Chinmay Impex Private Limited, Ahmedabad V. The Income Tax Officer, Ward-1(1)(3), Ahmedabad

ITA 564/AHD/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5807 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-07-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 27-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Borrowed satisfaction; Set aside
• Section: 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA RAGHUNATH KAMBLE, JUDICAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 564/Ahd/2024 (िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ / Assess ment Year : 2013-14) Ch in may I mpex P riv at e Li mit ed C/ o. M. S . Ch ha je d & Co . CA , “ Ka ma l Sh an ti ”, Nr . Sar da r Pa tel S ta tu e, Ah me da bad , Gu ja ra t, 38 00 14 बनाम बनामबनाम बनाम/ V s . In co me T ax Of fi ce r W ar d – 1( 1) (3) , Ah me da bad ᭭थायी लेखा सं./जीआइआर सं./P A N / G IR N o . : A A D C C 6 4 7 8 J (Appellant) . . (Respondent) अपीलाथᱮ ओर से /Appellant by : Shri M. S. Chhajed, AR ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Purushottam Kumar, Sr. DR D a t e o f H e a r i n g 08/07/2024 D a t e o f P r o n o u n c e m e n t 15/07/2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre ( NFAC), Delhi, (i n short ‘the CIT( A) ’) dated 28.02.2024 for the Assessment Year 2013-14. 2. The brief facts of t he case are that ret urn of inco me for A.Y. 2013-14 was file d on 30.09.2013 declaring total income of Rs.13,79,950/-. Subsequently, the AO r eceived an infor mation fro m DGI T (Inv.) , Mu mbai that asses see had entered into reversal ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 2 – trades in illiquid stock options resulting in non-genuine business profit. As per this infor mation, a profit of Rs.28,98,000/- was generated by the a ssessee by tr ading in illiquid stock options on the BSE during the F.Y. 2012-13 relevant to A.Y. 2013-14. Based on this infor mation, the AO recorded his reasons and reopened the case for re-assess ment under Section 147 of the Act after obtaining approval of the co mpetent authority. The assessment was co mpleted under Sec tion 147 r.w.s. 144B of the Act on 30.03.2022 at total inco me of Rs.42,77,950/-. 3. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided vide the impugned order. 5. Now, the assessee is in appeal is before us. 6. The assessee has t aken following grounds in this appeal: “1. The order passed by the Ld. CIT (A) is against law, equity & justice. 2. The Ld. CIT (A) has erred in law and on facts in upholding validity of reopening of assessment though Ld. PCIT has granted mechanical approval u/s 151 of the Act. 3. The Ld. CIT (A) has erred in law and on facts in upholding validity of reopening of assessment though Reopening of assessment is on borrowed satisfaction and without independent application of mind. 4. The Ld. CIT (A) has erred in law and on facts in upholding validity of reopening of assessment though the Ld. AO has assumed jurisdiction on the basis of some non specific & vague information. ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 3 – 5. The Ld. CIT (A) has erred in law and on facts in upholding validity of reopening of assessment though Reopening of assessment is based on incorrect facts. 6. The CIT(A) has erred in law and on facts in upholding addition made by the Ld. A.O. of Rs.28,98,000/- U/S 68 of the Act.” 7. Shri M. S . Chha jed, the Ld. Counsel for the assessee submitted that the reopening of the case was not proper as Ld. Addl. CI T had no locus-standi in the present case and was not co mpetent to grant approval of the satisfaction. He further submitted that the reopening was done on borrowed satisfaction and without independent application of mind. It was contended that the AO had not conducted any preli minar y enquiry to verif y the correctness of the infor mati on as received and that jurisdiction was a ssumed under Sec tion 147 of the Act on the basis of non-specific and vague infor mation. Th e Ld. AR submitted that the Ld. CI T(A) was not correct in upholding the validity of reope ning of the assess ment, which was based on incorrect facts. On merits, the Ld. AR sub mitted that t he addition of Rs.28,98,000/- made under Sect ion 68 of the Act was not correct. He explained that the profit of Rs.28,98,000/- earned b y the assessee in the transaction of currenc y derivatives was alread y disclosed in the audited books of accounts of the assessee and tax was paid t hereon. According to the Ld. AR , the addition as made b y the AO has resulted in double taxation. 8. Per contra, Shri P urushottam Ku ma r , S r. DR sub mitted that the reopening done b y the AO was b ased on specific infor mation ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 4 – received in the c ase of the assessee. The AO had not only analyz ed the infor mation as re ceived but had also applied his mind and verifie d fro m the recor ds whether this i nco me was disclosed in the accounts of the a ssessee or not. Ld. S r. DR contended that it was not open for t he assessee to challenge the sufficiency of the infor mation received. He further submitted that the reason as recorded b y the AO was dul y approved b y the PCIT, a fter independent application of mind. On merits, he supported the orders of the AO and t he CIT( A) . It was explained that the assessee did not cooperate in the course of the a ssessment proceeding and the details were file d by the assessee towards the fag end of li mitation period i.e. onl y on 29.03.2022 with a request for hearing, which was allowed virtually on 30.03.2022. He also questioned the transfer of profit derived from the ‘curr enc y derivatives transaction’ to ‘exchan ge rate fluctuation account’ and doubted the correctness of this treat ment. 9. In re joinder, the Ld. AR reiterated that since the assessee had alread y discl osed the profit derived fro m the currenc y derivatives transaction in the accounts, the addition made b y the AO was wrong and led to double taxation. He, therefore, requested that mat ter ma y be set aside to the AO to veri f y the fact of double taxation. 10. We have considered the rival submis sions and the mate rials brought on record. Ground Nos. 1 to 5 taken b y the ass essee are in respect of reopening of the case. It is found that the AO had ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 5 – received an information from DGIT ( Inv.), Mu mb ai under project Falcon regarding coordinated and pre mediated trading on BS E engaging in reve rsal trades in illiquid stock options (Stock derivation and currenc y derivative) resulting in non-genuine business loss/profit to the beneficiar y. A specific infor mation pertaining to assessee was receiv ed that the assessee had generated fictitious profit in equity/derivative of Rs.28,98,000/- by trading in illiquid stock options on the BSE. Bas ed on this infor mation, the AO had recorded his reasons under Se ction 147 of the Act and initiated the proceedings after obtaining the approval of the co mpetent authority. The contention of the assessee that the reopening was based on borrowed satisfaction is not found correct. The reopening has to be based on the basis of an infor mation in the possession of the AO. Merel y because the reopening was done on the basis of infor mation rec eived fro m DGI T (Inv.), Mumbai, it doesn’t mean that the reo pening was done on borrowed satisfaction. The AO had applied his mind and verified the information as received. A cop y of t he reason recorded by the AO has been brought on record. The AO has given a specific finding in his reason that the inco me was Rs.28,98,000/- earned b y the asses see in the derivative trading was non-genuine profit and that this income had escaped assessment. In view of detailed re a son as recorded b y the AO, the contention of the assessee that the reopening was done on borrowed satisfaction is not found correct. The correctness of the infor mation as received by the AO has also not been disputed. ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 6 – Further, the assessee also can’t challenge the sufficiency of the infor mation based on which the case was reopened. The objection of the assessee that approval was a ccorded b y the Ad dl. CI T, is also not found correct. The approval in this case was granted b y the PCIT, Ah medabad-1 and the Addl. C IT had only reco mmended the case for approval. The contention of the assessee that approval was granted in a mechanical ma nner is also not found correct. F ro m the cop y of the approval as brought on record, it is found that the Ld. PCIT had exa mined the reasons as recorded b y the AO, applied his mi nd and thereafter granted his approval on being satisfied that it was a fit case for reopening. In view of these f acts, we do not find any merit in th e grounds taken by the assessee against the reopening of the case . Accordingly, Gro und Nos. 2 to 5 as taken b y the a ssessee are rejected and the f inding of the Ld. CIT( A) on the reo pening of the case is upheld. 11. As r egarding me rits of the case, the assessee has ad mitted that profit of Rs.2 8,95,773.78 was generated in trading of USD derivatives, which was carried out through a broker Gir iraj Stock Broking Pvt. Ltd. A cop y of the c ontract note and the ledger account of the broker has been filed . It was explained that this profit of Rs.28,95,773.78 was t aken to “Excha nge Rate Fluctuation Account” and the closing balance of Rs.5,90,902.99 as appearing in the ledger ac count of “Exch ange Rate Fluctuation” was duly disclosed as inco me in the audited ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 7 – accounts. The assessee has pointed out that an a mount of Rs.5,90,903/- was disclosed as inco me on a ccount of Foreign Exchange fluctuation in Schedule-17, which was par t of other income . The assessee has also submi tted that all these documents were filed before t he AO in the course of assess ment pr oceeding. 12. It appears fro m the assess ment order that assessee had made co mpliance and filed details only on 29.03.2022 while the case was getting barred by li mitation on 31.03.2022. Th erefore, the AO might not have sufficient time t o verify the details as filed by the assessee. The contention of the assessee that the profit on Rs.28,98,000/- as added b y the AO under Section 68 of the Act was alread y disclosed in the accounts of the assessee, requires verification. There is considerable force in the argument of the assessee that if this a mount was alre a dy disclosed in the accounts, the addition as made b y the AO will result in double taxation. The assessee has, however, not expl ained as to wh y the profit of Rs.28,98,000/- derived in trading of USD derivative through the broker Girira j Stock Broking Pvt. Ltd was not shown separately as income and wh y it was taken to “Ex change Rate F luctuation Account”. The correctness of the transactions as appearing in “Ex change Rate Fl uctuation Account” also requires to be verified in view of the tr eat ment as given b y the assessee. Since, the assessee had filed the details at the ver y fag end, these might not have been verified b y the AO due to paucity of ti me. Therefore, in the interest of justice, we dee m it proper to set aside the matter ITA No. 564/Ahd/2024 [Chinmay Impex Private Limited vs. ITO] A.Y. 2013-14 - 8 – to the file of the J urisdictional AO with a direction to verif y the contention of the a ssessee as well as t he issues as discussed above and to decide the matter on merits of the case after giving a proper opportunity of hea ring to the assessee. 13. In the result, the appeal preferred b y the assessee is allowed for statistical purposes. This Order pronounced on 15/07/2024 Sd/- Sd/- (SUCHITRA RAGHUNATH KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 15/07/2024 S. K. SINHA True Copy आदेश कᳱ ᮧितिलिप अᮕेिषत आदेश कᳱ ᮧितिलिप अᮕेिषतआदेश कᳱ ᮧितिलिप अᮕेिषत आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT 4. आयकर आयुᲦ (अपील) / The CIT(A)- 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडᭅ फाईल / Guard file. आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/ BY ORDER, उप उपउप उप/सहायक पंजीकार सहायक पंजीकारसहायक पंजीकार सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय आयकर अपीलीय आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad