SURESH PRASAD CHOKHANI, MUMBAI V. ITO 4(3)(1), MUMBAI

ITA 330/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8061 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 16-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 20-01-2016
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Assessee Lawyers: RAHUL HAKANIAR
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Principle of natural justice; Additional evidence; Reason to believe
• Section: 143(3); 68; 148

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./330/MUM/2016 , /ASSESSMENT YEAR: 2005-06 SHRI SURESH PRASAD CHOKHANI 101/A, RIZVI PARK, S.V. ROAD, SANTACRUZ(W) MUMBAI-400 054. PAN:ADKPC 7748 Q VS. INCOME TAX OFFICER-4 (3) (1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN-DR ASSESSEE BY: SHRI RAHUL HAKANI-AR / DATE OF HEARING: 16.02.2017 / DATE OF PRONOUNCEMENT:07.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 15/10/2015 OF THE CIT ( A)-9,MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL. ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 29/08/2005, DECLARING TOTAL INCOME OF RS. 1.03 LAKHS. THE ASSESSING OFFIC ER (AO) COMPLETED THE ASSESSMENT, U/S. 143(3) OF THE ACT,ON 28/12/2007,DETERMINING HIS INC OME AT RS.2.58 LAKHS. THE AO, AFTER RECORDING THE REASONS FOR REOPENING,ISSUED A NOTICE U/S. 148 OF THE ACT ON 23/03/2011.HE COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 ON 23 /12/2011,COMPUTING THE INCOME OF THE ASSESSEE AT RS. 22.41 LAKHS BY MAKING AN ADDITION O F RS.19.82 LAKHS U/S. 68 OF THE ACT. 2. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS CHALLENGI NG THE REOPENING OF THE ASSESSMENT. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE(AR)STATED THAT ADDITIONAL GROUNDS WERE ARISING OUT OF THE ORDER PA SSED BY THE FIRST APPELLATE AUTHORITY (FAA), THAT SAME WERE OF LEGAL NATURE AND NO ENQUIR IES ABOUT THE FACTS WAS TO BE CARRIED OUT. THE DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT MA TTER COULD BE DECIDED ON MERITS. WE FIND THAT IN THE ADDITIONAL GROUNDS THE ASSESSEE HA S RAISED RELATED ISSUES ONLY AND DO NOT REQUIRE SCRUTINY ABOUT THE FACTS AND THEY DEAL WITH JURISDICTION.CONSIDERING THESE FACTS,WE ARE ADMITTING THE ADDITIONAL GROUNDS RAISED BY THE ASSE SSEE. 330/M/16-SURESH PS(05-06) 2 3. FIRST THREE GROUNDS DEAL WITH NON-ISSUE OF NOTICE U /S.143 (2), REOPENING OF THE ASSESSMENT BEYOND FOUR YEARS, AND VIOLATION OF NATURAL JUSTICE . THUS, THE ADDITIONAL GROUND AND THE ORIGINAL GROUNDS DEAL WITH JURISDICTION. BEFORE DECIDING THE ADDITIONAL GROUND, WE WANT TO T AKE NOTICE OF THE FACTS OF THE CASE ALSO. AFTER COMPLETING THE ASSESSMENT, THE AO RECEIVED IN FORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF B ILLS ISSUED BY MAHASAGAR SECURITIES PRIVATE LTD. OF MUKESH CHOKSHI(MC),THAT MC HAD ADMITTED THA T HE HAD ISSUED BOGUS BILLS TO VARIOUS PERSONS FOR CLAIMING LONG-TERM AND SHORT-TERM CAPIT AL GAINS,THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SOLD SHARES OF TALEN T INFO WAYS LTD. THROUGH MC.HE DIRECTED THE ASSESSEE TO FILE EXPLANATION ABOUT THE TRANSACT ION.AFTER CONSIDERING HIS SUBMISSIONS,THE AO HELD THAT GENUINENESS OF THE TRANSACTION WAS NOT ACCEPTABLE, THAT THE ASSESSEE HAD REDUCED THE TAX LABILITY BY ENTERING INTO NON-GENUINE TRANS ACTION OF SALE OF SHARES CASE. FINALLY, HE MADE AN ADDITION OF RS.19,82,670/- TO THE TOTAL INC OME OF THE ASSESSEE AS UNEXPLAINED CREDITS U/S.68 OF THE ACT. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA. HE PRODUCED ADDITIONAL EVIDENCES. THE FAA CALLED FOR R EMAND REPORT FROM THE AO. DISMISSING THE APPEAL FILED BY THE ASSESSEE, HE HELD THAT THER E WAS NO VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, THAT IT WAS NOT MANDATORY FOR AN AO TO ISS UE NOTICE U/S.143 (2) BEFORE PASSING ORDER U/S.143 (3) READ WITH SECTION 147. 4. DURING THE COURSE OF HEARING BEFORE US, THE AR ARGU ED THAT THE AO HAD NOT SUPPLIED THE ASSESSEE REASONS RECORDED FOR REOPENING, THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE, THAT ASSESSEE HAD OBJECTED TO REOPENING, THAT THE OBJECT IONS RAISED BY HIM WERE NOT ATTENDED TO, THAT COPIES OF THE STATEMENT OF MC NOT PROVIDED TO THE ASSESSEE, THAT MC HAD NOT STATED THAT THE ASSESSEE HAD ENTERED INTO BOGUS SHARE TRANSACTI ONS. THE DR SUPPORTED THE ORDER OF THE AO AND THE FAA. BEFORE PROCEEDING FURTHER,WE WOULD LIKE TO REPRODUC E THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT AND THEY READ AS UNDER: SEARCH AND SEIZURE OPERATIONS CONDUCTED IN CASE OF M/S. MAHASAGAR SECURITIES PRIVATE LTD (NOW ALAG SECURITIES PRIVATE LTD) AND I TS RELATED GROUP OF COMPANIES REVEALED THAT YOU HAVE ENTERED INTO TRANSACTIONS PU RCHASE AND SALE OF SHARES OF THE FOLLOWING SCRIPT FOR THE PERIOD RELATING TO AY. 200 5 06: TALENT INFO WAYS LIMITED. THE DETAILS OF THE SAID TRANSACTION ARE REFLECTED I N THE INVESTMENT SCHEDULE FILED WITH THE RETURN OF INCOME. SINCE INVESTIGATION IS MENTIO NED ABOVE HAS REVEALED THAT THE AFORESAID TRANSACTION IS A BOGUS TRANSACTION THE UN DERSIGNED HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT FOR THE ASSESSME NT YEAR 2005-06. 330/M/16-SURESH PS(05-06) 3 5. WE FIND THAT IN THE CASE UNDER CONSIDERATION THE OR IGINAL RETURN OF INCOME WAS FILED ON 9/08/2005,THAT THE PERIOD OF FOUR YEARS ENDED ON 31 /03/2010, THAT THE NOTICE U/S.48 WAS ISSUED ON 23/03/2011.AS THE ASSESSMENT WAS REOPENED BEYOND A PERIOD OF FOUR YEARS, SO,THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MAT ERIAL FACTS FOR COMPUTING THE ASSESSMENT WAS A PRECONDITION.THE AO HAS TO NOT ONLY RECORD THE FA ILURE OF THE ASSESSEE BUT HAS ALSO TO DEMONSTRATE IT.WITHOUT FULFILLING THE BASIC CONDITI ON, NO NOTICE U/S.148 SHOULD BE ISSUED. REOPENING OF A COMPLETED ASSESSMENT BEYOND THE PERI OD OF FOUR YEARS AND WITHIN SIX YEARS IS A SERIOUS MATTER AND THAT IS THE REASON AS TO WHY T HE PROVISO TO THE SECTION MANDATES CERTAIN PRE -CONDITIONS.IT IS ALSO A FACT THAT THE AO HAD N OT SUPPLIED THE COPY OF REASONS RECORDED FOR REOPENING. WE WOULD LIKE TO REFER TO THE CASE OF BU SINESS INDIA(354ITR154),DELIVERED BY THE HONORABLE BOMBAY HIGH COURT AND IT READS AS UNDER: THE GROUNDS FOR REOPENING OF ASSESSMENTS U/S. 148 O F THE INCOME-TAX ACT, 1961, BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR HAVE TO SPECIFY THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND FULLY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT. IT IS ONLY ON THE SATISFACTION OF THE JURISDICTIONAL REQUIREMENT THAT A NOTICE U/S. 148 CAN BE ISSUED BY THE ASSESSING OFFICER SEEKING TO REOPEN AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE NOTICES WERE ISSUED TO THE ASSESSEE BEYOND T HE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE REASONS, AS FURNISHED TO THE ASSESSEE, DID NOT INDICATE EVEN REMOTELY AN Y FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY MATERIAL FACTS NECESSARY FOR ASSESSMEN T. THE REASONS PROCEEDED ON THE BASIS THAT FOR THE SUB SEQUENT ASSESSMENT YEAR, THE ASSESSING OFFICER HAD HELD THE INTEREST PAID ON BORROWINGS WAS CAPITAL IN NATURE AND, THEREFORE, NOT ALLOWABLE AS AN EXPENDITURE AND THAT CONSEQUENTLY, INCOME CHARGEABL E TO TAX HAD ESCAPED ASSESSMENT. HOWEVER, THE REASONS NOWHERE INDICATED ANY FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE TRULY AND FULLY MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE RELIANCE PLACED ON BEHALF OF THE REVENUE UPON THE ORDER REJECTING THE ASSESSEE'S OBJECTIONS AND THE AFFIDAVIT-IN-REPL Y TO CONTEND THAT THERE HAD BEEN A FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT WAS NOT PERMISSIBLE. THE NOTICES WOULD STAND OR FALL ON THE BASIS OF THE REASONS RECORDED AT THE TIME WHEN THE NOTICES WERE ISSUED. THESE REASONS COULD NOT BE IMP ROVED UPON, SUBSTITUTED OR SUPPLEMENTED EITHER BY AFFIDAVITS OR WHILE DISPOSING OF THE OBJECTIONS OF THE ASSESSEE. THEREFORE, THE REVENUE HAD TO JUSTIFY THE NOTICES ONLY ON THE BASIS OF THE REASONS RECORDED A T THE TIME OF ISSUING THE NOTICES. THE REASONS, AS RECORDED AND FURNISHED TO THE ASSESSEE, DID NOT DIS CLOSE EVEN REMOTELY ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY MATERIAL FACTS NECESSARY FOR ASSESSMENT THUS, THE NOTICES BEING WITHOUT JURISDICTION COULD NOT BE SUSTAINED. IT IS ALSO A FACT THAT THE ASSESSEE HAD RAISED OBJ ECTIONS ABOUT RE-OPENING,BUT THE AO DID NOT DISPOSE THE SAME.IT IS CLEAR VIOLATION OF THE JUDGM ENT OF GKN DRIVESHAFTS(I)LTD.(259ITR19) DELIVERED BY THE HONBLE APEX COURT.LASTLY THE AO H AD NOT ISSUED NOTICE U/S.143(2)OF THE ACT BEFORE COMPLETING THE RE-ASSESSMENT.THUS,ON ALL THE THREE COUNTS THE RE-ASSESSMENT ORDER IS IN VALID.SO.REVERSING THE ORDER OF THE FAA,WE DE CIDE GOA 1-3 AND ADDITIONAL GROUND IN FAVOUR OF THE ASSESSEE.AS WE HAVE HELD THAT THE ORD ER PASSED BY THE AO WAS INVALID,SO,WE ARE NOT DECIDING THE OTHER GROUNDS RAISED BY THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED . . 330/M/16-SURESH PS(05-06) 4 ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH MARCH, 2017. 07 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( !' / RAJENDRA ) ! #$ / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 07.03 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.