SANGEETA RAMESH SHAH, MUMBAI V. ITO WD 16(3)(2), MUMBAI

ITA 7263/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88073 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BOARA
• Keywords: Reopening of assessment; Accommodation entries; Reason to believe
• Section: 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 7263/MUM/2014 (ASSESSMENT YEAR: 2008-09) SMT. SANGEETA RAMESH SHAH VS. INCOME TAX OFFICER K BLOCK, V.P. ROAD WARD 16(3)-2 SIKKA NAGAR, GIRGAON MUMBAI MUMBAI 400004 PAN AAGPS8074G APPELLANT RESPONDENT APPELLANT BY: SHRI RAKESH JOSHI RESPONDENT BY: SHRI VIJAY KUMAR BOARA DATE OF HEARING: 29.01.2015 DATE OF PRONOUNCEMENT: 29.01.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-27, MUMBAI AND IT PERTAINS TO A.Y. 2008- 09. 2. THE FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNA L: - 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE LEARNED ASSESSING OFFICER IN REOPENING THE CASE, WI THOUT CONSIDERING THE PROVISIONS OF LAW. 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WEL L AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE LEARNED ASSESSING OFFICER IN MAKING AN ADDITION. 3. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WEL L AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE LEARNED ASSESSING OFFICER IN MAKING AN ADDITION OF RS.8,368/- ON ACCOUNT OF ALLEGED COMMISSION PAID IN CASH @ 2% OF RS.4,18,437/-, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ASSESSEE RAISED PRELIMINARY OBJECTION WITH REGA RD TO THE JURISDICTION OF THE ASSESSING OFFICER IN ISSUING NO TICE UNDER SECTION 148 OF THE ACT. FACTS NECESSARY FOR DISPOSAL OF THE ISSUE ARE STATED IN BRIEF. ASSESSEE, IN HIS INDIVIDUAL CAPACITY, PURCHASED SHA RES IN THIS YEAR. HE HAS ITA NO. 7263/MUM/2014 SMT. SANGEETA RAMESH SHAH 2 EARNED INCOME FROM OTHER SOURCES WHICH WAS OFFERED TO TAX. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE AC T. THEREAFTER, I.E. ON 28.03.2013 THE ASSESSING OFFICER ISSUED NOTICE UNDE R SECTION 148 OF THE ACT ON THE GROUND THAT THE ASSESSEE CLAIMED TO HAVE PURCHASED SHARES THROUGH A PARTICULAR CONCERN, WHICH HAS MERELY GIVE N ACCOMMODATION ENTRIES/BILLS AND IN FACT THERE WAS UNEXPLAINED INV ESTMENT WHICH IS ASSESSABLE TO TAX UNDER SECTION 69 OF THE ACT. PAGE 1 OF THE PAPER BOOK, COPY OF THE REASONS RECODED BY THE AO, SHOWS THAT C ONSEQUENT TO THE SEARCH ACTION CONDUCTED IN THE CASE OF M/S. MAHASAG AR SECURITIES PVT. LTD. AND ITS RELATED GROUP COMPANIES DATA WAS COLLECTED BY THE CCIT (CENTRAL)- 1, MUMBAI WHERE FROM IT IS NOTICED THAT THE ASSESSE E OBTAINED ACCOMMODATION ENTRIES TO THE TUNE OF RS.4,18,437/- IN THE PREVIOUS YEAR RELEVANT TO AY 2008-09. HOWEVER, AO MENTIONED THAT DURING THE FINANCIAL YEAR 2007-08 THERE WAS ONE ACCOMMODATION ENTRY IN R ESPECT OF SHARES OF M/S. RELIANCE N.R. THROUGH ALLIANCE INTERMEDIATORIE S & NETWORK P. LTD. ACCORDING TO THE AO IT IS NOTHING BUT INCOME FROM O THER SOURCES NOT DISCLOSED IN HIS RETURN OF INCOME. THE LAST TWO PAR AGRAPHS OF THE REASONS ARE EXTRACTED FOR IMMEDIATE REFERENCE: - FROM THE DATA COLLECTED BY THE CCIT (CENTRAL)-1, M UMBAI, IT IS REVEALED THAT THE ABOVE MENTIONED ASSESSEE HAS OBTA INED ACCOMMODATION ENTRIES TO THE TUNE OF RS.4,18,437/- DURING THE F.Y. 2007-08 RELEVANT TO A.Y. 2008-09 THROUGH ALLIANCE I NTERMEDIATORIES & NETWORK PVT. LTD. IN RESPECT OF SHARES OF M/S. RELI ANCE N.R. THIS IS NOTHING BUT INCOME EARNED FROM A SOURCE NOT DISCLOS ED TO THE DEPARTMENT IN HIS RETURN OF INCOME. HENCE, THE ASSE SSEE HAS SUPPRESSED THE PRIMARY FACTS REQUIRED IN THE RETURN OF INCOME. IN VIEW OF THE ABOVE FACTS AND AFTER GOING THROUGH THE RECORDS AVAILABLE, I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX TO THE TUNE OF RS.4,18,437/- OR ANY OTHER INCOME CHARG EABLE TO TAX WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF PR OCEEDINGS OF RE- ASSESSMENT, HAS ESCAPED ASSESSMENT, WITHIN THE MEAN ING OF PROVISIONS OF SEC 147 OF THE ACT, 1961. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS FAILED TO DISCLOSE TRUE AND COMPLE TE PARTICULARS OF ITS INCOME FOR THE YEAR UNDER CONSIDERATION. ACCORDINGL Y, THE CASE IS BEING OPENED U/S 147 OF THE I.T. ACT 1961 FOR ASST. YEAR 2008-09. 4. ASSESSEE OBJECTED TO THE REASONS RECORDED ON THE GR OUND THAT HE HAS NOT PURCHASED SHARES, DURING THE SAID PERIOD, F ROM ANY OTHER PARTIES AND THERE IS ONLY ONE TRANSACTION OF M/S. RELIANCE N.R. THROUGH ALLIANCE ITA NO. 7263/MUM/2014 SMT. SANGEETA RAMESH SHAH 3 INTERMEDIATORIES & NETWORK PVT. LTD., WHICH IS COMP ETENT TO CARRY OUT BROKERAGE BUSINESS. THE AO, HOWEVER, PROCEEDED ON T HE ASSUMPTION THAT THE ASSESSEE MADE CERTAIN INVESTMENTS FROM A SOURCE NOT DISCLOSED TO THE DEPARTMENT IN HIS RETURN OF INCOME AND THEREFORE TH E SAME IS ASSESSABLE TO TAX UNDER SECTION 69 OF THE ACT. HE ACCORDINGLY BROUGHT TO TAX A SUM OF RS.4,18,437/-, WHICH IS REFERABLE TO THE SHARES OF M/S. RELIANCE N.R., JAI CORPORATION, ETC. 5. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. THE CONTENTION OF THE ASSESSEE BEFORE THE LEARNED CIT(A) WAS THAT SHA RES OF ONLY ONE COMPANY, I.E. M/S. RELIANCE N.R. WERE PURCHASED THR OUGH ALLIANCE INTERMEDIATORIES & NETWORK PVT. LTD. FOR A SUM OF R S.1,48,920/- AND ALL THE IMPUGNED SHARES WERE SOLD AFTER ONE YEAR FOR A SUM OF RS.6,24,156/- AND IT IS NOT KNOWN AS TO HOW IT WAS ASSUMED THAT T HE ASSESSEE INVESTED A SUM OF RS.4,18,437/- IN THIS YEAR. ASSESSEE HAS SUB MITTED THE BALANCE SHEET, CONTRACT NOTE AND D-MAT STATEMENT TO SUBMIT THAT THE ADDITION MADE IS NOT IN CONFORMITY WITH THE BOOKS OF ACCOUNT . NOTHING WAS DONE BY THE AO TO PROVE THAT THE ASSESSEE PURCHASED OTHER S HARES. 6. THE LEARNED CIT(A) APPEARS TO HAVE NOT PROPERLY APP RECIATED THE FACTS OF ASSESSEES CASE AS COULD BE NOTICED FROM T HE FACT THAT IN PARA 2.1, GROUNDS OF APPEAL OF SOME OTHER APPEAL WAS EXTRACTE D. IN OTHER WORDS, THERE WAS NO INDEPENDENT APPLICATION OF MIND IN THI S CASE AND THE ORDER WAS MORE IN THE FORM OF CUT AND PASTE, WHICH COULD HAVE BEEN AVOIDED BY THE LEARNED CIT(A) SINCE THE FACTS OF EACH CASE WOU LD DIFFER AND IT IS ALWAYS ADVISABLE THAT THE FACTS SHOULD HAVE BEEN PROPERLY RECORDED. 7. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT REOPENING OF ASSESSMENT ITSELF IS BAD IN LAW SINCE THERE IS NO MATERIAL TO CONFIRM THE BELIEF THAT INCOME ESCAPED ASSESSMENT. THE AO HAS NOT APPLIED HIS MIND WHILE ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THE INFORMATION OBTAINED BY THE AO WAS NOT EVEN PUT TO THE ASSESSEE. IT IS NOT KNOWN AS TO HOW THE SUM OF RS.4,18,437/- WAS ARRIVE D AT SINCE THE ASSESSEE, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, PURCHASED SHARES WORTH RS.1,48,920/- ONLY AND INCLUDING ITA NO. 7263/MUM/2014 SMT. SANGEETA RAMESH SHAH 4 OTHER CHARGES PAYABLE BY THE ASSESSEE TO ALLIANCE I NTERMEDIATORIES & NETWORK PVT. LTD. THE AMOUNT WORKS OUT TO RS.1,49,2 12/-. AS COULD BE NOTICED FROM THE BALANCE SHEET THERE WAS NO PAYMENT MADE BY THE ASSESSEE; IT WAS SHOWN AS LIABILITY IN THE BALANCE SHEET. EVEN THIS TRANSACTION WAS ONLY WITH REGARD TO THE SHARES OF R ELIANCE N.R. IT IS THUS NOT KNOWN AS TO HOW HE ARRIVED AT THE FIGURE OF RS. 4,18,437/-. IT WAS THEREFORE STRONGLY SUBMITTED THAT THERE IS NON APPL ICATION OF MIND BY THE AO AND THEREFORE REOPENING OF ASSESSMENT IS BAD IN LAW. 8. THE LEARNED D.R. PLACED BEFORE THE BENCH XEROX COPY OBTAINED FROM THE OFFICE OF THE CIT (CENTRAL)-1 TO SUBMIT THAT SH ARES OF VARIOUS OTHER COMPANIES WERE SHOWN TO HAVE BEEN PURCHASED THOUGH ALLIANCE INTERMEDIATORIES & NETWORK PVT. LTD. FROM APRIL, 20 07 TO MAY, 2007, THE TOTAL OF WHICH WORKS OUT TO RS.4,18,437/- AND SINCE THAT INFORMATION WAS PASSED ON TO THE AO, THE AO WAS JUSTIFIED IN FORMIN G A BELIEF THAT INCOME ESCAPED ASSESSMENT AND THUS JUSTIFIED THE ACTION OF THE AO. 9. JOINING THE ISSUE THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THERE IS NO EVIDENCE ON RECORD TO JUSTIFY THAT THE ASSESSEE PURCHASED SHARES OF OTHER COMPANIES AND EVEN IN THE BALANCE S HEET ASSESSEE HAS NOT SHOWN EITHER AVAILABILITY OF SHARES OR PURCHASE OF SHARES OF ESSAR OIL, JAI CORPORATION, ETC. EVEN AT THIS STAGE THERE IS NOTHI NG ON RECORD TO SUGGEST THAT THE ASSESSEE HAD EITHER PURCHASED OR SOLD THOS E SHARES AT A LATER DATE. THE AO HAD NOT AT ALL APPLIED HIS MIND WHILE REOPEN ING THE ASSESSMENT EXCEPT MECHANICALLY ISSUING NOTICE UNDER SECTION 14 8 OF THE ACT. HE THUS STRONGLY CONDEMNED THE ACTION OF THE AO ON THE GROU ND THAT THE BASIC TENET OF TAXATION IS THAT THE AO SHOULD NOT PROCEED ON A MATTER UNLESS THE CONDITIONS PRESCRIBED THEREIN ARE PROPERLY SATISFIE D. SECTION 147 USES THE EXPRESSION HAS REASONS TO BELIEVE WHICH IMPLIES T HAT IT IS FOR THE AO TO ACT INDEPENDENTLY BY LOOKING INTO THE INFORMATION G ATHERED BY HIM AND HE CANNOT MERELY BORROW THE VIEW TAKEN BY SOMEBODY ELS E. 10. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE RECORD. ADMITTEDLY, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE PURCHASED AND SOLD SHARES OF ESASR OIL, JA I CORPORATION, ETC. THE FIGURE OF RS.4,18,437/- IS NOT TALLYING WITH ANY MA TERIAL ON RECORD WHICH ITA NO. 7263/MUM/2014 SMT. SANGEETA RAMESH SHAH 5 AMPLY PROVE THAT THE AO HAD MECHANICALLY ISSUED NOT ICE UNDER SECTION 148 OF THE ACT. SIMILAR MISTAKE WAS COMMITTED BY THE CI T(A) BY REPRODUCING THE GROUNDS OF APPEAL OF SOME OTHER ASSESSEE WHILE PASSING THE ORDER, WHICH AMPLY SHOWS THAT BOTH THE AUTHORITIES BELOW H AD NOT APPLIED THEIR MINDS TO THE FACTS OF THE CASE. SINCE THE AO ISSUED NOTICE WITHOUT PROPER RECORDING OF HIS SATISFACTION THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, I AM OF T HE FIRM VIEW THAT REOPENING OF ASSESSMENT IS BAD IN LAW AND I ORDER A CCORDINGLY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2015. SD/- ( D. MANMOHAN ) VICE PRESIDENT MUMBAI, DATED: 29 TH JANUARY, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 27, MUMBAI 4. THE CIT 16, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.