Shri Badri Narayan Choudhary C/o Ashish Khandelwal & Associates G-2, Arihant Tower-II, Opp. BSNL Telephone Exchange, Sanganeri Gate, Jaipur, Jaipur V. Income Tax Officer Ward-4(1), Jaipur, Ward-4(1), Jaipur

ITA 283/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7768 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Transactions in derivatives; Reason to believe
• Section: 143(3); 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 283/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 SHRI BADRI NARAYAN CHOUDHARY 3356, GOVIND RAO JI KA RASTA, CHANDPOLE BAZAR, JAIPUR. CUKE VS. THE ITO, WARD-4(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADEPC 3076 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI ASHISH KHANDELWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. ANURADHA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/04/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 24/04/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), AJMER DATED 27.12.2018 FOR THE ASSESSMENT Y EAR 2010-11 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THAT THE LD. A.O. HAS ERRED IN LAW AS WELL AS I N FACTS OF THE CASE IN ASSUMING JURISDICTION U/S 148 OF THE I.T. A CT, 1961. 2. THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LA W AS WELL AS IN FACTS OF THE CASE IN CONSIDERING CASH DEPOSIT INTO BANK ACCOUNT AS ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 2 UNEXPLAINED AND THEREBY MADE ADDITION/SUSTAINED ADD ITION OF RS. 20,90,070/- TO THE RETURNED INCOME. 3. THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN F ACTS OF THE CASE IN NOT AFFORDING SUFFICIENT OPPORTUNITY OF BEING HE ARD, HENCE VIOLATED PRINCIPLE OF NATURAL JUSTICE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF TRADING OF COMMODITY DERIVATIVES ON MCX AND NCDEX STOCK EXCHANGES. THE ASSESSING OFFICER, ON RECEIPT OF CERTAIN INFORMATION, NOTICED THAT THE ASSESSEE HAS CARRIED OUT COMMODITY TRANSACTIONS WORTH RS. 7,33,80,90,800/- DURING THE FINANCIAL YEAR 2009- 10 AND BASIS THE SAME, FORMED THE BELIEF THAT THE I NCOME OF RS. 7,33,80,90,800/- HAS ESCAPED ASSESSMENT AND NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29.03.2017 AFTER SEEK ING NECESSARY APPROVAL. IN RESPONSE, THE ASSESSEE FILED HIS RETUR N OF INCOME DECLARING LOSS OF RS. 20,83,207/- FROM TRANSACTIONS IN COMMOD ITY DERIVATIVE. THE LOSS SO CLAIMED ON ACCOUNT OF COMMODITY TRADING WAS EXAMINED BY THE ASSESSING OFFICER AND THE SAME WAS NOT ALLOWED TO B E CARRIED FORWARD GIVEN THAT THE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME U/S 139(1) OF THE I.T. ACT. FURTHER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, ON PERUSAL OF BANK ACCOUNT OF THE ASSESSEE, THE AO OBS ERVED THAT THERE ARE CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESS EE TO THE TUNE OF RS. 20,90,065/- WHICH WAS CONSIDERED BY THE AO TO B E UNEXPLAINED INCOME AND BROUGHT TO TAX IN THE HANDS OF THE ASSES SEE. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DISMISSED THE APPEAL OF THE ASSESSEE AND NOW THE ASSESSEES IS IN APPEAL BEFORE US. ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 3 3. FIRSTLY, WE TAKE UP GROUND NO. 2 OF THE ASSESSEE S APPEAL WHERE HE HAS CHALLENGED THE ADDITION OF RS. 20,90,070/- B Y CONSIDERING THE CASH DEPOSIT IN HIS BANK ACCOUNT AS UNEXPLAINED AND BROUGHT TO TAX. IN THIS REGARD, THE LD. AR SUBMITTED THAT FROM THE PER USAL OF THE REASONS SO RECORDED BY THE AO BEFORE ISSUANCE OF NOTICE U/S 148, IT MAY BE NOTED THE SOLE REASON FOR EXERCISING JURISDICTION U /S 147 OF THE ACT WAS FORMATION OF BELIEF BY THE AO THAT INCOME FROM COMM ODITY DERIVATIVE HAS ESCAPED ASSESSMENT. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER, IT MAY BE NOTED THAT NO ADDITION WAS MADE BY THE AO ON ACCOUNT OF COMMODITY DERIVATIVE TRANSACTIONS AND THE ADDITION WHICH HAS BEEN MADE BY THE AO IS ON ALTOGETHER DIFFERENT GROUND I. E. UNEXPLAINED CASH DEPOSIT INTO THE ASSESSEES BANK ACCOUNT. IT WAS SU BMITTED THAT IT IS A SETTLED LEGAL POSITION THAT WHERE THE ALLEGED INCOM E IN RESPECT OF WHICH THE REASONS WERE RECORDED WERE NOT BROUGHT TO TAX B Y THE ASSESSING OFFICER, NO ADDITION ON ACCOUNT OF ANY OTHER TRANSA CTIONS CAN BE MADE AND THE JURISDICTION OF THE ASSESSING OFFICER COMES TO AN END AND EVEN THE RIGORS OF EXPLANATION NO. 3 TO SECTION 147 OF T HE ACT CANNOT BE SAVE THE JURISDICTION OF THE ASSESSING OFFICER. IN SUPPO RT, RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. JET AIRWAYS 331 ITR 236 WHERE THE DECISION OF THE HONB LE RAJASTHAN HIGH COURT IN CASE OF CIT VS. SHRI RAM SINGH 306 ITR 343 HAS ALSO BEEN FOLLOWED. IT WAS ACCORDINGLY SUBMITTED THAT IN VIEW OF THE FACTUAL MATRIX OF THE CASE AND THE BINDING JUDICIAL PRECEDENTS WHE RE THE ALLEGED INCOME IN RESPECT OF WHICH THE NOTICE HAS BEEN ISSU ED U/S 148 OF THE ACT WAS FOUND NON-EXISTENT, THEN THE AO IS PRECLUDE D TO EXTEND HIS JURISDICTION TO TAX ANY OTHER INCOME IN THE HANDS O F THE ASSESSEE. ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 4 4. PER CONTRA, THE LD. DR IS HEARD WHO HAS RELIED O N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN ORDER TO APPRECIATE THE CON TENTION SO ADVANCED BY THE LD. AR, WE REFER TO THE REASONS SO RECORDED BY THE AO BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT WHICH READS A S UNDER:- REASONS OF REOPENING OF THE CASE: ON PERUSAL OF DETAILS AVAILABLE ON RECORD, IT IS SE EN THAT THE ASSESSEE HAS MADE COMMODITY TRANSACTION OF RS. 7,33,80,90,800/- DURING THE FY 2009-10 BUT NO RETUR N OF INCOME HAS BEEN FILED FOR THE AY 2010-11. THUS, THE ASSESS EE DID NOT DISCLOSED FULLY & TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT. THEREFORE, I HAVE REASON TO BELIEVE THA T INCOME OF RS. 7,33,80,90,800/- HAS ESCAPED ASSESSMENT. IN VIEW OF THE ABOVE REASONS, IT IS REQUESTED THAT NECESSARY APPROVAL MAY KINDLY BE ACCORDED. 6. FURTHER, ON PERUSAL OF THE ASSESSMENT ORDER PASS ED BY THE AO U/S 143(3) R.W.S. 147 OF THE ACT, THE RELEVANT FIND ING OF THE AO IN RELATION TO THE COMMODITY TRANSACTION CARRIED OUT B Y THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION READS AS UNDER: - 5. IN RESPONSE THERETO, THE ASSESSEE HAS FILED DET AILS OF COMMODITY TRADING AND SHOWN GROSS SALES OF RS. 9,12 ,54,31,410/, GROSS PURCHASE OF RS. 9,12,75,14,617/- AND DECLARED NET LOSS OF ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 5 RS. 20,83,206/-. ON PERUSAL OF DETAILS, IT IS FOUND THAT ASSESSEE HAS MADE NET SALES/TURNOVER OF COMMODITY OF RS. 1,2 8,02,922/- ( 11449211-1353711) AND EARNED LOSS OF (-) RS. 20,83, 207/-. 6. ASSESSEE IS NOT ALLOWED TO CARRY FORWARD THE SPE CULATION LOSS, AS THE ASSESSEE HAS NOT FILED RETURN OF INCOME U/S 139(1) OF THE IT ACT, 1961. 7. IN LIGHT OF ABOVE, IT IS CLEAR THAT THE REASONS WHICH HAS BEEN RECORDED BEFORE ISSUANCE OF NOTICE U/S 148 OF THE A CT RELATES TO INCOME IN RESPECT OF COMMODITY TRANSACTION WHICH HAS ESCAP ED ASSESSMENT DURING FINANCIAL YEAR 2009-10 RELEVANT TO THE IMPUG NED ASSESSMENT YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SAID TRANSACTIONS WERE EXAMINED AND THE RETURNED LOSS OF RS. 20,83,207/- WAS ACCEPTED BY THE ASSESSING OFFICER HOWEVER THE A SSESSEE WAS NOT ALLOWED TO CARRY FORWARD THE SAME AS THE ASSESSEE H AS NOT FILED RETURN OF INCOME U/S 139(1) OF THE ACT. IT IS THEREFORE CL EAR THAT INCOME IN RESPECT OF WHICH THE REASONS FOR ESCAPEMENT OF INCO ME WERE RECORDED HAS NOT BEEN BROUGHT TO TAX AND IS NOT SUBJECT MATT ER OF ASSESSMENT BY THE ASSESSING OFFICER. THEREFORE, IN LIGHT OF THE S ETTLED LEGAL PROPOSITION OF LAW AS LAID DOWN BY THE VARIOUS COURTS INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. JET AI RWAYS (SUPRA) WHEREIN IT WAS HELD THAT IN TERMS OF SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INC OME WHICH HAS ESCAPED ASSESSMENT AND WHICH WAS THE BASIS FOR THE FORMATION TO BELIEF AND IT HE DOES SO HE CAN ALSO ASSESSED OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT WHICH COME TO HIS NOTI CE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, IF AFTER ISSUING NOTICE U/S ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 6 148 OF THE ACT, HE ACCEPTED THE CONTENTION OF THE A SSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REA SON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ES CAPED ASSESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCOME AND IF HE INTENDS TO DO SO, A FRESH NOTICE U/S 148 WOULD B E NECESSARY, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY TH E ASSESSING OFFICER TOWARDS UNEXPLAINED CASH DEPOSIT IN THE ASSESSEES BANK ACCOUNT CANNOT BE SUSTAINED AS THE VERY REASONS FOR REOPENI NG THE ASSESSMENT HAS NOT BEEN MADE THE SUBJECT MATTER OF ASSESSMENT IN THE HANDS OF THE ASSESSEE. IN LIGHT OF ABOVE GROUND NO. 2 IS DEC IDED IN FAVOUR OF THE ASSESSEE. 8. IN LIGHT OF ABOVE DISCUSSIONS, THOUGH VARIOUS CO NTENTIONS HAVE BEEN RAISED BY BOTH THE PARTIES REGARDING LEGALITY OF NOTICE AND ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT IN GR OUND NO. 1 AND ON MERITS OF THE ADDITIONS SO MADE BY THE AO, WE DO NO T DEEM IT NECESSARY TO EXAMINE THE SAID GROUND AND THE CONTEN TIONS SO ADVANCED BY BOTH THE PARTIES. IN THE RESULT, THE SAME ARE T REATED AS INFRUCTIOUS AND NOT ADJUDICATED UPON. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 283/JP/2019 SHRI BADRI NARAYAN CHOUDHARY VS. ITO 7 TK;IQJ@ JAIPUR FNUKAD@ DATED:-24/04/2019. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI BADRI NARAYAN CHOUDHARY, JAIPU R. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(1), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 283/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR