ITO 29 (2)(2), MUMBAI V. MUKESH B. PICHHOLIYA (HUF), MUMBAI

ITA 2264/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3506 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 11-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARAT ANDHADE
• Keywords: Reopening of assessment; Unexplained investment; Question of law; Wrong claim; Validity of assessment; Penny stocks; Reason to believe
• Section: 143(3); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.2264/M/2019 ASSESSMENT YEAR: 2014-15 INCOME TAX OFFICER- 29(2)2), ROOM NO.203, C-10, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, BANDRA (EAST), MUMBAI - 4000251 VS. M/S. MUKESH B. PICHHOLIYA (HUF), 703, 7 TH FLOOR, SIDDHESH APARTMENT, 2 ND KATAR GALLI, THAKUR DWAR ROAD, MUMBAI 400 002 PAN: AACHM 9921J (APPELLANT) (R ESPONDENT) CO NO.53/M/2019 (ARISING OUT OF ITA NO.2264/M/2019) ASSESSMENT YEAR: 2014-15 M/S. MUKESH B. PICHHOLIYA (HUF), 703, 7 TH FLOOR, SIDDHESH APARTMENT, 2 ND KATAR GALLI, THAKUR DWAR ROAD, MUMBAI 400 002 PAN: AACHM 9921J VS. INCOME TAX OFFICER- 29(2)2), ROOM NO.203, C-10, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, BANDRA (EAST), MUMBAI - 4000251 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNAMIYA, A.R. REVENUE BY : SHRI BHARAT ANDHADE, D.R. DATE OF HEARING : 14.01.2021 DATE OF PRONOUNCEMENT : 06.04.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEAL BY THE REVENUE AND THE CRO SS OBJECTION BY THE ASSESSEE HAVE BEEN PREFERRED AGAIN ST THE ORDER DATED 21.01.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ITA NO.2264/M/2019 & CO NO.53/M/2019 M/S. MUKESH B. PICHHOLIYA (HUF) 2 [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. THE REVENUE HAS CHALLENGED THE DELETION OF ADDIT ION OF ON MONEY OF RS.1,72,33,650/- AS MADE BY THE AO TOWARDS ON MONEY PAID BY THE ASSESSEE TO BUILDERS M/S. RUNWAL GREEN PROJECTS. WHEREAS THE ASSESSEE HAS CHALLENGED BY V IRTUE OF CROSS OBJECTION THE VALIDITY OF ASSESSMENT FRAMED UNDER S ECTION 143(3) READ WITH SECTION 147 OF THE ACT ON THE GROUND THAT NO ADDITIONS WERE MADE FOR WHICH THE REASONS WERE RECORDED UNDER SECTION 148(2) OF THE ACT AND THEREFORE THE ASSESSMENT MADE IS INVALID AND VOID AB-INITIO. 3. WE WOULD LIKE TO TAKE UP FIRST THE CROSS OBJECTI ON OF THE ASSESSEE IN WHICH THE ASSESSEE HAS RAISED LEGAL ISS UES WHICH ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LD. CIT(A) ERRED IN CONFIRMING THAT THE ASSESSMENT MADE IN PURSUANCE OF NOTICE U/S 148 OF THE ACT IS NOT VOID AND ILLEGAL. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND L AW THE LD. CIT(A) HAS NOT APPRECIATED FACTS THAT THERE WAS NO ESCAPEMENT OF I NCOME FOUND BY THE LEARNED ASSESSING OFFICER IN RELATION TO THE REASONS RECORD ED AS NO ADDITION/ DISALLOWANCE IS MADE IN THE ASSESSMENT ORDER BASED UPON THE REASONS RECORDED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND L AW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN FRAMING IMPUGNED ASSESSMENT ORDER W ITHOUT ASSUMING JURISDICTION AS PER LAW. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND L AW THE LD. CIT(A HAS NOT APPRECIATED FACTS THAT ASSESSMENT MADE U/S 148 IS B AD IN LAW. 4. WE WOULD LIKE TO FIRST ADJUDICATE THE GROUND NO. 2 OF THE CROSS OBJECTION. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 26.07.2014 DECLARING AN INCOME OF RS.86,6 20/-. THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF THE ACT ITA NO.2264/M/2019 & CO NO.53/M/2019 M/S. MUKESH B. PICHHOLIYA (HUF) 3 AFTER THE AO RECEIVED INFORMATION FROM DIRECTORATE OF INVESTIGATION THAT ASSESSEE HAS GENERATED BOGUS CAP ITAL GAIN ON PENNY STOCKS WHICH WAS CLAIMED AS EXEMPT UNDER SECT ION 10(38) OF THE ACT AMOUNTING TO RS.1,12,91,467/-. ACCORDIN GLY, THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 1 2.09.2016. THE REASONS RECORDED ARE REPRODUCED AS UNDER: REASONS FOR REOPENING :- IN THIS CASE, RETURN OF INCOME FOR AY 2014-15 WAS F ILED ON 26/07/2014 INCOME OF RS.86,620/- FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION. 2. INFORMATION HAS BEEN RECEIVED FROM THE DIRECTORA TE OF INVESTIGATION THAT AN ORGANIZED RACKET OF GENERATING BOGUS ENTRIES OF LTC G IN PENNY STOCKS HAVE BEEN UNEARTHED AS A RESULT OF INVESTIGATION CARRIED OUT THROUGHOUT THE COUNTRY. AS A RESULT OF THIS INVESTIGATION, MUKESH B. PICHOLIYA (HUF) BE NEFICIARIES WHO HAVE TAKEN BOGUS ENTRIES OF LTCG AMOUNTING TO RS. 1, 22,76,731 /- HAVE BEEN IDENTIFIED. M/S. MUKESH BHAWANILAL PICHOLIYA (HUF) HAVING PAN AACHM9 92U WHO IS ASSESSED IN THIS CIRCLE/WARD HAS ALSO AVAILED OF SUCH AN ENTRY. THE SAME IS REFLECTED IN THE RETURN OF INCOME FOR AY 2014-15 BY WAY OF CLAIM OF EXEMPTI ON AMOUNTING TO RS. 1, 12,91, 467/- UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1 961. 3. THE DIRECTORATE OF INVESTIGATION HAS MADE AVAILA BLE VARIOUS CONFESSIONAL STATEMENTS OF ENTITIES INVOLVED IN THE TRANSACTIONS FOR GENERATING SUCH BOGUS CLAIMS OF LTCG. I HAVE EXAMINED THESE STATEMENTS AND TRIO DETAILED REPORT OF THE INVESTIGATION. I HAVE ALSO EXAMINED THESE EVIDENCE VIS-A-VIS THE RETURN OF INCOME OF THE ASSESSEE. AFTER APPRAISAL OF THESE MATERIAL ON RECORD, THERE IS ENOUGH REASON TO BELIEVE THAT NOT ONLY THE CLAIM OF EXEMPTION UNDER SECTION 10(38) BY THE ASSESSEE IS PRIME FACIE BOGUS BUT BY MAKING SUCH BOGUS CLAIM, T HE ASSESSES HAS CLEARLY FAILED TO DISCLOSE ALL MATERIAL FACTS FOR DETERMINATION OF IN COME. IN FACT IN THIS CASE THE ASSESSEE SEEMS TO HAVE FABRICATED EVIDENCE IN ORDER TO MISLEAD THE REVENUE TO BELIEVE THE APPARENT AS REAL.' 6. THE ASSESSEE HAS CHALLENGED THIS ISSUE BEFORE TH E LD. CIT(A) WHO HAS DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE, HOWEVER, CANDIDLY RECORDED A FINDING THAT RE ASONS WERE RECORDED IN RESPECT OF BOGUS LONG TERM CAPITAL GAI N UNDER SECTION 148(2) OF THE ACT WHEREAS THE ASSESSMENT FR AMED WAS IN RESPECT OF SOME OTHER ISSUE, HOWEVER, DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT AO HAS RECEIVED INFORM ATION FROM THE OFFICE OF DDIT(INV.), UNIT 4(1), MUMBAI REGARDI NG SEIZED ITA NO.2264/M/2019 & CO NO.53/M/2019 M/S. MUKESH B. PICHHOLIYA (HUF) 4 MATERIAL FROM M/S. RUNWAL HOMES PVT. LTD. AND THUS JUSTIFIED THE REOPENING OF ASSESSMENT. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT UNDISPUTEDLY THE ASSESSMENT HA S BEEN FRAMED UNDER SECTION 143(3) READ WITH SECTION 147 O F THE ACT DATED 27.12.2017 WHEREIN THE ADDITION HAS BEEN MADE BY THE AO OF RS.1,72,33,620/- AS UNEXPLAINED INVESTMENT UN DER SECTION 69 QUA THE CASH PAID BY THE ASSESSEE TO M/S . RUNWAL HOMES PVT. LTD. FOR PURCHASE OF FLAT, THE EVIDENCES WHEREOF WERE FOUND DURING THE COURSE OF SEARCH ON THE SAID BUILD ER. THUS WE NOTE THAT NO ADDITION WAS MADE IN RESPECT OF THE BO GUS LONG TERM CAPITAL GAIN OF RS.1,12,91,467/- WHICH WAS STA TED TO BE CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE ACT B Y THE ASSESSEE IN THE REASONS RECORDED UNDER SECTION 148( 2) OF THE ACT. IN OUR OPINION, THE ORDER OF LD. CIT(A) UPHOLDING THE ASSESSMENT ORDER CAN NOT BE SUSTAINED. OUR FINDING IS SUPPORT ED BY THE FOLLOWING DECISIONS: 1. CIT VS. JET AIRWAYS INDIA LTD. (2011) 331 ITR 2 36 (BOM.) 2. CIT MUMBAI VS. ICICI BANK LTD. (2013) 31 TAXMANN.COM 53 IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (SUPRA) THE HONBLE BOMBAY HIGH COURT HAS OBSERVED AND HELD AS UNDER: 16. EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED BY JUDICIAL I NTERPRETATION, ON THE MAKING OF AN ASSESSMENT OR REASSESSMENT ON G ROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER SECTION 14 8 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JU DICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON TH E GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE ASSESSIN G OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH C AME TO HIS NOTICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOL D THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE ACT (NO. 2) OF 2009. H OWEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIVE PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED ITA NO.2264/M/2019 & CO NO.53/M/2019 M/S. MUKESH B. PICHHOLIYA (HUF) 5 TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. SECTION 147 HAS THIS EFFECT THAT THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSM ENT AND WHICH, COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVE R, IF AFTER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSE SSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDE NTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTICE UNDE R SECTION 148 WOULD BE NECESSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. 17. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THAT HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A MATTER OF FIRST PRINCIPLE, BASED ON THE LANGUAGE USED IN SECTION 147(1) AND ON THE BASIS OF THE PRECEDENT ON THE SUBJECT. WE AGREE WITH THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE AS SESSEE THAT SECTION 147(1) AS IT STANDS POSTULATES THAT UPON THE FORMATION OF A REAS ON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME 'AND ALS O' ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURIN G THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. THE WORDS 'AND ALSO' ARE USED I N A CUMULATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNAT IVE WOULD BE TO REWRITE THE LANGUAGE USED BY PARLIAMENT. OUR VIEW HAS BEEN SUPP ORTED BY THE BACKGROUND WHICH LED TO THE INSERTION OF EXPLANATION 3 TO SECTION 14 7. PARLIAMENT MUST BE REGARDED AS BEING AWARE OF THE INTERPRETATION THAT WAS PLACED O N THE WORDS 'AND ALSO' BY THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH'S CASE (SUPR A). PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DECISION. WHILE IT IS OPEN T O PARLIAMENT, HAVING REGARD TO THE PLENITUDE OF ITS LEGISLATIVE POWERS TO DO SO, THE P ROVISIONS OF SECTION 147(1) AS THEY STOOD AFTER THE AMENDMENT OF 1-4-1989 CONTINUE TO H OLD THE FIELD. 18. IN THAT VIEW OF THE MATTER AND FOR THE REASONS THAT WE HAVE INDICATED, WE DO NOT REGARD THE DECISION OF THE TRIBUNAL IN THE PRESENT CASE AS BEING IN ERROR. THE QUESTION OF LAW SHALL, ACCORDINGLY, STAND ANSWERED AGAINST T HE REVENUE AND IN FAVOUR OF THE ASSESSEE. THE APPEAL IS, ACCORDINGLY, DISMISSED. TH ERE SHALL BE NO ORDER AS TO COSTS. 8. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JE T AIRWAYS (I) LTD. (SUPRA) QUASH THE REASSESSMENT FRAMED BY THE A O. ACCORDINGLY, GROUND NO.2 OF THE CROSS OBJECTION IS ALLOWED. 9. SINCE WE HAVE QUASHED THE ASSESSMENT WE ARE NOT ADJUDICATING THE OTHER ISSUES RAISED BY THE ASSESSE E. 10. THE APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER OF LD. CIT(A) BECOMES INFRUCTUOUS AS WE HAVE QUASHED T HE ASSESSMENT FRAMED BY THE AO (SUPRA). ITA NO.2264/M/2019 & CO NO.53/M/2019 M/S. MUKESH B. PICHHOLIYA (HUF) 6 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHEREAS CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.04.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 06.04.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.