VEDANSH JEWELS P. LTD., Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur

ITA 439/JPR/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 7773 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA JCIT DR DHK
• Keywords: Reopening of assessment; Business income; Revision of order; Business expenditure; Search and seizure; Transactions in derivatives; Earning of tax free income; Question of law; Tangible material; Speculation loss; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; TDS; Rule 8D; Set aside; FORM 26AS
• Section: 43B; 143(3); 142(1); 133A; 234B; 14A; 37(1); 250; 139(1); 64; 13; 147; 148; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 439, 440 & 149/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11, 2012-13 & 2012-13 M/S. VEDANSH JEWEL (P) LTD. H-20, BHAGAT SINGH MARG C-SCHEME, JAIPUR CUKE VS. THE DCIT CIRCLE 6 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCV1538 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ASHOK KUMAR GUPTA & SHRI S.L.JAIN ,ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY : MS. CHANCHAL MEENA, JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18/12/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23/12/2019 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THREE SEPARATE ORDERS OF THE LD. CIT(A) DATED 8-01-2019, 8-01-2019 AND 19-11-2018 ARISING FROM THE REASSESSMENT ORDER PAS SED U/S 143(3) READ WITH SECTION 147 OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 AND ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 2 2012-13 AND ORIGINAL ASSESSMENT ORDER PASSED U/S 14 3(3) FOR THE ASSESSMENT YEAR 2012-13. 2.1 IN ITA NO. 439/JP/2019 FOR THE ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL . 1. TIME BARD RE-ASSESSMENT - THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS WHERE THE ASSESSEE H AS ALREADY MADE A FULL AND TRUE DISCLOSURE OF ALL THE RELEVANT MATERIALS IN THE FIR ST INSTANCE AND THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) THEN THE CASE IS C OVERED UNDER PROVISO TO SECTION 147 ( 4 YEARS TIME LIMIT ). THE LD. AO FAIL ED TO MENTION WHICH MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE. THERE IS NO FIND ING OF CONCEALED INCOME. 2. (A) RE-OPINING OF ASSESSMENT ON THE BASIS OF GEN ERAL CONFESSIONAL STATEMENT BY THIRD PARTY WITHOUT CROSS- EXAMINATION IS BAD IN LAW THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS UPHOLDING THE ASSESS MENT COMPLETED BY AO U/S R.W.S. OF INCOME TAX ACT 1961 MERELY ON THE BASIS O R STATEMENTS OF A THIRD PARTY WITHOUT BRINGING ANY CORROBORATIVE MATERIAL ON RECO RD AND WITHOUT MAKING PROPER ENQUIRES IN THE MATTER TO ENSURE THAT ANY IN COME OF ASSESSEE HAS ESCAPED ASSESSMENT. THUS APPELLANT PRAYS COMPLETION OF ASSE SSMENT U/S 147 R.W.S. 143 (3) MUST BE HELD BAD IN LAW. S.P. AGARWALLA ALIAS SUKHDEO PRASAD AGARWALLA VS IT O & OTHERS [19831 140ITR 1010(CAL.) CROSS - EXAMINATION - ANY STATEMENT OF THIRD PARTY RECORDED AT THE BACK O F THE ASSESSEE HAS NO EVIDENTIARY VALUE UNLESS THE WITNESS IS CROSS- EXAM INATION. - CIT VS PRADEEP KUMAR GUPTA 303 ITR 95 DELHI SLP D ISMISSED. 3. THAT THE AO HAS NO POWER TO REOPEN THE COMPLETED ASSESSMENTS MERELY FOR A CHANGE OF OPINION : - WHERE THE PRIMARY FACTS NECESSARY FOR ASSESSMENT , ARE FULLY AND TRULY DISCLOSED, THE ITO WILL NOT BE ENTITLED MERELY ON CHANGE OF OP INION TO COMMENCE PROCEEDINGS FOR REASSESSMENT. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 3 - CIT VS DINESH CHANDRA 82 ITR 367 (SC) 4. RE-ASSESSMENT IS BASED ON BORROWED SATISFACTION :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING ISSUIN G OF NOTICE U/S 148 ON THE BASIS OF INFORMATION RECEIVED FROM THE DIT JAIPUR T HAT FICTITIOUS PROFIT AND LOSSES WERE CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFICATION FACILITY IN F&O SEGMENT ON NSE DURING FY 2009-10 AN D WITHOUT VERIFYING THE CORRECTNESS OF THE INFORMATION AND THEREFORE RE- AS SESSMENT PROCEEDING IS ABSOLUTELY BAD IN LAW AND WITHOUT JURISDICTION AND FURTHER AO NOT RECORDED HIS SATISFACTION AND REASSESSMENT IS BASED ON BORROWED SATISFACTION WHICH WAS NOT SUFFICIENT TO CONFER POWER ON THE AO TO INITIATE RE ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE. CIT VS. SHREE RAJASTHAN SYNTEX LTD. (2009) 313 ITR 231 (RAJ) SLP DISMISSED :(2009) 313 ITR (ST.) 27 (SC) SUN PHARMACEUTICAL INDUSTRIES LT. VS. DY. CIT (2016 )287 CTR ( DEL.) 621 5. SANCTION U/S 151 WITHOUT APPLICATION OF MIND BY LD. (PR.CIT) :- THAT THE LEARNED PR. CIT HAS GROSSLY ERRED BOTH IN LAW AND FACTS IN GRANTING APPROVAL U/S 151 MECHANICALLY AND WITHOUT APPLICATI ON OF MIND AND THERE FOR SANCTION IS NOT ACCORDING TO MANDATE OF SC. 6. BUSINESS LOSS DISALLOWED RS. 10,50,960/- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS WHERE THE LOSS WAS O RIGINALLY ASSESSED AS NON SPECULATIVE LOSS AND WHERE WITHOUT HAVING ANY NEW I NFORMATION THE AO. CAME TO A CONCLUSION AFTER THE EXPIRY OF 4 YEARS THAT TH E LOSS SUFFERED BY THE ASSESSEE WAS A SPECULATIVE LOSS THE COURT HELD THAT THERE WA S NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE TRUE & FULL MATERIAL REQUIRED FOR ASSESSMENT. ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. 34 8 ITR 299(SC) 7. BUSINESS EXPENDITURE DISALLOWED RS. 21,019/-/- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS IN MAKING ASSUMPTION OF BROKERAGE PAID ON SHARE TRANSACTIONS AMOUNTING TO RS. 21019/- BY THE ASSESS EE WITHOUT-ANY-BASIS. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 4 8. NO SHOW CAUSE NOTICE :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AO HAS GROSSLY ERRED IN LAW AND FACTS IN MAKING DISPUTED ADDITIONS WITHOUT SERV ING SHOW CAUSE NOTICE WHICH IS MANDATORY AS PER CBDT CIRCULAR. 9. INTEREST LEVIED U/S 234A, 234B AND 234C THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. AO HAS GROSSLY ERRED IN LAW AND FACTS IN BY CONFIRMING IN CHARGING INTEREST U/S, 234(A), 234(B) & 234(C). 3.1 THE GROUND NO. 1 TO 5 OF THE ASSESSEE ARE RELAT ING TO VALIDITY OF REOPENING OF THE ASSESSMENT AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 3.2 THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND E NGAGED IN THE BUSINESS OF GEMS AND JEWELLERY. THE ASSESSEE HAS AL SO CARRIED OUT TRADING IN SHARES UNDER F&O AS WELL AS INVESTMENT IN SHARES AND SECURITIES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESS MENT YEAR 2010-11 ON 15-10-2010 DECLARING TOTAL INCOME AT RS. 28,93,970/ -. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 28-03-2013. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 14 8 OF THE ACT ON 27-03-2017 BY RECORDING THE REASONS THAT AS PER INF ORMATION RECEIVED FROM ADIT, INVESTIGATION WING, AHEMDABAD, SOME STOC K BROKERS ARE FOUND INDULGED IN SHIFTING OF PROFITS AND LOSSES FR OM TRADING OF SHARES UNDER F&O SEGMENT BY MISUSING CLIENT CODE MODIFICAT ION FACILITY. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 5 ACCORDINGLY, THE AO FORMED THE BELIEF THAT LOSS OF RS. 10,50,960/- SHOWN BY THE ASSESSEE FROM SHARE TRADING IS FICTITIOUS A ND CONSEQUENTLY THE INCOME ASSESSABLE TAX HAS ESCAPED ASSESSMENT. THE A O COMPLETED THE REASSESSMENT VIDE ORDER DATED 13-12-2017 WHEREBY AD DITION OF RS. 10,50,960/- WAS MADE ON ACCOUNT OF ALLEGED FIC TITIOUS LOSSES ON TRADING IN SHARES. THE AO ALSO MADE THE ADDITION OF RS. 21,019/- ON ACCOUNT OF PAYMENT OF COMMISSION 3.3 THE ASSESSEE CHALLENGED THE ACTION OF THE AO BE FORE THE LD. CIT(A) AND ALSO RAISED THE OBJECTION AGAINST VALIDITY OF R EOPENING OF THE ASSESSMENT. THE LD. CIT(A) HAS DISMISSED THE OBJECT ION RAISED BY THE ASSESSEE AGAINST REOPENING OF THE ASSESSMENT. 3.4 BEFORE US, THE LD.AR OF THE ASSESSEE HAS SUBMIT TED THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3). THE ASSESSEE H AS DULY DISCLOSED ALL RELEVANT FACTS IN THE RETURN OF INCOME FILED INCLUD ING THE LOSSES ON SHARES TRADING. THE AO DURING THE SCRUTINY ASSESSMENT HAD ISSUED THE NOTICE U/S 142(1) ALONGWITH QUESTIONNAIRE DATED 20-12-2012. HE HAS REFERRED TO QUESTION NO. 4 OF THE SAID QUESTIONNAIRE AND SUBMIT TED THAT THE AO HAD SPECIFICALLY ASKED THE ASSESSEE TO FILE THE DETAILS / EVIDENCE OF LOSS INCURRED/CLAIMED FROM SHARE TRADING. THE ASSESSEE F ILED THE RELEVANT DETAILS ALONGWITH ITS REPLY DATED 11-01-2013. THUS THE LD.AR OF THE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 6 ASSESSEE SUBMITTED THAT DURING THE SCRUTINY ASSESSM ENT THE AO HAD DULY EXAMINED THE CLAIM OF LOSS FROM SHARING TRADING AND AFTER HE WAS SATISFIED THE SAID CLAIM WAS ALLOWED. FURTHER THE ASSESSEE AL SO PRODUCED AUDITED FINANCIAL STATEMENT DURING THE SCRUTINY ASSESSMENT AND NO DEFECT WAS FOUND BY THE AO. ONCE THE ASSESSEE HAS PRODUCED ALL THE DETAILS AND DOCUMENTARY EVIDENCE REGARDING THE TRANSACTION IN S HARES AND LOSSES ARISING FROM THE SHARE TRADING THEN REOPENING OF TH E ASSESSMENT AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THAT TOO ON THE BASIS OF THE INFORMATION RECEIVED BY THE AO IS NOT VALID AS THER E IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. FURTHER THE AO HAS REOPEN ED THE ASSESSMENT ON THE BASIS OF BORROWED SATISFACTION WITHOUT CONDUCTI NG ANY ENQUIRY OR VERIFICATION OF THE RELEVANT DETAILS AND RECORDS TO FORM THE OPINION THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS REFERRED TO THE REASONS RECORDED BY THE AO AND SUBMITTED THAT THE A O HAS MENTIONED GENERAL INFORMATION RECEIVED FROM THE INVESTIGATION WING, AHEMDABAD WITHOUT ANY SPECIFIC ALLEGATION AGAINST THE ASSESSE E. HE HAS ALSO REFERRED TO THE OBJECTION OF THE ASSESSEE FILED AGAINST NOTI CE U/S 148 OF THE ACT AND SUBMITTED THAT THE AO HAS RAISED ALL THESE OBJECTIO NS. HOWEVER, THE AO HAS REJECTED THE SAME. IN SUPPORT OF HIS CONTENTION S, THE LD.AR OF THE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 7 ASSESSEE RELIED ON THE DECISION OF HON'BLE ALLAHABA D HIGH COURT IN THE CASE OF SMT. RAJ RANI GULATI VS UNION OF INDIA, (20 10), 329 ITR 370 (ALL.) AND SUBMITTED THAT HON'BLE HIGH COURT HAS HE LD THAT NOTICE ISSUED U/S 148 AFTER 4 YEARS IN THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS IS NOT VALID AND LIABLE TO BE QUASHED. THE LD.AR OF THE ASSESSEE ALSO RELIED ON T HE DECISION OF THIS TRIBUNAL DATED 23-10-2018 IN THE CASE OF DCIT VS GY ANDEEP KHEMKA (ITA NO.695/JP/2018 FOR THE ASSESSMENT YEAR 2009-10 ) AND GYANDEEP KHANNA VS DCIT (C.O. NO.15/JP/2018 FOR THE ASSESSME NT YEAR 2009-10) WHERE THE ASSESSMENT WAS REOPENED ON THE BASIS OF T HE INFORMATION RECEIVED BY THE ASSESSEE FROM THE INVESTIGATION WIN G, AHEMDABAD REGARDING TRANSFER OF PROFITS/LOSSES IN SHARE TRADI NG BY MISUSING THE CLIENT CODE MODIFICATION FACILITY PROVIDED BY THE STOCK EX CHANGE. THUS, HE HAS SUBMITTED THAT THE REOPENING OF ASSESSMENT IS NOT V ALID AND LIABLE TO BE QUASHED. 3.5 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE INFORMATION RECEIVED BY THE AO FROM THE INVESTIGATION WING, AHE MDABAD IS A TANGIBLE MATERIAL TO DISCLOSE THAT THE ASSESSEE HAS CLAIMED FICTITIOUS LOSS FROM THE SHARE TRADING BY MISUSING THE CLIENT CODE MODIFICATION FACILITY. THE SAID INFORMATION WAS NOT AVAILABLE BEFORE THE AO AT THE TIME OF ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 8 SCRUTINY ASSESSMENT FRAMED U/S 143(3). THUS, IT IS A CASE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIALS FACTS NECESSARY FOR ASSESSMENT. THE LD. DR FURTHER CONTENDED THAT A T THE TIME OF REOPENING OF THE ASSESSMENT WHAT IS REQUIRED, IS T HE PRIMA FACIE REASONS TO BELIEVE THAT INCOME ASSESSABLE TO TAX HAS ESCAPE D ASSESSMENT. WHEN THE AO HAD SPECIFIC INFORMATION REGARDING SHIFTING OF LOSS IN ORDER TO REDUCE THE INCOME BY MISUSING THE FACILITY OF CLIEN T CODE MODIFICATION THROUGH CERTAIN BROKERS INCLUDING THE BROKER OF THE ASSESSEE THEN THIS INFORMATION AND DISCOVERY OF FACTS CONSTITUTE A TAN GIBLE MATERIAL FOR FORMING THE BELIEF THAT INCOME ASSESSABLE TO TAX ON ACCOUNT OF FICTITIOUS LOSS ALLOWED IN THE ORIGINAL ASSESSMENT HAS ESCAPED ASSESSMENT. THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143 (3) ON 28-03-2013. WE FURTHER NOTE THAT DURING SCRUTINY ASSESSMENT THE AO VIDE QUESTIO NNAIRE DATED 20-12- 2012 HAS SPECIFICALLY ASKED THE ASSESSEE TO FILE DE TAILS / EVIDENCE IN RESPECT OF LOSS ON SHARE TRADING. IN REPLY TO THE S AID NOTICE ISSUED BY THE AO, THE ASSESSEE FILED ITS REPLY DATED 11-01-2013 G IVING DETAILS/ EVIDENCE IN RESPECT OF LOSS INCURRED ON ACCOUNT OF SHARE TRA DING. THUS THE AO HAS ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 9 VERIFIED THE CLAIM OF LOSS ARISING FROM SHARE TRADI NG IN F&O SEGMENT AND AFTER SATISFYING HIMSELF ALLOWED THE SAME. THE NOTI CE U/S 148 OF THE ACT WAS ISSUED BY THE AO ON 27-03-2017 WHICH IS CLEARLY AFTER 4 YEARS FROM THE END OF THE ASSESSMENT YEAR IN QUESTION. THUS IT IS MANDATORY PRECONDITION THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR ASSESSMENT, THE AO CA N EXERCISE ITS POWER U/S 147/148 OF THE ACT TO REOPEN THE COMPLETED ASS ESSMENT U/S 143(3) OF THE ACT AFTER FOUR YEARS. IN THE CASE IN HAND, THE AO HAS REOPENED THE ASSESSMENT BY RECORDING THE REASONS AS UNDER:- THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCO ME ON 15-10-2010 BY DECLARING TOTAL INCOME OF RS. 28,9 3,970/-. BUSINESS INCOME WAS SHOWN AT RS. NIL/-. THE CASE WA S ASSESSED U/S 143(3) ON 28-03-2013 AT TOTAL INCOME OF RS. 2,82,26 ,324/- BY DISALLOWANCE OF EXEMPTION U/S 10AA. CONSEQUENTLY TO THE ORDER OF THE CIT (A) DATED 23-03-2015 THE REVISED TOTAL INC OME COMES TO RS. 1,08,34,060/-. IN THE COMPUTATION OF INCOME ASSESSEE HAS DECLARED LOSS FROM TRADING OF SHARES AT RS. 10,89,418/-. IN THIS CASE, INFORMATION HAS BEEN RECEIVED FROM THE ADIT (INV), UNIT 1(3), AHEMDABAD. FROM THE INFORMATION, IT IS GATHERED THA T FICTITIOUS PROFITS AND LOSSES WERE CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFICATION FACILITY IN F&O SEGMENT ON NSE DURING THE F.Y. 2009-10. THE BROKERS WERE ALLEGED TO BE IN DULGING IN TRANSFERRING THE FICTITIOUS LOSSES TO DIFFERENT CLI ENTS TO REDUCE THEIR TAX LIABILITY AND FICTITIOUS PROFIT TO OTHER CLIENT S. IN SOME CASES OF BROKERS AS WELL AS CLIENTS, SURVEY U/S 133A WAS CAR RIED OUT AND THEY CONFIRMED HAVING MISUSED THE FACILITY OF CLIENT COD E MODIFICATION ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 10 TO CREATE FICTITIOUS LOSSES/ PROFITS AND IN TRANSFE RRING PROFITS AND LOSSES FROM ORIGINAL CLIENTS TO MODIFIED CLIENTS. FROM THE DETAILS RECEIVED, IT IS NOTICED THAT DURI NG THE YEAR UNDER CONSIDERATION ASSESSEE HAS SHIFTED IN AS CERTAINED LOSS OF RS. 10,50,960/-. IN THIS WAY, NET REDUCTION IN INCO ME DUE TO MISUSE OF CLIENT CODE MODIFICATION FACILITY COMES TO RS. 1 0,50,960/- FOR TAKING IN SUCH CONTRIVED LOSSES THE ASSESSEE WOULD HAVE PAID COMMISSION ALSO ON THE BASIS OF STATEMENT OF BROKER S, I ESTIMATE THAT THE ASSESSEE WOULD HAVE PAID COMMISSION @ 2% W HICH COMES TO RS. 21,019/-. SUCH EXPENDITURE WOULD HAVE BEEN P AID OUT OF BOOKS OF ACCOUNTS. THUS, I HAVE REASONS TO BELIEVE THAT INCOME OF RS. 10,79,979/- (RS. 10,50,960/- + 21,019/-) HAS ESCAPE D ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. THE ESCAPEMENT OF INCOME WAS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS. THE AO HAS STATED IN THE REASONS THAT INFORMATION H AS BEEN RECEIVED FROM THE ADIT, INVESTIGATION WING, AHEMDABAD, REVEALING THE FACT OF FICTITIOUS PROFITS AND LOSSES WERE CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFICATION FACILITY IN F&O SEGMENT ON NSE. THUS THE AO HAS NARRATED THE GENERAL STATEMENT THAT BROKERS WER E ALLEGEDLY INDULGED IN IN TRANSFERRING THE FICTITIOUS LOSSES TO DIFFERENT CLIENTS TO REDUCE THEIR TAX LIABILITY. HOWEVER, IN SOME CASES OF BROKERS AS WEL L AS CLIENTS, SURVEY U/S 133A OF THE ACT WAS CARRIED OUT WHEREIN THEY HAVE C ONFIRMED HAVING MISUSED THE FACILITY OF CLIENT CODE MODIFICATION TO CREATE FICTITIOUS LOSSESS/ PROFITS. IT IS MANIFEST FROM THE REASONS RECORDED B Y THE AO THAT ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 11 INFORMATION RECEIVED FROM INVESTIGATION WING, AHEMD ABAD IS GENERAL IN NATURE AND THE AO HAS NOT SPECIFIED ABOUT ANY PARTI CULAR TRANSACTION OF SHIFTING THE LOSSES FROM ONE CLIENT TO ANOTHER CLIE NT. BASED ON THAT GENERAL INFORMATION, THE AO HAS THEN FORMED HIS BELIEF THAT THE ASSESSEE HAS CLAIMED LOSS OF RS. 10,50,960/- ARISING FROM SHIFTI NG OF LOSSES BY MISUSING THE CLINE CODE MODIFICATION FACILITY. FURT HER IN REASONS, THE AO ESTIMATED THAT THE ASSESSEE WOULD HAVE PAID COMMISS ION @ 2%. AT THE OUTSET, WE NOTE THAT THIS TRIBUNAL IN THE CASE OF D CIT VS GYANDEEP KHEMKA (SUPRA) HAS CONSIDERED THIS ISSUE IN PARA 17 AS UNDER:- 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUT E THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 24/11/2011. SUBSEQUENTLY THE ASSESSING OFFICER ISSU ED NOTICE U/S 148 OF THE ACT ON 31/3/2016 WHICH IS AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERA TION. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING OF THE ASSESSMENT ARE AS UNDER: ON PERUSAL OF INFORMATION IN POSSESSION, IT IS REV EALED THE FICTITIOUS PROFITS AND LOSSES WERE CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFICATION FACILITY IN DERIVATIVES TRANSACTIONS O N NSE DURING MARCH, 2010. IN SOME CASES OF BROKERS AS WELL AS CLIENTS, SURVEY U/S 133A WAS CARRIED OUT BY THE DEPARTMENT AND IT HAS ADMITTEDLY BEING C ONFIRMED HAVING MISUSED THE FACILITY OF CLIENT CODE MODIFICATION TO CREATE FICTITIOUS LOSSES/PROFITS AND FURTHER ADMITTEDLY EXPLAINED IN THE CASE OF ASSESSEE ALSO TO RECEIVE COMMISSION AT THE RATE VARYING FROM 0.5% TO 2% ON THIS ACCOUNT. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 12 THE ASSESSING OFFICER HAS REFERRED TO THE INFORMATIO N IN POSSESSION, WHICH WAS GATHERED DURING THE SURVEY U/S 133A CARRIED OUT BY THE DEPARTMENT AT MUMBAI AND AHMADAB AD. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT INVOLVED IN TH E SURVEY PROCEEDINGS, WHICH IS THE BASIS FOR REOPENING OF THE ASSESSMENT AS PER THE REASONS RECORDED BY THE ASSESSING OFFICE R. THE FACTS RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS FICTITIOUSLY TRANSFERRED THE PROFITS IN RESPECT OF TRADING OF DERIVATIVES THROUGH BROKER C.M. GOYENKA STOCK BROKE RS IS NOT A NEW FACT BUT THE TRANSACTIONS WERE DULY PART OF THE A SSESSEES BOOK OF ACCOUNT AND THE ASSESSEE HAS OFFERED THE IN COME FROM THESE TRANSACTIONS WHICH WERE DONE ON BEHALF OF THE ASSESSEE BY THE SAID BROKER. THE DISPUTE IS ONLY REGARDING THE CERTAIN TRANSACTIONS WHICH WERE RECTIFIED BY USING THE CLIENT CODE MODIFICATION FACILITY ON THE PART OF THE BROKER AS THOSE TRANSACTIONS WERE NOT INTENDED TO BE DONE ON BEHALF OF THE ASSESSEE BUT DUE TO MISTAKE IN PUNCHING CLIENT CODE , THOSE WERE CARRIED OUT ON BEHALF OF THE ASSESSEE AND THEREFORE , SUBSEQUENTLY THE BROKER HAS MADE NECESSARY RECTIFICATION. ONCE T HE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT THEN THE REOPENING OF THE ASSESSMENT AFTER FOUR YEARS IS NOT PERMISSIBLE UNTIL AND UNLESS IT IS A CASE OF FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELE VANT FOR THE ASSESSMENT. THE ASSESSING OFFICER HAS NOT SPELLED OU T WHICH FACTS WERE NOT DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME OR WHICH COULD NOT BE DISCOVERED BY THE ASSESSING OFFIC ER DURING THE ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT . THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. SHODIMAN INVESTMENTS (P) LTD. (SUPRA) WHILE EXAMINING THE VAL IDITY OF REOPENING BASED ON THE REPORT OF THE DDIT (INV.) HAS OBSERVED AND HELD IN PARA 9 TO 14 AS UNDER: 9. WE FIND THAT AT THE TIME OF RE-OPENING OF THE ASS ESSMENT, THE ASSESSING OFFICER DID NOT PROVIDE THE REASONS RECORDED IN SUP PORT OF THE RE- OPENING NOTICE IN ITS ENTIRETY, TO THE RESPONDENT-A SSESSEE. THIS WAS CONTRARY TO AND IN DEFIANCE OF THE DECISION OF THE APEX COURT IN GKN DRIVESHAFTS V. ITO [2002] 125 TAXMAN 963/[2003] 259 ITR 19 . THE ENTIRE OBJECTS OF REASONS FOR RE- OPENING NOTICE AS RECORDED BEING MADE AVAILABLE TO AN ASSESSEE, IS TO ENABLE THE ASSESSIN G OFFICER TO HAVE A SECOND LOOK AT HIS REASONS RECORDED BEFORE HE PROCE EDS TO ASSESS THE INCOME, WHICH ACCORDING TO HIM, HAS ESCAPED ASSESSM ENT. IN FACT, NON ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 13 FURNISHING OF REASONS WOULD MAKE AN ASSESSMENT ORDE R BAD AS HELD BY THIS COURT IN CIT V. VIDESH SANCHAR NIGAM LTD. [2012] 21 TAXMANN.COM 53/340 ITR 66 . IN FACT, PARTIAL FURNISHING OF REASONS WILL ALSO NECESSARILY MEET THE SAME FATE I.E. RENDE R THE ASSESSMENT ORDER ON RE- OPENING NOTICE BAD. THEREFORE, ON THE ABOVE GROUND ITSELF, THE QUESTION AS PROPOSED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AS IT IS COVERED BY THE DECISION OF THIS COU RT IN VIDESH SANCHAR NIGAM LTD.'S, CASE ( SUPRA ) AGAINST THE REVENUE IN THE PRESENT FACTS. 10. BESIDES, THE SUBMISSIONS MADE ON BEHALF OF THE REVE NUE THAT IN VIEW OF THE DECISION OF THE APEX COURT IN RAJESH JHAVERI STOCK BROKERS (P.) LTD.'S, CASE ( SUPRA ), THE ASSESSING OFFICER IS ENTITLED TO RE-OPEN THE ASSESSMENT FOR WHATEVER REASONS AND THE SAME CANNOT BE SUBJECTED TO JURISDICTIONAL REVIEW, IS PREPOSTEROUS. FIRST OF AL L, TAKING OUT A WORD OR SENTENCE FROM THE ENTIRE JUDGMENT, DIVORCED FROM TH E CONTEXT AND RELYING UPON IT, IS NOT PERMISSIBLE (SEE CIT V. SUN ENGG. WORKS (P.) LTD. [1992] 64 TAXMAN 442/198 ITR 297 (SC) ). IT MAY BE USEFUL TO REPRODUCE THE CONTEXT IN WHICH THE SENTENCE IN RAJESH JHAVERI STOCK BROKERS (P.) LTD.'S CASE ( SUPRA ) BEING RELIED UPON BY THE REVENUE TO SUPPORT ITS CASE, WAS MADE. THE CONTEXT, IS AS UNDE R: 'THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBS TANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUB STITUTIONS. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSES SMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESS ED TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WE RE REQUIRED TO BE SATISFIED : FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME TAX H AVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON T O BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITI ONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE J URISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES.' THEREFORE, THE SENTENCE BEING RELIED UPON WAS MADE IN THE CONTEXT OF THE CHANGE IN LAW THAT UNDER THE AMENDED PROVISION 'REASON TO BELIEVE' THAT IN CASE OF ESCAPED ASSESSMENT, IS SUFFICIENT T O RE-OPEN THE ASSESSMENT. THIS UNLIKE THE EARLIER PROVISION OF SE CTION 147(A) OF THE ACT WHICH REQUIRED TWO CONDITIONS I.E. FAILURE TO D ISCLOSE FULLY AND TRULY ALL FACTS NECESSARY FOR ASSESSMENT AND REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THUS, THE OBSERVATIO NS BEING RELIED ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 14 UPON MUST BE READ IN THE CONTEXT IN WHICH IT WAS RE NDERED. ON SO READING THE SUBMISSION, WILL NOT SURVIVE. 11. FURTHER, A READING OF THE ENTIRE DECISION, IT IS CLEAR THAT THE REASONABLE BELIEF ON THE BASIS OF TANGIBLE MATERIAL COULD BE, PRIMA FACIE, FORMED TO CONCLUDE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. MR. MOHANTY, LEARNED COUNSEL IS IGNORING THE FACT THAT THE WORDS 'WHATEVER REASONS' IS QUALIFIED BY THE WORDS 'HAVING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT' . THE WORDS WHATEVER REASONS ONLY MEANS ANY TANGIBLE MATERIAL WHICH WOULD ON APPLICAT ION TO THE FACTS ON RECORD LEAD TO REASONABLE BELIEF THAT INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT. THIS MATERIAL WHICH FORMS THE B ASIS, IS NOT RESTRICTED, BUT THE MATERIAL MUST LEAD TO THE FORMA TION OF REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. MERE OBTAINING OF MATERIAL BY ITSELF DOES NOT RESULT IN REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IN FACT, THIS WOULD BE EVIDENT FROM THE FACT THAT IN PARA 16 OF THE DECISION IN RAJESH JHAVERI STOCK BROKERS (P.) LTD.'S, CASE ( SUPRA ), IT IS OBSERVED THAT THE WORD 'REASON' IN THE . 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. THEREFORE, IT CAN ONLY BE THE BASIS OF FORMING THE BELIEF HOWEVER , THE BELIEF MUST BE INDEPENDENTLY FORMED IN THE CONTEXT OF THE MATERIAL OBTAINED THAT THERE IS AN ESCAPEMENT OF INCOME. OTHERWISE, NO MEANING I S BEING GIVEN TO THE WORDS 'TO BELIEVE' AS FOUND IN SECTION 147 OF THE ACT. THEREFORE, THE WORDS 'WHATEVER REASONS' IN RAJESH JHAVERI STOCK BROKERS (P.) LTD.'S, CASE ( SUPRA ), ONLY MEANS WHATEVER THE MATERIAL, THE REASONS RECORDED MUST INDICATE THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS IS SO AS REASONS AS RECORDED ALONE GIVE THE ASSESSING OFFICER POWER TO RE-OPEN AN ASSESSMENT, IF IT REVEA LS/INDICATE, REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT. 12. THE RE-OPENING OF AN ASSESSMENT IS AN EXERCISE OF EXTRA-ORDINARY POWER ON THE PART OF THE ASSESSING OFFICER, AS IT L EADS TO UNSETTLING THE SETTLED ISSUE/ASSESSMENTS. THEREFORE, THE REASONS T O BELIEVE HAVE TO BE NECESSARILY RECORDED IN TERMS OF SECTION 148 OF THE ACT, BEFORE RE- OPENING NOTICE, IS ISSUED. THESE REASONS, MUST INDI CATE THE MATERIAL (WHATEVER REASONS) WHICH FORM THE BASIS OF RE-OPENI NG ASSESSMENT AND ITS REASONS WHICH WOULD EVIDENCE THE LINKAGE/NEXUS TO THE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. THIS IS A SETTLED POSITION AS OBSERVED BY THE SUPREME COURT IN S. NARAYANAPPA V. CIT [1967] 63 ITR 219 , THAT IT IS OPEN TO EXAMINE WHETHER THE REASON TO BELIEVE HAS RATIONAL CONNECTI ON WITH THE FORMATION OF THE BELIEF. TO THE SAME EFFECT, THE AP EX COURT IN ITO V. LAKHMANI MERWAL DAS [1976] 103 ITR 437 HAD LAID DOWN THAT THE REASONS TO BELIEVE MUST HAVE RATIONAL CONN ECTION WITH OR RELEVANT BEARING ON THE FORMATION OF BELIEF I.E. TH ERE MUST BE A LIVE LINK ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 15 BETWEEN MATERIAL COMING THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME. IF THE AFORESAID REQUIREMENT ARE NOT MET, THE ASSESSEE IS ENTITLED T O CHALLENGE THE VERY ACT OF RE-OPENING OF ASSESSMENT AND ASSUMING JURISD ICTION ON THE PART OF THE ASSESSING OFFICER. 13. IN THIS CASE, THE REASONS AS MADE AVAILABLE TO TH E RESPONDENT- ASSESSEE AS PRODUCED BEFORE THE TRIBUNAL MERELY INDICATES IN FORMATION RECEIVED FROM THE DIT (INVESTIGATION) ABOUT A PARTICULAR ENT ITY, ENTERING INTO SUSPICIOUS TRANSACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON TO COME TO THE CONCLUSION THAT THE RESPO NDENT-ASSESSEE HAS INDULGED IN ANY ACTIVITY WHICH COULD GIVE RISE TO R EASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS FOR THIS REASON THAT THE RECORDED REASONS EVEN DOES NOT INDICATE THE AMOUNT WHICH ACCORDING TO THE ASSESSING OFFICER, HAS ESCAPED ASSESSMENT. THIS IS AN EVIDENCE OF A FI SHING ENQUIRY AND NOT A REASONABLE BELIEF THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. 14. FURTHER, THE REASONS CLEARLY SHOWS THAT THE ASSESS ING OFFICER HAS NOT APPLIED HIS MIND TO THE INFORMATION RECEIVED BY HIM FROM THE DDIT (INV.). THE ASSESSING OFFICER HAS MERELY ISSUED A R E-OPENING NOTICE ON THE BASIS OF INTIMATION REGARDING RE-OPENING NOTICE FROM THE DDIT (INV.) THIS IS CLEARLY IN BREACH OF THE SETTLED POS ITION IN LAW THAT RE- OPENING NOTICE HAS TO BE ISSUED BY THE ASSESSING OF FICE ON HIS OWN SATISFACTION AND NOT ON BORROWED SATISFACTION. THUS, THE HON'BLE HIGH COURT HAS HELD THAT THE REASO NABLE BELIEF MUST BE BASED ON TANGIBLE MATERIAL AND COULD BE PRI MA FACIE FORMED TO CONCLUDE THAT THE INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT. THEREFORE, THE REOPENING ON BORR OWED SATISFACTION IS NOT PERMISSIBLE UNDER THE LAW. THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANDEEP ST OCKS PVT. LTD. VS ACIT (SUPRA) HAD OCCASION TO CONSIDER THE ISSUE O F REOPENING OF THE ASSESSMENT BASED ON THE SAME INFORMATION REC EIVED FROM ADIT RELATING TO FICTITIOUS PROFIT AND LOSSES CREATE D BY SOME BROKERS BY MISUSING CLIENT CODE MODIFICATION FACILI TY IN F&O SEGMENT ON NSE AND HELD AS UNDER: HAVING HEARD BOTH THE; COUNSEL, THIS COURT FINDS T HAT THE PETITIONER HAD SUBMITTED INITIAL RETURN ON 27 TH SEPTEMBER, 2009. THE CASE WAS ASSESSED UNDER SECTION 143(3) ON 23.11.11 AT TOTAL INCOME OF RS.23,54,40,980/- AND ASSESSMENT ORDER WAS PASSED AND THE SAME ATTAINED FINALITY. THE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 16 PETITIONER WAS ISSUED A NOTICE ON 29 TH MARCH, 2016 UNDER SECTION 148 QUOTING THAT THE INCOME CHARGEABLE TO TAX FOR ASSES SMENT, 2009-2010 HAS ESCAPED. ON HAVING ASKED BY THE PETITIONER TO P ROVIDE REASONS FOR REASSESSMENT, THE RESPONDENTS PROVIDED REASONS AS N OTED ABOVE. A LOOK AT THE SAID REASONS SHOWS THAT THE DEPARTMENT HAS G ATHERED INFORMATION RECEIVED FROM THEIR ADIT RELATING TO FICTITIOUS PRO FITS AND LOSSES CREATED BY SOME BROKERS BY MISUSING THE CLIENT CODE MODIFIC ATION FACILITY IN F&O SEGMENT ON NSE DURING THE FINANCIAL YEAR 2008-2009 AND ON THE BASIS THERETO AND ON THE BASIS OF SOME RAIDS CARRIED OUT WHEREIN THE SAID BROKERS HAVING MISUSED THE CLIENT CODE MODIFICATION AND PRESUMPTION HAS BEEN DRAWN THAT THE PETITIONER HAVE DURING THE SAID YEAR UNDER CONSIDERATION SHIFTED OUT CERTAIN PROFITS TO THE TU NE OF RS. 19865635.37, BUT THE FACT REMAINS AS TO HOW THE SAID FIGURE HAS BEEN ARRIVED AT, HAS NEITHER BEEN SHOWN IN THE REASON NOR IN ANSWER TO T HE OBJECTION. IT IS ALSO NOT REFLECTED IN REPLY TO THE PRESENT WRIT PETITION. THE SUBMISSION OF THE RESPONDENT WITH REGARD TO NOT PROVIDING DETAILS, IS NOT SATISFACTORY. IT IS TO BE NOTED THAT THE REASONS AS REQUIRED TO B E RECORDED IN THE PROCEEDINGS UNDER SECTION 148 OF THE ACT CANNOT BE VAGUE. THIS COURT IS OF THE FIRM VIEW THAT IF THE REASSESSMENT IS REQUIR ED TO BE MADE, THE VESTED RIGHT ALSO CREATED IN FAVOUR OF THE ASSESSEE AFTER ASSESSMENT IS SOUGHT TO BE TAKEN AWAY AND THEREFORE DETAILED REAS ONS MUST BE GIVEN OUT BY THE REVENUE FOR REASSESSMENT IN A GIVEN CASE . IN THE CASE OF SABH INFRASTRUCTURE LTD.(SUPRA). THE DELHI HIGH COURT HAS WHILE RELYING ON JUDGMENT OF SUPREME COURT OBSERVED AS UNDER: 11. THUS, IT IS ALSO NOW WELL SETTLED THAT THE REAS ONS TO BELIEVE HAVE TO BE SELF EXPLANATORY. THE REASONS CANNOT BE THEREAFT ER SUPPORTED BY ANY EXTRANEOUS MATERIAL. THE ORDER DISPOSING OF THE OBJECTIONS CANNOT ACT AS A SUBSTITUTE FOR THE REASONS TO BELIE VE AND NEITHER CAN ANY COUNTER AFFIDAVIT FILED BEFORE THIS COURT I N WRIT PROCEEDINGS. SIMILAR SITUATION AROSE IN THE PRESENT CASE. THE BA SIS FOR ARRIVING AT THE CONCLUSIONS ARE NOT TO BE FOUND FACTUALLY ON RECORD AS HAS BEEN NOTED IN THE AFORESAID JUDGMENTS. THE BASIS FOR THE REASONS TO BELIEVE INCLUDING EVIDENCE COLLECTED WAS REQUIRED TO BE PROVIDED AT T HIS STAGE. THE JUDGMENT AS CITED BY LEARNED COUNSEL FOR THE REVENU E IN GNK DRIVESHAFTS (INDIA) LTD. VS INCOME TAX OFFICER AS AT THE STAGE WHEN THE ASSESSEE HAD NOT SUBMITTED ANY OBJECTION TO THE ISS UANCE OF NOTICE AND IT IS IN THE CIRCUMSTANCES AND FACTS OF THE CASE CHAT SUPREME COURT OBSERVED AS UNDER: ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 17 11. THEREFORE, AT THIS STAGE IN THE PRESENT FACTS, WE ARE SATISFIED THAT THE ASSESSING OFFICER ON THE BASIS OF REASONS RECOR DED TO ISSUE IMPUGNED NOTICE DATED 30 TH MARCH, 2016, HAD REASONABLE BELIEF TO COME TO THE CONCLUSION THAT INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT. THE PETITIONER CAN DURING THE ASSESSMEN T PROCEEDINGS ESTABLISH THAT NO AMOUNT HAS ESCAPED ASSESSMENT. HO WEVER, WE DO NOT FIND THIS TO BE A FIT CASE TO INTERDICT THE REASSESSMENT PROCEEDINGS. IN THE PRESENT CASE HOWEVER, THIS COURT FINDS THAT THE ASSESSEE HAS FIRST RAISED OBJECTIONS ARID AFTER REPLY TO THE OBJECTIONS, HAS APPROACHED THIS. COURT CHALLENGING BOTH THE REASONS PROVIDED INITIALLY AS WELL AS IN REPLY AND THE OBJECTIONS. THIS COURT AGREES TO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE PETITIONER THAT EVEN IN THE REPLY AND THE OBJECTION, THERE IS NO SPECIFIC AVERMENT THAT THE P ETITIONER WAS HAVING ANY KNOWLEDGE RELATING TO THE CONDUCT OF THE SAID B ROKERS AND THEREFORE, PRESUMPTION OF SHIFTING OF CERTAIN PROFITS AT THE L EVEL OF ASSESSEE IS NOT MADE OUT PRIMA FACIE AND IN THE CIRCUMSTANCES THERE FORE, THE DETAILED REASONS AS HAS BEEN OBSERVED IN THE JUDGMENT PASSED BY DELHI HIGH COURT OUGHT TO HAVE BEEN MADE AVAILABLE TO THE PETITIONER. IN VIEW THEREOF, THE ACTION OF REOPENING OF ASSESSM ENT ON THE BASIS OF THE REASONS AS PROVIDED LETTER DATED 3.8.2016 IS NO T MADE OUT. THE ASSUMPTION OF JURISDICTION OF REASSESSMENT UNDER SE CTION 148 WAS THEREFORE NOT JUSTIFIED AND THE PETITIONER CANNOT B E SAID TO HAVE FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. TH E PROCEEDINGS ARE THEREFORE SET ASIDE AND THE ORDER OF REASSESSMENT AND THE NOTICE DATED 29.3.2016 IS QUASHED AND SET ASIDE.` THEREFORE, THE HON'BLE HIGH COURT HAS HELD THAT THE REOPENING OF THE ASSESSMENT ON THE BASIS OF THE REPORT OF DIT (IN V.) IS NOT VALID. FOLLOWING THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR.CIT VS. SHODIMAN INVESTMENTS (P) LTD. (SUPRA) AS WELL AS THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF SANDEEP STOCKS PVT. LTD. VS ACIT (SUPRA), WE HOLD THAT THE REOPENING OF THE ASSESSMENT BASED ON THE REPORT OF DIT (INV) IS NOT VALID WHEN THE CASE IS HIT BY THE PROVISO TO SECTION 147 OF THE ACT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS NOT EXPECTED TO DISCLOSE THE FACT THAT HE HAS INDULGED IN TRANSA CTION OF FICTITIOUS TRANSFER OF PROFITS BUT WHAT IS REQUIRED TO BE DISCL OSED IS THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE THORUGH TH E BROKER. HENCE, ONCE THE TRANSACTIONS CARRIED OUT BY THE ASS ESSEE ARE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 18 MATTER OF RECORD THEN THE CASE DOES NOT FALL IN THE CATEGORY OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE ASSESSE E IS NOT SUPPOSED TO DO WHAT OUGHT TO HAVE BEEN DONE BY THE ASSESSING OFFICER DURING THE SCRUTINY ASSESSMENT. ACCORDINGLY , THE REOPENING IS BAD IN LAW AND LIABLE TO BE QUASHED. FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL (SU PRA) AS WELL AS BINDING PRECEDENTS AS REFERRED AND RELIED UPON IN THE SAID DECISION, WE HOLD THAT REOPENING OF THE ASSESSMENT ON THE BASIS OF THE REP ORT OF THE INVESTIGATION WING, AHEMDABAD AFTER FOUR YEARS FROM THE END OF TH E ASSESSMENT YEAR WHERE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) , IS NOT VALID AS THE CASE IS HIT BY THE PROVISO TO SECTION 147 OF THE AC T. THE AO HAS NOT POINTED OUT AS TO WHAT FACTS OR PARTICULARS OF INCO ME, THE ASSESSEE HAS FAILED TO DISCLOSED FULLY AND TRULY. ACCORDINGLY, T HE REOPENING OF ASSESSMENT IS BAD IN LAW AND LIABLE TO BE QUASHED. SINCE WE HAVE QUASHED THE ISSUE OF REOPENING OF THE ASSESSMENT BY THE AO , THEREFORE, WE DO NOT PROPOSE TO ADJUDICATE UPON THE OTHER ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 4.1 IN ITA NO.440/JP/2019 FOR THE ASSESSMENT YEAR 2 012-13, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 19 1. NO VALID REASONS FOR RE-ASSESSMENT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS IN REOPENING THE AS SESSMENT U/S 148 OF THE IT ACT 1961 ARBITRARILY, WITHOUT APPRECIATING THE F ACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSION MADE, THUS, REOPENING O F ASSESSMENT U/S 147 MUST BE HELD BAD IN LAW AND THE CONSEQUENT ORDER PA SSED BY LD. AO DESERVES TO BE HELD VOID AB- INITIO. 2. THAT THE AO HAS NO POWER TO REOPEN THE COMPLETED ASSESSMENTS MERELY FOR A CHANGE OF OPINION - THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS WHERE THE PRIMARY FA CTS NECESSARY FOR ASSESSMENT , ARE FULLY AND TRULY DISCLOSED, AND THE LD. AO COMPL ETED ASSESSMENT U/S 143(3) AFTER MAKING NECESSARY ENQUIRES IN RESPECT OF LOSS FROM SHARE TRADING RS. 8,12,696/- THE ITO WILL NOT BE ENTITLE TO COMMENCE PROCEEDINGS FOR REASSESSMENT MERELY ON CHANGE OF OPINION. - CITVS DINESH CHANDRA 82 ITR367(SC) 3. BUSINESS LOSS DISALLOWED RS. 812,996/ - THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) AJMER HAS GROSSLY ERRED IN LAW AND FACTS WHERE THE LOSS WAS ORIGINALLY ASSESSED AS NON SPECULATIVE LOSS AND WHERE WITHOUT HAVING ANY N EW INFORMATION THE AO. CAME TO A CONCLUSION AFTER THE EXPIRY OF 2 YEARS TH AT THE LOSS SUFFERED BY THE ASSESSEE WAS A SPECULATIVE LOSS WITHOUT ANY EVIDENC E FROM OUTSIDE SOURCE. ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. 348 ITR 299(SC) 4. SANCTION U/S 151 WITHOUT APPLICATION OF MIND BY LD. (PR.CIT) :- THAT THE LEARNED PR. CIT HAS GROSSLY ERRED BOTH IN LAW AND FACTS IN GRANTING APPROVAL U/S 151 MECHANICALLY AND WITHOUT APPLICATION OF MIND AND THERE FOR SANCTION IS NOT ACCORDING TO MANDATE OF SC. 5. INTEREST LEVIED U/S 234A, 234B AND 234C THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. AO HAS GROSSLY ERRED IN LAW AND FACTS IN BY CONFIRMING IN CHARGING INTEREST U/S, 234(A), 234(B) & 234(C). ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 20 5.1 THE GROUND NO. 1 TO 4 OF THE ASSESSEE ARE REGAR DING VALIDITY OF REOPENING OF THE ASSESSMENT. 5.2 THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE AS SESSEE FILED ITS RETURN OF INCOME 30-09-2012 DECLARING TOTAL INCOME OF RS. 71,71,910/-. THE SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) O F THE ACT ON 21-02-2015. THEREAFTER THE AO REOPENED THE ASSESSME NT BY ISSUING NOTICE U/S 148 OF THE ACT ON 31-01-2017 TO DISALLOW THE LO SS ON SHARE TRADING BY TREATING THE SAME AS CAPITAL IN NATURE. THE LD.AR O F THE ASSESSEE REFERRED TO THE REASONS RECORDED BY THE AO AND SUBMITTED THA T AFTER ACCEPTING THE CLAIM OF LOSS FROM SHARE TRADING, THE AO NOW PROPOS ED TO DISALLOW THE SAME BY TAKING A DIFFERENT VIEW WHICH WAS TAKEN DUR ING THE SCRUTINY ASSESSMENT. THE LD.AR OF THE ASSESSEE POINTED OUT T HAT THE AO HAS ISSUED A NOTICE U/S 142(1) OF THE ACT ON 20-09-2014 ALONGW ITH A QUESTIONNAIRE. HE SUBMITTED THAT AS PER QUESTION NO. 14 OF THE QUE STIONNAIRE DATED 20-09-2014, THE AO ASKED THE ASSESSEE TO FURNISH AL L THE DETAILS REGARDING SHARE TRANSACTIONS. SUBSEQUENTLY, VIDE QUESTIONNAIR E DATED 11-11-2014, THE AO AGAINST ASKED THE ASSESSEE TO PRODUCE EVIDEN CE IN SUPPORT OF LOSS FROM SHARE TRADING. THE SAME QUERY WAS AGAIN ASKED BY THE AO ON 16-12-2014 AS PER PROCEEDINGS SHEET. THE LD.AR OF T HE ASSESSEE SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE RELEV ANT DETAILS IN SUPPORT OF ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 21 LOSS FROM SHARE TRADING AND ACCORDINGLY THE AO HAD ACCEPTED THE SAID CLAIM WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. THUS THE REOPENING OF THE ASSESSMENT BASED ON THE SAME MATER IAL AS AVAILABLE AT THE TIME OF SCRUTINY ASSESSMENT IS NOT VALID DUE TO THE REASONS THAT THE AO HAS REOPENED THE ASSESSMENT ON THE BASIS OF CHANGE OF OPINION. THE LD.AR OF THE ASSESSEE SUBMITTED THAT IN THE ABSENCE OF AN Y NEW INFORMATION OR ANY OTHER DEVELOPMENT, A COMPLETED ASSESSMENT U/S 1 43(3) CANNOT BE DISTURBED BY THE AO MERELY ON THE BASIS OF CHANGE O F OPINION. IN SUPPORT OF HIS CONTENTION, THE LD.AR OF THE ASSESSEE RELIE D ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. 348 ITR 299 (SC) AS WELL AS JUDGEME NT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. 320 ITR 561 (SC). 5.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THERE IS NO DISPUTE THAT THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMEN T IN ITS BOOKS OF ACCOUNTS AND BALANCE SHEET AND THEREFORE, THE LOSS ON ACCOUNT OF SALE OF INVESTMENT CANNOT BE ALLOWED AS BUSINESS LOSS. THE AO WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT HAD OVERLOOKED THIS FACT THAT THE CLAIM OF LOSS FROM SHARE TRADING IS NOT PERMISSIBLE BEING CAPITAL IN NATURE. THUS THE AO HAS REOPENED THE ASSESSMENT BASED ON UN DISPUTED FACTS OF ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 22 INCORRECT AND IMPERMISSIBLE CLAIM OF ASSESSEE REGAR DING LOSS FROM SHARE TRADING. THE LD. DR RELIED ON THE ORDERS OF THE AUT HORITIES BELOW. 5.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE FILED THE RETURN OF INCOME ON 30-09-2012 WHICH WAS SUBJECTED TO SCRUTINY ASSESSME NT U/S 143(3) OF THE ACT VIDE ORDER DATED 21-02-2015. DURING THE SCRUTIN Y ASSESSMENT, THE AO HAS ISSUED THE NOTICE U/S 142(1) ALONGWITH QUESTION NAIRE AND RAISED SPECIFIC QUERIES REGARDING THE SHARES TRANSACTIONS. WE FURTHER NOTE THAT AS PER PROCEEDINGS SHEET RECORDED BY THE AO DURING THE SCRUTINY ASSESSMENT, THE AO AGAIN RAISED A QUERY ON 11-11-2014, 16-12-20 14 AND 23-12-2014 REGARDING THE CLAIM OF LOSS FROM SHARE TRADING. THE AO HAS SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE THE EVIDENCE IN SUPPO RT OF SHARE LOSS OF RS. 8,12,692/-. THUS AFTER VERIFYING THE CLAIM OF LOSS OF RS. 8,12,692/- ARISING FROM PURCHASE AND SALES OF SHARES, THE AO ALLOWED T HE SAME WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. SU BSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 O F THE ACT ON 31-01- 2017 BY RECORDING THE REASONS AS UNDER:- THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCO ME FOR A.Y. 2012-12 ON 30-09-2012 DECLARING TOTAL INCO ME OF RS. 71,71,910/- WHICH WAS ASSESSED U/S 143(3) AT TH E TOTAL INCOME OF RS. 77,76,500/- ON 21-02-2015. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 23 ON GOING THROUGH THE RECORDS, IT WAS NOTICED THAT ASSESSEE HAS DEBITED AN ACCOUNT OF RS. 8,12,696/- O N ACCOUNT OF LOSS FROM SHARE TRADING. THE ASSESSEE HAS SHOWN SHARES AS INVESTMENT IN THE BALANCE SHEET. THEREFORE, THE LOS S FROM SHARE TRADING CANNOT BE CLAIMED AS BUSINESS LOSS. HENCE INCOME OF RS. 8,12,696/- HAS ESCAPED FROM ASSESSMENT. IN VIEW OF ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS. 10,79,979/-, 8,12,696/- H AS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961 FOR THE ASSTT. YEAR 2012-13.THE ESCAP EMENT OF INCOME WAS ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS. FROM THE REASONS RECORDED BY THE AO, IT IS MANIFEST THAT THE AO HAS FORMED ITS BELIEF ON GOING THROUGH THE RECORDS WHIC H IS ALREADY AVAILABLE WITH THE AO AT THE TIME OF FRAMING THE SCRUTINY ASS ESSMENT U/S 143(3). THOUGH THE LOSS ON ACCOUNT OF PURCHASE AND SALE OF SHARES CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE AS BUSINESS LOSS DUE TO T HE REASONS THAT THE ASSESSEE HAS SHOWN THE SHARES AS INVESTMENT AND NOT STOCK IN TRADE. HOWEVER, THE SAID MISTAKE COMMITTED BY THE AO WHILE COMPLETING THE SCRUTINY ASSESSMENT U/S 143(3) CANNOT BE RECTIFIED OR REVIEWED BY RESORTING TO THE PROVISIONS OF SECTION 147/148 OF T HE ACT AND THE AO IS NOT PERMITTED TO IMPROVE ITS OWN DECISION OR REVIEW ITS ON ORDER BY USING THE PROVISIONS OF SECTION 147/148 OF THE ACT. THERE ARE REMEDIES ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 24 PROVIDED UNDER THE INCOME TAX ACT AGAINST THE ERROR S COMMITTED BY THE AO WHILE PASSING THE SCRUTINY ASSESSMENT. IN THE CA SE IN HAND, THERE IS NO DISPUTE THAT THE ORDER PASSED BY THE AO U/S 143(3) OF THE ACT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE S O FAR AS THE CLAIM OF LOSS FROM PURCHASE AND SALES OF SHARES WAS ALLOWED BY TH E AO. THE REMEDY FOR SUCH ERROR COMMITTED BY THE AO IS PROVIDED U/S 263 OF THE ACT. EVEN OTHERWISE, AT THE TIME OF ISSUING NOTICE U/S 148 OF THE ACT ON 31-01-2017, THE LIMITATION WAS STILL AVAILABLE FOR EXERCISING T HE POWERS BY THE LD. CIT U/S 263 OF THE ACT. THUS INSTEAD OF RESORTING TO TH E PROVISIONS OF SECTION 147/148 OF THE ACT, THE AO OUGHT TO HAVE BROUGHT TH IS ERROR IN THE NOTICE OF THE LD. CIT. IT IS ALSO NOT IN DISPUTE THAT WHE N THE AO VERIFIED AND EXAMINED THE CLAIM OF THE ASSESSEE DURING THE SCRUT INY ASSESSMENT AND TAKEN A DECISION WHICH MAY BE INCORRECT DECISION BU T THE SAID DECISION CANNOT BE REVIEWED ON THE BASIS OF CHANGE OF OPINIO N. THERE IS NO FRESH MATERIAL OR INFORMATION RECEIVED BY THE AO AFTER PA SSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. THEREFORE, THE REOPENI NG OF THE ASSESSMENT BASED ON CHANGE OF OPINION IS NOT PERMITTED. ACCORD INGLY, IN VIEW OF THE BINDING PRECEDENTS IN SERIES OF DECISIONS INCLUDING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF ACIT VS ICICI PRIMARY DEALERSHIP LTD (SUPRA) AND CIT VS KELVINATOR OF INDIA LTD (SU PRA), THE REOPENING OF ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 25 ASSESSMENT IN THE CASE OF THE ASSESSEE IS NOT SUSTA INABLE IN LAW AND THE SAME IS QUASHED. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 6.1 THE GROUND NO. 5 OF THE ASSESSEE IS REGARDING C HARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT WHICH ARE MANDAT ORY AND CONSEQUENTIAL IN NATURE. 7.1 IN ITA NO.149/JP/2019 FOR THE ASSESSMENT YEAR 2 012-13, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL . 1. ADDITION ON ACCOUNT OF UNDISCLOSED INTEREST INCO ME RS. 48,000/- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CONFIRMING AD DITION OF INTEREST INCOME OF RS.48000/- IN THE P.Y. WITHOUT ANY JUSTIFICATION. T HE ASSASSEE HAS SHOWN INTEREST INCOME IN THE SUBSEQUENT ASSESSMENT YEAR A ND PAID TAX. 2. DISALLOWANCE OF EXPENSES OF RS 1,67,310/- U/S 14 A THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CONFIRMING DI SALLOWANCE OF EXPANSES OF RS.1,67,310/-U/S 14A (WORKOUT UNDER RULE 8D(2)) ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPTED INCOME. 3. DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE EXPENSES THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CONFIRMING DI SALLOWANCE OF EXPANSES ON THE GROUND OF UNVERIFIABLE. THE DISALLOWANCE IS NOT BASED ON ANY EVIDENCE /MATERIAL ON RECORD. NO ENQUIRY WAS CONDUCTED. IT I S PURELY BASED ON ASSUMPTION, PRESUMPTION AND CONJECTURE. 4. (A) DELAY PAYMENT OF ESI/EPF :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CONFIRMING AD DITION OF RS. 54,066/- ON ACCOUNT OF DELAY IN DEPOSIT OF EMPLOYEE CONTRIBUTIO N PF AND APPLYING THE PROVISIONS OF SECTION 36(1)(VA) OF THE IT ACT INSTE AD OF PROVISIONS OF SECTION 43B OF THE IT ACT WHICH IS APPLICABLE IN THE CASE O F THE ASSESSEE. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 26 (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CON FIRMING ADDITION OF RS. 93,949/-ON ACCOUNT OF DELAY IN DEPOSIT OF EMPLOYEE CONTRIBUTION ESI AND APPLYING THE PROVISIONS OF SECTION 36(1)(VA) OF THE IT ACT INSTEAD OF PROVISIONS OF SECTION 43B OF THE IT ACT WHICH IS AP PLICABLE IN THE CASE OF THE ASSESSEE. SUCH DISALLOWANCE CANNOT BE MADE WHERE THE PAYMENT OF GOVERNMENT DUES (EPF + ESI) IS MADE ON OR BEFORE TH E DUE DATE OF FILLING OF ITR U/S 139(1). 5. NO SHOW CAUSE NOTICE :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. AO HAS GROSSLY ERRED IN LAW AND FACTS IN MAKING DISPUTED T RADING ADDITIONS / DISALLOWANCE WITHOUT SERVING SHOW CAUSE NOTICE WHIC H IS MANDATORY AS PER CBDT CIRCULAR AND ALSO AGAINST THE PRINCIPLES OF NA TURAL JUSTICE. 6. INTEREST LEVIED U/S 234A, 234B AND 234C THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) II HAS GROSSLY ERRED IN LAW AND FACTS BY CONFIRMING IN CHARGING INTEREST U/S, 234(A), 234(8) & 234(C). 8.1 THE GROUND NO. 1 OF THE ASSESSEE IS REGARDING T HE ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME OF RS. 48,000/-. 8.2 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30-0 9-2012 DECLARING TOTAL INCOME OF RS. 71,71,910/-. DURING THE SCRUTIN Y ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAD GIVEN ADVANCE OF RS. 20 LACS TO M/S. KIRAN MODES ON WHICH NO INTEREST INCOME WAS SHOWN BY THE ASSESSEE WHEREAS AS PER FORM 26AS IT WAS FOUND THAT M/S. KIRAN MODES HAS SHOWN INTEREST PAID TO THE ASSESSEE COMPANY OF RS. 48,000/- ON WHI CH TDS OF RS. 4,800/- WAS DEDUCTED. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO EXPLAIN ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 27 AS TO WHY SUCH INTEREST INCOME WAS NOT DISCLOSED IN THE RETURN OF INCOME. THE ASSESSEE SUBMITTED ITS REPLY AND EXPLAINED THAT AN AMOUNT OF RS. 20 LACS WAS ADVANCED TO M/S. KIRAN MODES AT THE END OF MONTH OF MARCH 2012 AND THEREFORE, NO INTEREST HAD ACCRUED DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE INTEREST RECEIVED FROM THESE PARTIES HAS BEEN TAKEN TO THE INCOME IN THE NEXT YEAR. THUS THE ASSE SSEE CLAIMED THAT THE AMOUNT OF RS. 48,000/- WAS RECEIVED AS ADVANCE INTE REST FOR THE MONTHS OF APRIL AND MAY 2013. THE AO DID NOT ACCEPT THIS EXPL ANATION OF THE ASSESSEE AND MADE AN ADDITION OF RS. 48,000/- ON AC COUNT OF UNDISCLOSED INTEREST INCOME. THE ASSESSEE CHALLENGED THE ACTIO N OF THE ASSESSEE BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 8.3 BEFORE US, THE LD.AR OF THE ASSESSEE HAS REFERR ED TO THE LEDGER ACCOUNT OF M/S. KIRAN MODES IN THE BOOKS OF ACCOUNT OF THE ACCOUNT AND SUBMITTED THAT THE ADVANCE IN QUESTION AMOUNTING TO RS. 20 LACS WAS GIVEN ON 14-03-2012 AND THE AMOUNT OF RS. 48,000/- WAS RECEIVED AS ADVANCE INTEREST FOR THE MONTH OF APRIL AND MAY, 20 13. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ENTRY ON THIS ACCOUNT I S MADE IN THE LEDGER ACCOUNT OF M/S. KIRAN MODES ON 24-03-2012. THEREFOR E, EVEN OTHERWISE, THE INTEREST FOR TWO MONTHS IS NOT ACCRUED AT THE E ND OF MARCH 2012 WHEREAS THE ADVANCE ITSELF WAS GIVEN ON 14-03-2012. THE LD.AR OF THE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 28 ASSESSEE SUBMITTED THAT THIS INTEREST INCOME OF RS. 48,000/- HAS BEEN DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FO R THE ASSESSMENT YEAR 2013-14. WHEN THIS INCOME WAS NOT ACCRUED OR AROSE DURING THE YEAR UNDER CONSIDERATION THEN THE SAME CANNOT BE ASSESSE D IN THE YEAR UNDER CONSIDERATION. EVEN OTHERWISE, IT IS SUBJECTED TO D OUBLE TAXATION WHEN THE ASSESSEE HAS OFFERED THIS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR. 8.4 ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER FORM 26 AS, THE AO FOUND THAT THE ASSESSEE HAD RECEIVED INTEREST OF RS. 48,0 00/- FROM M/S. KIRAN MODES AND THEREFORE, ONCE THE ASSESSEE HAS CLAIMED THE CREDIT OF TDS ON THIS AMOUNT THEN THE INCOME IS ALSO LIABLE TO BE AS SESSED FOR THE YEAR UNDER CONSIDERATION. 8.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE AO HAS NOT DISPUTED THE FACT THAT ADVANCE OF RS. 20 LACS WAS GIVEN BY THE A SSESSEE TO M/S. KIRAN MODES ON 14-03-2012. AS PER LEDGER ACCOUNT OF M/S. KIRAN MODES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AN AMOUNT OF RS. 48,000/- IS SHOWN AS RECEIVED ON 24-03-2012 BEING TWO MONTHS INTEREST. T HE LD.AR OF THE ASSESSEE EXPLAINED THAT THIS IS AN ADVANCE INTEREST RECEIVED FOR THE MONTHS OF APRIL AND MAY, 2013. WE FIND MERITS IN THE EXPLA NATION OF THE ASSESSEE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 29 AS THE ENTRIES FOUND IN THE LEDGER ACCOUNT OF M/S. KIRAN MODES CLEARLY MANIFESTS THE INTEREST OF RS. 48,000/- IS FOR TWO MONTHS. THEREFORE, WHEN THE ADVANCE WAS GIVEN ON 14-03-2012 THEN THE INTERE ST FOR TWO MONTHS DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. F URTHER, WHEN THE LD.AR OF THE ASSESSEE HAS POINTED OUT THAT THIS INTEREST INCOME WAS OFFERED TO TAX FOR ASSESSMENT YEAR 2013-14 THEN WITHOUT VERIFYING THIS FACT FROM RECORDS WHICH WAS AVAILABLE WITH THE AO AT THE TIME OF PASSING THE ASSESSMENT ORDER, THE DENIAL OF THE CLAIM OF THE AS SESSEE IS HIGHLY ARBITRARY AND UNJUSTIFIED. THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION MADE BY THE AO ON VERY VAGUE REASONS STATED AT PARA 2.3 AS UNDER:- 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. IT IS SEEN THAT ASSESSEE HAS NOT SHOWN INTEREST INCOME OF RS. 48,000/- WHICH IS APPEARING IN FORM 26AS EVEN THOUG H ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. THE APPELLANT HAS NOT GIVEN ANY EVIDENCE THAT THIS INTE REST INCOME WAS DECLARED IN THE NEXT YEAR. RATHER THE AC COUNT OF M/S. KIRAN MODES FILED BY THE ASSESSEE SHOWS THAT I NTEREST OF RS. 48,000/- WAS RECEIVED IN THE MONTH OF MARCH, 20 12. THEREFORE, THE ADDITION OF RS. 48,000/- ON THIS ACC OUNT IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. THUS THE DEPARTMENT HAS ACCEPTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HENCE THE INCOM E CAN BE RECOGNIZED ONLY WHEN IT IS ACCRUED AND NOT ON THE BASIS OF REC EIPT. THE INTEREST ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 30 RECEIVED IN ADVANCE AND DECLARED AS INCOME IN SUBSE QUENT YEAR CANNOT BE ASSESSED FOR THE YEAR UNDER CONSIDERATION. WHEN THE RECORD WAS WITH THE DEPARTMENT REGARDING RETURN OF INCOME FOR THE ASSES SMENT YEAR 2013-14 THEN WITHOUT VERIFYING AND GIVING A DEFINITE FINDIN G, THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS NOT JUSTI FIED AND THE SAME IS DELETED. 8.5.1 THE TDS CREDIT OF RS. 4,800/- IN RESPECT OF I NTEREST INCOME CANNOT BE ALLOWED FOR THIS YEAR ALSO WHEN THE CORRESPONDIN G INCOME IS NOT OFFERED TO TAX FOR THE YEAR UNDER CONSIDERATION. AC CORDINGLY, THE SAME MAY BE ALLOWED FOR THE SUBSEQUENT YEAR WHEN THE ASS ESSEE HAS OFFERED THE CORRESPONDING INCOME TO TAX. 9.1 GROUND NO. 2 OF THE ASSESSEE IS REGARDING DISAL LOWANCE OF ADMINISTRATIVE EXPENSES OF RS. 1,67,310/- U/S 14A O F THE ACT. 9.2 THE AO NOTED THAT THE ASSESSEE HAS MADE INVESTM ENT OF RS. 3,70,60,847.51 IN UTI LIQ PLUS AND ALSO EARNED DIV IDEND INCOME OF RS. 23,64,565/- FROM MUTUAL FUND AND RS. 30,962/- F ROM SHARES TOTALING AMOUNT TO RS. 23,95,527/-. THE AO HAS ALSO NOTED T HAT THE ASSESSEE HAS CLAIMED GENERAL, ADMINISTRATIVE AND OTHER EXPENSES OF RS. 2,49,89,974/-. ACCORDINGLY, THE AO MADE DISALLOWANCE ON ACCOUNT OF INDIRECT ADMINISTRATIVE EXPENSES BEING 0.5% OF THE AVERAGE I NVESTMENT. THE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 31 ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 9.3 BEFORE US, THE LD.AR OF THE ASSESSEE SUBMITTED THAT FOR EARNING DIVIDEND INCOME, THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE. THEREFORE, NO DISALLOWANCE IS CALLED FOR U/S 14A OF THE ACT. HE HAS VEHEMENTLY ARGUED THAT THE PROVISIONS OF SECTION14A IS INVOKED ONLY WHEN THERE IS AN EXPENDITURE INCURRED BY THE ASSESS EE FOR EARNING EXEMPT INCOME. THE LD.AR OF THE ASSESSEE SUBMITTED THAT TH E EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT WAS INCURRED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE AND NO EXPENDI TURE WAS INCURRED FOR EARNING EXEMPT INCOME. 9.4 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSEE HAS MADE HUGE INVESTMENT IN THE MUTUAL FUND AND SHARES AND ALSO RECEIVED DIVIDEND INCOME OF MORE THAN RS. 23 LACS. THEREFORE , THE PROVISIONS OF SECTION 14A READ WITH RULE 8 OF INCOME TAX RULES, 1 962 ARE APPLICABLE IN THIS CASE. THE LD. DR RELIED ON THE ORDERS OF THE A UTHORITIES BELOW. 9.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE AO HAS MADE DISA LLOWANCE U/S 14A OF THE ACT ONLY ON ACCOUNT OF INDIRECT ADMINISTRATIVE EXPENSES AND COMPUTED THE QUANTUM OF DISALLOWANCE AS PER RULE 8D(2)(III) OF THE INCOME TAX ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 32 RULES BEING 0.5% OF AVERAGE INVESTMENT. WE FIND THA T DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS INCURRED EXPEN DITURE OF RS.10,61,704/- ON ACCOUNT OF ESTABLISHMENT/ OFFICE EXPENSES, APART FROM MISC. AND OFFICE EXPENSES. FURTHER, THE ASSESSEE HA S ALSO MADE FRESH INVESTMENT OF MORE THAN RS. 1.5 CRORES IN THE MUTUA L FUNDS DURING THE YEAR UNDER CONSIDERATION AND THERE WAS ALSO SALE OF INVESTMENTS IN SHARES DURING THE YEAR UNDER CONSIDERATION. THUS THERE IS A SUBSTANTIAL CHANGE AND CHURNING IN THE INVESTMENT PORTFOLIO OF THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT IN DISPUTE THAT THE DECISION OF MAKING INVESTMENT AND SELLING THE INVESTMENT IN SHARES AND MUTUAL FUNDS IS TAKEN AT THE HIGHEST LEVEL OF THE MANAGEMENT WHICH INCLUD ES THE DIRECTOR OF THE ASSESSEE COMPANY. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE WHICH CAN BE ATTRIBUTED FO R EARNING EXEMPT INCOME. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ACTION OF T HE AO FOR MAKING DISALLOWANCE U/S 14A OF THE ACT ON ACCOUNT OF INDIR ECT ADMINISTRATIVE EXPENDITURE. THUS GROUND NO. 2 OF THE ASSESSEE IS D ISMISSED. 10.1 THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING ADHOD DISALLOWANCE MADE BY THE AO @ 10% OF CERTAIN EXPENSES ON THE GRO UND OF UNVERIFIABLE EXPENSES WHICH WAS RESTRICTED TO 5% BY THE LD. CIT(A). ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 33 10.2 WE HAVE HEARD THE LD.AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE AO HAS MADE THE DISALLOWANCE @ 10% OF VARIOUS EXPENSES TOTAL AMOUNT OF RS. 24,13,645/- AND 10% OF WHICH COMES TO RS. 2,41,365/-. THE DETA ILS OF THE EXPENSES FOR WHICH DISALLOWANCE MADE BY THE AO ARE AS UNDER: - SR. NO. ITEM EXPENSES CLAIMED 1. SELLING EXPENSES 1067583.00 2. HANDLING EXPENSES 450000.00 3. MISCELLANEOUS EXPENSES 144387.00 4. SALES PROMOTION EXPENSES 83828.00 5. STAFF WELFARE EXPENSES 24032.00 6. TELEPHONE EXPENSES 3200.00 7. TRAVELLING & CONVEYANCE EXPENSES 613717.00 8. REPAIR & MAINTENANCE EXPENSE 26898.00 TOTAL 2413645.00 THE AO HAS GIVEN THE REASONS FOR DISALLOWANCE AS SO ME OF THE VOUCHERS ARE SELF MADE AND PAYMENT IS MADE IN CASH. ALL THES E REASONS GIVEN BY THE AO ARE VERY VAGUE AND GENERAL WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN RESPECT OF PARTICULAR EXPENDITURE. THE LD. CIT(A ) HAS RESTRICTED THE DISALLOWANCE TO 5% IN PARA 4.3. OF HIS IMPUGNED ORD ER AS UNDER:- 4.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 34 ASSESSING OFFICER MADE DISALLOWANCE @ 10% OF VARIOU S EXPENSES AS THE VOUCHERS WERE NOT COMPLETED AND SOM E WERE SELF MADE AND MOST THE PAYMENTS WERE IN CASH. I FIN D THAT THE REASONS GIVEN ABOVE FOR DISALLOWANCE BY THE ASSESSI NG OFFICER ARE CORRECT. HOWEVER, THE DISALLOWANCE SEEM S TO BE ON THE HIGHER SIDE AND THEREFORE, REDUCED TO 5% OF EXPENSES. ASSESSEE GETS CONSEQUENT RELIEF. THUS BOTH THE AO AS WELL AS LD. CIT(A) HAVE MADE AD HOC DISALLOWANCE ONLY ON GENERAL GROUND OF NON-VERIFIABLE OF SOME OF THE EXPENSES ON ACCOUNT OF SELF MADE VOUCHERS AND PAYMENT MADE IN C ASH. NEITHER THE AO NOR THE LD. CIT(A) HAVE POINTED OUT ANY SPECIFIC DE FECTS IN RESPECT OF A PARTICULAR EXPENDITURE OR VOUCHER. ACCORDINGLY, THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) ON ADHOC BASIS IS NOT P ERMISSIBLE . HENCE, WE DELETE THE ADHOC DISALLOWANCE OF EXPENSES. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 11.1 THE GROUND NO. 4 OF THE ASSESSEE IS REGARDING THE ADDITION MADE BY THE AO IN RESPECT OF DELAY IN PAYMENT OF ESI & P F. 11.2 WE HAVE HEAD THE LD.AR AND LD. DR AND CONSIDER ED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS ESI AND PF BEFORE ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 35 DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1) O F THE ACT. THE LD. CIT(A) HAS NOT DISPUTED THIS FACT. HOWEVER, THE ADD ITION WAS CONFIRMED BY THE LD. CIT(A) BY RELYING ON THE DECISION DATED 13-03-2018 OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. RAJAS THAN RENEWABLE ENERGY CORPORATION LTD, JAIPUR. IT IS PERTINENT TO NOTE THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE FROM THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS STATE BANK OF BIKA NER AND JAIPUR (2014), 363 ITR 70 (RAJ). EVEN IN THE CASE OF M/S. RAJASTHAN RENEWABLE ENERGY CORPORATION LTD.,JAIPUR THE HON'BLE RAJASTHA N HIGH COURT HAS FOLLOWED THE DECISION IN THE CASE OF CIT VS STATE B ANK OF BIKANER AND JAIPUR (SUPRA). HOWEVER, THERE IS A TYPOGRAPHICAL M ISTAKE IN THE CONCLUDING PART OF THE JUDGEMENT IN THE CASE OF M/S . RAJASTHAN RENEWABLE ENERGY CORPORATION LTD.,JAIPUR THAT THE ISSUE IS DECIDED IN FAVOUR OF THE DEPARTMENT WHICH IS OTHERWISE NOT CON SISTENT WITH REASONINGS AND DECISION FOLLOWED BY THE HON'BLE RAJ ASTHAN HIGH COURT IN THE CASE OF CIT VS STATE BANK OF BIKANER AND JAIPUR (SUPRA). IT IS PERTINENT TO MENTION THAT SIMILAR ISSUE HAS BEEN DECIDED BY THIS BENCH IN THE CASE OF M/S. K.S. AUTOMOBILES (P) LTD VS ITO/ DCIT (ITA NO.1184 & 1185/JP/2018 FOR THE ASSESSMENT YEAR 2013-14 & 2014 -15) VIDE ITS ORDER DATED 8-03-2019 AS UNDER:- ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 36 3. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE HONBLE JURISDICTIO NAL HIGH COURT INCLUDING THE DECISION IN CASE OF CIT VS. STATE BANK OF BIKANER & JAIPUR 99 DTR 131 AS WELL AS DECISION IN CASE OF CIT VS. JAIPUR VIDYUT VITRAN NIGAM LTD. 363 ITR 307 AND IN CASE OF CIT VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. 366 ITR 163. WE FURTHER NOTE THAT THE LD. CIT(A) THOUGH HAS NOT DISPUTED THE VARIOUS DECISIONS OF HONBLE HIGH COURT HOWEVER, DISALLOWANCE MADE BY THE AO ARE SUSTAINED AS HE MISUNDERSTOOD TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF PCIT VS. M/S RAJASTHAN RENEWABLE ENERGY CORPORATION LIMIT ED IN DB ITA NO. 10,11 & 12/2018 DATED 13.03.2018. IN THE CASE OF PCIT VS. M/S RAJASTHAN RENEWABLE ENERGY CORPORATIO N LIMITED (SUPRA) THE HONBLE HIGH COURT HAS CONSIDE RED THIS ISSUE IN PARA 4 TO 6 AS UNDER:- 4. SO FAR AS QUESTION NO. 1 IS CONCERNED, THE SAME IS NOW COVERED BY THE DECISIONS OF THIS COURT I N PRINCIPAL COMMISSIONER OF INCOME-TAX V/S RAJASTHAN STATE SEED CORPORATION LTD. [2016] 386 ITR 267 (RAJ) WHEREIN IT HAS BEEN HELD AS UNDER:- IN SO FAR AS THE EXPENDITURE INCURRED ON STATE RENEWAL FUND IS CONCERNED, THE SAID EXPENDITURE ALSO GOES TO SHOW THAT THE RENEWAL FUND WAS SET UP BY THE STATE GOVERNMENT AND WAS CREATED WITH THE OBJECT OF PROVIDING A SAFETY NET FOR THE WORKERS LI KELY TO BE EFFECTED BY RESTRICTING IN THE STATE PUBLIC ENTERPRISE AND THAT A FINDING OF FACT HAS BEEN RECORDED THAT THE CONTRIBUTION MADE TO THE STATE RENEWAL FUND IS SOLELY FOR THE PURPOSES OF THE WELFARE AND BENEFIT OF THE EMPLOYEES. IN OUR VIEW, IT IS FOR THE ASSESSEE TO DECIDE WHETHER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF BUSINESS AND EXPENDITURE OF THIS NATURE BEING FOR ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 37 BUSINESS EXPEDIENCY IS CERTAINLY ALLOWABLE DEDUCTION UNDER SECTION 37(1) OF THE ACT. IN OUR VIEW ANY NORMAL EXPENDITURE FOR THE WELFARE AND BENEFIT OF TH E EMPLOYEES IS ALLOWABLE EXPENDITURE UNDER SECTION 37(1), THE TRIBUNAL HAS COME TO A FINDING OF FACT TH AT IT WAS A LEGAL OBLIGATION OF THE RESPONDENT-ASSESSEE TOWARDS CONTRIBUTION OF THE SAID AMOUNT TO THE STATE RENEWAL FUND AND THERE BEING A LEGAL OBLIGATION AS WELL IN OUR VIEW THE TRIBUNAL HAS COME TO A CORRECT CONCLUSION. IN VIEW OF THE ABOVE, QUESTION NO. 1 IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 6. WITH REGARD TO ISSUE NO. 2 AND 3 THE CONTROVERSY IS PENDING BEFORE THE SUPREME COURT IN C.I.T., JAIPUR VS/ MS STATE BANK OF BIKANER AND JAIPUR IN S LP NO. 16249/2014, THEREFORE, SUBJECT TO DECISION OF SLP, FOR THE PRESENT, THESE ISSUES ARE DECIDED ON IN FAVOUR OF T HE DEPARTMENT AND AGAINST THE ASSESSEE. IT WILL BE OPEN FOR THE DEPARTMENT TO RECOVER THE AMOUNT IF THE DECISIO N IS IN THEIR FAVOUR. THUS, IT IS CLEAR THAT THE HONBLE JURISDICTIONAL HI GH COURT HAS FOLLOWED THE EARLIER DECISIONS IN CASE OF PCIT VS. RAJASTHAN STATE SEED CORPORATION LIMITED 386 ITR 267 AS WELL AS DECISION IN CASE OF CIT VS. STATE BANK OF BIK ANER & JAIPUR (SUPRA). ALL THESE DECISIONS WHICH WERE OLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT ARE IN FAVOUR OF THE ASSESSEE HOWEVER, IN THE CONCLUSION IN PARA 6 THERE IS A TYPOGRAPHICAL MISTAKE WHEREIN IT IS STATED THESE IS SUES DECIDED IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE. THE WHOLE DECISION OF THE HONBLE HIGH COU RT HAS TO BE CONSIDERED IN THE CONTEST OF THE DECISION FOLLOWED AND THE SUBSEQUENT LINE WHICH SAYS IT WILL BE OPENED FOR THE DEPARTMENT TO RECOVER THE AMOUNT IF THE DECISI ON IN THEIR FAVOUR WHICH MEANS THAT IN CASE OF FURTHER APP EAL ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 38 BEFORE HONBLE SUPREME COURT IF DECISION IS DELIVER ED IN FAVOUR OF THE DEPARTMENT IT CAN RECOVER THE AMOUNT. THEREFORE, EVEN THE DECISION WHICH IS RELIED UPON THE LD. CIT(A) THE SAME IS IN FAVOUR OF THE ASSESSEE THOUGH DUE TO TYPOGRAPHICAL MISTAKE IT WAS MISUNDERSTOOD BY THE LD . CIT(A) AS IN FAVOUR OF THE REVENUE. ACCORDINGLY, IN VIEW OF A SERIES OF DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE AND FURTHER HONBLE SUPRE ME COURT IN CASE OF PCIT VS. RAJASTHAN STATE BEVERAGES CORPORATION LTD. 250 TAXMANN 16 HAS DISMISSED THE S LP FILED BY THE DEPARTMENT THIS ISSUE IS DECIDED IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, DISALLOWANCES/ADDITIONS MADE BY THE AO ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF & ESI ARE DELETED. IN VIEW OF THE ABOVE FACTS, CIRCUMSTANCES OF THE CA SE AND THE DECISION OF THIS BENCH IN THE CASE OF M/S.K.S. AUTOMOBILES PVT. LTD VS ITO (SUPRA), THE SAID DISALLOWANCE/ ADDITION MADE BY TH E AO IS DELETED. 12.1 THE GROUND NO. 5 OF THE ASSESSEE IS GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION. 13.1 THE GROUND NO. 6 OF THE ASSESSEE IS REGARDING CHARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT WHICH ARE MANDAT ORY AND CONSEQUENTIAL IN NATURE. ITA NO.439/JP/2019 M/S. VEDANSH JEWEL (P) LTD. VS DCIT, CIRCLE 6,JAIPUR 39 14.0 IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO 439 & 440/JP/2019 ARE ALLOWED AND ITA NO. 149/JP/2019 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 /12/201 9. SD/- SD/- FO FO FO FOE FLAG ;KNO E FLAG ;KNO E FLAG ;KNO E FLAG ;KNO FOT; IKY JKO FOT; IKY JKO FOT; IKY JKO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23 /12/ 2019 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. VEDANSH JEWEL (P) LTD. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT , CIRCLE - 6,JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.439/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR