Shri Vikram Parmananddas Shah, Ahmedabad V. The Income Tax Officer, Ward-8(2), Ahmedabad

ITA 2391/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6028 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMASHANKAR PRASADSR
• Assessee Lawyers: S N DIVATIA
• Keywords: Income from undisclosed sources; Reason to believe
• Section: 147; 131; 148

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2391/AHD/2015 ( / ASSESSMENT YEAR : 2007-08) VIKRAM PARMANANDDAS SHAH 22, SHIVALIK VILLA RAJPATH CLUB ROAD OFF S.G. HIGH WAY AHMEDABAD-380 054 / VS. THE ITO WARD-8(2) A HMEDABAD-15 # ./ ./ PAN/GIR NO. : AIFPS 9377 R ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI S.N. DIVATIA, AR '#&)( / RESPONDENT BY : SHRI UMASHANKAR PRASAD,SR.DR *+), / DATE OF HEARING 06/02/2018 -./0), / DATE OF PRONOUNCEMENT 13/ 02 /2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANC E OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMIS SIONER OF INCOME TAX(APPEALS)-8, AHMEDABAD [CIT(A) IN SHORT] DATED 08/06/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W. S.147 OF THE ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 2 - INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') DATED 17/06/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2007-08 . 2. IN ITS GROUNDS OF APPEAL, THE ASSESSEE HAS CHALL ENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITIONS OF RS.15,52, 691/- ON SALE OF SHARES DENYING THE EXEMPTION UNDER S.10(38) OF THE ACT AS CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ALSO CHALLENGED THE VAL IDITY OF RE-OPENING UNDER S.147 OF THE ACT BY WAY OF ADDITIONAL GROUNDS OF APPEAL DATED 09/08/2017. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD.A R FOR THE ASSESSEE AT THE OUTSET CHALLENGED THE ACTION OF THE ASSESSING OFFICER (AO) IN USURPING JURISDICTION UNDER SECTION 147 OF THE ACT WRONGFULLY. THE LD.AR CLAIMED THAT THE REASONS RECORDED BY THE AO D OES NOT MEET THE PRE- REQUISITES FOR ASSUMPTION OF JURISDICTION AND THEREFORE THE NOTICE ISSUED PURSUANT TO SUCH RECORDING OF REASONS IS BAD IN LAW. IT WAS THUS SUBMITTED THAT THE CONSEQUENT RE-ASSESSMENT ORDER I S WITHOUT AUTHORITY OF LAW. 3.1. THE LD.AR ADVERTED OUR ATTENTION TO THE REASO NS RECORDED (PAGE NO.30 OF THE PAPER-BOOK) WHICH FORMS THE BASIS FOR INITIATING ACTION UNDER S.148 R.W.S. 147 OF THE ACT. THE LD.AR SUBMI TTED THAT A BARE PERUSAL OF REASONS RECORDED WOULD SHOW THAT THE SOL E BASIS OF RE-OPENING ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 3 - THE TIME BARRED ASSESSMENT WAS THAT THE ASSESSEE HA S PURCHASED 8200 SHARES OF PARAMOUNT COMMUNICATION IN THE FINANCIAL YEAR (FY) 2005-06 AT A PRICE OF RS.1,56,386/- OFFLINE THROUGH A BROKE R NAMELY ALLIANCE INTERMEDIARIES PVT.LTD. WHOSE REGISTRATION FOR GIV ING SERVICES AS BROKER WAS CANCELLED AND WAS THUS NOT AN AUTHORIZED BROKER AT THE TIME OF ISSUANCE OF CONTRACT FOR PURCHASE. THE LD.AR EMPH ASIZED THAT THE SOLITARY ALLEGATION AGAINST THE ASSESSEE FOR INVOCA TION FOR POWER UNDER S.147 IS THAT ASSESSEE HAS NOT PAID SECURITY TRANSA CTION TAXED (STT) ON THE PURCHASE OF SHARES AS THE SHARES WERE PURCHASED OFF LINE FROM AN UNAUTHORIZED BROKER AND CONSEQUENTLY, THE PROFIT ON SALE OF SUCH SHARE WAS NOT QUALIFIED FOR EXEMPTION UNDER S.10(38) OF T HE ACT IN THE ABSENCE OF PAYMENT OF SECURITY TRANSACTION TAX. 3.2. WITH REFERENCE TO THE AFORESAID REASONS RECOR DED, THE LD.AR SUBMITTED THAT THE REASONS TO BELIEVE AS CONTEMPL ATED UNDER S.147 OF THE ACT IS CLEARLY ABSENT IN THESE FACTS. THE AO HAS D RAWN WHOLLY WRONG PRESUMPTION THAT WHERE THE STT HAS NOT BEEN PAID ON PURCHASE OF SHARES, THE PROFIT ARISING ON SALE THEREOF IS NOT ELIGIBLE FOR EXEMPTION UNDER S.10(38) OF THE ACT. AT THE RELEVANT TIME OF EXERC ISE OF POWERS UNDER S.147 SUCH PROPOSITION WAS CLEARLY BEYOND THE SCOPE OF CONDITIONS FOR ELIGIBILITY UNDER S.10(38) OF THE ACT. THE LD.AR S UBMITTED THAT NOTWITHSTANDING THE NON-PAYMENT OF STT AT THE TIME OF PURCHASE, THE ASSESSEE IS ELIGIBLE FOR CLAIM UNDER S.10(38) OF TH E ACT WHERE THE STT HAS ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 4 - BEEN PAID ON SALE SUBJECT TO OTHER CONDITIONS NOT R ELEVANT HERE. THE LD.AR ACCORDINGLY SUBMITTED THAT THE VERY PREMISE F OR INVOKING SECTION 147 IS ON ACCOUNT WHOLLY WRONG UNDERSTANDING OF L AW AND THEREFORE NOT SUSTAINABLE. 3.3. THE LD.AR ACCORDINGLY PLEADED THAT THE ENTIRE ACTION OF THE AO IS A COMPLETE NON-STARTER AND REQUIRES TO BE STRUCK DOW N AT THE THRESHOLD. 4. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED IN FURTHERANCE THAT THE ASSESSEE HAS PURCHASED SHARES FROM AN UNAUTHORIZED BROKER AND TH EREFORE IT IS IMPLICIT THAT THE TRANSACTION OF PURCHASE ITSELF WERE BOGUS AND CONSEQUENTLY THE RESULTANT INCOME IS INCOME FROM UNDISCLOSED SOURCES . THE LD.DR FURTHER SUBMITTED THAT SECURITY TRANSACTION TAX SCHEME PROV IDES FOR PAYMENT OF STT EVEN AT THE TIME OF PURCHASE AND THEREFORE THE BENEFIT OF SECTION 10(38) WAS REQUIRED TO BE RIGHTLY DISALLOWED. THE LD.DR ACCORDINGLY SUBMITTED THAT THE BELIEF FORMED BY THE AO AT THE T IME OF ISSUANCE OF NOTICE UNDER S.148 OF THE ACT WAS IN THE REALM OF BONAFIDE AND BASED ON PRIMA FACIE MATERIAL AVAILABLE IN THIS REGARD AND THUS CANNOT BE ASSAILED. THE LD.DR ALSO RELIED UPON THE DECISION OF THE HON BLE RAJASTHAN HIGH COUR IN THE CASE OF DY.CIT VS. SAMBHAV ENERGY LTD. (2017) 80 TAXMANN.COM 389 (RAJ) FOR THE PROPOSITION THAT THER E IS NO REQUIREMENT IN ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 5 - LAW FOR HOLDING FRESH MATERIAL FOR THE PURPOSES OF FORMATION OF BELIEF THAT INCOME OF ANY PARTICULAR ASSESSMENT YEAR HAD ESCAPE D ASSESSMENT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR ISSUANCE OF NOTICE UNDER S.147 OF THE ACT WHICH IS UNDER CHALLENGE. IT WILL BE APT TO RE PRODUCE THE REASONS RECORDED HEREUNDER:- REASON FOR REOPENING THE SEARCH &. SEIZURE ACTION CARRIED OUT BY THE DEP ARTMENT ON 25.11.2009 IN THE GROUP CASE OF M/S., MAHASAGAR SECURITIES LTD., AND ALSO COVERED ITS ALL GROUP BOMPANIES WHICH WERE CONTROLLED BY SHRI MUKES H M. CHOKSI, AT MUMBAI. SHRI LUKESH.M. CHOKSI HIMSELF ADMITTED THAT MY ALL GROUP COMPANIES ARE PROVIDING ENTRY FOR TAKING PROFIT OR LOSS BY SH OWING PURCHASE OR SALE OF THE SHARES AND (SECURITIES TO VARIOUS PARTIES ACROSS IN DIA ON WHICH I WAS CHARGED CERTAIN (COMMISSION FROM THE BENEFICIARY PARTIES. T HE SAME INFORMATION RECEIVED BY THIS OFFICE SUPPLIED BY THE DIRECTOR OF INCOME-TAX (I &. CI.), NEW DELHI, VIDE LETTER DATED 07.03.2013 ALONGWITH COPY OF STATEMENT OF SHRI MUKESH M. CHOKSHI RECORDED BY THE DEPARTMENT ON OATH U/S. 131 OF THE IT. ACT. IN WHICH ALSO DETAIL PERTAIN TO VARIOUS ASSESSEE OF TH E CIT-V, AHMEDABAD'S CHARGE, WHICH WERE BY NAME ONLY AND WITHOUT PAN. AC CORDINGLY, ALL THE PURCHASE AND SALE TRANSACTIONS REGARDING SHARES AND SECURITIES MADE BY THE ABOVE NAMED ASSESSEE THROUGH GROUP COMPANIES BELONG ING TO SHRI MUKESH M. CHOKSHI WHICH WAS KNOWN AS MAHASAGAR SECURITIES LTD . WHICH IS TOTALLY UNVERIFIABLE TRANSACTION AS THE CONTROLLING PERSON NAMELY SHRI MUKESH M. CHOKSHI HIMSELF ADMITTED IN HIS STATEMENT RECORDED ON OATH U/S. 131 ON 16.01.2013 BY SHRI P. S. NAIK, CIT, CENTRAL-46, MUM BAI RECORDED. ON DEEP SCRUTINIZED OF THE DATA/DETAILS RECEIVED IN THIS OF FICE IT IS ASCERTAIN THAT THE ASSESSEE NAMELY SHRI VIKRAM P. SHAH WAS ALSO INVOLV ED FOR TAKING UNVERIFIABLE/BOGUS BENEFICIAL ENTRIES FROM THE GROU P COMPANIES BELONGS TO SHRI MUKESH CHOKSI DURING THE F.Y.2005-06 THE ASSESSEE'S TOTAL TRANSACTION ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 6 - INVOLVED OF RS.1,56,385/- FOR TAKING UNVERIFIABLE/B OGUS ENTRIES BY SHOWING PURCHASE AND SALE OF SHARE AND SECURITIES. AS THE I NFORMATION RECEIVED WITHOUT PAN HENCE ASSESSEE HAS WHETHER FILED RETURN OF INCO ME FOR A.Y. 2006-07 OR NOT IS NOT ACCESSIBLE. ACCORDINGLY, ALL THE TRANSACTION S MADE BY THE ASSESSEE ARE UNVERIFIABLE AND ALSO NOT ASCERTAINED THAT THE ASSE SSEE SAID TRANSACTION WHETHER REFLECTED IN HIS RETURN OR NOT. HENCE, SAME TRANSACTIONS ALSO SHOULD BE REQUIRED FOR DETAILED VERIFICATION FROM VARIOUS ASP ECTS FOR GENUINENESS OF THE SAID TRANSACTION AS PER THE INFORMATION SUPPLIED BY THE DIRECTOR OF INCOME-TAX (I & C.I.), NEW DELHI IN THIS CASE. I HAVE THEREFORE FIRM REASON TO BELIEVE THAT THE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y. 2006-07 DUE TO THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR ASSESSMENT. THUS, THE CASE NEEDS TO BE RE-OPENED BY ISSUING NOTICE U/S. 148 OF THE IT. ACT,1961. THE TIME LIMIT FOR ISSUE OF NOTICE U/S.!48FOR A.Y.2 006-07 EXPIRES ON 31/03/2013. SD/- (R.N.MEENA) INCOME-TAX OFFICER, WARD-10(4),AHMEDABAD. 6. A BARE GLANCE OF THE REASONS RECORDED GIVES AN U NMISTAKABLE IMPRESSION THAT THE ACTION UNDER S.147 OF THE ACT W AS TAKEN WITH A VIEW TO DENY THE EXEMPTION CLAIMED UNDER S.10(38) OF THE ACT TOWARDS GAINS ON SALE OF SHARES AMOUNTING TO RS.15,52,691/- ON TH E TRANSACTIONS CONCERNING SHARES OF PARAMOUNT COMMUNICATION. IT I S OSTENSIBLE THAT THE ONLY BASIS FOR FORMING BELIEF TOWARDS NON-ELIGIBILI TY OF EXEMPTION UNDER S.10(38) IS THAT THE ASSESSEE HAS NOT PAID SECURITY TRANSACTION TAX ON PURCHASE OF SHARES. THE ALLEGATION TO THIS EXTENT MAY BE TRUE HAVING REGARD TO THE FACT THAT THE PURCHASES HAVE BEEN MAD E FROM AN ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 7 - UNAUTHORIZED SHARE BROKER OFFLINE. HOWEVER, NON-PA YMENT OF STT AT THE TIME OF PURCHASE IS NOT A VALID GROUND FOR DENIAL O F EXEMPTION UNDER S.10(38) IN SO FAR AS AY 2007-08 IN QUESTION IS CON CERNED. NO SUCH CONDITION IS STIPULATED UNDER S.10(38) OF THE ACT. THUS, THE VERY PREMISE FOR FORMATION OF BELIEF AGAINST THE ASSESSEE RUNS C OUNTER TO PLAIN PROVISIONS OF LAW. IN THE ABSENCE OF ANY OTHER BAS IS TAKEN BY AO IN THE REASONS RECORDED UNDER S.148(2) OF THE ACT, IT IS A PPARENT THAT THE VERY PREMISE FOR REOPENING THE ASSESSMENT IS DE HORSE THE LAW IN THIS REGARD. THE PROPOSITION THAT REASONS RECORDED DE HORSE THE LAW OR FACTS IS NOT SUSTAINABLE IS SUPPORTED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE SAGAR ENTERPRISES (2001) 257 ITR 335 (GUJ. ). HENCE, WE FIND THAT THE NOTICE ISSUED UNDER S.147 OF THE ACT IS NO T BACKED BY THE AUTHORITY OF LAW AND CONSEQUENTIALLY BAD IN LAW. T HE ASSESSMENT AS A SEQUEL TO SUCH ILLEGAL NOTICE IS THEREFORE NULL AND VOID AND REQUIRES TO BE QUASHED. THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN SAMBHAV ENERGY LTD.(SUPRA) RELIED UPON ON BEHALF OF THE REV ENUE IS TOTALLY MISPLACED. THE AFORESAID DECISION ONLY SEEKS TO PE RMIT THE AO TO INITIATE ACTION UNDER S.147 OF THE ACT ON THE BASIS OF EXIST ING MATERIAL IN CERTAIN CIRCUMSTANCES WITHOUT THERE BEING ANY NEED FOR FRES H MATERIAL. THE BASIS FOR REOPENING IN THE PRESENT CASE ARE TOTALLY DIFFERENT AND OPPOSED TO LAW S NOTED ABOVE. ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 8 - 7. AS A RESULT, THE ASSESSEE SUCCEEDS ON LEGAL GROU NDS TOWARDS LACK OF JURISDICTION UNDER S.147 OF THE ACT. HENCE, WE DO NOT CONSIDER IT NECESSARY TO DWELL UPON THE MERITS OF THE CASE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 02 /2018 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/ 02 /2018 4 ..*,.*../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-8, AHMEDABAD 5. 9:;,*67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9 ,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6.2.18 (DICTATION-PAD 20- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.2.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.2.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.2.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER , . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2391/AHD/2015 ( / ASSESSMENT YEAR : 2007-08) VIKRAM PARMANANDDAS SHAH 22, SHIVALIK VILLA RAJPATH CLUB ROAD OFF S.G. HIGH WAY AHMEDABAD-380 054 / VS. THE ITO WARD-8(2) A HMEDABAD-15 # ./ ./ PAN/GIR NO. : AIFPS 9377 R ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI S.N. DIVATIA, AR '#&)( / RESPONDENT BY : SHRI UMASHANKAR PRASAD,SR.DR *+), / DATE OF HEARING 06/02/2018 -./0), / DATE OF PRONOUNCEMENT 13/ 02 /2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANC E OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMIS SIONER OF INCOME TAX(APPEALS)-8, AHMEDABAD [CIT(A) IN SHORT] DATED 08/06/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W. S.147 OF THE ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 2 - INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') DATED 17/06/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2007-08 . 2. IN ITS GROUNDS OF APPEAL, THE ASSESSEE HAS CHALL ENGED THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITIONS OF RS.15,52, 691/- ON SALE OF SHARES DENYING THE EXEMPTION UNDER S.10(38) OF THE ACT AS CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ALSO CHALLENGED THE VAL IDITY OF RE-OPENING UNDER S.147 OF THE ACT BY WAY OF ADDITIONAL GROUNDS OF APPEAL DATED 09/08/2017. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD.A R FOR THE ASSESSEE AT THE OUTSET CHALLENGED THE ACTION OF THE ASSESSING OFFICER (AO) IN USURPING JURISDICTION UNDER SECTION 147 OF THE ACT WRONGFULLY. THE LD.AR CLAIMED THAT THE REASONS RECORDED BY THE AO D OES NOT MEET THE PRE- REQUISITES FOR ASSUMPTION OF JURISDICTION AND THEREFORE THE NOTICE ISSUED PURSUANT TO SUCH RECORDING OF REASONS IS BAD IN LAW. IT WAS THUS SUBMITTED THAT THE CONSEQUENT RE-ASSESSMENT ORDER I S WITHOUT AUTHORITY OF LAW. 3.1. THE LD.AR ADVERTED OUR ATTENTION TO THE REASO NS RECORDED (PAGE NO.30 OF THE PAPER-BOOK) WHICH FORMS THE BASIS FOR INITIATING ACTION UNDER S.148 R.W.S. 147 OF THE ACT. THE LD.AR SUBMI TTED THAT A BARE PERUSAL OF REASONS RECORDED WOULD SHOW THAT THE SOL E BASIS OF RE-OPENING ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 3 - THE TIME BARRED ASSESSMENT WAS THAT THE ASSESSEE HA S PURCHASED 8200 SHARES OF PARAMOUNT COMMUNICATION IN THE FINANCIAL YEAR (FY) 2005-06 AT A PRICE OF RS.1,56,386/- OFFLINE THROUGH A BROKE R NAMELY ALLIANCE INTERMEDIARIES PVT.LTD. WHOSE REGISTRATION FOR GIV ING SERVICES AS BROKER WAS CANCELLED AND WAS THUS NOT AN AUTHORIZED BROKER AT THE TIME OF ISSUANCE OF CONTRACT FOR PURCHASE. THE LD.AR EMPH ASIZED THAT THE SOLITARY ALLEGATION AGAINST THE ASSESSEE FOR INVOCA TION FOR POWER UNDER S.147 IS THAT ASSESSEE HAS NOT PAID SECURITY TRANSA CTION TAXED (STT) ON THE PURCHASE OF SHARES AS THE SHARES WERE PURCHASED OFF LINE FROM AN UNAUTHORIZED BROKER AND CONSEQUENTLY, THE PROFIT ON SALE OF SUCH SHARE WAS NOT QUALIFIED FOR EXEMPTION UNDER S.10(38) OF T HE ACT IN THE ABSENCE OF PAYMENT OF SECURITY TRANSACTION TAX. 3.2. WITH REFERENCE TO THE AFORESAID REASONS RECOR DED, THE LD.AR SUBMITTED THAT THE REASONS TO BELIEVE AS CONTEMPL ATED UNDER S.147 OF THE ACT IS CLEARLY ABSENT IN THESE FACTS. THE AO HAS D RAWN WHOLLY WRONG PRESUMPTION THAT WHERE THE STT HAS NOT BEEN PAID ON PURCHASE OF SHARES, THE PROFIT ARISING ON SALE THEREOF IS NOT ELIGIBLE FOR EXEMPTION UNDER S.10(38) OF THE ACT. AT THE RELEVANT TIME OF EXERC ISE OF POWERS UNDER S.147 SUCH PROPOSITION WAS CLEARLY BEYOND THE SCOPE OF CONDITIONS FOR ELIGIBILITY UNDER S.10(38) OF THE ACT. THE LD.AR S UBMITTED THAT NOTWITHSTANDING THE NON-PAYMENT OF STT AT THE TIME OF PURCHASE, THE ASSESSEE IS ELIGIBLE FOR CLAIM UNDER S.10(38) OF TH E ACT WHERE THE STT HAS ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 4 - BEEN PAID ON SALE SUBJECT TO OTHER CONDITIONS NOT R ELEVANT HERE. THE LD.AR ACCORDINGLY SUBMITTED THAT THE VERY PREMISE F OR INVOKING SECTION 147 IS ON ACCOUNT WHOLLY WRONG UNDERSTANDING OF L AW AND THEREFORE NOT SUSTAINABLE. 3.3. THE LD.AR ACCORDINGLY PLEADED THAT THE ENTIRE ACTION OF THE AO IS A COMPLETE NON-STARTER AND REQUIRES TO BE STRUCK DOW N AT THE THRESHOLD. 4. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED IN FURTHERANCE THAT THE ASSESSEE HAS PURCHASED SHARES FROM AN UNAUTHORIZED BROKER AND TH EREFORE IT IS IMPLICIT THAT THE TRANSACTION OF PURCHASE ITSELF WERE BOGUS AND CONSEQUENTLY THE RESULTANT INCOME IS INCOME FROM UNDISCLOSED SOURCES . THE LD.DR FURTHER SUBMITTED THAT SECURITY TRANSACTION TAX SCHEME PROV IDES FOR PAYMENT OF STT EVEN AT THE TIME OF PURCHASE AND THEREFORE THE BENEFIT OF SECTION 10(38) WAS REQUIRED TO BE RIGHTLY DISALLOWED. THE LD.DR ACCORDINGLY SUBMITTED THAT THE BELIEF FORMED BY THE AO AT THE T IME OF ISSUANCE OF NOTICE UNDER S.148 OF THE ACT WAS IN THE REALM OF BONAFIDE AND BASED ON PRIMA FACIE MATERIAL AVAILABLE IN THIS REGARD AND THUS CANNOT BE ASSAILED. THE LD.DR ALSO RELIED UPON THE DECISION OF THE HON BLE RAJASTHAN HIGH COUR IN THE CASE OF DY.CIT VS. SAMBHAV ENERGY LTD. (2017) 80 TAXMANN.COM 389 (RAJ) FOR THE PROPOSITION THAT THER E IS NO REQUIREMENT IN ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 5 - LAW FOR HOLDING FRESH MATERIAL FOR THE PURPOSES OF FORMATION OF BELIEF THAT INCOME OF ANY PARTICULAR ASSESSMENT YEAR HAD ESCAPE D ASSESSMENT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR ISSUANCE OF NOTICE UNDER S.147 OF THE ACT WHICH IS UNDER CHALLENGE. IT WILL BE APT TO RE PRODUCE THE REASONS RECORDED HEREUNDER:- REASON FOR REOPENING THE SEARCH &. SEIZURE ACTION CARRIED OUT BY THE DEP ARTMENT ON 25.11.2009 IN THE GROUP CASE OF M/S., MAHASAGAR SECURITIES LTD., AND ALSO COVERED ITS ALL GROUP BOMPANIES WHICH WERE CONTROLLED BY SHRI MUKES H M. CHOKSI, AT MUMBAI. SHRI LUKESH.M. CHOKSI HIMSELF ADMITTED THAT MY ALL GROUP COMPANIES ARE PROVIDING ENTRY FOR TAKING PROFIT OR LOSS BY SH OWING PURCHASE OR SALE OF THE SHARES AND (SECURITIES TO VARIOUS PARTIES ACROSS IN DIA ON WHICH I WAS CHARGED CERTAIN (COMMISSION FROM THE BENEFICIARY PARTIES. T HE SAME INFORMATION RECEIVED BY THIS OFFICE SUPPLIED BY THE DIRECTOR OF INCOME-TAX (I &. CI.), NEW DELHI, VIDE LETTER DATED 07.03.2013 ALONGWITH COPY OF STATEMENT OF SHRI MUKESH M. CHOKSHI RECORDED BY THE DEPARTMENT ON OATH U/S. 131 OF THE IT. ACT. IN WHICH ALSO DETAIL PERTAIN TO VARIOUS ASSESSEE OF TH E CIT-V, AHMEDABAD'S CHARGE, WHICH WERE BY NAME ONLY AND WITHOUT PAN. AC CORDINGLY, ALL THE PURCHASE AND SALE TRANSACTIONS REGARDING SHARES AND SECURITIES MADE BY THE ABOVE NAMED ASSESSEE THROUGH GROUP COMPANIES BELONG ING TO SHRI MUKESH M. CHOKSHI WHICH WAS KNOWN AS MAHASAGAR SECURITIES LTD . WHICH IS TOTALLY UNVERIFIABLE TRANSACTION AS THE CONTROLLING PERSON NAMELY SHRI MUKESH M. CHOKSHI HIMSELF ADMITTED IN HIS STATEMENT RECORDED ON OATH U/S. 131 ON 16.01.2013 BY SHRI P. S. NAIK, CIT, CENTRAL-46, MUM BAI RECORDED. ON DEEP SCRUTINIZED OF THE DATA/DETAILS RECEIVED IN THIS OF FICE IT IS ASCERTAIN THAT THE ASSESSEE NAMELY SHRI VIKRAM P. SHAH WAS ALSO INVOLV ED FOR TAKING UNVERIFIABLE/BOGUS BENEFICIAL ENTRIES FROM THE GROU P COMPANIES BELONGS TO SHRI MUKESH CHOKSI DURING THE F.Y.2005-06 THE ASSESSEE'S TOTAL TRANSACTION ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 6 - INVOLVED OF RS.1,56,385/- FOR TAKING UNVERIFIABLE/B OGUS ENTRIES BY SHOWING PURCHASE AND SALE OF SHARE AND SECURITIES. AS THE I NFORMATION RECEIVED WITHOUT PAN HENCE ASSESSEE HAS WHETHER FILED RETURN OF INCO ME FOR A.Y. 2006-07 OR NOT IS NOT ACCESSIBLE. ACCORDINGLY, ALL THE TRANSACTION S MADE BY THE ASSESSEE ARE UNVERIFIABLE AND ALSO NOT ASCERTAINED THAT THE ASSE SSEE SAID TRANSACTION WHETHER REFLECTED IN HIS RETURN OR NOT. HENCE, SAME TRANSACTIONS ALSO SHOULD BE REQUIRED FOR DETAILED VERIFICATION FROM VARIOUS ASP ECTS FOR GENUINENESS OF THE SAID TRANSACTION AS PER THE INFORMATION SUPPLIED BY THE DIRECTOR OF INCOME-TAX (I & C.I.), NEW DELHI IN THIS CASE. I HAVE THEREFORE FIRM REASON TO BELIEVE THAT THE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y. 2006-07 DUE TO THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR ASSESSMENT. THUS, THE CASE NEEDS TO BE RE-OPENED BY ISSUING NOTICE U/S. 148 OF THE IT. ACT,1961. THE TIME LIMIT FOR ISSUE OF NOTICE U/S.!48FOR A.Y.2 006-07 EXPIRES ON 31/03/2013. SD/- (R.N.MEENA) INCOME-TAX OFFICER, WARD-10(4),AHMEDABAD. 6. A BARE GLANCE OF THE REASONS RECORDED GIVES AN U NMISTAKABLE IMPRESSION THAT THE ACTION UNDER S.147 OF THE ACT W AS TAKEN WITH A VIEW TO DENY THE EXEMPTION CLAIMED UNDER S.10(38) OF THE ACT TOWARDS GAINS ON SALE OF SHARES AMOUNTING TO RS.15,52,691/- ON TH E TRANSACTIONS CONCERNING SHARES OF PARAMOUNT COMMUNICATION. IT I S OSTENSIBLE THAT THE ONLY BASIS FOR FORMING BELIEF TOWARDS NON-ELIGIBILI TY OF EXEMPTION UNDER S.10(38) IS THAT THE ASSESSEE HAS NOT PAID SECURITY TRANSACTION TAX ON PURCHASE OF SHARES. THE ALLEGATION TO THIS EXTENT MAY BE TRUE HAVING REGARD TO THE FACT THAT THE PURCHASES HAVE BEEN MAD E FROM AN ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 7 - UNAUTHORIZED SHARE BROKER OFFLINE. HOWEVER, NON-PA YMENT OF STT AT THE TIME OF PURCHASE IS NOT A VALID GROUND FOR DENIAL O F EXEMPTION UNDER S.10(38) IN SO FAR AS AY 2007-08 IN QUESTION IS CON CERNED. NO SUCH CONDITION IS STIPULATED UNDER S.10(38) OF THE ACT. THUS, THE VERY PREMISE FOR FORMATION OF BELIEF AGAINST THE ASSESSEE RUNS C OUNTER TO PLAIN PROVISIONS OF LAW. IN THE ABSENCE OF ANY OTHER BAS IS TAKEN BY AO IN THE REASONS RECORDED UNDER S.148(2) OF THE ACT, IT IS A PPARENT THAT THE VERY PREMISE FOR REOPENING THE ASSESSMENT IS DE HORSE THE LAW IN THIS REGARD. THE PROPOSITION THAT REASONS RECORDED DE HORSE THE LAW OR FACTS IS NOT SUSTAINABLE IS SUPPORTED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE SAGAR ENTERPRISES (2001) 257 ITR 335 (GUJ. ). HENCE, WE FIND THAT THE NOTICE ISSUED UNDER S.147 OF THE ACT IS NO T BACKED BY THE AUTHORITY OF LAW AND CONSEQUENTIALLY BAD IN LAW. T HE ASSESSMENT AS A SEQUEL TO SUCH ILLEGAL NOTICE IS THEREFORE NULL AND VOID AND REQUIRES TO BE QUASHED. THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN SAMBHAV ENERGY LTD.(SUPRA) RELIED UPON ON BEHALF OF THE REV ENUE IS TOTALLY MISPLACED. THE AFORESAID DECISION ONLY SEEKS TO PE RMIT THE AO TO INITIATE ACTION UNDER S.147 OF THE ACT ON THE BASIS OF EXIST ING MATERIAL IN CERTAIN CIRCUMSTANCES WITHOUT THERE BEING ANY NEED FOR FRES H MATERIAL. THE BASIS FOR REOPENING IN THE PRESENT CASE ARE TOTALLY DIFFERENT AND OPPOSED TO LAW S NOTED ABOVE. ITA NO.2391/AHD /2015 VIKRAM PARMANANDDAS SHAH VS. ITO ASST.YEAR 2007-08 - 8 - 7. AS A RESULT, THE ASSESSEE SUCCEEDS ON LEGAL GROU NDS TOWARDS LACK OF JURISDICTION UNDER S.147 OF THE ACT. HENCE, WE DO NOT CONSIDER IT NECESSARY TO DWELL UPON THE MERITS OF THE CASE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 02 /2018 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/ 02 /2018 4 ..*,.*../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-8, AHMEDABAD 5. 9:;,*67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9 ,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6.2.18 (DICTATION-PAD 20- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.2.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.2.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.2.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER