JGS FINVEST SERVICES P.LTD, MUMBAI V. ITO 8(2)(1), MUMBAI

ITA 976/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9317 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Bogus Share capital; Search and seizure; Assessment record; Reason to believe; Set aside; Capital Gains
• Section: 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 976/MUM/2016 ASSESSMENT YEAR : 2010-11 JGS FINVEST SERVICES P. LTD., B-101, UNIVERSAL PARADISE, NANDA PATKAR ROAD, VILE-PARLE (EAST), MUMBAI [PAN : AAACB1614N] VS. INCOME TAX OFFICER-8(2)(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHREYASH SHAH, SHRI KUNAL SHAH, ARS RESPONDENT BY : SHRI RAJEEV GUBGOTRA, DR DATE OF HEARING : 08-08-2019 DATE OF PRONOUNCEMENT : 17-09-2019 O R D E R PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-17, MUMBAI, DATED 07-12-2015. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN THIS APPEAL. GROUND NOS.1, 2 & 3 RAISED BY ASSESSEE, CHALLENGING THE VALIDITY OF JURISDICTION OF THE LD. ASSESSING OFFICE R (HEREINAFTER CALLED LD. AO) TO PASS ORDER U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT (ACT) ON THE GROUND THAT RE-ASSESSMENT ITA NO. 976/MUM/2016 : 2 : PROCEEDINGS ITSELF ARE BAD IN LAW, AS THE REASONS RE CORDED BY FOR RE-OPENING ASSESSMENT WERE BY DIFFERENT AO THAN T HE AO WHO PASSED THE ASSESSMENT ORDER. 3. FACT IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF I NCOME ON 26-07-2010, DECLARING LOSS OF RS.33,622/-, WHICH WAS PROCESSED U/S.143(1) OF THE ACT. THEREAFTER, THE CASE WAS RE- OPENED U/S.147 OF THE ACT, AFTER RECORDING REASON TO B ELIEVE AND ACCORDINGLY A NOTICE U/S.148 OF THE ACT WAS ISSU ED ON 20- 01-2012, WHICH WAS DULY SERVED UPON ASSESSEE. THE R EASONS RECORDED ARE REPRODUCED AS UNDER FOR THE SAKE OF CON VENIENCE: NAME OF THE ASSESSEE :M/S.JGS FINVEST SERVICES PRIV ATE LIMITED (FORMERLY KNOWN AS BANSAL EXTRUSIONS PVT. LTD.) ADDRESS :4, USHA NIKETAN, MAHANT ROAD, VILE PARLE (EAST). MUMBAI-400057. PAN :AAACB1614N A.Y. :2010-2011 REASON FOR REOPENING ASSESSMENT U/S.147 OF THE I.T. ACT, 1961. IN THIS CASE, INFORMATION WAS RECEIVED FROM ADDL.DI T(INV), UNIT-1, MUMBAI VIDE HIS LETTER F.NO.ADDL.DIT(INV.)/U-I/MAHA SARAGINFO SHARING/201 1-12 DATED 12/9/2011. STALING THAT THER E WAS A SEARCH AND SEIZURE ACTION U/S. 132 ON 25.11.2009 IN THE CA SE OF MAHASAGAR SECURITIES PVT. LTD. AND ITS GROUP CONCERNS, AND IT WAS FOUND THAT THE GROUP CONCERNS, VIZ. M/S.TALENT INFOWAY LTD. AND M/ S.BUNIYAD CHEMICALS LTD., ARE NOT CARRYING ON ANY GENUINE BUS INESS AND THEY WERE ALL ENGAGED IN THE BUSINESS OF ISSUING BOGUS B ILLS FOR PROVIDING LONG TERM CAPITAL GAINS/LOSS, SPECULATION PROFIT OR LOSS AND PROVIDING BOGUS SHARE APPLICATION MONEY TO OTHER COMPANIES IN RETURN FOR CASH. THE PERUSAL OF BALANCE SHEET FOR A.Y.2010-11 SHOWS THAT THERE IS INCREASE IN SHAREHOLDERS' FUNDS AS UNDER: ITA NO. 976/MUM/2016 : 3 : AS AT 31 ST MARCH 2009 AS AT 31 ST MARCH, 2010 INCREASE SHARE CAPITAL 26,32,000 69,97,000 43,65,000 SHARE APPLICATION MONEY - 2,00,000 2,00,000 RESERVES AND SURPLUS - 3,91,47,174 3,91,47,174 FURTHER THE AUTHORIZED CAPITAL HAS ALSO BEEN INCREA SED FROM 2,70,000 IN PREVIOUS YEAR TO 7,00,000 EQUITY SHARES OF RS.10 EACH. AS PER THE DETAILS OF SHARE APPLICATION, THE EQUITY SHARES HAV E BEEN ISSUED AT FACE VALUE OF RS.10 EACH AND PREMIUM OF RS.90 EACH- PER SHARE. THE SHARE APPLICATION MONEY HAS BEEN RECEIVED FROM THE FOLLOWING ENTITIES: 1. ALPHA CHEMIE TRADE AGENCIES P. LTD. 2. TALENT INFORWAY LTD. 3. ALLIANCE INTERMEDIATRIES & NETWORK P.LTD. 4. BUNIYAD CHEMICALS LTD FROM THE ABOVE IT IS APPARENT THAT THE CONCERNS, VI Z. M/S.TALENT INFOWAY LTD. AND M/S.BUNIYAD CHEMICALS LTD., WHICH ARE PROVIDERS OF BOGUS SHARE APPLICATION MONEY ARE ALSO APPLICANT S TO THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE FOR A.Y. 2010-11. IN THE RETURN OF INCOME FOR A.Y.2010-11, THE ASSESS EE IS SHOWING NIL INCOME WHICH HAS BEEN PROCESSED U/S.143(1) OF T HE ACT AT NIL INCOME. THEREFORE, I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR A.Y.2010-11 WITHIN T HE MEANING OF SECTION 147 OF THE ACT AS THE ASSESSEE HAS FAILED T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT FOR A.Y.2010-11. THE CASE IS, THEREFORE, REOPENED U/S.147 OF THE I.T .ACT. 1961 FOR A.Y.2010-11. ACCORDINGLY, NOTICE U/S.148 OF THE I. T.ACT, 1961 IS ISSUED FOR A.Y.2010-11. SD/- (RAJAN1 V. NAIR) INCOME TAX OFFICER-2(1)(1), MUMBAI 3.1. IT IS QUITE CLEAR FROM THE REASONS RECORDED THAT RE ASONS WERE RECORDED BY THE AO, RAJANI V.NAIR, INCOME TAX OFFICER- 2(1)(1), MUMBAI, AS STATED ABOVE. THEREAFTER, THE ASS ESSMENT ITA NO. 976/MUM/2016 : 4 : WAS FRAMED BY ANOTHER AO, SHRI MANISH KASODEKAR, INC OME TAX OFFICER-8(2)(1), MUMBAI, VIDE ORDER DT.19-03-201 3 U/S.143(3) R.W.S. 147 OF THE ACT. THE ASSESSEE ALSO CHALLENGES THE RE-OPENING OF ASSESSMENT ON THE BASIS OF LACK OF T ANGIBLE AND INDEPENDENT MATERIAL TO FORM A REASON TO BELIEVE. 4. THE LD.CIT(A) DISMISSED THE APPEAL OF ASSESSEE B Y HOLDING THAT RE-ASSESSMENT PROCEEDINGS INITIATED U/S.147 OF THE ACT WERE VALID AS THE AO HAS SPECIFIC INFORMATION ABOUT TH E BOGUS SHARE APPLICATION MONEY. THE ASSESSEE HAS SHOWN FICTI TIOUS TRANSACTIONS OF SHARE APPLICATION MONEY WITH THREE ENTIT IES BELONGING TO SHRI MUKESH CHOKSHI GROUP. 5. LD.AR, AT THE OUTSET, SUBMITTED THAT THE ORDER PASSED BY THE LD.AO IS WITHOUT JURISDICTION AND SUFFERS FROM SER IOUS AND FATAL INFIRMITIES AND DEFECTS. THE LD AR ARGUED THAT ASSUMPTION OF JURISDICTION ON THE PART OF THE AO BY I SSUANCE OF SUCH NOTICE LD.AR POINTED OUT THAT THE REASONS FOR RE - OPENING THE ASSESSMENT U/S.147 OF THE ACT WERE RECORDE D BY DIFFERENT AO, THAN THE AO, WHO FRAMED THE ASSESSMENT. L D.AR REFERRED TO THE REASONS RECORDED A COPY OF IT IS FILED AT PG.96 OF THE PAPER BOOK AND IS RE-PRODUCED ELSEWHERE IN THIS O RDER AND SUBMITTED THAT THE REASONS WERE RECORDED BY THE AO, MS. RAJANI V.NAIR, INCOME TAX OFFICER-2(1)(1), MUMBAI, WHEREAS THE ASSESSMENT WAS FRAMED BY DIFFERENT AO, SHRI MANISH KASODEKAR, INCOME TAX OFFICER-8(2)(1), MUMBAI, DT.19 -03- 2013. IT IS A SETTLED POSITION THAT THE PERSONS WHO RECO RDS THE REASONS, HAS TO FRAME THE ASSESSMENT ULTIMATELY. LD.AR RELIED HEAVILY ON THE DECISION OF THE HON'BLE GUJARAT HIGH CO URT IN THE CASE OF PANKAJBHAI JAYSUKHLAL SHAH VS. ACIT R/S PECIAL ITA NO. 976/MUM/2016 : 5 : CIVIL APPEAL NO. 230 OF 2019 DATED 09-04-2019 WHERE IN IT HAS BEEN HELD THAT THE ORDER HAS TO BE PASSED BY THE SAME ITO/AO, WHO RECORDS THE REASONS TO BELIEVE U/S.147 O F THE ACT. LD.AR THEREFORE PRAYED THAT THE ASSESSMENT MAY KIND LY BE QUASHED, AS THE SAME IS WITHOUT JURISDICTION AND B AD IN LAW. 6. LD.DR, ON THE OTHER HAND, STRONGLY DEFENDING THE ORD ER OF AO AND CIT(A), SUBMITTED THAT THERE IS NO LEGAL BAR TH AT ASSESSMENT HAS TO BE FRAMED BY THE SAME PERSON, WHO HA S RECORDED THE REASONS U/S 148 OF THE ACT. HOWEVER, I N THIS CASE THE REASONS HAVE BEEN RECORDED BY ONE AO AND THE ASSESSMENT HAS BEEN FRAMED BY A DIFFERENT AO AND THERE FORE THE ASSESSMENT CANNOT BE HELD TO BE INVALID ONLY FOR THI S REASON. FINALLY HE PRAYED THAT THE GROUNDS RAISED BY TH E ASSESSEE RAISING THIS TECHNICAL AND LEGAL ISSUE MAY KINDLY BE DISMISSED. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATE RIAL ON RECORD, WE OBSERVE THAT THERE IS NO DISPUTE AS TO THE FACTS THAT REASONS FOR RE-ASSESSMENT RECORDED U/S.147 OF THE ACT WAS DONE BY MS. RAJANI V.NAIR, INCOME TAX OFFICER-2 (1)(1), MUMBAI WHILE THE ASSESSMENT WAS FRAMED BY ANOTHER AO, SHRI MANISH KASODEKAR, INCOME TAX OFFICER-8(2)(1), MUMBAI, DT.19-03-2013. THUS, IT IS APPARENT THAT BOTH THE ASSESS ING OFFICERS WERE DIFFERENT. IN OUR OPINION, THE ASSESSME NT HAS TO BE FRAMED BY A PERSON OR AO, WHO HAS RECORDED THE RE ASONS TO BELIEVE U/S.147 OF THE ACT. THE CASE OF THE ASSESSEE I S SUPPORTED BY THE DECISION OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF PANKAJBHAI JAYSUKHLAL SHAH VS ACIT ( SUPRA), ITA NO. 976/MUM/2016 : 6 : WHEREIN IT HAS BEEN HELD THAT WHERE THE NOTICE IS ISSUED BY A DIFFERENT AO THAN THE AO WHO PASSED THE ASSESSMENT ORDE R, IN THAT CASE THE JURISDICTION OF THE AO IS NOT ASSUMED AS PER LAW AND THE ASSESSMENT IS INVALID. SINCE THE FACTS OF THE IN STANT CASE ARE MATERIALLY SAME AS IN THE CASE CITED ABOVE, WE THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION O F THE HON'BLE GUJARAT HIGH COURT AS REFERRED TO ABOVE, SET ASIDE THE ORDER OF LD CIT(A) AND ALLOW THE GROUNDS RAISED BY ASSESSEE. 7.1. SINCE WE HAVE DECIDED THE APPEAL IN FAVOUR OF A SSESSEE ON TECHNICAL ISSUE AND ON ONE OF THE TWO LEGAL ISSUES , THE OTHER GROUNDS RAISED BY THE ASSESSEE ON LEGAL AS WELL AS ON MERITS WILL BECOME INFRUCTUOUS AND NEED NO ADJUDICATI ON. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2019 SD/- SD/- (RAM LAL NEGI) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 17-09-2019 TNMM ITA NO. 976/MUM/2016 : 7 : / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ % ( ) / THE CIT(A), MUMBAI 4. $ % / CIT, MUMBAI 5. ()* +, , $ .+,$/ , / DR, ITAT, MUMBAI 6. *012 / GUARD FILE $ / BY ORDER, # //TRUE COPY// / $ (DY./ASST. REGISTRAR) $ .+,$/, / ITAT, MUMBAI