DR . NEETA RAJAN MODI, MUMBAI V. ITO WD 11(3)(1), MUMBAI

ITA 370/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75699 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 15-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL K HAKANI
• Assessee Lawyers: AJAY R SINGH
• Keywords: Reopening of assessment; Unexplained investment; Reassessment proceedings
• Section: 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 370/MUM/2014 (ASSESSMENT YEAR: 2005-06) DR. NEETA RAJAN MODI INCOME TAX OFFICER - 11(3)(1) M/S. NATVARLAL VEPARI & CO. MUMBAI ORICON HOUSE, 4TH FLOOR VS. 12, K, DUBASH MARG MUMBAI 400023 PAN - AAPPM3547H APPELLANT RESPONDENT APPELLANT BY: SHRI AJAY R. SINGH RESPONDENT BY: SHRI RAHUL K. HAKANI DATE OF HEARING: 13.03.2014 DATE OF PRONOUNCEMENT: 13.03.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-20, MUMBAI AND IT PERTAINS TO A.Y. 2005-06. 2. ADDITION OF ` 1,71,465/- MADE BY THE AO IN THE REASSESSMENT PROCEEDINGS UNDER SECTION 148 OF THE ACT IS THE SUB JECT MATTER OF DISPUTE BEFORE THIS BENCH ON TWO GROUNDS, I.E. (I) REOPENIN G OF ASSESSMENT IS BAD IN LAW AND (II) ADDITION SHOULD NOT HAVE BEEN MADE UND ER SECTION 69 OF THE ACT. 3. BEFORE THE ISSUE CONCERNING VALIDITY OF REOPENING O F ASSESSMENT IS TAKEN UP FOR CONSIDERATION, THE BRIEF FACTS RELEVAN T FOR DISPOSAL OF THIS APPEAL NEEDS TO BE NOTICED. THE ASSESSEE IS A DOCTOR BY PR OFESSION. SHE HAS ALSO PURCHASED AND SOLD SHARES. FOR THE YEAR UNDER CONSI DERATION THE ASSESSEE DECLARED TOTAL INCOME OF ` 2,55,066/- ON 27.10.2005 AND IT WAS PROCESSED ACCORDINGLY. AFTER A LAPSE OF MORE THAN FOUR YEARS, I.E. ON 15.03.2011 THE AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON THE G ROUND THAT THE ASSESSEE HAS RECEIVED AN INCOME OF ` 1,71,465/- FROM M/S. GOLD STAR FINVEST PVT. LTD., WHICH WAS NOT OFFERED FOR TAX AND THUS THERE IS ESC APEMENT OF INCOME. ITA NO. 370/MUM/2014 DR. NEETA RAJAN MODI 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE ASKED THE AO TO FURNISH REASONS FOR REOPENING OF ASSESSMENT THOUGH, IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 IT WAS SUBMITTED THAT THE RETURN ORIGINALLY FILED ON 27.10.2005 SHOULD BE CONSIDERED AS RETURN IN RESPON SE TO THE SAID NOTICE. AS PER SECTION 151(2) OF THE ACT IF AN ASSESSMENT I S SOUGHT TO BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR THE PRE- REQUISITE FOR ISSUANCE OF NOTICE IS THE SATISFACTIO N RECORDED BY THE JOINT COMMISSIONER. SECTION 151(2) STATES THAT UNLESS TH E JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSIN G OFFICER, THAT IT IS FIT CASE FOR ISSUE OF SUCH NOTICE, NO NOTICE SHALL BE I SSUED UNDER SECTION 148 OF THE ACT BY AN ASSESSING OFFICER. IN THE INSTANT CA SE, AS CAN BE SEEN FROM THE ASSESSMENT ORDER, NOTICE WAS ISSUED ON 15.03.2011 W HEREAS THE APPROVAL OF THE JOINT COMMISSIONER WAS OBTAINED ON 23.04.2011 W HICH IN ITSELF SHOWS THAT THE NOTICE PRECEDED THE AUTHORISATION/SATISFAC TION REACHED BY THE JOINT COMMISSIONER. THOUGH THE ASSESSEE CHALLENGED THE RE OPENING OF ASSESSMENT IN GENERAL BEFORE THE CIT(A) IN VAIN, BEFORE THE TR IBUNAL THE LEARNED COUNSEL FOR THE ASSESSEE SPECIFICALLY CONTENDED THAT THE NO TICE ISSUED UNDER SECTION 148 OF THE ACT IS NOT IN ACCORDANCE WITH LAW BECAUS E THE PRELIMINARY CONDITION OF RECORDING SATISFACTION BY THE JOINT CO MMISSIONER WAS NOT SATISFIED PRIOR TO THE ISSUE OF NOTICE AND FURTHER SUBMITTED THAT THE REASONS RECORDED CLEARLY INDICATE THAT NEITHER THE AO NOR T HE JOINT COMMISSIONER HAS APPLIED THEIR MIND TO THE ISSUE ON HAND BECAUSE IN THE INSTANT CASE THE ASSESSEE HAS ENTERED INTO TOTAL PURCHASE TRANSACTIO NS OF ` 21,88,997/- AND SALE TRANSACTIONS OF ` 20,17,522/- WHICH IMPLIES THAT THE ASSESSEE HAS TO PAY THE DIFFERENTIAL AMOUNT OF ` 1,71,465/- TO THE CONCERNED BROKER, WHICH WAS REFLECTED IN THE BALANCE SHEET; ACCORDING TO THE AO IT WAS REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AS AMOUNT PAYABLE TO M/S. GOLD STAR FINVEST P. LTD. WHEREAS PAGE 4(A) AS WELL AS PAGE 21 ONWARD S OF THE PAPER BOOK CLEARLY REFLECTS THAT IT WAS SHOWN AS AMOUNT PAYABL E TO M/S. MAHASAGAR SECURITIES P. LTD. AND THERE IS NO CONNECTION, WHAT SOEVER, WITH M/S. GOLD STAR FINVEST P. LTD. AND IT CAN NEVER BE TREATED AS INCOME BECAUSE THE PURCHASE PRICE IS MORE THAN THE SALE PRICE AND THE ASSESSEE IS LIABLE TO PAY THE DIFFERENTIAL AMOUNT TO M/S. MAHASAGAR SECURITIE S P. LTD. WHEREAS THE ITA NO. 370/MUM/2014 DR. NEETA RAJAN MODI 3 AO, MERELY BASED ON SOME REPORTS CONCERNING CHOKSI GROUP, ASSUMED THAT IT IS AN INCOME. THUS, THE REOPENING OF ASSESSMENT IS BAD IN LAW BECAUSE THERE IS NO SATISFACTION REACHED EITHER BY THE AO O R BY THE JOINT COMMISSIONER. HE ALSO SUBMITTED THAT EVEN THE CIT(A ) REFERRED TO PROVISIONS OF SECTION 69 OF THE ACT AND OBSERVED THAT THOUGH T HE ADDITION CANNOT BE MADE UNDER SECTION 69 OF THE ACT BUT BY VIRTUE OF C REATION OF ASSETS, THE CORRESPONDING UNPROVED LIABILITY IS TO BE TAXED IND EPENDENTLY UNDER THE INCOME TAX ACT, WITHOUT SPECIFYING AS TO UNDER WHIC H PROVISION IT HAS TO BE ASSESSED TO TAX. HE THUS STRONGLY SUBMITTED THAT RE OPENING OF ASSESSMENT IS BAD IN LAW. 4. WHEN THE SAME WAS PUT TO THE LEARNED D.R. HE SUBMIT TED THAT THESE ARE CURABLE DEFECTS. IT DESERVES TO BE MAINTAINED T HAT THE DATE OF REOPENING OF THE ASSESSMENT, I.E. ISSUANCE OF NOTICE AND OBTA INING THE SATISFACTION OF THE JOINT COMMISSIONER IS NOT IN DISPUTE. IT ALSO D ESERVED TO BE NOTICED THAT THE REASON RECORDED BY THE AO IS THAT THE ASSESSEE RECEIVED INCOME OF ` 1,71,465/- FROM M/S. GOLD STAR FINVEST P. LTD. WHER EAS IN THE INSTANT CASE THE ASSESSEE HAS NOT DEALT WITH THAT ENTITY AT ALL. IF AT ALL THERE IS ANY TRANSACTION IT ONLY RESULTS IN PAYMENT TO BE MADE B Y THE ASSESSEE, I.E. LIABILITY OF THE ASSESSEE TOWARDS M/S. MAHASAGAR SE CURITIES P. LTD. AND IT CAN NEVER BE TREATED, FOR THE YEAR UNDER CONSIDERAT ION, AS INCOME FROM UNEXPLAINED INVESTMENTS, MUCH LESS AN ADDITION THAT COULD HAVE BEEN MADE UNDER SECTION 69 OF THE ACT. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. IN MY OPINION THE REASSESSMENT PROCEEDINGS ARE BAD IN LAW IN AS MUCH AS THE AO SOUGHT TO REOPEN THE ASSESSMENT BEYOND A PERIOD OF FOUR YEARS AND NOT FOLLOWED THE PROCEDURES LAID DOWN IN SECTION 151(2) OF THE ACT F OR ISSUING NOTICE UNDER SECTION 148 OF THE ACT. EVEN THE REASON RECORDED BY THE AO SHOWS THAT THE AO HAS NOT APPLIED HIS MIND AND CONSEQUENTLY, BASED ON THE WRONG REASONS PROVIDED BY THE AO, THE JOINT COMMISSIONER HAS RECO RDED HIS SATISFACTION IN WHICH CASE IT HAS TO BE HELD THAT THE SATISFACTION RECORDED BY THE TAX AUTHORITIES IS NOT IN ACCORDANCE WITH LAW, WHICH IS MANDATORY FOR THE PURPOSE OF ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT. UNDER THESE ITA NO. 370/MUM/2014 DR. NEETA RAJAN MODI 4 CIRCUMSTANCES THE PROCEEDINGS ARE QUASHED AND THE O RDERS PASSED BY THE AO AS WELL AS THE CIT(A) ARE SET ASIDE. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 13 TH MARCH, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 11, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.