M.Kiran Kumar, CHENNAI V. ACIT Corporate Circle 1(4), CHENNAI

ITA 354/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9251 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Block assessment; Set aside
• Section: 143(3); 142(1); 153A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.354/CHNY/2019 & '& / ASSESSMENT YEAR : 2012-13 SHRI M. KIRAN KUMAR, 123, USMAN ROAD, T. NAGAR, CHENNAI - 600 017. PAN : ACHPM 2247 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(4), CHENNAI. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. T. BANUSEKAR, CA +,)* - . / RESPONDENT BY : SHRI S. BHARATH, CIT / - 0# / DATE OF HEARING : 26.03.2019 12' - 0# / DATE OF PRONOUNCEMENT : 01.04.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -18, CHENNAI, DATED 21.01.2019 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL. ACCO RDING TO THE LD. REPRESENTATIVE, THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE ALONG 2 I.T.A. NO.354/CHNY/19 WITH M/S LALITHAA JEWELLERY MART P. LTD. NO MATERI AL WAS FOUND DURING THE COURSE OF SEARCH OPERATION IN THE PREMISES OF T HE ASSESSEE. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE FILED THE RETURN OF INCOME IN THE REGULAR COURSE FOR THE ASSESSMENT YEA R 2012-13 ON 29.09.2012. THE TIME LIMIT FOR ISSUING NOTICE UNDE R SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') EXPIRED O N 30.09.2013. EVEN THOUGH THE ASSESSING OFFICER CLAIMS THAT THE PROCEE DINGS ARE PENDING ON THE DATE OF SEARCH ON THE BASIS OF THE RETURN ORIGI NALLY FILED ON 29.09.2012, THEREFORE, THE PROCEEDINGS ARE ABATED, ACCORDING TO THE LD. REPRESENTATIVE, SINCE THE NOTICE UNDER SECTION 143( 2) OF THE ACT WAS NOT SERVED, THE PROCEEDINGS WERE TERMINATED AND IT IS N OT PENDING, THEREFORE, IT IS NOT CORRECT TO SAY THAT THE PROCEEDINGS WOULD ABATE. REFERRING TO SECTION 153A OF THE ACT, THE LD. REPRESENTATIVE SUB MITTED THAT THE PROCEEDINGS WHICH ARE PENDING ALONE WILL ABATE. TH E PROCEEDINGS INITIATED ON THE BASIS OF ORIGINAL RETURN, WHICH AR E NOT PENDING AND TERMINATED EITHER BY OPERATION OF LAW OR BY ORDER U NDER SECTION 143(3) OF THE ACT, WOULD NOT BE PENDING AT ALL. THEREFORE, A CCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HAS TO CONFIN E HIMSELF ONLY TO THE SEARCH MATERIAL FOUND DURING THE COURSE OF SEARCH O PERATION FOR COMPLETING THE BLOCK ASSESSMENT. ACCORDING TO THE LD. REPRESENTATIVE, IN THIS CASE, THERE WAS NO SEARCH MATERIAL, THEREFORE, THERE CANNOT BE ANY BLOCK ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. 3 I.T.A. NO.354/CHNY/19 3. COMING TO THE MERIT OF THE APPEAL, SH. T. BANUSE KAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE INVESTED IN THE SHARES OF FOUR COMPANIES, NAMELY, ECO WAVE INFO TECH LTD., AMLUCKIE INVESTMENT CO. LTD., GLOBAL CAPITAL MARKET LTD. AND CONCRETE CREDIT LTD. ACCORDING TO THE LD. REPRESENTATIVE, THE PROFIT ON SALE OF SHARES OF THE SAID COMPANIES WAS CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE ASSESSING OFFICER BY PLACING RELIANCE, MORE PAR TICULARLY ON THE INVESTIGATION REPORT SAID TO BE RECEIVED FROM INVES TIGATION WING OF THE DEPARTMENT AT KOLKATA, FOUND THAT THOSE COMPANIES I N WHICH THE ASSESSEE MADE INVESTMENTS WERE PENNY STOCK COMPANIE S AND GLOBAL CAPITAL MARKET LTD. HAS INVOLVED IN THE MANIPULATIO N OF PRICES OF SHARES. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE CLA IM OF THE ASSESSEE. ON APPEAL BY THE ASSESSEE, ACCORDING TO THE LD. REP RESENTATIVE, THE CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE ASS ESSING OFFICER. ACCORDING TO THE LD. REPRESENTATIVE, COPIES OF INVE STIGATION REPORT SAID TO BE RECEIVED FROM KOLKATA AND THE STATEMENTS RECORDE D FROM SOME OF THE INDIVIDUALS AT KOLKATA WERE NOT FURNISHED TO THE AS SESSEE. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE I S NOT IN A POSITION TO UNDERSTAND HOW THOSE COMPANIES ARE PENNY STOCK COMP ANIES. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE I S A REGULAR INVESTOR INVESTING IN SHARES OF THOSE COMPANIES, THEREFORE, HE HAS NO OCCASION TO 4 I.T.A. NO.354/CHNY/19 KNOW HOW THOSE COMPANIES ARE PENNY STOCK COMPANIES AND INVOLVE IN MANIPULATING THE PRICES OF SHARES. THEREFORE, ACCO RDING TO THE LD. REPRESENTATIVE, UNLESS AND UNTIL THE REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT SAID TO BE MADE AT KOLKATA IS FURNISHED TO THE ASSESSEE, THE ASSESSING OFFICER CANNOT CONCLUDE THAT THE SHARE PR ICES ARE MANIPULATED. 4. ON THE CONTRARY, SHRI S. BHARATH, THE LD. DEPART MENTAL REPRESENTATIVE, SUBMITTED THAT THERE WAS A SEARCH A ND SEIZURE OPERATION CONDUCTED UNDER SECTION 132 OF THE ACT IN THE PREMI SES OF THE ASSESSEE ON 02.09.2014 ALONG WITH M/S LALITHAA JEWELLERY MAR T PVT. LTD. ACCORDING TO THE LD. D.R., THE ASSESSEE FILED A RETURN OF INC OME ADMITTING A TOTAL INCOME OF 66,50,000/- CONSEQUENT TO THE NOTICE ISSUED UNDER S ECTION 153A OF THE ACT. THE ASSESSEE HAS ALSO CLAIMED EXE MPTION IN RESPECT OF THE PROFIT ON SALE OF SHARES OF THE COMPANIES. ACC ORDING TO THE LD. D.R., THE TRADING IN SHARES WAS FOUND TO BE BOGUS ON THE BASIS OF THE INVESTIGATION REPORT OF THE DIRECTORATE OF INCOME T AX (INVESTIGATION), KOLKATA. HENCE, ACCORDING TO THE LD. D.R., THE CI T(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. 5. THE LD. D.R. FURTHER SUBMITTED THAT DURING THE C OURSE OF SEARCH OPERATION, ONE SILVER COLOUR APPLE I PHONE WAS FOUN D SEIZED. HOWEVER, NO ADDITION WAS MADE ON THE BASIS OF THE SAID SEIZE D MATERIAL. THE LD. D.R. FURTHER SUBMITTED THAT ON THE BASIS OF THE RET URN ORIGINALLY FILED BEFORE 5 I.T.A. NO.354/CHNY/19 THE DATE OF SEARCH, NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 08.08.2013. THEREFORE, ACCORDING TO THE LD. D.R., IT IS NOT CORRECT TO SAY THAT NO NOTICE WAS ISSUED BEFORE THE DUE DATE FOR I SSUING NOTICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSING OFFICER A LSO ISSUED NOTICE UNDER SECTION 142(1) OF THE ACT ON 22.09.2014 AND T HE ASSESSEE ALSO FILED REPLY ON 04.10.2014, THEREFORE, THE PROCEEDIN G INITIATED ON THE BASIS OF THE RETURN ORIGINALLY FILED ON 29.09.2012 IS PEN DING ON THE DATE OF SEARCH. HENCE, ACCORDING TO THE LD. D.R., THE PEND ING PROCEEDING WILL ABATE AND COMPOSITE ASSESSMENT HAS TO BE MADE FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION FOR ALL THE INCOME, INCLUD ING THE INCOME DISCLOSED IN THE EARLIER RETURN OF INCOME. 6. BY WAY OF REJOINDER, SH. T. BANUSEKAR, THE LD. R EPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT SECTION 143(2) OF THE ACT REQUIRES THE ASSESSING OFFICER TO SERVE THE NOTICE ON THE ASSESS EE BEFORE THE DUE DATE. BUT, THE DEPARTMENT SAYS THAT IT WAS ISSUED ON 08.08.2013. ACCORDING TO THE LD. REPRESENTATIVE, THERE IS NO EV IDENCE TO SHOW THAT THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS SERVED O N THE ASSESSEE. ON A QUERY FROM THE BENCH WHETHER THE CIT(APPEALS) HAS RECORDED ANY FINDING, THE LD. REPRESENTATIVE SUBMITTED THAT THE CIT(APPEALS) SIMPLY OBSERVED THAT THE NOTICE UNDER SECTION 143(2) OF TH E ACT WAS ISSUED ON 6 I.T.A. NO.354/CHNY/19 08.08.2013. THERE WAS NO REFERENCE ABOUT SERVICE O F NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT, THEREFORE, IT NEED S TO BE VERIFIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTIONS 1 53A AND 143 OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS F ILED RETURN OF INCOME INITIALLY ON 29.09.2012 BEFORE THE DATE OF SEARCH. THE ASSESSEE CLAIMS THAT NO NOTICE WAS SERVED UNDER SECTION 143(2) OF T HE ACT BEFORE THE DATE OF SEARCH. THE TIME LIMIT FOR ISSUING OF NOTICE UN DER SECTION 143(2) WAS 30 TH SEPTEMBER, 2013. HENCE, THE PROCEEDING INITIATED ON THE BASIS OF THE RETURN FILED ON 29.09.2012 IS NOT PENDING, THER EFORE, IT WILL NOT ABATE. HENCE, THE ASSESSING OFFICER HAS TO CONFINE HIMSELF ONLY TO THE SEIZED MATERIAL. ADMITTEDLY, WHAT WAS FOUND DURING THE CO URSE OF SEARCH WAS ONE SILVER COLOUR APPLE I PHONE AND NO ADDITION WAS MADE. THE REVENUE CLAIMS THAT NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 08.08.2013. HOWEVER, THERE IS NO REFERENCE ABOUT T HE SERVICE OF NOTICE. SECTION 143(2) OF THE ACT TALKS OF SERVICE OF NOTIC E ON THE ASSESSEE. PROVISO TO SECTION 143(2) OF THE ACT CLEARLY SAYS T HAT NO NOTICE SHALL BE SERVED ON THE ASSESSEE AFTER EXPIRY OF SPECIFIED PE RIOD. THEREFORE, IT HAS TO BE ASCERTAINED WHETHER THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS 7 I.T.A. NO.354/CHNY/19 SERVED ON THE ASSESSEE BEFORE THE EXPIRY OF TIME LI MIT PRESCRIBED UNDER THE PROVISO TO SECTION 143(2) OF THE ACT. 8. ON THE MERIT OF THE CASE, ADMITTEDLY, BOTH THE A UTHORITIES BELOW DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT ON THE BASIS OF THE INVESTIGATION REPORT SAID TO BE RE CEIVED FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION), KOLKATA. IT IS NOT THE CASE OF THE REVENUE THAT THE REPORT OF THE INVESTIGATION WI NG SAID TO BE RECEIVED WAS FURNISHED TO THE ASSESSEE. THE ASSESSEE CLAIMS THAT A COPY OF THE INVESTIGATION REPORT WAS NOT FURNISHED TO HIM. THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE REVENUE PLACED REL IANCE ON THE INVESTIGATION REPORT SAID TO BE RECEIVED FROM KOLKA TA, THE SAME HAS TO BE FURNISHED TO THE ASSESSEE ALONG WITH STATEMENTS, IF ANY, RECORDED FROM THE INDIVIDUALS. MOREOVER, IT WAS NOT BROUGHT ON R ECORD HOW THE ASSESSEE IS INVOLVED IN PROMOTION OF THE COMPANIES IN WHICH THE INVESTMENTS IN SHARES WERE MADE BY HIM AND HOW THE ASSESSEE IS INVOLVED IN INFLATING THE PRICES OF SHARES OF THOSE COMPANIES. SINCE SUCH AN EXERCISE WAS NOT DONE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. 9. ON IDENTICAL SET OF FACTS, THIS TRIBUNAL IN THE CASE OF KANHAIYALAL & SONS (HUF) V. ITO IN I.T.A. NO.1849/CHNY/2018 DATED 06.02.2019 HAS REMITTED BACK THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER FOR 8 I.T.A. NO.354/CHNY/19 RECONSIDERATION. IN FACT, THIS TRIBUNAL HAS OBSERV ED AT PARA 4 OF ITS ORDER AS FOLLOWS:- 4. WE HEARD SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO. ADMITTEDLY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEES ON THE BASIS OF THE INFORMATION SAID TO BE RECEIVED FR OM THE INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA WIT H REGARD TO INVESTMENT MADE BY THE ASSESSEES IN THE P ENNY STOCK COMPANY. IT IS NOT IN DISPUTE THAT A COPY OF THE INVESTIGATION REPORT SAID TO BE RECEIVED FROM KOLKA TA WAS NOT FURNISHED TO THE ASSESSEE. MOREOVER, DETAILS O F THE ENQUIRIES SAID TO BE MADE BY THE ASSESSING OFFICER WERE ALSO NOT FURNISHED TO THE ASSESSEES. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE ASSESSING OFFICER HAS TO RECONSIDER THE IS SUE AFRESH AFTER FURNISHING THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSU E IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL BRING ON RECORD THE ROLE OF THE ASSESSEES IN PROMOTING THE COMPANY AND THE RELATION SHIP OF THE ASSESSEES, IF ANY WITH THE PROMOTERS, ROLE OF T HE ASSESSEES IN INFLATING THE PRICE OF SHARES, ETC. T HE ASSESSING OFFICER SHALL ALSO FURNISH A COPY OF THE INVESTIGATION REPORT SAID TO BE RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT AT KOLKATA AND OTHER MATERIALS IF ANYTHING IN HIS POSSESSION AND THEREAF TER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFT ER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEES. 10. IN VIEW OF THE ABOVE, ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE IS REMI TTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFTER SERVING A COPY OF INVESTIGATION REPORT AND ST ATEMENTS, IF ANY, 9 I.T.A. NO.354/CHNY/19 RECORDED FROM INDIVIDUALS TO THE ASSESSEE AND THERE AFTER DECIDE THE ISSUE AFRESH AS INDICATED IN THE ORDER OF THIS TRIBUNAL I N KANHAIYALAL & SONS (HUF) (SUPRA), IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 ST APRIL, 2019 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GA NESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 1 ST APRIL, 2019. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-18, CHENNAI-34 4. PRINCIPAL CIT, CENTRAL-1, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.