ITO WD 21(1(3), MUMBAI V. HEMANG M. GARADIA, MUMBAI

ITA 6577/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8954 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2003-2004
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHATURBHUJ DAS
• Assessee Lawyers: KESHAV B BHUJLE
• Section: 143(3); 54F; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI , . . BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 6577/MUM/2011 / ASSESSMENT YEAR 2003-04 INCOME TAX OFFICER, WD. 21(1)(2), 6 TH FLOOR, ROOM NO. 604, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. VS. SHRI HEMANG M. GORADIA, FLAT NO. 602, HEMU CASTLE, 6 TH FLOOR, DADABHAI ROAD, VILLE PARLE (W), MUMBAI - 400 056. PAN: ACKPG 6153 G ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI CHATURBHUJ DAS ASSESSEE BY : SHRI KESHAV B. BHUJLE ' #$% / DATE OF HEARING : 30 -08-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 05-09-2012 () / O R D E R PER RAJENDRA, A.M. THE FOLLOWING ARE THE GROUNDS OF APPEAL FILED BY TH E APPELLANT AGAINST THE ORDER DTD. 20-07-2011 OF THE CIT(A) -32, MUMBAI : 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 23,71,014/- A S INCOME FROM OTHER SOURCES. 2. THE CIT(A) ERRED IN ADMITTING THE NEW EVIDENCE IN CONTRAVENTION OF RULE 46. ITA NO. 6577/MUM/2011 SHRI HEMANG M. GORADIA 2 3. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 2. ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 01-12-2003 DECLARING THE TOTAL INCOME OF RS. 18,940/-. THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAIN ON SALE OF SHARES AND THE SALE RECEIPTS WERE INVEST ED IN PURCHASING RESIDENTIAL ACCOMMODATION. CLAIM MADE BY THE ASSESSEE U/S. 54F OF THE ACT WITH REGARD TO LONG TERM CAPITAL GAIN WAS ACCEPTED BY THE ASSESSING OF FICER (AO). ASSESSMENT WAS FINALISED ON 24-09-2005 U/S. 143(3) OF THE INCOME T AX ACT, 1961 (ACT) BY THE AO ACCEPTING THE COMPUTATION OF LONG TERM CAPITAL GAI N AND THE CLAIM MADE U/S. 54F OF THE ACT. LATER ON AO ISSUED NOTICE U/S. 148 OF THE ACT AND ASSESSMENT WAS RE-OPENED. ASSESSMENT U/S. 143(3) R.W.S. 147 WAS FI NALIZED ON 31-12-2010 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 23,91,905/-. 3. AS PER THE AO, HE HAD RECEIVED INFORMATION FROM THE DDIT (INV) UNIT 1(4) REGARDING THE SEARCH ACTION CONDUCTED IN THE CASE O F M/S. MAHASAGAR SECURITIES P. LTD., AND GROUP CASES. AO OBSERVED THAT THE SAID GR OUP WAS ENGAGED IN FRAUDULENT TRADING OF SHARES, THAT IT PROVIDED BOGUS SPECULATI ON PROFIT/LOSS, SHORT TERM/LONG TERM CAPITAL GAINS ETC. AND ASSESSEE WAS ONE OF TH E BENEFICIARIES OF FRAUDULENT ACTIVITIES CARRIED ON BY M/S.MAHASAGAR SECURITIES P . LTD., THAT ASSESSEE HAD LAUNDERED HIS MONEY BY PAYING CASH TO M/S. MAHASAGAR SECURITI ES P. LTD., THAT ASSESSEE HAD PAID COMMISSION FEES IN CASH TO THE DIRECTOR OF THE ALLE GED COMPANY, THAT MAIN PERSON OF THE GROUP SHRI MUKESH CHOKSHI HAD ADMITTED THAT ALL TRANSACTION CARRIED OUT BY HIM AND HIS VARIOUS COMPANIES WERE BOGUS. 4. IN RESPONSE TO NOTICE ISSUED BY THE AO, AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE APPEARED BEFORE HIM. HE SUBMITTED THAT ALL THE TRANSACTIONS WERE GENUINE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEES REPRESENTATIVE ABOUT THE SALE OF SHARES, AO HELD THAT CONTENTIONS RAISED BY THE AR O F THE ASSESSEE WERE NOT TENABLE, THAT ASSESSEE HAD NOT PROVIDED THE DETAILS OF SALE AND PURCHASE OF THE SHARES, THAT LONG TERM CAPITAL GAIN WAS DIFFICULT TO VERIFY IN ABSENC E OF THE SHARES SOLD BY THE ASSESSEE. FINALLY, HE HELD THAT THE LONG TERM CAPIT AL GAIN CLAIMED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT WAS INCOME FOR THE ASSESSME NT YEAR UNDER CONSIDERATION. HE ASSESSED THE SAME UNDER THE HEAD INCOME FROM OT HER SOURCES. 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). HE OBJECTED TO THE RE-OPENING OF ASSESSMENT U/S. 147 O F THE ACT AND ADDITIONS MADE BY THE AO UNDER THE HEAD INCOME FROM OTHER SOURCES. AFTER CONSIDERATION THE SUBMI- SSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT AT THE TIME OF RE-OPENING THE ASSESSMENT, AO HAD INFORMATION ABOUT ESCAPEMENT OF INCOME. HE FURTHER OBSERVED THAT THE FACT THAT LATER IT WAS INFORMED B Y THE ASSESSEE THAT HE DID NOT HAVE ANY TRANSACTION WITH MAHASAGAR GROUP WOULD NOT VITI ATE THE RE-OPENING. ALLOWING THE APPEAL OF THE ASSESSEE IN RESPECT OF THE ADDITI ON OF RS. 23.7 LAKHS, AS INCOME FROM THE OTHER SOURCES, FAA HELD THAT IT WAS UNFA IR TO SAY THAT THE ASSESSEE DELIBERATELY DID NOT PRODUCE VOUCHERS, THAT THE ASS ESSEE DID NOT PROVIDE THE DETAILS OF SALES AND PURCHASE OF SHARES, THAT ASSESSEE HAD DON E SALE TRANSACTIONS WITH TWO COMPANIES ONLY, THAT THE SAID TRANSACTIONS WERE OF RS. 24.36 LAKHS, THAT FIGURE ITA NO. 6577/MUM/2011 SHRI HEMANG M. GORADIA 3 AVAILABLE WITH THE AO I.E., RS. 4,91,794/- WAS NO T MATCHING WITH THE FIGURES SUBMITTED BY THE ASSESSEE, THAT THE AO HAD NOT BROU GHT ANYTHING ON RECORD THAT THE ASSESSEE HAD DEALING WITH MAHASAGAR GROUP, THAT DUR ING THE RE-ASSESSMENT PROCEEDINGS, THE AO DID NOT CONSIDER THE OBJECTION OF THE ASSESSEE ABOUT HAVING NO TRANSACTIONS WITH MAHASAGAR GROUP, THE AO DID NOT PROVIDE ANY BREAK UP OF DETAILS OF TRANSACTION OF RS. 4.91 LAKHS WHICH AS PER HIS I NFORMATION WAS DONE BY THE ASSESSEE WITH MAHASAGAR GROUP, THAT DESPITE OF THE OBJECTIONS RAISED BY THE ASSESSEE, AO HAD NOT PROVIDED ANY EVIDENCE TO THE ASSESSEE TO REBUT HIS CLAIM OF NOT CARRYING OUT ANY TRANSACTION WITH MAHASAGAR GROUP, THAT THE AO HAD NOT GIVEN ANY DETAILS OF THE TRANSACTION WHICH AS PER THE AO WERE DONE BY TH E APPELLATE WITH MAHASAGAR GROUP, THAT EVEN IN THE ASSESSMENT ORDER, NOTHING W AS MENTIONED AS TO WHAT WAS THE NATURE OF THE EVIDENCE FOR AO TO HOLD CONCLUSIVELY THAT THE ASSESSEE HAD DONE TRANSACTIONS WITH MAHASAGAR GROUP, THAT NAMES OF TH E SCRIPS/DATES OF THE TRANSACTIONS ALLEGEDLY CARRIED OUT BY THE ASSESSEE HAVE NOT BEEN MENTIONED BY THE AO IN THE REASONS RECORDED OR IN THE ASSESSMENT ORDER, THAT A SSESSEE HAD FILED THE DETAILS OF LONG TERM CAPITAL GAIN AND NO INFIRMITY WAS POINTED OUT BY THE AO IN THIS REGARD, THAT INFORMATION RECEIVED FROM THE INVESTIGATION WI NG CANNOT AUTOMATICALLY RESULT IN TO ADDITION IN THE HANDS OF THE ASSESSEE UNLESS THE AO ESTABLISHED THAT INFORMATION PERTAINS TO THE APPELLANT ONLY. REFERRING TO RULE 2 7 OF THE ITAT RULES,1963 HE FURTHER SUBMITTED THAT THERE WAS NON-APPLICATION OF MIND BY THE AO BEFORE ISSUING THE NOTICE U/S. 148. NO REASONS WERE RECORDED BY THE AO FOR R E-OPENING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, THAT IN THIS YEAR, NO INC OME HAD ESCAPED, THAT REASONS RECORDED DO NOT HOLD THAT INCOME HAD ESCAPED BECAUS E OF NON-DISCLOSURE OF SOME FACTS BY THE ASSESSEE. HE ALSO RELIED UPON THE CASE OF H INDUSTAN LEVER LTD. (260 ITR 332) DECIDED BY THE HONBLE BOMBAY HIGH COURT. 6. DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE OR DER OF THE AO. WE HAVE HEARD THE RIVAL SUBMISSIONS AND VARIOUS MATTERS MAD E AVAILABLE TO US. THE UN-DISPUTED FACTS OF THE CASE CAN BE SUMMARISED AS UNDER: I) THE ORIGINAL RETURN OF ASSESSMENT WAS FINALISED U/S . 143(3) OF THE ACT ACCEPTING THE COMPUTATION OF LONG TERM CAPITAL GAIN AND CLAIM MAD E BY THE ASSESSEE U/S. 54F OF THE ACT; II) INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G REGARDING THE SEARCH ACTION TAKEN BY M/S. MAHASAGAR SECURITIES PVT. LTD., III) AO ALLEGED THAT ASSESSEE WAS ONE OF THE BENEFICIARI ES OF THE FRAUDULENT ACTIVITIES CARRIED OUT BY THE MAHASAGAR GROUP; IV) NOTICE WAS ISSUED U/S. 140 OF THE ACT FOR RE-OPENIN G THE ASSESSMENT ON THE BASIS OF THE REPORT OF THE INVESTIGATION WING; V) IN THE RE-ASSESSMENT PROCEEDINGS, AO HELD THAT LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE WAS TO BE ASSESSED UNDER THE HEAD INC OME FROM OTHER SOURCES. 7. WE FIND THAT IN THE REASONS RECORDED BY THE AO FOR RE-OPENING THE ASSESSMENT, THERE IS NO MENTION ABOUT RS. 23.7 LAKHS THAT WAS R E-ASSESSED BY THE AO WHILE PASSING ORDER U/S. 143(3) R.W.S. 147 OF THE ACT. R EASONS RECORDED BY THE AO SPEAK OF AN AMOUNT OF RS. 4.91 LAKHS, BUT HOW THE SAID AMOU NT OF WAS RELATED TO THE ESCAPED ITA NO. 6577/MUM/2011 SHRI HEMANG M. GORADIA 4 INCOME IS NOT DISCUSSED.AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE ASSESSEE HAD PAID ANY AMOUNT TO MAHASAGAR GROUP. TH US, THE VERY BASIS FOR RE- OPENING THE ASSESSMENT WAS NOT THERE. IN OUR OPINIO N, RE-OPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS WIT HOUT ANY MERITS OR ANY LEGAL BASIS. WE ARE AWARE THAT INFORMATION HAD BEEN SUPPL IED BY THE INVESTIGATION WING ABOUT MAL-PRACTICES CARRIED OUT BY THE MAHASAGAR GR OUP, BUT IT WAS THE DUTY OF THE AO TO VERIFY THE FACTS OF THE CASE AND DECIDE THE I SSUE ON MERITS. HIS NON-APPLICATION OF MIND IS EVIDENT FROM THE REASONS RECORDED AND TH E ASSESSMENT ORDER PASSED BY HIM. THERE IS NO CO-ORDINATION BETWEEN THE TWO. FAA HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AS HIS ORDER DOES NOT SUFFER FROM AN Y LEGAL INFIRMITY. WE WANT TO UP-HOLD HIS ORDER. WE ARE UNABLE TO UNDERSTAND THA T CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND A CLEAR CUT FINDING B Y THE FAA, HOW THE SECOND APPEAL WAS RECOMMENDED, AUTHORISED AND FILED ? GROUND NOS. 1 TO 4 FILED BY THE AO ARE DECIDED AGAI NST HIM. AS A RESULT, THE APPEAL OF THE REVENUE STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH SEPTEMBER, 2012. SD/- SD/- ( /VIJAY PAL RAO ) ( / RAJENDRA ) (+ / JUDICIAL MEMBER % (+ / ACCOUNTANT MEMBER MUMBAI, ,( DATE: 05 TH SEPTEMBER, 2012 TNMM () () () () ' '' ' # # # # -# -# -# -# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE !# # //TRUE COPY// () () () () / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI