VISHAL HASMUKH SHAH, MUMBAI V. ITO 19(2)(2), MUMBAI

ITA 3316/MUM/2014

• Counselvise Citation: 331619914 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-08-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment
• Section: 147; 148; 143(3)

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (ACCOUNTANT MEMBER ) . . , ./ I.T.A. NO .3316 / MUM/20 14 ( / ASSESSMENT YEAR : 20 0 4 - 05 ) SHRI VISHAL HASMUKH SHAH, 3, VEER BUILDING, 21 ST FLOOR, 21, TAGORE ROAD, SANTRACRUZ (W), MUMBAI - 400054 / VS. INCOME TAX OFFICER, 1 9(2)(2), MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AALPS8905J / APPELLANT BY DR.P.DANIEL / RSPONDENT BY SHRI K P R R MURTY / DATE OF HEARING : 5 .8 . 201 5 / DATE OF PRONOU NCEMENT : 5 . 8. 201 5 / O R D E R PER B ENCH: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.2.2014 PASSED BY THE LD.CIT(A) - 30, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 200 4 - 05 . 2. THE ASSESSEE, INTER ALIA, IS CO NTESTING THE VALIDITY OF REOPENING OF ASSESSMENT. 3. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT IN THE HANDS OF THE ASSESSEE WAS ORIGINALLY COMPLETED UNDER SECTION 143 (3) OF THE ACT ON 24.11.2006. IN THE ORIGINAL ASSESSMENT ITA NO. 3316 / MUM/20 14 2 PROCEEDINGS, THE LONG TERM CAPITAL GAINS OF RS.4,74,837/ - ARISING ON SALE OF SHARES WAS ACCEPTED BY THE ASSESSING OFFICER AFTER CARRYING OUT DUE EXAMINATION. THE LD. COUNSEL SUBMITTED THAT THE AO SUBSEQUENTLY REOPENED THE ASSESSMENT BY ISSUING NOTI CE ON 24.3.2011 ON THE REASONING THAT THE ASSESSEE HAS ENTERED INTO PURCHASE AND SALES OF SHARES WITH M/S MAHASAGAR SECURITIES PVT LTD AND THE SAID COMPANY WAS FOUND TO BE INDULGING IN PROVIDING BOGUS ACCOMMODATION BILLS OF TRADING IN SHARES . 4. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER ALSO RE - OPENED THE ASSESSMENT AFTER OBTAINING APPROVAL FROM ADDL. COMMISSIONER OF INCOME TAX , 19(2), MUMBAI FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 5. THE LD. COUNSEL SUBMITTED THAT THE PRESENT A SSESSMENT HAS BEEN REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. H ENCE THE FIRST PROVISO TO SECTION 147 OF THE ACT SHALL APPLY TO THE FACTS OF THE PRESENT CASE. REF ERRING TO THE SAID PROVISO, THE LD. COUNSEL SUBMITTED THAT THE REOPENING CAN BE MADE BY THE AO AFTER EXPIRY OF FOUR YEARS IN SUCH CASES, ONLY IF THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSES SMENT. THE LD.AR SUBMITTED THAT THERE IS NO ALLEGATION MADE BY THE AO THAT THE ASSESSEE HAS NOT DISCLOSED TRULY AND FULLY ALL T HE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. ACCORDINGLY, HE SUBMITTED THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AS THE FIRST PROVISO TO SECTION 147 HAS NOT BEEN COMPLIED WITH BY THE AO. 6 . THE LD.AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 151, EXIST ING AT THE RELEVANT POINT OF TIME , HAS PRESCRIBED THAT THE SANCTION FOR ISSUING NOTICE UNDER SECTION 148 SHAL L BE OBTAINED FROM THE COMMISSIONER ITA NO. 3316 / MUM/20 14 3 OF INCOME TAX IN THE CASES WHERE THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT . HOWEVER, IN THE PRESENT CASE, THE AO HAS OBTAINED SANCTION FROM THE ADDITIONAL COMMISSIONER OF INCOME TAX AND HENCE , ON THAT COUNT AL SO THE REOPENING OF THE ASSESSMENT IS TO BE CANCELLED. IN SUPPORT OF THIS PROPOSITION, THE LD. COUNSEL PLACED RELIANCE ON THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GHANSHYAM K. KHABRANI V/S ACIT [2012] 346 ITR 443 (BOM). 7 . ON THE CONTRARY, THE LD. DR PLACED RELIANCE ON THE ORDER PASSED BY LD.CIT(A) ON THIS LEGAL ISSUE. 8 . I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSING OFFICER HAS OBTAINED SANCTION U/ S 148 OF THE ACT FROM THE ADDL. COMMISSIONER OF INCOME TAX. SINCE ORIGINAL ASSESSMENT FOR THE PRESENT YEAR HAS BEEN COMPLETED IN THE HANDS OF THE ASSESSEE UNDER SE C T I ON 143(3) OF THE ACT, THE SANCTION IS REQUIRED TO BE OBTAINED FROM THE COMMISSIONER OF INC OME TAX AS PER THE PROVISIONS OF SECTION 151(1) OF THE ACT . THIS LEGAL REQUIREMENT WAS NOT DISPUTED BY LD D.R. ADMITTEDLY, THE AO HAS NOT OBTAINED THE SANCTION FROM THE COMMISSIONER OF INCOME TAX, BUT OBTAINED FROM ADDL. COMMISSIONER . T HE HONBLE JURISD ICTIONAL HIGH COURT HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF GHANSHYAM K. KHABRANI (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDER : WHEN THE STATUTE MANDATES THE SATISFACTION OF A PARTICULAR FUNCTIONARY FOR THE EXERCISE OF A POWER, T HE SATISFACTION MUST BE OF THAT AUTHORITY. WHERE A STATUTE REQUIRES SOMETHING TO BE DONE IN A PARTICULAR MANNER, IT HAS TO BE DONE IN THAT MANNER. IN A SIMILAR SITUATION THE DELHI HIGH COURT IN CIT V. SPL'S SIDDHARTHA LTD. (ITA NO. 836 OF 2011 DECIDED ON S EPTEMBER 14, 2011) SINCE REPORTED IN [2012] 345 ITR 223 (DELHI) HELD THAT POWERS WHICH ARE CONFERRED UPON A PARTICULAR AUTHORITY HAVE TO BE EXERCISED BY THAT AUTHORITY ITA NO. 3316 / MUM/20 14 4 AND THE SATISFACTION WHICH THE STATUTE MANDATES OF A DISTINCT AUTHORITY CANNOT BE SUBSTI TUTED BY THE SATISFACTION OF ANOTHER. WE ARE IN RESPECTFUL AGREEMENT WITH THE JUDGMENT OF THE DELHI HIGH COURT. IN VIEW OF THE FINDINGS WHICH WE HAVE RECORDED ON SUBMISSIONS (I), (II) AND (IV), IT IS NOT NECESSARY FOR THE COURT TO CONSIDER SUBMISSION (III) WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE. ONCE THE COURT HAS COME TO THE CONCLUSION THAT THERE WAS NO COMPLIANCE WITH THE MANDATORY REQUIREMENTS OF SECTIONS 147 AND 151(2), THE NOTICE REOPENING THE ASSESSMENT CANNOT BE SUSTAINED IN LAW. HENCE, THE APPROVAL GIVEN BY THE ADDITIONAL COMMISSIONER OF INCOME TAX CANNOT BE CONSIDERED TO BE A VALID APPROVAL REQUIRED TO BE OBTAINED UNDER SECTION 151 OF THE ACT AND HENCE, ON THIS COUNT ALONE , THE NOTICE OF REOPENING OF THE ASSESSMENT ISSUED BY THE AO IS LIAB LE TO BE CANCELLED. 9 . I HAVE GONE THROUGH THE ORIGINAL ASSESSMENT ORDER PLACED ON RECORD AND NOTICE THAT THE AO HAS STATED IN THE ASSESSMENT ORDER THAT HE HAS EXAMINED THE DETAILS RELATING TO LTCG OF RS.4,74,837/ - ARISING FROM SALE OF SHARES BY VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE, MEANING THEREBY, THE ASSESSEE HAS FURNISHED ALL MATERIAL FACTS AND THE SAME HAS ALSO BEEN ACCEPTED BY THE AO . IN THE REASONS FOR THE REOPENING , THE AO HAS NOWHERE STATED THAT THERE IS AN ESCAPEMENT OF INCOME DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FAC T S NECESSARY FO R THE ASSESSMENT . IN THE ABSENCE OF SUCH ALLEGATION, IN MY VIEW, THE FIR S T PROVISO TO SECTION 147 ALSO COMES TO THE PROTECTION OF THE ASSESSEE. IN VIEW OF THE ABOVE REASON ALSO , I AGREE WITH THE CONTENTION OF THE LD . AR THAT REOPENING OF ASSESSMENT IS BAD IN LAW. 10. ACCORDINGLY , HOLD THAT THE RE - OPENING OF ASSESSMENT IS NOT VALID. ACCORDINGLY I SET ASIDE THE ORDER OF LD CIT(A) ON THIS LEGAL ISSUE AN D QUASH ITA NO. 3316 / MUM/20 14 5 THE IMPUGNED ASSESSMENT ORDER. SINCE THE ASSESSMENT ORDER IS QUASHED, THERE IS NO NECESSITY TO ADDRESS THE GROUNDS URGED ON MERITS. 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED PRONOUNCED ACCORDINGLY ON 5 TH AUGUST 2015 . 5 TH AUGUST, 2015 SD ( . . / B.R. BASKARAN) / ACCOUNTANT MEMBER MUMBAI: 5 TH AUG , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITA T, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, M UMBAI