2014 (10) TMI 434 - AT - Income Tax

Validity of notice u/s 148 Validity of the reassessment proceedings - Held that - As per the reasons recorded by the AO, not only the statement of persons involved in the racket of bogus entry providers were obtained by Investigation Wing of the Department wherein they admitted regarding providing bogus entry but the complete list is available along with the DD no., date and amount etc. and thereafter, the AO has examined this aspect also that these drafts are in fact deposited in the bank account of the assessee AO also noted that although the drafts were deposited in the bank account in the present year but no income has been declared by the assessee on account of capital gain in respect of these sale of shares for which drafts were deposited the order of the CIT(A) is upheld Decided against assessee. Treatment of LTCG from undisclosed sources Income from other sources Admission of additional evidence under Rule 46A Held that - The transaction of sale of shares was made through different brokers and M/s CMS Securities Ltd. happens to be one of such brokers - The transaction of sale is supported by contract note/sale bill corresponding bank statement and confirmation of account by broker - without giving a finding that M/s CMS Securities Ltd. was still broker inspite of statement of Shri Mukesh Kumar Gupta that the licence of M/s CMS Securities was cancelled in the year 1998, how the CIT(A) can say that the transaction of sale of shares was made through broker - There is no mention in the order of CIT(A) that the distinctive numbers of the shares purchased and sold were made available before him the shares of M/s B.T. Technet Ltd. were purchased by the assessee in AY 2000-2001 but still he has not mentioned the distinctive numbers of the shares - It is also not mentioned as to whether the shares were standing in the name of the assessee or not. The address of the company is also not available in the order of CIT(A) - It is also not coming out as to whether the delivery of shares was given by the assessee at the time of sale in physical form or through DEMAT account - No enquiry was made from the concerned company as to whether any shares were standing in the name of the assessee during AY 2000-01 to present AY i.e. 2002-03 and whether the shares were transferred in some other name after the date of stated sale and when the shares were so transferred and in whose name - the assessee has not been able to establish the factum of shares sold by the assessee - It is also not coming out that the shares of this company were listed share or not and what was the listed price on the date of purchase and sale - when the assessee is not furnishing any evidence before us also regarding the contract note in respect of stated sale of shares along with the distinctive numbers etc. the order of CIT(A) is not sustainable when such details were not furnished the order of the CIT(A) is set aside Decided in favour of revenue.

Issues Involved:
1. Validity of reassessment proceedings under Section 147.
2. Validity of the assessment order dated 11.09.2007.
3. Addition of Rs. 32,40,265/- as undisclosed income.
4. Non-disposal of objections by the Assessing Officer.
5. Consideration of additional evidence by CIT(A) without remand report.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO) under Section 147, arguing that the "reasons to believe" were based on borrowed satisfaction and not on an independent application of mind. The Tribunal found that the reasons recorded by the AO were specific and detailed, including DD numbers, dates, and amounts. Statements from involved parties confirmed the provision of accommodation entries. The Tribunal concluded that the reassessment proceedings were valid, distinguishing the present case from the cited case of ITO vs. Maya Gupta, where the information was found to be vague and unsubstantiated.

2. Validity of the Assessment Order Dated 11.09.2007:
The assessee contended that the AO did not separately dispose of objections against the reassessment proceedings, violating principles laid out in GKN Driveshafts (India) Ltd. vs. ITO. The Tribunal noted that the AO had addressed the objections in the order sheet entry dated 14/08/2007, which was communicated to the assessee. Therefore, the Tribunal found no merit in the assessee's claim and upheld the validity of the assessment order.

3. Addition of Rs. 32,40,265/- as Undisclosed Income:
The Revenue appealed against the CIT(A)'s decision to treat the amount as long-term capital gain instead of income from undisclosed sources. The Tribunal noted that the assessee failed to provide distinctive numbers of shares, the address of the company, or evidence of share transfer. The CIT(A) had not obtained a remand report from the AO despite new information being presented. The Tribunal found that the assessee could not substantiate the claim that the amount was received from the sale of shares, reversing the CIT(A)'s order and restoring the AO's addition of Rs. 32,40,265/- as undisclosed income.

4. Non-Disposal of Objections by the Assessing Officer:
The assessee argued that the AO did not dispose of objections separately, impacting the maintainability of the assessment order. The Tribunal found that the AO had indeed addressed the objections in an order sheet entry, which was noted by the assessee's representative. Thus, the Tribunal rejected this ground of appeal.

5. Consideration of Additional Evidence by CIT(A) Without Remand Report:
The Revenue contended that the CIT(A) considered additional evidence without giving the AO an opportunity to respond, violating Rule 46A of the Income Tax Rules. The Tribunal agreed, noting that the CIT(A) failed to obtain a remand report despite new evidence being presented. The Tribunal emphasized the necessity of verifying the distinctive numbers of shares, the market rate, and the transfer records, which were not adequately addressed by the CIT(A).

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the validity of the reassessment proceedings and the assessment order. It allowed the Revenue's appeal, reversing the CIT(A)'s decision and restoring the AO's addition of Rs. 32,40,265/- as undisclosed income. The Tribunal emphasized the need for detailed verification and compliance with procedural requirements, including obtaining remand reports when new evidence is presented.

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