M Aditya Shreeramji., Hyd, Hyderabad V. ITO, Ward-6(3), Hyd, Hyderabad

ITA 651/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2582 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2016
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Assessment record
• Section: 143(3); 148; 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 651/HYD/2016 ASSESSMENT YEAR: 2006-07 SHRI M. ADITYA SHREERAMJI, HYDERABAD. PAN AIIPM5030G VS. THE INCOME TAX OFFICER WARD 6 (3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SHRI P. CHANDRA SEKHAR DATE OF HEARING : 11-01-2017 DATE OF PRONOUNCEMENT : 17-03-2017 ORDER PER P. MADHAVI DEVI, J.M.: IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT 6, HYDERABAD, DATED 28-03-2016, REVISING THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, DATED 20-12-2013 U/S 263 OF THE INCOME TAX ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 15-03-2007 ADMITTING INCOME OF RS. 16,46,626/-. AS PER THE INFORMATION RECEIVED BY THE ASSESSING OFFICER (A.O) FROM THE CCIT, CENTRAL 1, MUMBAI, THE ASSESSEE HAS OBTAINED ACCOMMODATION BILLS FROM M/S MAHASAGAR GROUP, MUMBAI. TO VERIFY THE SAME, THE CASE WAS REOPENED BY ISSUANCE OF A NOTICE U/S 148 OF THE INCOME TAX ACT ON 28-03-2013. IN REPLY THERETO, THE ASSESSEE FILED A LETTER DATED 25-04-2013 STATING THAT THE 2 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. RETURN OF INCOME FILED ON 15-03-2007 BE TREATED AS A RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE INCOME TAX ACT. SUBSEQUENTLY, DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, THE A.O CALLED FOR CERTAIN INFORMATION AND THE ASSESSEE FILED THE INFORMATION CALLED FOR. AFTER VERIFICATION OF INFORMATION FILED, THE A.O. COMPLETED THE ASSESSMENT BY ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. 3. THEREAFTER, THE CIT, ASSUMING THE POWERS U/S 263 OF THE INCOME TAX ACT, PERUSED THE ASSESSMENT RECORD AND OBSERVED THAT DURING THE COURSE OF THE ASSESSMENT, THE ASSESSEE HAD CLAIMED TO HAVE DONE THE TRANSACTION THROUGH A BROKER AND PRODUCED LEDGER EXTRACTS AND CONTRACT NOTES OF M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. (HEREIN AFTER REFERRED TO AS AINPL), WHO IS STATED TO BE THE BROKER IN NATIONAL STOCK EXCHANGE (NSE) AND THAT THE A.O, WHILE COMPLETING THE ASSESSMENT, THOUGH RECORDED THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE INFORMATION RECEIVED THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS FROM M/S MAHASAGAR GROUP, MUMBAI, AND FURTHER HAD CALLED FOR COPIES OF DMAT ACCOUNT, BUT THOUGH THE COPIES OF DMAT ACCOUNT OF THE ASSESSEE WAS NOT PRODUCED BY THE ASSESSEE BEFORE HIM AND NO FURTHER EXPLANATION FOR SUCH NON PRODUCTION WAS FILED BY THE ASSESSEE, THE A.O HAS ACCEPTED THE RETURNED INCOME. THEREFORE, THE CIT WAS OF THE OPINION THAT THE A.O HAS COMPLETED THE ASSESSMENT ACCEPTING THE RETURNED INCOME MERELY ON THE BASIS OF CONTRACT NOTES AND LEDGER EXTRACTS OF M/S AINPL PRODUCED BY THE ASSESSEE HIMSELF WITHOUT MAKING ANY FURTHER 3 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. ENQUIRIES AS REQUIRED AND WITHOUT VERIFYING THE GENUINENESS OF THE BROKER NAMELY M/S AINPL, WHOSE CONTRACT NOTES WERE TAKEN AS EVIDENCE OF THE GENUINENESS OF THE TRANSACTION. THEREFORE, HE WAS OF THE OPINION THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, HE ALSO OBSERVED FROM THE ASSESSMENT RECORDS FOR THE A.Y 2007-08, THAT THE SECURITY EXCHANGE BOARD OF INDIA (SEBI) HAS CANCELLED THE MEMBERSHIP OF M/S AINPL FROM 19-02-2004 FOR INDULGENCE IN UNFAIR PRACTICES AND FURTHER FROM THE INFORMATION COLLECTED FROM THE BOMBAY STOCK EXCHANGE (BSE), M/S AINPL IS NEITHER A BROKER NOR A SUB-BROKER REGISTERED WITH BSE. 4. THEREFORE, THE CIT ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE FOR REVISING THE ASSESSMENT ORDER U/S 263 OF THE INCOME TAX ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED A DETAILED REPLY STATING THAT THE A.O DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT, HAD CALLED FOR VARIOUS DETAILS, WHICH WERE SUBMITTED BY THE ASSESSEE AND THAT THE A.O HAS COMPLETED THE ASSESSMENT AFTER DUE APPLICATION OF MIND AND VERIFICATION OF DETAILS. THEREFORE, ACCORDING TO THE ASSESSEE, THE ASSESSMENT ORDER WAS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE NOT REVISABLE U/S 263 OF THE INCOME TAX ACT. THE ASSESSEE ALSO PLACED RELIANCE UPON VARIOUS CASE LAWS IN SUPPORT OF HIS CONTENTIONS. 5. THE CIT, HOWEVER, HELD THAT THE ASSESSMENT WAS COMPLETED WITHOUT CARRYING OUT ENQUIRIES AS REQUIRED AND 4 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. THEREFORE THE ASSESSMENT WAS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THEREFORE, SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE A.O TO COMPLETE THE ASSESSMENT AFTER MAKING ENQUIRIES WITH STOCK EXCHANGES REGARDING THE PURCHASE PRICE OF SHARES SHOWN AS SOLD DURING THE YEAR BY THE ASSESSEE AND ALSO AS TO WHETHER M/S AINPL, THROUGH WHOM SUCH SHARES ARE ALLEGEDLY PURCHASED AND SOLD, WAS AUTHORIZED TO TRADE ON THE STOCK EXCHANGE, EITHER AS A MEMBER OR AS A BROKER AND THEREAFTER TO DETERMINE THE GENUINENESS OF THE TRANSACTIONS REFLECTED. AGAINST THIS ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND PLACED RELIANCE UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS. M. ADITYA SHREERAMJI (AY: 2006-07) INDEX FOR CASE LAWS S.NO NAME OF THE CASE COURT CITATION RELEVANT PARA PAGE NO 1. CIT VS MALABAR INDUSTRIAL CO.LTD. SUPREME COURT 109 TAXMAN 66 (SC) 7 1 TO 3 2. CIT VS DEVELOPMENT CREDIT BANK LTD BOMBAY HIGH COURT 196 TAXMAN 329 (BOMBAY) 7 4 TO 6 3. ITO VS D.G. HOUSING PROJECTS LTD DELHI HIGH COURT 20 TAXMAN 587 (DELHI) 19 7 TO 11 4 CIT VS SPECTRA SHARES & SCRIPS (P.) LTD. AP HIGH COURT 36 TAXMAN 348 (ANDHRA PRADESH) 22-63 12 TO 25 5 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. 7. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT AND ALSO PLACED RELIANCE UPON THE DECISIONS RELIED UPON BY THE CIT IN HIS ORDER U/S 263 OF THE ACT. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT HAD BEEN REOPENED U/S 147 OF THE INCOME TAX ACT ONLY TO VERIFY THE ALLEGED ACCOMMODATION BILLS ISSUED BY M/S MAHASAGAR GROUP. IN THE REPLIES FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT, THE ASSESSEE SUBMITTED THE STATEMENT OF AFFAIRS AS ON 31-03-2006, THE COPY OF THE FINANCIAL STATEMENT RECEIVED FROM M/S AINPL AND COPIES OF THE CONTRACT NOTES FOR THE TRANSACTIONS DONE THROUGH M/S AINPL DURING THE F.Y 2005-06. THE ASSESSEE HAS ALSO FURNISHED THE REGISTRATION NO. OF M/S AINPL WITH SEBI AND HAS STATED THAT SAID FIRM IS ALSO A MEMBER OF NSE. FROM THE ORDER OF THE CIT, WE FIND THAT THE IDENTITY OF THE SAID CONCERN IS ESTABLISHED AS THE CIT HAS RECORDED THAT THE SEBI HAS CANCELLED THE MEMBERSHIP OF M/S AINPL W.E.F 09- 02-2004. THE CIT HAS ALSO OBSERVED THAT THE SAID CONCERN IS NOT A MEMBER OF BSE, THOUGH THE CONTENTION OF THE ASSESSEE WAS THAT IT WAS A MEMBER OF NSE. NO VERIFICATION WITH NSE HAS BEEN DONE. THE OBSERVATION OF THE CIT IS THAT THE A.O HAS CALLED FOR THE DMAT ACCOUNT BUT WITHOUT INSISTING ON THE SAME AND TAKING NOTE OF ONLY THE HOLDING CERTIFICATES SUBMITTED BY THE ASSESSEE, THE A.O HAS ACCEPTED GENUINENESS OF THE TRANSACTIONS WITHOUT FURTHER VERIFICATION. THEREFORE, IT IS NOT THE CASE OF LACK OF ENQUIRY BY THE A.O BUT ACCORDING TO THE CIT, IT IS A CASE OF LACK OF ADEQUATE ENQUIRY. IN SUCH CIRCUMSTANCES, WHETHER THE 6 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. ASSESSMENT ORDER CAN BE SAID TO BE ERRONEOUS IS THE QUESTION BEFORE US. ADMITTEDLY, THE A.O COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 147 OF THE INCOME TAX ACT AFTER CALLING FOR CERTAIN INFORMATION FROM THE ASSESSEE. THE ASSESSEE HAD FURNISHED SOME INFORMATION AND THE A.O BEING SATISFIED WITH THE SAME HAS COMPLETED THE ASSESSMENT. THEREFORE, THE A.O IN HIS WISDOM, HAS FOUND IT NOT NECESSARY TO CONTINUE WITH FURTHER ENQUIRIES. AS THE A.O HAS TAKEN ONE OF THE POSSIBLE VIEWS, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS. 9. FURTHER, TO INVOKE THE PROVISIONS OF SECTION 263, THE CIT HAS TO BE SATISFIED THAT THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THOUGH THE CIT HAS BROUGHT OUT CERTAIN FACTS TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS FOR LACK OF RELEVANT AND ADEQUATE ENQUIRY, WE FIND THAT HE HAS ALSO TO PRIMA-FACIE ESTABLISH AS TO HOW THE ASSESSMENT ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10. THE LD. DR HAD RELIED UPON THE FINDINGS OF THE CIT THAT ON PERUSAL OF THE RECORDS OF THE A.Y 2007-08, IT IS PROVED THAT THE TRANSACTIONS WERE BOGUS AND THEREFORE THE TRANSACTIONS BEING SIMILAR IN THE RELEVANT ASSESSMENT YEAR 2006-07, IT IS SUFFICIENT TO COME TO THE CONCLUSION THAT THE TRANSACTIONS DURING THE FINANCIAL YEAR RELEVANT FOR THE ASSESSMENT YEAR 2007-08 ARE ALSO BOGUS RESULTING IN THE ASSESSMENT ORDER ALSO BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. 11. HOWEVER, WE CANNOT AGREE WITH THESE FINDINGS OF THE CIT. EACH ASSESSMENT YEAR IS DISTINCT AND THE FACTS PERTAINING TO THE RELEVANT ASSESSMENT YEAR ALONE IS MATERIAL FOR ASSESSMENT OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. WE FIND THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE CIT TO PROVE THAT M/S AINPL DID NOT EXIST DURING THE RELEVANT FINANCIAL YEAR OR THAT THE TRANSACTIONS DURING THE RELEVANT YEAR WERE BOGUS. IN THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE, THE HONBLE HIGH COURTS HAVE HELD THAT WHERE THE A.O HAS ACCEPTED THE ENTRIES AFTER DUE ENQUIRIES, THE REVISION U/S 263 ON THE INCOME TAX ACT IS NOT SUSTAINABLE AND IN ORDER TO SUSTAIN SUCH AN ORDER IT IS REQUIRED THAT THE CIT HAS TO GIVE A FINDING THAT THE ASSESSMENT ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 12. THE LD. DR HAD RELIED UPON CERTAIN DECISIONS WHEREIN IT HAS BEEN HELD THAT IF SUFFICIENT MATERIAL IS AVAILABLE WITH CIT THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, CIT CAN INVOKE THE PROVISIONS OF SECTION 263 AND REVISE THE ASSESSMENT ORDER. 13. WE FIND THAT THE COMMON PRINCIPLE LAID DOWN IN ALL THESE DECISIONS IS THAT THE TWIN CONDITIONS I.E (I) THE ASSESSMENT ORDER BEING ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTEREST OF THE REVENUE; ARE TO BE SATISFIED TO EMPOWER THE CIT TO REVISE AN ASSESSMENT ORDER. ON GOING THROUGH THE ASSESSEES SUBMISSIONS BEFORE THE A.O AND THE CIT, WE FIND THAT THE ASSESSEE HAD SUBMITTED THAT THE TRANSACTIONS WERE DONE THROUGH AN AUTHORIZED SHARE BROKER MEMBER OF NSE M/S AINPL AND HAS ALSO GIVEN SEBI 8 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. REGISTRATION NO. AND ALSO ITS ADDRESS AT MUMBAI AND THAT ALL THE TRANSACTIONS ARE SUPPORTED BY BILLS / CONTRACT NOTES. IT WAS ALSO SUBMITTED THAT ALL THE TRANSACTIONS WERE ALSO AFFECTED BY SECURITIES TRANSACTION TAX PROPERLY. WE ALSO FIND THAT THE ASSESSEE FURNISHED THE COPIES OF ALL BILLS/CONTRACT NOTES OF ALL THE TRANSACTIONS BUT DID NOT PRODUCE ANY EVIDENCE AS REGARD THE SUFFERANCE OF THE STT AND ALSO THAT THE TRANSACTIONS WERE THROUGH NSE. OBVIOUSLY, THE A.O DID NOT CALL FOR ANY OTHER DETAILS FROM THE ASSESSEE. THEREFORE, WE AGREE THAT THE ASSESSMENT ORDER IS ERRONEOUS TO SUCH AN EXTENT. BUT, IN ORDER TO COME TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE CIT IS REQUIRED TO CARRY OUT CERTAIN ENQUIRIES AS ALL ERRONEOUS ORDERS CANNOT BE HELD TO BE ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LTD AS REPORTED IN (1993) 203 ITA NO. 108, 115 (BOM) THERE MUST BE SOME PRIMA-FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED AND WITHOUT SUCH MATERIAL, EXERCISE OF POWER U/S 263 WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IN THE CASE BEFORE US, THE ASSESSEE HAS OFFERED THE SHORT TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES. EXCEPT FOR STATING THAT THE ASSESSEE HAS FAILED TO PRODUCE THE DMAT ACCOUNT, THE CIT HAS NOT RELIED ON ANY MATERIAL, NOR HAS BROUGHT OUT HOW THE PURCHASE OR SALE PRICE RETURNED BY THE ASSESSEE ARE NOT CORRECT RESULTING IN PREJUDICE TO THE INTEREST OF THE REVENUE. WE FIND THAT THE CIT HAS ONLY SET ASIDE THE ASSESSMENT ORDER AND HAS DIRECTED THE A.O TO MAKE 9 ITA NO. 651/HYD/2016 SHRI M. ADITYA SHREERAMJI, HYDERABAD. RELEVANT ENQUIRIES AS REGARDS THE PURCHASE AND SALE PRICE BEFORE COMPUTING THE SHORT TERM CAPITAL GAINS. THUS, IT IS CLEAR THAT THE CIT IS NOT SURE THAT THE ASSESSMENT ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE REVISION ORDER IS NOT SUSTAINABLE AND, HENCE, THE ORDER OF THE AO IS RESTORED. ACCORDINGLY, THE ASSESSEES APPEAL IS ALLOWED. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2017. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 17 TH MARCH, 2017 KRK 1) SHRI M. ADITYA SHREERAMJI C/O P. MURALI & CO, CA 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. 2) ITO, WARD -6(3), HYDERABAD 3) PCIT -VI, HYDERABAD 4) ADDL. CIT, RANGE-14, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6) GUARD FILE