Manish Gyanchand Jain, Gandhidham V. Asstt. Commr. Of Income Tax, Gandhidham Circle, , Gandhidham

ITA 95/RJT/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9168 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Salary income; Opportunity of being heard; Cost of acquisition; Revised return; Reason to believe; Reassessment proceedings; Set aside
• Section: 147; 69; 148; 2; 139; 143(3); 133A; 251; 64

Judgement Text

आयकर अपील य अ धकरण, राजकोट यायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./I. T. A. Nos. 95-97/Rjt/2018 ( नधा रण वष / A s s e s s me nt Y e a r s 2 0 09 -1 0 t o 20 1 1 - 1 2) Shri Manish Gyanchand Jain, Kalpesh S. Doshi and Co., 411, Cosmo Complex, Near Mahila College Circle, Kalawad Road, Rajkot-360001. बनाम/ Vs. Assi stan t Co mmis sio ner of In co me-Tax, Gandh id ham Circle, Gandh idham. थायी लेखा सं. /जीआइआर सं. /PAN/ GIR No. : ABZPJ2544G (अपीलाथ /Appellant) ( यथ / Respondent) AND आयकर अपील सं./I. T. A. No. 93/Rjt/2020 ( नधा रण वष / A s se s s m e n t Ye ar 2 0 1 6- 1 7 ) Shri Manish Gyanchand Jain, Kalpesh S. Doshi and Co., 411, Cosmo Complex, Near Mahila College Circle, Kalawad Road, Rajkot-360001. बनाम/ Vs. Assi stan t Co mmis sio ner of In co me-Tax, Circle-1, Gandh idham. थायी लेखा सं. /जीआइआर सं. /PAN/ GIR No. : ABZPJ2544G (अपीलाथ /Appellant) ( यथ / Respondent) 2 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से / Appellant by : Shri Kalpesh Doshi , A.R यथ क ओर से/Respondent by : Shri B.D. Gupta, Sr. D.R स ु नवाई क तार ख / D a t e o f H e a r i n g 29/06/2022 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t 08/07/2022 आदेश / O R D E R PER BENCH: The captioned appeals have been filed by the assessee against the orders of the Ld. Commissioner of Income-Tax (Appeals), Rajkot, arising in the matter of the Assessment Order passed u/s 143(3) of the Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2009-2010 to 2011-12 except the appeal for the 2016-17. Since issues involved in all these appeals are identical, we proceed to dispose of all the appeals by this common order for the sake of convenience and brevity. First we take IT(SS)A No. 95/Rjt/2018, an appeal by the Assessee for A.Y. 2009-10. 2. The assessee has raised the following grounds of appeal: 1. That, the learned CIT(A) has wrongly confirmed the reopening of assessment u/s.148 of the Income Tax Act, 1961 by the Assessing Officer. 2. That, the learned CIT(A) has wrongly confirmed the disallowance of loss of Rs.23,63,465/- on share trading. 3. That, the learned CIT(A) has wrongly confirmed the charging of the interest u/s.23A, 234B, 234C and 234D of the I.T. Act, 1961. 4. That, the findings of the learned Assessing Officer and CIT(A) are not justified and are bad-in-law. The appellant craves to add, alte, amend or delete any of the above grounds of appeal. 3 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 3. At the outset, we note that the learned AR at the time of hearing has not advanced any argument on the ground raised by the assessee challenging the validity of the reopening under the provisions of section 147 of the Act. Accordingly, in the absence of any argument by the learned counsel for the assessee, we dismiss the same. 4. The issue raised in ground Nos. 3 and 4 by the assessee is either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 5. The 1 st issue raised by the assessee is that the learned CIT-A erred in confirming the disallowance of the loss claimed against the share trading activity which was set of against the profit from the shipping business. 6. The necessary facts as arising from the order of authorities below are that the assessee in the present case is an individual and was subject to the survey operation under section 133A of the Act. As a result of survey, the statement of the assessee under section 131(1A) was recorded wherein the assessee has claimed to have earned income from the business of shipping agency which was not disclosed in the income tax return. The assessee simultaneously during the survey proceedings agreed to disclose an income of 9 1,03,50,000/- in a period of three years beginning from AYs 2009-10, 2010-11 and 2011-12. The income pertaining to the year under consideration was of Rs. 30,50,000.00 from the business of shipping agency. Subsequently, the proceedings under section 147 of the Act were initiated against the assessee by issuing a show cause notice under the provisions of section 148 of the Act. The assessee in response to such notice filed a return of income dated 18 May 2016 declaring an income of 9 7,57,680.00 only. As per the assessee, there was the loss of Rs. 23,63,465.00 arising from the share trading activities which was adjusted against the shipping business. 4 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 6.1 It was contended by the assessee that the income during the survey operation was estimated at 9 30,50,000.00 based on the entries found in the bank accounts and other documents. The loss from the share trading activities was very much determinable from the very bank accounts found during the course of survey operation. Thus, the documents found during the course of survey operation should be taken as a whole while calculating the total income of the assessee. 6.2 Likewise, it was also submitted that the assessee has not claimed any share trading loss in the original return of income. Thus loss from the activity of share trading was not connected with the original return of income filed by the assessee. As such, the original return was filed declaring income under the head salary only. In the return filed under section 148 of the Act, the assessee has offered the income under one head i.e. shipping business but in the same manner the loss from another head i.e. share trading based on the same set of documents found during the course of survey. Thus the impugned loss should also be eligible to set off against the escaped income i.e. shipping business. Thus, according to the assessee the principles laid down by the Hon’ble Supreme Court in the case of M/s Sun Engineering Works Private Ltd reported in 198 ITR 297 are not applicable in the given set of facts. In that case the Hon’ble Supreme Court did not allow the set off of the claim pertaining to the original return of income which was claimed during the income escaping assessment. In that case, the claim pertaining to the original return of income was made in the income escaping proceedings. But it is not so in his case. 7. However, the AO was not satisfied with the contention of the assessee on the reasoning that the reassessment proceeding were initiated with respect to shipping agency business and the same was also accepted in the course of survey operation. Now, the assessee is claiming the set off of the loss of the share trading activity which is unconnected with the shipping trading business. Thus, the AO disallowed the claim of the assessee. 5 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 7.1 Besides the above, the AO noted that the loss from the share trading activity was computed under the provisions of section 44AF of the Act. Admittedly, under the provisions of section 44AF of the Act, income is calculated of an assessee engaged in retail trade equal to 5% of the total turnover. Thus, under the provisions of section 44 AF the Act there is no possibility of claiming the loss. Furthermore, the turnover of the assessee exceeds 940 Lacs being the threshold limit and therefore the provisions of section 44 AF cannot be applied. Based on the above, the AO did not allow the set off of the loss claimed by the assessee with respect to share trading activities against the shipping business. 8. Aggrieved assessee preferred an appeal to the learned CIT-A. 9. The assessee before the learned CIT-A submitted that the investigation was carried out by the Income Tax Department on the basis of the information available with it for the transactions carried out in the stock market through Religare Financial Services. However, the assessee has disclosed the income from the shipping business before the investigation report. However, the impugned income from the shipping business was set of against the share trading loss which was arising from the same bank account in which the transactions of shipping business were recorded. As such the common fund was used for both the business activities of the assessee being shipping business and share trading business through the common bank account. Thus, it was contended that the loss from the share trading activity should be allowed to be set off against the shipping business. Furthermore, the impugned loss from share trading activity has no connection with the original return of income. 10. However, the learned CIT(A) rejected the contention of the assessee by observing as under: 6 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others Having considered facts and circumstances of the case, I find the issue for decision here is whether the assessee can claim losses in reassessment proceedings (which were not claimed in original return/original assessment). To reiterate the relevant facts, it can be seen that when faced with investigations about the transactions in his bank account, the assessee admitted having undisclosed shipping agency business and disclosed the gross Receipts to the tune of Rs. 1,75,12,824/- and profit of Rs. 30,50,000/- for F.Y. 2008-09. Similarly turnover of Rs. 1,56,79,714/- and income of Rs. 27,50,000/- were declared for F.Y. 2009-10 and turnover of Rs. 1,03,50,000/- and income of Rs. 45,50,000/- were declared for F.Y. 2010-11.The notice u/s 148 was issued to bring to tax this admittedly undisclosed income and the unaccounted payments to Religare from the bank account. During investigations by the ADIT the assessee did not ciaim any losses or profits from the share trading. I find merit in very cogent findings of the AO that: from the sequence of events it is noticed that assessee did not claim any share trading loss in its original return. It is beyond understanding of common prudence why losses from share trading were not claimed during filing of original return. Assessee had intention to conceal his income from shipping agency. Then assessee also paid self-assessment tax of Rs 15,20,000/- suo motto based on its estimated profit from shipping business without making any set-off from its share trading losses. It is also pertinent to note that self assessment tax was paid while filing original return. Thus, it leads to a situation where if no reassessment proceedings would have been initiated against assessee then he was content with payment of his self assessment tax. It is only when the assessment were proceedings were underway that the claim of losses from share trading and issue of refund was made. Such claim is devoid of logic and prudence and Is of malafide nature. Reassessment proceedings were initiated to reassess undisclosed income generated from shipping agency in the name of M/s Prime Corporation which were invested in shares as well as non disclosure of salary Income, as accepted in earlier proceedings before department. As regards the application of Section 44AF, I find that the assessee has himself contended that: - With respect the findings that Share trading activities are not retail activities hence, cannot be covered u/s 44AF the submissions of assessee are that. The appellant has maintained its books of accounts on estimated basis. - The appellant have prepared Trading and Profit and loss A/c for its share trading activities also. - Profit/loss on shares have been properly calculated and showed in its Trading and Profit and Loss A/c for the year under consideration. The profit have not been calculated as per section 44AF. It is also contended that by assessee that:- Hence, it is respectfully submitted that the mention of the Section 44AF m the return of income is mere an error, and it does not offset the calculation of the profit as per the provisions of the I T. Act, 1961. In these facts and circumstances of the case I find merit in findings of the AO that claim of such losses is not allowable. The claim of assessee that the transactions were in the same bank account is not tenable. The bank account merely contains details of payments and receipts. It does not reveal the complete business of the assessee. In fact, it was to explain the source of excess payments from the bank account that the assessee admitted his unaccounted business of shipping agency and income thereof. I find that the assessee's 7 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others arguments are neither here, nor there and they are contradictory also. On the one hand he claims that the profit and loss account has been made on estimate basis as he does not maintain his books of account and that claim u/s 44AF was made erroneously. On the other he claims that his claim of loss should be accepted. The assessee did not claim any such loss before Investigation authority or in original return. The payments to Regigare were explained to be out of undisclosed income from shipping agency business. But the Income or loss of share business was never disclosed before investigation authority. A claim which was not made in original return is not allowable in reassessment proceedings. In the decision of Hon’ble Supreme Court in CIT vs Sun Engineerings Works (P) Ltd. 198 297 (SC) (Asstyr 1960-62) it was held that the assessee cannot claim re-computation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment that facts of his case are distinguishable from this case is devoid of any merit. The decision of apex court is squarely applicable here. The Karnataka High Court in the case of CIT Vs. Sangeetha Granites Ltd. (2010) 326 ITR 324(Kar) has held that: 11. In so far as question no.2 is concerned, having perused the judgemtn of Hon’ble supreme court in Sun Engineering works (P) Ltd. case (1992) 198 ITR 297 we have no hesitation to hold that in a reassessment proceedings which relate to the income which has escaped assessment where the assessment where the assesee would be entitle to put forward the claim for deduction of any expenditure in respect of that income (that income which is referable to escaped income) and also about the taxability of items which were sought to be taxed in the assessment proceedings only be agitated and not to income which was not the subject matter of assessment. If the contention of learned counsel Sri Kalkarni were to be accepted which is to the effect that income which has been assessed and accepted by the assesee can also be gone into the reassessment proceedings. It would be leading to an incongruous situation transaction as the assessee would under the gules o questioning the taxability would in effect convert it as his appeal or revising in disguise which is impermissible in law particularly having accepted the assessment order. Hence we are of the considered opinion that in view of Sun Engineering Works (P.) Ltd. case (1992) 198ITR 297, the Tribunal was in reassessment proceedings. Accordingly, we answer the question NO.2 in the negative, i.e in favour of the Revenue and against the assessee. The Ld. ITAT Bangalore C bench Bangalore in ITA NO.1372/Bang/2014 (AY 2007-08) in the case of Karnata State Co-operative Apex Bank Ltd., Vide its order dated 29/02.2016 has held that “10. As regards ground No. 5 about allowance of additional claim on account of loss on sale of securities of Rs. 8,28,65,052/- it is undisputed fact that this claim was made only in the return of income filed in response to notice u/s. 148. The issue is whether the assessee is entitled to agitate the issues which were concluded in the original assessment proceedings? This additional claim was obviously not made in the original assessment proceedings nor this issue is one of those issues which is sought to be reconsidered by the AO during the course of re-assessment proceedings. Therefore, concluded issue in the original assessment proceedings cannot be re-agitated during the course of re-assessment proceedings. The ratio laid down by the Hon’ble Supreme Court in the case of Sun Engineering (supra) is squarely applicable to the facts of the case. Even assuming that it is only re-adjustment of claim already made, such re-adjustment is not possible in the 8 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others proceedings of re-assessment. The assessee can have recourse to any other provisions of the Income-tax Act, 1961. Hence, this ground of appeal is dismissed. Similarly the ld. ITAT Mumbai in case of Metro Ispat P. Ltd., Mumbai vs Assessee in ITA No. 2553/Mum/2010 has held that “11. We find that in the case of Sun Engineering Works (P) Ltd. Vs. CIT it has been held as follows: “The High Court clearly fell in error by permitting the assessee to re-agitate, in the reassessment proceedings under section 147(a), the finally concluded assessment proceedings and to grant to him relief in respect of items not only earlier rejected, but also unconnected with the escapement of income by assuming as if the original assessment had not been concluded or was ‘still open” 12. The ratio of the decision in the case of Sun Engineering Works (P) Ltd. is that once an assessment is validly reopened only the previous underassessment is set aside and not the original assessment proceedings particularly if it has acquired finality. In the reassessment proceedings it is not open to an assessee to seek a review of the concluded item, unconnected with escapement of income. 13. Hence in our opinion when excise duty amounting to Rs. 12,96,995/- which is unconnected with the escapement of income has been concluded finally against the assessee in the reassessment proceedings, it is not open to the assessee to raise a fresh claim de hors the issue in reassessment. It is obvious that the reassessment proceedings are always intended to put the Revenue in the beneficial position so as to charge any income which escaped taxation at an earlier stage. Such proceedings cannot be used by the assessee for making a fresh claim and thus putting it in an advantageous position.” I also find that the assessee has not even established that the actually incurred any such loss. Admittedly he does not maintain books of account. The profit and loss account has admittedly been made on estimated basis. Admittedly, the provision of Section 44AF do not apply to him. This claim was admittedly made erroneously by the assessee. Therefore such loss is not allowable also because the loss is not proved to be genuine besides for the reason that no such loss can be claimed in re-assessment proceedings. In view of the above discussion in my considered opinion the action of AO calls for no interference. The Ground of Appeal 2 is rejected.” 11. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 12. The learned AR before us filed a paper book running from pages 1 to 54 and reiterated the submission made before the authorities below. 13. On the contrary the learned DR before us relied on the order of the authorities below. 9 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 14. We have heard the rival contentions of both the parties and perused the materials available on record. The proceedings under section 147 of the Act are for benefit of the revenue and not for the assessee. The proceedings under section 147 of the Act cannot be allowed to be converted as 'revisional' or 'review' proceedings. The claims which have been disallowed in original assessment proceeding are not permitted to be re-agitated on assessment being reopened for bringing to tax certain income which had escaped assessment. A matter which is not agitated in concluded original assessment proceedings also cannot be permitted to be agitated in reassessment proceedings unless relatable to the item sought to be taxed as 'escaped income'. The assessee is not permitted to claim relief of an item not claimed in the original return of income or original assessment proceedings unless relatable to escaped income. Consequently, allowance of such claim in respect of escaped assessment u/s 147 of the Act has to be limited to the extent they reduce the income to originally assessed and as such income for the purpose of re-assessment cannot be reduced beyond the income originally assessed. Therefore, in reassessment proceedings under section 147 of the Act, the assessee cannot seek a review of concluded item, unconnected with escapement of income for purpose of computation of escaped income. In holding so, we rely on various judgments of the Hon’ble Courts including the case of CIT v. Sun Engineering Works (P.) Ltd [1992] 64 Taxman 442/198 ITR 297 (SC) where the Hon’ble Supreme Court held that in the reassessment proceedings, it was not open to the assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the escaped income. 14.1 Moving further, we also note that the Finance (No. 2) Act, 2009 inserted an Explanation 3 to Section147 retrospectively with effect from 01/04/1989 which reads as follows: "Explanation 3. - For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of 10 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others the proceedingsunder this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148." 14.2 Under this Explanation in section 147 of the Act, the AO was empowered to assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub- section (2) of section 148 of the Act. Thus, Explanation 3 makes it clear that the AO may assess or reassess the income in respect of issues which have escaped assessment, if such issues come to his notice in the course of proceedings under this Section even though the said issues did not find mention in the reasons recorded and the notice issued under section 148 of the Act. 14.3 Now coming to the facts of the case before us. For this purpose we are inclined to refer the reasons recorded for initiating the proceedings under section 147 of the Act which reads as under: “It is noticed that the assessee has accepted total profits during different Financial Years which as below before the Income Tax Department: Sr. F.Y. Taxable 1 2008-09 3050000 2. 2009-10 2750000 3. 2010-11 4550000 4. 2011-12 2469480 5. 2012-13 8658660 2. During A.Y. 2009-10 the assessee was engaged in the business of shipping agency in the name of M/s.Prime Corporation. The assessee has accepted before the Department the he has not maintained any books of accounts, therefore he declared total disclosed income of Rs.30,50,000/- by estimating net profit on the approximate basis for A.Y. 2009- 10. Various transactions related to business were appearing in various his bank accounts for this period. However, the assessee has not filed return of income for the FY 2008-09 relevant to A.Y. 2009-10. 3. In the light of the above facts, it is clear that the assessee has failed disclosed the amount of Rs.30,50,000/- for AY 2009-10. The case of the assessee was not selected for scrutiny assessment & hence no order u/s.143/144 has been passed. The assessee has failed to disclose fully and truly all the material facts necessary for assessing true and correct income of the assessee. Therefore I have reason to believe that income chargeable to tax of Rs.30,50,000/- for AY 2009-10 has escaped assessment within the meaning of Section 147 and this is a fit case for issue of notice u/s.148 of the Act. 4. A copy of the reasons recorded is also enclosed herewith. 11 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 14.4 On perusal of the above reasons, we note that the proceedings were initiated on account of escapement of income from the business of shipping agency carried on by the assessee under the name and style of M/s Prime Corporation. However, the AO during the assessment proceedings has also made the addition on account of unexplained investment of 9 5,83,333.00 under the provisions of section 69 of the Act. The reason of making the addition was based on the proceedings before the ADIT (Inv) as mentioned in the assessment order. The relevant extract is reproduced as under: Unexplained investment u/s.69 of the Act. During the earlier proceedings before ADIT(Inv) the assessee has accepted total profits of Rs.1,03,50,000/- for AY 2008-09 till FY 2010-11 (3 years). However, as per dissemination note. “During the period April to December, 2010, client has made total payments of Rs.1.46 crores to Religare and payout taken of Rs.25.54 lakhs. All the transactions were routed through Bank account No.909010033105496 of Axis Bank.” 14.5 A perusal of the above proceedings before the ADIT investigation reveals that addition of unexplained investment relates to the share trading activities carried out by the assessee through its bank i.e. Axis Bank and Religare Financial Services. 14.6 It is undisputed fact that there was no mentioned about the share trading activity in the reasons recorded by the AO under the provisions of section 147 of the Act which is evident from the preceding paragraph. But the law provides the authority to the AO to make the addition of any other income which comes to his knowledge subsequently in the course of assessment proceedings. 14.7 Now the controversy in the given facts and circumstances relates whether the loss claimed by the assessee with respect to share trading business can be allowed as deduction against the escaped income as discussed above. In this 12 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others regard, we refer to the order of the ITAT Pune Tribunal in the case of Malpani states versus a CIT reported in 44 Taxmann.com 242 wherein it was held as under: 16. The argument set-up by the learned Departmental Representative on the basis of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P.) Ltd. (supra), in our view, is also untenable having regard to the facts of the present case. No doubt the Hon'ble Supreme Court has observed that reopening of an assessment u/s 147/148 is for the benefit of the Revenue. In the case before the Hon'ble Supreme Court, assessee wanted to set-off loss against the escaped income which was taxed in the re- assessment proceedings and the claim of such set-off was not made in the return of income originally filed. According to the Hon'ble Supreme Court, the claim was not entertainable because the said claim not connected with the assessment of escaped income. In-fact, the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) is not an authority to say that assessee cannot raise a claim pertaining to an issue which is connected to the assessment of escaped income. In-fact, if a claim which is connected to the escaped income is set-up before the Assessing Officer in the course of re-assessment proceedings, the same is liable to be considered and the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) only precludes such new claims by the assessee which are unconnected with the assessment of escaped income. 14.8 Similarly, we also make reference to the order of ITAT Kolkata Tribunal in the case of Van Oord Atlanta B.V. v. Assistant Director of Income-tax reported in 112 TTJ 0229 wherein it was observed as under: 8. We have heard the rival submissions of the parties and also perused the documents produced by both the parties. Before dealing with the main issue regarding the existence of any PE of the appellant company in India and the question of taxability of the appellant's income in India, we would like to decide the question of admissibility of the grounds of appeal. The learned CIT(A) dismissed the grounds of appeal in its totality, presumably because the issues covered by these grounds were not -raised before the Assessing Officer. In out view, the Department's reliance on the judgment of the Hon'ble Apex Court in the case of Sun Engg. works (P.) Ltd. (supra) is misplaced on the facts and circumstances of the case. This decision pertains essentially to proceedings under section 147 of the Act and entails as to what should toe the role of the Assessing Officer and the assessee in reassessment proceed. This is exactly what the Apex Court said :— "In proceedings under section 147 of the Income-tax Act, 1961 the ITO may bring to charge items of income which had escaped assessment other than or in addition to the item or which led to the issuance of a notice under section 148 and where reassessment is made under section 147 in respect of income which had escaped tax, the ITO's jurisdiction is confined only to such income which has escaped tax or has been under assessed-and does not extend to' revising, reopening or reconsidering the whole assessment or permitting the assessee to questions' which had been decided in the original assessment proceedings. It is only the under assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under section 147. An assessee cannot resist reassessment proceedings validly initiated under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under s. 152(2). The words such income in section 147 clearly refer to the income which is chargeable to tax but has 'escaped assessment' and the ITO's jurisdiction under the section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally 13 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others the concluded earlier assessment. Claims which have been disallowed in the original assessment cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which has escaped assessment, because the controversy on reassessment is confined to matters which are relevant only in respect of the income which had not been brought to tax during the course of the original assessment. A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the items sought to be taxed as 'escaped income'. Indeed, in the reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to the assessee to put forward claims for deduction of any expenditure in respect of that income or regarding the non-taxability of the items at all, section 147, being for the benefit of the revenue and not the assessee, the assessee cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income'. Even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped income are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income, for purposes of 'reassessment' cannot he reduced beyond the income originally assessed.' 14.9 In the light of above decision and after analyzing all the facts as discussed above, we find that the assessee is entitled to claim the deduction of the expenditures in respect of which the escaped income has sought to be assessed. The loss from the share trading activity has direct nexuses with respect to the unexplained investments which has been added by the AO under the provisions of section 69 of the Act. Accordingly we hold that the assessee is entitled for the deduction with respect to the loss claimed by the assessee from the share trading activities amounting to Rs. 23,63,465.00. 14.10 In addition to the above, we also note that there was single bank account which was used for the purpose of the share trading activities as well as for shipping business activities. As such the income generated by the assessee from the share trading activities was diverted to the business of shipping. The common fund was used for generating both the incomes out of the single bank account. Therefore we find difficult to hold that the activities being share trading and shipping business are distinct and not interconnected in the given facts and circumstances. 14 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 14.11 Furthermore, there is also no dispute to the fact that the assessee in the original return of income filed under section 139 of the Act has only disclosed income from the salary. Thus, it is not the case of the assessee that the impugned share trading loss relates to the original return of income of the assessee. As such, the share trading loss was never subject matter of dispute or discussion in the original return of income. Accordingly, the principles laid down by the Hon’ble Supreme Court in the case of M/s Sun engineering (supra), in our humble understanding, are not applicable in the given facts and circumstances for the reasons elaborated hereinabove. 14.12 The next question arises about the quantification of the loss from the share trading activities. It has been alleged by the revenue that the loss from the share trading activity has been computed under the provisions of section 44AF of the Act. Admittedly, there’s no possibility of showing any loss from the share trading activities under the provisions of section 44 AF of the Act. However, we note that the assessee has not claimed any loss under section 44AF of the Act. As such there is a separate trading and profit & loss account placed on page 29 of the paper book. Thus we disagree with the finding of the authorities below that impugned loss was computed under the provision of section 44AF of the Act. Hence, the ground of appeal of the assessee is allowed. 14.13 In the result, the appeal filed by the assessee is allowed. Coming to ITA No. 96/RJT/2018, an appeal by the assessee for the assessment year 2010-11. 15. The assessee has raised the following grounds of appeal: 1. That, the learned CIT(A) has wrongly confirmed the reopening of assessment u/s.148 of the Income Tax Act, 1961 by the Assessing Officer. 15 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 2. That, the learned CIT(A) has wrongly confirmed the disallowance of loss of Rs.23,46,510/- on share trading. 3. That, the learned CIT(A) has wrongly confirmed the charging of the interest u/s.23A, 234B, 234C and 234D of the I.T. Act, 1961. 4. That, the findings of the learned Assessing Officer and CIT(A) are not justified and are bad-in-law. The appellant craves to add, alte, amend or delete any of the above grounds of appeal. 16. At the outset, we note that the learned AR at the time of hearing has not advanced any argument on the ground raised by the assessee challenging the validity of the reopening under the provisions of section 147 of the Act. Accordingly, in the absence of any argument by the learned counsel for the assessee, we dismiss the same. 17. The issue raised in ground No. 3 and 4 by the assessee is either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 18. The solitary issue raised by the assessee in ground no. 2 is that the learned CIT-A erred in confirming the disallowance of the loss claimed against the share trading activity which was set off against the profit from the shipping business. 19. At the outset, we note that the issue raised by the assessee in his ground of appeal is identical to the issue raised by the assessee in his own case bearing ITA No. 95/Rjt/2018 for the assessment year 2009-10. Therefore, the findings given in ITA No. 95/Rjt/2018 shall also be applicable for the issue raised by the assessee in the above mentioned appeal. The ground of appeal of the assessee in for the 95/Rjt/2018 has been allowed by us vide paragraph Nos. 14 to 14.13 of this order. The learned DR and Ld. AR also agreed that whatever will be the findings in 95/Rjt/2018 for AY 2009-10 shall also be applied to the appeal on hand i.e. ITA No. 16 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 96/Rjt/2018 for the assessment year 2010-11. Hence, the ground of appeal filed by the Assessee is allowed. 19.1 In the result, the appeal of Assessee is allowed. Coming to ITA No. 97/RJT/2018, an appeal by the assessee for the assessment year 2011-12. 20. The assessee has raised the following grounds of appeal: 1. That, the learned CIT(A) has wrongly confirmed the reopening of assessment u/s 148 of the Income Tax Act, 1961 by the Ld. Assessing Officer. 2. That, the learned CIT(A) has wrongly confirmed the disallowance of loss of Rs.15,70,042/- on share trading. 3. That, the learned CIT(A) has wrongly confirmed the addition of Rs.5,83,333/- u/s 69 of the I.T Act, 1961 on account of unexplained investment. 4. That, the learned CIT(A) has wrongly enhanced the addition of Rs. 11,66,667/- u/s 69 of the I.T Act, 1961 on account of unexplained investment' 5. That, the learned CIT(A has enhanced income without giving opportunity as provided u/s 251(2) of the I.T. act. 6. That, the learned CIT(A) has wrongly confirmed the charging of the interest u/s 234A, 234B, 234C and 234D of the I. T. Act,1961. 7. That, the findings of the learned ,AO and CIT (A) are not justified and are bad-in-law. The appellant craves to add, alter, amend or delete any of the above grounds of appeal. 21. At the outset, we note that the learned AR at the time of hearing has not advanced any argument on the ground raised by the assessee challenging the validity of the reopening under the provisions of section 147 of the Act. Accordingly, in the absence of any argument by the learned counsel for the assessee, we dismiss the same. 17 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 22. The issues raised in ground Nos. 6 and 7 by the assessee are either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 23. The 1 st issue raised by the assessee in ground No. 2 is that the learned CIT- A erred in confirming the disallowance of the loss claimed of Rs. 15,70,042.00 as against the share trading activity which was set off against the profit from the shipping business. 24. At the outset, we note that the issue raised by the assessee in his ground of appeal is identical to the issue raised by the assessee in his own case bearing ITA No. 95/Rjt/2018 for the assessment year 2009-10. Therefore, the findings given in ITA No. 95/Rjt/2018 shall also be applicable for the issue raised by the assessee in the above mentioned appeal. The ground of appeal of the assessee in ITA No. 95/Rjt/2018 has been allowed by us vide paragraph Nos. 14 to 14.13 of this order. The learned DR and Ld. AR also agreed that whatever will be the findings in ITA 95/Rjt/2018 for AY 2009-10 shall also be applied to the appeal on hand i.e. ITA No. 97/Rjt/2018 for the assessment year 2011-12. Hence, the ground of appeal filed by the Assessee allowed. 25. The 2 nd issue raised by the assessee in ground Nos. 3 and 4 is that the learned CIT-A erred in confirming the addition of 9 5,83,333.00 and 9 11,66,667.00 under the provisions of section 69 of the Act. 26. The AO during the assessment proceedings found that the assessee has made payment of 91.46 crores against which there was a pay out of 924.54 lakhs. Thus, the net outflow stood at 91.21 crores only. The assessee at the same time 18 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others has also accepted an income of 91.035 crores from the shipping business pertaining to the financial years 2008-09 to 2010-11. Thus, the AO was of the view that the outflow representing the payment of 91.21 crores was the application of the income accepted by the assessee for 91.035 crores from the shipping business. However, the AO further found that the income is less than the payment made by the assessee leading to a difference of 9 17,50,000.00 which was not explained. Thus, the AO treated the same as unexplained investment under section 69 of the Act and allocated the same over the period of three years being 9 5,83,333.00 each in all the years. Thus, the AO made the addition of 9 5,83,333.00 being unexplained investment under section 69 of the Act to the total income of the assessee. 27. Aggrieved, assessee preferred an appeal to the learned CIT-A who has enhanced addition made by the AO to the income of the assessee from 9 5,83,333.00 to Rs. 17,50,000 by observing as under: Having considered facts and circumstances of the case I find that the assessee has paid Rs. 1.21 cr. from his Bank account from April 1 to Dec, 2010 and has received Rs. 24.5 lacs as deposits in the bank account. The assessee has claimed that these payments and deposits pertain to his share trading business. The AO has given a set off of undisclosed profits from shipping agency business declared during F.Y. 2008-09, 2009-10 and 2010-11 and also given credit of deposits of Rs. 24.5 lacs and has computed net outflow of Rs. 17,50,000/-. The AO averaged this as unaccounted investment spread over three years and made addition u/s 69 of Rs. 5,83,333/-in each year as no objection to this proposition was filed by assessee during assessment. During appellate proceedings it has been contended that working of assessing officer is merely a surmise. The assessee has contended that for availability of funds gross receipts of shipping business should be seen and not only the Profit. I do not find any arguments for turnover of assessee explaining bank deposits. His contention that turnover and the profit should be seen as source of deposits is devoid of any merit. The AO as discussed earlier it is the excess of payment over receipts and the profit of shipping agency which only has been considered unexplained by AO. Considering the totality of facts and circumstances of the case, I am of the considered opinion that the assessee has failed to explain the source of excess of payments over the receipts. The A.O. has been more than reasonable in allowing set off of the profit of undisclosed shipping agency and in making addition of only the excess after giving this set off. Such excess payment of Rs. 17,50,000/- still remains unexplained. However, I do not find merits in action of A.O. in averaging out this excess payment over three years. In my 19 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others considering opinion, the addition of Rs. 17,50,000/- should be made in the A.Y. 2011-12 along which is the contention of assessee as well in appeals for A.Y 2009-10 & 2010-11. Therefore the additions of Rs. 5,83,333/- each made in A.Y. 2009-10 and 2010-11 have been directed to be deleted by me in relevant appeals. However, in A.Y. 2011-12, the addition of Rs. 5,83,333/- is enhanced to Rs. 17,50,000/-. Accordingly ground of appeal is dimissed with enhancement. 28. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. The learned AR before us filed a paper book running from pages 1 to 51 and submitted as under: 1. The appellant is engaged in the Shipping agency business and earns income and also carried out activity of share trading with Religare and other broking company. 2. The learned Assessing Officer has made addition in respect of investment m share trading activities on account of difference in pay-in and pay-out of Religare account for the period April 2010 to December 2010 and has made addition for the current year of Rs.5,83,333/- on estimated basis and Rs. 11,66,667/- on account of investment made in AY 2009-10 and 2011-12. 3. The working of ld. AO is merely on presumption and surmises. The AO has made working of such unexplained investment without any basis. 4. The appellant has duly maintained profit and loss account for share trading activities and the income and expenses are duly reflected in the said account. The copy of share trading account is enclosed on page no. 36. 5. The pay-in and pay-out amount are duly made through regular bank accounts and duly reflected in the trading account. 6. It can be seen from the trading account that the appellant is having opening stock of shares, has also purchased shares during the year and has sold shares. The detailed working is also furnished in trading account. 7. Therefore, the basis of making addition is incorrect and there are no such transaction carried on by the appellant with reference to Religare. The purchases and sales of shares through Religare are duly accounted for in the trading account and therefore the working of ld. AO is not justified. 8. It is also further stated that the AO has considered only net income of shipping business against pay out, whereas the total turnover is much higher and therefore the fund available with the appellant is gross receipt at that point of time and the gross receipt from shipping activity is much higher in all these 3 years. 9. The gross receipts from the shipping business is as under: A.Y. Gross Receipts Income Disclosed 2009-10 1,75,12,824 30,50,000 2010-11 1,58,79,814 27,50,000 2011-12 1,52,02,385 45,50,000 Total 4,85,95,023 1,03,50,000 20 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 10. Therefore, the gross receipts of 3 years is Rs. 4,85,95,023/-, the said amount is available for the pay-in and pay-out and therefore the findings of the ld. AO is incorrect. 11. Therefore, the source of investment is duly reflected in the bank accounts and therefore the same is duly explained. 12. It is therefore respectfully submitted to delete the addition, which purely made on the basis of surmises and presumption. GROUND 5:That, the learned CIT(A) has enhanced income without opportunity as provided u/s 251(2) of the I. T. Act. 1. The Ld. AO has made addition of Rs. 5,83,333/- in 3 years (AY being average of investments amounting to Rs. 17,50,000/-. 2. The Ld. CIT(A) vide para no, 3.3.4, page no, 24-25 deleted the addition made by Ld. AO in AY 2009-10 and AY 2010-11, stating that appellant has admitted that must be made in the AY 2011-12. 3. The appellant in its submission for AY 2009-10 and AY 2010-11 has only mentioned the fact that investment is made In the period of April 2010 to December 2010. Therefore, the same addition in AY 2009-10 and AY 2010-11 is not warranted. 4. In this regard it is submitted that the appellant has not made any such claim. The Ld. CIT(A) has made addition without providing the opportunity of being heard. 5. Your kind attention is invited to provisions contained in section 251 of the Act. The relevant portion of section is reproduced as under: Powers of the Commissioner (Appeals) 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a).... (aa)... (b)... (c)... (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 6. It is respectfully submitted that as per the provisions contained in section 251(2) of the Act, the Ld. CIT(A) is required to provide opportunity of being to assessee before enhancing the assessment for the year under consideration. 7. It is therefore requested to consider the above facts and allow the claim made by appellant. 29. On the contrary, the learned DR vehemently supported the order of the authorities below. 21 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 30. We have heard the rival contentions of both the parties and perused the materials available on record. The AO in the proceedings under section 143(3) of the Act made the addition under section 69 of the Act amounting to 9 5,83,333.00 representing the investment in share trading business. According to the AO, there was unexplained investment under section 69 of the Act amounting to 917 ,50,000 which was pertaining to 3 years i.e. 2008-09, 2009-10 and 2010-11 and therefore the same was allocated in proportion to all the years. In fact, the addition was made by the AO for 9 5,83,333.00 in each of the assessment years in equal proportion aggregating to 917,50,000 for all the years under dispute. However, the learned CIT(A) in the earlier assessment years 2008-09 and 2009-10 has deleted the addition made by the AO amounting to 9 5,83,333/- for each year but confirmed the addition for all the 3 years as discussed above amounting to 917,50,000.00. Thus the sum of 911,67,777 out of the total addition of 9 17,50,000 pertains to the assessment year 2008-09 which was added to the total income of the assessee including the income of the assessee under consideration. In other words the addition made by the AO for the year under consideration for 95,83,333.00 pertains to the year under consideration whereas the balance amount of addition was not subject matter of dispute in the assessment order. But the learned CIT-A has added the same in the year under consideration. Thus, the income for the year under consideration was enhanced by the ld. CIT-A and therefore it was mandatory upon the learned CIT-A to issue the enhancements notice under the provisions of section 251 of the Act. 30.1 As far the addition of 911, 67,777.00 is concerned, we note that this addition has been made in the year under consideration by enhancing the income declared by the assessee which has been elaborated in the preceding paragraph. At this juncture it is necessary to refer the relevant provisions of section 251(2) of the Act which reads as under: 22 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others (2) The 56 [***] 57 [Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 30.2 From the above reading of the provisions of law, we note that it is mandatory for the learned CIT-A before enhancing the income that he has to provide the opportunity of being heard to the assessee. However, we find that no such opportunity has been extended to the assessee. The ld. DR has also not provided anything contrary to the arguments advanced by the ld. AR for the assessee. Therefore, to our understanding, the addition of Rs. 11,67,777.00 is not warranted in the given facts and circumsatnces. 30.3 For the balance amount of 95,83,333.00, we note that it was explained by the assessee that there is no additional income which was undisclosed which was utilized for the purpose of impugned investment. According to the learned AR, the addition was made by the AO on account of the undisclosed investments based on wrong assumption of facts. According to the learned AR there was the sale proceeds of Rs. 4,85,95,023.00 out of which a sum of 9 1,03,50,000.00 was disclosed but no inference can be drawn that the cash available with the assessee was only of Rs. 1,03,50,000.00 only. The contention of the learned AR was not disproved by the learned DR appearing on behalf of the revenue. Thus, we hold that investment was made by the assessee out of the gross receipts shown by him from the activity of share trading. Accordingly, we are of the view that no addition in the given facts and circumstances is warranted. Hence, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed. 30.4 In the result, the appeal filed by the assessee is allowed . 23 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others Coming to ITA No. 93/Rjt/2020 for A.Y. 2016-17, an appeal by the assessee. 31. The only issue raised by the assessee is that the learned CIT-A erred in confirming the addition made by the AO for 921 lakhs on account of difference in opening balance and closing balance of the shares. 32 The AO during the assessment proceedings found that the assessee has claimed an expense of 921 lakhs which is the difference in the value of the stock of shares and the closing value stock of shares in year under consideration. According to the AO, such difference cannot be allowed as deduction against the business profit of share trading business. Thus the AO disallowed the same and added to the total income of the assessee. 33. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the same by observing as under: During the appellate proceeding the appellate reiterated the contention raised before the Assessing Officer and stated that the Assessing Officer wrongly consider the amount of Rs.21,00,000/- as expenses however, same is nothing but difference of opening stock and of closing stock (Rs.2,23,88,387 - Rs.2,02,88,387). The applicant has accordingly followed generally accepted account and principle of computing profit and loss in the revised return of income and hence rightly arrived to the loss of Rs.1,12,2361-. The appellant's such argument are not in accordance in accounting principle relating to computation of capital gain/loss' The Assessing Officer has rightfully treated the appellant's transaction of shares giving rise to the capital gain and from the capital gain the difference in stock expenses amounting to Rs.21,00,000/- is not the allowable expenditure as per the income Tax Act. Therefore the appellants argument made supra are not tenable hence I confirm the action of the Assessing Officer to disallow sum of Rs.21,00,000/-- being stock difference claimed as expenses against the capital gain. The ground of appeal on this account is accordingly dismissed. 24 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others 34. Being aggrieved by the order of the learned CIT-A. The assessee is in appeal before us. The learned AR before us filed a paper book running from pages 1 to 17 and contended that It is stated that the appellant has followed generally accepted accounting principles for computing the profit or loss for the ear under consideration. Therefore, in order to arrive as the profit or loss the appellant has taken the net effect of stock valuation. It is further stated that the per broker’s profit and loss statement the amount of valuation of opening stock has not been taken into consideration while arriving at the overall profit and loss. The copy of broker’s profit and loss statement is enclosed at page no.15. It is also sated that the purchase value and sale value are duly reflected in the profit and loss statement provided by he brokers. The opening stock valuation is taken from the holding statement provided by the broker. The copy of holding statement for year ended 31/03/2015 and 31/03/2016 are enclosed at page no.16-17. The transaction are carried out through normal banking channel and through registered share broker. It is stated that the closing stock consists of two scripts which are also part of purchases made during the year. The closing quantity of scrips can be verified from the holding statement enclosed at page no.17. It is therefore submitted that when the purchases of scripts are taken into consideration in order to arrive at the profit for the year under consideration. It is also submitted that as per the market valuation the value of closing stock as on 31/03/2016 is Rs.1,10,05,640/- The closing stock valuation as per working given above is Rs.2,02,88,387/-. Therefore, the appellant has shown profit on higher side as compared to normal accounting practice. It is respectfully submitted that while arriving at the net profit, the value of opening stock and closing stock is to be taken into consideration and the same cannot be merely the difference of the sales and purchases. As some of the items of opening stocks are sold during the ear and duly included in the sales figures. Further, some of the purchases are lying as closing stock. And therefore to derive the correct opening stock and closing stock items are required to b taken into consideration. Therefore, the appellant has not claimed any expense it is merely the net effect of the opening and closing stock valuation. Therefore, considering the facts and circumstances of the case it is requested to delete the addition. 35. On the other hand the learned DR vehemently supported the order of the authorities below. 36. We have heard the rival contentions of both the parties and perused the materials available on record. As per the accounting practice, the closing stock of 25 ITA No.93/Rjt/2020 A.Y. 2016-17 and 4 others the shares as on the last day of the previous year is carried forward to the year under consideration which is shown as opening balance. Against such opening balance, the assessee makes the sale of the shares and the net effect is accounted as income/ loss in the books of accounts which is accepted accounting practice. If such practice is not followed to carry forward opening balance, then the amount of sales of the items appearing in the opening stock will result as gross income in the hands of the assessee which would not reflect the true income of the assessee. In other words the income is determined after reducing the cost of acquisition from the sales price. As such the opening stock reflects the cost of acquisition which is adjusted against the price of the sales. If it is not done, the income chargeable to tax under the provisions of law cannot be determined. Thus we hold that assessee has not claimed any expense of 921 lakhs which is reflectin g the difference in the opening and closing stock as alleged by the authorities below. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 36.1 In the result the appeal of the assessee is allowed. 37. In the combined result, all the appeals of the assessee are allowed. This Order pronounced in Open Court on 08/07/2022 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot, Dated 08/07/2022 manish