Pradeep Sonawat, New Delhi V. ITO WARD 37(4), New Delhi

ITA 2330/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1973 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 15-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reason to believe
• Section: 250; 147; 148

Judgement Text

1 ITA NO. 2330/DEL/2019 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I(2) + SM C-1 NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEM BER, AND SHRI PRASHANT MAHARISHI, ACCOU NTANT MEMBER ITA NO. 2330/DEL/2019 ( A.Y 2010-11) PRADEEP SONAWAT B-3/20, SUNRISE APARTMENT, SEC- 13, NEW DELHI PIN: 110085 PAN: AFUPS5780E (APPELLANT) VS ITO WARD-37(4) NEW DELHI (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. PRADEEP SINGH GAUTAM, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 27/12/2018 PASSED BY CIT(A)-13, NEW DELHI FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, M R. PRADEEP SONAWAT (HEREINAFTER REFERRED TO AS THE APPELLANT') RESPE CTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 13, NEW DELHI (HEREINAFTER REFERRED TO AS THE 'LD .CIT(A)') FOR ASSESSMENT YEAR 2010-11 UNDER SECTION 250 OF THE INCOME-TAX AC T, 1961 ('ACT'), ON THE FOLLOWING GROUNDS: 1. THAT LD.CIT(A) HAS GROSSLY ERRED BOTH IN LAW AND O N FACTS IN CONFIRMING DATE OF HEARING 04.03.2020 DATE OF PRONOUNCEMENT 12 .05.2020 2 ITA NO. 2330/DEL/2019 THE ADDITIONS MADE BY THE INCOME TAX OFFICER, WARD 37(4), NEW DELHI (HEREINAFTER REFERRED TO AS THE LD. AO') IN THE AS SESSMENT ORDER AND THAT THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW. 2. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON F ACTS IN UPHOLDING THE ADDITION OF RS. 4,19,839/- MADE BY THE LD. AO ON TH E BASIS OF INFORMATION RECEIVED FROM ADIT(LNV) UNIT 1(3), AHMEDABAD. THE L D. AO RE-OPENED ASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S 148 ON THE BASIS OF INFORMATION RECEIVED FROM ABOVE SOURCE. HOWEVER THE INFORMATION RECEIVED FROM ABOVE SOURCE WAS NOT ENOUGH TO CONCLUDE WHETHE R ANY INCOME HAS ESCAPED ASSESSMENT AND LD. AO HAD NO VALID REASON T O BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF THE AP PELLANT ASSESSEE. 2.1 THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT T HE APPELLANT HAD NO ROLE IN MODIFICATION OF CLIENT CODES AND THE POWER TO MO DIFY CLIENT CODE COULD BE EXERCISED BY THE BROKER OF HIS AUTHORIZED STAFF ONL Y. THE APPELLANT USED TO GIVE TRADE ORDERS ON PHONE AND RARELY VISITED BROKE R'S OFFICE PHYSICALLY. THERE WERE HUNDREDS OF TRANSACTIONS IN THE ACCOUNT OF THE APPELLANT BUT CLIENT CODE WAS MODIFIED IN RESPECT OF VERY FEW TRANSACTIONS WH ICH WAS DUE TO RECTIFICATION OF GENUINE MISTAKE MADE BY THE BROKER . THE LD. AO SHOULD HAVE ENQUIRED FROM THE CONCERNED BROKER ABOUT THE TRUE F ACTS AND CIRCUMSTANCES LEADING TO CHANGES OF CLIENT CODES BUT THE LD. AO N EITHER MADE ANY EFFORT IN THIS REGARD NOR GRANTED OPPORTUNITY TO THE APPELLAN T TO CROSS EXAMINE THE BROKER THOUGH THE APPELLANT HAD MADE WRITTEN REQUES T TO THE LD. CIT(A) TO THIS EFFECT. THEREFORE THE ADDITION HAS BEEN MADE ON THE BASIS OF UNSUBSTANTIATED FACTS AND WITHOUT PROVIDING ANY OPPORTUNITY TO THE APPELLANT TO PROVE HIS CASE. 2.2 THE REASONS GIVEN BY THE LD. ASSESSING OFFICER IN SUPPORT OF THE IMPUGNED NOTICE ACCEPTS THE FACT THAT AS A MATTER OF REGULAR BUSINESS PRACTICE, A BROKER IN THE STOCK EXCHANGE MAKES MODIFICATIONS IN THE CL IENT CODE ON SALE AND /OR PURCHASE OF ANY SECURITIES, AFTER THE TRADING IS OV ER SO AS TO RECTIFY ANY ERROR WHICH MAY HAVE OCCURRED WHILE PUNCHING THE ORDERS. THE REASONS DO NOT INDICATE THE BASIS FOR THE ASSESSING OFFICER TO COM E TO REASONABLE BELIEF THAT THERE HAS BEEN ANY ESCAPEMENT OF INCOME ON THE GROU ND THAT THE 3 ITA NO. 2330/DEL/2019 MODIFICATIONS DONE IN THE CLIENT CODE WAS NOT ON AC COUNT OF A GENUINE ERROR, ORIGINALLY OCCURRED WHILE PUNCHING THE TRADE. THE M ATERIAL AVAILABLE IS THAT THERE IS A CLIENT CODE MODIFICATION DONE BY THE ASS ESSEE'S BROKER BUT THERE IS NO LINK FROM THERE TO CONCLUDE THAT IT WAS DONE TO ESCAPE ASSESSMENT OF A PART OF ITS INCOME PRIMA FACIE, THIS APPEARS TO BE A CAS E OF REASON TO SUSPECT AND NOT REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 2.3 THAT THE LD. C1T(A) HAS FAILED TO APPRECIATE THAT THE ADDITION HAS BEEN MADE MECHANICALLY, ARBITRARILY IN DISREGARD OF THE FACTS AND POSITION OF THE LAW AND THEREFORE UNTENABLE. 2.4 THAT VARIOUS ADVERSE FINDINGS RECORDED IN THE ORDE R OF ASSESSMENT ARE CONTRARY TO FACTS AND LAW AND, HAVE BEEN RECORDED W ITHOUT GRANTING ANY OPPORTUNITY MUCH LESS VALID AND PROPER OPPORTUNITY AND THEREFORE, VITIATED, UNTENABLE AND, UNSUSTAINABLE. 3. THAT THE LD. C1T(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN NOT APPRECIATING THAT THE IMPUGNED ASSESSMENT HAS BEEN PASSED BY THE LD. AO WITHOUT PROPERLY CONSIDERING THE SUBMISSIONS MADE BY THE AP PELLANT FROM TIME TO TIME AND WITHOUT GRANTING ANY FAIR AND PROPER OPPORTUNIT Y OF BEING HEARD AND THE SAME IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTI CE. ALL OF THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT RESPECTFULLY CRAVES LEAVE TO ADD. AL TER, OMIT OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIM E OF APPEAL, TO ENABLE THE HONBLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL IN ACCORDANCE WITH LAW. 3. AN INFORMATION WAS RECEIVED FROM ADIT INVESTIGAT ION UNIT 1(3), AHMEDABAD IN RESPECT OF CLIENT CODE MODIFICATION (C CN) AND THE DISSEMINATION OF BENEFICIARY CLIENT WHO HAVE TAKEN CONTRIVE LOSSE S AND SHIFTED OUT PROFIT DURING THE FINANCIAL YEAR 2009-10. THE ASSESSEE WA S ONE OF THE BENEFICIARIES 4 ITA NO. 2330/DEL/2019 WHO CONTRIVED LOSSES OF RS. 4,19,839/- BY SHIFTING OUT A CERTAIN PROFIT OF RS. 4,19,839/- IN THE FINANCIAL YEAR 2009-10. HENCE, T HE PROCEEDINGS U/S 147 OF THE INCOME TAX ACT WAS INITIATED AFTER RECORDING TH E REASONS THAT THE INCOME OF RS.4,19,839/- HAS ESCAPE ASSESSMENT FOR THE ASSESSM ENT YEAR 2010-11. THE STATUTORY NOTICE U/S 148 WAS ISSUED ON 31/3/2017. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED ITR ON 22/8/2017 DECLARI NG TOTAL INCOME OF RS. 4,59,833/- STATING THAT ITR FILED ON 14/2/2011 MAY BE TREATED AS ITR IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE ASS ESSING OFFICER HELD THAT THE ASSESSEE IS IN DEFAULT AND HAS USED CCN WITH MALAFI DE INTENTION AND LOSES OF RS. 4,19,839/- WAS DISALLOWED AND ADDED TO THE RETU RN INCOME. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE AND THER E IS NO ADJOURNMENT APPLICATION ON BEHALF OF THE ASSESSEE. THE NOTICE HAS BEEN DULY SERVED TO THE ASSESSEE. THEREFORE, WE ARE TAKING THE SUBMISSIONS OF THE ASSESSEE BEFORE THE CIT(A) AS WELL AS BEFORE THE ASSESSING OFFICER AS CONTENTIONS/ARGUMENTS BEFORE US. 6. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER WAS RIGHT IN MAKING THE ADDITION AND THE CIT(A) RIGHTLY CONFIRMED THE SAME. THE CIT(A) HELD THAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO CONTROVERT THE FINDING OF THE ASSESSING OFFICER EX CEPT SAYING THAT THE ASSESSING OFFICER HAD NO CREDIBLE MATERIAL AVAILABLE WITH HI M AT THE TIME OF ISSUE OF NOTICE U/S 148. THE LD. DR FURTHER SUBMITTED THAT IN FACT, FROM THE PERUSAL OF THE ASSESSMENT ORDER ALSO, IT CAN BE SEEN THAT THE ASSESSEE HAS NOT DISCHARGES ITS ONUS OF IDENTITY, CREDIBILITY AND GENUINENESS O F THE TRANSACTION. THUS, THE LD. DR RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF VIJAY KUMAR GOEL & SONS VS. ITO (ITA NO. 7222/DEL/2017 ASSESSMENT YEAR 2010-11 DATED 30/11/2018). 5 ITA NO. 2330/DEL/2019 7. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. IT IS PERTINENT TO OBSERVE THAT THE ASSESSING OFFIC ER OBSERVED THAT THERE WERE 28 TRANSACTIONS INVOLVING CLIENT CODE MODIFICATION (CC M). THE LOSSES WERE TAKEN FROM SHRI DALCHAND SONAWAT, MOHIT MITTAL, PRADEEP S ONAWAT HUF, SHIV SHANKAR AGGARWAL HUF, SMT. ANITA SONAWAT AND M/S CO MFORT BUILDWELL PVT. LTD. ALL THE CHARACTERS OF CODE OF BOTH THE CLIENTS WERE TOTALLY DIFFERENT. HENCE, THE ASSESSING OFFICER CONCLUDED THAT IT WAS NOT A P UNCHING/TYPOGRAPHICAL ERROR AND IN FACT IS A COLORABLE DEVICE BY ARRANGING SUCH MODIFICATIONS FOR HIS BENEFIT. INFORMATION WAS RECEIVED FROM THE OFFICE OF THE ASS ISTANT DIRECTOR OF INCOME TAX (INVESTIGATION) AHMEDABAD IN RESPECT OF CLIENT CODE MODIFICATION AND THE DISSEMINATION OF BENEFICIARY CLIENTS WHO HAVE TAKEN LOSSES AND SHIFTED OUT PROFITS DURING THE FY 2008-09. THIS LIST WAS SPECIF ICALLY INCLUDING NAME OF THE ASSESSEE WHO IS ONE OF THE BENEFICIARIES OF THIS SC HEME. THUS, THE ASSESSING OFFICER HAS GIVEN AN ELABORATE FINDING WITH THE EXP LANATION AS TO WHY THE SAID TRANSACTION IS NOT JUSTIFIED AND RIGHTLY MADE ADDIT IONS. BEFORE THE CIT(A) ALSO, THE ASSESSEE HAS NOT DEMONSTRATED THE GENUINENESS, IDENTITY AND CREDITWORTHINESS OF THE TRANSACTION. THUS, THERE I S NO NEED TO INTERFERE WITH THE FINDING OF THE CIT(A). HENCE, THE APPEAL OF TH E ASSESSEE IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON THIS 12 TH DAY OF MAY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12/05/2020 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 6 ITA NO. 2330/DEL/2019 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 12.03.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.03.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 3 . 5 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER