BADRUDDIN P. HIRANI, MUMBAI V. ASST CIT CIR 19(3), MUMBAI

ITA 4188/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0994 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 15-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMAT SR
• Assessee Lawyers: RAHUL R SARDA
• Keywords: Reopening of assessment; Search and seizure; Accommodation entries; Sham transactions; Reassessment proceedings
• Section: 143(3); 132

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B, BENCH , , BEFORE S/SH. JOGINDERSINGH ,JUDICIAL M EMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.4188/MUM/2012, / ASSESSMENT YEAR - 20 03 - 04 MR. BADRUDDIN P. HIRANI 503, MAKHIJA CHAMBERS, TURNER ROAD , BANDRA WEST , MUMBAI - 050. PAN:AAAPH 4811 Q VS ACIT - CIRCLE - 19(3) PIRA MAL CHAMBERS, 3RD FLOOR, LALBAUG MUMBAI - 400 012. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI RAHUL R. SARDA / REVENUE BY :SHRI YO GESH KAMAT - SR. AR / DATE OF HEARING : 02 - 0 7 - 2015 / DATE OF PRONOUNCEMENT : 02 - 07 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 26.3.12 OF CIT(A ) - 30, MUMBAI THE ASSESSEE , HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED C IT (A) FAILED TO APPRECIATE THAT NO INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, AND HENCE, THE REOPENING OF APPELLANT'S ASSESSMENT U1S. 147 IS BAD IN LAW. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE RECOR DED REASONS CONTAIN A FACTUALLY INCORRECT STATEMENT THAT APPELLANT'S NAME FINDS MENTION IN THE STATEMENT OF MR. MUKESH CHOKSI. SINCE THE REOPENING OF ASSESSMENT IS DONE ON A FACTUALLY INCORRECT BASIS, THE SAME IS LIABLE TO BE SET ASIDE. 3. WITHOUT PREJU DICE TO THE ABOVE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE AO SOUGHT TO UNDERTAKE A ROVING ENQUIRY UNDER THE GARB OF REASSESSMENT, AND HENCE, THE REASSESSMENT PROCEEDINGS ARE BAD IN LAW. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) F AILED TO APPRECIATE THAT IT IS NOT THE AO'S CASE THAT THE APPELLANT FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THEREFORE, REOPENING OF ASSESSMENT BEYOND FOUR YEARS IS NOT JUSTIFIED. II. ADDITION OF RS. 24,12,653/ - 5. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE AO ERRED IN MAKING ADDITION OF RS.24, 12,653/ - U/S 69A TO THE APPELLANT'S INCOME. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAD PRODUCED ALL EVIDE NCE SUCH AS CONTRACT NOTES, DEMAT STATEMENT ETC., NONE OF WHICH WAS FOUND TO BE FALSE. HENCE, THE ADDITION OF RS. 24,12,653/ - MAY BE DELETED. 7. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE ADDITION OF RS. 24,12,653 / - TO THE INCOME OF THE APPELLANT WOULD RESULT IN DOUBLE ADDITION OF THE SAME AMOUNT IN THE APPELLANT'S HANDS. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 4188/12 BADRUDDINH.(03 - 04) 2 2. ASSESSEE,AN INDIVIDUAL, ENGAGED IN SH ARE TRADING ACTIVITIES FILED HIS RETURN OF INCOME ON 3110.03 DECLARING TOTAL INCOME OF RS.2.75 LACS . THE AO COMPLETED THE ASSESSMENT ON 10.3.2006 U / S. 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSE AT 3.83 LACS. LATER ON A NOTICE U/S. 147 OF THE ACT WAS ISSUED RECORDING FOLLOWING REASONS : 3. SEARCH AND SEIZURE ACTION U/ S. 132 OF THE ACT WAS UNDERTAKEN IN THE CASE OF M/ S. MAHASAGAR SECURITIES PVT. LTD. (NOW KNOWN AS M/ S. ALAG SECURITIES PVT. LTD.} AND ITS GROUP COMPANIES, MAINLY WHIC H ARE M/ S. MIHIR AGENCIES PVT. LTD., M/ S. GOLD STAR FINVEST PVT. LTD. AND M/ S. ALLIANCE INTERMEDIATORIES & NETWORK PVT. LTD. ON 25 - 11 - 2009. 4. ON THE DATE OF SEARCH IT WAS DISCOVERED THAT MR. MUKESH M. CHOKSI, A C.A. HAD FLOATED SOME 34 C OMPANIES FROM HIS OFFICE AT SHREE SADASHIV CHS, SANTACRUZ (EJ, MUMBAI, INCLUDING M/ S. TALENT INFOWAY LTD. AND BUNIYAD CHEMICALS LTD. THERE WAS NO GENUINE BUSINESS BEING CARRIED ON BY ANY OF THESE CONCERNS, AND THEY. WERE ALL ENGAGED IN THE ACTIV ITIES OF ISSUING BOGUS BILLS FOR PROVIDING LONG TERM. CAPITAL GAINS/ LOSS, SPECULATION PROFIT OR LOSS. 5. THE COMPANIES, ALLIANCE INTERMEDIATORIES & NETWORK PVT. LTD. AND GOLDSTAR FINVEST PVT. LTD. CLAIM TO BE SUB - BROKER FOR NATIONAL STOCK EXCHANGE (NSE). BUT THE IMPUGNED TRANSACTIONS HAVE NOT BEEN DONE THROUGH THIS BROKER. IN FACT THE TRANSACTIONS HAVE NOT BEEN ROUTED THROUGH ANY OF THE STOCK EXCHANGES. ONLY FICTITIOUS AND FACILITATING BILLS HAVE BEEN PREPARED TO SHOW THAT THE TRANSACTIONS ARE RECORDED IN THE STOCK EXCHANGE. 6. IT IS SEEN FROM THE STATEMENT RECORDED DURING THE COURSE OF THE ABOVE REFERRED SEARCH AND SEIZURE OPERATIONS THAT THE ASSESSEE HAS ENTERED INTO FIVE TRANSACTIONS OF RS. 4,67,590/ - . ' THE AO COMPLETED THE ASS ESSMENT, ON U/S. 143(3) R.W.S. 147 OF THE ACT, ON 24.12.10 DETERMINING THE INCOME OF THE ASSESSEE AT 27.96 LACS. 3. A GGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY( FAA ). BEFORE HIM, THE REOPENING OF THE ASSESSMENT , U/S. 147 OF THE ACT WAS CHALLENGED AS WELL AS THE ADDITION OF RS.24.12 LACS MADE BY THE AO U/S. 69A OF THE ACT. BEFORE HIM THE ASSESSEE, VIDE HIS LETTER DT D. 3.12.10, STATED THAT HIS CASE WAS COVERED BUY PROVISO S.147 OF THE ACT , THAT THE PERIOD OF 4 Y EA RS HAD LAPSED AT THE END OF RELEVANT AY THAT THE ASSESSMENT,THAT I N THE CASE UNDER APPEAL ASSESSMENT WAS COMPLETED ON 10.3.06, THAT THE ASSESSEE HAD SHOWN THE INCOME ARISING FROM SALE OF TRANSACTION UNDER THE HEAD BUSINESS AND NOT LTCG OR STCG AS MENTIONED IN THE REASON RECORDED BY AO. THE FAA HELD THAT THE PROVISIO TO S.147 OF THE ACT WOULD NOT COME TO THE RES C U E OF THE ASSESSEE , THAT PROVISIONS OF S ECTION 147 HAD BEEN INVOKED ON THE BASIS OF INFORMATION RECEIVED FROM DDIT(INV.), THAT AS PER THE I NFORMATION THE ASSESSEE WAS INDULGING IN PURCHASE AND SHARES ON THE BASIS OF ACCOMMODATION ENTRIES, THAT THERE WAS NO FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR THE Y EA R UNDER CONSIDERATION, THAT AO WAS JUSTIFIED IN INITIATING PROCEEDINGS U/S. 147 OF THE ACT . WITH REGARD TO AD DITION MADE U/S. 69A OF THE ACT, THE FAA HELD THAT THERE WAS SEARCH AND SEIZURE ACTION IN THE CASE OF MAHASAGR SECURITIES GROUP ON 25.11.09, THE THE ASSESSEE WAS STATED TO BE IN THE BUSINESS OF SHARE TRADING INVESTME NT AND FINANCING PROFESSION , THAT HE HAD SHOWN SALE OF RS . 24.03 LACS TO GOLD S TAR FINV E ST P . LTD ONE OF THE GROUP CONCERN OF MAHA SAGAR SECURTITIES,T HAT IT WAS FOUND THAT MUKESH M CHOKSI OF MAHASAGR SECURITIES HAD FLOATED 34 BOGUS CO MPANIES THAT ALL THOSE C OMPANIES S WERE ENGAGED IN ACTIVITY OF ISSUING BOGUS BILL FOR PROVING LTCG/L OSS OR SPECULATION PROFIT/LOSS, THAT THE TRANSACTION HAD NOT BEEN ROUTED THRO UGH ANY OF THE STOCK EXCHANGES,THAT ONLY FICTITIOUS BILLS HAD BEEN PREPARED TO SHOW THAT TRANSACTION HAD BEEN RECORD IN STOCK EXCHANGE, THAT THE AO HAD RIGHTLY HELD THAT IMPUGNED SHARE TRANSACTIONS WERE SHAM TRANSACTIONS, THAT THE TRANSACTIONS WERE GIVEN A COLOUR OF LEGITIMACY BY BROKER S NOTE, THAT THE 4188/12 BADRUDDINH.(03 - 04) 3 ASSESSEE HAD NOT PRODUCED ANY EV IDENCE OF HAVING CARRIED OUT ANY OTHER TRANSACTION THROUGH THE SAME BROKER. FI NALLY, HE UPHELD THE ADDITION MADE BY AM OUN T IN G TO RS. 24,12,653/ - . 4. DURING THE COURS E OF HEA RING BEFORE US AUTHORISED REPRESENTATIVE( AR ) STATED THAT THE REOPENING OF THE COMPLETED ASSESSMENT Y EAR WAS AB - INITIO VOID, THAT THE FAA HAD IGNORED THE OBJECTIONS RAISED BY THE ASSESSEE, THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE , THAT MUKESH CHOKSI HAD NEVER MENTIONED THE NAME OF THE ASSESSEE , THAT IN THE REASONS RECORD THE FIGURE MENTIONED WAS 4.67 LACS WH EREAS THE ADD ITION WAS MADE FOR RS.24. 12 LACS. HE REFERRED PG NO.131 - 147 AND 29 OF THE PB. DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. FIRST WE WILL LIKE TO DECID E THE JURISDICTIONAL ISSUE, AS IT GOES TO THE ROOT OF THE MATTER. IT IS F OUND THAT THE ORIGINAL ASS ES S MENT W AS COMPLETED ON 10.3.06 , THAT THE NOTICE U/S.14 7 WAS ISSUE D ON 30.3.10 , THAT THE REASSESSMENT NOTICE WAS ISSUED AFTER 4 YEARS FROM AY. IN WHICH ORIGINAL A SS ESSMEN T WAS COMPLETED, THAT THE PROVISO TO S ECTION 147 WAS CLEARLY APPLICABLE IN THE CASE UNDER CONSIDERATION, THAT THE AO HAS NOW HE RE MENTIONED THAT BEC AUSE OF THE FAILURE OF THE ASSESSEE TO DISCLOSE MAT ERIA L FACT FULLY AND TRULY THE HIS INCOME HAD E SCAPE D TAXATION. IN OUR OPINION, THE AO HAS NOT ONLY TO MENTION THE FAILURE HE HAS ALSO TO DEMONSTRATE AS TO HOW THE FAILURE ON PART OF THE ASSESSEE LED TO ESCAPEMENT/ UNDERASS ESSMEN T OF THE INCOME FOR A PARTICULAR AY. HERE WE WOULD LIKE TO CASE OF HINDUSTAN LEVE R LIMITED (268 ITR 332) OF THE BOMBAY HC WHICH READS AS UNDER : WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OF THE INCOME - TAX ACT, 1961, HAS BEEN MADE FOR AN ASSESSMENT YEAR, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. THE REASONS RECORDED FOR ISSUING NOTICE PROVIDE THE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BA SED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY WAS NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEMENTED BY FILING AN AFFIDAVIT OR MAKING AN ORAL SUBMISSION. THE HONBLE COURT FURTHER HELD A S UNDER: . THAT THE NOTICE WAS CLEARLY BEYOND THE PERIOD OF FOUR YEARS. THE REASONS RECORDED BY THE ASSESSING OFFICER NOWHERE STATED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMEN T FOR THAT ASSESSMENT YEAR. HENCE, THE ASSESSING OFFICER HAD NO JURISDICTION TO REOPEN THE ASSESSMENT PROCEEDINGS. THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED. RESPECTFULLY, FOLLOWING THE ABOVE WE DECIDE THE 1 ST EFFECTIVE GROUND IN FAVOUR OF THE ASSESSEE AND HOLD THAT THE ORDER PASSED BY THE AO U/S. 143(3) R.W.S. 147 WAS INVALID. AS WE HAVE DECIDE THE JURISDICTIONAL ISSUE REVERSING THE ORDER OF FAA IN FAV OU R OF THE ASSESSEE, SO WE ARE NOT DECIDING 2 ND G ROU ND OF APPEAL RAISED BY HIM . AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. . 4188/12 BADRUDDINH.(03 - 04) 4 ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JU LY ,2015. 2, , 2015 SD/ - SD/ - ( / JOGINDERSINGH ) ( / RAJENDRA) / JUDICIAL MEMBER / A CCOUNTANT MEMBER / MUMBAI, /DATE: 02 .0 7 .2015 JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT( A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./AS ST. REGISTRAR , / ITAT, MUMBAI.