SUNIL R. PHADTARE HUF, BHIWANDI V. ITO WD 1(4), KALYAN

ITA 3697/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2752 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Unexplained investment; Unexplained expenditure; Business income; Search and seizure; Principle of natural justice; Opportunity of cross examination; Cost of acquisition; Validity of assessment
• Section: 148; 12; 69

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, MUMBAI BEFORE SHRI A.D.JAIN, JUDICIAL MEMBER . . , ./ I.T.A. NO. 3697 AND 3698/ MUM/2015 ( / ASSESSMENT YEAR S :200 6 - 07 AND 2007 - 08 ) SUNIL R PHADTARE HUF, 219, PHADTARE SADAN, LAHOTI COMPOUND , KALYAN ROAD, BHIWANDI - 421302 / VS. INCOME TAX OFFICER 1(4), KALYAN ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAPHS4915P / APPELLANT S BY SHRI DEVEND RA JAIN / RSPONDENT BY SHRI A JAY / DATE OF HEARING : 0 8 /07/2016 / DATE OF PRONOUNCEMENT : 0 8 /07/2016 / O R D E R TH ESE ARE THE TWO APPEAL S FILED BY THE ASSESSEE AGAINST THE TWO SEPARATE ORDER S DATED 4. 3 .2015 PASSED BY THE LD.CIT(A) - 2 , MUMBAI FOR THE ASSESSMENT YEAR S 200 6 - 07 AND 2007 - 08 . SINCE THE APPEALS BE FORE US RELATE TO THE SAME ASSESSEE, AND THE ISSUE INVOLVED THEREIN IS COMMON, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO .3697/MUM/2015 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A), THANE HAS ERRED IN UPHOLDING THE VALIDITY OF THE 3697 & 3698 /MUM/2015 2 REOPENING OF ASSESSMENT U/S 147, WITHOUT APPRECIATING THE POSITION THAT A . THE AO HAD NO VALID REASONS TO BEL IEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT AND THE NOTICE U/S. 148 HAS BEEN ISSUED BY THE AO WITHOUT ANY APPLICATION OF MIND, B. NOTICE U/S. 148 HAS BEEN ISSUED DISREGARDING THE PROVISIONS OF S.151 (2). 2. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED IN UPHOLDING THE ADDITION OF RS. 1,03,326/ - BEING SPECULATION PROFIT ON SHARES, WITHOUT APPRECIATING THE FACT THAT APPELLANT HAS ALREADY OFFERED BUSINESS INCOME OF RS. 1,38,000/ - , THEREBY TAXING THE SAME AMOUNT TWICE. 3. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED IN UPHOLDING THE ADDITION OF RS. 3,90,125/ - U/S. 69 AS UNEXPLAINED INVESTMENT IN SHARES, WITHOUT APPRECIATING THE LEGAL POSITION THAT S. 69 APPLIES ONLY TO INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. 4. WITHOUT PREJUDICE TO GROUND NO. 1 AND 3, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W THE LEARNED CIT(A) - 2, THANE HAS ERRED IN UPHOLDING THE ADDITION OF RS. 3,90,125/ - U/S. 69 AS UNEXPLAINED INVESTMENT IN SHARES, WITHOUT APPRECIATING THE FACTUAL AND LEGAL POSITION THAT THE AMOUNT OF RS. 3,90,125/ - WAS PAYABLE AT THE END OF THE YEAR AND HE NCE THE QUESTION OF EXPLAINING THE SOURCE DOES NOT ARISE. 5. WITHOUT PREJUDICE TO GROUND NO. 1, 3 AND 4, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED IN UPHOLDING THE ADDITION OF RS. 3,90,125/ - U/S. 6 9 AS UNEXPLAINED INVESTMENT IN SHARES, WITHOUT APPRECIATING THE FACTUAL POSITION THAT THE BALANCE IN CAPITAL ACCOUNT OF THE APPELLANT ON 01.04.2005 WAS RS. 575,500/ - THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUNDS: WITHOUT PREJUDICE TO OTHER GROUND S OF APPEAL, ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN UPHOLDING THE VALIDITY OF ASSESSMENT REOPENED ON THE BASIS OF STATEMENT OF THIRD PARTY WITHOUT PROVIDING AN OPPORTUNITY OF CROSS - 3697 & 3698 /MUM/2015 3 EXAMINATION, DISREGARDING THE LAW L AID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V/S CIT (1980) 125 ITR 713 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO.3698/MUM/2015 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A ), THANE HAS ERRED IN UPHOLDING THE VALIDITY OF THE REOPENING OF ASSESSMENT U/S 147, WITHOUT APPRECIATING THE POSITION THAT B . THE AO HAD NO VALID REASONS TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT AND THE NOTICE U/S. 148 HAS BEEN ISSUED BY THE AO W ITHOUT ANY APPLICATION OF MIND, B. NOTICE U/S. 148 HAS BEEN ISSUED DISREGARDING THE PROVISIONS OF S.151 (2). 2. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED I N RESTRICTING THE COST OF ACQUISITION OF SHARES TO RS.1,03,326/ - INSTEAD OF RS.4,93,451/ - . 3. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED IN CONSIDERING THE LONG TERM CAPITAL GAINS AND THEREBY DENYING EXEMPTION U/S 10(38), MERELY ON THE BASIS OF STATEMENT OF THIRD PARTY WITHOUT GIVING AN OPPORTUNITY OF CROSS EXAMINATION TO THE APPELLANT, THEREBY DISREGARDING THE LEGAL POSITION PRONOUNCED BY HONBLE SUPREME COURT I N THE CASE OF KISHANCHAND CHELLARAM V. CIT (1980) 125 ITR 713. 4. WITHOUT PREJUDICE TO GROUND NO. 1 AND 3, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) - 2, THANE HAS ERRED IN CONSIDERING THE LONG TERM CAPITAL GAIN ON SAL E OF SHARES AS SHORT TERM CAPITAL GAINS AND THEREBY DENYING EXEMPTION U/S 10(38), DISREGARDING THE FACTUAL AND LEGAL POSITION THAT SHARES WERE HELD FOR MORE THAN 12 MONTHS AND SECURITIES TRANSACTION TAX WAS PAID ON SALE OF SHARES. 3 . I HAVE HEARD THE PAR TIES AND HAVE PERUSED THE RECORD. THE ADDITIONAL GROUND RAISED IN ITA NO.3697/MUM/2015 IS A LEGAL G R OUND. THE 3697 & 3698 /MUM/2015 4 SAME IS ADMITTED. THE FACTS RELEVANT TO THE ABOVE SAID ISSUES ARE THAT THE DEPARTMENT CARRIED OUT A SEARCH AND SEIZURE OPERATION ON THE PREMISES OF A PERSON NAMED AS SHRI MUKESH CHOKSHI , WHO ADMITTED THAT HE AND HIS GROUP OF COMPANIES WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS FOR PURCHASE AND SALE OF SHARES IN ORDER TO ENABLE THE PERSONS TO GENERATE THE SPECULATION PROFIT /LOS S , SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAINS , ETC. IT WAS NOTICED THAT T HE ASSESSEE HEREIN HAD ALSO PURCHASED SHARES FROM THE GROUP COMPANIES BELONGING TO SHRI MUKESH CHOK SHI. HENCE, UPON RECEIPT OF INFORMATION IN THIS REGARD, THE AO RE - OPENED THE ASSESSMENT OF THIS ASSESSEE FOR THE YEARS UNDER CONSIDE RA TION. THE AO TREATED THE PURCHASE VALUE OF THE SHARES AS BOGUS PURCHASES AND ASSESSED THE SAME AS INCOME OF THE ASSESSEE. T HE AO ALSO ESTIMATED THE EXPENDITURE THAT COULD HAVE BEEN INCURRED B Y T HE ASSE S SEE FOR GETTING ACCOMMODATION BILLS OF THE PURCHASE VALUE AND ASSESSED THE SAME AS UNEXPLAINED EXPENDITURE. THE LD. CIT(A) DISMISSED THE APPEAL S FILED BY THE ASSESSEE AND HENCE THEY HA V E FILED TH ESE APPEAL S BEFORE THE TRIBUNAL. 4 . THE LD. COUNS EL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E HEREIN HAD SOU GHT FOR CROSS - EXAMINATION OF SHRI MUKESH CHOK SHI, SINCE THE AO FRAMED THE ASSESSMENT ON THE STRENGTH OF THE STATEMENT GIVEN BY SHRI MUKESH CHOKSHI . H E SUBMITTED THAT THE ASSESSEE W AS NOT AFFORDED THE OPPORTUNITY TO CROSS - EXAMINE SHRI MUKESH CHOK SHI. ACCORDINGLY, T HE LD. AR SUBMITTED THAT THE AO SHOULD NOT HAVE 3697 & 3698 /MUM/2015 5 MADE THE ADDITIONS BY VIOLATIN G THE PRINCIPLE S OF NATURAL JUSTICE . A CCORDINGLY HE PRAYED THAT THE ASSESSEE SHOULD BE PROVID ED WITH A DEQUATE OPPORTUNITY TO CROSS - EXAMINE SHRI MUKESH CHOKSHI . THE LD A.R SUBMITTED THAT THE SAME WOULD HELP THE ASSESSEE TO SUPPORT THE SHARE TRANSACTION S. 5 . THE LD. DR COULD NOT SUCCESSFULLY REBUT THE PLEA PUT FORTH BY THE LD. AR , THOUGH HE PLA CED STRONG RELIANCE ON THE IMPUGNED ORDERS. 6 . HAVING REGARD TO THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN NOT AFFORDING THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE HEREIN AND THE SAID ACTION OF THE AO VIOLATES THE P RINCIPLES OF NATURAL JUSTICE. FURTHER, AS SUBMITTED BY THE LD A.R, THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITIONS ONLY ON THE BASIS OF STATEMENT GIVEN BY SHRI MUKESH CHOKSI. ACCORDINGLY, I AM OF THE VIEW THAT THE ASSESSEE HEREIN SHOULD BE PROVIDED WITH A DEQUATE OPPORTUNITY TO CROSS - EXAMINE SHRI MUKESH CHOKASHI . ACCORDINGLY , I SET ASIDE THE ORDER OF LD. CIT(A) IN RESPECT OF THE ADDITIONS REFERRED ABOVE AN D RESTORE THEM TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THESE ISSUES AFRESH AFTER AFF ORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE SHRI MUKESH CHOKS I AND ALSO AFTER CONSIDERING ANY OTHER INFORMATION AND EXPLANATION S THAT MAY BE FURNISHED BY THESE ASSESSEE. THE ASSESSEE, NO DOUBT, SHALL COOPERATE WITH THE AO IN THE FRESH PROCEEDINGS BEFORE HIM. 3697 & 3698 /MUM/2015 6 7 . IN THE RESULT, THE APPEAL S F ILED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES . PRONOUNCED ACCORDINGLY ON 8 TH JULY, 2016. 8 TH JULY, 2016 SD ( . . / A.D. JAIN ) / JUDICIAL MEMBER MUMBAI: 8 TH JULY, 2016 . . . ./ 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, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI