JIGNA ANIL SHAH, MUMBAI V. ITO WD 25(3)(2), MUMBAI

ITA 2737/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8441 (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: 22-10-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P KAPADIA
• Keywords: Unexplained expenditure; Invalid notice; Gift; Accommodation entries; Reason to believe
• Section: 143(3); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, SMC , MUMBAI BEFORE SHRI H L KARWA, PRESIDENT I T A NO: 2737/MUM/2012 (ASSESSMENT YEAR: 2003 - 04) MRS JIGNA ANIL SHAH, MUMBAI APPELLANT ( PAN NO.: ALPPS5172B) VS INCOME TAX OFFICER, WARD 25(3)(2), MUMBAI RESPONDENT APPELLANT BY: SHRI K P KAPADIA RESPONDENT BY: SHRI MANOJ KUMAR DATE OF HEARING : 22 ND OCTOBER 2012 DATE OF PRONOUNCEMENT : 23 RD OCTOBER 012 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 35, MUMBAI, DATED 23 RD JANUARY 2012, RELATING TO ASSESSMENT YEAR 2003 - 04. 2. VIDE GROUND NO.1 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ), AND VIDE GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE ACTION OF CIT(A) IN CONFIRMING THE ADDITION OF RS. 22,125/ - MADE ON THE GROUND THAT IT WAS AN UNEXPLAINED EXPENDITURE AND FURTHER HOLDING THAT THE SAID EXPENDITURE WAS SHAM AND BOGUS. 3. B RIEFLY STATED THE FACTS OF THE CASE ARE THAT FOR THE ASSESSMENT YEAR 2003 - 04 THE ASSESSEE FILED HER RETURN OF INCOME ON 28 TH JULY 2012 DECLARING TOTAL INCOME AT RS.1,38,840/ - . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 16 TH DECEMBER 2003, RESULTING IN THE REFUND OF RS.9,491/ - . 2 SUBSEQUENTLY, THE CASE WAS REOPENED AND NOTICE UNDER SECTION 148 OF THE ACT DATED 31 ST MARCH 2010 WAS ISSUED AND DULY SERVED ON THE ASSESSEE. ACCORDING TO ASSESSING OFFICER, AN INFORMATION WAS RECEIVED FROM THE CHI EF COMMISSIONER OF INCOME TAX (CENTRAL I), MUMBAI THAT ONE SHRI N ARENDRA R SHAH, A HAWALA OPERATOR, INVOLVED MAINLY IN GIVING OF HAWALA OF CAPITAL GAINS TO MANY BENEFICIARIES. BEFORE CIT(A) - 37, MUMBAI THE HAWALA OPERATOR SHRI N ARENDRA SHAH HAD ADMITTED HI S ROLE OF HAWALA OPERATOR AND HAD ALSO SUBMITTED THE LIST OF BENEFICIARIES CONCERNING THE DEEMED TRANSACTIONS. THE ASSESSEE PURCHASED 15000 SHARES OF SURYA D EEP SALT REFINERY AND CHEMICALS LTD. FOR THE PURPOSE OF TAKING BOGUS GAINS ON SHARE TRANSACTION. T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED SHARES OF SURYADEEP SALT REFINERY AND CHEMICALS LTD. AS UNDER: - THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASES SHOWN ABOVE SHOULD NOT BE TREATED AS NON GENUINE. THE ASSESSEE WAS ALSO SUPPLIED THE COPY OF LETTER SUBMITTED BY SHRI NARENDRA SHAH TO THE CIT(A) , WHICH READS AS UNDER: - THE HON COMMISSIONER OF INCOME TAX (APPEALS) 37, MUMBAI REG: MY APPEAL FOR THE AY 2000 - 01 TO 2006 - 07 APPEAL NO. CIT(A) - 37/IT - 377 TO 383/ACCC - 13/09 - 10 SUB: SUBMISSIONS OF DETAILS RESPECTED SIR, WITH REFERENCE TO ABOVE AND IN CONTINUATION OF EARLIE R SUBMISSIONS AND AS ASKED BY YOUR HONOUR I HEREBY SUBMIT A PAPER BOOK CONTAINING THE LIST OF NAME & ADDRESS OF PARTIES DATE QUANTITY RATE AMOUNT 01.04.2002 7500 1.45 10875 11.04.2002 7500 1.50 11250 TOTAL 15000 22125 3 WHO WERE THE BENEFICIARIES OF VARIOUS FINANCIAL ACCOMMODATION ENTRIES FOR SPECULATION PROFIT, LONG TERM CAPITAL GAINS, SHORT TERM CAPITA L GAIN, GIFTS, ONE TIME ENTRY, DONATION ETC. THE DETAILS ALSO INCLUDE THE NAME OF THE PERSON COMPILED BY THE SPECIAL AUDITORS APPOINTED U/S 142(2A) FROM THE DATE SEIZED IN FLOPPIES/CDS SEIZED FROM MY RESIDENCE AND OFFICE DURING THE COURSE OF THE SEARCH. THE LIST ENCLOSED HEREWITH CONTAINS THE NAME AND ADDRESS OF MORE THAN 700 PARTIES. THE LIST IS NOT EXHAUSTIVE. I HAVE FORGOTTEN THE NAME OF MANY MORE PARTIES WHO WERE THE BENEFICIARIES FOR THE ISSUE OF CHEQUES FROM MY BANK ACCOUNT. THE DETAILS ENCLOSED HEREWITH CONCLUSIVELY PROVE AND ESTABLISH THE FACT THAT I WAS ENGAGED IN ISSUING CHEQUES/DDS FOR ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES. NEEDLESS TO SAY THAT I HAVE RECEIVED THE AMOUNT IN CASH AND THIRD PARTY CHEQUES FOR GIVING CHEQUES FOR ACCOMMO DATION ENTRIES TO THE VERY SAME PARTIES. PLEASE FIND THE SAME IN ORDER AND OBLIGE. THANKING YOU YOURS FAITHFULLY SD/ - (NARENDRA R SHAH) ENCL: AS ABOVE. IN RESPONSE TO ABOVE QUERY THE ASSESSEE VIDE HER LETTER DATED 22 ND DECEMBER 2010 SUBMITTED THAT SHE HAD PURCHASED 15000 SHARES OF SURYADEEP SALT REFINERY AND CHEMICAL S LTD. THROUGH DRISHTI SECURITIES PVT. LTD., SHOP NO.19, ASHOKA PALACE, JITENDRA ROAD, MALAD (E), MUMBAI 97. THE ASSESSEE FURTHER CLAIMED THAT SHE DID NOT KNOW SHRI NARENDRA R SHAH. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAS OBTAINED THE BOGUS SHARE PURCHASE BILL FOR 15000 SHARES OF SURYADEEP SALT REFINERY AND CHEMICAL S LTD. IN ORDER TO ENGINEER A BOGUS CAPITAL GAINS THROUGH PENNY STOCK. CONSEQUENTLY, THE ASSESSING OFFICER ADDED A SUM OF RS. 2 2,125/ - TO THE TOTAL INCOME OF THE ASSESSEE TREATING THE SAME EARNED FROM UNDISCLOSED SOURCES. 4 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE 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 TRIBUNAL. 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AV AILAB LE ON RECORD. REASONS FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT READ AS UNDER: - REASONS FOR ISSUE OF NOTICE U/S. 148 OF THE I.T.ACT, 1961 VIDE LETTER DT. 11/3/2010 THE CHIEF COMMISSIONER OF INCOME TAX (CENTRAL - 1), MUMBAI HAS CIRCULATED THE LETTER NO.CIT(A) - 37/PENNY STOCK SCRIPS/2009 - 10 DATED 4/2/2010 OF LD. CIT - 37, MUMBAI WHICH CONTAINED ADMISSION OF SHRI NARENDRA R SHAH, THE HAWALA OPERATOR INVOLVED MAINLY IN GIVING OF HAWALA OF CAPITAL GAINS TO MANY BENEFICIARIES. BEFORE LD.CIT(A) THE HAWALA OPERATOR SHRI SHAH HAS ADMITTED HIS ROLE OF HAWALA OPERATOR AND HAS ALSO SUBMITTED TO HIM THE LIST OF BENEFICIARIES WHO HAVE TAKEN PART IN THE HAWALA TRANSACTIONS. THE ASSESSEE HAS EFFECTED TRANSACTION OF 15000 SHARES OF SURYADEEP SALT REFINERY & CHEMICALS LTD. FOR THE PURPOSE OF TAKING BOGUS GAINS ON SHARE TRANSACTION. AS PER CURRENT 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 WITH IN THE MEANING OF SECTION 147 OF THE I T ACT, 1961. THEREFORE, THE PROCEEDINGS FOR A.Y. 2003 - 04 ARE BEING 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 : 3 1.03.2010 INCOME - TAX OFFICER - 25(3)(2), MUMBAI. SHRI K P KAPADIA, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT A PERUSAL OF THE REASONS FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT RECORDED BY THE ASSESSING OFFICER WOULD CLEARLY DEMONSTRATE THAT THE 5 ASSESSING OFFICER HAS NOT MENTIONED THE QUANTUM OF ESCAPED INCOME. HE FURTHER SUBMITTED THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS 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 ASSESSING OFFICER WERE TO BE ACCEPTED AS CORRECT, HE COULD NOT RECORD SATISFACTION ON T HE ESCAPEMENT OF INCOME BEYOND THE AMOUNT OF RS.22,125/ - . ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, NO NOTICE UNDER SECTION 148 OF THE ACT COULD BE ISSUED FOR ESCAPEMENT OF THE INCOME OF RS.22,125/ - AS THE PERIOD PRESCRIBED FOR ISSUE OF SUCH NOTI CE UNDER SECTION 149 OF THE ACT HAD ELAPSED. SHRI K P KAPAD I A, THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT IN THIS CASE A NOTICE UNDER SECTION 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 AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF 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 UNDER CLAUSE (B) OF CLAUSE (C); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED 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 T HE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT. 6 EXPLANATION IN DETERMINING INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED A SSESSMENT FOR THE PURPOSES OF THIS SUB - SECTION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION. (2) THE PROVISIONS OF SUB - SECTION (1) AS TO THE ISSUE OF NOTICE SHALL BE SUBJECT TO THE PROVISIONS O F SECTION 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 148 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 PURSUANCE 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, AND 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 THE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT IS CORRECT. REASONS RECORDED BY THE ASSESSING OFFICER ARE SILENT ABOUT THE QUANTUM OF ESCAPED INCOME. HOWEVER, FROM THE ASSESSMENT ORDER IT IS CLEAR THAT THE QUANTUM OF ESCAPED INCOME IS RS.22,125/ - ONLY. THE ASSESSING OFFICER HAS MENTIONED THAT THE ASSESSEE HAS EFFECTED TRANSACTION OF 15000 SHARES OF SURYADEEP SALT REFINER Y AND CHEMICALS LTD. FOR THE PURPOSE OF TAKING BOGUS GAINS ON SHARE TRANSACTION. THERE IS NO INDICATION IN THE REASONS RECORDED BY THE ASSESSING OFFICER THAT THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ON E 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 ESCAPED ASS ESSMENT. 7 THUS, THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT AFTER EXPIRY OF 4 YEARS FROM THE END OF ASSESSMENT YEAR UNDER CONSIDERATION COULD NOT BE SUSTAINED IN VIEW OF THE PROVISIONS OF S ECTION 149 OF THE ACT. IT IS WELL SETTLED LAW THAT IN A PROCEEDING UNDER SECTION 147 OF THE ACT, WHERE NOTICE UNDER SECTION 148 IS ISSUED IN RESPECT OF A YEAR FOR WHICH THERE IS A LIMIT OF ESCAPED OF INCOME, NOTICE WILL BE INVALID, IF THERE WERE NO REASONS TO BELIEVE THAT ESCAPE MENT EXCEEDS THE LIMIT. IN THIS REGARD THE FOLLOWING DECISIONS 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 SECTION 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, DESERVES TO BE ANNULLED. ACCORDINGLY I ANNUL THE IMPUGNED ORDER PASSED BY THE CIT(A) AND THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. 7. SINCE I HAVE ANNULLED THE ORDER S OF LOWER AUTHORITIES, AND THEREFORE , I DO NOT THINK IT NECESSARY TO DECIDE GROU ND NO.2 OF THE APPEAL RAISED BY THE ASSESSEE ON MERITS. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED I N THE OPEN COURT ON 2 3 R D OCTOBER 2012. S D / - (H L KARWA) MUMBAI, DATED 2 3 .10.2012 PRESIDENT SALDANHA 8 COPY OF THE ORDER FORWARDED TO: 1. MRS JIGNA ANIL SHAH D/401, ARCAD BHOOMI, OPP. CHILDREN ACADEMY SCHOOL A S ROAD, KANDIVLI (EAST), MUMBAI 400 101 2. INCOME TAX OFFICER, WARD 25(3)(2), MUMBAI 3. CIT - 25, MUMBAI 4. CIT(A) - 35, MUMBAI 5. DR SM C BENCH 6. GUARD FILE TRUE COPY BY ORDER DY / ASSTT. REGISTRAR ITAT, MUMBAI