2021 (1) TMI 278 - AT - Income Tax

Validity of reopening of assessment u/s 147/148 - information as per the annual information return AIR that assessee has entered into the commodity/share transactions with one broker - HELD THAT - In the present case there was a tangible material available with the assessing officer in the form of annual information return. The concrete details were available about the broker through Womb the assessee has made the transaction. AO has further noted that Assessee has not filed any voluntary return of income u/s 139 (1) of the act. Therefore we find that the learned assessing officer was having a tangible material in the nature of Annual Information Return where the concrete information about the trading by the assessee on commodities/shares were available with a particular broker for which assessee has not disclosed any profit/loss - the information available with the assessing officer cannot be found to be vague as there was concrete information with every rupee was found to be correct about the turnover and the name of the broker. It is not the case of the assessee that she denies carrying on any transaction. AO also applied his mind to verify the above information from the ITD however, except the permanent account number of the assessee, no other information was available. Therefore, there was a proper application of mind by the AO. In view of this, we do not find any infirmity in the action of the learned assessing officer in reopening the assessment u/s 147 - Decided against assessee. Addition at profit rate of 1% of the total transaction in commodity in shares and gold - Even before us no bills of the brokers or the statement from the exchange was submitted. Even the 1% profit determined by the learned AO on trading of gold was also without any basis. The confirmation of the above addition by the learned CIT A was also not based on any material. In view of this, in the interest of justice, we set-aside the whole issue of determination of profit on the transaction of ₹ 121,684,248 made by the assessee in trading of gold is required to be examined by the learned assessing officer afresh to arrive at the correct profit earned by the assessee. Assessee has submitted that in subsequent year also on identical transaction assessee has been assessed at a loss. Therefore, we direct the assessee to submit the copies of the bills, the statement of profit and loss on the trading of gold based on the above bills to the assessing officer, which may be examined by the AO in accordance with the law and resultant profit/loss may be taxed accordingly. In view of this ground number 2 4 are allowed with above direction.

Summary

Issues:
1. Validity of proceedings initiated under section 147/148 without tangible material.
2. Addition upheld by CIT (A) without considering all facts and material.
3. Failure to understand the true nature of transactions and turnover.
4. Dismissal of transaction summary for commodity trading.
5. Allegation of arbitrariness and violation of natural justice.

Issue 1: Validity of Proceedings under Section 147/148
The appeal challenged the initiation of proceedings under section 147/148 without tangible material. The assessing officer relied on information from the Annual Information Return (AIR) regarding commodity/share transactions by the assessee. The AO assumed 2% of the transaction as profit due to non-disclosure by the assessee, leading to reopening of the case. The tribunal found the AO had concrete information from the AIR about the transactions and the broker involved, with no voluntary return filed by the assessee. As there was no denial of transactions by the assessee, the tribunal upheld the validity of proceedings initiated under section 147/148.

Issue 2-4: Addition Upheld by CIT (A)
The CIT (A) upheld the addition of ?12,16,248 made by the AO without considering all facts and material. The assessee contended that she incurred a loss of ?5,085 in the transactions, supported by demat account and trading statements. The tribunal noted that the AO's 1% profit determination lacked basis and the CIT (A)'s confirmation was also unsupported. In the interest of justice, the tribunal set aside the profit determination and directed the AO to reexamine the issue based on the complete statement provided by the assessee, including bills and profit/loss details. The appeal was partly allowed on these grounds.

Issue 5: Allegation of Arbitrariness and Violation of Natural Justice
The appellant alleged arbitrariness and violation of natural justice in the order. The tribunal considered the submissions and directed a fresh examination by the AO to determine the correct profit earned by the assessee in the trading of gold. The appellant was instructed to submit necessary documents for assessment. Consequently, the tribunal allowed the appeal partly, emphasizing a fair assessment process and adherence to legal procedures.

This detailed analysis of the judgment addresses the issues raised in the appeal, highlighting the tribunal's findings and directions on each aspect of the case.