED ON IRRELEVANT INFORMATION. HE RELIED UPON JU DGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS. MANZIL DINESHKUMAR SHAH, TAX APPEAL NO.451 OF 2018. COPY OF THIS DECI SION HAS ALSO BEEN PLACED ON RECORD. 6. ON THE OTHER HAND, THE LD.DR ASSISTED BY SHRI J. K. PARIKH, ITO CONTENDED THAT THE DEPARTMENT IS UNABLE TO LAY ITS HAND ON THE COMPLETE PROFORMA IN WHICH REASONS WERE RECORDED. THE REASO NS REPRODUCED IN THE COPY OF THE LETTER ISSUED TO THE ASSESSEE ARE THE O NLY REASONS WITH THE ITA NO.1424/AHD/2063 4 DEPARTMENT. THESE VERY REASONS HAVE BEEN CONSIDERE D BY THE AO WHILE DISPOSING OF THE OBJECTION OF THE ASSESSEE AGAINST REOPENING OF THE ASSESSMENT. HE POINTED OUT THAT THE AO WAS HAVING CONCURRENT IN FORMATION INDICATING THE FACT THAT THE ASSESSEE HAS GENERATED BOGUS LONG TER M CAPITAL AND CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE INCOME TAX AC T. THESE TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH GOLD STAR FINVEST SEC URITIES P LTD., MAHASAGAR SECURITIES P.LTD. AND OTHER ENTITIES MANAGED BY THE DIRECTORS OF MAHASAGAR SECURITIES. IN THE ORDER, WHILE REJECTING THE OBJE CTIONS, THE AO HAS MADE REFERENCE TO THE INFORMATION RECEIVED FROM NATIONAL STOCK EXCHANGE RELATING TO M/S.ALLIANCE INTERMEDIARIES AND NETWORK I.E. THE CONCERN THROUGH WHOM THE ASSESSEE HAS UNDERTAKEN HIS TRANSACTION. 7. I HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GON E THROUGH THE RECORD CAREFULLY. THE REASONS RECORDED BY THE AO AND SUPP LIED TO THE ASSESSEE VIDE LETTER DATED 28.5.2003 READS AS UNDER: '..AS PER THE INFORMATION RECEIVED FROM THE ITO WD. 16(3)(1), MUMBAI, ASSESSEE CARRIED OUT TRANSACTIONS IN SHARE/ SECURIT IES WITH M/S GOLD STAR FINVEST SECURITIES PVT. LTD. FURTHER IT WAS LEARNT THAT THE SAID M/S GOLD STAR FINVEST SECURITIES PVT. LTD. WAS ENGAGED IN FR AUDULENT BILLING ACTIVITIES AND WAS IN THIS BUSINESS OF PROVIDING BO GUS SPECULATION PROFIT/ LOSS, STCG/LTCG /LOSS, SHARES APPLICATIONS MONEY, C OMMODITY PROFIT/ LOSS ON COMMODITY TRADING (THROUGH MCX) ETC. IN VIE W OF THE NON GENUINENESS OF THE SAID TRANSACTION OF THE ASSESSEE , THE ASSESSEE HAS PRIMA FACIE RECEIVED AN OTHER UN-ENTITLED BENEFIT T O THE EXTENT OF THE AMOUNT OF THE SAID TRANSACTIONS, FURTHER, AS PER TH E INFORMATION THE EFFECT OF THIS TRANSITIONS IS REFLECTED IN THE BALA NCE SHEET ON THE ASSET SIDE AS INVESTMENT IN SHARES OF TALENT INFOWAYS LTD ., AT RS.36795.66. IT HAS BEEN FOUND IN CASE OF THIS TYPE THAT SUCH EFFEC T HAS BEEN RECORDED IN THE BALANCE SHEET ON THE ASSET SIDE AS INVESTMENT I N SHARES, SPECULATION PROFIT OR SOME SUCH NARRATION. THE SAID EFFECT HAS BEEN GENERALLY EN- CASHED IN THE FUTURE YEARS AND CLAIM OF LTCG HAVE B EEN MADE, IN THE INSTANT CASE, INFORMATION WAS RECEIVED BY THE ITO W D. 16(3)0), MUMBAI, FROM THE INVESTIGATION WING PERTAINING TO SHARE TRA NSACTION WITH M/S GOLD STAR FINVEST SECURITIES PVT. LTD., WHEREAS, AS PER THE ITO WD. 16(3)(1), MUMBAI, THE ASSESSEE HAS CARRIED OUT TRANSACTIONS W ITH M/S MAHASAGAR SECURITIES PVT. LTD. ITA NO.1424/AHD/2063 5 THE MAJOR BENEFIT IF ANY WOULD BE IN THE ASSESSMENT YEAR UNDER CONSIDERATION WHERE IN THE CLAIM HAS BEEN MADE OF H AVING LIQUIDATED THE PURPORTED ASSETS HELD IN THE BALANCE SHEET AS AT 31 /03/2005 AND SUCH LIQUIDATION HAS RESULTED IN GAIN TO THE ASSESSEE, W HICH NEEDS TO BE BROUGHT TO TAX. ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AS WEL L AS THE INFORMATION RECEIVED, I AM OF THE OPINION AND I HAV E REASON TO BELIEVE THAT THE ASSESSEE'S INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE YEAR UNDER CONSIDERATION DUE TO FAILURE OF THE ASSE SSEE TO DISCLOSE FULLY ARID TRULY ALL THE MATERIAL FACTS IN THE RETURN OF INCOM E. THEREFORE, I AM SATISFIED THAT IT IS A FIT CASE FOR INITIATING PROCEEDING U/S .148 OF THE I.-T. ACT....' 8. A PERUSAL OF THE ABOVE REASON WOULD INDICATE THA T THE AO HAS NOWHERE QUANTIFIED THE INCOME ESCAPED. THE HONBLE JURISDI CTIONAL HIGH COURT HAS CONSIDERED IDENTICAL REASONS WHERE NO QUANTIFICATIO N OF ESCAPED INCOME WAS MADE BY THE AO. HONBLE COURT HAD CONSIDERED ISSUE ABOUT LIMITATION PROVIDED UNDER SECTION 149(1)(B)OF THE ACT. THE DI SCUSSION MADE BY THE HONBLE HIGH COURT IN THE CASE OF BAKULBHAI RAMANLA L PATEL VS. ACIT (SUPRA) IN PARA-31 IS WORTH TO NOTE. IT READS AS U NDER: AS REGARDS THE CONTENTION THAT THE REASONS DO NOT REFLECT THAT THE INCOME HAVING ESCAPED ASSESSMENT IS MORE THAN RUPEES ONE L AKH OR LIKELY TO BE MORE THAN RUPEES ONE LAKH AS LAID DOWN UNDER THE PROVISI ONS OF S. 149(1)(B) OF THE ACT AND AS SUCH, THE ASSESSMENT IS TIME BARRED, A P ERUSAL OF THE REASONS RECORDED INDICATES THAT NOTHING HAS BEEN RECORDED B Y THE AO TO INDICATE AS TO WHAT IS THE AMOUNT OF INCOME WHICH IS ALLEGED TO HAVE ESCAPED ASSESSMENT. IN THE LIGHT OF THE PROVISIONS OF S. 14 9(1)(B) OF THE ACT, WHILE REOPENING THE ASSESSMENT BEYOND A PERIOD OF FOUR YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, SINCE THERE IS A STATUTOR Y BAR AGAINST REOPENING THE ASSESSMENT IN CASE WHERE THE AMOUNT OF INCOME ESCAP ING ASSESSMENT DOES NOT AMOUNT TO RUPEES ONE LAKH OR MORE, THE AO IS AL SO REQUIRED TO RECORD A FINDING TO THAT EFFECT. IN THE PRESENT CASE, NO SUC H FINDING HAS BEEN RECORDED. EXCEPT FOR A BARE AVERMENT IN THE AFFIDAVIT-IN-REPL Y WHEREIN IT IS STATED THAT THE INCOME WHICH HAS ESCAPED ASSESSMENT IS MORE THA N RUPEES ONE LAKH, THERE IS NO MATERIAL ON RECORD TO INDICATE THE EXTE NT OF INCOME WHICH HAS ESCAPED ASSESSMENT. IN FACT, AS OBSERVED HEREINABOV E, THERE IS NOTHING TO INDICATE THAT THE AO HAS REASON TO BELIEVE THAT ANY INCOME WHATSOEVER HAS ESCAPED ASSESSMENT. IN THE CIRCUMSTANCES, ON THIS C OUNT ALSO, THE ASSUMPTION OF JURISDICTION UNDER S. 147 OF THE ACT IS INVALID. : ITA NO.1424/AHD/2063 6 9. SINCE IN THE PRESENT CASE ALSO NOTICE HAS BEEN I SSUED AFTER AN EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, BUT BEFORE SIX YEARS. THIS NOTICE COULD BE ISSUED WITHIN LIMITATION IF TH E AO HAS MADE OUT A CASE THAT INCOME EXCEEDED RUPEES ONE LAKH HAS ESCAPED AS SESSMENT. NO SUCH FINDING OR OBSERVATION OR REFERENCE HAS BEEN MADE I N THE REASONS EXTRACTED (SUPRA). IN THE OPENING LINE OF THE REASONS, THE A O HAS OBSERVED THAT AS PER INFORMATION RECEIVED FROM THE ITO, WARD-16(1), MUMB AI, THE ASSESSEE CARRIED OUT TRANSACTION IN SHARES/SECURITIES WITH M/S.GOLD STAR FINVEST. THIS INFORMATION IS FACTUALLY INCORRECT OR NOT CROSS-VER IFIED BY THE AO BEFORE RECORDING REASONS. THE ASSESSEE HAS NOT CARRIED OU T ITS SHARE/SECURITY TRANSACTION WITH GOLD STAR FINVEST IN RESPECT OF WH ICH CAPITAL GAIN AROSE TO THE ASSESSEE STAND ULTIMATELY CONSIDERED BY THE AO FOR DENIAL OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. FURTHER, A PERUSAL OF T HE REASONS WOULD INDICATE THAT THERE IS NO COHERENCE BETWEEN THE INFORMATION AVAILABLE WITH THE AO VIS- -VIS TRANSACTION OF THE ASSESSEE, AND FORMATION OF BELIEF THAT INCOME HAS ESCAPED THE ASSESSMENT. THESE REASONS ARE VAGUE AN D INCONCLUSIVE. THEREFORE, ON THE BASIS OF SUCH REASONING, THE ASSE SSMENT ASSESSEE CANNOT BE REOPENED. RESPECTFULLY FOLLOWING THE JUDGMENT OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BAKULBHAI RAMANLAL PATEL VS. ACIT (SUPRA), I ALLOW THIS GROUND OF APPEAL AND QUASH THE RE-ASSESSMENT O RDER. 10. SINCE RE-ASSESSMENT ORDER HAS BEEN QUASHED, THE RE IS NO NEED TO EXAMINE OTHER GROUNDS ON MERIT. WITH THIS OBSERVAT ION, I ALLOW THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 6 TH FEBRUARY, 2020 AT AHMEDABAD. SD/- (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED 06/02/2020