Saket Agarwal, New Delhi V. ACIT Circle-58(1), New Delhi

ITA 494/DEL/2020

AI Insights

The case involves Saket Agarwal, the appellant, contesting the reassessment order passed by the Assessing Officer (AO) for the Assessment Year 2011-12 under Section 147 read with Section 143(3) of the Income Tax Act, 1961. The reassessment was based on alleged escapement of income from the sale of shares of Amulya Leasing and Finance Ltd., which were considered penny stocks. The AO made additions under Section 68, treating the income as unexplained cash credits. The Commissioner of Income Tax (Appeals) upheld the AO's decision, which was then challenged in the Tribunal. The Tribunal found that the reassessment was not valid as the additions were made on grounds unrelated to the reasons recorded for reopening the assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121644 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-09-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 26-01-2020
• Other Referred Cases: CIT vs. Jet Airways, Ranbaxy Laboratory Ltd. vs. CIT, CIT vs. Living Media India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 68; 69; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” DELHI BEFORE CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.494/DEL/2020 Assessment Year 2011-2012 Saket Agarwal, L-506, Agrasen Apt. Plot No.66, IP Extn. Patparganj, New Delhi. Vs. ACIT, Circle-58(1) New Delhi TAN/PAN: ABXPA8150D (Appellant) (Respondent) Appellant by: Shri C.S. Anand, Adv. Respondent by: Shri Anuj Garg, Sr.DR Date of hearing: 26 09 2023 Date of pronouncement: 06 10 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he c a p ti o n e d a p pe a l h as b e e n fi le d b y t he a ss es se e ag ai n s t t h e or d e r o f t he C o m m i ss i o n e r o f In co me Ta x (A p p e a l s) - X X X V , D e l hi [‘ C IT (A ) ’ in s h o rt ] d a t e d 1 5. 1 2 . 20 1 9 ar is i n g f ro m th e a ss e s s me n t or d e r d a t e d 3 0 . 12. 2 0 1 8 pa sse d b y t he A sse s si ng O ff ic e r ( A O ) un de r S ec t i on 1 47 r. w . Sec t i o n 1 4 3( 3 ) o f t h e I nc o m e T a x Ac t , 1 9 6 1 ( t he A ct ) co nc er n i n g A Y 2 010 - 1 1. 2. T he gr ou n d s o f a p pe a l r ai se d b y t he a sse ss e e r ead a s u n d e r : “ 1 . T h a t t h e l d . C IT ( A ) h a s e r r e d i n n o t q u a s h i n g th e p r o c e e d i n g s i n i t i a t e d u / s . 1 4 7 . 2 . T h a t t h e l d . C I T ( A ) h a s e r r e d i n n o t a p p r e c i a t in g t h e l a w t h a t n o o t h e r a d d i t i o n m a y s u r v i v e , u n l e s s & u n t i l t h e r e p or t e d l y e s c a p e d i n c o m e ( R s . 1 0 , 0 2 , 8 6 5 / - ) i s a s s e s s e d . 3 . T h a t t h e l d . C I T ( A ) h a s e r r e d i n n o t d i s a p p r o v i ng t h e I d AO ' s f i n d in g I.T.A. No.494/Del/2020 2 t h a t t h e S h o r t T e r m C a p i t a l G a i n o f R s . 1 , 3 7 , 6 4 3 / - , ( w h i c h a r o s e o n sa l e o f 2 6 5 0 0 s h a r e s o f A m u l y a L e a s i n g & F i n a n c e L i m i t e d) w e r e b o g u s. 4 . T h a t t h e l d . C I T (A ) h a s e r r e d i n u p h o l d i n g t h e tr e a t m e n t g i v e n b y t h e I d A O t o t h e a m o u n t o f S h o r t T e r m C a p i t a l G a i n o f Rs . 1 , 3 7 ,6 4 3 / - (w h i c h a ro s e o n sa l e o f 2 6 5 0 0 s h a r e s o f A m u l y a L e a s i n g & Fi n a n c e L i m i t e d ) 5 . T h a t t h e l d . C I T ( A ) h a s e r r e d i n u p h o l d i n g t h e ad d i t i o n o f R s . 3 , 1 3 ,2 2 7 / - , w h i c h wa s m a d e b y t h e I d A O o n h y p o t h e ti c a l b a s i s u / s 6 8 . 6 . T h a t t h e l d . C I T ( A ) h a s e r r e d i n u p h o l d i n g t h e ad d i t i o n o f R s . 1 0 , 2 3 8 / - w h i c h w a s m a d e b y t h e I d A O w h i l e s t a t i n g " s i n c e t he g a i n s i n t r a d i n g in A m u l y a L e a s i n g & F i n a n c e L i m i t e d i s b e i n g t r e a t e d as b o g u s e x p e n s e s c l a i m e d i n t h i s a c c o u n t a r e d i s a l l o w e d a n d a d d e d b ac k t o t h e i n c o m e o f t h e a s s e s s e e u s 6 9 C o f t h e I n c o m e T a x A c t 1 9 6 1 " . ” 3. W he n t he ma t t er w a s c a ll e d fo r he a ri n g , t h e l d. c ou n s el fo r t he a s se ss e e a t t h e out se t s u b m i t t e d th at w h i l e t her e a r e m a n y fa c et s t o t h e c ha l le ng e t o w a rd s a s su m p t i on o f j u ri sd i c t i o n u nd er S e c t io n 14 7 o f t h e A c t in t h e i n st a n t c a s e . O ne o f th e fo remo st gr ou n d s ho w e v er i s t ha t t h e ad d i t io ns m a de i n t he c o u r se o f t he a ss e s s me n t a re d e h o rs t h e re a so ns re c or de d a n d t h e r e f o re , w h e re t he r e aso n s re c or d e d d o no t l e a d t o a n y a dd i t i on s or d is al l ow a nc e s , t he ot he r a dd i t i o ns a r e n o t sus t a i n a b l e i n a re -a s se ss m e n t o rd e r i n vi e w o f se v e r a l j u di ci a l p r e c e d e n t s i n t h is r e g ar d. T he re as o n s re c or de d i n t hi s re ga rd w e r e a dv er t e d an d i t w a s c o n t e n d e d th at a s pe r t he re a so ns , t h e s a l e co ns i d e ra t i on (t ra d e va l ue ) a m o unt i n g t o Rs. 1 0 , 02, 8 6 5/ - h a s e sc a p e d as se ss m e nt q ua t he s c r i p ‘A m ul ya Le a si ng a n d F i na n ce Lt d. ’ (n o w A p ol l o P ip e s L t d. ). T he r e - a ss es s m e n t h ow e v e r h a s be e n f ra m e d by i n v o ki ng S e cti o n 6 8 o f t he A ct t ow a r d s ga i n o n s a l e o f se c u r i t i e s a mo u nt i n g t o Rs. 3 , 1 3, 22 7 / -. Th e l d. c o u n se l c o n te nd ed t ha t t he a s se s s m en t o f i nc o m e ot he r t ha n i nc o m e a l l e g e d l y e sc a p e d as s e ss m e n t i n t h e r e a s on s r e co rd e d i s c on t i ng e n t u po n t he a s se ss me nt o f i n c o m e a ll e g e d l y es c a pe d a ss es s m e n t i n th e r e as o n s re co rd e d . T h e l d . c ou n se l t h u s c on t en de d t ha t t h e re - as se ss m en t fr a me d in t he i ns t a n t c a se is t o t a l ly d i v o rc e d fr o m t h e re a s on s r e co rd ed a n d t hu s t he i mp u g n e d a ddit i on s a r e n ot I.T.A. No.494/Del/2020 3 sus t a i n a b l e i n l a w . 4. T he re a so ns r e c or d e d b y t h e A ss e s si n g O ff i c e r unde r re f e r e n c e i s re pr o d uc e d h e r e u nde r : “ R e a s o n s f o r r e o p e n i n g o f t h e a s s e s s m e n t i n t h e c a se o f S h . S a k e t A g a rw a l f o r A Y 2 0 1 1 - 1 2 u / s . 1 4 7 o f t h e I n c o m e T a x Ac t , 1 9 6 1 . T h e a s s e s s e e i s a n i n d i v i d u a l a n d h a s i n c o m e f r o m bu s i n e s s a n d p ro f e s s i o n , i n c o m e f ro m c a p i t a l g a i n s a n d i n c o m e f ro m o t h e r so u r c e s . T h e a s s e s s e e f i l e d r e t u r n o f i n c o m e f o r A Y 2 0 1 1 - 1 2 d e c l a r i n g t o t a l i n c o m e o f R s . 6 7 ,8 1 , 1 6 0 / - . T h e I T R w a s p ro c e s s e d u /s . 1 4 3 (1 ) o f t h e A c t , h o w e v e r n o a s s e s s m e n t w a s c a r r i e d o u t u / s . 1 4 3 ( 3 ) of t h e A c t . 2 . F o r A Y 2 0 1 1 - 1 2 , t h e A s s e s s i n g O f f i c e r r e c e i v e d in f o r m a t i o n f r o m O o D D I T (I n v ) , U n i t 6 (2 ) , M u m b a i t h r o u g h e - m a i l d a t e d 25 .0 3 . 2 0 1 8 t h a t t h e a s s e s s e e h a d s o ld sh a r e s o f a p e n n y s t o c k ' A m u l y a Le a s i n g a n d F i n a n c e L t d . ( n o w A p o l l o P i p e s L i d . ) d u r i n g F Y 1 0 - 1 1 . 3 . T h i s i n f o r m a t i o n w a s c ro s s - v e r i f i e d w i t h o t h e r in f o r m a t i o n a v a i l a b l e w i t h t h e A O i n r e sp e c t o f t h e a s s e s s e e . W h e n t h e 3 60 d e g r e e p r o f i l e o f t h e a s s e s s e e w a s e x a m i n e d o n th e I T B A p o r t a l , i t w a s f ou n d t h a t t h e a s s e s s e e h a d so l d s h a r e s o f t h e s c r i p " A m u l y a L e a s i n g a n d F in a n c e L t d ." t r a d e v a l u e a m o u n t i n g t o Rs . 1 0 ,0 2 , 8 6 5 / - . I t i s a l s o s e e n t h a t t h e a s s e s s e e h a s c l a i m e d i n c o m e e x e m p t u / s . 1 0 ( 3 8 ) o f t h e A c t a m o u n ti n g t o R s . 1 , 1 8 ,9 4 , 2 4 7 d u r i n g t h e y e a r u n d e r c o n s i d e ra t i o n . 4 . I t i s p e r t i n e n t t o n o t e t h a t t h e i s s u e o f p e n n y s t o c k s h a s b e e n e x a m i n e d i n c o n s i d e ra b l e d e t a i l b y t h e In c o m e Ta x D e p a r t m e n t, w h e r e i t h a s b e e n f o u n d t h a t s u c h s c r i p s a r e u s e d b y b e n e f i c i a r i e s t o b o o k n o n -g e n u i n e l o n g - t e r m / S h o r t - t e r m c a p i t a l g a i n s / c a p i t a l l o s s / t r ad i n g l o s s i n o r d e r t o e s c a p e p a y i n g t a x o n s u c h c o n s i d e r a t i o n . W h e n t h e f i n a n c i a l s o f t h e a b o v e s c r i p s w e r e a n a l ys e d , i t i s s e e n t h a t t h e c o m p a n y h a s r e p o r t e d n e g l i g i b l e p r o f i t s d u r i n g t h e p e r i o d w h e n t h e p r i c e s o f s u c h s c r i p s s h o w e d h u g e p r i c e v a r i a t i o n s . P r o f i t s b e f o r e t a x f o r A Y 2 0 1 0 - 1 1 a n d AY 2 0 1 2 - 1 3 a r e a s u n d e r : ( i n c r o r e s ) M a r c h e n d i n g A m u l y a L e a s i n g & F i n a n c e L t d . ( n o w A p o l l o P i p e s L t d . ) 2 0 1 0 2 . 1 9 2 0 1 1 2 . 5 3 2 0 1 2 0 . 5 2 T h i s w a s i n c o m p l e t e c o n t r a s t t o t h e l a r g e f l u c t u at i o n i n p r i c e s o f s h a r e s o f t h i s s c r i p d u r i n g F Y 1 0 - 1 1 . S u c h h u g e p r ic e v a r i a t i o n s a r e n o t s u p p o r t e d b y t h e f i n a n c i a l s o f t h e c o m p a n y . T h i s a ls o su g g e s t s t h a t p r i c e s I.T.A. No.494/Del/2020 4 o f t h e s c r i p w e r e r i g g e d i n o rd e r t o a l l o w b e n e f i c ia r i e s t o b o o k b o g u s g a i n s . D u r i n g e n q u i r i e s , i t w a s a l s o f o u n d t h a t c e rt a i n b ro k e r s a n d e n t r y p ro v i d e r s a l s o m a d e s t a t e m e n t s b e f o r e t h e D i r e c t o r at e o f I n v e s t i g a t i o n , K o l k a t a a n d P a t a w h e r e i n t h e y a d m i t t e d t o h a v i n g b ee n i n v o l v e d i n m a n i p u l a t i o n o f p r i c e s o f s u c h s c r i p s . 5 . I t i s e v i d e n t t h a t M / s A m u l y a L e a s i n g a n d F i n a nc e L t d . ( n o w A p o l l o P i p e s L t d . ) i s p e n n y s t o c k s a n d g a i n s b o o k e d b y t h e a s s e s s e a r e n o t g e n u i n e . T h i s i s b a s e d o n t h e i n f o r m a t i o n r e c e i v e d i n t h i s o f f i c e , a s w e l l a s i n d e p e n d e n t e n q u i r i e s t o c o r r o b o r a t e t h e s a m e a s e x p l a i n e d i n t h e p r e c e d i n g p a r a s . 6 . T h e r e f o r e , b a s e d o n t h e a s s e s s e e ' s n a t u r e o f t r an s a c t i o n s , c o r r o b o r a t i v e e v i d e n c e o n t h e S c r i p s a n d i t s f i n a n ci a l s a s d e t a i l e d a b o v e , I h a v e r e a so n s t o b e l i e v e t h a t i n c o m e c h a r g e a b l e t o t a x h a s e s c a p e d a s s e s s m e n t f o r A Y 1 1 - 1 2 . S u c h e s c a p e d i n c o m e i s l i ke l y t o a m o u n t t o a t l e a s t R s . 1 0 ,0 2 ,8 6 5 / - 7 . I n t h i s c a s e , a r e t u r n o f i n c o m e w a s f i l e d f o r t h e A Y u n d e r c o n s i d e r a t i o n , b u t n o s c r u t i n y a s s e s s m e n t u / s . 1 4 3 (3 ) o f t h e A c t w a s c a r r i e d o u t . A c c o r d i n g l y , i n t h i s c a s e , t h e o n l y r eq u i r e m e n t t o i n i t i a t e p ro c e e d i n g s u / s . 1 4 7 o f t h e A c t i s t h a t t h e A O h a v e " r e a so n s t o b e l i e v e ’ t h a t i n c o m e c h a rg e a b l e t o t a x h a s e s c a p e d a s s e s s m e nt , w h i c h h a s b e e n d u l y r e c o r d e d i n P a ra s 1 t o 6 a b o v e . I t i s p e r t i n e nt t o m e n t i o n h e r e t h a t i n t h i s c a s e , t h e r e t u r n w a s m e r e l y p r o c e s s e d u / s . 1 4 3 ( 1 ) o f t h e A c t . I n v i e w o f t h e a b o v e , t h e p r o v i s i o n s o f c l a u s e ( b ) o f E x p l a n a t i o n 2 t o S e c t i o n 1 4 7 a r e a p p l i c a b l e t o t h e f a c t s o f t h i s c a se a n d i t i s d e e m e d t o b e a c a s e w h e r e i n c o m e c h a r g e a b l e t o t a x h a s e s c a p e d as s e s s m e n t f o r t h e r e l e v a n t a s s e s s m e n t y e a r . ” 5. I t i s t h e c a s e o f t h e a s se ss e e t h a t t he r e- as se ss m e nt h a s be e n ma de o n a l t og e t h e r d i f fe re n t g r o u n ds t ha n w h a t i s re co r de d i n t h e re a so ns for r e o p e n i ng t h e a ss e s s m en t . A s pe r t h e r eas o n s r ec or de d, t he a l l e g a t i o n o f e s c ap e m e n t i s w it h r e fe r e n ce to inc o m e c l ai m e d a s e xe mp t u n de r S e c ti on 1 0( 38 ) o f t he A c t t o t h e e xt ent o f Rs. 1 0 , 02, 8 6 5/ - in r e la t i on t o t r ad in g i n t h e sc r i p s n a m el y , A mu l y a Le a si ng a nd F i na nc i ng L t d . H o w ev er , a pe r u s al o f t he re - a ss e s s me n t or d e r sh ow s th at th e ad di t i o n s ha ve be e n ma d e b y i nvo k i n g Se c t i o n 68 o f t h e A c t f or a n a m o u nt o f Rs. 3 , 1 3, 2 27 / - h o l d i ng t he sa m e t o b e un e x p l a i n e d ca sh c r e d i t . T h u s, t h e ‘ r e aso n t o b e l i eve ’ w hi c h i n t he fi r st i n st a n c e , i m p e l l ed t h e D ep a r t m e nt t o r eo pe n th e p r oc e e d i n g s ha s u n d e r go ne a c o m p l e t e c h a n g e . I.T.A. No.494/Del/2020 5 6. I t i s w e ll se t t l e d t ha t o nc e t h e A ss e ss i n g O f fi ce r a ss u me s j ur i s d i c t io n t o r e o p e n t h e pr oc ee di ng s u n de r S e ct i on 1 4 8 , h e c a n n ot i nd e p e n d e n t ly m a k e a d d i ti o n s in re s pe c t o f o t he r i nc o me w hi c h e sc a p e s a ss e s s m en t un l e s s th e A ss e ss i n g O ff i c e r m a ke s so me a dd i t i o ns b a se d o n a l l e g a t i on s i n t h e r e a s on s re c o rd e d . In ot he r w or ds, i f t h e A ss e ssi ng O ffi ce r d o e s n o t a ss e s s i nco m e fo r w hi c h re a so ns w e re r e c o r de d, he i s n ot e m p o w er e d t o a ss ess ‘ ot he r i nc o m e ’ i n t h e r e -a ss e s s me n t pr oc e e d i n g s. A re fe r e nc e i s made to v a r io us j ud g me n t s vi z , C IT v s. J e t A i rw a y s, 33 1 IT R 2 36 (B om ); R a n ba xy L ab o ra t o ry L t d . vs. CIT , or de r d at ed 03 J u ne , 2 01 1 (D e l H C) ; C IT v s. L i v i n g Me d i a In di a L t d. , 3 59 I T R 1 0 6 (D e l). I n t h e l i g h t o f t h es e j ud g me n t s, i t i s n o t o p e n t o th e A ss e s si n g O f fi c e r t o as s e ss in co me on a c co un t o f o t he r i s su e s i n d e pe nd en t l y w h er e t he r e a s o n s r e c or de d do n o t c u l mi n a t e i n a n y a d di t i on s t o t h e re t ur ne d inc o m e . 7. I n t h e i n s t a n t c as e , th e f o un da t i o n o f r e o p e n i n g h a s be e n kn o c k e d o ut a n d a ddi t i on s ha ve b ee n ma d e o n u nr e l a te d gr ou n d s w hi c h is no t p er mi ssi bl e i n l a w . T h u s, t he ad di t io ns un de r ch a l l e nge a re n ot p e r mi s si bl e i n l aw . H e nc e , s uc h i mp u gn ed a ddi t i o ns a re l ia bl e t o be q u a sh e d . 6. I n t h e re s ul t , th e a p p e a l o f th e a s se ss e e i s a l lo w ed . Order pronounced in the open Court on 06/10/2023 Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /10/2023 Prabhat