SHRI CHETAS KARAMSHI NANDU, MUMBAI V. ITO-WARD-22(1)(1), MUMBAI

ITA 1589/MUM/2023

AI Insights

The case revolves around the reassessment proceedings initiated against Chetas Karmshi Nandu by the Income Tax Officer (ITO) under Section 148 of the Income Tax Act, 1961, for the assessment year 2013-14. The ITO had disallowed the exemption claimed on long-term capital gains from the sale of shares, treating the transactions as bogus and the gains as unexplained income. The assessee contested the validity of the reassessment notice, arguing that it was based on a change of opinion without new tangible material, and that the CIT(A) upheld the ITO's actions without proper examination of the evidence. The Tribunal, after examining the reasons for reopening the assessment, found a critical error in the recorded reasons, leading to the quashing of the notice and allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300117 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 07-05-2023
• Other Referred Cases: Chellaram v. CIT (1980) 125 ITR 713, Andaman Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006), Varna Trading Pvt. Ltd. v/s ITO ward-4(3)(1) writ petition No. 930 of 2022, ITO Ward-5(3)(1) v/s M/s Ice Worth Reality LLP ITA No. 565 & 566/Ahd/2020, Dilip Bhagirathmal Jiwarjka writ petition no. 3023 of 2019, Sager Bullion Pvt. Ltd. v/s writ petition no. 3051 of 2019, Sagar Enterprises v/s Assistant Commissioner of Income Tax [2002] 124 taxmann.com 641 (Guj)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH KISHINCHANDANI
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Opportunity of cross examination
• Section: 68; 148; 69C; 143(3); 153A; 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 1589/Mum/2023 (A.Y. 2013-14) Chetas Karmshi Nandu B/304, Jay Apartment, Nehru Road, Mumbai-400055 Vs. ITO 22(1)(3) Room No. 314, 3 rd Floor, Piramal Chambers, Parel Mumbai-400012 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AIJPN0030C Appellant .. Respondent Appellant by : Shri. Devendra Jain Respondent by : Shri. Prakash Kishinchandani Date of Hearing 07.09.2023 Date of Pronouncement 26.09.2023 आदेश / O R D E R PER AMARJIT SINGH :- 1. The present appeal filed by the assessee is directed against the order passed u/s 250 of the Income Tax Act, 1961 ([hereinafter “the Act”] by the Learned Commissioner of Income Tax (Appeals)- 34 [hereinafter „the CIT(A)‟] dated 09.03.2023 for A.Y. 2013-14. 2. The grounds of appeal of the assessee are as under: 1. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act merely on the basis of change of opinion without being in possession of any fresh tangible material after completion of the first reassessment. P a g e | 2 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu 2. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of issuing notice u/s 148 on borrowed satisfaction merely relying on the basis of alleged information received without any independent application of mind thereon. 3. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of completing the assessment u/s 143(3) read with section 147, without providing the material or information in his possession and without providing any opportunity of cross examination of the witnesses relied upon by the Assessing Officer and thus violating the law laid down by Honorable Supreme Court in the case of Chellaram v. CIT (1980) 125 ITR 713 and Andaman Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006.) 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer in treating the transaction of the sale of shares of M/s Sunrise Asian Ltd. as bogus and sham and has erred in confirming the addition of Rs. 22,15,323/- as unexplained cash credit under section 68 of the Act. 5. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of not granting the exemption of long terms capital gain under section 10(38) of the Act on sale of listed equity shares sold through recognized stock exchange which has duly been subjected to security transaction tax (S.T.T.) on surmises, conjecture and suspicion. 6. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming addition in respect of commission of Rs. 66,460/- estimated at 3 per cent of Rs. P a g e | 3 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu 22,15,323/-, as unexplained expenditure under section 69C of the Act. 3. Fact in brief is that the original return of income was filed by the assessee on 16.03.2015 declaring total income of Rs 1,98,120/-. Subsequently, the case was reopened by issuing notice under Section 148 dated 30.03.2017 after recording reasons under Section 147 of the Act and after obtaining sanctions of the Joint Commissioner of Income Tax Range-22(1), Mumbai. 4. The assessee is an individual and has earned income from capital gain and income from other sources, salary and interest and business income. During the course of assessment the Assessing Officer noticed that the assessee has purchased 5,000 shares of Sunrise Asian Ltd. @ Rs 20 per share on 20.12.2010 through broker Santoshima Lease Finance and investment (India) Ltd. Further, the said 4950 shares were sold by the assessee during year under consideration. The assessee earned long term capital gain on the sale of share and claimed as exempt under Section 10(38) of the Act. The Assessing Officer stated that the assessee has failed to prove the genuineness of the transaction and observed that the long term capital gain booked by the assessee in her books were pre-arranged method to evade taxes. The Assessing Officer has disallowed the claim of exemption of ₹ 21,00,222/- earned on sale of share of Sunrise Asian Ltd. and P a g e | 4 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu added back to the total income of the assessee under Section 68 of the Act. 5. The assessee has filed the appeal before the CIT(A). The CIT(A) held that the assessee failed to prove the genuineness of the long term capital gain and the Assessing Officer has correctly taxed entire sale proceed instead of net proceed as unexplained credit because the assessee did not furnish any documentary evidences in support of source of purchase of penny stock and there was credit entries of sale proceed of ₹ 22,15,323/- in the bank statements/books of account. 6. During the course of appellate proceeding before us, at the outset the learned counsel submitted that notice issued under Section 148 of the Act for reopening of the assessment was invalid. In this regard the learned counsel referred reasons recorded for reopening as placed in the paper book at page no. 10 of the paper book. He submitted that in the reasons recorded it is stated that return of income filed by the assessee was processed under Section 143(1) of the Act, however, in the case of the assessee the assessment was completed under Section 143(3) of the Act. In the entire reasons recorded nowhere it has been mentioned that assessment under Section 143(3) of the Act was made in the case of the assessee. In support of his contention the Learned counsel P a g e | 5 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu has placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of Varna Trading Pvt. Ltd. v/s ITO ward-4(3)(1) writ petition No. 930 of 2022 wherein notice issued under Section 148 of the Act was quashed on the ground that approval under section 151 of the Act was granted on the erroneous statement recorded in the reasons.. The learned counsel also referred decision of ITAT Ahmadabad in the case of ITO Ward-5(3)(1) v/s M/s Ice Worth Reality LLP ITA No. 565 & 566/Ahd/2020. The Learned Counsel has also placed reliance on the decision of the Hon‟ble Bombay High Court in the case of Dilip Bhagirathmal Jiwarjka writ petition no. 3023 of 2019. 7. On the other hand the Learned Departmental Representative supported the order of lower authorities. 8. Heard both the sides and perused the material on record. The case of the assessee was reopened by issuing of notice under Section 148 of the Act on 30.03.2014. The notice under Section 148 of the Act was issued on the basis of reasons recorded by the Assessing Officer wherein it is mentioned that the assessee has declared income of Rs 1,98,120/- and same was processed under Section 143(1) of the Act however in the reasons recorded the correct fact that assessment order under Section 143(3) of the Act was also passed in the case of the assessee vide order under P a g e | 6 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu Section 143(3) on 17.02.2016 was not mentioned. I have perused the decision of the Hon‟ble Bombay High Court in the case of Varna Trading (supra) wherein the Hon'ble Bombay High court has quashed the notice issued under Section 148 of the Act because of incorrect recording of fact in the reason recorded, the relevant operating part of the decision is as under: 1. In the reasons recorded, copy whereof is annexed to Exhibit J to the petition, it is recorded that, "In this case return of income was filed for year under consideration but no scrutiny assessment under Section 143(3) of the Act was made." In the affidavit in reply filed through one S.D. said Suryavanshi admits that what is stated in the reasons recorded is erroneous but has tried to explain that the error occurred due to substantial Suryavanshi who has recorded the reasons, affirmed on 13.4.2022, the work pressure. What is significant is approval granted under Section 151 of the Act is based on erroneous statement recorded in the reasons. That also indicates that approving authorities have not checked the file before according approval. In our view, if the approving authorities had only considered the file, they would have come to know that there was scrutiny assessment that has been made for petitioner. 9. I have also perused the decision of Hon'ble Jurisdictional High Court in the case of Sager Bullion Pvt. Ltd. v/s writ petition no. 3051 of 2019. We have also perused the decision of Hon'ble Jurisdictional High Court in the case of Bhagirathmal Jiwarjka as referred supra wherein in the reason recorded the Assessing Officer has not mentioned that the assessment in that case have P a g e | 7 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu been completed under Section 153A read with section 143(3) of the Act, therefore, the Hon'ble High court has quashed the notice issued under Section 148 of the Act. The assessee has also referred the decision of Hon'ble Gujarat High Court in the case of Sagar Enterprises v/s Assistant Commissioner of Income Tax [2002] 124 taxmann.com 641 (Guj). 10. It is undisputed fact that in the case of the assessee assessment under Section 143(3) of the Act has already been finalized by the Assessing Officer on 17.02.2016 however, in the reason recorded it is mentioned that return of income was processed under section 143(1) of the Act and no where it is stated assessment was also made u/s 143(3) of the Act. The assessee has also placed in the paper book submission made during the course of original assessment proceedings under Section 143(3) and also referred the notice issued by the Assessing Officer, ledger account of sale proceeds, bill invoices of purchase of share of broker and also referred the other details pertaining to long term capital gain and supporting and documents. It is evident that in the reasons for reopening there is no mention about the assessment corporate u/s 143(3) of the Act therefore approval granted u/s 151 of the Act is based on erroneous facts recorded in the reasons. It is incorrectly mentioned that only assessment P a g e | 8 ITA No. 1589/Mum/2023 A.Y. 2013-14 Shri. Chetas karamshi Nandu under Section 143(1) of the Act has been made in the case of the assessee, therefore, following the decision of the Hon'ble High Courts as discussed supra in this order, I find that proceedings under Section 148 of the Act are not valid; therefore, I quash the notice issued under Section 148 of the Act. Since I have quashed the assessment, therefore, other grounds of appeal are not required any adjudication and the same left as open. Therefore, the appeal of the assessee is allowed. 11. In the result the appeal filed by the assessee is allowed. Order Pronounced in Open Court on 26.09.2023 Sd/- (AMARJIT SINGH) ACCOUNTANT MEMBER Place: Mumbai Date 26.09.2023 ANIKET SINGH RAJPUT/STENO आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण/ ITAT, Bench, Mumbai.