Sunil Kumar Jain, Hisar V. ITO, Hisar

ITA 1832/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3310 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 27-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Assessee Lawyers: SONAL JAIN
• Keywords: Search and seizure; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 1832/DEL/2017 A.Y. : 2007-08 SUNIL KUMAR JAIN, PROP. S.K. TRADERS, OUTSIDE BARSI GATE, HANSI, HISAR (PAN: ABBPJ4274B) VS. ITO, WARD-5, AAYAKAR BHAWAN, SECTOR-14, HISAR (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. SONAL JAIN, CA DEPARTMENT BY : SH. V.K. JIWANI, SR. DR ORDER ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER D ATED 06.1.2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), RO HTAK PERTAINING TO ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) HAS GONE WRONG JN DISMIS SING THE APPEAL WITHOUT APPRECIATING THE FACTS THAT THE RE-A SSESSMENT PROCEEDINGS WERE NOT VALIDLY INITIATED AND WERE VOI D AND WAS ON ACCOUNT OF CHANGE OF OPINION. 2. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT DISPOSING O F THE OBJECTION OF THE APPELLANT AGAINST THE INITIATION OF PROCEEDI NGS U/S 147 WELL 2 IN ADVANCE BEFORE PASSING THE ASSESSMENT ORDER AS S UCH THE ORDER OF THE ASSESSING AUTHORITY WAS BAD IN LAW AND SHOUL D HAVE BEEN CANCELLED IN TERMS OF DECISIONS IN THE CASE OF ASIA N PAINTS LTD. VS DC IT (2008) 296 ITR 90 BOMBAY. 3. THAT THE LEARNED CIT (A) WHILE DISMISSING THE AP PEAL HAS NOT CORRECTLY APPRECIATED THE FACTS THAT THE APPELLANT HAD NOT SOLD SHARES TO SUPERTECH LEATHER PVT LTD. BUT HAVE SOLD 7940 NOS. OF SHARES TO MIS BLOSSOM AUTOMOTIVE PVT. LTD. FOR RS. 8,00,000/- AND 1060 NOS. OF SHARES FOR RS. 3,18,000/- TO M/S TECHP RO SYSTEM PVT. LTD. 4. THAT THE LEARNED CIT (A) HAS GONE WRONG IN NOT A PPRECIATING THE FACT THAT THE APPELLANT HAS NOT TRANSFERRED AN Y SHARE TO NINE KOLKATTA BASED COMPANY AS ALLEGED BY THE DEPAR TMENT. 5. THAT THE LEARNED CIT (A) HAS GONE WRONG IN CONFI RMING THE ASSESSMENT OF RS. 17,42,000/- AS SHORT TERM CAPITAL GAINS ON TRANSFER OF 8000 SHARES AND NOT ON TRANSFER OF A PL OT AS ALLEGED AGAINST THE ACTUAL FACTS THAT 7940 NOS. OF SHARE W ERE SOLD TO BLOSSOM AUTOMOTIVE PVT. LTD. AGAINST A CHEQUE OF RS . 8 LACS OF HDFC BANK AND 1060 NOS. OF SHARE TO /IS TECHPRO SYS TEMS PVT. LTD. FOR RS. 3.18 LACS FOR WHICH ALSO PAYMENT WAS R ECEIVED BY CHEQUE DIRECTLY. 3 6. THAT THE LEARNED CIT (A) HAS GONE WRONG IN NOT A PPRECIATING THE FACT THAT IN THE ASSESSMENT OF APPELLANT SHORT TERM CAPITAL GAIN RS. 6000/- WAS ALREADY ASSESSED AS DECLARED AS AGAI NST TRANSFER OF 7940 SHARES TO M/S BLOSSOM AUTOMOTIVE PVT. LTD AND RS. 207308/- AS LONG TERM CAPITAL GAIN AGAINST TRANSFER OF 1060 SHARES TO M/S TECHPRO SYSTEMS PVT. LTD IN ORIGINAL RETURN AFTER CONSIDERING ALL NECESSARY FACTS DISCLOSED BY THE ASSESSEE WHICH HAV E NOT BEEN FOUND TO BE INCORRECT. THE PRESENT ASSESSMENT IS TH E RESULT OF CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. 7. THE LEARNED CIT (A) HAS IGNORED THE ORDER-OF THE HON'BLE ITAT JAIPUR BENCH ON THE SAME FACTS IN THE CASE OF M/S S INGHAL CREDIT MANAGEMENT LTD., SNR RUBBERS PVT. LTD., & SINGHAL S ECURITIES PVT. LTD. VIDE COMMON ORDER IN ITA NO. 853, 854 & 8 55/JP/2011 DT. 31.01.2012 AS REFERRED, AND ALSO THE ORDER OF C IT (A) IN THE APPEAL OF PREM KUMAR GARG ARISING FROM SAME FACTS S ETTING ASIDE THE ASSESSMENT OF SHORT TERM CAPITAL GAIN. 8. THAT THE REQUISITE FEE OF RS. 10000/-- HAS BEEN PAID BEFORE FILING APPEAL AND THE APPEAL IS BEING FILED WITHIN LIMITATION AND NO ADMITTED TAX IS DUE TO BE PAID. 9. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR RESCI ND ANY GROUND ARISING OUT OF THE ORDER. 4 2. THE BRIEF FACTS OF THE CASE ARE THAT ORIGINAL AS SESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED AS THE ACT) ON 29.12.2009 AT AN INCOME OF RS. 1,93,350/- A S AGAINST RETURNED INCOME OF RS. 1,61,770/-. LATER ON, AN INFORMATION WAS RECEI VED FROM THE ACIT, CENTRAL CIRCLE, ALWAR (RAJ.) THAT A SEARCH AND SEIZURE OPER ATION WAS CONDUCTED IN THE CASE OF SHRI S.K. SINGHAL GROUP ON 17/18.09.2008. D URING THE YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 SH. SUNIL KUMAR JAIN ALONG WITH OTHER SHAREHOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. HAVE TRANSFERRED T HE SHARE HOLDING TO M/S TECHPRO SYSTEMS LTD. ON THE BASIS OF INFORMATION, I T TRANSPIRED THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION. SUBSEQUENTLY, ON THE BASIS OF REASON S RECORDED BY THE AO, RECOURSE TO INITIATE ACTION UNDER SECTION 147 OF TH E ACT WAS TAKEN WITH THE PRIOR APPROVAL OF THE COMMISSIONER OF INCOME-TAX, HISAR A ND ISSUED NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961 ON 12.11.2013 AND SENT TO THE ASSESSEE BY REGISTERED POST. IN RESPONSE TO THE SAID NOTICE, TH E ASSESSEE DID NOT FILE THE RETURN OF INCOME. THEREFORE, NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 15.05.2014 AND IN RESPONSE TO THE SAID NOTICE, NO RETURN WAS F ILED BY THE ASSESSEE. AGAIN ON TRANSFER OF THE CASE TO ANOTHER AO, THE NOTICE U /S. 142(1) OF THE ACT WAS ISSUED ON 15.12.2014 ALONGWITH A COPY OF QUESTIONNA IRE DATED 16.7.2014 REQUIRING THE ASSESSEE TO FILE THE RETURN OF INCOME . ON 05.1.2015, THE COUNSEL OF THE ASSESSEE APPEARED AND FILED A LETTER STATING TH EREIN THAT THE RETURN FILED ALREADY MAY BE TREATED AS RETURN IN RESPONSE TO NOT ICE U/S. 148 OF THE ACT. ON 5 RECEIPT OF RETURN, NOTICES U/S. 143(2)/142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE ALONGWITH QUESTIONNAIRE ON 09.1.2015 FIXIN G THE CASE FOR 19.1.2015. IN RESPONSE TO THE SAID NOTICES, THE AR OF THE ASSESS EE ATTENDED THE ASSESSMENT PROCEEDINGS AND FILED A WRITTEN REPLY. IN THE REPL Y DATED 22.12.2014 AND 19.1.2015, THE ASSESSEE HAS, INTER-ALIA, EMPHASIZED THAT:- ..THE CASE HAS BEEN REOPENED ON THE BASIS OF S OME FINDINGS RECORDED IN THE NUMBER OF CASES REFERRED I N THE NOTICE WHICH CANNOT BE BASIS FOR REOPENING THE ASSE SSMENT. IT IS NO WHERE MENTIONED IN THE REASONS RECORDED THAT THE ESCAPEMENT OF INCOME FROM ASSESSMENT HAS OCCASIONED BY THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY. THIS IS NECESSARY CONDITION FOR OVERCOMING THE BAR SET UP BY THE PROVISO TO SECTION 147. THEREFORE, THE REOPENING IS NOT VALID IN LAW AS HEL D IN MICROSOFT CORPORATION (I) PVT. LTD. 357 ITR. THE AFORESAID OBJECTION WERE REJECTED BY THE AO AN D THEREAFTER, THE AO HELD THAT THE TRANSFER OF SHARES BY THE ASSESSEE AL ONG WITH OTHER SHAREHOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. KOLKATA BASED COMP ANIES WAS SHAM, IN REALITY IT WAS TRANSFER OF SHARES TO M/S TECHPRO SY STEMS AND THE TRANSFER OF SHARES WAS USED BY THE ASSESSEE AND OTHER SHAREHOLD ERS TO TRANSFER THE ONLY ASSET I.E PLOT OF LAND HELD BY M/S BLOSSOM AUTOMOTIVE PVT . LTD. TO M/S TECHPRO SYSTEMS LTD. SHORT TERM CAPITAL GAIN OF RS. 8,71,00 ,000/- WAS EARNED ON 6 TRANSFER OF ENTIRE TRANSFER OF SHAREHOLDING TO M/S TECHPRO SYSTEMS PVT. LTD. BY VIRTUE OF TRANSFERRING THEIR SHAREHOLDING OF M/S BL OSSOM AUTOMOTIVESPVT. LTD. TO M/S TECHPRO SYSTEMS LTD. FOR THE PURPOSE TRANSFE RRING THE PLOT OF LAND. ALTHOUGH, THE DOCUMENTS REGARDING THE WHOLE TRANSAC TION OF TRANSFER OF SHARES HAVE BEEN MANAGED TO CAMOUFLAGE THE REAL TRANSACTIO N OF TRANSFER OF PLOT OF LAND AND OF EVADING CAPITAL GAIN TAX THEREON BUT AS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE CLT VS. DURGA PRASAD MORE , 82 HR 540 THAT, 'TAXES AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WH ILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK IN TO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS.' IN THIS CASE THE CIRCUMSTANCES AS HAS BEEN DISCUSSED I N PRECEDING PARAS REVEAL THAT THE REAL INTENTION OF THE ASSESSEE WHICH WAS TO AVO ID TAX ON CAPITAL GAIN. AN ASSESSING OFFICER IS REQUIRED TO KEEP HIS EARS AND EYES OPEN AND USE THE FACULTIES OF HIS BRAIN TO DECIDE A CASE JUDICIOUSLY AND ON MERITS. IN THIS CASE, UNDERSIGNED CANNOT SHUT HER EYES TO THE OPEN SECRET THAT THERE IS A BLATANT ATTEMPT ON THE PART OF THE ASSESSEE TO EVADE TAX BY STAGE MANAGING DOCUMENTS. IN VIEW OF ABOVE, THE AO HELD THAT THE ASSESSEE HAS EARNED A SHORT TERM CAPITAL GAIN FROM TRANSFER OF PLOT OF LAND THROUGH THE MO DE OF SHARE TRANSFER AND ADDED THE SHORT TERM CAPITAL GAIN OF RS. 17,42,000/ - BY ASSESSING THE INCOME OF THE ASSESSEE AT RS. 19,35,350/- (INCLUDING LTCG OF RS. 2,07,308/-) VIDE ORDER DATED 27.03.2015 PASSED U/S. 143(3)/147 OF THE I.T. ACT, 1961. AGAINST THE ASSESSMENT ORDER DATED 27.3.2015, ASSESSEE APPEALE D BEFORE THE LD. CIT(A), 7 ROHTAK, WHO VIDE HIS IMPUGNED ORDER DATED 06.01.201 7 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE LD. CIT(A)S ORDER DATED 06.1 .2017, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE STATED THAT ASSESSEE HAS RAISED SO MANY GROUNDS, BUT ARGUED ONLY THE GRO UND NO. 1 I.E. LD. CIT(A) HAS GONE WRONG IN DISMISSING THE APPEAL WITHOUT AP PRECIATING THE FACTS THAT THE RE-ASSESSMENT PROCEEDINGS WERE NOT VALIDLY INITIATE D AND WERE VOID AND WAS ON ACCOUNT OF CHANGE OF OPINION. IT WAS STATED THAT IN THE ASSESSMENT OF ASSESSEE SHORT TERM CAPITAL GAIN RS. 6000/- WAS ALREADY ASSE SSED AS DECLARED AS AGAINST TRANSFER OF 7940 SHARES TO M/S BLOSSOM AUTOMOTIVE P VT. LTD AND RS. 207308/- AS LONG TERM CAPITAL GAIN AGAINST TRANSFER OF 1060 SHARES TO M/S TECHPRO SYSTEMS PVT. LTD IN ORIGINAL RETURN AFTER CONSIDERI NG ALL NECESSARY FACTS DISCLOSED BY THE ASSESSEE WHICH HAVE NOT BEEN FOUND TO BE INCORRECT. THE PRESENT ASSESSMENT IS THE RESULT OF CHANGE OF OPINI ON WHICH IS NOT PERMISSIBLE IN LAW. THEREFORE, THE RE-ASSESSMENT PROCEEDINGS ARE INVALID ON THE BASIS OF THIS GROUND ITSELF, IN VIEW OF THE SETTLED LAW. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. I HAVE ALSO GONE THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIE S AS WELL AS THE CONTENTION RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL AN D FOUND THAT IN THE ASSESSMENT OF ASSESSEE SHORT TERM CAPITAL GAIN RS. 6000/- WAS ALREADY ASSESSED AS DECLARED 8 AS AGAINST TRANSFER OF 7940 SHARES TO M/S BLOSSOM A UTOMOTIVE PVT. LTD AND RS. 207308/- AS LONG TERM CAPITAL GAIN AGAINST TRANSFER OF 1060 SHARES TO M/S TECHPRO SYSTEMS PVT. LTD IN ORIGINAL RETURN AFTER CONSIDERING ALL NECESSARY FACTS DISCLOSED BY THE ASSESSEE WHICH HAVE NOT BEEN FOUND TO BE INCORRECT. HENCE, THE PRESENT RE-ASSESSMENT IS THE RESULT OF CHANGE OF OP INION WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. IN THIS REGARD, I DRAW MY SUPP ORT TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ALLIED STRI PS LIMITED VS. ACIT 384 ITR 0424 (DELHI) WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDER (HEADS NOTES):- REASSESSMENT-ISSUE OF NOTICE OF REASSESSMENT- CHANGE OF OPINION - ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLETED ON 07.10.2009-RETURN OF INCOME WAS FILED ON 16.11.2007-PERUSAL OF QUESTIONNAIRE ALONG WITH RESPONSE FURNISHED AND AO AFTER EXAMINING ASPECT OF SHARE APPLICATION MONEY FRAMED ASSESSMENT U/S 143(3)-RETURNED INCOME WAS ACCEPTED AND NO ADDITION WAS MADE ON ACCOUNT OF SHARE APPLICATION MONEY-AO ISSUED NOTICE U/S 148 TO ASSESSEE FOR REASSESSMENT ON GROUND THAT INCOME OF ASSESSEE HAD ESCAPED ASSESSMENT-ASSESSEE CHALLENGED NOTICE ISSUE D U/S 148 ON GROUND THAT RE-ASSESSMENT PROCEEDINGS HA D BEEN INITIATED AFTER PERIOD OF FOUR YEARS FROM END OF 9 RELEVANT ASSESSMENT YEAR AND PRE-CONDITION FOR SUCH INITIATION THAT THERE WAS FAILURE ON PART OF ASSESS EE TO FULLY AND TRULY DISCLOSE ALL MATERIAL PARTICULARS NECESSARY FOR ASSESSMENT WAS ABSENT-ASSESSEE SUBMITTED THAT IT WAS CLEAR CASE OF CHANGE OF OPINI ON, AS ISSUE SOUGHT TO BE RAKED UP BY WAY OF IMPUGNED NOTICE U/S 148 HAD BEEN DULY CONSIDERED BY AO DURIN G ORIGINAL ASSESSMENT U/S 143(3)-HELD, IN CIT VS. USH A INTERNATIONAL LTD IT HELD THAT RE-ASSESSMENT PROCEEDINGS WOULD BE INVALID IN CASE AN ISSUE OR QU ERY WAS RAISED AND ANSWERED BY ASSESSEE IN ORIGINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER AO DID NOT MAKE ANY ADDITION IN ASSESSMENT ORDER IN SUCH SITUATIONS IT SHOULD BE ACCEPTED THAT ISSUE WAS EXAMINED BUT AO DID NOT FIND ANY GROUND OR REASON T O MAKE ADDITION OR REJECT STAND OF THE ASSESSEE-RE- ASSESSMENT WOULD BE INVALID BECAUSE AO HAD FORMED OPINION IN ORIGINAL ASSESSMENT, THOUGH HE HAD NOT RECORDED HIS REASONS- CASE OF ASSESSEE WAS BASED CHANGE OF OPINION-QUESTIONNAIRE AND PARTICULARLY QUESTION 8.1 SPECIFICALLY RAISED ISSUE WITH REGARD TO SHARE CAPITAL-IT REQUIRED ASSESSEE TO GIVE LIST, SO URCE, 10 GENUINENESS, IDENTITY OF SHARE HOLDERS ALONG WITH CONFIRMATION COPIES OF LEDGER ACCOUNT OF PARTY INCLUDING CONFIRMATION OF MODE, DATE, ADDRESS AND ACKNOWLEDGEMENT OF RETURN, ETC. FROM SAID PARTY ALO NG WITH SOURCE AND RELEVANT BANK ENTRIES-SAID INFORMATION WAS PROVIDED BY ASSESSEE- AFTER RECEIPT OF SAID INFORMATION, AO DID NOT THINK IT FIT TO MAKE ADDITION AND, UNDER THESE CIRCUMSTANCES, NO ADDITIO N ITSELF AMOUNTED TO FORMING OPINION AS HAD BEEN HELD IN USHA INTERNATIONAL LTD-PRESENT EXERCISE OF ISSUING NOTICE U/E 148 WOULD AMOUNT TO NOTHING BUT CHANGE O F OPINION, WHICH WAS NOT PERMISSIBLE- PERUSAL OF REASONS FOR INITIATING RE-ASSESSMENT SHOWED THAT TH ERE WAS NOT EVEN AN ALLEGATION THAT THERE HAD BEEN FAIL URE ON PART OF ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL PARTICULARS NECESSARY FOR RE-ASSESSMENT PERUSAL OF REASONS FOR INITIATING RE-ASSESSMENT SHO WED THAT THERE WAS NOT EVEN AN ALLEGATION THAT THERE HA D BEEN FAILURE ON PART OF ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL PARTICULARS NECESSARY FOR REASSESSMENT ASSESSEES PETITION ALLOWED. 11 6.1 AFTER PERUSING THE AFORESAID JUDGMENT OF THE HO NBLE HIGH COURT OF DELHI, I AM OF THE CONSIDERED VIEW THAT THE ISSUE I N DISPUTE IS SQUARELY COVERED BY THE AFORESAID JUDGMENT, HENCE, RESPECTFULLY, FOL LOWING THE AFORESAID DECISION, I QUASH THE ASSESSMENT BEING CHANGE OF OPINION AND ACCORDINGLY ALLOW THE LEGAL ISSUE IN DISPUTE RAISED VIDE GROUND NO. 1 BY THE A SSESSEE. SINCE I HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, HENCE , THE OTHER GROUNDS ON MERITS ARE NOT BEING ADJUDICATED BEING ACADEMIC. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED ON 08/03/2018. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 08/03/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES