VARUN GOEL,NEW DELHI V. DCIT CIRCLE INTL. TAXATION 1(3)(1), NEW DELHI

ITA 1500/DEL/2024

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 101812 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VASANTA
• Assessee Lawyers: GUNJAN JAIN
• Keywords: Set aside; Reassessment proceedings; Unexplained expenditure; Tax effect; Period of limitation; Capital Gains; Principle of natural justice; Accommodation entries; Earning of tax free income; Double taxation relief; Bogus
• Section: 147; 148; 139(1); 69C; 13; 69A; 144C

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI BEFORE SH. RAMIT KOCHAR, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.1500/Del/2024 Assessment Year: 2013-14 Varun Goel A-13, Daya Apartments, 8 Sri Ram Road, Civil Lines, New Delhi-110054 PAN No.AKJPG9777F Vs. DCIT Circle Intl. Taxation 1(3) (1) New Delhi (APPELLANT) (Respondent) Appellant by Ms. Gunjan Jain, CA Respondent by Sh.Vijay Vasanta, CIT DR Date of hearing: 01/04/2025 Date of Pronouncement: 16/04/2025 ORDER PER SUDHIR KUMAR, JM: Theassessee has filed the present appeal against the assessment order dated 04.03.2024 passed under Section 147 r.w.s.144C of the Income Tax Act, 1961 (the “Act”) in pursuance to the directions of Ld. Dispute Resolution Panel (“DRP”) pertaining to the Assessment year (“AY”) 2013-14. 2 2. The assessee has raised following grounds of appeal :- 1. Under the facts of the case, the reassessment proceedings initiated by the Id. A.O. are barred by limitation u/s 149 of the Act and the same is invalid and void ab initio. 2. Under the facts and circumstances of the case, the proceedings initiated are bad at law as there is no Income which has escaped assessment for initiating reassessment proceedings u/s 147 of the Act. 3. Under the facts and circumstances of the case, the Id. Assessing Authority has grossly erred initiating reassessment proceeding without complying with the provisions of the law and the same is not in accordance with the direction of the Hon. Supreme court in the case of the union of India vs. Ashish Agarwal which is injudicious and bat at law. 4. Under the facts and circumstances of the case, the reassessment proceedings initiated by the Ld. AO are injudicious and bad at law. 5. Under the facts and circumstances of the case, the reply furnished by the assessee to the show cause notice under Section 148A(b) of the Act has not been considered as required by clause(c) of Section 148A of the Act. 3 6. Under the facts and circumstances of the case, the Ld. assessing officer failed to pass a judicious speaking order in accordance with clause(d) of Section 148A of the Act which is mandatory requirement for initiation of reassessment proceedings. 7. Under the facts and circumstances of the case, the sanction for initiation of reassessment proceedings is not in accordance with the provisions contained in Section 151 of the Act. 8. Under the facts and circumstances of the case, the addition made by the ld. A.O. is without any basis or evidence against the assessee which is injudicious, unwarranted and bad at law. 9. Under the facts and circumstances of the case, the Id. A.O. as well as Hon. DRP has grossly erred in alleging that the assessee failed to establish the genuineness of the transaction of sale of shares and consequent claim of LTCG which is grossly injudicious, unwarranted, against the facts of the case and bad at law. 10. Under the facts and circumstances of the case, the Id. A.O. as well as hon. DRP has grossly erred in making addition of Rs.55,37,075/- by treating the amount received against the sale of equity shares as unexplained money u/s 69A of the Act is highly injudicious, unwarranted, against the facts of the case and bad in law. 4 11. The addition made in the assessment order passed by the Ld. AO are based on surmise and conjecture and are against the facts and bad at law. 12. Under the facts and circumstances of the case, the orders passed by the ld. A.O. on the direction of the hon. DRP is bad at law and against the principles of natural justice as the orders passed by the DRP u/s 144C(5) are passed without providing reasonable opportunity to the assessee. 13. Under the facts and circumstances of the case, the Id. A.O. as well as hon. DRP has grossly erred in disallowing exemption claimed u/s 10(38) of the Act in respect of LTCG amounting to Rs.55,37,075/- earned by the assessee on sale of listed equity shares sold through recognized stock exchange which has been duly subjected to STT which is highly injudicious, unwarranted, against the facts of the case and untenable at law. Total Tax Effect relating to the above-mentioned grounds of appeal isRs.43,18,920/- 14. Under the facts and circumstances of the case, the Id. A.O. as well as hon. DRP has grossly erred making the addition of Rs. 1,66,112 /- by treating the amount received against the sale of equity shares as unexplained expenditure u/s 69C of the Act is highly injudicious, unwarranted, against the facts of the case and bad in law. 5 Total Tax Effect relating to the above-mentioned grounds of appeal isRs.1,29,567/- 15. The appellant prays for leave to add, amend alter or withdraw any grounds of appeal. 3. Brief facts of the case are that the assessee filed his return of income u/s 139(1) of the Act on 05-08-2013 declaring total income of Rs. Nil disclosing the long-term Capital gain of Rs. 55,37,075/-, claiming exempt income u/s 10(38) of the Act. The return of income was accepted by the Department. The information was received from the Investigation Wing through the Insight portal that during the year under consideration the assessee had received accommodation entries by way of bogus Long Term Capital Gain / Loss from M/s. PMC Fincorp Ltd. amounting to Rs.56,20,500/-.A search operation was conducted in the case of M/s. PMC Limited on 11.10.2018 during the Investigation it was found that the company M/s. PMC Fincorp Ltd. provides accommodation entry by way of long- term capital gain to various beneficiaries in lieu of commission. The assessee’s name among the list of beneficiaries. In pursuance of the direction of the Hon’ble Supreme Court Judgment in the case of Union of India Vs. Ashish Agarwal and incompliance with the amended procedure laid down u/s. 148 and 148A of the Act a show cause notice 6 wasissued to the assessee and thereafter the order under Section 148A(d) was passed with the approval specified authority wherein it was held that there was an escapement of income for AY 2013-14 and accordingly notice u/s. 148 of the Act was issued. 4. The Ld. Assessing officer (AO) in his draft assessment order, assessed the income of the assessee atRs.57,03,187/-as against the income of Rs. Nil returned by the assessee on account of the following additions proposed by him: Particulars Amount (Rs.) Amount (Rs.) Total taxable income declared as per return of income Nil Add: Unexplained money u/s. 69A of the IT Act, 1961 55,37,075/- 55,37,075/- Add:Unexplained expenditure u/s.69C of the IT Act, 1961 1,66,112/- 1,66,112/- TotalAssessedIncome 57,03187/- 5. Against the above additions proposed by the Ld. AO the assessee raised the objections before the Ld. DRP who vide its 7 order dated 23-02-2024 recorded the findings in para no 4.2.7 & 6.8 & 6.9 as under: “4.2.7. Without prejudice to the above, the other question would be whether any ground on jurisdiction can be taken up before the Dispute Resolution panel. This issue has already been dealt in negative by this Panel before in several other cases. However, for the sake of brevity the issue is dealt again in the instant case. Dispute Resolution Panel was introduced vide Finance Act 2009 to deal with taxation of non-residents. The idea is to achieve the objective of uniformity in tax outcome on identical matter in a time-bound manner keeping in view that tax incidence is just as intended under the Income-tax Act read with provisions of relevant DTAA, if applicable as tax cost is a factor that impacts the level of investment. This is reflected in sub-section (1) of section 144C which provides that the Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee. The sub-section (1) of section 144C makes it 8 clear that, the objective of reference to the DRP is to find out whether the proposed variation in the income or loss returned by the AO is prejudicial to the interest of such assessee or not income. Therefore, the DRP's jurisdiction begins and ends with issues on merit. Alternatively, DRP has no jurisdiction to deal with jurisdictional or technical matter. Sub-section (8) clarifies this position further as per which the Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order. Even the power to set aside any proposed variation or issue any direction under sub-section (5) for further enquiry is prohibited. The point that is made out here is that the scope of DRP is limited to deal with cannot set aside any issue or give direction further enquiry. The second limb in a sense empowers the DRP to conduct fresh inquiry, required if at all at its level only similar to the function of the AO being a quasi-judicial authority. Therefore, the technical grounds taken up by the assessee challenging the jurisdiction is beyond its legislative mandate. 6.8 The transactions entered into by the assessee exhibit similar features as mentioned in the case laws cited above. It 9 is evident that the assessee is one of the beneficiaries of accommodation entry receipts in the form of Long-Term Capital Gains. Entire price movement of the PMC Fincorp shares were manipulated/rigged in a coordinated manner giving rise to such capital gains. He has failed to prove that share transactions are genuine. Though the assessee has received amounts through banking channels, the transactions cannot be treated as genuine in the presence of overwhelming evidences put forward by the AO. Considering the findings of the investigation wing, enquiries conducted in the case of the director/operator of the scrip and entry operators, the nature of transactions entered into by the assessee, the LTCG of Rs. 55.37.075/- deserves to be disallowed and added back to the total income of the assessee. The Panel finds no ground to interfere with the conclusion of the AO and holds the entire amount of capital gain amounting of Rs. 55.37.075/- as bogus, liable to be taxed in the hands of the assessee as unexplained money u/s 69A of the Act. 6.9 The AO has further added an amount of Rs. 1,66,112/- (being 3% of 55,37,075/- as commission paid to entry 10 operator) to the total income as unexplained expenditure u/s 69C of the Act. The Panel is of the considered view that the above mentioned purported LTCG was orchestrated by the assessee in conjunction with the entry operators and scrip brokers who indulged in artificial manipulation of share prices. 3% rate of commission as expenditure by the assessee for such facilitation by the entry providers appears to be reasonable and the AO has rightly made addition on this count treating the sum as unexplained expenditure u/s 69C of the Act. The Panel upholds the addition proposed by the AO on this count.” 6. The Ld. AO in his final assessment order dated 04- 03-2024 confirmed the impugned additions. 7. Aggrieved, the order of the AO the assessee is in appeal before the tribunal. 8. The ld. AR of the assessee has submitted that reassessment proceedings initiated by the Ld. Assessing officer are barred by the limitation u/s 149 of the Act. She further submitted that in the case of Rajeev Bansal v. Union of India [Civil Appeal No. 8629 of 2024 the Hon’ble 11 Supreme Court directed that any notice issued under the unamended section 148 of the Act, must comply with in the time limits after adjusting the remaining days as on 30-06-2021. She has filed the particulars of the notice as under: 12 9. She has further submitted that the case of the assessee is squarely covered the Hon’ble Delhi court case Ram Balram Build Home (P) Ltd. v. Income- tax officer {2025} 171 taxmann.com 99 (Delhi) In this case the Hon’ble Delhi High Court held as under: “63. It is clear from the above that the Supreme Court had in unambiguous terms held that (a) the date of notices issued under Section 148 of the Act, under the old regime which was subject matter of challenge in Union of India & Ors. v. Ashish Agarwal, has not been struck off and further notices and orders issued under Section 148 of the Act were in continuance of the proceedings that had commenced on the date of issuance of such notices; (b) the period from the date of issuance of such notices till the date of the decision in the case of Union of India & Ors. v. Ashish Agarwal, that is 04.05.2021, was required to be excluded for the period of calculation of limitation by virtue of the third proviso to Section 149(1) of the Act. The AO could not continue any proceeding till the Supreme Court rendered its decision to treat the notices issued under Section 148 of the Act as notices issued under Section 148A(b) of the Act; and, (c) the period from the date of the decision in Union of India & Ors. v. Ashish Agarwal, that is 04.05.2022, to the date when the material was supplied by the AO to the Assessee, as was required under Section 148A(b) of the Act, was also required to be excluded. The 13 Supreme Court reasoned that the AO could not proceed further till the said material was supplied. Therefore, the said period is also required to be excluded by virtue of the third proviso to Section 149(1) of the Act. 64. It is material to note that the Supreme Court had also explained that provision of TOLA would be applicable to notices which were subject matter of challenge in Union of India & Ors. v. Ashish Agarwal. ANALYSIS – IN THE FACTUAL CONTEXT 65. Thus, in the facts of the present case, the last date for issuance of notice under Section 148 of the Act for AY 2013-14 under the statutory framework, as was existing prior to 01.04.2021 was 31.03.2020, that is, six years from the end of the relevant assessment year.” 66. By virtue of Section 3(1) of TOLA time for completion of specified acts, which fell during the period 20.03.2020 to 31.12.2020 were extended till 30.06.20218 . Thus, the notice dated 01.06.2021 was issued twenty-nine days prior to the expiry of period of limitation for issuing a notice under Section 148 of the Act as was extended by TOLA. As noted above, the period from 01.06.2021, the date of issuance of notice, and 04.05.2022, being the date of decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal2 is required to be excluded by virtue of the third proviso to Section 149(1) of the Act. 14 67. Additionally, the period from the date of decision in Union of India & Ors. v. Ashish Agarwal2 till the date of providing material, as required to the accompanied with a notice under Section 148A(b) of the Act, is required to be excluded. Thus, the period between 04.05.2022 to 30.05.2022, the date on which the AO had issued the notice under Section 148A(b) of the Act in furtherance of his earlier notice dated 01.06.2021, is also required to be excluded by virtue of the third proviso to Section 149(1) of the Act as held by the Supreme Court in Union of India & Ors. v. Rajeev Bansal4 . 68. In addition to the above, the time granted to the petitioner to respond to the notice dated 30.05.2022 – the period of two weeks –is also required to be excluded by virtue of the third proviso to Section 149(1) of the Act. The petitioner had furnished its response to the notice under Section 148A(b) of the Act on 13.06.2022. Thus, the period of limitation began running from that date. 69. As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A(d) of the Act. Thus, the AO was required to pass an order under Section 148A(d) of the Act W.P.(C) 16232/2024 Page 44 of 45 within the said 15 twenty-nine days notwithstanding the time stipulated under Section 148A(d) of the Act. This period expired on 12.07.2022. 70. Since the period of limitation, as provided under Section 149(1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation. 71. It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A(d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A(b) of the Act was received. Thus, the order under Section 148A(d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thus, the time available to the AO to pass an order under Section 148A(d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order under Section 148A(d) of the Act was in excess of the seven days. 16 72. In view of the above, we find merit in Mr. Sehgal’s contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation. W.P.(C) 16232/2024 Page 45 of 45 73. The petition is accordingly allowed and the impugned order dated 30.07.2022 passed under Section 148A(d) of the Act; the impugned notice dated 30.07.2022 issued under Section 148 of the Act; and the assessment order dated 30.05.2023 framed under Section 147 of the Act pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside. Pending application is also disposed of.” 10. The Ld. DR has fairly conceded to this. The ld. DR relied upon the judgment of the lower authorities. 11. In the instant case, the last date for issuance of notice u/s 148 of the Act for the A.Y 2013-14 under the statutory frame work, as was existing prior to 01-04-2021 was 31-03-2020, that is six years from the end of the relevant assessment year. 12. By virtue of section 3(1) OF TOLA time for completion of specified acts was extended till 30-06-2021. Thus, the notice dated 22-06-2021was issued 8 days prior to the expiry of period of limitation for issuing a notice u/s 148 of the Act as the extended time by TOLA. The period between 04-05-2022 to 30- 17 05-2022, the date on which the AO has issued the notice u/s 148A(b) of the Act in furtherance of his earlier notice dated 22- 06-2021 is also required to be excluded by virtue of the third proviso to section 149(1) of the Act as held by the Hon’ble Supreme Court in Rajeev Bansal Case. The AO has issued notice to the assessee dated 19-05-2022 and the twoweeks-time was granted to respond the notice. The assessee had furnished its response to the notice u/s 148A(b) of the Act on 02-06-2022. The AO was issued the second notice dated 06-07-2022 (Page no 2 of the synopsis) to the assessee and the assessee has filed the response in the compliance on 11-07-2022.Thus, the period of limitation began running from that date i.e11-07-2022. By virtue of TOLA,the AO had period of 8 days limitation left on the date of commencement of the reassessment proceedings, which began on 22-06-2021,to issue a notice u/s 148 of the Act. The AO was required to pass an order u/s 148A(d) of the Act within the 8 days not withstanding the time stipulated u/s 148A(b) of the Act. This period expired on 19-07-2022. Since the period of limitation, as provided u/s 149(1) of the act had expired prior to issuance of the reassessment order dated 23-07-2022. Thus, the reassessment order is beyond the period of limitation. The case of the assessee is squarely covered from the aforesaid decision of the Hon’ble Delhi High Court. So, we decided the ground No 1 raised by the assessee in favour of the assessee. 18 The assessment order dated 23-07-2022 is liable to be set aside and set aside accordingly. 13. We have decided the legal issue raised by the assessee in his favour, hence rest grounds are not adjudicated at this stage and be kept them open. 14 In the result the appeal of the assessee is allowed. Order pronounced in the court on 16.04.2025. Sd/- Sd/- (RAMIT KOCHAR) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER *NEHA, Sr. PS* Date:-16.04.2025 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(Appeals) ` 5.DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "