Himanshu Manharlal Shah, Rajkot V. Pr. Commr. of Income Tax-2, Rajkot

ITA 195/RJT/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9805 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 02-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Salary income; Audit objection; Source of fund; Reassessment proceedings
• Section: 143(3); 133(6); 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 195/RJT/2018 ( ASSESSMENT YEAR : 2013-14) SHRI HIMANSHU MANHARLAL SHAH KALPESH S. DOSHI & CO. CHARTERED ACCOUNTANT 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT 360001 / VS. PRINCIPAL COMMISSIONER OF INCOME TAX-2 RAJKOT ./ ./ PAN/GIR NO. : ASLPS0458F ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KALPESH DOSHI, A.R. / RESPONDENT BY : SHRI JITENDER KUMAR, CIT. DR DATE OF HEARING 17/07/2018 !'# / DATE OF PRONOUNCEMENT 25/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE PR. CIT-2, RAJKOT (PR.CIT IN SHORT), DATED 26.03.2018 ARISING IN THE ASSESSMENT ORDER DA TED 16.03.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3 ) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2013-1 4. ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 2 - 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT HAS GROSSLY ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S 263 OF THE ACT ON ERRONEOUS GROUND THAT THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 THE LEARNED CIT HAS GROSSLY ERRED IN LAW AND O N FACTS IN NOT APPRECIATING THAT IN ORDER TO INVOKE SECTION 263, T WO CONDITIONS MUST BE FULFILLED VIZ. THAT THE IMPUGNED ASSESSMENT ORDER MUST BE EROGENOUS AND THE ERROR MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE PRESENT CASE ID.AO HAS PASSED THE A SSESSMENT ORDER U/S 143(3) R.W.S. 147 AFTER MAKING VARIOUS ENQUIRIE S FROM APPELLANT, CALLING DETAILS FROM PARTIES U/S 133(6) , RECORDING OF STATEMENT OF APPELLANT , RECORDING THE STATEMENT OF THE DEBTORS AND ALSO VERIFYING THE DETAILS OF SOURCE OF FUND, THERE FORE THERE WAS NO ERROR IN THE IMPUGNED ASSESSMENT ORDER SO AS TO JUS TIFY ACTION U/S 263 OF THE ACT. UNDER THE CIRCUMSTANCES, THE VERY A SSUMPTION OF POWER U/S 263 OF THE IT. ACT IS UNJUSTIFIED AND BAD -IN-LAW AND THEREFORE ORDER U/S 263 OF THE ACT DESERVED TO BE Q UASHED. 3 THE ID. CIT GROSSLY ERRED IN HOLDING THAT PR OVISION OF SECTION 68 OF THE IT. ACT IS APPLICABLE IN THE CASE OF SALES AND IF THE BUYERS HAVE NOT FILED RETURN OF INCOME, THE SALES SHOWN BY THE APPELLANT CAN AGAIN BE ADDED AS INCOME. HOWEVER, THE SALE AMOUNT IS ALREADY SHOWN AS INCOME AND THEREFORE NATURE OF TRANSACTION AMOUNTING TO SALES CANNOT BE EQUATED WITH THE NATURE OF LOAN TRA NSACTION. 4. THE LEARNED CIT ERRED IN INVOKING THE REVISIONAR Y POWERS MERELY FOR ROVING INQUIRY BASED ON THE OPINION OF THE AO T HAT, AS PER THE AUDIT OBJECTION REOPENING OF THE ASSESSMENT CANNOT BE MADE AGAIN AND THEREFORE THE AO REQUESTED CIT TO AVAIL THE POW ER U/S.263. IT IS PRAYED THAT, THE REVISIONARY POWER STARTED ON THE B ASIS OF THE AO'S LETTER AND ALSO ON THE BASIS OF AUDIT OBJECTION IS ILLEGAL AND LIABLE TO BE QUASHED. 5. IN INVOKING HIS REVISIONARY POWERS, HE COULD NOT HAVE ACTED OR STARTED SUCH POWERS ON THE BASIS OF ATTENTION DRAWN BY THE WARD OFFICER. THEREFORE, THE ORDER PASSED IS BAD IN LAW. 6. THE LEARNED CIT HAS FURTHER ERRED IN LAW IN NOT COMING TO ANY CONCRETE CONCLUSION AND WITHOUT CONDUCTING ANY INQU IRY OR INVESTIGATING ISSUE, MERELY DIRECTED THE AO TO FRAM E THE ASSESSMENT ORDER AFRESH. 3. IN THIS APPEAL, ASSESSEE HAS RAISED MULTIPLE GRO UNDS OF APPEAL BUT IN SUBSTANCE SEEKS TO IMPUGN THE ACTION OF THE PR.C IT IN INVOKING UNDER SECTION 263 OF THE ACT AND ESSENTIALLY CONTENDS THA T THE ASSESSMENT ORDER FRAMED UNDER S.143(3) R.W.S. 147 OF THE ACT, PASSED BY THE AO CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 3 - 4. THE RELEVANT FACTS, IN BRIEF, ARE THAT THE ASSES SMENT UNDER S.143(3) R.W.S. 147 OF THE ACT FOR AY 2013-14 WAS COMPLETED BY THE AO DETERMINING THE TOTAL INCOME AT RS.4,45,914/- AGAIN ST THE RETURN OF INCOME OF RS.2,09,192/- VIDE ORDER DATED 16.03.2016 . THEREAFTER, THE PR.CIT IN EXERCISE OF HIS REVISIONARY POWER ISSUED NOTICE UNDER S.263 OF THE ACT DATED 06.12.2017 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT SO FRAMED UNDER S.143(3) R.W.S. 147 SHOULD NOT BE SET ASIDE OR MODIFIED. IT WAS ALLEGED BY THE PR.CIT TH AT EXAMINATION OF RECORDS REVEALED THAT ASSESSMENT ORDER SO PASSED IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE INTER ALIA FOR THE REASONS THAT THE AO HAS FAILED TO CONDUCT INQUIRY AND VERIF ICATIONS REGARDING CASH DEPOSITS IN ITS BANK ACCOUNT AND THE CREDITWOR THINESS OF THE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE RECEIVED MON EY BY WAY OF CASH FOR EXECUTING TRANSACTIONS IN CURRENCY/SHARES ETC. THE ORDER OF THE AO WAS CONSEQUENTIALLY CANCELLED WITH A DIRECTION TO M AKE A FRESH ASSESSMENT DE NOVO AFTER MAKING INQUIRY AND VERIFICATION REGARDING CAS H DEPOSITS AND THE CREDITWORTHINESS OF THE PARTIES CO NCERN. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE SUBMITTED BEFORE THE PR.CIT THAT THE IMPUGNED RE-ASSESSMENT ORDER SO UGHT TO BE SET ASIDE AND CANCELLED HAS BEEN FRAMED AFTER PROPER APPLICAT ION OF MIND INTO THE FACTS AND CIRCUMSTANCES OF THE CASE. IT WAS SUBMIT TED THAT THE ASSESSEE IS A DIRECTOR OF DK FOREX PVT. LTD. WHICH PROVIDES CON SULTANCY SERVICES AND OTHER SERVICES RELATED TO FOREIGN CURRENCY. MO REOVER, THE ASSESSEE ALSO PROVIDES CONSULTANCY IN HIS INDIVIDUAL CAPACIT Y. THE ASSESSEE IS THUS DERIVING INCOME FROM SALARY AS WELL AS COMMISS ION FROM SUCH ACTIVITIES. THE COMMISSION INCOME SO EARNED IS ON ACCOUNT OF PROVIDING CONSULTANCY FOR TRADING IN FUTURES IN CURRENCY SEGM ENT. IN THE COURSE OF SUCH CONSULTANCY BUSINESS, THE ASSESSEE HAS ALSO EX ECUTED TRANSACTIONS ON BEHALF OF THE VARIOUS CLIENTS WHO DO NOT HAVE TH EIR OWN ACCOUNTS WITH MCX OR COMMODITY EXCHANGE TO ENABLE THEM TO UNDERTA KE THE TRANSACTIONS IN DERIVATIVE AND FOREIGN CURRENCY. FOR DOING TRANSACTIONS ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 4 - ON BEHALF OF THE CLIENT, THE ASSESSEE HAS COLLECTED CASH FROM THE CLIENTS AND DEPOSITED THE SAME INTO HIS SAVINGS BANK ACCOUN T AND THEN SUBSEQUENTLY PAYMENT MADE TO THE BROKING CONCERNS N AMELY INDIA INFOLINE LTD. AND RELIGARE LTD. THUS, THE ASSESSEE HAS REINVESTED SUCH CASH DEPOSITS (RECEIVED FROM THE CLIENTS) IN FOREIG N CURRENCY TRANSACTIONS ON BEHALF OF THE CLIENTS. THE ASSESSEE POINTED OUT TO THE PR.CIT BY WAY OF WRITTEN SUBMISSIONS THAT COMPREHENSIVE SCRUTINY OF THE RETURN WAS UNDERTAKEN BY THE AO AND THEREFORE, THE ORDER PASSE D BY THE AO UNDER S.143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUD ICIAL TO THE INTEREST OF THE REVENUE. 6. THE REVISIONAL COMMISSIONER HOWEVER WAS NOT IMPR ESSED BY THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND WAS OF THE VIEW THAT AO FINALIZED THE ASSESSMENT WITHOUT MAKING NECESSARY I NQUIRY REGARDING THE CREDITWORTHINESS OF THE PARTIES CLAIMED TO HAVE GIV EN MONEY TO THE ASSESSEE IN CASH AGAINST THEIR PURPORTED TRADING IN CURRENCY STATEDLY EXECUTED BY THE ASSESSEE ON THEIR BEHALF. THE PR.C IT ACCORDINGLY INVOKED EXPLANATION 2 APPENDED BELOW SECTION 263(1) OF THE ACT AS INSERTED VIDE THE FINANCE ACT, 2015 AND HELD THAT A SSESSMENT ORDER UNDER S.143(3) R.W.S. 147 OF THE ACT UNDER REVIEW WAS PAS SED WITHOUT MAKING PROPER INQUIRIES AND VERIFICATION WHICH OUGHT TO HA VE BEEN MADE BY THE AO. THE PR.CIT CONSEQUENTLY HELD THAT THE IMPUGNED ASSESSMENT ORDER UNDER S.143(3) R.W.S. 147 OF THE ACT IS ERRONEOUS I N SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN TERMS OF SECTION 263 OF THE ACT. THE PR.CIT ACCORDINGLY CANCELLED THE ASSESSME NT ORDER WITH A DIRECTION TO THE AO TO MAKE A FRESH ASSESSMENT DE NOVO AFTER MAKING INQUIRY AND VERIFICATION REGARDING CASH DEPOSITS, T HE CREDITWORTHINESS OF THE CONCERN PARTIES, THE CLAIM OF BUSINESS ON BEHAL F OF THE OTHER PERSONS AND TRANSACTIONS IN SHARES ETC. 7. AGGRIEVED BY THE IMPUGNED ACTION UNDER S.263 OF THE ACT BY THE PR.CIT SEEKING TO SET ASIDE THE ASSESSMENT ORDER FR AMED UNDER S.143(3) ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 5 - R.W.S. 147 OF THE ACT DATED 16.03.2016, THE ASSESSE E PREFERRED APPEAL BEFORE THE TRIBUNAL. 8. THE LEARNED AR FOR THE ASSESSEE AT THE OUTSET RE FERRED TO THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S. 147 O F THE ACT WHICH IS SUBJECT MATTER OF REVIEW UNDER S.263 OF THE ACT AND SUBMITTED THAT THE PROCEEDINGS UNDER S.147 OF THE ACT WAS UNDERTAKEN T O VERIFY THE SOURCE OF CASH DEPOSITS AMOUNTING TO RS.52,06,700/- DURING THE YEAR IN THE BANK ACCOUNT OF THE ASSESSEE. IT WAS SUBMITTED THAT SPE CIFIC SHOW CAUSE NOTICE WAS ISSUED AS REPRODUCED IN THE ASSESSMENT O RDER ITSELF WITH A VIEW TO VERIFY THE CASH TRANSACTIONS. THE LEARNED AR THEREAFTER REFERRED TO THE VOLUMINOUS PAPER BOOK SHOWING DETAILED SUBMI SSIONS MADE BEFORE THE AO IN THIS REGARD TOGETHER WITH THE COPY OF BAN K STATEMENT OF THE VARIOUS PARTIES AND THEIR RETURN OF INCOME ALONG WI TH CONFIRMATIONS. THE LEARNED AR THEREAFTER POINTED OUT THAT THE AO DID N OT READILY ACCEPT THE CONFIRMATION OF CASH GIVING PARTIES BUT ALSO ISSUED NOTICE UNDER S.133(6) OF THE ACT TO ALL THESE PERSONS AS WELL AS EXAMINED SOME OF THE PERSONS UNDER S.131 OF THE ACT IN THE COURSE OF THE ASSESSM ENT PROCEEDINGS. IT WAS THUS CONTENDED THAT WHERE THE AO PASSED THE RE- ASSESSMENT ORDER AFTER REQUISITE APPLICATION OF MIND AND AFTER DETAI LED INQUIRIES AS PLAUSIBLE, THE ACTION OF THE AO CANNOT BE SET ASIDE AS ERRONEOUS MERELY ON THE GROUND THAT THE EXTENT OF INQUIRIES DO NOT M ATCH WITH THE STANDARD SET BY THE REVISIONAL COMMISSIONER. TO AUGMENT ITS CONTENTIONS, THE LEARNED AR REFERRED TO THE CONFIRMATIONS RECEIVED F ROM ALL THE NOTICES UNDER S.133(6) OF THE ACT WHO HAVE ALL RESPONDED AN D FILED THE DETAILS AND CONFIRMATIONS. THE LEARNED AR THUS STEADFASTLY SUBMITTED IN CONCLUSION THAT THE ACTION OF THE PR.CIT DOES NOT M EET THE REQUIREMENTS OF LAW FOR INVOCATION OF SECTION 263 OF THE ACT DES PITE INSERTION OF EXPLANATION 2 THEREOF. THE LEARNED AR ACCORDINGLY URGED FOR SETTING ASIDE AND THE CANCELLATION OF THE REVISIONAL ORDER PASSED UNDER S.263 OF THE ACT. ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 6 - 9. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE PR.CIT AND SUBMITTED IN FURTHERANCE THAT THE INQUIR IES MADE BY THE AO WERE CLEARLY MARRED WITH SERIOUS INADEQUACIES IN AS MUCH AS CREDITWORTHINESS OF THE PARTIES STATED TO HAVE DEPO SITED MONEY WITH THE ASSESSEE IS NOT BORNE OUT FROM THE RECORDS. THE LE ARNED DR ACCORDINGLY SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF TH E REVISIONAL COMMISSIONER IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE REVISIONAL ORDER AS WELL AS ASSESSMENT ORDER UN DER REVIEW. WE HAVE ALSO PERUSED THE DOCUMENTARY EVIDENCES REFERRED TO AND RELIED UPON ON BEHALF OF THE ASSESSEE. THE CONTROVERSY BEFORE US, IS MAINTAINABILITY OF REVISIONAL ORDER PASSED UNDER S.263 OF THE ACT SETT ING ASIDE THE RE- ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S. 147 O F THE ACT. SECTION 263 OF THE ACT ENABLES THE PR.CIT/CIT CONCERNED TO REVIEW THE RECORDS OF ANY PROCEEDINGS AND ORDER PASSED THEREON BY THE AO. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE PR.CIT SEEKING TO UPSE T THE FINALITY OF ASSESSMENT ORDER PASSED BY THE AO IN TERMS OF S.143 (3) R.W.S. 147 OF THE ACT UNDER THE UMBRELLA OF REVISIONAL POWERS UNDER S .263 OF THE ACT. AT THE FIRST BLUSH, WE FIND ON A PLAIN READING OF RE-A SSESSMENT ORDER THAT THE RE-ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESS EE WAS CARRIED OUT UNDER S.147 OF THE ACT PRIMARILY TO VERIFY THE BONA FIDES OF CASH DEPOSITS AS NOTICED FROM THE QUERIES RAISED AND SUBMISSIONS THEREOF DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS. WE OBSERVE THAT ALL THE SIGNIFICANT DETAILS AND DOCUMENTATIONS WERE FURNISH ED BEFORE THE AO TOGETHER WITH CONFIRMATIONS OF VARIOUS PARTIES CLAI MING TO HAVE GIVEN CASH TO THE ASSESSEE FOR REIMBURSEMENT OF TRADING L OSSES. THE ASSESSEE IN TURN HAS GIVEN MONEY BY THE CHEQUES TO THE CORRE SPONDING BROKERS. THE AO HAD ALSO MADE INQUIRIES UNDER S.133(6) OF TH E ACT FROM SEVERAL PARTIES ALL OF WHOM HAVE RESPONDED AND CONFIRMED TH E POSITION TAKEN BY THE ASSESSEE. SOME OF THE PARTIES WERE ALSO EXAMIN ED ON OATH UNDER S.131 OF THE ACT. THE AO HAS ALSO MADE ADJUSTMENTS IN THE QUANTUM OF ITA NO. 195/RJT/2018 [SHRI HIMANSHU M. SHAH VS. PR .CIT] A.Y. 2013 -14 - 7 - COMMISSION INCOME EARNED BASED ON SUCH INQUIRIES. THEREFORE, IN A PECULIAR FACT SITUATION WHERE THE CASE WAS SPECIFIC ALLY RE-OPENED TO MAKE INQUIRY ON A SPECIFIC ISSUE AND WHERE THE INQUIRY I S FOUND TO BE CONDUCTED IN A SIGNIFICANT MANNER, IT IS DIFFICULT TO FIND MERIT IN THE ASPERSIONS CAST BY PR.CIT ON THE EXTENT OF INQUIRY BY THE AO. IT IS A CASE WHERE THE EXTENT OF INQUIRY EXPECTED BY THE RE VISIONAL COMMISSIONER IS PROBABLY FOUND SHORT FROM THE AO. H OWEVER, THIS BY ITSELF WOULD NOT GIVE BLANKET LICENSE TO THE REVISI ONAL COMMISSIONER TO ASSUME JURISDICTION UNDER S.263 OF THE ACT. THE FA CTS THE RECORDS ADEQUATELY SHOW THAT THE REASONABLE INQUIRIES WERE MADE ON VARIOUS ASPECTS CONCERNING CASH DEPOSIT PURSUANT TO STRINGE NT PROCEEDINGS OF RE- OPENING OF A COMPLETED ASSESSMENT. WHEN SEEN IN PE RSPECTIVE, WE FIND THAT THE ACTION OF THE AO CANNOT BE TARRED WITH INA DEQUACY OF REASONABLE INQUIRY IN THE CONTEXT. THUS, WE FIND MERIT IN THE PLEA RAISED ON BEHALF OF THE ASSESSEE ON THIS SCORE. THE ACTION OF THE R EVISIONAL COMMISSIONER UNDER S.263 OF THE ACT IS THUS REQUIRE D TO BE STRUCK DOWN. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 25/09/2018 TRUE COPY S. K. SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITA T, RAJKOT THIS ORDER PRONOUNCED IN OPEN COURT ON 25/09/201 8