ALKA SANJAY SHAH, MUMBAI V. ITO WD 25(3)(3), MUMBAI

ITA 2736/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8460 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-10-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P KAPADIA
• Keywords: Invalid notice; Accommodation entries; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC : MUMBAI BEFORE SHRI H.L.KARWA, HONBLE PRESIDENT ITA. NO. 2736/MUM/2012 ASSESSMENT YEAR 2003-2004 MRS. ALKA SANJAY S HAH MUMBAI 400 101. PAN AFBPS0820F VS. I NCOME T AX OFFICER - 25 ( 3 ) ( 3 ) MUMBAI 400 051. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI K.P. KAPADIA FOR RESPONDENT : SHRI MANOJ KUMAR (D.R.) DATE OF HEARING : 23-10-2012 DATE OF PRONOUNCEMENT : 23-10-2012 ORDER PER H.L.KARWA, PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-35, MUMBAI DATED 23-01-2012 RELATING TO THE ASSESSMENT YEAR 2003-2004. 2. VIDE GROUND NO.1 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REOPENING OF THE ASSESSMENT UNDER S ECTION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) STATING T HAT THE REOPENING WAS BARRED BY LIMITATION. GROUND NO. 2 OF THE APPEAL IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.23,231/-. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND THE ASSESSMENT YEAR INVOLVED IS 2003 -2004. FOR THE ASSESSMENT YEAR 2003-2004, THE ASSESSEE FILED HER R ETURN OF INCOME ON 18 TH JUNE, 2003 DECLARING TOTAL INCOME AT RS.1,55,780/- . IN THIS CASE, AN INFORMATION WAS RECEIVED FROM THE CIT(A)-35, MUMBAI THAT ONE SHRI NARENDRA R.SHAH, A HAWALA OPERATOR, WAS INVOLVED MA INLY GIVING OF HAWALA ENTRIES. THE ASSESSEE WAS ONE SUCH BENEFICIA RY WHO HAD OBTAINED 2 BOGUS/ACCOMMODATION ENTRIES. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED AFTER RECORDING REASONS AND OBTAINING PRIOR APPROVAL OF THE ADDITIONAL CIT(A). THE ASSESSING OFFICER ISSUED NOT ICE UNDER SECTION 148 OF THE ACT ON 30 TH MARCH, 2010. NOTICES UNDER SECTION 143 (2) AND 142 (1) OF THE ACT WERE ALSO ISSUED. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, FROM THE DETAILS SUBMITTED BY THE ASSESSEE, THE ASS ESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN PURCHASE OF SHARES OF S URYADEEP SALT REFINERY & CHEMICAL LTD. AS UNDER : DATE Q TY RATE AMOUNT 01.04.2002 7500 1.45 10875 11.04.2002 7500 1.50 11250 TOTAL 15000 22125 4. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO E XPLAIN AS TO WHY THE PURCHASE SHOWN ABOVE SHOULD NOT BE TREATED AS NON-G ENUINE IN VIEW OF THE COPY OF THE LETTER SUBMITTED BY SHRI NARENDRA S HAH TO THE CIT(A)-35, MUMBAI. IN RESPONSE TO ABOVE QUERY, THE ASSESSEE MA DE DETAILED SUBMISSIONS BEFORE THE ASSESSING OFFICER, WHICH ARE MENTIONED IN PARA 6 OF THE ASSESSMENT ORDER. HOWEVER, THE ASSESSING OFF ICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITI ON OF RS.22,125/- TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCE S. THE ASSESSING OFFICER ALSO ESTIMATED THE COMMISSION @ 5% PAYABLE ON SUCH ACCOMMODATION ENTRIES WHICH COMES TO RS.1,106/-. TH US, THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER WAS AT RS.23 ,231/-. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) AND THE CIT(A) VIDE HIS ORDER DATED 23 RD JANUARY, 2012 DISMISSED THE APPEAL OF THE ASSESSEE AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 3 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. REASONS FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT ARE AS UNDER : IN THIS CASE, INFORMATION WAS RECEIVED FROM CCIT- 1 VIDE LETTER NO. CCIT(C)I/PENNTY STOCK/CIT(A)-37/2009-10 DATED 11.03 .2010, WHEREIN IT WAS MENTIONED THAT, BEFORE THE CIT(A)-37 , SHRI NARENDRA R. SHAH IN APPEAL NO. CIT(A)-37, I.T. 377 TO 383/AC CC-13/09-10, HAS SUBMITTED A LIST OF PERSONS WHO HAD LAUNDERED T HEIR BLACK MONEY AND BECAME THE BENEFICIARIES OF THE IMPUGNED PENNY STOCK SCAM. FURTHER, IT WAS ALSO INTIMATED THAT THESE BEN EFICIARIES HAVE AVAILED FINANCIAL ACCOMMODATION ENTRIES FOR BOGUS S HARE APPLICATION MONEY/BOGUS LONG TERM CAPITAL GAIN FOR VARIOUS SHAR ES. AS PER THE LIST, THE ASSESSEE IS ONE OF SUCH BENEFICIARY AND 1 5000 SHARES OF M/S. SURYADEEP SALT REFINERY & CHEMICAL WORKS LTD. (ONE OF PENNY STOCK COMPANY MENTION IN THE INFORMATION) WERE TRAN SFERRED ON 29.04.2002 FOR THE PURPOSE OF LONG TERM CAPITAL GAI N. THEREFORE, I HAVE BEEN REASON TO BELIEVE THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SE CTION 147 OF THE I.T. ACT AND ACCORDINGLY, THE CASE OF THE ASSES SEE IS REQUIRED TO BE REOPENED BY ISSUE OF NOTICE U/S. 148 OF THE ACT SO AS TO REASSESS THE ASSESSEES CORRECT INCOME FOR THE A.Y. 2003-04 . 7. IT IS OBSERVED THAT VIDE ORDER OF EVEN DATE I HA VE DECIDED A SIMILAR ISSUE IN THE CASE OF MRS. JIGNA ANIL SHAH VS. I.T.O . WARD 25(3)(2), MUMBAI IN ITA.NO. 2737/MUM/2012 RELATING TO ASSESSMENT YEA R 2003-2004. THE FINDINGS GIVEN THEREIN ARE REPRODUCED AS UNDER : 4 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. REASONS FOR ISSUANCE OF NOTIC E UNDER SECTION 148 OF THE ACT READ AS UNDER: - REASONS FOR ISSUE OF NOTICE U/S. 148 OF THE I.T.AC T, 1961 VIDE LETTER DT. 11/3/2010 THE CHIEF COMMISSIONER OF INCOME TAX (CENTRAL-1), MUMBAI HAS CIRCULATED THE L ETTER NO.CIT(A)-37/PENNY STOCK SCRIPS/2009-10 DATED 4/2/2 010 OF LD. CIT-37, MUMBAI WHICH CONTAINED ADMISSION OF SHR I NARENDRA R SHAH, THE HAWALA OPERATOR INVOLVED MAINL Y IN GIVING OF HAWALA OF CAPITAL GAINS TO MANY BENEFICIARIES. BEFORE LD.CIT(A) THE HAWALA OPERATOR SHRI SHAH HAS ADMITTE D HIS ROLE OF HAWALA OPERATOR AND HAS ALSO SUBMITTED TO HIM TH E LIST OF BENEFICIARIES WHO HAVE TAKEN PART IN THE HAWALA TRA NSACTIONS. THE ASSESSEE HAS EFFECTED TRANSACTION OF 15000 SHAR ES OF SURYADEEP SALT REFINERY & CHEMICALS LTD. FOR THE PU RPOSE OF TAKING BOGUS GAINS ON SHARE TRANSACTION. AS PER CU RRENT MARKET PRACTICE THE SHARES ARE ALLOTTED ON PAYMENT OF CASH . IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WIT HIN THE MEANING OF SECTION 147 OF THE I T ACT, 1961. THEREFORE, THE PROCEEDINGS FOR A.Y. 2003-04 ARE BEI NG RE-OPENED BY ISSUING NOTICE U/S. 148 OF THE I.T.ACT , 1961. ISSUED NOTICE U/S. 148 OF THE I.T.ACT,1961. SD/- (JAY PRAKASH N SINGH) DATE: 31.03.2010 INCOME-TAX OFFICER-25(3)(2), MUMBAI. SHRI K P KAPADIA, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT A PERUSAL OF THE REASONS FOR ISSUE OF NOTICE UNDER SE CTION 148 OF THE ACT RECORDED BY THE ASSESSING OFFICER WOULD CLEARLY DEM ONSTRATE THAT THE ASSESSING OFFICER HAS NOT MENTIONED THE QUANTUM OF ESCAPED INCOME. HE FURTHER SUBMITTED THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS 5 BARRED BY LIMITATION AND THE ASSESSING OFFICER WAS NOT ENTITLED TO ISSUE A NOTICE UNDER SECTION 148 OF THE ACT IN VIEW OF THE PROVISIONS OF SECTION 149 OF THE ACT. SHRI K P KAPADIA, LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT EVEN IF THE FACTS STATED BY THE ASSE SSING OFFICER WERE TO BE ACCEPTED AS CORRECT, HE COULD NOT RECORD SATISFACTI ON ON THE ESCAPEMENT OF INCOME BEYOND THE AMOUNT OF RS.22,125/-. ACCORD ING TO THE LEARNED COUNSEL FOR THE ASSESSEE, NO NOTICE UNDER SECTION 1 48 OF THE ACT COULD BE ISSUED FOR ESCAPEMENT OF THE INCOME OF RS.22,125/- AS THE PERIOD PRESCRIBED FOR ISSUE OF SUCH NOTICE UNDER SECTION 1 49 OF THE ACT HAD ELAPSED. SHRI K P KAPADIA, THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT IN THIS CASE A NOTICE UNDER SECTIO N 148 OF THE ACT WAS ISSUED AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. A NOTICE UNDER SECTION 148 COULD BE ISSUED A FTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY I F THE ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE. SECTION 149 OF THE ACT, READS AS UNDER: - TIME LIMIT FOR NOTICE. 149. (1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, - (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UND ER CLAUSE (B) OF CLAUSE (C); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAV E ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEA R UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAP ED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR; (C) IF FOUR YEARS, BUT NOT MORE THAN SIXTEEN YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMEN T YEAR UNLESS THE INCOME IN RELATION TO ANY ASSET (IN CLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT. 6 EXPLANATION IN DETERMINING INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF TH IS SUB-SECTION, THE PROVISIONS OF EXPLANATION 2 OF SEC TION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF T HAT SECTION. (2) THE PROVISIONS OF SUB-SECTION (1) AS TO THE ISS UE OF NOTICE SHALL BE SUBJECT TO THE PROVISIONS OF SECTIO N 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 14 8 IS TO BE SERVED IS A PERSON TREATED AS THE AGENT OF A NON- RESIDENT UNDER SECTION 163 AND THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION TO BE MADE IN PURSUAN CE OF THE NOTICE IS TO BE MADE ON HIM AS THE AGENT OF SUCH NON-RESIDENT, THE NOTICE SHALL NOT BE ISSUED AFTER THE EXPIRY OF A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 6. KEEPING IN VIEW THE ABOVE PROVISIONS OF ACT, AN D THE FACTS OF PRESENT CASE I AM OF THE VIEW THAT THE CONTENTION RAISED BY SHRI K P KAPADIA, LEARNED COUNSEL FOR THE ASSESSEE REGARDING TIME LIMIT FOR T HE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT IS CORRECT. REASONS RECORDE D BY THE ASSESSING OFFICER ARE SILENT ABOUT THE QUANTUM OF ESCAPED INCOME. HOW EVER, FROM THE ASSESSMENT ORDER IT IS CLEAR THAT THE QUANTUM OF ES CAPED INCOME IS RS.22,125/- ONLY. THE ASSESSING OFFICER HAS MENTIO NED THAT THE ASSESSEE HAS EFFECTED TRANSACTION OF 15000 SHARES OF SURYADE EP SALT REFINERY AND CHEMICALS LTD. FOR THE PURPOSE OF TAKING BOGUS GAIN S ON SHARE TRANSACTION. THERE IS NO INDICATION IN THE REASONS RECORDED BY T HE ASSESSING OFFICER THAT THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSE SSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER, THE ASSESSING OFFICER HAS ALSO NOT MENTIONED OTHER ITEMS OF ESCAPED INCOME IN THE REASONS RECORDED BY HIM. IN FACT, THE ASSESSING OFFICER HAS NOT MENTIONED THE AMOUNT ESCA PED ASSESSMENT. 7 THUS, THE NOTICE ISSUED UNDER SECTION 148 OF THE AC T AFTER EXPIRY OF 4 YEARS FROM THE END OF ASSESSMENT YEAR UNDER CONSIDERATION COULD NOT BE SUSTAINED IN VIEW OF THE PROVISIONS OF SECTION 149 OF THE ACT . IT IS WELL SETTLED LAW THAT IN A PROCEEDING UNDER SECTION 147 OF THE ACT, WHERE NO TICE UNDER SECTION 148 IS ISSUED IN RESPECT OF A YEAR FOR WHICH THERE IS A LI MIT OF ESCAPED OF INCOME, NOTICE WILL BE INVALID, IF THERE WERE NO REASONS TO BELIEVE THAT ESCAPEMENT EXCEEDS THE LIMIT. IN THIS REGARD THE FOLLOWING DE CISIONS ARE WORTHWHILE TO REFER TO: - (1) MANIK CHAND NAHATA VS. INCOME TAX OFFICER & ANR . (1970) 78 ITR 204 (CAL) (2) MOHINDER SINGH MALIK VS. CHIEF COMMISSIONER OF INCOME TAX (2004) 267 ITR 716 (P&H) IN VIEW OF THE ABOVE, THE ASSESSMENT FRAMED UNDER S ECTION 143(3) READ WITH SECTION 147 OF THE ACT DATED 24 TH DECEMBER 2010 ON THE BASIS OF INVALID NOTICE ISSUED UNDER SECTION 148 OF THE ACT, DESERVE S TO BE ANNULLED. ACCORDINGLY I ANNUL THE IMPUGNED ORDER PASSED BY TH E CIT(A) AND THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER UNDER SE CTION 143(3) READ WITH SECTION 147 OF THE ACT. 7. SINCE I HAVE ANNULLED THE ORDERS OF LOWER AUTHO RITIES, AND THEREFORE, I DO NOT THINK IT NECESSARY TO DECIDE GROUND NO.2 OF THE APP EAL RAISED BY THE ASSESSEE ON MERITS. 8. IN THE RESULT, THE APPEAL IS ALLOWED. 8. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THA T OF MRS. JIGNA ANIL SHAH (SUPRA) AND THE FINDINGS GIVEN THEREIN SHALL A PPLY WITH EQUAL FORCE TO THIS APPEAL ALSO. 8 ITA. NO. 2736/MUM/2012 MRS. ALKA SANJAY SHAH 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23-10-2012. SD/- (H.L.KARWA) PRESIDENT MUMBAI, DATED 23 RD OCTOBER, 2012 VBP/- COPY TO 1. MRS. ALKA SANJAY S HAH , 601/602, SIDDHANT, OPP. CHILDREN ACADEMY SCHOOL, A.S.ROAD, KANDIVLI (E), MUMBAI 400 101. PAN A FBPS0820F 2. I NCOME T AX OFFICER, WARD 25 ( 3 ) ( 3 ), C. - 11, 3 RD FLOOR, ROOM NO. 304, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BA NDRA (E), MUMBAI 400051. 3. CIT(A) - 3 5 , MUMBAI 4. CIT - 25 , MUMBAI 5. DR SMC BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, I.T.A.T. MUMBAI