Asstt. Commissioner of Income Tax, Kanpur V. Dr. Shiva Kant Mishra, Kanpur

ITA 428/LKW/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9106 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-11-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 30-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Keywords: Reopening of assessment; Unexplained investment; Deemed dividend; Block assessment; Sham transactions; Reassessment proceedings
• Section: 54F; 147; 148; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.428/LKW/2012 ASSESSMENT YEAR:2002-03 ASSTT. CIT CENTRAL CIRCLE 1 KANPUR V. DR. SHIVA KANT MISHRA 120/503, SHIVAJI NAGAR KANPUR TAN/PAN:ACFPM9660H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. R. K. RAM, D.R. RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 18 11 2014 DATE OF PRONOUNCEMENT: 23 01 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER:- 1. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELEING THE ADDITION OF RS.36,60,072/-MADE ON ACCOUNT OF SHAM TRANSACTIONS OF SALE AND PURCHASE OF SHARES, WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD MADE DETAILED ENQUIRY WITH REGARD TO THE GENUINENESS OF THE SALE AND PURCHASE OF SHARE'S TRANSACTIONS SHOWN BY THE ASSESSEE AND THE SAME WAS FOUND TO BE SHAM TRANSACTION AND, THEREFORE, A.O. WAS JUSTIFIED IN MAKING SUCH ADDITION. 2. THAT LD CIT (A) HAS ERRED IN LAW AND ON FACTS IN COMING TO THE CONCLUSION THAT THE INFORMATION WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS UNDER SECTION 158BC COULD NOT BE USED FOR INITIATING PROCEEDINGS UNDER SECTION 147 OF THE I.T. ACT 1961. INCOME WHICH IS NOT COVERED UNDER PROCEEDINGS UNDER SECTION 158BC HAVE RIGHTLY BEEN BROUGHT TO TAX IN A PROCEEDINGS UNDER :- 2 -: SECTION 147 OF THE I.T. ACT 1961. 3. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN COMING TO THE CONCLUSION THAT A.O. WAS PREVENTED FROM ASSESSING THIS INCOME WHICH WAS IN THE KNOWLEDGE OF A.O. PRIOR TO TAKING UP PROCEEDINGS UNDER SECTION 147 OF THE I.T. ACT. IN FACT, PROCEEDINGS U/S 147 ARE TAKEN ON THE BASIS OF KNOWLEDGE WHICH HAS COME TO THE NOTICE OF THE A.O. 4. THAT LD CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION EVEN AFTER HAVING UPHELD THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE I.T. ACT IN RESPECT OF DEEMED DIVIDEND, AND THUS IGNORING THE PROVISIONS OF EXPLANATION 3 TO SECTION 147 OF THE I.T. ACT 1961. 5. THAT THE ORDER OF THE LD. CIT (A) DESERVES TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE A.O. BE RESTORE. 2. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. D.R. HAS INVITED OUR ATTENTION THAT THE LD. CIT(A) HAS KNOCKED DOWN THE REOPENING OF ASSESSMENT HAVING HELD THAT IT CANNOT BE SAID THAT THE ESCAPEMENT OF INCOME CAME TO THE NOTICE OF THE ASSESSING OFFICER FOR THE REASON THAT NO NEW FACTS, WHICH WERE NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF COMPLETING THE ASSESSMENT UNDER SECTION 158BC OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'), WERE SURFACED FOR REOPENING THE ASSESSMENT. THE LD. D.R. HAS FURTHER INVITED OUR ATTENTION TO THE FACT THAT WHILE HOLDING THE REOPENING AS BAD, THE LD. CIT(A) HAS EXAMINED THE ONLY ISSUE OF LONG TERM CAPITAL GAIN EARNED ON SALE OF SHARES; WHEREAS THE REOPENING WAS DONE FOR THE ESCAPEMENT OF INCOME ON ADVANCES RECEIVED FROM THE COMPANY, M/S SHIVANI HOSPITAL PVT. LTD. UNDER SECTION 2(22)(E) OF THE ACT AFTER TREATING IT TO BE DEEMED DIVIDED. IN SUPPORT OF HIS CONTENTION, THE LD. D.R. HAS INVITED OUR ATTENTION TO THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT, WHICH ARE AVAILABLE AT PAGE 20 OF THE COMPILATION OF THE ASSESSEE; ACCORDING TO WHICH THE REOPENING WAS DONE BY THE ASSESSING OFFICER HAVING FORMED A BELIEF THAT DURING THE :- 3 -: SCRUTINY ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 IN THE CASE OF M/S SHIVANI HOSPITAL PVT. LTD., A COMPANY IN WHICH ASSESSEE IS A DIRECTOR AND SHAREHOLDER, HOLDING MORE THAN 10% SHARES, IT WAS NOTED THAT THE COMPANY HAS GIVEN ADVANCES IN THE NATURE OF LOANS OVER THE YEARS AND AFTER EXAMINATION OF THE SAME, IT WAS HELD THAT THESE LOANS WERE IN THE NATURE OF DEEMED DIVIDEND AS GIVEN IN SECTION 2(22)(E) OF THE ACT AND IN THE ASSESSMENT FRAMED UNDER SECTION 147/143(3) OF THE ACT, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.1.65 LAKHS BEING THE DEEMED DIVIDEND AS PER PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IT IS THE SETTLED POSITION OF LAW THAT WHEN THE ASSESSMENT IS REOPENED ON A PARTICULAR ISSUE AND ADDITION IS MADE ON THAT ISSUE ALSO, THE ASSESSING OFFICER IS AT LIBERTY TO EXAMINE OTHER ISSUES IN DISPUTE. THEREFORE, THERE IS NO ILLEGALITY IN ADJUDICATING THE ISSUE OF LONG TERM CAPITAL GAIN CLAIMED ON SALE OF SHARES AND EXEMPTION UNDER SECTION 54F OF THE ACT. 3. THE LD. D.R. HAS FURTHER INVITED OUR ATTENTION THAT THE LD. CIT(A) WHILE HOLDING THAT THE REOPENING TO BE INVALID, HAS NOT ADVERTED TO THE GROUNDS FOR REOPENING OF THE ASSESSMENT. HE HAS TAKEN A VIEW THAT ISSUE OF LONG TERM CAPITAL GAIN WAS EXAMINED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 158BC OF THE ACT AND THAT ADDITION WAS NOT SUSTAINED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE HAS ALREADY DECLARED CAPITAL GAIN ON SALE OF SHARES IN ITS RETURN OF INCOME, THEREFORE, THE SAID INCOME CANNOT BE CALLED TO BE UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 158BC OF THE ACT. 4. OUR ATTENTION WAS ALSO INVITED TO THE FACT THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING INCOME AT RS.7,20,377/- ON 29.7.2002 WHICH WAS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT BY ORDER DATED 31.7.2003. THEREFORE, THE ASSESSING OFFICER HAD NO OCCASION TO APPLY HIS MIND ON THE COMPUTATION OF LONG TERM CAPITAL GAIN ON SALE OF SHARES. THE ISSUE OF LONG TERM CAPITAL GAIN WAS SURFACED ONLY DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, BUT THE ASSESSMENT COULD NOT BE MADE ON THIS :- 4 -: ISSUE ON THE GROUND THAT INFORMATION WAS AVAILABLE WITH THE ASSESSING OFFICER. BUT IT DOES NOT PREVENT THE ASSESSING OFFICER FROM EXAMINING THE ISSUE IN THE RE-ASSESSMENT PROCEEDINGS. THEREFORE, THE ORDER OF THE LD. CIT(A) HOLDING THE REOPENING TO BE INVALID DESERVES TO BE SET ASIDE. SINCE THE LD. CIT(A) HAS NOT GIVEN ANY FINDING ON MERIT, THE MATTER MAY BE RESTORED TO HIM FOR ADJUDICATION OF THE ISSUE ON MERIT. 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, BESIDES PLACING HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS CONTENDED THAT THE ISSUE OF LONG TERM CAPITAL GAIN WAS EXAMINED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 158BC OF THE ACT AND ADDITION ON THIS ISSUE WAS NOT SUSTAINED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE HAS ALREADY DECLARED LONG TERM CAPITAL GAIN IN ITS RETURN OF INCOME, THEREFORE, IT CANNOT BE CALLED TO BE UNDISCLOSED INCOME OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL AVAILABLE AT PAGES 5 TO 18 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT ONCE THE ISSUE OF LONG TERM CAPITAL GAIN HAS BEEN EXAMINED BY THE ASSESSING OFFICER, IT CANNOT BE RE-EXAMINED BY REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THEREFORE, THE LD. CIT(A) HAS RIGHTLY HELD THE REOPENING TO BE INVALID. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS:- 1. VISHWANATH PRASAD ASHOK KUMAR SARRAF VS. CIT & OTHERS, 327 ITR 190 (ALLD). 2. MOTILAL P.KHINVASARA, HUF VS. DCIT, 26 ITR (TRIB.) 101 (PUNE). 3. CIT VS. C. SIVANANDAN, 52 DTR 428 (KER.) 4. SMT. MIRA ANANTA NAIK VS. DCIT, 183 TAXMANN.COM 40 (BOM.) 5. ACIT, CHHATTISGARH VS. SUNIL KUMAR JAIN, CASE NO.17 OF 2011, DATED 15.1.2014. :- 5 -: 6. SMT. KAMLABAI B. GUNDECHA VS. DCIT, I.T.A. NO. 190/PN/2012, ORDER DATED 29.4.2013 (ITAT PUNE BENCH). 7. SMT. SUREKHABHAI SHARAD MUTHA VS. DCIT, PUNE, I.T.A. NO. 16/PN/2012, ORDER DATED 29.4.2014. 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE RETURN OF INCOME WAS FLED ON 29.7.2002 AND WAS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT VIDE ORDER DATED 31.7.2003. IT IS ALSO NOT IN DISPUTE THAT WHILE FILING THE ORIGINAL RETURN OF INCOME, THE ASSESSEE HAS DISCLOSED CAPITAL GAIN EARNED ON SALE OF SHARES. SUBSEQUENTLY, A SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE ACT AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE AND ACCORDINGLY THE ASSESSMENT ORDER DATED 29.2004 UNDER SECTION 158BC OF THE ACT WAS PASSED FOR THE BLOCK PERIOD ENDING ON 14.9.2002. WHILE FRAMING THE BLOCK ASSESSMENT, THE ASSESSING OFFICER HAS EXAMINED THE TRANSACTION OF PURCHASE AND SALE OF SHARES AND ON VERIFICATION, HAVING DOUBTED THE TRANSACTION TO BE GENUINE, THE ASSESSING OFFICER HAS HELD IT TO BE SHAM TRANSACTION AND SALE PROCEEDS RECEIVED AT RS.36,60,072/- WAS TREATED TO BE INCOME FROM OTHER SOURCES AND ACCORDINGLY THE ADDITION WAS MADE. THIS ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) ON THE GROUND THAT THIS TRANSACTION OF PURCHASE AND SALE OF SHARES CANNOT BE EXAMINED IN THE BLOCK ASSESSMENT, AS THE ASSESSEE HAS ALREADY MADE DECLARATION OF THE CAPITAL GAIN ACCRUED ON SALE OF SHARES WHILE FILING THE ORIGINAL RETURN OF INCOME, THEREFORE, IT CANNOT BE CALLED TO BE UNDISCLOSED INCOME FOR ITS ADJUDICATION IN BLOCK ASSESSMENT UNDER SECTION 158BC OF THE ACT. BEING CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION IN THIS REGARD AND THE REVENUE HAD PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS ALSO APPROVED THE VIEW OF THE LD. CIT(A), HAVING OBSERVED THAT THE ASSESSEE HAD DECLARED ALL MATERIAL FACTS PRIOR TO SEARCH CONDUCTED AND CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT ON THE LONG TERM CAPITAL GAIN. :- 6 -: 7. WE HAVE ALSO CAREFULLY EXAMINED THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, WHICH ARE AVAILABLE AT PAGE 20 OF THE COMPILATION OF THE ASSESSEE AND WE FIND THAT THE REOPENING WAS DONE ON THE BASIS OF THE INFORMATION COLLECTED BY THE ASSESSING OFFICER FROM THE ASSESSMENT IN THE CASE OF M/S SHIVANI HOSPITAL PVT. LTD., IN WHICH IT HAS BEEN SURFACED THAT THE COMPANY HAS GIVEN ADVANCES IN THE NATURE OF LOAN OVER THE YEARS AND HAVING NOTED THAT THE LOANS WERE IN THE NATURE OF DEEMED DIVIDEND AS GIVEN IN SECTION 2(22)(E) OF THE ACT, THE ASSESSING OFFICER HAS ISSUED A NOTICE UNDER SECTION 148 OF THE ACT HAVING FORMED A BELIEF THAT THE AMOUNT OF RS.1,65,000/- HAS ESCAPED ASSESSMENT. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143 (3) READ WITH 147 OF THE ACT, THE ASSESSING OFFICER HAS MADE ADDITION UNDER SECTION 2(22)(E) OF THE ACT AFTER TREATING THIS ADVANCE TO BE DEEMED DIVIDEND. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE OF LONG TERM CAPITAL GAIN ACCRUED ON TRANSACTION OF PURCHASE AND SALE OF SHARES AND CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT. SINCE THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT, THE ASSESSING OFFICER HAD NO OCCASION TO EXAMINE THIS CLAIM, THEREFORE, THE CLAIM WAS EXAMINED IN THE REASSESSMENT PROCEEDINGS COMPLETED UNDER SECTION 147/143(3) OF THE ACT. IN THE BLOCK ASSESSMENT, THE ASSESSING OFFICER HAS EXAMINED THE CLAIM OF LONG TERM CAPITAL GAIN ACCRUED IN TRANSACTION OF PURCHASE AND SALE OF SHARES AND ALSO CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT AND FINALLY HELD THAT THE TRANSACTION IN SALE IN SHARES TO BE BOGUS AND MADE ADDITION OF THE SAME AS UNEXPLAINED INVESTMENT IN THE PROPERTY. THIS ADDITION WAS KNOCKED DOWN BY THE LD. CIT(A) ON THE GROUND THAT SINCE THE ASSESSEE HAS ALREADY DISCLOSED RECEIPT OF CAPITAL GAIN AND CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT IN ITS ORIGINAL RETURN OF INCOME, THE SAID CLAIM CANNOT BE RE-EXAMINED UNDER SECTION 147 OF THE ACT. 8. NOW THE QUESTION ARISES WHETHER THE CLAIM OF CAPITAL GAIN AND EXEMPTION UNDER SECTION 54F OF THE ACT CAN BE EXAMINED DURING THE :- 7 -: ASSESSMENT PROCEEDINGS FRAMED CONSEQUENT TO THE REOPENING OF ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT, HAVING FORMED A BELIEF THAT THE ADVANCES RECEIVED BY THE ASSESSEE FROM THE COMPANY ARE DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, THEREFORE, THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT? 9. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD. CIT(A), WE FIND THAT WHILE HOLDING THE REOPENING TO BE INVALID, THE LD. CIT(A) HAS NOT EXAMINED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF ASSESSMENT. THE REOPENING OF ASSESSMENT WAS DONE AFTER FORMING A BELIEF THAT THE ADVANCES RECEIVED BY THE ASSESSEE ARE DEEMED DIVIDEND AND THEREFORE CHARGEABLE TO TAX; WHEREAS THE LD. CIT(A) HAS EXAMINED THE ISSUE OF LONG TERM CAPITAL GAIN AND CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT ACCRUED ON TRANSACTION IN PURCHASE AND SALE OF SHARES. IT IS SETTLED POSITION OF LAW THAT ONCE ASSESSMENT IS REOPENED ON A PARTICULAR ISSUE AND ADDITION IS MADE THEREON, THE OTHER ISSUES SURFACED DURING THE COURSE OF ASSESSMENT PROCEEDINGS CAN ALSO BE EXAMINED AND THE ADDITION CAN BE MADE ACCORDINGLY. IN THE INSTANT CASE, THE ASSESSMENT WAS REOPENED ON AN ISSUE OF DEEMED DIVIDEND AND DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE OF LONG TERM CAPITAL GAIN AND CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT. SINCE THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND HAS BEEN MADE BY THE ASSESSING OFFICER, EXAMINATION OF CLAIM OF LONG TERM CAPITAL GAIN AND EXEMPTION UNDER SECTION 54F OF THE ACT IS WITHIN THE PERMISSIBLE LIMIT OF THE ASSESSING OFFICER AND HE HAS RIGHTLY DID SO. WE, THEREFORE, FIND NO INFIRMITY IN THIS ACTION OF THE ASSESSING OFFICER. THOUGH THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.1.65 LAKHS MADE BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT BEFORE THE LD. CIT(A), BESIDE VALIDITY OF REOPENING OF ASSESSMENT, BUT THE LD. CIT(A) HAS EXAMINED THE VALIDITY OF REOPENING OF THE ASSESSMENT ON AN ISSUE OF LONG TERM CAPITAL GAIN AND CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT AND KNOCKED DOWN THE REOPENING OF ASSESSMENT, HAVING OBSERVED THAT THE ISSUE OF LONG TERM CAPITAL GAIN WAS EXAMINED BY THE :- 8 -: ASSESSING OFFICER WHILE COMPLETING THE BLOCK ASSESSMENT. THESE OBSERVATIONS OF THE LD. CIT(A) WHILE DEALING WITH THE ISSUE OF REOPENING OF ASSESSMENT IS TOTALLY IRRELEVANT AND UNCALLED FOR. IF HE HAS EXAMINED THE VALIDITY OF REOPENING OF ASSESSMENT, HE HAS TO EXAMINE THE SAME IN THE LIGHT OF THE REASONS RECORDED BY THE ASSESSING OFFICER, BUT HE CONSIDERED IRRELEVANT FACTS WHILE KNOCKING DOWN THE REOPENING OF ASSESSMENT. THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED HEREUNDER:- IN THIS CASE A SEARCH U/S 132 OF THE I.T. ACT WAS CONDUCTED AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE APPELLANT. ACCORDINGLY, ASSESSMENT ORDER (DATED 28.09.2004) U/S 158BC OF THE I.T. ACT, 1961 WAS PASSED BY THE DCIT, CC-II, KANPUR FOR THE BLOCK PERIOD ENDING 14.09.2002. IN THIS ORDER, AN INCOME OF RS.36,60,072/-, RESULTING FROM TRANSACTIONS OF PURCHASE AND SALE OF SHARES WHICH WERE HELD TO BE SHAM TRANSACTIONS, WAS ADDED. THE APPELLANT FILED ITS APPEAL IN WHICH VIDE PARA NO. 49 OF ORDER DATED 28.04.2006, THE ADDITION OF RS.36,60,072/- WAS DELETED WITH THE OBSERVATION THAT 'THE ASSESSMENT IS BASED ON THE MATERIAL (THAT) ALREADY EXISTED ON RECORD OR ON THE MATERIAL COLLECTED AFTER THE SEARCH PROCEEDINGS WERE OVER AND THE ASSESSMENT IS NOT MADE ON THE BASIS O THE MATERIAL AND EVIDENCE FOUND AS A RESULT OF SEARCH NOR ON THE BASIS OF EVIDENCE AVAILABLE WITH THE A.O. AND RELATABLE TO SUCH EVIDENCE FOUND AS A RESULT OF SEARCH'. THE HON'BLE ITAT IN THE APPEAL RELATING TO THE APPELLANT-NO. 699/LUC/2006, ORDER DATED 23.5.2008 VIDE PARA NO. 29 HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT BY MAKING THE FOLLOWING OBSERVATION: 'IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED WHEREAS CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED.' 7.2.1 IN APPEARS THAT THE A.O. TO SAFEGUARD THE INTEREST OF THE REVENUE, ISSUED NOTICE U/S 148. IN THE REASONS RECORDED, HE DID NOT INCLUDE THE ISSUE OF EARNING OF THE IMPUGNED L.T.C.G. THE REASONS SO RECORDED WERE CONFINED TO THE ISSUE OF DEEMED DIVIDEND. HAVING CAREFULLY PERUSED THE INSTANT ASST. ORDER AND ALSO THE ASST. ORDER PASSED U/S 158BC, I FIND THAT THE ISSUE OF EARNING OF LT.C.G. (ON :- 9 -: PURCHASE AND SALE OF EQUITY SHARES) WAS ALREADY WITH THE A.O. WHEN HE WAS FRAMING THE ASSESSMENT U/S 158BC. RESULTS OF ALL ENQUIRIES MADE IN THIS REGARD, INFERENCE DRAWN THEREFROM AS MENTIONED IN THE INSTANT ASST, ORDER FRAMED WERE IDENTICAL TO THOSE MENTIONED IN THE ORDER PASSED U/S 158BC. NO NEW FACT WHICH WERE NOT AVAILABLE WITH THE A.O. AT THE TIME OF COMPLETING THE 158BC ORDER. IN REGARD TO SUCH TRANSACTION HAS BEEN BROUGHT ON RECORD DURING THE; COURSE OF 147 PROCEEDINGS. IN THIS VIEW OF THE MATTER, I CONCUR WITH THE ARGUMENTS OF THE LD. A.R. THAT AS PER THE SPECIFIC PROVISIONS OF SEC. 147, WHEREIN THE A.O. CAN ASSESS OR REASSESS 'SUCH INCOME' (WHICH DENOTES THE INCOME FOR WHICH REASONS WERE RECORDED BY THE A.O, WHICH IN THE INSTANT CASE WERE ONLY IN RESPECT OF THE ESCAPED DEEMED DIVIDEND) AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS UNDER THIS SECTION. IN THE INSTANT CASE, IN THE ORDER U/S 147, THE AO HAS MADE AN ADDITION ON ACCOUNT OF DEEMED DIVIDEND AS ALSO ON ACCOUNT OF L.T.C.G. AS DISCUSSED ABOVE, ALL THE ISSUES CONCERNING THE TRANSACTIONS GIVING RISE TO THE IMPUGNED L.T.C.G. WERE VERY MUCH IN THE KNOWLEDGE OF THE A.O. AT THE TIME OF THE ASSESSMENT MADE U/S 158BC. THUS, IT CANNOT BE SAID THAT THE ESCAPEMENT OF THIS INCOME CAME TO THE NOTICE OF THE A.O. SUBSEQUENTLY DURING THE COURSE OF PROCEEDINGS UNDER SECTION 147. IN THIS VIEW OF THE MATTER, I AM OF THE CONSIDERED VIEW THAT THE A.O. WAS PREVENTED FROM ASSESSING/REASSESSING THIS INCOME WHICH WAS ALREADY IN THE KNOWLEDGE OF THE A.O. PRIOR TO TAKING UP THE CASE U/S 147. ACCORDINGLY, THE IMPUGNED ADDITION MADE STANDS DELETED. 7.2.2 THE LD. A.R. HAS ALSO ADVANCED HIS ARGUMENTS ON MERITS OF THE CASE. SINCE RELIEF HAS BEEN ALLOWED TO THE ASSESSEE ON ITS FIRST ARGUMENT, NO USEFUL PURPOSE SHALL BE SERVED BY ADJUDICATING ON THESE ARGUMENTS; THUS NOT ADJUDICATED UPON. 10. MOREOVER, THE ORIGINAL RETURN WAS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT AND THE ASSESSING OFFICER HAD NO OCCASION TO EXAMINE THE CLAIM OF LONG TERM CAPITAL GAIN. IN THE BLOCK ASSESSMENT, THE CLAIM :- 10 -: COULD NOT BE EXAMINED ON THE GROUND THAT ALL INFORMATION IN THIS REGARD WAS AVAILABLE IN THE ORIGINAL RETURN OF INCOME. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS WITHIN HIS POWER OR JURISDICTION TO EXAMINE THE CLAIM OF LONG TERM CAPITAL GAIN AND EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT AFTER REOPENING OF ASSESSMENT ON THE ISSUE OF DEEMED DIVIDEND. THEREFORE, WE DO NOT FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A) AND WE SET ASIDE HIS ORDER. SINCE THE LD. CIT(A) HAS NOT GIVEN ANY FINDING ON MERIT, WE RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO ADJUDICATE THE ISSUE ON MERIT BY PASSING A SPEAKING ORDER WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF RECEIPT OF THE ORDER OF THE TRIBUNAL. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:23 RD JANUARY, 2015 JJ:0801 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR